G.R. No.

81510 Case Digest

G.R. NO. 81510, March 14, 1990
Hortencia Salazar, petitioner
vs Hon. Tomas Achaoso as Administrator
Marquez, respondents
Ponente: Sarmiento

of

POEA

and

Ferdie

Facts:
Concerns the validity of the power of Secretary of Labor to
issue of warrants of arrest and seizure under Article 38 of the
Labor Code, prohibiting illegal recruitment
On October 1987, Rosalie Tesoro of Pasay City in a sworn
statement filed with POEA charged Hortencia Salazar of illegally
taking her PECC Card thus prohibiting her to be employed.
On November 1987, Atty. Marquez telegram the petitioner to
report to the anti-illegal recruitment unit of PEOA, but on the
same day, having ascertained that the petitioner had no license
to operate a recruitment agency, Achaoso issued his challenged
Closure and Seizure Order stating that pursuant to PD No. 1920,
the recruitment agency ordered be for closure and seizure of the
documents having verified that it has (1) no valid license from
DOLE to recruit and deploy workers for overseas employment (2)
committed acts prohibited under Article 34 of Labor Code in
relation to Article 38.
On January 26, 1988, POEA director on Licensing and Regulation
Atty. Espiritu issued an office order designating the Atty
Marquez and other members of a team tasked to implement closure
and seizure.
On January 28, 1988, petitioner filed a petition with POEA that
the personal properties seized at her residence be immediately
returned on the ground that it was contrary to law because: (1)
client was not given prior notice or hearing, (2) violates
section 2 of constitution (3)
the premises invaded were the
private residence of the Salazar family and it was without
consent.
On February 2, 1988 before POEA could answer the letter,
petitioner filed the instant petition, on even date, POEA filed
a criminal complaint against her with the Pasig Provincial
Fiscal

Issue: May POEA validly issue warrants of search and seizure

under Article 38 of the Labor Code?
Ruling:
Under new constitution, only a judge may issue warrants of
search and arrest, however in the amended RA 8042, the minister
of labor shall have the power to cause the arrest and detention
of non-licensee of authority if after proper investigation.
Petition is granted, Article 38 of the Labor code is declared
unconstitutional and null and void.

G.R. No. 81510 March 14, 1990

HORTENCIA SALAZAR, petitioner,
vs.
HON. TOMAS D. ACHACOSO, in his capacity as Administrator of the Philippine
Overseas Employment Administration, and FERDIE MARQUEZ, respondents.
Gutierrez & Alo Law Offices for petitioner.

SARMIENTO, J.:
This concerns the validity of the power of the Secretary of Labor to issue warrants of arrest and seizure under Article 38 of the Labor Code,
prohibiting illegal recruitment.
The facts are as follows:
xxx xxx xxx
1. On October 21, 1987, Rosalie Tesoro of 177 Tupaz Street, Leveriza, Pasay City, in a sworn statement filed with the
Philippine Overseas Employment Administration (POEA for brevity) charged petitioner Hortencia Salazar, viz:
04. T: Ano ba ang dahilan at ikaw ngayon ay narito at
nagbibigay ng salaysay.
S: Upang ireklamo sa dahilan ang aking PECC Card ay
ayaw ibigay sa akin ng dati kong manager. Horty
Salazar 615 R.O. Santos, Mandaluyong, Mla.
05. T: Kailan at saan naganap and ginawang panloloko sa
iyo ng tao/mga taong inireklamo mo?
S. Sa bahay ni Horty Salazar.
06. T: Paano naman naganap ang pangyayari?
S. Pagkagaling ko sa Japan ipinatawag niya ako. Kinuha
ang PECC Card ko at sinabing hahanapan ako ng
booking sa Japan. Mag 9 month's na ako sa Phils. ay
hindi pa niya ako napa-alis. So lumipat ako ng ibang
company pero ayaw niyang ibigay and PECC Card
ko.
2. On November 3, 1987, public respondent Atty. Ferdinand Marquez to whom said complaint was assigned, sent to
the petitioner the following telegram:
YOU ARE HEREBY DIRECTED TO APPEAR BEFORE FERDIE MARQUEZ POEA ANTI
ILLEGAL RECRUITMENT UNIT 6TH FLR. POEA BLDG. EDSA COR. ORTIGAS AVE.
MANDALUYONG MM ON NOVEMBER 6, 1987 AT 10 AM RE CASE FILED AGAINST YOU.
FAIL NOT UNDER PENALTY OF LAW.
4. On the same day, having ascertained that the petitioner had no license to operate a recruitment agency, public
respondent Administrator Tomas D. Achacoso issued his challenged CLOSURE AND SEIZURE ORDER NO. 1205
which reads:
HORTY SALAZAR
No. 615 R.O. Santos St.
Mandaluyong, Metro Manila

Pursuant to the powers vested in me under Presidential Decree No. 1920 and Executive Order No. 1022, I hereby
order the CLOSURE of your recruitment agency being operated at No. 615 R.O. Santos St., Mandaluyong, Metro
Manila and the seizure of the documents and paraphernalia being used or intended to be used as the means of
committing illegal recruitment, it having verified that you have
(1) No valid license or authority from the Department of Labor and Employment to recruit and
deploy workers for overseas employment;
(2) Committed/are committing acts prohibited under Article 34 of the New Labor Code in relation
to Article 38 of the same code.
This ORDER is without prejudice to your criminal prosecution under existing laws.
Done in the City of Manila, this 3th day of November, 1987.
5. On January 26, 1988 POEA Director on Licensing and Regulation Atty. Estelita B. Espiritu issued an office order
designating respondents Atty. Marquez, Atty. Jovencio Abara and Atty. Ernesto Vistro as members of a team tasked to
implement Closure and Seizure Order No. 1205. Doing so, the group assisted by Mandaluyong policemen and
mediamen Lito Castillo of the People's Journal and Ernie Baluyot of News Today proceeded to the residence of the
petitioner at 615 R.O. Santos St., Mandaluyong, Metro Manila. There it was found that petitioner was operating
Hannalie Dance Studio. Before entering the place, the team served said Closure and Seizure order on a certain Mrs.
Flora Salazar who voluntarily allowed them entry into the premises. Mrs. Flora Salazar informed the team that Hannalie
Dance Studio was accredited with Moreman Development (Phil.). However, when required to show credentials, she
was unable to produce any. Inside the studio, the team chanced upon twelve talent performers practicing a dance
number and saw about twenty more waiting outside, The team confiscated assorted costumes which were duly
receipted for by Mrs. Asuncion Maguelan and witnessed by Mrs. Flora Salazar.
6. On January 28, 1988, petitioner filed with POEA the following letter:
Gentlemen:
On behalf of Ms. Horty Salazar of 615 R.O. Santos, Mandaluyong, Metro Manila, we respectfully request that the
personal properties seized at her residence last January 26, 1988 be immediately returned on the ground that said
seizure was contrary to law and against the will of the owner thereof. Among our reasons are the following:
1. Our client has not been given any prior notice or hearing, hence the Closure and Seizure Order
No. 1205 dated November 3, 1987 violates "due process of law" guaranteed under Sec. 1, Art. III,
of the Philippine Constitution.
2. Your acts also violate Sec. 2, Art. III of the Philippine Constitution which guarantees right of the
people "to be secure in their persons, houses, papers, and effects against unreasonable
searches and seizures of whatever nature and for any purpose."
3. The premises invaded by your Mr. Ferdi Marquez and five (5) others (including 2 policemen)
are the private residence of the Salazar family, and the entry, search as well as the seizure of the
personal properties belonging to our client were without her consent and were done with
unreasonable force and intimidation, together with grave abuse of the color of authority, and
constitute robbery and violation of domicile under Arts. 293 and 128 of the Revised Penal Code.
Unless said personal properties worth around TEN THOUSAND PESOS (P10,000.00) in all (and
which were already due for shipment to Japan) are returned within twenty-four (24) hours from
your receipt hereof, we shall feel free to take all legal action, civil and criminal, to protect our
client's interests.
We trust that you will give due attention to these important matters.
7. On February 2, 1988, before POEA could answer the letter, petitioner filed the instant petition; on even date, POEA
1
filed a criminal complaint against her with the Pasig Provincial Fiscal, docketed as IS-88-836.

On February 2, 1988, the petitioner filed this suit for prohibition. Although the acts sought to be barred are
already fait accompli, thereby making prohibition too late, we consider the petition as one for certiorari in
view of the grave public interest involved.

The Court finds that a lone issue confronts it: May the Philippine Overseas Employment Administration (or
the Secretary of Labor) validly issue warrants of search and seizure (or arrest) under Article 38 of the
Labor Code? It is also an issue squarely raised by the petitioner for the Court's resolution.
Under the new Constitution, which states:
. . . no search warrant or warrant of arrest shall issue except upon probable cause to be
determined personally by the judge after examination under oath or affirmation of the
complainant and the witnesses he may produce, and particularly describing the place to
2
be searched and the persons or things to be seized.
3

it is only a judge who may issue warrants of search and arrest. In one case, it was declared that mayors
may not exercise this power:
xxx xxx xxx
But it must be emphasized here and now that what has just been described is the state of
the law as it was in September, 1985. The law has since been altered. No longer does
the mayor have at this time the power to conduct preliminary investigations, much less
issue orders of arrest. Section 143 of the Local Government Code, conferring this power
on the mayor has been abrogated, rendered functus officio by the 1987 Constitution
which took effect on February 2, 1987, the date of its ratification by the Filipino people.
Section 2, Article III of the 1987 Constitution pertinently provides that "no search warrant
or warrant of arrest shall issue except upon probable cause to be determined personally
by the judge after examination under oath or affirmation of the complainant and the
witnesses he may produce, and particularly describing the place to be searched and the
person or things to be seized." The constitutional proscription has thereby been
manifested that thenceforth, the function of determining probable cause and issuing, on
the basis thereof, warrants of arrest or search warrants, may be validly exercised only by
judges, this being evidenced by the elimination in the present Constitution of the phrase,
"such other responsible officer as may be authorized by law" found in the counterpart
provision of said 1973 Constitution, who, aside from judges, might conduct preliminary
4
investigations and issue warrants of arrest or search warrants.
Neither may it be done by a mere prosecuting body:
We agree that the Presidential Anti-Dollar Salting Task Force exercises, or was meant to
exercise, prosecutorial powers, and on that ground, it cannot be said to be a neutral and
detached "judge" to determine the existence of probable cause for purposes of arrest or
search. Unlike a magistrate, a prosecutor is naturally interested in the success of his
case. Although his office "is to see that justice is done and not necessarily to secure the
conviction of the person accused," he stands, invariably, as the accused's adversary and
his accuser. To permit him to issue search warrants and indeed, warrants of arrest, is to
make him both judge and jury in his own right, when he is neither. That makes, to our
mind and to that extent, Presidential Decree No. 1936 as amended by Presidential
5
Decree No. 2002, unconstitutional.
Section 38, paragraph (c), of the Labor Code, as now written, was entered as an amendment by
Presidential Decrees Nos. 1920 and 2018 of the late President Ferdinand Marcos, to Presidential Decree
No. 1693, in the exercise of his legislative powers under Amendment No. 6 of the 1973 Constitution.
Under the latter, the then Minister of Labor merely exercised recommendatory powers:
(c) The Minister of Labor or his duly authorized representative shall have the power to
6
recommend the arrest and detention of any person engaged in illegal recruitment.

On May 1, 1984, Mr. Marcos promulgated Presidential Decree No. 1920, with the avowed purpose of
giving more teeth to the campaign against illegal recruitment. The Decree gave the Minister of Labor
arrest and closure powers:
(b) The Minister of Labor and Employment shall have the power to cause the arrest and
detention of such non-licensee or non-holder of authority if after proper investigation it is
determined that his activities constitute a danger to national security and public order or
will lead to further exploitation of job-seekers. The Minister shall order the closure of
companies, establishment and entities found to be engaged in the recruitment of workers
7
for overseas employment, without having been licensed or authorized to do so.
On January 26, 1986, he, Mr. Marcos, promulgated Presidential Decree No. 2018, giving the Labor
Minister search and seizure powers as well:
(c) The Minister of Labor and Employment or his duly authorized representatives shall
have the power to cause the arrest and detention of such non-licensee or non-holder of
authority if after investigation it is determined that his activities constitute a danger to
national security and public order or will lead to further exploitation of job-seekers. The
Minister shall order the search of the office or premises and seizure of documents,
paraphernalia, properties and other implements used in illegal recruitment activities and
the closure of companies, establishment and entities found to be engaged in the
recruitment of workers for overseas employment, without having been licensed or
8
authorized to do so.
The above has now been etched as Article 38, paragraph (c) of the Labor Code.
The decrees in question, it is well to note, stand as the dying vestiges of authoritarian rule in its twilight
moments.
We reiterate that the Secretary of Labor, not being a judge, may no longer issue search or arrest
warrants. Hence, the authorities must go through the judicial process. To that extent, we declare Article
38, paragraph (c), of the Labor Code, unconstitutional and of no force and effect.
9

The Solicitor General's reliance on the case of Morano v. Vivo is not well-taken. Vivo involved a
deportation case, governed by Section 69 of the defunct Revised Administrative Code and by Section 37
of the Immigration Law. We have ruled that in deportation cases, an arrest (of an undesirable alien)
ordered by the President or his duly authorized representatives, in order to carry out a final decision of
10
deportation is valid. It is valid, however, because of the recognized supremacy of the Executive in
11
matters involving foreign affairs. We have held:
xxx xxx xxx
The State has the inherent power to deport undesirable aliens (Chuoco Tiaco vs. Forbes,
228 U.S. 549, 57 L. Ed. 960, 40 Phil. 1122, 1125). That power may be exercised by the
Chief Executive "when he deems such action necessary for the peace and domestic
tranquility of the nation." Justice Johnson's opinion is that when the Chief Executive finds
that there are aliens whose continued presence in the country is injurious to the public
interest, "he may, even in the absence of express law, deport them". (Forbes vs. Chuoco
Tiaco and Crossfield, 16 Phil. 534, 568, 569; In re McCulloch Dick, 38 Phil. 41).
The right of a country to expel or deport aliens because their continued presence is
detrimental to public welfare is absolute and unqualified (Tiu Chun Hai and Go Tam vs.
12
Commissioner of Immigration and the Director of NBI, 104 Phil. 949, 956).

The power of the President to order the arrest of aliens for deportation is, obviously, exceptional. It (the
power to order arrests) can not be made to extend to other cases, like the one at bar. Under the
Constitution, it is the sole domain of the courts.
Moreover, the search and seizure order in question, assuming, ex gratia argumenti, that it was validly
issued, is clearly in the nature of a general warrant:
Pursuant to the powers vested in me under Presidential Decree No. 1920 and Executive
Order No. 1022, I hereby order the CLOSURE of your recruitment agency being operated
at No. 615 R.O. Santos St., Mandaluyong, Metro Manila and the seizure of the
documents and paraphernalia being used or intended to be used as the means of
committing illegal recruitment, it having verified that you have
(1) No valid license or authority from the Department of Labor and
Employment to recruit and deploy workers for overseas employment;
(2) Committed/are committing acts prohibited under Article 34 of the New
Labor Code in relation to Article 38 of the same code.
This ORDER is without prejudice to your criminal prosecution under existing laws.

13

We have held that a warrant must identify clearly the things to be seized, otherwise, it is null and void,
thus:
xxx xxx xxx
Another factor which makes the search warrants under consideration constitutionally
objectionable is that they are in the nature of general warrants. The search warrants
describe the articles sought to be seized in this wise:
1) All printing equipment, paraphernalia, paper, ink, photo equipment,
typewriters, cabinets, tables, communications/ recording equipment, tape
recorders, dictaphone and the like used and/or connected in the printing
of the "WE FORUM" newspaper and any and all
documents/communications, letters and facsimile of prints related to the
"WE FORUM" newspaper.
2) Subversive documents, pamphlets, leaflets, books, and other
publications to promote the objectives and purposes of the subversive
organizations known as Movement for Free Philippines, Light-a-Fire
Movement and April 6 Movement; and
3) Motor vehicles used in the distribution/circulation of the "WE FORUM"
and other subversive materials and propaganda, more particularly,
1) Toyota-Corolla, colored yellow with Plate No. NKA 892;
2) DATSUN, pick-up colored white with Plate No. NKV 969;
3) A delivery truck with Plate No. NBS 542;
4) TOYOTA-TAMARAW, colored white with Plate No. PBP 665; and

5) TOYOTA Hi-Lux, pick-up truck with Plate No. NGV 472 with marking
"Bagong Silang."
In Stanford v. State of Texas, the search warrant which authorized the search for "books,
records, pamphlets, cards, receipts, lists, memoranda, pictures, recordings and other
written instruments concerning the Communist Parties of Texas, and the operations of
the Community Party in Texas," was declared void by the U.S. Supreme Court for being
too general. In like manner, directions to "seize any evidence in connection with the
violation of SDC 13-3703 or otherwise" have been held too general, and that portion of a
search warrant which authorized the seizure of any "paraphernalia which could be used
to violate Sec. 54-197 of the Connecticut General Statutes (the statute dealing with the
crime of conspiracy)" was held to be a general warrant, and therefore invalid. The
description of the articles sought to be seized under the search warrants in question
cannot be characterized differently.
In the Stanford case, the U.S. Supreme court calls to mind a notable chapter in English
history; the era of disaccord between the Tudor Government and the English Press,
when "Officers of the Crown were given roving commissions to search where they
pleased in order to suppress and destroy the literature of dissent both Catholic and
Puritan." Reference herein to such historical episode would not be relevant for it is not the
policy of our government to suppress any newspaper or publication that speaks with "the
14
voice of non-conformity" but poses no clear and imminent danger to state security.
For the guidance of the bench and the bar, we reaffirm the following principles:
1. Under Article III, Section 2, of the l987 Constitution, it is only judges, and no other, who
may issue warrants of arrest and search:
2. The exception is in cases of deportation of illegal and undesirable aliens, whom the
President or the Commissioner of Immigration may order arrested, following a final order
of deportation, for the purpose of deportation.
WHEREFORE, the petition is GRANTED. Article 38, paragraph (c) of the Labor Code is declared
UNCONSTITUTIONAL and null and void. The respondents are ORDERED to return all materials seized
as a result of the implementation of Search and Seizure Order No. 1205.
No costs.
SO ORDERED.

FIRST DIVISION
G.R. No. 195792, November 24, 2014
ABOSTA SHIP MANAGEMENT AND/OR ARTEMIO CORBILLA, Petitioners, v.
WILHILM M. HILARIO, Respondent.
DECISION
SERENO, C.J.:
Abosta Ship Management Corporation (petitioner) filed a Petition for Review on Certiorari1
under Rule 45 of the 1997 Rules of Civil Procedure assailing the Court of Appeals (CA)
Decision2 dated 3 December 2010 and Resolution3 dated 11 February 2011 in CA-G.R. SP No.
110745.
The antecedents of this case are as follows:

cralawlawlibrary

On 24 October 2002, an employment contract was executed by petitioner, on behalf of its foreign
principal Panstar Shipping Co., Ltd., and respondent. In this contract, the latter was hired as a
bosun (boatswain) of the foreign vessel Grand Mark for a period of nine months, with a monthly
salary of USD566.4 The contract was duly approved by the Philippine Overseas Employment
Agency (POEA) on 25 October 2002.5
chanroblesvirtuallawlibrary

On 27 November 2002, upon reporting to the office of petitioner, respondent was informed that
the latter's deployment had been postponed due to shifting demands of the foreign principal. It
appears, though, that the foreign principal decided to promote an able seaman on board the
vessel instead of hiring respondent. Petitioner thus requested respondent to wait for another two
to three months for a vacancy to occur.6 In the meantime, respondent was allowed to make cash
advances7 as financial assistance.
Eventually, on 28 January 2003, respondent filed a Complaint with the POEA against petitioner
for violation of Section 2(r), Rule I, Part VI of the 2002 POEA Rules by failing to deploy
respondent within the prescribed period without any valid reason. Respondent likewise filed a
Complaint with the Labor Arbiter on 6 February 2003 based on the same ground and sought
actual, moral and exemplary damages and attorney's fees.
Petitioner moved for the dismissal of the Complaint, alleging that the Labor Arbiter had no
jurisdiction over the matter, as jurisdiction was supposedly lodged with the POEA. However, the
Labor Arbiter denied the motion, stating that the action for damages arising from employment
relations was clearly within its jurisdiction.
On 13 February 2004, the National Labor Relations Commission (NLRC) granted petitioner's
appeal and reversed the Labor Arbiter's Order. The NLRC held that considering no employeremployee relationship existed between the parties, the POEA had jurisdiction over the case. The
claim for non-deployment was administrative in character, and sanctions may be imposed by the

POEA.8

chanroblesvirtuallawlibrary

Respondent consequently filed a Petition for Certiorari with the CA questioning the ruling of the
NLRC.
On 17 March 2006, the CA granted the Petition. It pointed out that Section 10 of the Labor Code
provides that the jurisdiction of the Labor Arbiter includes claims arising by virtue of any law or
contract involving Filipino workers for overseas deployment, including claims for actual, moral,
exemplary and other forms of damages. Meanwhile, the POEA has jurisdiction over preemployment cases that are administrative in character. Thus, respondent's Complaint was
reinstated.9
chanroblesvirtuallawlibrary

After the parties submitted their respective Position Papers, the Labor Arbiter ordered petitioner
to pay respondent his salary for nine months in the amount of USD 10,071. The Labor Arbiter
found that the contract executed between the parties and the non-fulfillment thereof entitled
respondent to his salary for the whole duration of the contract. However, the arbiter did not find
bad faith, which would have merited the award of moral damages.10
chanroblesvirtuallawlibrary

This Decision prompted petitioner to appeal to the NLRC. On 11 March 2009, it held that
respondent's non-deployment was due to a valid exercise of the foreign principal's management
prerogative, which should be given due respect. Thus, the NLRC dismissed the Complaint, but
ordered petitioner "to comply with our directive to deploy respondent as soon as possible or face
the inevitable consequences."11
chanroblesvirtuallawlibrary

Dissatisfied with the NLRC's ruling, respondent filed a Petition for Certiorari with the CA. On 3
December 2010, it granted the Petition and held that the NLRC committed grave abuse of
discretion by holding that the able seaman's promotion was a valid management prerogative. The
CA further ruled that since respondent had already been hired for the same position, then there
was no longer any vacant position to which to promote the able seaman. Moreover, under the
POEA Rules, petitioner assumed joint and solidary liability with its foreign principal, and was
thus liable to respondent. It thus found the NLRC's Decision to be contrary to law and prevailing
jurisprudence. Finally, the CA ruled that NLRC's Order for petitioner "to deploy respondent as
soon as possible or face inevitable consequences" was "nonsensical" considering that the
controversy arose from way back in 2002, and that the assailed Order was issued in 2009.12
chanroblesvirtuallawlibrary

The CA likewise denied the Motion for Reconsideration filed by petitioner. Hence, this Petition.
ASSIGNMENT OF ERRORS
Petitioner raises the following errors allegedly committed by the CA:

chanroblesvirtuallawlibrary

The Honorable Court of Appeals committed grave reversible error when it ruled that
complainant is entitled to actual damages in the light of Paul v. Santiago case, the doctrine of
stare decis [sic] being inapplicable in the instant case as to the issue of award of actual damages.
The Honorable NLRC did not commit grave abuse of discretion when it ruled differently from
Santiago case [on] the issue of actual damages contrary to erroneous decision of the Court of

Appeals that NLRC committed grave abuse of discretion in disregarding Santiago case on the
issue of actual damages.
The Honorable Court of Appeals committed reversible error when it disregarded the factual
findings of the NLRC, that, if properly considered, would justify petitioner's use of management
prerogative.
The Honorable Court of Appeals committed reversible error in reinstating the award of actual
damages despite the want of any factual and legal basis and again in missapplying [sic] Datuman
case in the instant case.13
The Court's Ruling
The issue boils down to whether the CA committed serious errors of law.
We rule in the negative.
There is no dispute that the parties entered into a contract of employment on 24 October 2002,
and that petitioner failed to deploy respondent. The controversy arose from the act of the foreign
principal in promoting another person, an act that effectively disregarded the contract dated 24
October 2002 entered into between petitioner, on behalf of its foreign principal, and respondent.
There was a clear breach of contract when petitioner failed to deploy respondent in accordance
with the POEA-approved contract.
The Court is left with the issue of whether such breach would entitle respondent to the payment
of actual damages for the failure of petitioner to comply with the latter's obligations in
accordance with the employment contract.
It is the contention of petitioner that respondent's non-deployment was due to the foreign
principal's management prerogative to promote an able seaman. Supposedly, this exercise of
management prerogative is a valid and justifiable reason that would negate any liability for
damages.
We do not agree.
Based on a communication sent by a certain M.K. Jin dated 10 October 2002,14 the foreign
principal had already chosen respondent from among the other candidates as BSN (bosun or
boatswain). Pursuant to this communication, petitioner entered into an employment contract and
hired respondent on 24 October 2002. Subsequent communications, though, show that the
foreign principal approved a different candidate for the position of BSN.15 Thus, petitioner did
not deploy respondent.
There was an apparent violation of the contract at the time that the foreign principal decided to
promote another person as expressed in its communications dated 10 November 2002 and 14
November 2002. The vacancy for the position of boatswain ceased to exist upon the execution of
the contract between petitioner and respondent on 24 October 2002, a contract subsequently

approved by the POEA on 25 October 2002. Clearly, there was no vacancy when the foreign
principal changed its mind, since the position of boatswain had already been filled up by
respondent.
The contract was already perfected on the date of its execution, which occurred when petitioner
and respondent agreed on the object and the cause, as well as on the rest of the terms and
conditions therein. Naturally, contemporaneous with the perfection of the employment contract
was the birth of certain rights and obligations, a breach of which may give rise to a cause of
action against the erring party.16 Also, the POEA Standard Contract must be recognized and
respected. Thus, neither the manning agent nor the employer can simply prevent a seafarer from
being deployed without a valid reason.17
chanroblesvirtuallawlibrary

True, the promotion and choice of personnel is an exercise of management prerogative. In fact,
this Court has upheld management prerogatives, so long as they are exercised in good faith for
the advancement of the employer's interest, and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid agreements.18
However, there are limitations on the exercise of management prerogatives, such as existing laws
and the principle of equity and substantial justice.19
chanroblesvirtuallawlibrary

Under the principle of equity and substantial justice, change of mind was not a valid reason for
the non-deployment of respondent. He lost the opportunity to apply for other positions in other
agencies when he signed the contract of employment with petitioner. Simply put, that contract
was binding on the parties and may not later be disowned simply because of a change of mind of
either one of them.
The unilateral and unreasonable failure to deploy respondent constitutes breach of contract,
which gives rise to a liability to pay actual damages. The sanctions provided for non-deployment
do not end with the suspension or cancellation of license or the imposition of a fine and the
return of all documents at no cost to the worker. They do not forfend a seafarer from instituting
an action for damages against the employer or agency that has failed to deploy him.20
chanroblesvirtuallawlibrary

Considering that it was petitioner who entered into the contract of employment with respondent
for and on behalf of the foreign principal, it has the primary obligation to ensure the
implementation of that contract. Furthermore, in line with the policy of the state to protect and
alleviate the plight of the working class, Section 1, paragraph f (3) of Rule II of the POEA Rules
and Regulations,21 clearly provides that the private employment agency shall assume joint and
solidary liability with the employer. Indeed, this Court has consistently held that private
employment agencies are held jointly and severally liable with the foreign-based employer for
any violation of the recruitment agreement or contract of employment.22 This joint and solidary
liability imposed by law on recruitment agencies and foreign employers is meant to assure the
aggrieved worker of immediate and sufficient payment of what is due him.23
chanroblesvirtuallawlibrary

In sum, the failure to deploy respondent was an exercise of a management prerogative that went
beyond its limits and resulted in a breach of contract. In turn, petitioner's breach gave rise to
respondent's cause of action to claim actual damages for the pecuniary loss suffered by the latter
in the form of the loss of nine months' worth of salary as provided in the POEA-approved

contract of employment.
WHEREFORE, premises considered, the instant Petition is DENIED.
SO ORDERED.

G.R. No. 162419

July 10, 2007

PAUL V. SANTIAGO, petitioner,

vs.
CF SHARP CREW MANAGEMENT, INC., respondent.
DECISION
TINGA, J.:
At the heart of this case involving a contract between a seafarer, on one hand, and the manning
agent and the foreign principal, on the other, is this erstwhile unsettled legal quandary: whether
the seafarer, who was prevented from leaving the port of Manila and refused deployment without
valid reason but whose POEA-approved employment contract provides that the employeremployee relationship shall commence only upon the seafarers actual departure from the port in
the point of hire, is entitled to relief?
This treats of the petition for review filed by Paul V. Santiago (petitioner) assailing the Decision
and Resolution of the Court of Appeals dated 16 October 2003 and 19 February 2004,
respectively, in CA-G.R. SP No. 68404.1
Petitioner had been working as a seafarer for Smith Bell Management, Inc. (respondent) for
about five (5) years.2 On 3 February 1998, petitioner signed a new contract of employment with
respondent, with the duration of nine (9) months. He was assured of a monthly salary of
US$515.00, overtime pay and other benefits. The following day or on 4 February 1998, the
contract was approved by the Philippine Overseas Employment Administration (POEA).
Petitioner was to be deployed on board the "MSV Seaspread" which was scheduled to leave the
port of Manila for Canada on 13 February 1998.
A week before the scheduled date of departure, Capt. Pacifico Fernandez, respondents Vice
President, sent a facsimile message to the captain of "MSV Seaspread," which reads:
I received a phone call today from the wife of Paul Santiago in Masbate asking me not to
send her husband to MSV Seaspread anymore. Other callers who did not reveal their
identity gave me some feedbacks that Paul Santiago this time if allowed to depart will
jump ship in Canada like his brother Christopher Santiago, O/S who jumped ship from
the C.S. Nexus in Kita-kyushu, Japan last December, 1997.
We do not want this to happen again and have the vessel penalized like the C.S. Nexus in
Japan.
Forewarned is forearmed like his brother when his brother when he was applying he
behaved like a Saint but in his heart he was a serpent. If you agree with me then we will
send his replacement.
Kindly advise.3

To this message the captain of "MSV Seaspread" replied:

Many thanks for your advice concerning P. Santiago, A/B. Please cancel plans for him to
return to Seaspread.4
On 9 February 1998, petitioner was thus told that he would not be leaving for Canada anymore,
but he was reassured that he might be considered for deployment at some future date.
Petitioner filed a complaint for illegal dismissal, damages, and attorney's fees against respondent
and its foreign principal, Cable and Wireless (Marine) Ltd.5 The case was raffled to Labor
Arbiter Teresita Castillon-Lora, who ruled that the employment contract remained valid but had
not commenced since petitioner was not deployed. According to her, respondent violated the
rules and regulations governing overseas employment when it did not deploy petitioner, causing
petitioner to suffer actual damages representing lost salary income for nine (9) months and fixed
overtime fee, all amounting to US$7, 209.00.
The labor arbiter held respondent liable. The dispositive portion of her Decision dated 29
January 1999 reads:
WHEREFORE, premises considered, respondent is hereby Ordered to pay complainant
actual damages in the amount of US$7,209.00 plus 10% attorney's fees, payable in
Philippine peso at the rate of exchange prevailing at the time of payment.
All the other claims are hereby DISMISSED for lack of merit.
SO ORDERED.6
On appeal by respondent, the National Labor Relations Commission (NLRC) ruled that there is
no employer-employee relationship between petitioner and respondent because under the
Standard Terms and Conditions Governing the Employment of Filipino Seafarers on Board
Ocean Going Vessels (POEA Standard Contract), the employment contract shall commence
upon actual departure of the seafarer from the airport or seaport at the point of hire and with a
POEA-approved contract. In the absence of an employer-employee relationship between the
parties, the claims for illegal dismissal, actual damages, and attorneys fees should be dismissed.7
On the other hand, the NLRC found respondents decision not to deploy petitioner to be a valid
exercise of its management prerogative.8 The NLRC disposed of the appeal in this wise:
WHEREFORE, in the light of the foregoing, the assailed Decision dated January 29,
1999 is hereby AFFIRMED in so far as other claims are concerned and with
MODIFICATION by VACATING the award of actual damages and attorneys fees as
well as excluding Pacifico Fernandez as party respondent.
SO ORDERED.9
Petitioner moved for the reconsideration of the NLRCs Decision but his motion was denied for
lack of merit.10 He elevated the case to the Court of Appeals through a petition for certiorari.

In its Decision11 dated 16 October 2003, the Court of Appeals noted that there is an ambiguity in
the NLRCs Decision when it affirmed with modification the labor arbiters Decision, because
by the very modification introduced by the Commission (vacating the award of actual damages
and attorneys fees), there is nothing more left in the labor arbiters Decision to affirm.12
According to the appellate court, petitioner is not entitled to actual damages because damages are
not recoverable by a worker who was not deployed by his agency within the period prescribed in
the POEA Rules.13 It agreed with the NLRCs finding that petitioners non-deployment was a
valid exercise of respondents management prerogative.14 It added that since petitioner had not
departed from the Port of Manila, no employer-employee relationship between the parties arose
and any claim for damages against the so-called employer could have no leg to stand on.15
Petitioners subsequent motion for reconsideration was denied on 19 February 2004.16
The present petition is anchored on two grounds, to wit:
A. The Honorable Court of Appeals committed a serious error of law when it ignored
[S]ection 10 of Republic Act [R.A.] No. 8042 otherwise known as the Migrant Workers
Act of 1995 as well as Section 29 of the Standard Terms and Conditions Governing the
Employment of Filipino Seafarers On-Board Ocean-Going Vessels (which is deemed
incorporated under the petitioners POEA approved Employment Contract) that the
claims or disputes of the Overseas Filipino Worker by virtue of a contract fall within the
jurisdiction of the Labor Arbiter of the NLRC.
B. The Honorable Court of Appeals committed a serious error when it disregarded the
required quantum of proof in labor cases, which is substantial evidence, thus a total
departure from established jurisprudence on the matter.17
Petitioner maintains that respondent violated the Migrant Workers Act and the POEA Rules
when it failed to deploy him within thirty (30) calendar days without a valid reason. In doing so,
it had unilaterally and arbitrarily prevented the consummation of the POEA- approved contract.
Since it prevented his deployment without valid basis, said deployment being a condition to the
consummation of the POEA contract, the contract is deemed consummated, and therefore he
should be awarded actual damages, consisting of the stipulated salary and fixed overtime pay.18
Petitioner adds that since the contract is deemed consummated, he should be considered an
employee for all intents and purposes, and thus the labor arbiter and/or the NLRC has
jurisdiction to take cognizance of his claims.19
Petitioner additionally claims that he should be considered a regular employee, having worked
for five (5) years on board the same vessel owned by the same principal and manned by the same
local agent. He argues that respondents act of not deploying him was a scheme designed to
prevent him from attaining the status of a regular employee.20
Petitioner submits that respondent had no valid and sufficient cause to abandon the employment
contract, as it merely relied upon alleged phone calls from his wife and other unnamed callers in

arriving at the conclusion that he would jump ship like his brother. He points out that his wife
had executed an affidavit21 strongly denying having called respondent, and that the other alleged
callers did not even disclose their identities to respondent.22 Thus, it was error for the Court of
Appeals to adopt the unfounded conclusion of the NLRC, as the same was not based on
substantial evidence.23
On the other hand, respondent argues that the Labor Arbiter has no jurisdiction to award
petitioners monetary claims. His employment with respondent did not commence because his
deployment was withheld for a valid reason. Consequently, the labor arbiter and/or the NLRC
cannot entertain adjudication of petitioners case much less award damages to him. The
controversy involves a breach of contractual obligations and as such is cognizable by civil
courts.24 On another matter, respondent claims that the second issue posed by petitioner involves
a recalibration of facts which is outside the jurisdiction of this Court.25
There is some merit in the petition.
There is no question that the parties entered into an employment contract on 3 February 1998,
whereby petitioner was contracted by respondent to render services on board "MSV Seaspread"
for the consideration of US$515.00 per month for nine (9) months, plus overtime pay. However,
respondent failed to deploy petitioner from the port of Manila to Canada. Considering that
petitioner was not able to depart from the airport or seaport in the point of hire, the employment
contract did not commence, and no employer-employee relationship was created between the
parties.26
However, a distinction must be made between the perfection of the employment contract and the
commencement of the employer-employee relationship. The perfection of the contract, which in
this case coincided with the date of execution thereof, occurred when petitioner and respondent
agreed on the object and the cause, as well as the rest of the terms and conditions therein. The
commencement of the employer-employee relationship, as earlier discussed, would have taken
place had petitioner been actually deployed from the point of hire. Thus, even before the start of
any employer-employee relationship, contemporaneous with the perfection of the employment
contract was the birth of certain rights and obligations, the breach of which may give rise to a
cause of action against the erring party. Thus, if the reverse had happened, that is the seafarer
failed or refused to be deployed as agreed upon, he would be liable for damages.
Moreover, while the POEA Standard Contract must be recognized and respected, neither the
manning agent nor the employer can simply prevent a seafarer from being deployed without a
valid reason.
Respondents act of preventing petitioner from departing the port of Manila and boarding "MSV
Seaspread" constitutes a breach of contract, giving rise to petitioners cause of action.
Respondent unilaterally and unreasonably reneged on its obligation to deploy petitioner and must
therefore answer for the actual damages he suffered.
We take exception to the Court of Appeals conclusion that damages are not recoverable by a
worker who was not deployed by his agency. The fact that the POEA Rules27 are silent as to the

payment of damages to the affected seafarer does not mean that the seafarer is precluded from
claiming the same. The sanctions provided for non-deployment do not end with the suspension
or cancellation of license or fine and the return of all documents at no cost to the worker. They
do not forfend a seafarer from instituting an action for damages against the employer or agency
which has failed to deploy him.
The POEA Rules only provide sanctions which the POEA can impose on erring agencies. It does
not provide for damages and money claims recoverable by aggrieved employees because it is not
the POEA, but the NLRC, which has jurisdiction over such matters.
Despite the absence of an employer-employee relationship between petitioner and respondent,
the Court rules that the NLRC has jurisdiction over petitioners complaint. The jurisdiction of
labor arbiters is not limited to claims arising from employer-employee relationships. Section 10
of R.A. No. 8042 (Migrant Workers Act), provides that:
Sec. 10. Money Claims. Notwithstanding any provision of law to the contrary, the
Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the
original and exclusive jurisdiction to hear and decide, within ninety (90) calendar days
after the filing of the complaint, the claims arising out of an employer-employee
relationship or by virtue of any law or contract involving Filipino workers for overseas
deployment including claims for actual, moral, exemplary and other forms of damages. x
x x [Emphasis supplied]
Since the present petition involves the employment contract entered into by petitioner for
overseas employment, his claims are cognizable by the labor arbiters of the NLRC.
Article 2199 of the Civil Code provides that one is entitled to an adequate compensation only for
such pecuniary loss suffered by him as he has duly proved. Respondent is thus liable to pay
petitioner actual damages in the form of the loss of nine (9) months worth of salary as provided
in the contract. He is not, however, entitled to overtime pay. While the contract indicated a fixed
overtime pay, it is not a guarantee that he would receive said amount regardless of whether or not
he rendered overtime work. Even though petitioner was "prevented without valid reason from
rendering regular much less overtime service,"28 the fact remains that there is no certainty that
petitioner will perform overtime work had he been allowed to board the vessel. The amount of
US$286.00 stipulated in the contract will be paid only if and when the employee rendered
overtime work. This has been the tenor of our rulings in the case of Stolt-Nielsen Marine
Services (Phils.), Inc. v. National Labor Relations Commission29 where we discussed the matter
in this light:
The contract provision means that the fixed overtime pay of 30% would be the basis for
computing the overtime pay if and when overtime work would be rendered. Simply
stated, the rendition of overtime work and the submission of sufficient proof that said
work was actually performed are conditions to be satisfied before a seaman could be
entitled to overtime pay which should be computed on the basis of 30% of the basic
monthly salary. In short, the contract provision guarantees the right to overtime pay but
the entitlement to such benefit must first be established. Realistically speaking, a seaman,

by the very nature of his job, stays on board a ship or vessel beyond the regular eighthour work schedule. For the employer to give him overtime pay for the extra hours when
he might be sleeping or attending to his personal chores or even just lulling away his time
would be extremely unfair and unreasonable.30
The Court also holds that petitioner is entitled to attorneys fees in the concept of damages and
expenses of litigation. Attorney's fees are recoverable when the defendant's act or omission has
compelled the plaintiff to incur expenses to protect his interest.31 We note that respondents basis
for not deploying petitioner is the belief that he will jump ship just like his brother, a mere
suspicion that is based on alleged phone calls of several persons whose identities were not even
confirmed. Time and again, this Court has upheld management prerogatives so long as they are
exercised in good faith for the advancement of the employers interest and not for the purpose of
defeating or circumventing the rights of the employees under special laws or under valid
agreements.32 Respondents failure to deploy petitioner is unfounded and unreasonable, forcing
petitioner to institute the suit below. The award of attorneys fees is thus warranted.
However, moral damages cannot be awarded in this case. While respondents failure to deploy
petitioner seems baseless and unreasonable, we cannot qualify such action as being tainted with
bad faith, or done deliberately to defeat petitioners rights, as to justify the award of moral
damages. At most, respondent was being overzealous in protecting its interest when it became
too hasty in making its conclusion that petitioner will jump ship like his brother.
We likewise do not see respondents failure to deploy petitioner as an act designed to prevent the
latter from attaining the status of a regular employee. Even if petitioner was able to depart the
port of Manila, he still cannot be considered a regular employee, regardless of his previous
contracts of employment with respondent. In Millares v. National Labor Relations
Commission,33 the Court ruled that seafarers are considered contractual employees and cannot be
considered as regular employees under the Labor Code. Their employment is governed by the
contracts they sign every time they are rehired and their employment is terminated when the
contract expires. The exigencies of their work necessitates that they be employed on a
contractual basis.34
WHEREFORE, petition is GRANTED IN PART. The Decision dated 16 October 2003 and the
Resolution dated 19 February 2004 of the Court of Appeals are REVERSED and SET ASIDE.
The Decision of Labor Arbiter Teresita D. Castillon-Lora dated 29 January 1999 is
REINSTATED with the MODIFICATION that respondent CF Sharp Crew Management, Inc. is
ordered to pay actual or compensatory damages in the amount of US$4,635.00
representing salary for nine (9) months as stated in the contract, and attorneys fees at the
reasonable rate of 10% of the recoverable amount.
SO ORDERED

STOLT-NIELSEN
TRANSPORTATION GROUP,
INC. AND CHUNG GAI SHIP
MANAGEMENT,

G.R. No. 177498

Present:

Petitioners,
CARPIO, J.,
Chairperson,
PEREZ,
SERENO,
-versus-

REYES, and
PERLAS-BERNABE, JJ.*

SULPECIO MEDEQUILLO,
JR.,

Promulgated:

Respondent.
January 18, 2012
x------------------------------------------------x

DECISION

PEREZ, J.:

Before the Court is a Petition for Review on Certiorari1 of the Decision2 of the
First Division of the Court of Appeals in CA-G.R. SP No. 91632 dated 31 January
2007, denying the petition for certiorari filed by Stolt-Nielsen Transportation Group,

Inc. and Chung Gai Ship Management (petitioners) and affirming the Resolution of
the National Labor Relations Commission (NLRC). The dispositive portion of the
assailed decision reads:
WHEREFORE, the petition is hereby DENIED. Accordingly, the
assailed Decision promulgated on February 28, 2003 and the Resolution dated
July 27, 2005 are AFFIRMED.3

The facts as gathered by this Court follow:

On 6 March 1995, Sulpecio Madequillo (respondent) filed a complaint before
the Adjudication Office of the Philippine Overseas Employment Administration
(POEA) against the petitioners for illegal dismissal under a first contract and for
failure to deploy under a second contract. In his complaint-affidavit,4 respondent
alleged that:
1. On 6 November 1991(First Contract), he was hired by Stolt-Nielsen Marine
Services, Inc on behalf of its principal Chung-Gai Ship Management of Panama
as Third Assistant Engineer on board the vessel Stolt Aspiration for a period of
nine (9) months;
2. He would be paid with a monthly basic salary of $808.00 and a fixed overtime
pay of $404.00 or a total of $1,212.00 per month during the employment period
commencing on 6 November 1991;
3. On 8 November 1991, he joined the vessel MV Stolt Aspiration;
4. On February 1992 or for nearly three (3) months of rendering service and while
the vessel was at Batangas, he was ordered by the ships master to disembark the
vessel and repatriated back to Manila for no reason or explanation;
5. Upon his return to Manila, he immediately proceeded to the petitioners office
where he was transferred employment with another vessel named MV Stolt
Pride under the same terms and conditions of the First Contract;
6. On 23 April 1992, the Second Contract was noted and approved by the POEA;
7. The POEA, without knowledge that he was not deployed with the vessel, certified
the Second Employment Contract on 18 September 1992.
8. Despite the commencement of the Second Contract on 21 April 1992, petitioners
failed to deploy him with the vessel MV Stolt Pride;
9. He made a follow-up with the petitioner but the same refused to comply with the
Second Employment Contract.

10. On 22 December 1994, he demanded for his passport, seamans book and other
employment documents. However, he was only allowed to claim the said
documents in exchange of his signing a document;
11. He was constrained to sign the document involuntarily because without these
documents, he could not seek employment from other agencies.

He prayed for actual, moral and exemplary damages as well as attorneys fees
for his illegal dismissal and in view of the Petitioners bad faith in not complying with
the Second Contract.
The case was transferred to the Labor Arbiter of the DOLE upon the effectivity
of the Migrant Workers and Overseas Filipinos Act of 1995.
The parties were required to submit their respective position papers before the
Labor Arbiter. However, petitioners failed to submit their respective pleadings despite
the opportunity given to them.5
On 21 July 2000, Labor Arbiter Vicente R. Layawen rendered a judgment6
finding that the respondent was constructively dismissed by the petitioners. The
dispositive portion reads:
WHEREFORE, premises considered, judgment is hereby rendered,
declaring the respondents guilty of constructively dismissing the complainant by
not honoring the employment contract. Accordingly, respondents are hereby
ordered jointly and solidarily to pay complainant the following:

1. $12,537.00 or its peso equivalent at the time of payment.7

The Labor Arbiter found the first contract entered into by and between the
complainant and the respondents to have been novated by the execution of the second
contract. In other words, respondents cannot be held liable for the first contract but are
clearly and definitely liable for the breach of the second contract.8 However, he ruled
that there was no substantial evidence to grant the prayer for moral and exemplary
damages.9
The petitioners appealed the adverse decision before the National Labor Relations
Commission assailing that they were denied due process, that the respondent cannot
be considered as dismissed from employment because he was not even deployed yet
and the monetary award in favor of the respondent was exorbitant and not in
accordance with law.10

On 28 February 2003, the NLRC affirmed with modification the Decision of

the Labor Arbiter. The dispositive portion reads:
WHEREFORE, premises considered, the decision under review is hereby,
MODIFIED BY DELETING the award of overtime pay in the total amount of
Three Thousand Six Hundred Thirty Six US Dollars (US $3,636.00).
In all other respects, the assailed decision so stands as, AFFIRMED.11

Before the NLRC, the petitioners assailed that they were not properly notified of the
hearings that were conducted before the Labor Arbiter. They further alleged that after
the suspension of proceedings before the POEA, the only notice they received was a
copy of the decision of the Labor Arbiter.12
The NLRC ruled that records showed that attempts to serve the various notices of
hearing were made on petitioners counsel on record but these failed on account of
their failure to furnish the Office of the Labor Arbiter a copy of any notice of change
of address. There was also no evidence that a service of notice of change of address
was served on the POEA.13
The NLRC upheld the finding of unjustified termination of contract for failure on the
part of the petitioners to present evidence that would justify their non-deployment of
the respondent.14 It denied the claim of the petitioners that the monetary award should
be limited only to three (3) months for every year of the unexpired term of the
contract. It ruled that the factual incidents material to the case transpired within 19911992 or before the effectivity of Republic Act No. 8042 or the Migrant Workers and
Overseas Filipinos Act of 1995 which provides for such limitation.15
However, the NLRC upheld the reduction of the monetary award with respect to the
deletion of the overtime pay due to the non-deployment of the respondent.16
The Partial Motion for Reconsideration filed by the petitioners was denied by
the NLRC in its Resolution dated 27 July 2005.17
The petitioners filed a Petition for Certiorari before the Court of Appeals
alleging grave abuse of discretion on the part of NLRC when it affirmed with
modification the ruling of the Labor Arbiter. They prayed that the Decision and
Resolution promulgated by the NLRC be vacated and another one be issued
dismissing the complaint of the respondent.
Finding no grave abuse of discretion, the Court of Appeals AFFIRMED the
Decision of the labor tribunal.

The Courts Ruling

The following are the assignment of errors presented before this Court:
I.
THE COURT A QUO ERRED IN FINDING THAT THE SECOND
CONTRACT NOVATED THE FIRST CONTRACT.
1. THERE WAS NO NOVATION OF THE FIRST CONTRACT BY THE
SECOND CONTRACT; THE ALLEGATION OF ILLEGAL DISMISSAL
UNDER THE FIRST CONTRACT MUST BE RESOLVED SEPARATELY
FROM THE ALLEGATION OF FAILURE TO DEPLOY UNDER THE
SECOND CONTRACT.
2. THE ALLEGED ILLEGAL DISMISSAL UNDER THE FIRST CONTRACT
TRANSPIRED MORE THAN THREE (3) YEARS AFTER THE CASE
WAS FILED AND THEREFORE HIS CASE SHOULD HAVE BEEN
DISMISSED FOR BEING BARRED BY PRESCRIPTION.
II.
THE COURT A QUO ERRED IN RULING THAT THERE WAS
CONSTRUCTIVE DISMISSAL UNDER THE SECOND CONTRACT.
1. IT IS LEGALLY IMPOSSIBLE TO HAVE CONSTRUCTIVE DISMISSAL
WHEN THE EMPLOYMENT HAS NOT YET COMMENCED.
2. ASSUMING THERE WAS OMISSION UNDER THE SECOND
CONTRACT, PETITIONERS CAN ONLY BE FOUND AS HAVING
FAILED IN DEPLOYING PRIVATE RESPONDENT BUT WITH VALID
REASON.
III.
THE COURT A QUO ERRED IN FAILING TO FIND THAT EVEN
ASSUMING THERE WAS BASIS FOR HOLDING PETITIONER LIABLE
FOR FAILURE TO DEPLOY RESPONDENT, THE POEA RULES
PENALIZES SUCH OMISSION WITH A MERE REPRIMAND.18

The petitioners contend that the first employment contract between them and
the private respondent is different from and independent of the second contract
subsequently executed upon repatriation of respondent to Manila.
We do not agree.

Novation is the extinguishment of an obligation by the substitution or change of

the obligation by a subsequent one which extinguishes or modifies the first, either by
changing the object or principal conditions, or, by substituting another in place of the
debtor, or by subrogating a third person in the rights of the creditor. In order for
novation to take place, the concurrence of the following requisites is indispensable:
1. There must be a previous valid obligation,
2. There must be an agreement of the parties concerned to a new contract,
3. There must be the extinguishment of the old contract, and
4. There must be the validity of the new contract.19

In its ruling, the Labor Arbiter clarified that novation had set in between the first and
second contract. To quote:
xxx [T]his office would like to make it clear that the first contract entered into by
and between the complainant and the respondents is deemed to have been novated
by the execution of the second contract. In other words, respondents cannot be
held liable for the first contract but are clearly and definitely liable for the breach
of the second contract.20

This ruling was later affirmed by the Court of Appeals in its decision ruling
that:
Guided by the foregoing legal precepts, it is evident that novation took
place in this particular case. The parties impliedly extinguished the first contract
by agreeing to enter into the second contract to placate Medequillo, Jr. who was
unexpectedly dismissed and repatriated to Manila. The second contract would not
have been necessary if the petitioners abided by the terms and conditions of
Madequillo, Jr.s employment under the first contract. The records also reveal that
the 2nd contract extinguished the first contract by changing its object or principal.
These contracts were for overseas employment aboard different vessels. The first
contract was for employment aboard the MV Stolt Aspiration while the second
contract involved working in another vessel, the MV Stolt Pride. Petitioners and
Madequillo, Jr. accepted the terms and conditions of the second contract. Contrary
to petitioners assertion, the first contract was a previous valid contract since it
had not yet been terminated at the time of Medequillo, Jr.s repatriation to Manila.
The legality of his dismissal had not yet been resolved with finality. Undoubtedly,
he was still employed under the first contract when he negotiated with petitioners
on the second contract. As such, the NLRC correctly ruled that petitioners could
only be held liable under the second contract.21

We concur with the finding that there was a novation of the first employment
contract.
We reiterate once more and emphasize the ruling in Reyes v. National Labor
Relations Commission,22 to wit:
x x x [F]indings of quasi-judicial bodies like the NLRC, and affirmed by the
Court of Appeals in due course, are conclusive on this Court, which is not a trier
of facts.
xxxx
x x x Findings of fact of administrative agencies and quasi-judicial bodies,
which have acquired expertise because their jurisdiction is confined to
specific matters, are generally accorded not only respect, but finality when
affirmed by the Court of Appeals. Such findings deserve full respect and,
without justifiable reason, ought not to be altered, modified or reversed.(Emphasis
supplied)23

With the finding that respondent was still employed under the first contract
when he negotiated with petitioners on the second contract,24 novation became an
unavoidable conclusion.
Equally settled is the rule that factual findings of labor officials, who are
deemed to have acquired expertise in matters within their jurisdiction, are generally
accorded not only respect but even finality by the courts when supported by
substantial evidence, i.e., the amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion.25 But these findings are not infallible.
When there is a showing that they were arrived at arbitrarily or in disregard of the
evidence on record, they may be examined by the courts.26 In this case, there was no
showing of any arbitrariness on the part of the lower courts in their findings of facts.
Hence, we follow the settled rule.
We need not dwell on the issue of prescription. It was settled by the Court of
Appeals with its ruling that recovery of damages under the first contract was already
time-barred. Thus:
Accordingly, the prescriptive period of three (3) years within which
Medequillo Jr. may initiate money claims under the 1st contract commenced on
the date of his repatriation. xxx The start of the three (3) year prescriptive period
must therefore be reckoned on February 1992, which by Medequillo Jr.s own
admission was the date of his repatriation to Manila. It was at this point in time
that Medequillo Jr.s cause of action already accrued under the first contract. He
had until February 1995 to pursue a case for illegal dismissal and damages arising

from the 1st contract. With the filing of his Complaint-Affidavit on March 6,
1995, which was clearly beyond the prescriptive period, the cause of action under
the 1st contract was already time-barred.27

The issue that proceeds from the fact of novation is the consequence of the nondeployment of respondent.
The petitioners argue that under the POEA Contract, actual deployment of the
seafarer is a suspensive condition for the commencement of the employment.28 We
agree with petitioners on such point. However, even without actual deployment, the
perfected contract gives rise to obligations on the part of petitioners.
A contract is a meeting of minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some service. 29 The
contracting parties may establish such stipulations, clauses, terms and conditions as
they may deem convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy.30
The POEA Standard Employment Contract provides that employment shall
commence upon the actual departure of the seafarer from the airport or seaport in the
port of hire.31 We adhere to the terms and conditions of the contract so as to credit the
valid prior stipulations of the parties before the controversy started. Else, the
obligatory force of every contract will be useless. Parties are bound not only to the
fulfillment of what has been expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping with good faith, usage and law.32
Thus, even if by the standard contract employment commences only upon
actual departure of the seafarer, this does not mean that the seafarer has no remedy in
case of non-deployment without any valid reason. Parenthetically, the contention of
the petitioners of the alleged poor performance of respondent while on board the first
ship MV Stolt Aspiration cannot be sustained to justify the non-deployment, for no
evidence to prove the same was presented.33
We rule that distinction must be made between the perfection of the
employment contract and the commencement of the employer-employee relationship.
The perfection of the contract, which in this case coincided with the date of execution
thereof, occurred when petitioner and respondent agreed on the object and the cause,
as well as the rest of the terms and conditions therein. The commencement of the
employer-employee relationship, as earlier discussed, would have taken place had
petitioner been actually deployed from the point of hire. Thus, even before the start of
any employer-employee relationship, contemporaneous with the perfection of the
employment contract was the birth of certain rights and obligations, the breach of

which may give rise to a cause of action against the erring party. Thus, if the reverse
had happened, that is the seafarer failed or refused to be deployed as agreed upon, he
would be liable for damages.34
Further, we do not agree with the contention of the petitioners that the penalty
is a mere reprimand.
The POEA Rules and Regulations Governing Overseas Employment35 dated 31
May 1991 provides for the consequence and penalty against in case of nondeployment of the seafarer without any valid reason. It reads:
Section 4. Workers Deployment. An agency shall deploy its recruits within
the deployment period as indicated below:
xxx
b. Thirty (30) calendar days from the date of processing by the administration of
the employment contracts of seafarers.
Failure of the agency to deploy a worker within the prescribed period
without valid reasons shall be a cause for suspension or cancellation of
license or fine. In addition, the agency shall return all documents at no cost to
the worker.(Emphasis and underscoring supplied)

The appellate court correctly ruled that the penalty of reprimand36 provided
under Rule IV, Part VI of the POEA Rules and Regulations Governing the
Recruitment and Employment of Land-based Overseas Workers is not applicable in
this case. The breach of contract happened on February 1992 and the law applicable at
that time was the 1991 POEA Rules and Regulations Governing Overseas
Employment. The penalty for non-deployment as discussed is suspension or
cancellation of license or fine.
Now, the question to be dealt with is how will the seafarer be compensated by
reason of the unreasonable non-deployment of the petitioners?
The POEA Rules Governing the Recruitment and Employment of Seafarers do
not provide for the award of damages to be given in favor of the employees. The
claim provided by the same law refers to a valid contractual claim for compensation
or benefits arising from employer-employee relationship or for any personal injury,
illness or death at levels provided for within the terms and conditions of employment
of seafarers. However, the absence of the POEA Rules with regard to the payment of
damages to the affected seafarer does not mean that the seafarer is precluded from
claiming the same. The sanctions provided for non-deployment do not end with the

suspension or cancellation of license or fine and the return of all documents at no cost
to the worker. As earlier discussed, they do not forfend a seafarer from instituting an
action for damages against the employer or agency which has failed to deploy him.37
We thus decree the application of Section 10 of Republic Act No. 8042
(Migrant Workers Act) which provides for money claims by reason of a contract
involving Filipino workers for overseas deployment. The law provides:
Sec. 10. Money Claims. Notwithstanding any provision of law to the contrary,
the Labor Arbiters of the National Labor Relations Commission (NLRC) shall
have the original and exclusive jurisdiction to hear and decide, within ninety (90)
calendar days after the filing of the complaint, the claims arising out of an
employer-employee relationship or by virtue of any law or contract involving
Filipino workers for overseas deployment including claims for actual, moral,
exemplary and other forms of damages. x x x (Underscoring supplied)

Following the law, the claim is still cognizable by the labor arbiters of the
NLRC under the second phrase of the provision.
Applying the rules on actual damages, Article 2199 of the New Civil Code
provides that one is entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved. Respondent is thus liable to pay petitioner
actual damages in the form of the loss of nine (9) months worth of salary as provided
in the contract.38 This is but proper because of the non-deployment of respondent
without just cause.
WHEREFORE, the appeal is DENIED. The 31 January 2007 Decision of the
Court of Appeals in CA-G.R. SP. No. 91632 is hereby AFFIRMED. The Petitioners
are hereby ordered to pay Sulpecio Medequillo, Jr., the award of actual damages
equivalent to his salary for nine (9) months as provided by the Second Employment
Contract.
SO ORDERED.

EN BANC
[G.R. NO. 167614 : March 24, 2009]
ANTONIO M. SERRANO, Petitioner, v. Gallant MARITIME SERVICES, INC. and
MARLOW NAVIGATION CO., INC., Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
For decades, the toil of solitary migrants has helped lift entire families and communities out of
poverty. Their earnings have built houses, provided health care, equipped schools and planted the
seeds of businesses. They have woven together the world by transmitting ideas and knowledge
from country to country. They have provided the dynamic human link between cultures, societies
and economies. Yet, only recently have we begun to understand not only how much international
migration impacts development, but how smart public policies can magnify this effect.
United Nations Secretary-General Ban Ki-Moon
Global Forum on Migration and Development
Brussels, July 10, 20071
For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5th paragraph of
Section 10, Republic Act (R.A.) No. 8042,2 to wit:
Sec. 10. Money Claims. - x x x In case of termination of overseas employment without just, valid
or authorized cause as defined by law or contract, the workers shall be entitled to the full
reimbursement of his placement fee with interest of twelve percent (12%) per annum, plus his
salaries for the unexpired portion of his employment contract or for three (3) months for every
year of the unexpired term, whichever is less.
x x x x (Emphasis and underscoring supplied)

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does not magnify the contributions of overseas Filipino workers (OFWs) to national
development, but exacerbates the hardships borne by them by unduly limiting their entitlement in
case of illegal dismissal to their lump-sum salary either for the unexpired portion of their
employment contract "or for three months for every year of the unexpired term, whichever is
less" (subject clause). Petitioner claims that the last clause violates the OFWs' constitutional
rights in that it impairs the terms of their contract, deprives them of equal protection and denies
them due process.
By way of Petition for Review under Rule 45 of the Rules of Court, petitioner assails the
December 8, 2004 Decision3 and April 1, 2005 Resolution4 of the Court of Appeals (CA), which
applied the subject clause, entreating this Court to declare the subject clause unconstitutional.

Petitioner was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd.
(respondents) under a Philippine Overseas Employment Administration (POEA)-approved
Contract of Employment with the following terms and conditions:
Duration of contract

12 months

Position

Chief Officer

Basic monthly salary

US$1,400.00

Hours of work

48.0 hours per week

Overtime

US$700.00 per month

Vacation leave with pay 7.00 days per month5

On March 19, 1998, the date of his departure, petitioner was constrained to accept a downgraded
employment contract for the position of Second Officer with a monthly salary of US$1,000.00,
upon the assurance and representation of respondents that he would be made Chief Officer by the
end of April 1998.6
Respondents did not deliver on their promise to make petitioner Chief Officer.7 Hence, petitioner
refused to stay on as Second Officer and was repatriated to the Philippines on May 26, 1998.8
Petitioner's employment contract was for a period of 12 months or from March 19, 1998 up to
March 19, 1999, but at the time of his repatriation on May 26, 1998, he had served only two (2)
months and seven (7) days of his contract, leaving an unexpired portion of nine (9) months and
twenty-three (23) days.
Petitioner filed with the Labor Arbiter (LA) a Complaint9 against respondents for constructive
dismissal and for payment of his money claims in the total amount of US$26,442.73, broken
down as follows:
May 27/31, 1998 (5 days) incl. Leave pay

US$ 413.90

June 01/30, 1998

2,590.00

July 01/31, 1998

2,590.00

August 01/31, 1998

2,590.00

Sept. 01/30, 1998

2,590.00

Oct. 01/31, 1998

2,590.00

Nov. 01/30, 1998

2,590.00

Dec. 01/31, 1998

2,590.00

Jan. 01/31, 1999

2,590.00

Feb. 01/28, 1999

2,590.00

Mar. 1/19, 1999 (19 days) incl. leave pay

1,640.00
-------------------------------------------------------------------------25,382.23

Amount adjusted to chief mate's salary

(March 19/31, 1998 to April 1/30, 1998) +

1,060.5010
--------------------------------------------------------------------------------------US$ 26,442.7311

TOTAL CLAIM
as well as moral and exemplary damages and attorney's fees.

The LA rendered a Decision dated July 15, 1999, declaring the dismissal of petitioner illegal and
awarding him monetary benefits, to wit:
WHEREFORE, premises considered, judgment is hereby rendered declaring that the dismissal of
the complainant (petitioner) by the respondents in the above-entitled case was illegal and the
respondents are hereby ordered to pay the complainant [petitioner], jointly and severally, in
Philippine Currency, based on the rate of exchange prevailing at the time of payment, the amount
of EIGHT THOUSAND SEVEN HUNDRED SEVENTY U.S. DOLLARS (US $8,770.00),
representing the complainant's salary for three (3) months of the unexpired portion of the
aforesaid contract of employment.
rbl r l l lbr r

The respondents are likewise ordered to pay the complainant [petitioner], jointly and severally,
in Philippine Currency, based on the rate of exchange prevailing at the time of payment, the
amount of FORTY FIVE U.S. DOLLARS (US$ 45.00),12 representing the complainant's claim
for a salary differential. In addition, the respondents are hereby ordered to pay the complainant,
jointly and severally, in Philippine Currency, at the exchange rate prevailing at the time of
payment, the complainant's (petitioner's) claim for attorney's fees equivalent to ten percent (10%)
of the total amount awarded to the aforesaid employee under this Decision.

The claims of the complainant for moral and exemplary damages are hereby DISMISSED for
lack of merit.
All other claims are hereby DISMISSED.
SO ORDERED.13 (Emphasis supplied)

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In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his computation on the
salary period of three months only - - rather than the entire unexpired portion of nine months and
23 days of petitioner's employment contract - applying the subject clause. However, the LA
applied the salary rate of US$2,590.00, consisting of petitioner's "[b]asic salary,
US$1,400.00/month + US$700.00/month, fixed overtime pay, + US$490.00/month, vacation
leave pay = US$2,590.00/compensation per month."14
Respondents appealed15 to the National Labor Relations Commission (NLRC) to question the
finding of the LA that petitioner was illegally dismissed.
Petitioner also appealed16 to the NLRC on the sole issue that the LA erred in not applying the
ruling of the Court in Triple Integrated Services, Inc. v. National Labor Relations Commission17
that in case of illegal dismissal, OFWs are entitled to their salaries for the unexpired portion of
their contracts.18
In a Decision dated June 15, 2000, the NLRC modified the LA Decision, to wit:
WHEREFORE, the Decision dated 15 July 1999 is MODIFIED. Respondents are hereby ordered
to pay complainant, jointly and severally, in Philippine currency, at the prevailing rate of
exchange at the time of payment the following:
1. Three (3) months salary
$1,400 x 3

US$4,200.00

2. Salary differential

45.00

US$4,245.00
3. 10% Attorney's fees 424.50
TOTAL

US$4,669.50

The other findings are affirmed.

SO ORDERED.19
The NLRC corrected the LA's computation of the lump-sum salary awarded to petitioner by
reducing the applicable salary rate from US$2,590.00 to US$1,400.00 because R.A. No. 8042

"does not provide for the award of overtime pay, which should be proven to have been actually
performed, and for vacation leave pay."20
Petitioner filed a Motion for Partial Reconsideration, but this time he questioned the
constitutionality of the subject clause.21 The NLRC denied the motion.22
Petitioner filed a Petition for Certiorari23 with the CA, reiterating the constitutional challenge
against the subject clause.24 After initially dismissing the petition on a technicality, the CA
eventually gave due course to it, as directed by this Court in its Resolution dated August 7, 2003
which granted the Petition for Certiorari, docketed as G.R. No. 151833, filed by petitioner.
In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on the reduction of the
applicable salary rate; however, the CA skirted the constitutional issue raised by petitioner.25
His Motion for Reconsideration26 having been denied by the CA,27 petitioner brings his cause to
this Court on the following grounds:
I
The Court of Appeals and the labor tribunals have decided the case in a way not in accord with
applicable decision of the Supreme Court involving similar issue of granting unto the migrant
worker back wages equal to the unexpired portion of his contract of employment instead of
limiting it to three (3) months
II
In the alternative that the Court of Appeals and the Labor Tribunals were merely applying their
interpretation of Section 10 of Republic Act No. 8042, it is submitted that the Court of Appeals
gravely erred in law when it failed to discharge its judicial duty to decide questions of substance
not theretofore determined by the Honorable Supreme Court, particularly, the constitutional
issues raised by the petitioner on the constitutionality of said law, which unreasonably, unfairly
and arbitrarily limits payment of the award for back wages of overseas workers to three (3)
months.
III
Even without considering the constitutional limitations [of] Sec. 10 of Republic Act No. 8042,
the Court of Appeals gravely erred in law in excluding from petitioner's award the overtime pay
and vacation pay provided in his contract since under the contract they form part of his salary.28
On February 26, 2008, petitioner wrote the Court to withdraw his petition as he is already old
and sickly, and he intends to make use of the monetary award for his medical treatment and
medication.29 Required to comment, counsel for petitioner filed a motion, urging the court to
allow partial execution of the undisputed monetary award and, at the same time, praying that the
constitutional question be resolved.30

Considering that the parties have filed their respective memoranda, the Court now takes up the
full merit of the petition mindful of the extreme importance of the constitutional question raised
therein.
On the first and second issues
The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner was illegal is
not disputed. Likewise not disputed is the salary differential of US$45.00 awarded to petitioner
in all three fora. What remains disputed is only the computation of the lump-sum salary to be
awarded to petitioner by reason of his illegal dismissal.
Applying the subject clause, the NLRC and the CA computed the lump-sum salary of petitioner
at the monthly rate of US$1,400.00 covering the period of three months out of the unexpired
portion of nine months and 23 days of his employment contract or a total of US$4,200.00.
Impugning the constitutionality of the subject clause, petitioner contends that, in addition to the
US$4,200.00 awarded by the NLRC and the CA, he is entitled to US$21,182.23 more or a total
of US$25,382.23, equivalent to his salaries for the entire nine months and 23 days left of his
employment contract, computed at the monthly rate of US$2,590.00.31
The Arguments of Petitioner
Petitioner contends that the subject clause is unconstitutional because it unduly impairs the
freedom of OFWs to negotiate for and stipulate in their overseas employment contracts a
determinate employment period and a fixed salary package.32 It also impinges on the equal
protection clause, for it treats OFWs differently from local Filipino workers (local workers) by
putting a cap on the amount of lump-sum salary to which OFWs are entitled in case of illegal
dismissal, while setting no limit to the same monetary award for local workers when their
dismissal is declared illegal; that the disparate treatment is not reasonable as there is no
substantial distinction between the two groups;33 and that it defeats Section 18,34 Article II of the
Constitution which guarantees the protection of the rights and welfare of all Filipino workers,
whether deployed locally or overseas.35
Moreover, petitioner argues that the decisions of the CA and the labor tribunals are not in line
with existing jurisprudence on the issue of money claims of illegally dismissed OFWs. Though
there are conflicting rulings on this, petitioner urges the Court to sort them out for the guidance
of affected OFWs.36
Petitioner further underscores that the insertion of the subject clause into R.A. No. 8042 serves
no other purpose but to benefit local placement agencies. He marks the statement made by the
Solicitor General in his Memorandum, viz.:
Often, placement agencies, their liability being solidary, shoulder the payment of money claims
in the event that jurisdiction over the foreign employer is not acquired by the court or if the
foreign employer reneges on its obligation. Hence, placement agencies that are in good faith and
which fulfill their obligations are unnecessarily penalized for the acts of the foreign employer. To

protect them and to promote their continued helpful contribution in deploying Filipino migrant
workers, liability for money claims was reduced under Section 10 of R.A. No. 8042. 37 (Emphasis
supplied)
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Petitioner argues that in mitigating the solidary liability of placement agencies, the subject clause
sacrifices the well-being of OFWs. Not only that, the provision makes foreign employers better
off than local employers because in cases involving the illegal dismissal of employees, foreign
employers are liable for salaries covering a maximum of only three months of the unexpired
employment contract while local employers are liable for the full lump-sum salaries of their
employees. As petitioner puts it:
In terms of practical application, the local employers are not limited to the amount of backwages
they have to give their employees they have illegally dismissed, following well-entrenched and
unequivocal jurisprudence on the matter. On the other hand, foreign employers will only be
limited to giving the illegally dismissed migrant workers the maximum of three (3) months
unpaid salaries notwithstanding the unexpired term of the contract that can be more than three
(3) months.38
Lastly, petitioner claims that the subject clause violates the due process clause, for it deprives
him of the salaries and other emoluments he is entitled to under his fixed-period employment
contract.39
The Arguments of Respondents
In their Comment and Memorandum, respondents contend that the constitutional issue should
not be entertained, for this was belatedly interposed by petitioner in his appeal before the CA,
and not at the earliest opportunity, which was when he filed an appeal before the NLRC.40
The Arguments of the Solicitor General
The Solicitor General (OSG)41 points out that as R.A. No. 8042 took effect on July 15, 1995, its
provisions could not have impaired petitioner's 1998 employment contract. Rather, R.A. No.
8042 having preceded petitioner's contract, the provisions thereof are deemed part of the
minimum terms of petitioner's employment, especially on the matter of money claims, as this
was not stipulated upon by the parties.42
Moreover, the OSG emphasizes that OFWs and local workers differ in terms of the nature of
their employment, such that their rights to monetary benefits must necessarily be treated
differently. The OSG enumerates the essential elements that distinguish OFWs from local
workers: first, while local workers perform their jobs within Philippine territory, OFWs perform
their jobs for foreign employers, over whom it is difficult for our courts to acquire jurisdiction, or
against whom it is almost impossible to enforce judgment; and second, as held in Coyoca v.
National Labor Relations Commission43 and Millares v. National Labor Relations Commission,44
OFWs are contractual employees who can never acquire regular employment status, unlike local
workers who are or can become regular employees. Hence, the OSG posits that there are rights
and privileges exclusive to local workers, but not available to OFWs; that these peculiarities

make for a reasonable and valid basis for the differentiated treatment under the subject clause of
the money claims of OFWs who are illegally dismissed. Thus, the provision does not violate the
equal protection clause nor Section 18, Article II of the Constitution.45
Lastly, the OSG defends the rationale behind the subject clause as a police power measure
adopted to mitigate the solidary liability of placement agencies for this "redounds to the benefit
of the migrant workers whose welfare the government seeks to promote. The survival of
legitimate placement agencies helps [assure] the government that migrant workers are properly
deployed and are employed under decent and humane conditions."46
The Court's Ruling
The Court sustains petitioner on the first and second issues.
When the Court is called upon to exercise its power of judicial review of the acts of its co-equals,
such as the Congress, it does so only when these conditions obtain: (1) that there is an actual case
or controversy involving a conflict of rights susceptible of judicial determination;47 (2) that the
constitutional question is raised by a proper party48 and at the earliest opportunity;49 and (3) that
the constitutional question is the very lis mota of the case,50 otherwise the Court will dismiss the
case or decide the same on some other ground.51
Without a doubt, there exists in this case an actual controversy directly involving petitioner who
is personally aggrieved that the labor tribunals and the CA computed his monetary award based
on the salary period of three months only as provided under the subject clause.
The constitutional challenge is also timely. It should be borne in mind that the requirement that a
constitutional issue be raised at the earliest opportunity entails the interposition of the issue in the
pleadings before a competent court, such that, if the issue is not raised in the pleadings before
that competent court, it cannot be considered at the trial and, if not considered in the trial, it
cannot be considered on appeal.52 Records disclose that the issue on the constitutionality of the
subject clause was first raised, not in petitioner's appeal with the NLRC, but in his Motion for
Partial Reconsideration with said labor tribunal,53 and reiterated in his Petition for Certiorari
before the CA.54 Nonetheless, the issue is deemed seasonably raised because it is not the NLRC
but the CA which has the competence to resolve the constitutional issue. The NLRC is a labor
tribunal that merely performs a quasi-judicial function - its function in the present case is limited
to determining questions of fact to which the legislative policy of R.A. No. 8042 is to be applied
and to resolving such questions in accordance with the standards laid down by the law itself;55
thus, its foremost function is to administer and enforce R.A. No. 8042, and not to inquire into the
validity of its provisions. The CA, on the other hand, is vested with the power of judicial review
or the power to declare unconstitutional a law or a provision thereof, such as the subject clause.56
Petitioner's interposition of the constitutional issue before the CA was undoubtedly seasonable.
The CA was therefore remiss in failing to take up the issue in its decision.
The third condition that the constitutional issue be critical to the resolution of the case likewise
obtains because the monetary claim of petitioner to his lump-sum salary for the entire unexpired

portion of his 12-month employment contract, and not just for a period of three months, strikes at
the very core of the subject clause.
Thus, the stage is all set for the determination of the constitutionality of the subject clause.
Does the subject clause violate Section 10,
Article III of the Constitution on non-impairment
of contracts?
The answer is in the negative.
Petitioner's claim that the subject clause unduly interferes with the stipulations in his contract on
the term of his employment and the fixed salary package he will receive57 is not tenable.
Section 10, Article III of the Constitution provides:
No law impairing the obligation of contracts shall be passed.
The prohibition is aligned with the general principle that laws newly enacted have only a
prospective operation,58 and cannot affect acts or contracts already perfected;59 however, as to
laws already in existence, their provisions are read into contracts and deemed a part thereof.60
Thus, the non-impairment clause under Section 10, Article II is limited in application to laws
about to be enacted that would in any way derogate from existing acts or contracts by enlarging,
abridging or in any manner changing the intention of the parties thereto.
As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995 preceded the execution
of the employment contract between petitioner and respondents in 1998. Hence, it cannot be
argued that R.A. No. 8042, particularly the subject clause, impaired the employment contract of
the parties. Rather, when the parties executed their 1998 employment contract, they were deemed
to have incorporated into it all the provisions of R.A. No. 8042.
But even if the Court were to disregard the timeline, the subject clause may not be declared
unconstitutional on the ground that it impinges on the impairment clause, for the law was enacted
in the exercise of the police power of the State to regulate a business, profession or calling,
particularly the recruitment and deployment of OFWs, with the noble end in view of ensuring
respect for the dignity and well-being of OFWs wherever they may be employed.61 Police power
legislations adopted by the State to promote the health, morals, peace, education, good order,
safety, and general welfare of the people are generally applicable not only to future contracts but
even to those already in existence, for all private contracts must yield to the superior and
legitimate measures taken by the State to promote public welfare.62
Does the subject clause violate Section 1,
Article III of the Constitution, and Section 18,
Article II and Section 3, Article XIII on labor
as a protected sector?

The answer is in the affirmative.

Section 1, Article III of the Constitution guarantees:
No person shall be deprived of life, liberty, or property without due process of law nor shall any
person be denied the equal protection of the law.
Section 18,63 Article II and Section 3,64 Article XIII accord all members of the labor sector,
without distinction as to place of deployment, full protection of their rights and welfare.
To Filipino workers, the rights guaranteed under the foregoing constitutional provisions translate
to economic security and parity: all monetary benefits should be equally enjoyed by workers of
similar category, while all monetary obligations should be borne by them in equal degree; none
should be denied the protection of the laws which is enjoyed by, or spared the burden imposed
on, others in like circumstances.65
Such rights are not absolute but subject to the inherent power of Congress to incorporate, when it
sees fit, a system of classification into its legislation; however, to be valid, the classification must
comply with these requirements: 1) it is based on substantial distinctions; 2) it is germane to the
purposes of the law; 3) it is not limited to existing conditions only; and 4) it applies equally to all
members of the class.66
There are three levels of scrutiny at which the Court reviews the constitutionality of a
classification embodied in a law: a) the deferential or rational basis scrutiny in which the
challenged classification needs only be shown to be rationally related to serving a legitimate state
interest;67 b) the middle-tier or intermediate scrutiny in which the government must show that the
challenged classification serves an important state interest and that the classification is at least
substantially related to serving that interest;68 and c) strict judicial scrutiny69 in which a
legislative classification which impermissibly interferes with the exercise of a fundamental
right70 or operates to the peculiar disadvantage of a suspect class71 is presumed unconstitutional,
and the burden is upon the government to prove that the classification is necessary to achieve a
compelling state interest and that it is the least restrictive means to protect such interest.72
Under American jurisprudence, strict judicial scrutiny is triggered by suspect classifications73
based on race74 or gender75 but not when the classification is drawn along income categories.76
It is different in the Philippine setting. In Central Bank (now Bangko Sentral ng Pilipinas)
Employee Association, Inc. v. Bangko Sentral ng Pilipinas,77 the constitutionality of a provision
in the charter of the Bangko Sentral ng Pilipinas (BSP), a government financial institution (GFI),
was challenged for maintaining its rank-and-file employees under the Salary Standardization
Law (SSL), even when the rank-and-file employees of other GFIs had been exempted from the
SSL by their respective charters. Finding that the disputed provision contained a suspect
classification based on salary grade, the Court deliberately employed the standard of strict
judicial scrutiny in its review of the constitutionality of said provision. More significantly, it was
in this case that the Court revealed the broad outlines of its judicial philosophy, to wit:

Congress retains its wide discretion in providing for a valid classification, and its policies should
be accorded recognition and respect by the courts of justice except when they run afoul of the
Constitution. The deference stops where the classification violates a fundamental right, or
prejudices persons accorded special protection by the Constitution. When these violations
arise, this Court must discharge its primary role as the vanguard of constitutional guaranties, and
require a stricter and more exacting adherence to constitutional limitations. Rational basis should
not suffice.
Admittedly, the view that prejudice to persons accorded special protection by the Constitution
requires a stricter judicial scrutiny finds no support in American or English jurisprudence.
Nevertheless, these foreign decisions and authorities are not per se controlling in this
jurisdiction. At best, they are persuasive and have been used to support many of our decisions.
We should not place undue and fawning reliance upon them and regard them as indispensable
mental crutches without which we cannot come to our own decisions through the employment of
our own endowments. We live in a different ambience and must decide our own problems in the
light of our own interests and needs, and of our qualities and even idiosyncrasies as a people, and
always with our own concept of law and justice. Our laws must be construed in accordance with
the intention of our own lawmakers and such intent may be deduced from the language of each
law and the context of other local legislation related thereto. More importantly, they must be
construed to serve our own public interest which is the be-all and the end-all of all our laws. And
it need not be stressed that our public interest is distinct and different from others.
xxx
Further, the quest for a better and more "equal" world calls for the use of equal protection as a
tool of effective judicial intervention.
Equality is one ideal which cries out for bold attention and action in the Constitution. The
Preamble proclaims "equality" as an ideal precisely in protest against crushing inequities in
Philippine society. The command to promote social justice in Article II, Section 10, in "all
phases of national development," further explicitated in Article XIII, are clear commands to the
State to take affirmative action in the direction of greater equality. x x x [T]here is thus in the
Philippine Constitution no lack of doctrinal support for a more vigorous state effort towards
achieving a reasonable measure of equality.
Our present Constitution has gone further in guaranteeing vital social and economic rights to
marginalized groups of society, including labor. Under the policy of social justice, the law bends
over backward to accommodate the interests of the working class on the humane justification
that those with less privilege in life should have more in law. And the obligation to afford
protection to labor is incumbent not only on the legislative and executive branches but also on
the judiciary to translate this pledge into a living reality. Social justice calls for the humanization
of laws and the equalization of social and economic forces by the State so that justice in its
rational and objectively secular conception may at least be approximated.
xxx

Under most circumstances, the Court will exercise judicial restraint in deciding questions of
constitutionality, recognizing the broad discretion given to Congress in exercising its legislative
power. Judicial scrutiny would be based on the "rational basis" test, and the legislative discretion
would be given deferential treatment.
But if the challenge to the statute is premised on the denial of a fundamental right, or the
perpetuation of prejudice against persons favored by the Constitution with special
protection, judicial scrutiny ought to be more strict. A weak and watered down view would
call for the abdication of this Court's solemn duty to strike down any law repugnant to the
Constitution and the rights it enshrines. This is true whether the actor committing the
unconstitutional act is a private person or the government itself or one of its instrumentalities.
Oppressive acts will be struck down regardless of the character or nature of the actor.
xxx
In the case at bar, the challenged proviso operates on the basis of the salary grade or officeremployee status. It is akin to a distinction based on economic class and status, with the higher
grades as recipients of a benefit specifically withheld from the lower grades. Officers of the BSP
now receive higher compensation packages that are competitive with the industry, while the
poorer, low-salaried employees are limited to the rates prescribed by the SSL. The implications
are quite disturbing: BSP rank-and-file employees are paid the strictly regimented rates of the
SSL while employees higher in rank - possessing higher and better education and opportunities
for career advancement - are given higher compensation packages to entice them to stay.
Considering that majority, if not all, the rank-and-file employees consist of people whose status
and rank in life are less and limited, especially in terms of job marketability, it is they - and not
the officers - who have the real economic and financial need for the adjustment . This is in
accord with the policy of the Constitution "to free the people from poverty, provide adequate
social services, extend to them a decent standard of living, and improve the quality of life for
all." Any act of Congress that runs counter to this constitutional desideratum deserves strict
scrutiny by this Court before it can pass muster. (Emphasis supplied)
cralawlibrary

Imbued with the same sense of "obligation to afford protection to labor," the Court in the present
case also employs the standard of strict judicial scrutiny, for it perceives in the subject clause a
suspect classification prejudicial to OFWs.
Upon cursory reading, the subject clause appears facially neutral, for it applies to all OFWs.
However, a closer examination reveals that the subject clause has a discriminatory intent against,
and an invidious impact on, OFWs at two levels:
First, OFWs with employment contracts of less than one year vis - -vis OFWs with
employment contracts of one year or more;
Second, among OFWs with employment contracts of more than one year; and
Third, OFWs vis - -vis local workers with fixed-period employment;

OFWs with employment contracts of less than one year vis - -vis OFWs with employment
contracts of one year or more
As pointed out by petitioner,78 it was in Marsaman Manning Agency, Inc. v. National Labor
Relations Commission79 (Second Division, 1999) that the Court laid down the following rules on
the application of the periods prescribed under Section 10(5) of R.A. No. 804, to wit:
A plain reading of Sec. 10 clearly reveals that the choice of which amount to award an
illegally dismissed overseas contract worker, i.e., whether his salaries for the unexpired
portion of his employment contract or three (3) months' salary for every year of the unexpired
term, whichever is less, comes into play only when the employment contract concerned has a
term of at least one (1) year or more. This is evident from the words "for every year of the
unexpired term" which follows the words "salaries x x x for three months."
To follow petitioners' thinking that private respondent is entitled to three (3) months salary only
simply because it is the lesser amount is to completely disregard and overlook some words used
in the statute while giving effect to some. This is contrary to the well-established rule in legal
hermeneutics that in interpreting a statute, care should be taken that every part or word thereof be
given effect since the law-making body is presumed to know the meaning of the words employed
in the statue and to have used them advisedly. Ut res magis valeat quam pereat.80 (Emphasis
supplied)
cralawlibrary

In Marsaman, the OFW involved was illegally dismissed two months into his 10-month contract,
but was awarded his salaries for the remaining 8 months and 6 days of his contract.
Prior to Marsaman, however, there were two cases in which the Court made conflicting rulings
on Section 10(5). One was Asian Center for Career and Employment System and Services v.
National Labor Relations Commission (Second Division, October 1998),81 which involved an
OFW who was awarded a two-year employment contract, but was dismissed after working for
one year and two months. The LA declared his dismissal illegal and awarded him SR13,600.00
as lump-sum salary covering eight months, the unexpired portion of his contract. On appeal, the
Court reduced the award to SR3,600.00 equivalent to his three months' salary, this being the
lesser value, to wit:
Under Section 10 of R.A. No. 8042, a worker dismissed from overseas employment without just,
valid or authorized cause is entitled to his salary for the unexpired portion of his employment
contract or for three (3) months for every year of the unexpired term, whichever is less.
In the case at bar, the unexpired portion of private respondent's employment contract is eight (8)
months. Private respondent should therefore be paid his basic salary corresponding to three (3)
months or a total of SR3,600.82
Another was Triple-Eight Integrated Services, Inc. v. National Labor Relations Commission
(Third Division, December 1998),83 which involved an OFW (therein respondent Erlinda
Osdana) who was originally granted a 12-month contract, which was deemed renewed for
another 12 months. After serving for one year and seven-and-a-half months, respondent Osdana

was illegally dismissed, and the Court awarded her salaries for the entire unexpired portion of
four and one-half months of her contract.
The Marsaman interpretation of Section 10(5) has since been adopted in the following cases:
Case Title

Contract
Period

Period of
Service

Unexpired
Period

Period Applied
in the
Computation of
the Monetary
Award

Skippers v.
Maguad84

6 months

2 months

4 months

4 months

Bahia
Shipping v.
Reynaldo
Chua 85

9 months

8 months

4 months

4 months

Centennial
Transmarine v.
dela Cruz l86

9 months

4 months

5 months

5 months

Talidano v.
Falcon87

12 months

3 months

9 months

3 months

Univan v. CA

12 months

3 months

9 months

3 months

12 months

more than 2
months

10 months

3 months

PCL v.
NLRC90

12 months

more than 2
months

more or less 9
months

3 months

Olarte v.
Nayona91

12 months

21 days

11 months and 9
days

3 months

JSS v. .Ferrer92

12 months

16 days

11 months and
24 days

3 months

Pentagon v.
Adelantar93

12 months

Phil. Employ
v. Paramio, et
al.94

12 months

10 months

2 months

Unexpired portion

Flourish
Maritime v.

2 years

26 days

23 months and 4
days

6 months or 3
months for each

88

Oriental v. CA
89

9 months and 2 months and 23

7 days
days

2 months and 23
days

Almanzor 95
Athenna
Manpower v.
Villanos 96

year of contract
1 year, 10
months and
28 days

1 month

1 year, 9 months
and 28 days

6 months or 3
months for each
year of contract

As the foregoing matrix readily shows, the subject clause classifies OFWs into two categories.
The first category includes OFWs with fixed-period employment contracts of less than one year;
in case of illegal dismissal, they are entitled to their salaries for the entire unexpired portion of
their contract. The second category consists of OFWs with fixed-period employment contracts of
one year or more; in case of illegal dismissal, they are entitled to monetary award equivalent to
only 3 months of the unexpired portion of their contracts.
The disparity in the treatment of these two groups cannot be discounted. In Skippers, the
respondent OFW worked for only 2 months out of his 6-month contract, but was awarded his
salaries for the remaining 4 months. In contrast, the respondent OFWs in Oriental and PCL who
had also worked for about 2 months out of their 12-month contracts were awarded their salaries
for only 3 months of the unexpired portion of their contracts. Even the OFWs involved in
Talidano and Univan who had worked for a longer period of 3 months out of their 12-month
contracts before being illegally dismissed were awarded their salaries for only 3 months.
To illustrate the disparity even more vividly, the Court assumes a hypothetical OFW-A with an
employment contract of 10 months at a monthly salary rate of US$1,000.00 and a hypothetical
OFW-B with an employment contract of 15 months with the same monthly salary rate of
US$1,000.00. Both commenced work on the same day and under the same employer, and were
illegally dismissed after one month of work. Under the subject clause, OFW-A will be entitled to
US$9,000.00, equivalent to his salaries for the remaining 9 months of his contract, whereas
OFW-B will be entitled to only US$3,000.00, equivalent to his salaries for 3 months of the
unexpired portion of his contract, instead of US$14,000.00 for the unexpired portion of 14
months of his contract, as the US$3,000.00 is the lesser amount.
The disparity becomes more aggravating when the Court takes into account jurisprudence that,
prior to the effectivity of R.A. No. 8042 on July 14, 1995,97 illegally dismissed OFWs, no matter
how long the period of their employment contracts, were entitled to their salaries for the entire
unexpired portions of their contracts. The matrix below speaks for itself:
Case Title

Contract
Period

Period of
Service

Unexpired
Period

Period Applied in
the Computation of
the Monetary
Award

ATCI v. CA,
et al.98

2 years

2 months

22 months

22 months

Phil.
Integrated v.

2 years

7 days

23 months
and 23 days

23 months and 23
days

NLRC99
JGB v. NLC100

2 years

9 months

15 months

15 months

Agoy v.
NLRC101

2 years

2 months

22 months

22 months

EDI v. NLRC,
et al.102

2 years

5 months

19 months

19 months

Barros v.
NLRC, et al.103

12 months

4 months

8 months

8 months

Philippine
Transmarine v.
Carilla104

12 months

6 months 5 months and 5 months and 18 days

and 22 days
18 days

It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods or the unexpired
portions thereof, were treated alike in terms of the computation of their monetary benefits in case
of illegal dismissal. Their claims were subjected to a uniform rule of computation: their basic
salaries multiplied by the entire unexpired portion of their employment contracts.
The enactment of the subject clause in R.A. No. 8042 introduced a differentiated rule of
computation of the money claims of illegally dismissed OFWs based on their employment
periods, in the process singling out one category whose contracts have an unexpired portion of
one year or more and subjecting them to the peculiar disadvantage of having their monetary
awards limited to their salaries for 3 months or for the unexpired portion thereof, whichever is
less, but all the while sparing the other category from such prejudice, simply because the latter's
unexpired contracts fall short of one year.
Among OFWs With Employment Contracts of More Than One Year
Upon closer examination of the terminology employed in the subject clause, the Court now has
misgivings on the accuracy of the Marsaman interpretation.
The Court notes that the subject clause "or for three (3) months for every year of the unexpired
term, whichever is less" contains the qualifying phrases "every year" and "unexpired term." By
its ordinary meaning, the word "term" means a limited or definite extent of time.105 Corollarily,
that "every year" is but part of an "unexpired term" is significant in many ways: first, the
unexpired term must be at least one year, for if it were any shorter, there would be no occasion
for such unexpired term to be measured by every year; and second, the original term must be
more than one year, for otherwise, whatever would be the unexpired term thereof will not reach
even a year. Consequently, the more decisive factor in the determination of when the subject
clause "for three (3) months for every year of the unexpired term, whichever is less" shall apply
is not the length of the original contract period as held in Marsaman,106 but the length of the
unexpired portion of the contract period - - the subject clause applies in cases when the

unexpired portion of the contract period is at least one year, which arithmetically requires that
the original contract period be more than one year.
Viewed in that light, the subject clause creates a sub-layer of discrimination among OFWs whose
contract periods are for more than one year: those who are illegally dismissed with less than one
year left in their contracts shall be entitled to their salaries for the entire unexpired portion
thereof, while those who are illegally dismissed with one year or more remaining in their
contracts shall be covered by the subject clause, and their monetary benefits limited to their
salaries for three months only.
To concretely illustrate the application of the foregoing interpretation of the subject clause, the
Court assumes hypothetical OFW-C and OFW-D, who each have a 24-month contract at a salary
rate of US$1,000.00 per month. OFW-C is illegally dismissed on the 12th month, and OFW-D,
on the 13th month. Considering that there is at least 12 months remaining in the contract period
of OFW-C, the subject clause applies to the computation of the latter's monetary benefits. Thus,
OFW-C will be entitled, not to US$12,000,00 or the latter's total salaries for the 12 months
unexpired portion of the contract, but to the lesser amount of US$3,000.00 or the latter's salaries
for 3 months out of the 12-month unexpired term of the contract. On the other hand, OFW-D is
spared from the effects of the subject clause, for there are only 11 months left in the latter's
contract period. Thus, OFW-D will be entitled to US$11,000.00, which is equivalent to his/her
total salaries for the entire 11-month unexpired portion.
OFWs vis - -vis Local Workers
With Fixed-Period Employment
As discussed earlier, prior to R.A. No. 8042, a uniform system of computation of the monetary
awards of illegally dismissed OFWs was in place. This uniform system was applicable even to
local workers with fixed-term employment.107
The earliest rule prescribing a uniform system of computation was actually Article 299 of the
Code of Commerce (1888),108 to wit:
Article 299. If the contracts between the merchants and their shop clerks and employees should
have been made of a fixed period, none of the contracting parties, without the consent of the
other, may withdraw from the fulfillment of said contract until the termination of the period
agreed upon.
Persons violating this clause shall be subject to indemnify the loss and damage suffered, with the
exception of the provisions contained in the following articles.
In Reyes v. The Compaia Maritima,109 the Court applied the foregoing provision to determine
the liability of a shipping company for the illegal discharge of its managers prior to the
expiration of their fixed-term employment. The Court therein held the shipping company liable
for the salaries of its managers for the remainder of their fixed-term employment.

There is a more specific rule as far as seafarers are concerned: Article 605 of the Code of
Commerce which provides:
Article 605. If the contracts of the captain and members of the crew with the agent should be for
a definite period or voyage, they cannot be discharged until the fulfillment of their contracts,
except for reasons of insubordination in serious matters, robbery, theft, habitual drunkenness,
and damage caused to the vessel or to its cargo by malice or manifest or proven negligence.
Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie,110 in
which the Court held the shipping company liable for the salaries and subsistence allowance of
its illegally dismissed employees for the entire unexpired portion of their employment contracts.
While Article 605 has remained good law up to the present,111 Article 299 of the Code of
Commerce was replaced by Art. 1586 of the Civil Code of 1889, to wit:
Article 1586. Field hands, mechanics, artisans, and other laborers hired for a certain time and for
a certain work cannot leave or be dismissed without sufficient cause, before the fulfillment of the
contract. (Emphasis supplied.)
Citing Manresa, the Court in Lemoine v. Alkan112 read the disjunctive "or" in Article 1586 as a
conjunctive "and" so as to apply the provision to local workers who are employed for a time
certain although for no particular skill. This interpretation of Article 1586 was reiterated in
Garcia Palomar v. Hotel de France Company.113 And in both Lemoine and Palomar, the Court
adopted the general principle that in actions for wrongful discharge founded on Article 1586,
local workers are entitled to recover damages to the extent of the amount stipulated to be paid to
them by the terms of their contract. On the computation of the amount of such damages, the
Court in Aldaz v. Gay114 held:
The doctrine is well-established in American jurisprudence, and nothing has been brought to our
attention to the contrary under Spanish jurisprudence, that when an employee is wrongfully
discharged it is his duty to seek other employment of the same kind in the same community, for
the purpose of reducing the damages resulting from such wrongful discharge. However, while
this is the general rule, the burden of showing that he failed to make an effort to secure other
employment of a like nature, and that other employment of a like nature was obtainable, is upon
the defendant. When an employee is wrongfully discharged under a contract of employment his
prima facie damage is the amount which he would be entitled to had he continued in such
employment until the termination of the period. (Howard v. Daly, 61 N. Y., 362; Allen v.
Whitlark, 99 Mich., 492; Farrell v. School District No. 2, 98 Mich., 43.)115 (Emphasis supplied)

cralawlibrary

On August 30, 1950, the New Civil Code took effect with new provisions on fixed-term
employment: Section 2 (Obligations with a Period), Chapter 3, Title I, and Sections 2 (Contract
of Labor) and 3 (Contract for a Piece of Work), Chapter 3, Title VIII, Book IV.116 Much like
Article 1586 of the Civil Code of 1889, the new provisions of the Civil Code do not expressly
provide for the remedies available to a fixed-term worker who is illegally discharged. However,
it is noted that in Mackay Radio & Telegraph Co., Inc. v. Rich,117 the Court carried over the

principles on the payment of damages underlying Article 1586 of the Civil Code of 1889 and
applied the same to a case involving the illegal discharge of a local worker whose fixed-period
employment contract was entered into in 1952, when the new Civil Code was already in
effect.118
More significantly, the same principles were applied to cases involving overseas Filipino
workers whose fixed-term employment contracts were illegally terminated, such as in First Asian
Trans & Shipping Agency, Inc. v. Ople,119 involving seafarers who were illegally discharged. In
Teknika Skills and Trade Services, Inc. v. National Labor Relations Commission,120 an OFW
who was illegally dismissed prior to the expiration of her fixed-period employment contract as a
baby sitter, was awarded salaries corresponding to the unexpired portion of her contract. The
Court arrived at the same ruling in Anderson v. National Labor Relations Commission,121 which
involved a foreman hired in 1988 in Saudi Arabia for a fixed term of two years, but who was
illegally dismissed after only nine months on the job - - the Court awarded him salaries
corresponding to 15 months, the unexpired portion of his contract. In Asia World Recruitment,
Inc. v. National Labor Relations Commission,122 a Filipino working as a security officer in 1989
in Angola was awarded his salaries for the remaining period of his 12-month contract after he
was wrongfully discharged. Finally, in Vinta Maritime Co., Inc. v. National Labor Relations
Commission,123 an OFW whose 12-month contract was illegally cut short in the second month
was declared entitled to his salaries for the remaining 10 months of his contract.
In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term employment who were
illegally discharged were treated alike in terms of the computation of their money claims: they
were uniformly entitled to their salaries for the entire unexpired portions of their contracts. But
with the enactment of R.A. No. 8042, specifically the adoption of the subject clause, illegally
dismissed OFWs with an unexpired portion of one year or more in their employment contract
have since been differently treated in that their money claims are subject to a 3-month cap,
whereas no such limitation is imposed on local workers with fixed-term employment.
The Court concludes that the subject clause contains a suspect classification in that, in the
computation of the monetary benefits of fixed-term employees who are illegally discharged, it
imposes a 3-month cap on the claim of OFWs with an unexpired portion of one year or more
in their contracts, but none on the claims of other OFWs or local workers with fixed-term
employment. The subject clause singles out one classification of OFWs and burdens it with a
peculiar disadvantage.
There being a suspect classification involving a vulnerable sector protected by the Constitution,
the Court now subjects the classification to a strict judicial scrutiny, and determines whether it
serves a compelling state interest through the least restrictive means.
What constitutes compelling state interest is measured by the scale of rights and powers arrayed
in the Constitution and calibrated by history.124 It is akin to the paramount interest of the state125
for which some individual liberties must give way, such as the public interest in safeguarding
health or maintaining medical standards,126 or in maintaining access to information on matters of
public concern.127

In the present case, the Court dug deep into the records but found no compelling state interest
that the subject clause may possibly serve.
The OSG defends the subject clause as a police power measure "designed to protect the
employment of Filipino seafarers overseas x x x. By limiting the liability to three months [sic],
Filipino seafarers have better chance of getting hired by foreign employers." The limitation also
protects the interest of local placement agencies, which otherwise may be made to shoulder
millions of pesos in "termination pay."128
The OSG explained further:
Often, placement agencies, their liability being solidary, shoulder the payment of money claims
in the event that jurisdiction over the foreign employer is not acquired by the court or if the
foreign employer reneges on its obligation. Hence, placement agencies that are in good faith and
which fulfill their obligations are unnecessarily penalized for the acts of the foreign employer.
To protect them and to promote their continued helpful contribution in deploying Filipino
migrant workers, liability for money are reduced under Section 10 of RA 8042.
This measure redounds to the benefit of the migrant workers whose welfare the government
seeks to promote. The survival of legitimate placement agencies helps [assure] the government
that migrant workers are properly deployed and are employed under decent and humane
conditions.129 (Emphasis supplied)
cralawlibrary

However, nowhere in the Comment or Memorandum does the OSG cite the source of its
perception of the state interest sought to be served by the subject clause.
The OSG locates the purpose of R.A. No. 8042 in the speech of Rep. Bonifacio Gallego in
sponsorship of House Bill No. 14314 (HB 14314), from which the law originated;130 but the
speech makes no reference to the underlying reason for the adoption of the subject clause. That is
only natural for none of the 29 provisions in HB 14314 resembles the subject clause.
On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on money claims, to wit:
Sec. 10. Money Claims. - Notwithstanding any provision of law to the contrary, the Labor
Arbiters of the National Labor Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90) calendar days after the filing of the
complaint, the claims arising out of an employer-employee relationship or by virtue of the
complaint, the claim arising out of an employer-employee relationship or by virtue of any law or
contract involving Filipino workers for overseas employment including claims for actual, moral,
exemplary and other forms of damages.
The liability of the principal and the recruitment/placement agency or any and all claims under
this Section shall be joint and several.
Any compromise/amicable settlement or voluntary agreement on any money claims exclusive of
damages under this Section shall not be less than fifty percent (50%) of such money claims:

Provided, That any installment payments, if applicable, to satisfy any such compromise or
voluntary settlement shall not be more than two (2) months. Any compromise/voluntary
agreement in violation of this paragraph shall be null and void.
Non-compliance with the mandatory period for resolutions of cases provided under this Section
shall subject the responsible officials to any or all of the following penalties:
(1) The salary of any such official who fails to render his decision or resolution within the
prescribed period shall be, or caused to be, withheld until the said official complies therewith;
(2) Suspension for not more than ninety (90) days; or
(3) Dismissal from the service with disqualification to hold any appointive public office for five
(5) years.
Provided, however, That the penalties herein provided shall be without prejudice to any liability
which any such official may have incurred under other existing laws or rules and regulations as a
consequence of violating the provisions of this paragraph.
But significantly, Section 10 of SB 2077 does not provide for any rule on the computation of
money claims.
A rule on the computation of money claims containing the subject clause was inserted and
eventually adopted as the 5th paragraph of Section 10 of R.A. No. 8042. The Court examined the
rationale of the subject clause in the transcripts of the "Bicameral Conference Committee
(Conference Committee) Meetings on the Magna Carta on OCWs (Disagreeing Provisions of
Senate Bill No. 2077 and House Bill No. 14314)." However, the Court finds no discernible state
interest, let alone a compelling one, that is sought to be protected or advanced by the adoption of
the subject clause.
In fine, the Government has failed to discharge its burden of proving the existence of a
compelling state interest that would justify the perpetuation of the discrimination against OFWs
under the subject clause.
Assuming that, as advanced by the OSG, the purpose of the subject clause is to protect the
employment of OFWs by mitigating the solidary liability of placement agencies, such callous
and cavalier rationale will have to be rejected. There can never be a justification for any form of
government action that alleviates the burden of one sector, but imposes the same burden on
another sector, especially when the favored sector is composed of private businesses such as
placement agencies, while the disadvantaged sector is composed of OFWs whose protection no
less than the Constitution commands. The idea that private business interest can be elevated to
the level of a compelling state interest is odious.
Moreover, even if the purpose of the subject clause is to lessen the solidary liability of placement
agencies vis-a-vis their foreign principals, there are mechanisms already in place that can be
employed to achieve that purpose without infringing on the constitutional rights of OFWs.

The POEA Rules and Regulations Governing the Recruitment and Employment of Land-Based
Overseas Workers, dated February 4, 2002, imposes administrative disciplinary measures on
erring foreign employers who default on their contractual obligations to migrant workers and/or
their Philippine agents. These disciplinary measures range from temporary disqualification to
preventive suspension. The POEA Rules and Regulations Governing the Recruitment and
Employment of Seafarers, dated May 23, 2003, contains similar administrative disciplinary
measures against erring foreign employers.
Resort to these administrative measures is undoubtedly the less restrictive means of aiding local
placement agencies in enforcing the solidary liability of their foreign principals.
Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is violative of the
right of petitioner and other OFWs to equal protection.
rbl r l l l brr

Further, there would be certain misgivings if one is to approach the declaration of the
unconstitutionality of the subject clause from the lone perspective that the clause directly violates
state policy on labor under Section 3,131 Article XIII of the Constitution.
While all the provisions of the 1987 Constitution are presumed self-executing,132 there are some
which this Court has declared not judicially enforceable, Article XIII being one,133 particularly
Section 3 thereof, the nature of which, this Court, in Agabon v. National Labor Relations
Commission,134 has described to be not self-actuating:
Thus, the constitutional mandates of protection to labor and security of tenure may be deemed as
self-executing in the sense that these are automatically acknowledged and observed without need
for any enabling legislation. However, to declare that the constitutional provisions are enough to
guarantee the full exercise of the rights embodied therein, and the realization of ideals therein
expressed, would be impractical, if not unrealistic. The espousal of such view presents the
dangerous tendency of being overbroad and exaggerated. The guarantees of "full protection to
labor" and "security of tenure", when examined in isolation, are facially unqualified, and the
broadest interpretation possible suggests a blanket shield in favor of labor against any form of
removal regardless of circumstance. This interpretation implies an unimpeachable right to
continued employment-a utopian notion, doubtless-but still hardly within the contemplation of
the framers. Subsequent legislation is still needed to define the parameters of these guaranteed
rights to ensure the protection and promotion, not only the rights of the labor sector, but of the
employers' as well. Without specific and pertinent legislation, judicial bodies will be at a loss,
formulating their own conclusion to approximate at least the aims of the Constitution.
Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a positive
enforceable right to stave off the dismissal of an employee for just cause owing to the failure to
serve proper notice or hearing. As manifested by several framers of the 1987 Constitution, the
provisions on social justice require legislative enactments for their enforceability.135 (Emphasis
added)
Thus, Section 3, Article XIII cannot be treated as a principal source of direct enforceable rights,
for the violation of which the questioned clause may be declared unconstitutional. It may

unwittingly risk opening the floodgates of litigation to every worker or union over every
conceivable violation of so broad a concept as social justice for labor.
It must be stressed that Section 3, Article XIII does not directly bestow on the working class any
actual enforceable right, but merely clothes it with the status of a sector for whom the
Constitution urges protection through executive or legislative action and judicial recognition. Its
utility is best limited to being an impetus not just for the executive and legislative departments,
but for the judiciary as well, to protect the welfare of the working class.And it was in fact
consistent with that constitutional agenda that the Court in Central Bank (now Bangko Sentral ng
Pilipinas) Employee Association, Inc. v. Bangko Sentral ng Pilipinas, penned by then Associate
Justice now Chief Justice Reynato S. Puno, formulated the judicial precept that when the
challenge to a statute is premised on the perpetuation of prejudice against persons favored by the
Constitution with special protection - - such as the working class or a section thereof - - the Court
may recognize the existence of a suspect classification and subject the same to strict judicial
scrutiny.
The view that the concepts of suspect classification and strict judicial scrutiny formulated in
Central Bank Employee Association exaggerate the significance of Section 3, Article XIII is a
groundless apprehension. Central Bank applied Article XIII in conjunction with the equal
protection clause. Article XIII, by itself, without the application of the equal protection clause,
has no life or force of its own as elucidated in Agabon.
Along the same line of reasoning, the Court further holds that the subject clause violates
petitioner's right to substantive due process, for it deprives him of property, consisting of
monetary benefits, without any existing valid governmental purpose.136
The argument of the Solicitor General, that the actual purpose of the subject clause of limiting
the entitlement of OFWs to their three-month salary in case of illegal dismissal, is to give them a
better chance of getting hired by foreign employers. This is plain speculation. As earlier
discussed, there is nothing in the text of the law or the records of the deliberations leading to its
enactment or the pleadings of respondent that would indicate that there is an existing
governmental purpose for the subject clause, or even just a pretext of one.
The subject clause does not state or imply any definitive governmental purpose; and it is for that
precise reason that the clause violates not just petitioner's right to equal protection, but also her
right to substantive due process under Section 1,137 Article III of the Constitution.
The subject clause being unconstitutional, petitioner is entitled to his salaries for the entire
unexpired period of nine months and 23 days of his employment contract, pursuant to law and
jurisprudence prior to the enactment of R.A. No. 8042.
On the Third Issue
Petitioner contends that his overtime and leave pay should form part of the salary basis in the
computation of his monetary award, because these are fixed benefits that have been stipulated
into his contract.

Petitioner is mistaken.
The word salaries in Section 10(5) does not include overtime and leave pay. For seafarers like
petitioner, DOLE Department Order No. 33, series 1996, provides a Standard Employment
Contract of Seafarers, in which salary is understood as the basic wage, exclusive of overtime,
leave pay and other bonuses; whereas overtime pay is compensation for all work "performed" in
excess of the regular eight hours, and holiday pay is compensation for any work "performed" on
designated rest days and holidays.
By the foregoing definition alone, there is no basis for the automatic inclusion of overtime and
holiday pay in the computation of petitioner's monetary award, unless there is evidence that he
performed work during those periods. As the Court held in Centennial Transmarine, Inc. v. Dela
Cruz,138
However, the payment of overtime pay and leave pay should be disallowed in light of our ruling
in Cagampan v. National Labor Relations Commission, to wit:
The rendition of overtime work and the submission of sufficient proof that said was actually
performed are conditions to be satisfied before a seaman could be entitled to overtime pay which
should be computed on the basis of 30% of the basic monthly salary. In short, the contract
provision guarantees the right to overtime pay but the entitlement to such benefit must first be
established.
In the same vein, the claim for the day's leave pay for the unexpired portion of the contract is
unwarranted since the same is given during the actual service of the seamen.
WHEREFORE, the Court GRANTS the Petition. The subject clause "or for three months for
every year of the unexpired term, whichever is less" in the 5th paragraph of Section 10 of
Republic Act No. 8042 is DECLARED UNCONSTITUTIONAL; and the December 8, 2004
Decision and April 1, 2005 Resolution of the Court of Appeals are MODIFIED to the effect that
petitioner is AWARDED his salaries for the entire unexpired portion of his employment contract
consisting of nine months and 23 days computed at the rate of US$1,400.00 per month.
No costs.
SO ORDERED.

G.R. No. 170139, August 05, 2014

SAMEER OVERSEAS PLACEMENT AGENCY, INC., Petitioner, v. JOY C. CABILES,
Respondent.
DECISION
LEONEN, J.:
This case involves an overseas Filipino worker with shattered dreams. It is our duty, given the
facts and the law, to approximate justice for her.
We are asked to decide a petition for review1 on certiorari assailing the Court of Appeals
decision2 dated June 27, 2005. This decision partially affirmed the National Labor Relations
Commissions resolution dated March 31, 2004,3 declaring respondents dismissal illegal,
directing petitioner to pay respondents three-month salary equivalent to New Taiwan Dollar
(NT$) 46,080.00, and ordering it to reimburse the NT$3,000.00 withheld from respondent, and
pay her NT$300.00 attorneys fees.4
cralawred

Petitioner, Sameer Overseas Placement Agency, Inc., is a recruitment and placement agency.5
Responding to an ad it published, respondent, Joy C. Cabiles, submitted her application for a
quality control job in Taiwan.6
cralawred

Joys application was accepted.7 Joy was later asked to sign a one-year employment contract for
a monthly salary of NT$15,360.00.8 She alleged that Sameer Overseas Agency required her to
pay a placement fee of P70,000.00 when she signed the employment contract.9
cralawred

Joy was deployed to work for Taiwan Wacoal, Co. Ltd. (Wacoal) on June 26, 1997.10 She
alleged that in her employment contract, she agreed to work as quality control for one year.11 In
Taiwan, she was asked to work as a cutter.12
cralawred

Sameer Overseas Placement Agency claims that on July 14, 1997, a certain Mr. Huwang from
Wacoal informed Joy, without prior notice, that she was terminated and that she should
immediately report to their office to get her salary and passport.13 She was asked to prepare for
immediate repatriation.14
cralawred

Joy claims that she was told that from June 26 to July 14, 1997, she only earned a total of
NT$9,000.15 According to her, Wacoal deducted NT$3,000 to cover her plane ticket to
Manila.16
cralawred

On October 15, 1997, Joy filed a complaint17 with the National Labor Relations Commission
against petitioner and Wacoal. She claimed that she was illegally dismissed.18 She asked for the
return of her placement fee, the withheld amount for repatriation costs, payment of her salary for
23 months as well as moral and exemplary damages.19 She identified Wacoal as Sameer

Overseas Placement Agencys foreign principal.20

cralawred

Sameer Overseas Placement Agency alleged that respondent's termination was due to her
inefficiency, negligence in her duties, and her failure to comply with the work requirements [of]
her foreign [employer].21 The agency also claimed that it did not ask for a placement fee of
?70,000.00.22 As evidence, it showed Official Receipt No. 14860 dated June 10, 1997, bearing
the amount of ?20,360.00.23 Petitioner added that Wacoal's accreditation with petitioner had
already been transferred to the Pacific Manpower & Management Services, Inc. (Pacific) as of
August 6, 1997.24 Thus, petitioner asserts that it was already substituted by Pacific Manpower.25
cralawred

Pacific Manpower moved for the dismissal of petitioners claims against it.26 It alleged that there
was no employer-employee relationship between them.27 Therefore, the claims against it were
outside the jurisdiction of the Labor Arbiter.28 Pacific Manpower argued that the employment
contract should first be presented so that the employers contractual obligations might be
identified.29 It further denied that it assumed liability for petitioners illegal acts.30
cralawred

On July 29, 1998, the Labor Arbiter dismissed Joys complaint.31 Acting Executive Labor
Arbiter Pedro C. Ramos ruled that her complaint was based on mere allegations.32 The Labor
Arbiter found that there was no excess payment of placement fees, based on the official receipt
presented by petitioner.33 The Labor Arbiter found unnecessary a discussion on petitioners
transfer of obligations to Pacific34 and considered the matter immaterial in view of the dismissal
of respondents complaint.35
cralawred

Joy appealed36 to the National Labor Relations Commission.

In a resolution37 dated March 31, 2004, the National Labor Relations Commission declared that
Joy was illegally dismissed.38 It reiterated the doctrine that the burden of proof to show that the
dismissal was based on a just or valid cause belongs to the employer.39 It found that Sameer
Overseas Placement Agency failed to prove that there were just causes for termination.40 There
was no sufficient proof to show that respondent was inefficient in her work and that she failed to
comply with company requirements.41 Furthermore, procedural due process was not observed in
terminating respondent.42
cralawred

The National Labor Relations Commission did not rule on the issue of reimbursement of
placement fees for lack of jurisdiction.43 It refused to entertain the issue of the alleged transfer of
obligations to Pacific.44 It did not acquire jurisdiction over that issue because Sameer Overseas
Placement Agency failed to appeal the Labor Arbiters decision not to rule on the matter.45
cralawred

The National Labor Relations Commission awarded respondent only three (3) months worth of
salary in the amount of NT$46,080, the reimbursement of the NT$3,000 withheld from her, and
attorneys fees of NT$300.46
cralawred

The Commission denied the agencys motion for reconsideration47 dated May 12, 2004 through a
resolution48 dated July 2, 2004.
Aggrieved by the ruling, Sameer Overseas Placement Agency caused the filing of a petition49 for

certiorari with the Court of Appeals assailing the National Labor Relations Commissions
resolutions dated March 31, 2004 and July 2, 2004.
The Court of Appeals50 affirmed the decision of the National Labor Relations Commission with
respect to the finding of illegal dismissal, Joys entitlement to the equivalent of three months
worth of salary, reimbursement of withheld repatriation expense, and attorneys fees.51 The
Court of Appeals remanded the case to the National Labor Relations Commission to address the
validity of petitioner's allegations against Pacific.52 The Court of Appeals held, thus:
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Although the public respondent found the dismissal of the complainant-respondent illegal, we
should point out that the NLRC merely awarded her three (3) months backwages or the amount
of NT$46,080.00, which was based upon its finding that she was dismissed without due process,
a finding that we uphold, given petitioners lack of worthwhile discussion upon the same in the
proceedings below or before us. Likewise we sustain NLRCs finding in regard to the
reimbursement of her fare, which is squarely based on the law; as well as the award of attorneys
fees.
But we do find it necessary to remand the instant case to the public respondent for further
proceedings, for the purpose of addressing the validity or propriety of petitioners third-party
complaint against the transferee agent or the Pacific Manpower & Management Services, Inc.
and Lea G. Manabat. We should emphasize that as far as the decision of the NLRC on the claims
of Joy Cabiles, is concerned, the same is hereby affirmed with finality, and we hold petitioner
liable thereon, but without prejudice to further hearings on its third party complaint against
Pacific for reimbursement.
WHEREFORE, premises considered, the assailed Resolutions are hereby partly AFFIRMED
in accordance with the foregoing discussion, but subject to the caveat embodied in the last
sentence. No costs.
SO ORDERED.53
Dissatisfied, Sameer Overseas Placement Agency filed this petition.54

cralawred

We are asked to determine whether the Court of Appeals erred when it affirmed the ruling of the
National Labor Relations Commission finding respondent illegally dismissed and awarding her
three months worth of salary, the reimbursement of the cost of her repatriation, and attorneys
fees despite the alleged existence of just causes of termination.
Petitioner reiterates that there was just cause for termination because there was a finding of
Wacoal that respondent was inefficient in her work.55 Therefore, it claims that respondents
dismissal was valid.56
cralawred

Petitioner also reiterates that since Wacoals accreditation was validly transferred to Pacific at
the time respondent filed her complaint, it should be Pacific that should now assume
responsibility for Wacoals contractual obligations to the workers originally recruited by
petitioner.57
cralawred

Sameer Overseas Placement Agencys petition is without merit. We find for respondent.
I
Sameer Overseas Placement Agency failed to show that there was just cause for causing Joys
dismissal. The employer, Wacoal, also failed to accord her due process of law.
Indeed, employers have the prerogative to impose productivity and quality standards at work.58
They may also impose reasonable rules to ensure that the employees comply with these
standards.59 Failure to comply may be a just cause for their dismissal.60 Certainly, employers
cannot be compelled to retain the services of an employee who is guilty of acts that are inimical
to the interest of the employer.61 While the law acknowledges the plight and vulnerability of
workers, it does not authorize the oppression or self-destruction of the employer.62
Management prerogative is recognized in law and in our jurisprudence.
This prerogative, however, should not be abused. It is tempered with the employees right to
security of tenure.63 Workers are entitled to substantive and procedural due process before
termination. They may not be removed from employment without a valid or just cause as
determined by law and without going through the proper procedure.
Security of tenure for labor is guaranteed by our Constitution.64

cralawred

Employees are not stripped of their security of tenure when they move to work in a different
jurisdiction. With respect to the rights of overseas Filipino workers, we follow the principle of
lex loci contractus.
Thus, in Triple Eight Integrated Services, Inc. v. NLRC,65 this court noted:

chanRoblesvirtualLawlibrary

Petitioner likewise attempts to sidestep the medical certificate requirement by contending that
since Osdana was working in Saudi Arabia, her employment was subject to the laws of the host
country. Apparently, petitioner hopes to make it appear that the labor laws of Saudi Arabia do
not require any certification by a competent public health authority in the dismissal of employees
due to illness.
Again, petitioners argument is without merit.
First, established is the rule that lex loci contractus (the law of the place where the contract is
made) governs in this jurisdiction. There is no question that the contract of employment in this
case was perfected here in the Philippines. Therefore, the Labor Code, its implementing rules
and regulations, and other laws affecting labor apply in this case. Furthermore, settled is the
rule that the courts of the forum will not enforce any foreign claim obnoxious to the forums
public policy. Here in the Philippines, employment agreements are more than contractual in
nature. The Constitution itself, in Article XIII, Section 3, guarantees the special protection of
workers, to wit:
chanRobles virtualLawlibrary

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.
....

chanrobleslaw

This public policy should be borne in mind in this case because to allow foreign employers to
determine for and by themselves whether an overseas contract worker may be dismissed on the
ground of illness would encourage illegal or arbitrary pre-termination of employment contracts.66
(Emphasis supplied, citation omitted)
Even with respect to fundamental procedural rights, this court emphasized in PCL Shipping
Philippines, Inc. v. NLRC,67 to wit:
chanRoblesvirtualLaw library

Petitioners admit that they did not inform private respondent in writing of the charges against
him and that they failed to conduct a formal investigation to give him opportunity to air his side.
However, petitioners contend that the twin requirements of notice and hearing applies strictly
only when the employment is within the Philippines and that these need not be strictly observed
in cases of international maritime or overseas employment.
The Court does not agree. The provisions of the Constitution as well as the Labor Code which
afford protection to labor apply to Filipino employees whether working within the Philippines
or abroad. Moreover, the principle of lex loci contractus (the law of the place where the
contract is made) governs in this jurisdiction. In the present case, it is not disputed that the
Contract of Employment entered into by and between petitioners and private respondent was
executed here in the Philippines with the approval of the Philippine Overseas Employment
Administration (POEA). Hence, the Labor Code together with its implementing rules and
regulations and other laws affecting labor apply in this case.68 (Emphasis supplied, citations
omitted)
By our laws, overseas Filipino workers (OFWs) may only be terminated for a just or authorized
cause and after compliance with procedural due process requirements.
Article 282 of the Labor Code enumerates the just causes of termination by the employer.
Thus:
chanRoblesvirtualLawlibrary

Art. 282. Termination by employer. An employer may terminate an employment for any of the
following causes:
cralawlawlibrary

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;
chanroblesvirtuallaw library

(b) Gross and habitual neglect by the employee of his duties;

chanroblesvirtuallawlibrary

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;
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(d) Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representatives; and
ChanRob lesVirtualawlibrary

(e) Other causes analogous to the foregoing.

Petitioners allegation that respondent was inefficient in her work and negligent in her duties69
may, therefore, constitute a just cause for termination under Article 282(b), but only if petitioner
was able to prove it.
The burden of proving that there is just cause for termination is on the employer. The employer
must affirmatively show rationally adequate evidence that the dismissal was for a justifiable
cause.70 Failure to show that there was valid or just cause for termination would necessarily
mean that the dismissal was illegal.71
cralawred

To show that dismissal resulting from inefficiency in work is valid, it must be shown that: 1) the
employer has set standards of conduct and workmanship against which the employee will be
judged; 2) the standards of conduct and workmanship must have been communicated to the
employee; and 3) the communication was made at a reasonable time prior to the employees
performance assessment.
This is similar to the law and jurisprudence on probationary employees, which allow termination
of the employee only when there is just cause or when [the probationary employee] fails to
qualify as a regular employee in accordance with reasonable standards made known by the
employer to the employee at the time of his [or her] engagement.72
cralawred

However, we do not see why the application of that ruling should be limited to probationary
employment. That rule is basic to the idea of security of tenure and due process, which are
guaranteed to all employees, whether their employment is probationary or regular.
The pre-determined standards that the employer sets are the bases for determining the
probationary employees fitness, propriety, efficiency, and qualifications as a regular employee.
Due process requires that the probationary employee be informed of such standards at the time of
his or her engagement so he or she can adjust his or her character or workmanship accordingly.
Proper adjustment to fit the standards upon which the employees qualifications will be
evaluated will increase ones chances of being positively assessed for regularization by his or her
employer.
Assessing an employees work performance does not stop after regularization. The employer, on
a regular basis, determines if an employee is still qualified and efficient, based on work
standards. Based on that determination, and after complying with the due process requirements
of notice and hearing, the employer may exercise its management prerogative of terminating the

employee found unqualified.

The regular employee must constantly attempt to prove to his or her employer that he or she
meets all the standards for employment. This time, however, the standards to be met are set for
the purpose of retaining employment or promotion. The employee cannot be expected to meet
any standard of character or workmanship if such standards were not communicated to him or
her. Courts should remain vigilant on allegations of the employers failure to communicate work
standards that would govern ones employment if [these are] to discharge in good faith [their]
duty to adjudicate.73
cralawred

In this case, petitioner merely alleged that respondent failed to comply with her foreign
employers work requirements and was inefficient in her work.74No evidence was shown to
support such allegations. Petitioner did not even bother to specify what requirements were not
met, what efficiency standards were violated, or what particular acts of respondent constituted
inefficiency.
There was also no showing that respondent was sufficiently informed of the standards against
which her work efficiency and performance were judged. The parties conflict as to the position
held by respondent showed that even the matter as basic as the job title was not clear.
The bare allegations of petitioner are not sufficient to support a claim that there is just cause for
termination. There is no proof that respondent was legally terminated.
Petitioner failed to comply with
the due process requirements
Respondents dismissal less than one year from hiring and her repatriation on the same day show
not only failure on the part of petitioner to comply with the requirement of the existence of just
cause for termination. They patently show that the employers did not comply with the due
process requirement.
A valid dismissal requires both a valid cause and adherence to the valid procedure of dismissal.75
The employer is required to give the charged employee at least two written notices before
termination.76 One of the written notices must inform the employee of the particular acts that
may cause his or her dismissal.77 The other notice must [inform] the employee of the
employers decision.78 Aside from the notice requirement, the employee must also be given an
opportunity to be heard.79
cralawred

Petitioner failed to comply with the twin notices and hearing requirements. Respondent started
working on June 26, 1997. She was told that she was terminated on July 14, 1997 effective on
the same day and barely a month from her first workday. She was also repatriated on the same
day that she was informed of her termination. The abruptness of the termination negated any
finding that she was properly notified and given the opportunity to be heard. Her constitutional
right to due process of law was violated.
II

Respondent Joy Cabiles, having been illegally dismissed, is entitled to her salary for the
unexpired portion of the employment contract that was violated together with attorneys fees and
reimbursement of amounts withheld from her salary.
Section 10 of Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas
Filipinos Act of 1995, states that overseas workers who were terminated without just, valid, or
authorized cause shall be entitled to the full reimbursement of his placement fee with interest of
twelve (12%) per annum, plus his salaries for the unexpired portion of his employment contract
or for three (3) months for every year of the unexpired term, whichever is less.
Sec. 10. MONEY CLAIMS. Notwithstanding any provision of law to the contrary, the Labor
Arbiters of the National Labor Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90) calendar days after filing of the
complaint, the claims arising out of an employer-employee relationship or by virtue of any law
or contract involving Filipino workers for overseas deployment including claims for actual,
moral, exemplary and other forms of damages.
The liability of the principal/employer and the recruitment/placement agency for any and all
claims under this section shall be joint and several. This provisions [sic] shall be incorporated in
the contract for overseas employment and shall be a condition precedent for its approval. The
performance bond to be filed by the recruitment/placement agency, as provided by law, shall be
answerable for all money claims or damages that may be awarded to the workers. If the
recruitment/placement agency is a juridical being, the corporate officers and directors and
partners as the case may be, shall themselves be jointly and solidarily liable with the corporation
or partnership for the aforesaid claims and damages.
Such liabilities shall continue during the entire period or duration of the employment contract
and shall not be affected by any substitution, amendment or modification made locally or in a
foreign country of the said contract.
Any compromise/amicable settlement or voluntary agreement on money claims inclusive of
damages under this section shall be paid within four (4) months from the approval of the
settlement by the appropriate authority.
In case of termination of overseas employment without just, valid or authorized cause as defined
by law or contract, the workers shall be entitled to the full reimbursement of his placement fee
with interest of twelve (12%) per annum, plus his salaries for the unexpired portion of his
employment contract or for three (3) months for every year of the unexpired term, whichever is
less.
....
(Emphasis supplied)

chanrobleslaw

Section 15 of Republic Act No. 8042 states that repatriation of the worker and the transport of
his [or her] personal belongings shall be the primary responsibility of the agency which recruited

or deployed the worker overseas. The exception is when termination of employment is due
solely to the fault of the worker,80 which as we have established, is not the case. It reads:
chanRoblesv irtualLawlibrary

SEC. 15. REPATRIATION OF WORKERS; EMERGENCY REPATRIATION FUND. The

repatriation of the worker and the transport of his personal belongings shall be the primary
responsibility of the agency which recruited or deployed the worker overseas. All costs attendant
to repatriation shall be borne by or charged to the agency concerned and/or its principal.
Likewise, the repatriation of remains and transport of the personal belongings of a deceased
worker and all costs attendant thereto shall be borne by the principal and/or local agency.
However, in cases where the termination of employment is due solely to the fault of the worker,
the principal/employer or agency shall not in any manner be responsible for the repatriation of
the former and/or his belongings.
....
The Labor Code81 also entitles the employee to 10% of the amount of withheld wages as
attorneys fees when the withholding is unlawful.
The Court of Appeals affirmed the National Labor Relations Commissions decision to award
respondent NT$46,080.00 or the three-month equivalent of her salary, attorneys fees of
NT$300.00, and the reimbursement of the withheld NT$3,000.00 salary, which answered for her
repatriation.
We uphold the finding that respondent is entitled to all of these awards. The award of the threemonth equivalent of respondents salary should, however, be increased to the amount
equivalent to the unexpired term of the employment contract.
In Serrano v. Gallant Maritime Services, Inc. and Marlow Navigation Co., Inc.,82 this court ruled
that the clause or for three (3) months for every year of the unexpired term, whichever is less83
is unconstitutional for violating the equal protection clause and substantive due process.84
cralawred

A statute or provision which was declared unconstitutional is not a law. It confers no rights; it
imposes no duties; it affords no protection; it creates no office; it is inoperative as if it has not
been passed at all.85
cralawred

We are aware that the clause or for three (3) months for every year of the unexpired term,
whichever is less was reinstated in Republic Act No. 8042 upon promulgation of Republic Act
No. 10022 in 2010. Section 7 of Republic Act No. 10022 provides:
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Section 7. Section 10 of Republic Act No. 8042, as amended, is hereby amended to read as
follows:
chanRoblesvirtualLawlibrary

SEC. 10. Money Claims. Notwithstanding any provision of law to the contrary, the Labor
Arbiters of the National Labor Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90) calendar days after the filing of the
complaint, the claims arising out of an employer-employee relationship or by virtue of any law
or contract involving Filipino workers for overseas deployment including claims for actual,

moral, exemplary and other forms of damage. Consistent with this mandate, the NLRC shall
endeavor to update and keep abreast with the developments in the global services industry.
The liability of the principal/employer and the recruitment/placement agency for any and all
claims under this section shall be joint and several. This provision shall be incorporated in the
contract for overseas employment and shall be a condition precedent for its approval. The
performance bond to de [sic] filed by the recruitment/placement agency, as provided by law,
shall be answerable for all money claims or damages that may be awarded to the workers. If the
recruitment/placement agency is a juridical being, the corporate officers and directors and
partners as the case may be, shall themselves be jointly and solidarily liable with the corporation
or partnership for the aforesaid claims and damages.
Such liabilities shall continue during the entire period or duration of the employment contract
and shall not be affected by any substitution, amendment or modification made locally or in a
foreign country of the said contract.
Any compromise/amicable settlement or voluntary agreement on money claims inclusive of
damages under this section shall be paid within thirty (30) days from approval of the settlement
by the appropriate authority.
In case of termination of overseas employment without just, valid or authorized cause as defined
by law or contract, or any unauthorized deductions from the migrant workers salary, the worker
shall be entitled to the full reimbursement if [sic] his placement fee and the deductions made
with interest at twelve percent (12%) per annum, plus his salaries for the unexpired portion of his
employment contract or for three (3) months for every year of the unexpired term, whichever is
less.
In case of a final and executory judgement against a foreign employer/principal, it shall be
automatically disqualified, without further proceedings, from participating in the Philippine
Overseas Employment Program and from recruiting and hiring Filipino workers until and unless
it fully satisfies the judgement award.
Noncompliance with the mandatory periods for resolutions of case provided under this section
shall subject the responsible officials to any or all of the following penalties:
cralawlawlibrary

(a) The salary of any such official who fails to render his decision or resolution within the
prescribed period shall be, or caused to be, withheld until the said official complies therewith;

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(b) Suspension for not more than ninety (90) days; or

(c) Dismissal from the service with disqualification to hold any appointive public office for five
(5) years.
Provided, however, That the penalties herein provided shall be without prejudice to any liability
which any such official may have incured [sic] under other existing laws or rules and regulations
as a consequence of violating the provisions of this paragraph. (Emphasis supplied)

Republic Act No. 10022 was promulgated on March 8, 2010. This means that the reinstatement
of the clause in Republic Act No. 8042 was not yet in effect at the time of respondents
termination from work in 1997.86 Republic Act No. 8042 before it was amended by Republic Act
No. 10022 governs this case.
When a law is passed, this court awaits an actual case that clearly raises adversarial positions in
their proper context before considering a prayer to declare it as unconstitutional.
However, we are confronted with a unique situation. The law passed incorporates the exact
clause already declared as unconstitutional, without any perceived substantial change in the
circumstances.
This may cause confusion on the part of the National Labor Relations Commission and the Court
of Appeals. At minimum, the existence of Republic Act No. 10022 may delay the execution of
the judgment in this case, further frustrating remedies to assuage the wrong done to petitioner.
Hence, there is a necessity to decide this constitutional issue.
Moreover, this court is possessed with the constitutional duty to [p]romulgate rules concerning
the protection and enforcement of constitutional rights.87 When cases become moot and
academic, we do not hesitate to provide for guidance to bench and bar in situations where the
same violations are capable of repetition but will evade review. This is analogous to cases where
there are millions of Filipinos working abroad who are bound to suffer from the lack of
protection because of the restoration of an identical clause in a provision previously declared as
unconstitutional.
In the hierarchy of laws, the Constitution is supreme. No branch or office of the government may
exercise its powers in any manner inconsistent with the Constitution, regardless of the existence
of any law that supports such exercise. The Constitution cannot be trumped by any other law. All
laws must be read in light of the Constitution. Any law that is inconsistent with it is a nullity.
Thus, when a law or a provision of law is null because it is inconsistent with the Constitution, the
nullity cannot be cured by reincorporation or reenactment of the same or a similar law or
provision. A law or provision of law that was already declared unconstitutional remains as such
unless circumstances have so changed as to warrant a reverse conclusion.
We are not convinced by the pleadings submitted by the parties that the situation has so changed
so as to cause us to reverse binding precedent.
Likewise, there are special reasons of judicial efficiency and economy that attend to these cases.
The new law puts our overseas workers in the same vulnerable position as they were prior to
Serrano. Failure to reiterate the very ratio decidendi of that case will result in the same untold
economic hardships that our reading of the Constitution intended to avoid. Obviously, we cannot
countenance added expenses for further litigation that will reduce their hard-earned wages as
well as add to the indignity of having been deprived of the protection of our laws simply because

our precedents have not been followed. There is no constitutional doctrine that causes injustice in
the face of empty procedural niceties. Constitutional interpretation is complex, but it is never
unreasonable.
Thus, in a resolution88 dated October 22, 2013, we ordered the parties and the Office of the
Solicitor General to comment on the constitutionality of the reinstated clause in Republic Act
No. 10022.
In its comment,89 petitioner argued that the clause was constitutional.90 The legislators intended a
balance between the employers and the employees rights by not unduly burdening the local
recruitment agency.91 Petitioner is also of the view that the clause was already declared as
constitutional in Serrano.92
cralawred

The Office of the Solicitor General also argued that the clause was valid and constitutional.93
However, since the parties never raised the issue of the constitutionality of the clause as
reinstated in Republic Act No. 10022, its contention is that it is beyond judicial review.94
cralawred

On the other hand, respondent argued that the clause was unconstitutional because it infringed on
workers right to contract.95
cralawred

We observe that the reinstated clause, this time as provided in Republic Act. No. 10022, violates
the constitutional rights to equal protection and due process.96 Petitioner as well as the Solicitor
General have failed to show any compelling change in the circumstances that would warrant us
to revisit the precedent.
We reiterate our finding in Serrano v. Gallant Maritime that limiting wages that should be
recovered by an illegally dismissed overseas worker to three months is both a violation of due
process and the equal protection clauses of the Constitution.
Equal protection of the law is a guarantee that persons under like circumstances and falling
within the same class are treated alike, in terms of privileges conferred and liabilities
enforced.97 It is a guarantee against undue favor and individual or class privilege, as well as
hostile discrimination or the oppression of inequality.98
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In creating laws, the legislature has the power to make distinctions and classifications.99 In
exercising such power, it has a wide discretion.100
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The equal protection clause does not infringe on this legislative power.101 A law is void on this
basis, only if classifications are made arbitrarily.102 There is no violation of the equal protection
clause if the law applies equally to persons within the same class and if there are reasonable
grounds for distinguishing between those falling within the class and those who do not fall
within the class.103 A law that does not violate the equal protection clause prescribes a reasonable
classification.104
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A reasonable classification (1) must rest on substantial distinctions; (2) must be germane to the
purposes of the law; (3) must not be limited to existing conditions only; and (4) must apply

equally to all members of the same class.105

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The reinstated clause does not satisfy the requirement of reasonable classification.
In Serrano, we identified the classifications made by the reinstated clause. It distinguished
between fixed-period overseas workers and fixed-period local workers.106 It also distinguished
between overseas workers with employment contracts of less than one year and overseas workers
with employment contracts of at least one year.107 Within the class of overseas workers with at
least one-year employment contracts, there was a distinction between those with at least a year
left in their contracts and those with less than a year left in their contracts when they were
illegally dismissed.108
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The Congress classification may be subjected to judicial review. In Serrano, there is a

legislative classification which impermissibly interferes with the exercise of a fundamental right
or operates to the peculiar disadvantage of a suspect class.109
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Under the Constitution, labor is afforded special protection.110 Thus, this court in Serrano,
[i]mbued with the same sense of obligation to afford protection to labor, . . . employ[ed] the
standard of strict judicial scrutiny, for it perceive[d] in the subject clause a suspect classification
prejudicial to OFWs.111
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We also noted in Serrano that before the passage of Republic Act No. 8042, the money claims of
illegally terminated overseas and local workers with fixed-term employment were computed in
the same manner.112 Their money claims were computed based on the unexpired portions of
their contracts.113 The adoption of the reinstated clause in Republic Act No. 8042 subjected the
money claims of illegally dismissed overseas workers with an unexpired term of at least a year to
a cap of three months worth of their salary.114 There was no such limitation on the money claims
of illegally terminated local workers with fixed-term employment.115
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We observed that illegally dismissed overseas workers whose employment contracts had a term
of less than one year were granted the amount equivalent to the unexpired portion of their
employment contracts.116 Meanwhile, illegally dismissed overseas workers with employment
terms of at least a year were granted a cap equivalent to three months of their salary for the
unexpired portions of their contracts.117
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Observing the terminologies used in the clause, we also found that the subject clause creates a
sub-layer of discrimination among OFWs whose contract periods are for more than one year:
those who are illegally dismissed with less than one year left in their contracts shall be entitled to
their salaries for the entire unexpired portion thereof, while those who are illegally dismissed
with one year or more remaining in their contracts shall be covered by the reinstated clause, and
their monetary benefits limited to their salaries for three months only.118
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We do not need strict scrutiny to conclude that these classifications do not rest on any real or
substantial distinctions that would justify different treatments in terms of the computation of
money claims resulting from illegal termination.

Overseas workers regardless of their classifications are entitled to security of tenure, at least for
the period agreed upon in their contracts. This means that they cannot be dismissed before the
end of their contract terms without due process. If they were illegally dismissed, the workers
right to security of tenure is violated.
The rights violated when, say, a fixed-period local worker is illegally terminated are neither
greater than nor less than the rights violated when a fixed-period overseas worker is illegally
terminated. It is state policy to protect the rights of workers without qualification as to the place
of employment.119 In both cases, the workers are deprived of their expected salary, which they
could have earned had they not been illegally dismissed. For both workers, this deprivation
translates to economic insecurity and disparity.120 The same is true for the distinctions between
overseas workers with an employment contract of less than one year and overseas workers with
at least one year of employment contract, and between overseas workers with at least a year left
in their contracts and overseas workers with less than a year left in their contracts when they
were illegally dismissed.
For this reason, we cannot subscribe to the argument that [overseas workers] are contractual
employees who can never acquire regular employment status, unlike local workers121 because it
already justifies differentiated treatment in terms of the computation of money claims.122
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Likewise, the jurisdictional and enforcement issues on overseas workers money claims do not
justify a differentiated treatment in the computation of their money claims.123 If anything, these
issues justify an equal, if not greater protection and assistance to overseas workers who generally
are more prone to exploitation given their physical distance from our government.
We also find that the classifications are not relevant to the purpose of the law, which is to
establish a higher standard of protection and promotion of the welfare of migrant workers, their
families and overseas Filipinos in distress, and for other purposes.124 Further, we find specious
the argument that reducing the liability of placement agencies redounds to the benefit of the
[overseas] workers.125
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Putting a cap on the money claims of certain overseas workers does not increase the standard of
protection afforded to them. On the other hand, foreign employers are more incentivized by the
reinstated clause to enter into contracts of at least a year because it gives them more flexibility to
violate our overseas workers rights. Their liability for arbitrarily terminating overseas workers is
decreased at the expense of the workers whose rights they violated. Meanwhile, these overseas
workers who are impressed with an expectation of a stable job overseas for the longer contract
period disregard other opportunities only to be terminated earlier. They are left with claims that
are less than what others in the same situation would receive. The reinstated clause, therefore,
creates a situation where the law meant to protect them makes violation of rights easier and
simply benign to the violator.
As Justice Brion said in his concurring opinion in Serrano:

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Section 10 of R.A. No. 8042 affects these well-laid rules and measures, and in fact provides a
hidden twist affecting the principal/employers liability. While intended as an incentive accruing
to recruitment/manning agencies, the law, as worded, simply limits the OFWs recovery in

wrongful dismissal situations. Thus, it redounds to the benefit of whoever may be liable,
including the principal/employer the direct employer primarily liable for the wrongful
dismissal. In this sense, Section 10 read as a grant of incentives to recruitment/manning
agencies oversteps what it aims to do by effectively limiting what is otherwise the full liability
of the foreign principals/employers. Section 10, in short, really operates to benefit the wrong
party and allows that party, without justifiable reason, to mitigate its liability for wrongful
dismissals. Because of this hidden twist, the limitation of liability under Section 10 cannot be an
appropriate incentive, to borrow the term that R.A. No. 8042 itself uses to describe the
incentive it envisions under its purpose clause.
What worsens the situation is the chosen mode of granting the incentive: instead of a grant that,
to encourage greater efforts at recruitment, is directly related to extra efforts undertaken, the law
simply limits their liability for the wrongful dismissals of already deployed OFWs. This is
effectively a legally-imposed partial condonation of their liability to OFWs, justified solely by
the laws intent to encourage greater deployment efforts. Thus, the incentive, from a more
practical and realistic view, is really part of a scheme to sell Filipino overseas labor at a bargain
for purposes solely of attracting the market. . . .
The so-called incentive is rendered particularly odious by its effect on the OFWs the benefits
accruing to the recruitment/manning agencies and their principals are taken from the pockets of
the OFWs to whom the full salaries for the unexpired portion of the contract rightfully belong.
Thus, the principals/employers and the recruitment/manning agencies even profit from their
violation of the security of tenure that an employment contract embodies. Conversely, lesser
protection is afforded the OFW, not only because of the lessened recovery afforded him or her
by operation of law, but also because this same lessened recovery renders a wrongful dismissal
easier and less onerous to undertake; the lesser cost of dismissing a Filipino will always be a
consideration a foreign employer will take into account in termination of employment decisions.
. . .126
Further, [t]here can never be a justification for any form of government action that alleviates the
burden of one sector, but imposes the same burden on another sector, especially when the
favored sector is composed of private businesses such as placement agencies, while the
disadvantaged sector is composed of OFWs whose protection no less than the Constitution
commands. The idea that private business interest can be elevated to the level of a compelling
state interest is odious.127
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Along the same line, we held that the reinstated clause violates due process rights. It is arbitrary
as it deprives overseas workers of their monetary claims without any discernable valid
purpose.128
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Respondent Joy Cabiles is entitled to her salary for the unexpired portion of her contract, in
accordance with Section 10 of Republic Act No. 8042. The award of the three-month
equivalence of respondents salary must be modified accordingly. Since she started working on
June 26, 1997 and was terminated on July 14, 1997, respondent is entitled to her salary from July
15, 1997 to June 25, 1998. To rule otherwise would be iniquitous to petitioner and other OFWs,
and would, in effect, send a wrong signal that principals/employers and recruitment/manning

agencies may violate an OFWs security of tenure which an employment contract embodies and
actually profit from such violation based on an unconstitutional provision of law.129
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III
On the interest rate, the Bangko Sentral ng Pilipinas Circular No. 799 of June 21, 2013, which
revised the interest rate for loan or forbearance from 12% to 6% in the absence of stipulation,
applies in this case. The pertinent portions of Circular No. 799, Series of 2013, read:
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The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following
revisions governing the rate of interest in the absence of stipulation in loan contracts, thereby
amending Section 2 of Circular No. 905, Series of 1982:
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Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the
rate allowed in judgments, in the absence of an express contract as to such rate of interest, shall
be six percent (6%) per annum.
Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations for Banks and
Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial
Institutions are hereby amended accordingly.
This Circular shall take effect on 1 July 2013.
Through the able ponencia of Justice Diosdado Peralta, we laid down the guidelines in
computing legal interest in Nacar v. Gallery Frames:130
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II. With regard particularly to an award of interest in the concept of actual and compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
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1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a
loan or forbearance of money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of stipulation, the rate of interest shall be
6% per annum to be computed from default, i.e., from judicial or extrajudicial demand
under and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an
interest on the amount of damages awarded may be imposed at the discretion of the court
at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated
claims or damages, except when or until the demand can be established with reasonable
certainty. Accordingly, where the demand is established with reasonable certainty, the
interest shall begin to run from the time the claim is made judicially or extrajudicially
(Art. 1169, Civil Code), but when such certainty cannot be so reasonably established at
the time the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may be
deemed to have been reasonably ascertained). The actual base for the computation of
legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory,
the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above,
shall be 6% per annum from such finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of credit.

And, in addition to the above, judgments that have become final and executory prior to July 1,
2013, shall not be disturbed and shall continue to be implemented applying the rate of interest
fixed therein.131
Circular No. 799 is applicable only in loans and forbearance of money, goods, or credits, and in
judgments when there is no stipulation on the applicable interest rate. Further, it is only
applicable if the judgment did not become final and executory before July 1, 2013.132
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We add that Circular No. 799 is not applicable when there is a law that states otherwise. While
the Bangko Sentral ng Pilipinas has the power to set or limit interest rates,133 these interest rates
do not apply when the law provides that a different interest rate shall be applied. [A] Central
Bank Circular cannot repeal a law. Only a law can repeal another law.134
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For example, Section 10 of Republic Act No. 8042 provides that unlawfully terminated overseas
workers are entitled to the reimbursement of his or her placement fee with an interest of 12% per
annum. Since Bangko Sentral ng Pilipinas circulars cannot repeal Republic Act No. 8042, the
issuance of Circular No. 799 does not have the effect of changing the interest on awards for
reimbursement of placement fees from 12% to 6%. This is despite Section 1 of Circular No. 799,
which provides that the 6% interest rate applies even to judgments.
Moreover, laws are deemed incorporated in contracts. The contracting parties need not repeat
them. They do not even have to be referred to. Every contract, thus, contains not only what has
been explicitly stipulated, but the statutory provisions that have any bearing on the matter.135
There is, therefore, an implied stipulation in contracts between the placement agency and the
overseas worker that in case the overseas worker is adjudged as entitled to reimbursement of his
or her placement fees, the amount shall be subject to a 12% interest per annum. This implied
stipulation has the effect of removing awards for reimbursement of placement fees from Circular
No. 799s coverage.
The same cannot be said for awards of salary for the unexpired portion of the employment
contract under Republic Act No. 8042. These awards are covered by Circular No. 799 because
the law does not provide for a specific interest rate that should apply.
In sum, if judgment did not become final and executory before July 1, 2013 and there was no
stipulation in the contract providing for a different interest rate, other money claims under
Section 10 of Republic Act No. 8042 shall be subject to the 6% interest per annum in accordance
with Circular No. 799.
This means that respondent is also entitled to an interest of 6% per annum on her money claims
from the finality of this judgment.

IV
Finally, we clarify the liabilities of Wacoal as principal and petitioner as the employment agency
that facilitated respondents overseas employment.
Section 10 of the Migrant Workers and Overseas Filipinos Act of 1995 provides that the foreign
employer and the local employment agency are jointly and severally liable for money claims
including claims arising out of an employer-employee relationship and/or damages. This section
also provides that the performance bond filed by the local agency shall be answerable for such
money claims or damages if they were awarded to the employee.
This provision is in line with the states policy of affording protection to labor and alleviating
workers plight.136
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In overseas employment, the filing of money claims against the foreign employer is attended by
practical and legal complications. The distance of the foreign employer alone makes it difficult
for an overseas worker to reach it and make it liable for violations of the Labor Code. There are
also possible conflict of laws, jurisdictional issues, and procedural rules that may be raised to
frustrate an overseas workers attempt to advance his or her claims.
It may be argued, for instance, that the foreign employer must be impleaded in the complaint as
an indispensable party without which no final determination can be had of an action.137
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The provision on joint and several liability in the Migrant Workers and Overseas Filipinos Act of
1995 assures overseas workers that their rights will not be frustrated with these complications.
The fundamental effect of joint and several liability is that each of the debtors is liable for the
entire obligation.138 A final determination may, therefore, be achieved even if only one of the
joint and several debtors are impleaded in an action. Hence, in the case of overseas employment,
either the local agency or the foreign employer may be sued for all claims arising from the
foreign employers labor law violations. This way, the overseas workers are assured that
someone the foreign employers local agent may be made to answer for violations that the
foreign employer may have committed.
The Migrant Workers and Overseas Filipinos Act of 1995 ensures that overseas workers have
recourse in law despite the circumstances of their employment. By providing that the liability of
the foreign employer may be enforced to the full extent139 against the local agent, the overseas
worker is assured of immediate and sufficient payment of what is due them.140
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Corollary to the assurance of immediate recourse in law, the provision on joint and several
liability in the Migrant Workers and Overseas Filipinos Act of 1995 shifts the burden of going
after the foreign employer from the overseas worker to the local employment agency. However,
it must be emphasized that the local agency that is held to answer for the overseas workers
money claims is not left without remedy. The law does not preclude it from going after the
foreign employer for reimbursement of whatever payment it has made to the employee to answer
for the money claims against the foreign employer.

A further implication of making local agencies jointly and severally liable with the foreign
employer is that an additional layer of protection is afforded to overseas workers. Local agencies,
which are businesses by nature, are inoculated with interest in being always on the lookout
against foreign employers that tend to violate labor law. Lest they risk their reputation or
finances, local agencies must already have mechanisms for guarding against unscrupulous
foreign employers even at the level prior to overseas employment applications.
With the present state of the pleadings, it is not possible to determine whether there was indeed a
transfer of obligations from petitioner to Pacific. This should not be an obstacle for the
respondent overseas worker to proceed with the enforcement of this judgment. Petitioner is
possessed with the resources to determine the proper legal remedies to enforce its rights against
Pacific, if any.
V
Many times, this court has spoken on what Filipinos may encounter as they travel into the
farthest and most difficult reaches of our planet to provide for their families. In Prieto v.
NLRC:141
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The Court is not unaware of the many abuses suffered by our overseas workers in the foreign
land where they have ventured, usually with heavy hearts, in pursuit of a more fulfilling future.
Breach of contract, maltreatment, rape, insufficient nourishment, sub-human lodgings, insults
and other forms of debasement, are only a few of the inhumane acts to which they are subjected
by their foreign employers, who probably feel they can do as they please in their own country.
While these workers may indeed have relatively little defense against exploitation while they are
abroad, that disadvantage must not continue to burden them when they return to their own
territory to voice their muted complaint. There is no reason why, in their very own land, the
protection of our own laws cannot be extended to them in full measure for the redress of their
grievances.142
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But it seems that we have not said enough.

We face a diaspora of Filipinos. Their travails and their heroism can be told a million times over;
each of their stories as real as any other. Overseas Filipino workers brave alien cultures and the
heartbreak of families left behind daily. They would count the minutes, hours, days, months, and
years yearning to see their sons and daughters. We all know of the joy and sadness when they
come home to see them all grown up and, being so, they remember what their work has cost
them. Twitter accounts, Facetime, and many other gadgets and online applications will never
substitute for their lost physical presence.
Unknown to them, they keep our economy afloat through the ebb and flow of political and
economic crises. They are our true diplomats, they who show the world the resilience, patience,
and creativity of our people. Indeed, we are a people who contribute much to the provision of
material creations of this world.
This government loses its soul if we fail to ensure decent treatment for all Filipinos. We default

by limiting the contractual wages that should be paid to our workers when their contracts are
breached by the foreign employers. While we sit, this court will ensure that our laws will reward
our overseas workers with what they deserve: their dignity.
Inevitably, their dignity is ours as well.
WHEREFORE, the petition is DENIED. The decision of the Court of Appeals is AFFIRMED
with modification. Petitioner Sameer Overseas Placement Agency is ORDERED to pay
respondent Joy C. Cabiles the amount equivalent to her salary for the unexpired portion of her
employment contract at an interest of 6% per annum from the finality of this judgment. Petitioner
is also ORDERED to reimburse respondent the withheld NT$3,000.00 salary and pay
respondent attorneys fees of NT$300.00 at an interest of 6% per annum from the finality of this
judgment.
The clause, or for three (3) months for every year of the unexpired term, whichever is less in
Section 7 of Republic Act No. 10022 amending Section 10 of Republic Act No. 8042 is declared
unconstitutional and, therefore, null and void.
SO ORDERED.

[G.R. NOS. 182978-79 : April 7, 2009]

BECMEN SERVICE EXPORTER AND PROMOTION, INC., Petitioner, v. SPOUSES
SIMPLICIO and MILA CUARESMA (for and in behalf of their daughter, Jasmin G.
Cuaresma), WHITE FALCON SERVICES, INC. and JAIME ORTIZ (President,White
Falcon Services, Inc.), Respondents.
[G.R. NOS. 184298-99 : April 7, 2009]
SPOUSES SIMPLICIO and MILA CUARESMA (for and in behalf of their daughter,
Jasmin G. Cuaresma), Petitioners, v. WHITE FALCON SERVICES, INC. and BECMEN
SERVICE EXPORTER AND PROMOTION, INC., Respondents.
DECISION
YNARES-SANTIAGO, J.:
These consolidated petitions assail the Amended Decision1 of the Court of Appeals dated May
14, 2008 in CA-G.R. SP No. 80619 and CA-G.R. SP No. 81030 finding White Falcon Services,
Inc. and Becmen Service Exporter and Promotion, Inc. solidarily liable to indemnify spouses
Simplicio and Mila Cuaresma the amount of US$4,686.73 in actual damages with interest.
On January 6, 1997, Jasmin Cuaresma (Jasmin) was deployed by Becmen Service Exporter and
Promotion, Inc.2 (Becmen) to serve as assistant nurse in Al-Birk Hospital in the Kingdom of
Saudi Arabia (KSA), for a contract duration of three years, with a corresponding salary of
US$247.00 per month.
Over a year later, she died allegedly of poisoning.
Jessie Fajardo, a co-worker of Jasmin, narrated that on June 21, 1998, Jasmin was found dead by
a female cleaner lying on the floor inside her dormitory room with her mouth foaming and
smelling of poison.3
Based on the police report and the medical report of the examining physician of the Al-Birk
Hospital, who conducted an autopsy of Jasmin's body, the likely cause of her death was
poisoning. Thus:
According to letter No. 199, dated 27.2.1419H, issued by Al-Birk Police Station, for examining
the corpse of Jasmin Cuaresma, 12.20 P.M. 27.2.1419H, Sunday, at Al-Birk Hospital.
1. The Police Report on the Death
2. The Medical Diagnosis
Sex: Female Age: 25 years Relg: Christian

The said person was brought to the Emergency Room of the hospital; time 12.20 P.M. and she
was unconscious, blue, no pulse, no respiration and the first aid esd undertaken but without
success.
3. Diagnosis and Opinion: Halt in blood circulation respiratory system and brain damage due to
an apparent poisoning which is under investigation.4
Name

: Jasmin Cuaresma

Sex

: Female

Marital Status : Single Nationality: Philipino (sic)

Religion

: Christian

Profession

: Nurse

Address

: Al-Birk Genrl. Hospital Birth Place: The Philippines

On 27.2.1419H, Dr. Tariq Abdulminnem and Dr. Ashoki Komar, both have examined the dead
body of Jasmin Cuaresma, at 12.20 P.M., Sunday, 22.2.14189H, and the result was:
1. Report of the Police on the death
2. Medical Examination: Blue skin and paleness on the Extrimes (sic), total halt to blood
circulation and respiratory system and brain damage. There were no external injuries. Likely
poisoning by taking poisonous substance, yet not determined. There was a bad smell in the
mouth and unknown to us.5 (Emphasis supplied)
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Jasmin's body was repatriated to Manila on September 3, 1998. The following day, the City
Health Officer of Cabanatuan City conducted an autopsy and the resulting medical report
indicated that Jasmin died under violent circumstances, and not poisoning as originally found by
the KSA examining physician. The City Health Officer found that Jasmin had abrasions at her
inner lip and gums; lacerated wounds and abrasions on her left and right ears; lacerated wounds
and hematoma (contusions) on her elbows; abrasions and hematoma on her thigh and legs; intramuscular hemorrhage at the anterior chest; rib fracture; puncture wounds; and abrasions on the
labia minora of the vaginal area.6
On March 11, 1999, Jasmin's remains were exhumed and examined by the National Bureau of
Investigation (NBI). The toxicology report of the NBI, however, tested negative for non-volatile,
metallic poison and insecticides.7
Simplicio and Mila Cuaresma (the Cuaresmas), Jasmin's parents and her surviving heirs,
received from the Overseas Workers Welfare Administration (OWWA) the following amounts:
P50,000.00 for death benefits; P50,000.00 for loss of life; P20,000.00 for funeral expenses; and
P10,000.00 for medical reimbursement.

On November 22, 1999, the Cuaresmas filed a complaint against Becmen and its principal in the
KSA, Rajab & Silsilah Company (Rajab), claiming death and insurance benefits, as well as
moral and exemplary damages for Jasmin's death.8
In their complaint, the Cuaresmas claim that Jasmin's death was work-related, having occurred at
the employer's premises;9 that under Jasmin's contract with Becmen, she is entitled to "iqama
insurance" coverage; that Jasmin is entitled to compensatory damages in the amount of
US$103,740.00, which is the sum total of her monthly salary of US$247.00 per month under her
employment contract, multiplied by 35 years (or the remaining years of her productive life had
death not supervened at age 25, assuming that she lived and would have retired at age 60).
The Cuaresmas assert that as a result of Jasmin's death under mysterious circumstances, they
suffered sleepless nights and mental anguish. The situation, they claim, was aggravated by
findings in the autopsy and exhumation reports which evidently show that a grave injustice has
been committed against them and their daughter, for which those responsible should likewise be
made to pay moral and exemplary damages and attorney's fees.
In their position paper, Becmen and Rajab insist that Jasmin committed suicide, citing a prior
unsuccessful suicide attempt sometime in March or April 1998 and relying on the medical report
of the examining physician of the Al-Birk Hospital. They likewise deny liability because the
Cuaresmas already recovered death and other benefits totaling P130,000.00 from the OWWA.
They insist that the Cuaresmas are not entitled to "iqama insurance" because this refers to the
"issuance" - not insurance - of iqama, or residency/work permit required in the KSA. On the
issue of moral and exemplary damages, they claim that the Cuaresmas are not entitled to the
same because they have not acted with fraud, nor have they been in bad faith in handling
Jasmin's case.
While the case was pending, Becmen filed a manifestation and motion for substitution alleging
that Rajab terminated their agency relationship and had appointed White Falcon Services, Inc.
(White Falcon) as its new recruitment agent in the Philippines. Thus, White Falcon was
impleaded as respondent as well, and it adopted and reiterated Becmen's arguments in the
position paper it subsequently filed.
On February 28, 2001, the Labor Arbiter rendered a Decision10 dismissing the complaint for lack
of merit. Giving weight to the medical report of the Al-Birk Hospital finding that Jasmin died of
poisoning, the Labor Arbiter concluded that Jasmin committed suicide. In any case, Jasmin's
death was not service-connected, nor was it shown that it occurred while she was on duty;
besides, her parents have received all corresponding benefits they were entitled to under the law.
In regard to damages, the Labor Arbiter found no legal basis to warrant a grant thereof.
On appeal, the National Labor Relations Commission (Commission) reversed the decision of the
Labor Arbiter. Relying on the findings of the City Health Officer of Cabanatuan City and the
NBI as contained in their autopsy and toxicology report, respectively, the Commission, via its
November 22, 2002 Resolution11 declared that, based on substantial evidence adduced, Jasmin
was the victim of compensable work-connected criminal aggression. It disregarded the Al-Birk
Hospital attending physician's report as well as the KSA police report, finding the same to be

inconclusive. It declared that Jasmin's death was the result of an "accident" occurring within the
employer's premises that is attributable to her employment, or to the conditions under which she
lived, and thus arose out of and in the course of her employment as nurse. Thus, the Cuaresmas
are entitled to actual damages in the form of Jasmin's lost earnings, including future earnings, in
the total amount of US$113,000.00. The Commission, however, dismissed all other claims in the
complaint.
Becmen, Rajab and White Falcon moved for reconsideration, whereupon the Commission issued
its October 9, 2003 Resolution12 reducing the award of US$113,000.00 as actual damages to
US$80,000.00.13 The NLRC likewise declared Becmen and White Falcon as solidarily liable for
payment of the award.
Becmen and White Falcon brought separate petitions for certiorari to the Court of Appeals.14 On
June 28, 2006, the appellate court rendered its Decision,15 the dispositive portion of which reads,
as follows:
WHEREFORE, the subject petitions are DENIED but in the execution of the decision, it should
first be enforced against White Falcon Services and then against Becmen Services when it is
already impossible, impractical and futile to go against it (White Falcon).
SO ORDERED.16
The appellate court affirmed the NLRC's findings that Jasmin's death was compensable, the same
having occurred at the dormitory, which was contractually provided by the employer. Thus her
death should be considered to have occurred within the employer's premises, arising out of and
in the course of her employment.
Becmen and White Falcon moved for reconsideration. On May 14, 2008, the appellate court
rendered the assailed Amended Decision, the dispositive portion of which reads, as follows:
WHEREFORE, the motions for reconsideration are GRANTED. Accordingly, the award of
US$80,000.00 in actual damages is hereby reduced to US$4,686.73 plus interest at the legal rate
computed from the time it became due until fully paid. Petitioners are hereby adjudged jointly
and solidarily liable with the employer for the monetary awards with Becmen Service Exporter
and Promotions, Inc. having a right of reimbursement from White Falcon Services, Inc.
SO ORDERED.17
In the Amended Decision, the Court of Appeals found that although Jasmin's death was
compensable, however, there is no evidentiary basis to support an award of actual damages in the
amount of US$80,000.00. Nor may lost earnings be collected, because the same may be charged
only against the perpetrator of the crime or quasi-delict. Instead, the appellate court held that
Jasmin's beneficiaries should be entitled only to the sum equivalent of the remainder of her 36month employment contract, or her monthly salary of US$247.00 multiplied by nineteen (19)
months, with legal interest.

Becmen filed the instant Petition for Review on Certiorari (G.R. NOS. 182978-79). The
Cuaresmas, on the other hand, moved for a reconsideration of the amended decision, but it was
denied. They are now before us via G.R. NOS. 184298-99.
On October 6, 2008, the Court resolved to consolidate G.R. NOS. 184298-99 with G.R. NOS.
182978-79.
In G.R. NOS. 182978-79, Becmen raises the following issues for our resolution:
(THE COURT OF APPEALS) GRAVELY ERRED WHEN IT GAVE MORE CREDENCE
AND WEIGHT TO THE AUTOPSY REPORT CONDUCTED BY THE CABANATUAN
CITY HEALTH OFFICE THAN THE MEDICAL AND POLICE REPORTS ISSUED BY THE
MINISTRY OF HEALTH OF KINGDOM OF SAUDI ARABIA AND AL-BIRK HOSPITAL.
(THE COURT OF APPEALS) GRAVELY ERRED WHEN ON THE BASIS OF THE
POSITION PAPERS AND ANNEXES THERETO INCLUDING THE AUTOPSY REPORT, IT
CONCLUDED THAT THE DEATH OF JASMIN CUARESMA WAS CAUSED BY
CRIMINAL AGGRESSION.
(THE COURT OF APPEALS) GRAVELY ERRED WHEN IT HELD THAT THE DEATH OF
JASMIN CUARESMA WAS COMPENSABLE PURSUANT TO THE RULING OF THE
SUPREME COURT IN TALLER v. YNCHAUSTI, G.R. NO. 35741, DECEMBER 20, 1932,
WHICH IT FOUND TO BE STILL GOOD LAW.
(THE COURT OF APPEALS) GRAVELY ERRED WHEN IT HELD BECMEN LIABLE FOR
THE DEATH OF JASMIN CUARESMA NOTWITHSTANDING ITS ADMISSIONS THAT
"IQAMA INSURANCE" WAS A TYPOGRAPHICAL ERROR SINCE "IQAMA" IS NOT AN
INSURANCE.
(THE COURT OF APPEALS) GRAVELY ERRED WHEN IT CONCLUDED THAT THE
DEATH OF JASMIN WAS WORK RELATED.
(THE COURT OF APPEALS) GRAVELY ERRED WHEN IT HELD BECMEN LIABLE TO
JASMIN'S BENEFICIARIES FOR THE REMAINDER OF HER 36-MONTH CONTRACT
COMPUTED IN THIS MANNER: MONTHLY SALARY OF US$246.67 MULTIPLIED BY
19 MONTHS, THE REMAINDER OF THE TERM OF JASMIN'S EMPLOYMENT
CONTRACT, IS EQUAL TO US$4,686.73.
(THE COURT OF APPEALS) GRAVELY ERRED WHEN IT HELD BECMEN LIABLE TO
PAY INTEREST AT THE LEGAL RATE FROM THE TIME IT WAS DUE UNTIL FULLY
PAID.
(THE COURT OF APPEALS) GRAVELY ERRED WHEN IT HELD BECMEN AND WHITE
FALCON JOINTLY AND SEVERALLY LIABLE WITH THE EMPLOYER
NOTWITHSTANDING THE ASSUMPTION OF LIABILITY EXECUTED BY WHITE
FALCON IN FAVOR OF BECMEN.

On the other hand, in G.R. NOS. 184298-99, the Cuaresmas raise the following issues:
(THE COURT OF APPEALS) GRAVELY ERRED IN APPLYING THE PROVISIONS OF
THE CIVIL CODE CONSIDERED GENERAL LAW DESPITE THE CASE BEING
COVERED BY E.O. 247, R.A. 8042 AND LABOR CODE CONSIDERED AS SPECIAL
LAWS.
(THE COURT OF APPEALS) GRAVELY ERRED IN NOT APPLYING THE DECEASED'S
FUTURE EARNINGS WHICH IS (AN) INHERENT FACTOR IN THE COMPUTATION OF
DEATH BENEFITS OF OVERSEAS FILIPINO CONTRACT WORKERS.
(THE COURT OF APPEALS) GRAVELY ERRED IN REDUCING THE DEATH BENEFITS
AWARDED BY NLRC CONSIDERED FINDINGS OF FACT THAT CANNOT BE
DISTURBED THROUGH CERTIORARI UNDER RULE 65 OF THE RULES OF COURT.
The issue for resolution is whether the Cuaresmas are entitled to monetary claims, by way of
benefits and damages, for the death of their daughter Jasmin.
The terms and conditions of Jasmin's 1996 Employment Agreement which she and her employer
Rajab freely entered into constitute the law between them. As a rule, stipulations in an
employment contract not contrary to statutes, public policy, public order or morals have the force
of law between the contracting parties.18 An examination of said employment agreement shows
that it provides for no other monetary or other benefits/privileges than the following:
1. 1,300 rials (or US$247.00) monthly salary;
2. Free air tickets to KSA at the start of her contract and to the Philippines at the end thereof, as
well as for her vacation at the end of each twenty four-month service;
3. Transportation to and from work;
4. Free living accommodations;
5. Free medical treatment, except for optical and dental operations, plastic surgery charges and
lenses, and medical treatment obtained outside of KSA;
6. Entry visa fees will be shared equally between her and her employer, but the exit/re-entry visa
fees, fees for Iqama issuance, renewal, replacement, passport renewal, sponsorship transfer and
other liabilities shall be borne by her;
7. Thirty days paid vacation leave with round trip tickets to Manila after twenty four-months of
continuous service;
8. Eight days public holidays per year;

9. The indemnity benefit due her at the end of her service will be calculated as per labor laws of
KSA.
Thus, the agreement does not include provisions for insurance, or for accident, death or other
benefits that the Cuaresmas seek to recover, and which the labor tribunals and appellate court
granted variably in the guise of compensatory damages.
However, the absence of provisions for social security and other benefits does not make Jasmin's
employment contract infirm. Under KSA law, her foreign employer is not obliged to provide her
these benefits; and neither is Jasmin entitled to minimum wage - unless of course the KSA labor
laws have been amended to the opposite effect, or that a bilateral wage agreement has been
entered into.
Our next inquiry is, should Jasmin's death be considered as work-connected and thus
compensable? The evidence indicates that it is not. At the time of her death, she was not on duty,
or else evidence to the contrary would have been adduced. Neither was she within hospital
premises at the time. Instead, she was at her dormitory room on personal time when she died.
Neither has it been shown, nor does the evidence suggest, that at the time she died, Jasmin was
performing an act reasonably necessary or incidental to her employment as nurse, because she
was at her dormitory room. It is reasonable to suppose that all her work is performed at the Albirk Hospital, and not at her dormitory room.
We cannot expect that the foreign employer should ensure her safety even while she is not on
duty. It is not fair to require employers to answer even for their employees' personal time away
from work, which the latter are free to spend of their own choosing. Whether they choose to
spend their free time in the pursuit of safe or perilous undertakings, in the company of friends or
strangers, lovers or enemies, this is not one area which their employers should be made
accountable for. While we have emphasized the need to observe official work time strictly,19
what an employee does on free time is beyond the employer's sphere of inquiry.
While the "employer's premises" may be defined very broadly not only to include premises
owned by it, but also premises it leases, hires, supplies or uses,20 we are not prepared to rule that
the dormitory wherein Jasmin stayed should constitute employer's premises as would allow a
finding that death or injury therein is considered to have been incurred or sustained in the course
of or arose out of her employment. There are certainly exceptions,21 but they do not appear to
apply here. Moreover, a complete determination would have to depend on the unique
circumstances obtaining and the overall factual environment of the case, which are here lacking.
But, did Jasmin commit suicide? Rajab, Becmen and White Falcon vehemently insist that she
did; thus, her heirs may not claim benefits or damages based on criminal aggression. On the
other hand, the Cuaresmas do not believe so.
The Court cannot subscribe to the idea that Jasmin committed suicide while halfway into her
employment contract. It is beyond human comprehension that a 25-year old Filipina, in the prime
of her life and working abroad with a chance at making a decent living with a high-paying job

which she could not find in her own country, would simply commit suicide for no compelling
reason.
The Saudi police and autopsy reports - which state that Jasmin is a likely/or apparent victim of
poisoning - are patently inconclusive. They are thus unreliable as evidence.
On the contrary, the autopsy report of the Cabanatuan City Health Officer and the exhumation
report of the NBI categorically and unqualifiedly show that Jasmin sustained external and
internal injuries, specifically abrasions at her inner lip and gums; lacerated wounds and
abrasions on her left and right ears; lacerated wounds and hematoma (contusions) on her
elbows; abrasions and hematoma on her thigh and legs; intra-muscular hemorrhage at the
anterior chest; a fractured rib; puncture wounds; and abrasions on the labia minora of the
vaginal area. The NBI toxicology report came up negative on the presence of poison.
All these show that Jasmin was manhandled - and possibly raped - prior to her death.
Even if we were to agree with the Saudi police and autopsy reports that indicate Jasmin was
poisoned to death, we do not believe that it was self-induced. If ever Jasmin was poisoned, the
assailants who beat her up - and possibly raped her - are certainly responsible therefor.
We are not exactly ignorant of what goes on with our OFWs. Nor is the rest of the world blind to
the realities of life being suffered by migrant workers in the hands of some foreign employers. It
is inconceivable that our Filipina women would seek employment abroad and face uncertainty in
a foreign land, only to commit suicide for unexplained reasons. Deciding to leave their family,
loved ones, and the comfort and safety of home, to work in a strange land requires unrivaled
strength and courage. Indeed, many of our women OFWs who are unfortunate to end up with
undesirable employers have been there more times than they care to, beaten up and broken in
body - yet they have remained strong in mind, refusing to give up the will to live. Raped, burned
with cigarettes, kicked in the chest with sharp high-heeled shoes, starved for days or even weeks,
stabbed, slaved with incessant work, locked in their rooms, forced to serve their masters naked,
grossly debased, dehumanized and insulted, their spirits fought on and they lived for the day that
they would once again be reunited with their families and loved ones. Their bodies surrendered,
but their will to survive remained strong.
It is surprising, therefore, that Rajab, Becmen and White Falcon should insist on suicide, without
even lifting a finger to help solve the mystery of Jasmin's death. Being in the business of sending
OFWs to work abroad, Becmen and White Falcon should know what happens to some of our
OFWs. It is impossible for them to be completely unaware that cruelties and inhumanities are
inflicted on OFWs who are unfortunate to be employed by vicious employers, or upon those who
work in communities or environments where they are liable to become victims of crime. By now
they should know that our women OFWs do not readily succumb to the temptation of killing
themselves even when assaulted, abused, starved, debased and, worst, raped.
Indeed, what we have seen is Rajab and Becmen's revolting scheme of conveniently avoiding
responsibility by clinging to the absurd theory that Jasmin took her own life. Abandoning their
legal, moral and social obligation (as employer and recruiter) to assist Jasmin's family in

obtaining justice for her death, they immediately gave up on Jasmin's case, which has remained
under investigation as the autopsy and police reports themselves indicate. Instead of taking the
cudgels for Jasmin, who had no relative or representative in the KSA who would naturally
demand and seek an investigation of her case, Rajab and Becmen chose to take the most
convenient route to avoiding and denying liability, by casting Jasmin's fate to oblivion. It appears
from the record that to this date, no follow up of Jasmin's case was ever made at all by them, and
they seem to have expediently treated Jasmin's death as a closed case. Despite being given the
lead via the autopsy and toxicology reports of the Philippine authorities, they failed and refused
to act and pursue justice for Jasmin's sake and to restore honor to her name.
Indeed, their nonchalant and uncaring attitude may be seen from how Jasmin's remains were
repatriated. No official representative from Rajab or Becmen was kind enough to make personal
representations with Jasmin's parents, if only to extend their condolences or sympathies; instead,
a mere colleague, nurse Jessie Fajardo, was designated to accompany Jasmin's body home.
Of all life's tragedies, the death of one's own child must be the most painful for a parent. Not
knowing why or how Jasmin's life was snuffed out makes the pain doubly unbearable for
Jasmin's parents, and further aggravated by Rajab, Becmen, and White Falcon's baseless
insistence and accusation that it was a self-inflicted death, a mortal sin by any religious standard.
Thus we categorically hold, based on the evidence; the actual experiences of our OFWs; and the
resilient and courageous spirit of the Filipina that transcends the vilest desecration of her
physical self, that Jasmin did not commit suicide but a victim of murderous aggression.
Rajab, Becmen, and White Falcon's indifference to Jasmin's case has caused unfathomable pain
and suffering upon her parents. They have turned away from their moral obligation, as employer
and recruiter and as entities laden with social and civic obligations in society, to pursue justice
for and in behalf of Jasmin, her parents and those she left behind. Possessed with the resources to
determine the truth and to pursue justice, they chose to stand idly for the sake of convenience and
in order that they may avoid pecuniary liability, turning a blind eye to the Philippine authorities'
autopsy and toxicology reports instead of taking action upon them as leads in pursuing justice for
Jasmin's death. They have placed their own financial and corporate interests above their moral
and social obligations, and chose to secure and insulate themselves from the perceived
responsibility of having to answer for and indemnify Jasmin's heirs for her death.
Under Republic Act No. 8042 (R.A. 8042), or the Migrant Workers and Overseas Filipinos Act
of 1995,22 the State shall, at all times, uphold the dignity of its citizens whether in country or
overseas, in general, and Filipino migrant workers, in particular.23 The State shall provide
adequate and timely social, economic and legal services to Filipino migrant workers.24 The rights
and interest of distressed25 overseas Filipinos, in general, and Filipino migrant workers, in
particular, documented or undocumented, are adequately protected and safeguarded.26
Becmen and White Falcon, as licensed local recruitment agencies, miserably failed to abide by
the provisions of R.A. 8042. Recruitment agencies are expected to extend assistance to their
deployed OFWs, especially those in distress. Instead, they abandoned Jasmin's case and allowed
it to remain unsolved to further their interests and avoid anticipated liability which parents or

relatives of Jasmin would certainly exact from them. They willfully refused to protect and tend to
the welfare of the deceased Jasmin, treating her case as just one of those unsolved crimes that is
not worth wasting their time and resources on. The evidence does not even show that Becmen
and Rajab lifted a finger to provide legal representation and seek an investigation of Jasmin's
case. Worst of all, they unnecessarily trampled upon the person and dignity of Jasmin by
standing pat on the argument that Jasmin committed suicide, which is a grave accusation given
its un-Christian nature.
We cannot reasonably expect that Jasmin's parents should be the ones to actively pursue a just
resolution of her case in the KSA, unless they are provided with the finances to undertake this
herculean task. Sadly, Becmen and Rajab did not lend any assistance at all in this respect. The
most Jasmin's parents can do is to coordinate with Philippine authorities as mandated under R.A.
8042, obtain free legal assistance and secure the aid of the Department of Foreign Affairs, the
Department of Labor and Employment, the POEA and the OWWA in trying to solve the case or
obtain relief, in accordance with Section 2327 of R.A. 8042. To our mind, the Cuaresmas did all
that was within their power, short of actually flying to the KSA. Indeed, the Cuaresmas went
even further. To the best of their abilities and capacities, they ventured to investigate Jasmin's
case on their own: they caused another autopsy on Jasmin's remains as soon as it arrived to
inquire into the true cause of her death. Beyond that, they subjected themselves to the painful and
distressful experience of exhuming Jasmin's remains in order to obtain another autopsy for the
sole purpose of determining whether or not their daughter was poisoned. Their quest for the truth
and justice is equally to be expected of all loving parents. All this time, Rajab and Becmen instead of extending their full cooperation to the Cuaresma family - merely sat on their laurels in
seeming unconcern.
In Interorient Maritime Enterprises, Inc. v. NLRC,28 a seaman who was being repatriated after
his employment contract expired, failed to make his Bangkok to Manila connecting flight as he
began to wander the streets of Bangkok aimlessly. He was shot to death by Thai police four days
after, on account of running amuck with a knife in hand and threatening to harm anybody within
sight. The employer, sued for death and other benefits as well as damages, interposed as defense
the provision in the seafarer agreement which provides that "no compensation shall be payable in
respect of any injury, incapacity, disability or death resulting from a willful act on his own life
by the seaman." The Court rejected the defense on the view, among others, that the recruitment
agency should have observed some precautionary measures and should not have allowed the
seaman, who was later on found to be mentally ill, to travel home alone, and its failure to do so
rendered it liable for the seaman's death. We ruled therein that The foreign employer may not have been obligated by its contract to provide a companion for a
returning employee, but it cannot deny that it was expressly tasked by its agreement to assure the
safe return of said worker. The uncaring attitude displayed by petitioners who, knowing fully
well that its employee had been suffering from some mental disorder, nevertheless still
allowed him to travel home alone, is appalling to say the least. Such attitude harks back to
another time when the landed gentry practically owned the serfs, and disposed of them
when the latter had grown old, sick or otherwise lost their usefulness.29 (Emphasis
supplied)
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Thus, more than just recruiting and deploying OFWs to their foreign principals, recruitment
agencies have equally significant responsibilities. In a foreign land where OFWs are likely to
encounter uneven if not discriminatory treatment from the foreign government, and certainly a
delayed access to language interpretation, legal aid, and the Philippine consulate, the recruitment
agencies should be the first to come to the rescue of our distressed OFWs since they know the
employers and the addresses where they are deployed or stationed. Upon them lies the primary
obligation to protect the rights and ensure the welfare of our OFWs, whether distressed or not.
Who else is in a better position, if not these recruitment agencies, to render immediate aid to
their deployed OFWs abroad?
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Article 19 of the Civil Code provides that every person must, in the exercise of his rights and in
the performance of his duties, act with justice, give everyone his due, and observe honesty and
good faith. Article 21 of the Code states that any person who wilfully causes loss or injury to
another in a manner that is contrary to morals, good customs or public policy shall compensate
the latter for the damage. And, lastly, Article 24 requires that in all contractual, property or other
relations, when one of the parties is at a disadvantage on account of his moral dependence,
ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant
for his protection.
Clearly, Rajab, Becmen and White Falcon's acts and omissions are against public policy because
they undermine and subvert the interest and general welfare of our OFWs abroad, who are
entitled to full protection under the law. They set an awful example of how foreign employers
and recruitment agencies should treat and act with respect to their distressed employees and
workers abroad. Their shabby and callous treatment of Jasmin's case; their uncaring attitude;
their unjustified failure and refusal to assist in the determination of the true circumstances
surrounding her mysterious death, and instead finding satisfaction in the unreasonable insistence
that she committed suicide just so they can conveniently avoid pecuniary liability; placing their
own corporate interests above of the welfare of their employee's - all these are contrary to
morals, good customs and public policy, and constitute taking advantage of the poor employee
and her family's ignorance, helplessness, indigence and lack of power and resources to seek the
truth and obtain justice for the death of a loved one.
Giving in handily to the idea that Jasmin committed suicide, and adamantly insisting on it just to
protect Rajab and Becmen's material interest - despite evidence to the contrary - is against the
moral law and runs contrary to the good custom of not denouncing one's fellowmen for alleged
grave wrongdoings that undermine their good name and honor.30
Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of
Philippine labor and social legislation, contract stipulations to the contrary notwithstanding. This
pronouncement is in keeping with the basic public policy of the State to 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. This ruling is likewise
rendered imperative by Article 17 of the Civil Code which states that laws which have for their
object public order, public policy and good customs shall not be rendered ineffective by laws or
judgments promulgated, or by determinations or conventions agreed upon in a foreign country.31

The relations between capital and labor are so impressed with public interest,32 and neither shall
act oppressively against the other, or impair the interest or convenience of the public.33 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.34
The grant of moral damages to the employee by reason of misconduct on the part of the
employer is sanctioned by Article 2219 (10)35 of the Civil Code, which allows recovery of such
damages in actions referred to in Article 21.36
Thus, in view of the foregoing, the Court holds that the Cuaresmas are entitled to moral
damages, which Becmen and White Falcon are jointly and solidarily liable to pay, together with
exemplary damages for wanton and oppressive behavior, and by way of example for the public
good.
Private employment agencies are held jointly and severally liable with the foreign-based
employer for any violation of the recruitment agreement or contract of employment. This joint
and solidary liability imposed by law against recruitment agencies and foreign employers is
meant to assure the aggrieved worker of immediate and sufficient payment of what is due him.37
If the recruitment/placement agency is a juridical being, the corporate officers and directors and
partners as the case may be, shall themselves be jointly and solidarily liable with the corporation
or partnership for the aforesaid claims and damages.38
White Falcon's assumption of Becmen's liability does not automatically result in Becmen's
freedom or release from liability. This has been ruled in ABD Overseas Manpower Corporation
v. NLRC.39 Instead, both Becmen and White Falcon should be held liable solidarily, without
prejudice to each having the right to be reimbursed under the provision of the Civil Code that
whoever pays for another may demand from the debtor what he has paid.40
WHEREFORE, the Amended Decision of the Court of Appeals dated May 14, 2008 in CA-G.R.
SP No. 80619 and CA-G.R. SP No. 81030 is SET ASIDE. Rajab & Silsilah Company, White
Falcon Services, Inc., Becmen Service Exporter and Promotion, Inc., and their corporate
directors and officers are found jointly and solidarily liable and ORDERED to indemnify the
heirs of Jasmin Cuaresma, spouses Simplicio and Mila Cuaresma, the following amounts:
1) TWO MILLION FIVE HUNDRED THOUSAND PESOS (P2,500,000.00) as moral damages;
2) TWO MILLION FIVE HUNDRED THOUSAND PESOS (P2,500,000.00) as exemplary
damages;
3) Attorney's fees equivalent to ten percent (10%) of the total monetary award; and,
4) Costs of suit.
SO ORDERED.

[G.R. NO. 161757 - January 25, 2006]

SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC. Petitioner, v.
NATIONAL LABOR RELATIONS COMMISSION, Second Division; HON. ERNESTO S.
DINOPOL, in his capacity as Labor Arbiter, NLRC; NCR, Arbitration Branch, Quezon
City and DIVINA A. MONTEHERMOZO, Respondents.
DECISION
CARPIO MORALES, J.:
Petitioner, Sunace International Management Services (Sunace), a corporation duly organized
and existing under the laws of the Philippines, deployed to Taiwan Divina A. Montehermozo
(Divina) as a domestic helper under a 12-month contract effective February 1, 1997.1 The
deployment was with the assistance of a Taiwanese broker, Edmund Wang, President of Jet
Crown International Co., Ltd.
After her 12-month contract expired on February 1, 1998, Divina continued working for her
Taiwanese employer, Hang Rui Xiong, for two more years, after which she returned to the
Philippines on February 4, 2000.
Shortly after her return or on February 14, 2000, Divina filed a complaint2 before the National
Labor Relations Commission (NLRC) against Sunace, one Adelaide Perez, the Taiwanese
broker, and the employer-foreign principal alleging that she was jailed for three months and that
she was underpaid.
The following day or on February 15, 2000, Labor Arbitration Associate Regina T. Gavin issued
Summons3 to the Manager of Sunace, furnishing it with a copy of Divina's complaint and
directing it to appear for mandatory conference on February 28, 2000.
The scheduled mandatory conference was reset. It appears to have been concluded, however.
On April 6, 2000, Divina filed her Position Paper4 claiming that under her original one-year
contract and the 2-year extended contract which was with the knowledge and consent of Sunace,
the following amounts representing income tax and savings were deducted:
Year
1997
1998
1999

Deduction for Income Tax

NT10,450.00
NT9,500.00
NT13,300.00

Deduction for Savings

NT23,100.00
NT36,000.00
NT36,000.00;5

and while the amounts deducted in 1997 were refunded to her, those deducted in 1998 and 1999
were not. On even date, Sunace, by its Proprietor/General Manager Maria Luisa Olarte, filed its
Verified Answer and Position Paper,6 claiming as follows, quoted verbatim:

COMPLAINANT IS NOT ENTITLED FOR THE REFUND OF HER 24 MONTHS

SAVINGS
3. Complainant could not anymore claim nor entitled for the refund of her 24 months savings as
she already took back her saving already last year and the employer did not deduct any money
from her salary, in accordance with a Fascimile Message from the respondent SUNACE's
employer, Jet Crown International Co. Ltd., a xerographic copy of which is herewith attached as
ANNEX "2" hereof;
COMPLAINANT IS NOT ENTITLED TO REFUND OF HER 14 MONTHS TAX AND
PAYMENT OF ATTORNEY'S FEES
4. There is no basis for the grant of tax refund to the complainant as the she finished her one
year contract and hence, was not illegally dismissed by her employer. She could only lay claim
over the tax refund or much more be awarded of damages such as attorney's fees as said reliefs
are available only when the dismissal of a migrant worker is without just valid or lawful cause as
defined by law or contract.
The rationales behind the award of tax refund and payment of attorney's fees is not to enrich the
complainant but to compensate him for actual injury suffered. Complainant did not suffer injury,
hence, does not deserve to be compensated for whatever kind of damages.
Hence, the complainant has NO cause of action against respondent SUNACE for monetary
claims, considering that she has been totally paid of all the monetary benefits due her under her
Employment Contract to her full satisfaction.
6. Furthermore, the tax deducted from her salary is in compliance with the Taiwanese law, which
respondent SUNACE has no control and complainant has to obey and this Honorable Office has
no authority/jurisdiction to intervene because the power to tax is a sovereign power which the
Taiwanese Government is supreme in its own territory. The sovereign power of taxation of a
state is recognized under international law and among sovereign states.
7. That respondent SUNACE respectfully reserves the right to file supplemental Verified Answer
and/or Position Paper to substantiate its prayer for the dismissal of the above case against the
herein respondent. AND BY WAY OF x x x x (Emphasis and underscoring supplied)

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Reacting to Divina's Position Paper, Sunace filed on April 25, 2000 an ". . . answer to
complainant's position paper"7 alleging that Divina's 2-year extension of her contract was
without its knowledge and consent, hence, it had no liability attaching to any claim arising
therefrom, and Divina in fact executed a Waiver/Quitclaim and Release of Responsibility and an
Affidavit of Desistance, copy of each document was annexed to said ". . . answer to
complainant's position paper."

To Sunace's ". . . answer to complainant's position paper," Divina filed a 2-page reply,8 without,
however, refuting Sunace's disclaimer of knowledge of the extension of her contract and without
saying anything about the Release, Waiver and Quitclaim and Affidavit of Desistance.
The Labor Arbiter, rejected Sunace's claim that the extension of Divina's contract for two more
years was without its knowledge and consent in this wise:
We reject Sunace's submission that it should not be held responsible for the amount withheld
because her contract was extended for 2 more years without its knowledge and consent because
as Annex "B"9 shows, Sunace and Edmund Wang have not stopped communicating with each
other and yet the matter of the contract's extension and Sunace's alleged non-consent thereto has
not been categorically established.
What Sunace should have done was to write to POEA about the extension and its objection
thereto, copy furnished the complainant herself, her foreign employer, Hang Rui Xiong and the
Taiwanese broker, Edmund Wang.
And because it did not, it is presumed to have consented to the extension and should be liable for
anything that resulted thereform (sic).10 (Underscoring supplied)
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The Labor Arbiter rejected too Sunace's argument that it is not liable on account of Divina's
execution of a Waiver and Quitclaim and an Affidavit of Desistance. Observed the Labor
Arbiter:
Should the parties arrive at any agreement as to the whole or any part of the dispute, the same
shall be reduced to writing and signed by the parties and their respective counsel (sic), if any,
before the Labor Arbiter.
The settlement shall be approved by the Labor Arbiter after being satisfied that it was voluntarily
entered into by the parties and after having explained to them the terms and consequences
thereof.
A compromise agreement entered into by the parties not in the presence of the Labor Arbiter
before whom the case is pending shall be approved by him, if after confronting the parties,
particularly the complainants, he is satisfied that they understand the terms and conditions of the
settlement and that it was entered into freely voluntarily (sic) by them and the agreement is not
contrary to law, morals, and public policy.
And because no consideration is indicated in the documents, we strike them down as contrary to
law, morals, and public policy.11
He accordingly decided in favor of Divina, by decision of October 9, 2000,12 the dispositive
portion of which reads:
Wherefore, judgment is hereby rendered ordering respondents SUNACE INTERNATIONAL
SERVICES and its owner ADELAIDA PERGE, both in their personal capacities and as agent of

Hang Rui Xiong/Edmund Wang to jointly and severally pay complainant DIVINA A.
MONTEHERMOZO the sum of NT91,950.00 in its peso equivalent at the date of payment, as
refund for the amounts which she is hereby adjudged entitled to as earlier discussed plus 10%
thereof as attorney's fees since compelled to litigate, complainant had to engage the services of
counsel.
SO ORDERED.13 (Underescoring supplied)
On appeal of Sunace, the NLRC, by Resolution of April 30, 2002,14 affirmed the Labor Arbiter's
decision.
Via petition for certiorari, 15 Sunace elevated the case to the Court of Appeals which dismissed it
outright by Resolution of November 12, 2002,16 the full text of which reads:
The petition for certiorari faces outright dismissal.
The petition failed to allege facts constitutive of grave abuse of discretion on the part of the
public respondent amounting to lack of jurisdiction when the NLRC affirmed the Labor Arbiter's
finding that petitioner Sunace International Management Services impliedly consented to the
extension of the contract of private respondent Divina A. Montehermozo. It is undisputed that
petitioner was continually communicating with private respondent's foreign employer (sic). As
agent of the foreign principal, "petitioner cannot profess ignorance of such extension as
obviously, the act of the principal extending complainant (sic) employment contract
necessarily bound it." Grave abuse of discretion is not present in the case at bar.
ACCORDINGLY, the petition is hereby DENIED DUE COURSE and DISMISSED.17
SO ORDERED.
(Emphasis on words in capital letters in the original; emphasis on words in small letters and
underscoring supplied)
Its Motion for Reconsideration having been denied by the appellate court by Resolution of
January 14, 2004,18 Sunace filed the present Petition for Review on Certiorari .
The Court of Appeals affirmed the Labor Arbiter and NLRC's finding that Sunace knew of and
impliedly consented to the extension of Divina's 2-year contract. It went on to state that "It is
undisputed that [Sunace] was continually communicating with [Divina's] foreign employer." It
thus concluded that "[a]s agent of the foreign principal, 'petitioner cannot profess ignorance of
such extension as obviously, the act of the principal extending complainant (sic) employment
contract necessarily bound it.' "
Contrary to the Court of Appeals finding, the alleged continuous communication was with the
Taiwanese broker Wang, not with the foreign employer Xiong.

The February 21, 2000 telefax message from the Taiwanese broker to Sunace, the only basis of a
finding of continuous communication, reads verbatim:
xxxx
Regarding to Divina, she did not say anything about her saving in police station. As we
contact with her employer, she took back her saving already last years. And they did
not deduct any money from her salary. Or she will call back her employer to check it
again. If her employer said yes! we will get it back for her.
Thank you and best regards.
(Sgd.)
Edmund Wang
President19
The finding of the Court of Appeals solely on the basis of the above-quoted telefax message, that
Sunace continually communicated with the foreign "principal" (sic)and therefore was aware of
and had consented to the execution of the extension of the contract is misplaced. The message
does not provide evidence that Sunace was privy to the new contract executed after the
expiration on February 1, 1998 of the original contract. That Sunace and the Taiwanese broker
communicated regarding Divina's allegedly withheld savings does not necessarily mean that
Sunace ratified the extension of the contract. As Sunace points out in its Reply20 filed before the
Court of Appeals,
As can be seen from that letter communication, it was just an information given to the petitioner
that the private respondent had t[aken] already her savings from her foreign employer and that no
deduction was made on her salary. It contains nothing about the extension or the petitioner's
consent thereto.21
Parenthetically, since the telefax message is dated February 21, 2000, it is safe to assume that it
was sent to enlighten Sunace who had been directed, by Summons issued on February 15, 2000,
to appear on February 28, 2000 for a mandatory conference following Divina's filing of the
complaint on February 14, 2000.
Respecting the Court of Appeals following dictum:
As agent of its foreign principal, [Sunace] cannot profess ignorance of such an extension as
obviously, the act of its principal extending [Divina's] employment contract necessarily bound
it,22
it too is a misapplication, a misapplication of the theory of imputed knowledge.
The theory of imputed knowledge ascribes the knowledge of the agent, Sunace, to the principal,
employer Xiong, not the other way around.23 The knowledge of the principal-foreign employer
cannot, therefore, be imputed to its agent Sunace.

There being no substantial proof that Sunace knew of and consented to be bound under the 2year employment contract extension, it cannot be said to be privy thereto. As such, it and its
"owner" cannot be held solidarily liable for any of Divina's claims arising from the 2-year
employment extension. As the New Civil Code provides,
Contracts take effect only between the parties, their assigns, and heirs, except in case where the
rights and obligations arising from the contract are not transmissible by their nature, or by
stipulation or by provision of law.24
Furthermore, as Sunace correctly points out, there was an implied revocation of its agency
relationship with its foreign principal when, after the termination of the original employment
contract, the foreign principal directly negotiated with Divina and entered into a new and
separate employment contract in Taiwan. Article 1924 of the New Civil Code reading
The agency is revoked if the principal directly manages the business entrusted to the agent,
dealing directly with third persons.
thus applies.
In light of the foregoing discussions, consideration of the validity of the Waiver and Affidavit of
Desistance which Divina executed in favor of Sunace is rendered unnecessary.
WHEREFORE, the petition is GRANTED. The challenged resolutions of the Court of Appeals
are hereby REVERSED and SET ASIDE. The complaint of respondent
DivinaA.Montehermozo against petitioner is DISMISSED.
SO ORDERED.

G.R. No. 197303, June 04, 2014

APQ SHIPMANAGEMENT CO., LTD., AND APQ CREW MANAGEMENT USA, INC.,
Petitioner, v. ANGELITO L. CASEAS, Respondent.
DECISION
MENDOZA, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court seeks to review,
reverse and set aside the January 24, 2011 Decision1 and the June 1, 2011 Resolution2 of the
Court of Appeals (CA), in CA-G.R. SP No. 112997, which annulled and set aside the October
14, 2009 Decision of the National Labor Relations Commission (NLRC) in NLRC LAC No. 04000220-09, where respondent Angelito L. Caseas (Caseas) was seeking disability and other
benefits against petitioner APQ Shipmanagement Co., Ltd. (APQ) and petitioner-principal APQ
Crew Management USA, Inc. (Crew Management). 3
cralawred

It appears from the records that in June 2004, Casenas was hired by APQ, acting for and in
behalf of its principal, Crew Management, as Chief Mate for vessel MV Perseverance for a
period of eight (8) months starting from June 16, 2004 to February 16, 2005, with a basic
monthly salary of US$840.00, for forty-eight (48) hours a week, with US$329.00 as overtime
pay.
In his Position Paper,4 Casenas further alleged that on June 16, 2004, he left Manila to join his
assigned vessel in Miami, Florida, USA, though the vessel could not leave the Florida port
because of its incomplete documents for operation; that consequently, he was transferred to
another vessel, MV HAITIEN PRIDE, which was in Haiti, although again because of incomplete
documents, the vessel could not leave the port and remained at Cap Haitien; that together with
the rest of the vessel's officers and crew, he was left to fend for himself; that they were not
provided food and water and had to fish for their own food and were not paid their salaries; that
he suffered extreme stress and anxiety because of the uncertainty of the situation; that his
employment contract was extended by APQ from the original eight (8) months to twenty-six (26)
months; that the vessel eventually left for Bahamas; that he felt he became weaker and got tired
easily; that despite his unpaid wages and weakened condition, he performed his duties as Chief
Mate diligently; that in August 2006, he began to suffer shortness of breath, headache and chest
pains; that he was then brought to the Grand Bahamas Health Services and was diagnosed with
hypertension and was given medicines; that he was then repatriated due to his condition and he
arrived in the Philippines on August 30, 2006; that within three (3) days thereafter, he reported to
APQ for post-employment medical examination where the company-designated physician later
diagnosed him with Ischemic Heart Disease; that a certain Dr. Ariel G. Domingo likewise
examined him, confirming and certifying that he was suffering from Essential Hypertension and
Ischemic Heart Disease; that he was declared unfit for sea service; that as a result, he was not
able to work for more than 120 days from his repatriation; that another medical examination was
conducted by Dr. Lina R. Cero, showing that he was suffering from Essential Hypertension with
Cariomegally Ischemic Heart Disease and Indirect Inguinal Hernia Right; that he was then
advised to take his maintenance medications for life; that APQ refused to provide him further

medical attention, thus, he incurred medical expenses in the amount of P6,390.00 by November
2006; that he demanded payment of permanent total disability benefits, sickness allowance and
medical expenses to which he was entitled under the POEA Standard Employment Contract
(POEA-SEC), but APQ refused to pay; that he, together with other crew members, sent a series
of letters and e-mails to the representatives of the shipowners regarding their unpaid wages, but
despite efforts, APQ still refused to pay their salaries; that demands for payment were also made
to the president of APQ, but the same were refused; and that ultimately, he was compelled to
seek redress and filed a complaint for permanent total disability benefits, reimbursement of
medical expenses, sickness allowance, non-payment of salaries representing the extended portion
of the employment contract, damages, and attorney's fees.
APQ, on the other hand, alleged in its Position Paper5 that upon expiration of the contract,
Caseas refused to return to the Philippines until he finally did on August 30, 2006;6 that
thereafter, Caseas demanded payment of his wages, overtime and vacation pay for the alleged
extended portion of the contract; that it could not be held liable for claims pertaining to the
extended portion of the contract for it did not consent to it; that, in fact, as early as January 2005,
it had been making arrangements, through American Airlines/American Eagle, for Caseas
repatriation at the end of his contract in February 2005; that Caseas was fully paid of his wages
and other benefits for the duration of his 8-month contract; and that Caseas suffered illness after
the expiration of the contract, hence, it could not be made liable to pay him any benefits for his
injury/illness.7
cralawred

Caseas, however, disputed the position of APQ, claiming that his contract of employment was
duly extended.8 He denied that APQ had been making arrangements for his repatriation as early
as January 2005. To prove that his contract was extended, he submitted the following
documents:
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1. Deck Logbook, dated 14 August 2006;

2. Report of Mr. Steve Mastroropolous, dated 16 May 2006;
3. Letter, dated 24 April 2006 of Mr. Alex P. Quillope, President of the respondent APQ to
OWWA, admitting that there was no food and water for the crew of MV HAITIEN
PRIDE.9

APQ countered that the abovementioned documents did not prove mutual consent of the parties
as provided in Caseas employment contract. His contract expired on August 1, 2005 and, thus,
he had no legal basis to claim any salary after the said period.10 Caseas became ill in August
2006 or more than one (1) year after the expiration of his employment contract.11
cralawred

Labor Arbiter Decision

On November 20, 2008, the Labor Arbiter (LA) rendered the Decision12 dismissing Caseas'
complaint. He was of the view that the employment contract was not extended pursuant to the
terms and conditions of the contract. Caseas failed to prove mutual consent of the parties to the
extension of the contract. He rendered services on MV Haitien Pride from August 1, 2005 to
April 30, 2006, after the expiration of his contract with APQ on board the vessel MV

Perseverance on February 15, 2005.

The LA pointed out that the illness/disease suffered by Caseas was sustained while serving on
board MV Cap Haitien Pride, which was outside the period of his contractual employment. Thus,
Caseas' claims could not be awarded.
NLRC Resolution
On June 22, 2009, the NLRC resolved the appeal by reversing and setting aside the LA decision.
Based on the records, it found that the employment contract was extended. The illness, Essential
Hypertension, suffered by Caseas was a compensable disease under Section 32-A, No. 20 of the
POEA-SEC. Hence, NLRC ruled that Caseas was entitled to his claims because the illness was
sustained within the duration of his employment contract.
On October 14, 2009, the NLRC, acting on the motion for reconsideration filed by APQ,
reconsidered and set aside the June 22, 2009 NLRC Resolution. It explained that the
documentary evidence presented only proved the extension of contract but not the consent given
to it by APQ. Caseas failed to present the new contract duly signed by APQ or Crew
Management, or any proof that they consented to the extension. The NLRC explained that
Caseas directly dealt with the shipowner to the exclusion of APQ and Crew Management,
hence, his recourse was against the shipowner. Thus, APQ could not be held liable for the unpaid
salaries, as well as the permanent disability benefits, because these were claims that accrued after
the expiration of the employment contract.
Caseas moved for a reconsideration, but the NLRC denied his motion in its Resolution, dated
November 27, 2009.
CA Decision
Caseas filed a petition for certiorari under Rule 65 before the CA, assailing the October 14,
2009 decision and the November 27, 2009 resolution of the NLRC. On January 24, 2011, the CA
granted the petition and nullified and set aside the questioned NLRC decision and resolution.
The CA reinstated the earlier June 22, 2009 NLRC Resolution. In so ruling, the CA cited the
case of Placewell International Services Corporation v. Camote,13 where it was written:
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xxx a subsequently executed side agreement of an overseas contract worker with the foreign
employer is void, simply because it is against our existing laws, morals and public policy. The
subsequent agreement cannot supersede the terms of the standard employment contract approved
by the POEA. Assuming arguendo that petitioner entered into an agreement with the foreign
principal for an extension of his contract of employment, sans approval by the POEA, the
contract that governs petitioner's employment is still the POEA-SEC until his repatriation. As far
as Philippine law is concerned, petitioner's contract of employment with respondents was
concluded only at the time of his repatriation on August 30, 2006.
Further, the CA explained that a declaration from the company-designated physician as to the
fitness or unfitness of a seafarer to continue his sea-duties is sanctioned by Section 20(B)(3) of
the POEA-SEC. There being no declaration made by the company-designated physician within

the 120-day period as to the fitness of Caseas, the CA opined that he was undoubtedly entitled
to disability benefits.
APQ filed a motion for reconsideration, while Caseas filed his Comment/Opposition. On June
1, 2011, the CA denied the motion for lack of merit.
Hence, this petition.
GROUNDS
THE HONORABLE COURT OF APPEALS ERRED IN REVERSING AND SETTING
ASIDE THE DECISION AND RESOLUTION OF THE NLRC DATED 14 OCTOBER
2009 AND 27 NOVEMBER 2009, AND REINSTATING THE NLRCS RESOLUTION
DATED 22 JUNE 2009, CONSIDERING THAT:
PRIVATE RESPONDENTS CONTRACT OF EMPLOYMENT WAS NEVER
EXTENDED BY THE COMPANY NOR BY THE PRINCIPAL
PRIVATE RESPONDENTS CLAIM FOR DISABILITY BENEFITS, SICKNESS
ALLOWANCE AND UNPAID WAGES ALL ACCRUED AFTER THE EXPIRATION
OF THE CONTRACT OF EMPLOYMENT14
The pivotal issue for resolution is whether or not the employment contract of Caseas was
extended with the consent of APQ/Crew Management.
The Court rules in the affirmative.
At the outset, it is to be emphasized that the Court is not a trier of facts and, thus, its jurisdiction
is limited only to reviewing errors of law. The rule, however, admits of certain exceptions, one of
which is where the findings of fact of the lower tribunals and the appellate court are
contradictory. Such is the case here. Thus, the Court is constrained to review and resolve the
factual issue in order to settle the controversy.
Employment contracts of seafarers on board foreign ocean-going vessels are not ordinary
contracts. They are regulated and an imprimatur by the State is necessary. While the seafarer and
his employer are governed by their mutual agreement, the POEA Rules and Regulations require
that the POEA-SEC be integrated in every seafarers contract.15 In this case, there is no dispute
that Caseas employment contract was duly approved by the POEA and that it incorporated the
provisions of the POEA-SEC.
As earlier stated, the controversy started when Caseas claimed sickness and disability benefits
as well as unpaid wages from the petitioners upon his return to the Philippines. The petitioners,
on the other hand, refused to pay, arguing that Caseas sickness was contracted after his
employment contract expired.
Regarding the issue of extension and its corresponding consequences, two cases were cited by
the parties in their pleadings. The first was Sunace International Management Services, Inc. v.

NLRC16 (Sunace) and the second was Placewell International Services Corporation v. Camote17
(Placewell).
In Sunace, the Court ruled that the theory of imputed knowledge ascribed the knowledge of the
agent to the principal, not the other way around. The knowledge of the principal-foreign
employer could not, therefore, be imputed to its agent. As there was no substantial proof that
Sunace knew of, and consented to be bound under, the 2-year employment contract extension, it
could not be said to be privy thereto. As such, it and its owner were not held solidarily liable for
any of the complainants claims arising from the 2-year employment extension.18
cralawred

In Placewell, the Court concluded that the original POEA-approved employment contract
subsisted and, thus, the solidary liability of the agent with the principal continued. It ruled that:

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R.A. No. 8042 explicitly prohibits the substitution or alteration to the prejudice of the worker, of
employment contracts already approved and verified by the Department of Labor and
Employment (DOLE) from the time of actual signing thereof by the parties up to and including
the period of the expiration of the same without the approval of the DOLE. Thus, we held in
Chavez v. Bonto-Perez,19 that the subsequently executed side agreement of an overseas contract
worker with her foreign employer which reduced her salary below the amount approved by the
POEA is void because it is against our existing laws, morals and public policy. The said side
agreement cannot supersede her standard employment contract approved by the POEA.
xxx
Moreover, we find that there was no proper dismissal of respondent by SAAD; the termination
of respondent was clearly a ploy to pressure him to agree to a lower wage rate for continued
employment. Thus, the original POEA-approved employment contract of respondent subsists
despite the so-called new agreement with SAAD. Consequently, the solidary liability of
petitioner with SAAD for respondents money claims continues in accordance with Section 10 of
R.A. 8042.20
APQs primary argument revolves around the fact of expiration of Caseas employment
contract, which it claims was not extended as it was without its consent. While the contract stated
that any extension must be made by mutual consent of the parties, it, however, incorporated
Department Order (DO) No. 4 and Memorandum Circular No. 09, both series of 2000, which
provided for the Standard Terms and Conditions Governing the Employment of Filipino
Seafarers on Board Ocean Going Vessels. Sections 2 and 18 thereof provide:
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SECTION 2. COMMENCEMENT/ DURATION OF CONTRACT

A. The Employment contract between the employer and the seafarer shall commence upon
actual departure of the seafarer from the airport or seaport in the point of hire and with a
POEA approved contract. It shall be effective until the seafarers date of arrival at the
point of hire upon termination of his employment pursuant to Section 18 of this
Contract.

B. The period of employment shall be for a period mutually agreed upon by the seafarer and
the employer but not to exceed 12 months. Any extension of the contract shall be subject
to the mutual consent of both parties.

xxx
SECTION 18. TERMINATION OF EMPLOYMENT
A. The employment of the seafarer shall cease when the seafarer completes his period of
contractual service aboard the vessel, signs off from the vessel and arrives at the point of
hire.
The employment of the seafarer is also terminated when the seafarer arrives at the point
of hire for any of the following reasons:
1. When the seafarer signs off and is disembarked for medical reasons pursuant to
Section 20 (B)5 of this Contract.

xxx
[Emphases supplied]
It is to be observed that both provisions require the seafarer to arrive at the point of hire as it
signifies the completion of the employment contract, and not merely its expiration. Similarly, a
seafarers employment contract is terminated even before the contract expires as soon as he
arrives at the point of hire and signs off for medical reasons, due to shipwreck, voluntary
resignation or for other just causes. In a nutshell, there are three (3) requirements necessary for
the complete termination of the employment contract: 1] termination due to expiration or other
reasons/causes; 2] signing off from the vessel; and 3] arrival at the point of hire.
In this case, there was no clear showing that Caseas signed off from the vessel upon the
expiration of his employment contract, which was in February or April 2005. He did not arrive
either in Manila, his point of hire, because he was still on board the vessel MV Haitien Pride on
the supposed date of expiration of his contract. It was only on August 14, 2006 that he signed
off21 from MV Haitien Pride and arrived in Manila on August 30, 2006.
In Interorient Maritime Enterprises, Inc. v. NLRC,22 the Court held that the obligations and
liabilities of the local agency and its foreign principal do not end upon the expiration of the
contracted period as they were duty bound to repatriate the seaman to the point of hire to
effectively terminate the contract of employment.23
cralawred

APQ avers that Caseas transferred from MV Perseverance to MV Haitien Pride, which was not
the ship specifically mentioned in his contract. Section 15 of the POEA-SEC guides the Court on
this. It reads:
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Section 15. Transfer Clause The seafarer agrees to be transferred at any port to any vessel
owned or operated, manned or managed by the same employer, provided it is accredited to
the same manning agent and provided further that the position of the seafarer and the rate of his
wages and terms of services are in no way inferior and the total period of employment shall not
exceed that originally agreed upon.
Any form of transfer shall be documented and made available when necessary.
APQ did not argue that MV Haitien Pride was not operated or managed by Crew Management. It
did not claim either that said vessel was not accredited by it. The logical conclusion, therefore, is
that MV Haitien Pride was operated/managed by Crew Management and accredited by APQ.
Thus, Caseas transfer should have been documented and made part of its records for future
purposes, but no documentation has been shown.
Even assuming arguendo that MV Haitien Pride was not related in any way with either Crew
Management or APQ, it is with more reason that the transfer should have been properly
documented pursuant to the above provision because it necessitated the termination of his
employment contract and his repatriation to the Philippines, pursuant to Section 26(A) of the
POEA-SEC. The said provision specifically provides that:
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Section 26. Change of Principal.

A. When there is change of principal of the vessel necessitating the termination of
employment of the seafarer before the date indicated in the Contract, the seafarer shall be
entitled to earned wages, repatriation at employers expense and one month basic pay as
termination pay.
B. If by mutual agreement, the seafarer continues his service on board the same vessel, such
service shall be treated as a new contract. The seafarer shall be entitled to earned wages
only.
C. In case arrangement has been made for the seafarer to join another vessel to complete his
contract, the seafarer shall be entitled to basic wage until the date joining the other vessel.

Meanwhile, Caseas claimed that his transfer was due to the fact that MV Perseverance could
not leave port because of incomplete documents for its operation. This was not disputed. To the
mind of the Court, having incomplete documents for the vessels operation renders it
unseaworthy. While seaworthiness is commonly equated with the physical aspect and condition
of the vessel for voyage as its ability to withstand the rigors of the sea, it must not be forgotten
that a vessel should be armed with the necessary documents required by the maritime rules and
regulations, both local and international. It has been written that vessel seaworthiness further
extends to cover the documents required to ensure that the vessel can enter and leave ports
without problems.24
cralawred

Accordingly, Caseas contract should have been terminated and he should have been repatriated
to the Philippines because a seafarer cannot be forced to sail with an unseaworthy vessel,

pursuant to Section 24 of the POEA-SEC.25 There was, however, no showing that his contract
was terminated by reason of such transfer. It is necessary to reiterate that MV Haitien Pride
appears to be manned by, and accredited with, the same principal/ agency. His joining the said
vessel could only mean that it was for the purpose of completing his contract as the transfer was
made well within the period of his employment contract on board MV Perseverance.
APQ further claims that that there was an agreement between Caseas and the shipowner, but
there was no concrete proof adduced to show that indeed a new agreement for the extension of
the contract was ever made. Granting that a new agreement for the extension was made, the acts
of APQ and Crew Management proved that there was implied consent to the extension.
APQ attempts to impress upon the Court that Caseas contract already expired and that he had a
new employer during the alleged extension of the contract by relying on the December 16, 2005
Letter of the POEA. APQ alleged in its Memorandum26 that:
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In a letter dated 16 December 2005 letter, the POEA confirmed that the Contract expired on
April 2005 but he was not allowed repatriation by the owner of the Vessel, his new employer
[See Annex 6 of Comment attached as Annex z of this Petition.]
A perusal of the said letter, however, discloses that nowhere was it stated that Caseas was
allowed repatriation by the owner of the vessel, his new employer. What was clearly stated
therein was that Caseas was not allowed repatriation by his employer for some reason. Insofar
as Philippine law is concerned, the employer referred to in the said letter remains to be the
foreign principal/manning agency as stated in the POEA-approved employment contract.
Finally, there was no showing as to why Caseas was not repatriated to the Philippines upon the
expiration of his contract. It was expressly provided therein that the contract was for eight (8)
months, plus or minus two (2) months, that is, until February 2005 or at most, April 2005.
On its claim of lack of consent, APQ insists that as proof of its intention not to extend Caseas
contract, it already arranged his plane ticket as early as January & February 2005, in anticipation
of the expiration of the contract, attaching the e-mail copy of the American Airlines E-ticket &
Itinerary.
Again, a scrutiny of the records reveals otherwise. The e-mail and e-ticket consistently relied
upon by the petitioners clearly showed that the e-ticket was issued on January 18, 2006, which
flight was scheduled on January 23 (Monday) bound for Miami and January 25 (Wednesday)
bound for Manila. There were two (2) other e-tickets arranged for Caseas which showed a flight
schedule on February 8 (Wednesday) and February 15 (Wednesday), both bound for Manila
from Miami. These e-mails and e-tickets were sent by Crew Management to APQ via fax. Crew
Management also executed the letter,27 dated February 24, 2006, addressed to DOLE-OWWA
in response to the report of the wife of Caseas to DOLE regarding his repatriation. Crew
Management stated in said letter, copy furnished APQ, that it had already issued an air ticket to
Caseas, but he failed to claim it. The same letter assured the DOLE-OWWA of its arranging the
payment of wages and repatriation of the crew members on-board MV Haitien Pride, as well as
its arranging another plane ticket for Caseas, if necessary. Thus, these communications reveal
that APQ had actual knowledge that Caseas continued working on board the said vessel after

February/April 2005. Despite such knowledge, APQ neither posed any objection to the
extension of the contract nor make any effort to protect itself from any responsibility that might
arise from the extension, if it did not indeed intend to extend the employment contract. To keep
on notifying a person/party who was not anymore privy to any contract at all makes no sense.
Also, APQ sent OWWA another letter,28 dated April 24, 2006, giving information on the status
of MV Haitien Pride. The same letter confirmed that APQ and Crew Management had constant
communication with each other regarding the said vessel and its crew. Alex P. Quillope, APQs
President, even stated in the same letter that:
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Soon as I receive any information from them, I will at once inform your good office as I have
then already prepared my travel again to Miami, Florida once MV Haitien Pride be on her sailing
to Miami.29
APQ cannot now feign ignorance of any extension of the contract and claim that it did not
consent to it. As it had knowledge of the extended contract, APQ is solidarily liable with Crew
Management for Caseas claims. Caseas is, therefore, entitled to the unpaid wages during the
extended portion of his contract.
As to his claim for medical and other benefits, there is no dispute that the symptoms of Caseas
illness began to manifest during the term of his employment contract. The fact that the
manifestations of the illness only came about in August 2006 will not bar a conclusion that he
contracted the ailment while the contract was subsisting. The overall state and condition that he
was exposed to over time was the very cause of his illness. Thus, the CA was correct in
reinstating the NLRC resolution awarding sickness allowance as well as disability benefits in
favor of Caseas. Section 20(B)(3) of the 2000 POEA Standard Terms and Conditions
Governing the Employment of Filipino Seafarers on Board Ocean Going Vessels provides:
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B. COMPENSATION AND BENEFITS FOR INJURY OR ILLNESS

xxx
3. Upon sign-off from the vessel for medical treatment, the seafarer is entitled to sickness
allowance equivalent to his basic wage until he is declared fit to work or the degree of
permanent disability has been assessed by the company-designated physician but in no case
shall this period exceed one hundred twenty (120) days.
For this purpose, the seafarer shall submit himself to a postemployment medical examination by
a company-designated physician within three working days upon his return except when he is
physically incapacitated to do so, in which case, a written notice to the agency within the same
period is deemed as compliance. Failure of the seafarer to comply with the mandatory reporting
requirement shall result in his forfeiture of the right to claim the above benefits. If a doctor
appointed by the seafarer disagrees with the assessment, a third doctor may be agreed jointly
between the Employer and the seafarer. The third doctors decision shall be final and binding on
both parties.
xxx

In Magsaysay Maritime Corporation vs. NLRC,30 citing Vergara vs. Hammonia Maritime
Services, Inc.,31 the Court reiterated that the seafarer, upon sign-off from his vessel, must report
to the company-designated physician within three (3) days from arrival for diagnosis and
treatment. For the duration of the treatment but in no case to exceed 120 days, the seaman is on
temporary total disability as he is totally unable to work. He receives his basic wage during this
period until he is declared fit to work or his temporary disability is acknowledged by the
company to be permanent, either partially or totally, as his condition is defined under the POEASEC and by applicable Philippine laws. If the 120 days initial period is exceeded and no such
declaration is made because the seafarer requires further medical attention, then the temporary
total disability period may be extended up to a maximum of 240 days, subject to the right of the
employer to declare within this period that a partial or total disability already exists. The seaman
may, of course, also be declared fit to work at any time such declaration is justified by his
medical condition.32
cralawred

In this case, Casenas immediately reported to APQ for the required post-employment medical
examination upon his return to the Philippines. He was referred to the company-designated
physician, who diagnosed him to be suffering from Ischemic Heart Disease, which was a
manifestation of organ damage.33 Caseas likewise consulted two (2) other physicians who
certified him to be suffering from Essential Hypertension aside from Ischemic Heart Disease.34
From the time of Caseas diagnosis by the company-designated physician, he was under the
state of temporary total disability, which lasted for at least 120 days as provided by law. Such
period could be extended up to 240 days, if further medical attention was required. There was,
however, no showing of any justification to extend said period. As the law requires, within 120
days from the time he was diagnosed of his illness, the company-designated physician must
make a declaration as to the fitness or unfitness of Caseas As correctly observed by the CA,
however, the 120 day period lapsed without such a declaration being made.35 Caseas is now
deemed to be in a state of permanent total disability and, thus, clearly entitled to the total
disability benefits provided by law.
WHEREFORE, the petition is DENIED.
SO ORDERED.

G.R. No. 214132, February 18, 2015

SEALANES MARINE SERVICES, INC./ARKLOW SHIPPING NETHERLAND
AND/OR CHRISTOPHER DUMATOL, Petitioners, v. ARNEL G. DELA TORRE,
Respondent.
RESOLUTION
REYES, J.:
This is a Petition for Review on Certiorari1 from the Decision2 dated April 24, 2014 of the Court
of Appeals (CA) in CA-G.R. SP No. 130641, which affirmed the Decision dated February 28,
2013 and Resolution dated April 24, 2013 of the National Labor Relations Commission (NLRC),
in NLRC LAC-09-000747-12-OFW, entitled, Arnel G. Dela Torre v. Sealanes Marine Services,
Inc./Arklow Shipping Netherland and Christopher Dumatol, which upheld the disability award
by the Labor Arbiter (LA) of US$80,000.00 in favor of Arnel G. Dela Torre (respondent),
pursuant to the parties Collective Bargaining Agreement (CBA).
Factual Antecedents
The respondent was hired by Sealanes Marine Services, Inc. (Sealanes), a local manning agency,
through its President, Christopher Dumatol (Dumatol), in behalf of its foreign principal, Arklow
Shipping Netherland (petitioners), as an able seaman on board M/V Arklow Venture for a period
of nine months at a basic monthly salary of US$545.00. An overriding CBA between the
respondents union, Associated Marine Officers and Seamens Union of the Philippines, and the
Netherlands Maritime Employers Association, called CBA for Filipino Ratings on Board
Netherlands Flag Vessels (Dutch CBA), also covered his contract.3
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The respondent embarked on January 21, 2010. On August 1, 2010, during the crews rescue
boat drill at the port of Leith, Scotland, he figured in an accident and injured his lower back. An
X-ray of his lumbosacral spine was taken at a hospital at the port, but while according to his
attending physician he sustained no major injury, the pain in his back persisted and he was
repatriated. On August 4, 2010, the respondent was referred by Sealanes to the Marine Medical
Services of the Metropolitan Medical Center. On August 5, 2010, an X-ray of his lumbosacral
spine showed, per the medical report, that he sustained lumbar spine degenerative changes with
associated L1 compression fracture. The next day, a Magnetic Resonance Imaging scan of his
lumbar spine revealed an acute compression fracture body of L1; right paracentral disc
protrusion at L5-S1 causing minimal canal compromise; L4-L5 and L5-S1 disc
dehydration. Again on December 16, 2010, an X-ray showed compression deformity of L1
vertebra; L2-L1 disc space is now defined but slightly narrowed. On January 27, 2011, his
fourth X-ray still showed a compression fracture, L1 with narrowed L2-L1 disc space; no
significant neural foraminal compromise.4
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The respondent underwent several physical therapy sessions, and finally on March 10, 2011 the
company-designated physician assessed him with a Grade 11 disability for slight rigidity or onethird loss of motion or lifting power of trunk. Nonetheless, he was informed of the assessment
only in May 2011, or more than 240 days since the accident.5
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Rulings of the LA and the NLRC

On May 20, 2011, the respondent filed a complaint for disability benefits, medical
reimbursement, underpaid sick leave, damages and attorneys fees. On July 30, 2012, the LA
rendered judgment awarding him US$80,000.00 in disability benefits as provided in the Dutch
CBA, plus 10% as attorneys fees. In particular, the LA held that such an award cannot be made
to depend on the company-designated physicians disability assessment which was issued more
than 120 days after the accident, especially if despite treatment for more than 240 days the
respondent was still unable to return to his accustomed work.6
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On August 31, 2012, the petitioners appealed to the NLRC contending that the disability benefits
due to the respondent should be based on his Grade 11 disability assessment issued by the
company-designated physician. On September 21, 2012, the respondent also filed his appeal
assailing the denial of his medical and transportation expenses.7
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In its Decision dated February 28, 2013, the NLRC affirmed the award of total disability benefits
to the respondent noting that he continued with his rehabilitation even after the companys Grade
11 disability rating issued on March 10, 2011, indicating that its disability rating was intended
merely to comply with the 240-day limit for the company-designated physician to either declare
him fit to work or to assess the degree of his permanent disability. The petitioners motion for
reconsideration was denied on April 24, 2013.
On petition for certiorari to the CA, the petitioners raised the following grounds:

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I. PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT AWARDED
MAXIMUM DISABILITY COMPENSATION AND ATTORNEYS FEES TO [THE
RESPONDENT] DESPITE THE FOLLOWING:
a. Private respondent was assessed with Disability Grade 11 only by the company-designated
physician within his 240-day period of treatment;
cralawred

b. Under the POEA-contract and the Dutch CBA, disability benefits of seafarer shall be based on
the medical assessment of the company-designated physician.
c. Under the POEA-contract, benefits are awarded based solely on gradings and not by the
number of days of treatment.
II. PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT AWARDED
ATTORNEY'S FEES TO PRIVATE RESPONDENT.8
Ruling of the CA
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The petitioners maintained that the respondent is not entitled to maximum disability benefits
under the Philippine Overseas Employment Administration Standard Employment Contract
(POEA SEC), the Dutch CBA and this Courts decisions, in view of his Grade 11 disability
rating as assessed by the company-designated physician. But the respondent pointed out that, at

the time the said rating was issued, he was not completely healed but had to continue with his
physical therapy sessions even beyond the maximum 240-day period allowed under the
Amended Rules on Employee Compensation (AREC),9 implying that the companys disability
rating on March 10, 2011 was temporary; that since his treatment exceeded the 240 days
permitted, his disability is now total and permanent.
In its Decision10 dated April 24, 2014, the CA ruled that the seafarers right to disability benefits
is determined not solely by the companys assessment of his impediment but also by law,
contract and medical findings. Citing Articles 191 to 193 of the Labor Code, Section 2, Rule X
of the AREC, the POEA SEC, the parties CBA, and the employment contract between the
parties, the appellate concurred that the respondent was entitled to total permanent disability
benefits.11
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Petition for Review in the Supreme Court

In this petition, the petitioners insist that the CA erred in disregarding the petitioners partial
permanent disability rating of Grade 11 under the POEA SEC schedule of disability benefits,
even as they pointed out that the respondent failed to refer his assessment to a neutral third
doctor as provided in Paragraph 3, Section 20(B) of the POEA SEC.
Ruling of the Court
The Court denies the petition.
It is expressly provided in Article 192(c)(1) of the Labor Code that a temporary total disability
lasting continuously for more than 120 days, except as otherwise provided in the Rules, shall be
deemed total and permanent. Section 2(b), Rule VII of the AREC, likewise provides that a
disability is total and permanent if as a result of the injury or sickness the employee is unable to
perform any gainful occupation for a continuous period exceeding 120 days, except as otherwise
provided under Rule X of these Rules.
As to sickness allowance, Section 2(a), Rule X of the AREC, referred to in Article 192(c)(1) of
the Labor Code, reads:
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Sec. 2. Period of Entitlement (a) The income benefit shall be paid beginning on the first day
of such disability. If caused by an injury or sickness it shall not be paid longer than 120
consecutive days except where such injury or sickness still requires medical attendance beyond
120 days but not to exceed 240 days from onset of disability in which case benefit for temporary
total disability shall be paid. However, the System may declare the total and permanent status at
any time after 120 days of continuous temporary total disability as may be warranted by the
degree of actual loss or impairment of physical or mental functions as determined by the System.
For its part, the POEA SEC for seafarers provides in Paragraph 3 of Section 20(B) thereof
that:
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3. Upon sign-off from the vessel for medical treatment, the seafarer is entitled to sickness
allowance equivalent to his basic wage until he is declared fit to work or the degree of permanent

disability has been assessed by the company-designated physician but in no case shall this period
exceed one hundred twenty (120) days.
For this purpose, the seafarer shall submit himself to a post-employment medical examination
by a company-designated physician within three working days upon his return except when he is
physically incapacitated to do so, in which case, a written notice to the agency within the same
period is deemed as compliance. Failure of the seafarer to comply with the mandatory reporting
requirement shall result in his forfeiture of the right to claim the above benefits.
If a doctor appointed by the seafarer disagrees with the assessment, a third doctor may be agreed
jointly between the employer and the seafarer. The third doctors decision shall be final and
binding on both parties.
True, under Section 20(B)(3) of the POEA SEC, it is the company-designated physician
who should determine the disability grading or fitness to work of the seafarer. Also, under
Article 21.4.1 of the Dutch CBA governing the parties, it is the doctor appointed by the
companys medical advisor who shall determine the degree of disability suffered by a seafarer:

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21.4.1 DISABILITY COMPENSATION the degree of disability which the COMPANY

subject to this Agreement is liable to pay shall be determined by a doctor appointed by the
COMPANY'S MEDICAL ADVISOR.
Under Section 3212 of the POEA SEC, only those injuries or disabilities classified as Grade 1 are
considered total and permanent. In Kestrel Shipping Co., Inc. v. Munar,13 the Court read the
POEA SEC in harmony with the Labor Code and the AREC, and explained that: (a) the 120 days
provided under Section 20(B)(3) of the POEA SEC is the period given to the employer to
determine fitness to work and when the seafarer is deemed to be in a state of total and temporary
disability; (b) the 120 days of total and temporary disability may be extended up to a maximum
of 240 days should the seafarer require further medical treatment; and (c) a total and temporary
disability becomes permanent when so declared by the company-designated physician within
120 or 240 days, as the case may be, or upon the expiration of the said periods without a
declaration of either fitness to work or permanent disability and the seafarer is still unable to
resume his regular seafaring duties.14
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The respondent was repatriated on August 4, 2010 and immediately underwent treatment and
rehabilitation at the company-designated facility, Marine Medical Services of the Metropolitan
Medical Center. It lasted until July 20, 2011, exceeding the 240 days allowed to declare him
either fit to work or permanently disabled. Although he was given a Grade 11 disability rating
on March 10, 2011, the assessment may be deemed tentative because he continued his physical
therapy sessions beyond 240 days. Yet, despite his long treatment and rehabilitation, he was
eventually unable to go back to work as a seafarer, which fact entitled him under the Dutch CBA
to maximum disability benefits.
It was held in Kestrel that the POEA SEC provides merely for the basic or minimal acceptable
terms of a seafarers employment contract, thus, in the assessment of whether his injury is partial
and permanent, the same must be so characterized not only under the Schedule of Disabilities in
Section 32 of the POEA SEC, but also under the relevant provisions of the Labor Code and the

AREC implementing Title II, Book IV of the Labor Code. According to Kestrel, while the
seafarer is partially injured or disabled, he must not be precluded from earning doing the same
work he had before his injury or disability or that he is accustomed or trained to do. Otherwise, if
his illness or injury prevents him from engaging in gainful employment for more than 120 or 240
days, as may be the case, then he shall be deemed totally and permanently disabled.
In Crystal Shipping, Inc. v. Natividad,15 the Court ruled that it is of no consequence that the
seafarer recovered from his illness or injury, for what is important is that he was unable to
perform his customary work for more than 120 days, and this constitutes total permanent
disability:
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Petitioners tried to contest the above findings by showing that respondent was able to work again
as a chief mate in March 2001. Nonetheless, this information does not alter the fact that as a
result of his illness, respondent was unable to work as a chief mate for almost three years. It is of
no consequence that respondent was cured after a couple of years. The law does not require that
the illness should be incurable. What is important is that he was unable to perform his
customary work for more than 120 days which constitutes permanent total disability. An award
of a total and permanent disability benefit would be germane to the purpose of the benefit, which
is to help the employee in making ends meet at the time when he is unable to work.16 (Citations
omitted and italics supplied)
Thus, that the respondent required therapy beyond 240 days and remained unable to perform his
customary work during this time rendered unnecessary any further need by him to secure his
own doctors opinion or that of a neutral third doctor to determine the extent of his permanent
disability.
Concerning the joint and solidary liability of the manning agency, Sealanes, its foreign principal,
Arklow Shipping Netherland, and Sealanes President Dumatol, Section 10 of Republic Act
(R.A.) No. 8042, otherwise known as the Migrant Workers and Overseas Filipinos Act of
1995, as amended by Section 7 of R.A. No. 10022, reads:
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SEC. 10. Money Claims. Notwithstanding any provision of law to the contrary, the Labor
Arbiters of the National Labor Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90) calendar days after the filing of the
complaint, the claims arising out of an employer-employee relationship or by virtue of any law
or contract involving Filipino workers for overseas deployment including claims for actual,
moral, exemplary and other forms of damage. Consistent with this mandate, the NLRC shall
endeavor to update and keep abreast with the developments in the global services industry.
The liability of the principal/employer and the recruitment/placement agency for any and all
claims under this section shall be joint and several. This provision shall be incorporated in the
contract for overseas employment and shall be a condition precedent for its approval. The
performance bond to [be] filed by the recruitment/placement agency, as provided by law, shall be
answerable for all money claims or damages that may be awarded to the workers. If the
recruitment/placement agency is a juridical being, the corporate officers and directors and
partners as the case may be, shall themselves be jointly and solidarily liable with the corporation
or partnership for the aforesaid claims and damages.

Such liabilities shall continue during the entire period or duration of the employment contract
and shall not be affected by any substitution, amendment or modification made locally or in a
foreign country of the said contract.
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x x x x (Italics ours)
Thus, every applicant for license to operate a seafarers manning agency shall, in the case of a
corporation or partnership, submit a written application together with, among others, a verified
undertaking by officers, directors and partners that they will be jointly and severally liable with
the company over claims arising from employer-employee relationship.17 Laws are deemed
incorporated in employment contracts and the contracting parties need not repeat them. They do
not even have to be referred to. Every contract, thus, contains not only what has been explicitly
stipulated, but also the statutory provisions that have any bearing on the matter.18
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WHEREFORE, the petition is DENIED.

SO ORDERED.

chanrobles

[G.R. NO. 152894 : August 17, 2007]

CENTURY CANNING CORPORATION, Petitioner, v. COURT OF APPEALS and
GLORIA C. PALAD, Respondents.
DECISION
CARPIO, J.:
The Case
This is a Petition for Review 1 of the Decision2 dated 12 November 2001 and the Resolution
dated 5 April 2002 of the Court of Appeals in CA-G.R. SP No. 60379.
The Facts
On 15 July 1997, Century Canning Corporation (petitioner) hired Gloria C. Palad (Palad) as "fish
cleaner" at petitioner's tuna and sardines factory. Palad signed on 17 July 1997 an apprenticeship
agreement3 with petitioner. Palad received an apprentice allowance of P138.75 daily. On 25 July
1997, petitioner submitted its apprenticeship program for approval to the Technical Education
and Skills Development Authority (TESDA) of the Department of Labor and Employment
(DOLE). On 26 September 1997, the TESDA approved petitioner's apprenticeship program.4
According to petitioner, a performance evaluation was conducted on 15 November 1997, where
petitioner gave Palad a rating of N.I. or "needs improvement" since she scored only 27.75%
based on a 100% performance indicator. Furthermore, according to the performance evaluation,
Palad incurred numerous tardiness and absences. As a consequence, petitioner issued a
termination notice5 dated 22 November 1997 to Palad, informing her of her termination effective
at the close of business hours of 28 November 1997.
Palad then filed a complaint for illegal dismissal, underpayment of wages, and non-payment of
pro-rated 13th month pay for the year 1997.
On 25 February 1999, the Labor Arbiter dismissed the complaint for lack of merit but ordered
petitioner to pay Palad her last salary and her pro-rated 13th month pay. The dispositive portion
of the Labor Arbiter's decision reads:
WHEREFORE, premises considered, judgment is hereby rendered declaring that the complaint
for illegal dismissal filed by the complainant against the respondents in the above-entitled case
should be, as it is hereby DISMISSED for lack of merit. However, the respondents are hereby
ordered to pay the complainant the amount of ONE THOUSAND SIX HUNDRED THIRTYTWO PESOS (P1,632.00), representing her last salary and the amount of SEVEN THOUSAND
TWO HUNDRED TWENTY EIGHT (P7,228.00) PESOS representing her prorated 13th month
pay.
All other issues are likewise dismissed.

SO ORDERED.6
On appeal, the National Labor Relations Commission (NLRC) affirmed with modification the
Labor Arbiter's decision, thus:
WHEREFORE, premises considered, the decision of the Arbiter dated 25 February 1999 is
hereby MODIFIED in that, in addition, respondents are ordered to pay complainant's backwages
for two (2) months in the amount of P7,176.00 (P138.75 x 26 x 2 mos.). All other dispositions of
the Arbiter as appearing in the dispositive portion of his decision are AFFIRMED.
SO ORDERED.7
Upon denial of Palad's motion for reconsideration, Palad filed a special civil action for certiorari
with the Court of Appeals. On 12 November 2001, the Court of Appeals rendered a decision, the
dispositive portion of which reads:
WHEREFORE, in view of the foregoing, the questioned decision of the NLRC is hereby SET
ASIDE and a new one entered, to wit:
(a) finding the dismissal of petitioner to be illegal;
(b) ordering private respondent to pay petitioner her underpayment in wages;
(c) ordering private respondent to reinstate petitioner to her former position without loss of
seniority rights and to pay her full backwages computed from the time compensation was
withheld from her up to the time of her reinstatement;
(d) ordering private respondent to pay petitioner attorney's fees equivalent to ten (10%) per cent
of the monetary award herein; and
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(e) ordering private respondent to pay the costs of the suit.

SO ORDERED.8
The Ruling of the Court of Appeals
The Court of Appeals held that the apprenticeship agreement which Palad signed was not valid
and binding because it was executed more than two months before the TESDA approved
petitioner's apprenticeship program. The Court of Appeals cited Nitto Enterprises v. National
Labor Relations Commission,9 where it was held that prior approval by the DOLE of the
proposed apprenticeship program is a condition sine qua non before an apprenticeship agreement
can be validly entered into.
The Court of Appeals also held that petitioner illegally dismissed Palad. The Court of Appeals
ruled that petitioner failed to show that Palad was properly apprised of the required standard of

performance. The Court of Appeals likewise held that Palad was not afforded due process
because petitioner did not comply with the twin requirements of notice and hearing.
The Issues
Petitioner raises the following issues:
1. WHETHER THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
HOLDING THAT PRIVATE RESPONDENT WAS NOT AN APPRENTICE; and
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2. WHETHER THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN

HOLDING THAT PETITIONER HAD NOT ADEQUATELY PROVEN THE EXISTENCE OF
A VALID CAUSE IN TERMINATING THE SERVICE OF PRIVATE RESPONDENT.10
The Ruling of the Court
The petition is without merit.
Registration and Approval by the TESDA of Apprenticeship Program Required Before Hiring
of Apprentices
The Labor Code defines an apprentice as a worker who is covered by a written apprenticeship
agreement with an employer.11 One of the objectives of Title II (Training and Employment of
Special Workers) of the Labor Code is to establish apprenticeship standards for the protection of
apprentices.12 In line with this objective, Articles 60 and 61 of the Labor Code provide:
ART. 60. Employment of apprentices. - Only employers in the highly technical industries may
employ apprentices and only in apprenticeable occupations approved by the Minister of
Labor and Employment. (Emphasis supplied)
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ART. 61. Contents of apprenticeship agreements. - Apprenticeship agreements, including the

wage rates of apprentices, shall conform to the rules issued by the Minister of Labor and
Employment. The period of apprenticeship shall not exceed six months. Apprenticeship
agreements providing for wage rates below the legal minimum wage, which in no case shall
start below 75 percent of the applicable minimum wage, may be entered into only in
accordance with apprenticeship programs duly approved by the Minister of Labor and
Employment. The Ministry shall develop standard model programs of apprenticeship.
(Emphasis supplied)
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In Nitto Enterprises v. National Labor Relations Commission,13 the Court cited Article 61 of the
Labor Code and held that an apprenticeship program should first be approved by the DOLE
before an apprentice may be hired, otherwise the person hired will be considered a regular
employee. The Court held:
In the case at bench, the apprenticeship agreement between petitioner and private respondent was
executed on May 28, 1990 allegedly employing the latter as an apprentice in the trade of "care

maker/molder." On the same date, an apprenticeship program was prepared by petitioner and
submitted to the Department of Labor and Employment. However, the apprenticeship agreement
was filed only on June 7, 1990. Notwithstanding the absence of approval by the Department of
Labor and Employment, the apprenticeship agreement was enforced the day it was signed.
Based on the evidence before us, petitioner did not comply with the requirements of the law. It is
mandated that apprenticeship agreements entered into by the employer and apprentice
shall be entered only in accordance with the apprenticeship program duly approved by the
Minister of Labor and Employment.
Prior approval by the Department of Labor and Employment of the proposed apprenticeship
program is, therefore, a condition sine qua non before an apprenticeship agreement can be
validly entered into.
The act of filing the proposed apprenticeship program with the Department of Labor and
Employment is a preliminary step towards its final approval and does not instantaneously give
rise to an employer-apprentice relationship.
Article 57 of the Labor Code provides that the State aims to "establish a national apprenticeship
program through the participation of employers, workers and government and non-government
agencies" and "to establish apprenticeship standards for the protection of apprentices." To
translate such objectives into existence, prior approval of the DOLE to any apprenticeship
program has to be secured as a condition sine qua non before any such apprenticeship agreement
can be fully enforced. The role of the DOLE in apprenticeship programs and agreements cannot
be debased.
Hence, since the apprenticeship agreement between petitioner and private respondent has no
force and effect in the absence of a valid apprenticeship program duly approved by the DOLE,
private respondent's assertion that he was hired not as an apprentice but as a delivery boy
("kargador" or "pahinante") deserves credence. He should rightly be considered as a regular
employee of petitioner as defined by Article 280 of the Labor Code x x x. (Emphasis supplied)14
Republic Act No. 779615 (RA 7796), which created the TESDA, has transferred the authority
over apprenticeship programs from the Bureau of Local Employment of the DOLE to the
TESDA.16 RA 7796 emphasizes TESDA's approval of the apprenticeship program as a prerequisite for the hiring of apprentices. Such intent is clear under Section 4 of RA 7796:
SEC. 4. Definition of Terms. - As used in this Act:
xxx
j) "Apprenticeship" training within employment with compulsory related theoretical
instructions involving a contract between an apprentice and an employer on an approved
apprenticeable occupation;

k) "Apprentice" is a person undergoing training for an approved apprenticeable occupation

during an established period assured by an apprenticeship agreement;
l) "Apprentice Agreement" is a contract wherein a prospective employer binds himself to train
the apprentice who in turn accepts the terms of training for a recognized apprenticeable
occupation emphasizing the rights, duties and responsibilities of each party;
m) "Apprenticeable Occupation" is an occupation officially endorsed by a tripartite body and
approved for apprenticeship by the Authority [TESDA]; (Emphasis supplied)
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In this case, the apprenticeship agreement was entered into between the parties before petitioner
filed its apprenticeship program with the TESDA for approval. Petitioner and Palad executed the
apprenticeship agreement on 17 July 1997 wherein it was stated that the training would start on
17 July 1997 and would end approximately in December 1997.17 On 25 July 1997, petitioner
submitted for approval its apprenticeship program, which the TESDA subsequently approved on
26 September 1997.18 Clearly, the apprenticeship agreement was enforced even before the
TESDA approved petitioner's apprenticeship program. Thus, the apprenticeship agreement is
void because it lacked prior approval from the TESDA.
The TESDA's approval of the employer's apprenticeship program is required before the
employer is allowed to hire apprentices. Prior approval from the TESDA is necessary to ensure
that only employers in the highly technical industries may employ apprentices and only in
apprenticeable occupations.19 Thus, under RA 7796, employers can only hire apprentices for
apprenticeable occupations which must be officially endorsed by a tripartite body and approved
for apprenticeship by the TESDA.
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This is to ensure the protection of apprentices and to obviate possible abuses by prospective
employers who may want to take advantage of the lower wage rates for apprentices and
circumvent the right of the employees to be secure in their employment.
The requisite TESDA approval of the apprenticeship program prior to the hiring of apprentices
was further emphasized by the DOLE with the issuance of Department Order No. 68-04 on 18
August 2004. Department Order No. 68-04, which provides the guidelines in the implementation
of the Apprenticeship and Employment Program of the government, specifically states that no
enterprise shall be allowed to hire apprentices unless its apprenticeship program is
registered and approved by TESDA.20
Since Palad is not considered an apprentice because the apprenticeship agreement was enforced
before the TESDA's approval of petitioner's apprenticeship program, Palad is deemed a regular
employee performing the job of a "fish cleaner." Clearly, the job of a "fish cleaner" is necessary
in petitioner's business as a tuna and sardines factory. Under Article 28021 of the Labor Code, an
employment is deemed regular where the employee has been engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer.
Illegal Termination of Palad

We shall now resolve whether petitioner illegally dismissed Palad.

Under Article 27922 of the Labor Code, an employer may terminate the services of an employee
for just causes23 or for authorized causes.24 Furthermore, under Article 277(b)25 of the Labor
Code, the employer must send the employee who is about to be terminated, a written notice
stating the causes for termination and must give the employee the opportunity to be heard and to
defend himself. Thus, to constitute valid dismissal from employment, two requisites must
concur: (1) the dismissal must be for a just or authorized cause; and (2) the employee must be
afforded an opportunity to be heard and to defend himself.26
In this case, the Labor Arbiter held that petitioner terminated Palad for habitual absenteeism and
poor efficiency of performance. Under Section 25, Rule VI, Book II of the Implementing Rules
of the Labor Code, habitual absenteeism and poor efficiency of performance are among the valid
causes for which the employer may terminate the apprenticeship agreement after the
probationary period.
However, the NLRC reversed the finding of the Labor Arbiter on the issue of the legality of
Palad's termination:
As to the validity of complainant's dismissal in her status as an apprentice, suffice to state that
the findings of the Arbiter that complainant was dismissed due to failure to meet the standards is
nebulous. What clearly appears is that complainant already passed the probationary status of the
apprenticeship agreement of 200 hours at the time she was terminated on 28 November 1997
which was already the fourth month of the apprenticeship period of 1000 hours. As such, under
the Code, she can only be dismissed for cause, in this case, for poor efficiency of performance on
the job or in the classroom for a prolonged period despite warnings duly given to the apprentice.
We noted that no clear and sufficient evidence exist to warrant her dismissal as an
apprentice during the agreed period. Besides the absence of any written warnings given to
complainant reminding her of "poor performance," respondents' evidence in this respect
consisted of an indecipherable or unauthenticated xerox of the performance evaluation
allegedly conducted on complainant. This is of doubtful authenticity and/or credibility,
being not only incomplete in the sense that appearing thereon is a signature (not that of
complainant) side by side with a date indicated as "1/16/98". From the looks of it, this
signature is close to and appertains to the typewritten position of "Division/Department
Head", which is below the signature of complainant's immediate superior who made the
evaluation indicated as "11-15-97."
The only conclusion We can infer is that this evaluation was made belatedly, specifically,
after the filing of the case and during the progress thereof in the Arbitral level, as shown
that nothing thereon indicate that complainant was notified of the results. Its authenticity
therefor, is a big question mark, and hence lacks any credibility. Evidence, to be admissible
in administrative proceedings, must at least have a modicum of authenticity. This,
respondents failed to comply with. As such, complainant is entitled to the payment of her wages
for the remaining two (2) months of her apprenticeship agreement.27 (Emphasis supplied)
cralawlibrary

Indeed, it appears that the Labor Arbiter's conclusion that petitioner validly terminated Palad was
based mainly on the performance evaluation allegedly conducted by petitioner. However, Palad
alleges that she had no knowledge of the performance evaluation conducted and that she was not
even informed of the result of the alleged performance evaluation. Palad also claims she did not
receive a notice of dismissal, nor was she given the chance to explain. According to petitioner,
Palad did not receive the termination notice because Palad allegedly stopped reporting for work
after being informed of the result of the evaluation.
Under Article 227 of the Labor Code, the employer has the burden of proving that the
termination was for a valid or authorized cause.28 Petitioner failed to substantiate its claim that
Palad was terminated for valid reasons. In fact, the NLRC found that petitioner failed to prove
the authenticity of the performance evaluation which petitioner claims to have conducted on
Palad, where Palad received a performance rating of only 27.75%. Petitioner merely relies on the
performance evaluation to prove Palad's inefficiency. It was likewise not shown that petitioner
ever apprised Palad of the performance standards set by the company. When the alleged valid
cause for the termination of employment is not clearly proven, as in this case, the law considers
the matter a case of illegal dismissal.29
Furthermore, Palad was not accorded due process. Even if petitioner did conduct a performance
evaluation on Palad, petitioner failed to warn Palad of her alleged poor performance. In fact,
Palad denies any knowledge of the performance evaluation conducted and of the result thereof.
Petitioner likewise admits that Palad did not receive the notice of termination30 because Palad
allegedly stopped reporting for work. The records are bereft of evidence to show that petitioner
ever gave Palad the opportunity to explain and defend herself. Clearly, the two requisites for a
valid dismissal are lacking in this case.
WHEREFORE, we AFFIRM the Decision dated 12 November 2001 and the Resolution dated
5 April 2002 of the Court of Appeals in CA-G.R. SP No. 60379.
SO ORDERED.

[G.R. No. 187320 : January 26, 2011]

ATLANTA INDUSTRIES, INC. AND/OR ROBERT CHAN, PETITIONERS, VS.
APRILITO R. SEBOLINO, KHIM V. COSTALES, ALVIN V. ALMOITE, AND JOSEPH
S. SAGUN, RESPONDENTS.
DECISION
BRION, J.:
For resolution is the petition for review on certiorari[1] assailing the decision[2] and the
resolution[3] of the Court of Appeals (CA) rendered on November 4, 2008 and March 25, 2009,
respectively, in CA-G.R. SP. No. 99340.[4]
cralaw

The Antecedents
The facts are summarized below.
In the months of February and March 2005, complainants Aprilito R. Sebolino, Khim V.
Costales, Alvin V. Almoite, Joseph S. Sagun, Agosto D. Zao, Domingo S. Alegria, Jr., Ronie
Ramos, Edgar Villagomez, Melvin Pedregoza, Teofanes B. Chiong, Jr., Leonardo L. dela Cruz,
Arnold A. Magalang, and Saturnino M. Mabanag filed several complaints for illegal dismissal,
regularization, underpayment, nonpayment of wages and other money claims, as well as claims
for moral and exemplary damages and attorney's fees against the petitioners Atlanta Industries,
Inc. (Atlanta) and its President and Chief Operating Officer Robert Chan. Atlanta is a domestic
corporation engaged in the manufacture of steel pipes.
The complaints were consolidated and were raffled to Labor Arbiter Daniel Cajilig, but were
later transferred to Labor Arbiter Dominador B. Medroso, Jr.
The complainants alleged that they had attained regular status as they were allowed to work with
Atlanta for more than six (6) months from the start of a purported apprenticeship agreement
between them and the company. They claimed that they were illegally dismissed when the
apprenticeship agreement expired.
In defense, Atlanta and Chan argued that the workers were not entitled to regularization and to
their money claims because they were engaged as apprentices under a government-approved
apprenticeship program. The company offered to hire them as regular employees in the event
vacancies for regular positions occur in the section of the plant where they had trained. They also
claimed that their names did not appear in the list of employees (Master List)[5] prior to their
engagement as apprentices.
On May 24, 2005, dela Cruz, Magalang, Zao and Chiong executed a Pagtalikod at
Pagwawalang Saysay before Labor Arbiter Cajilig.
The Compulsory Arbitration Rulings

On April 24, 2006, Labor Arbiter Medroso dismissed the complaint with respect to dela Cruz,
Magalang, Zao and Chiong, but found the termination of service of the remaining nine to be
illegal.[6] Consequently, the arbiter awarded the dismissed workers backwages, wage
differentials, holiday pay and service incentive leave pay amounting to P1,389,044.57 in the
aggregate.
Atlanta appealed to the National Labor Relations Commission (NLRC). In the meantime, or on
October 10, 2006, Ramos, Alegria, Villagomez, Costales and Almoite allegedly entered into a
compromise agreement with Atlanta.[7] The agreement provided that except for Ramos, Atlanta
agreed to pay the workers a specified amount as settlement, and to acknowledge them at the
same time as regular employees.
On December 29, 2006,[8] the NLRC rendered a decision, on appeal, modifying the ruling of the
labor arbiter, as follows: (1) withdrawing the illegal dismissal finding with respect to Sagun,
Mabanag, Sebolino and Pedregoza; (2) affirming the dismissal of the complaints of dela Cruz,
Zao, Magalang and Chiong; (3) approving the compromise agreement entered into by
Costales, Ramos, Villagomez, Almoite and Alegria, and (4) denying all other claims.
Sebolino, Costales, Almoite and Sagun moved for the reconsideration of the decision, but the
NLRC denied the motion in its March 30, 2007[9] resolution. The four then sought relief from the
CA through a petition for certiorari under Rule 65 of the Rules of Court. They charged that the
NLRC committed grave abuse of discretion in: (1) failing to recognize their prior employment
with Atlanta; (2) declaring the second apprenticeship agreement valid; (3) holding that the
dismissal of Sagun, Mabanag, Sebolino and Melvin Pedregoza is legal; and (4) upholding the
compromise agreement involving Costales, Ramos, Villagomez, Almoite and Alegria.
The CA Decision
The CA granted the petition based on the following findings:[10]
1. The respondents were already employees of the company before they entered into the first and
second apprenticeship agreements - Almoite and Costales were employed as early as December
2003 and, subsequently, entered into a first apprenticeship agreement from May 13, 2004 to
October 12, 2004; before this first agreement expired, a second apprenticeship agreement, from
October 9, 2004 to March 8, 2005 was executed. The same is true with Sebolino and Sagun, who
were employed by Atlanta as early as March 3, 2004. Sebolino entered into his first
apprenticeship agreement with the company from March 20, 2004 to August 19, 2004, and his
second apprenticeship agreement from August 20, 2004 to January 19, 2005. Sagun, on the other
hand, entered into his first agreement from May 28, 2004 to October 8, 2004, and the second
agreement from October 9, 2004 to March 8, 2005.
2. The first and second apprenticeship agreements were defective as they were executed in
violation of the law and the rules.[11] The agreements did not indicate the trade or occupation in
which the apprentice would be trained; neither was the apprenticeship program approved by the
Technical Education and Skills Development Authority (TESDA).

3. The positions occupied by the respondents - machine operator, extruder operator and scaleman
- are usually necessary and desirable in the manufacture of plastic building materials, the
company's main business. Costales, Almoite, Sebolino and Sagun were, therefore, regular
employees whose dismissals were illegal for lack of a just or authorized cause and notice.
4. The compromise agreement entered into by Costales and Almoite, together with Ramos,
Villagomez and Alegria, was not binding on Costales and Almoite because they did not sign the
agreement.
The petitioners themselves admitted that Costales and Almoite were initially planned to be a part
of the compromise agreement, but their employment has been regularized as early as January 11,
2006; hence, the company did not pursue their inclusion in the compromise agreement.[12]
The CA faulted the NLRC for failing to appreciate the evidence regarding the respondents' prior
employment with Atlanta. The NLRC recognized the prior employment of Costales and Almoite
on Atlanta's monthly report for December 2003 for the CPS Department/Section dated January 6,
2004.[13] This record shows that Costales and Almoite were assigned to the company's first shift
from 7:00 a.m. to 3:00 p.m. The NLRC ignored Sebolino and Sagun's prior employment under
the company's Production and Work Schedule for March 7 to 12, 2005 dated March 3,
2004,[14] as they had been Atlanta's employees as early as March 3, 2004, with Sebolino
scheduled to work on March 7-12, 2005 at 7:00 a.m. to 7:00 p.m., while Sagun was scheduled to
work for the same period but from 7:00 p.m. to 7:00 a.m. The CA noted that Atlanta failed to
challenge the authenticity of the two documents before it and the labor authorities.
Atlanta and Chan moved for reconsideration, but the CA denied the motion in a resolution
rendered on March 25, 2009.[15] Hence, the present petition.
The Petition
Atlanta seeks a reversal of the CA decision, contending that the appellate court erred in (1)
concluding that Costales, Almoite, Sebolino and Sagun were employed by Atlanta before they
were engaged as apprentices; (2) ruling that a second apprenticeship agreement is invalid; (3)
declaring that the respondents were illegally dismissed; and (4) disregarding the compromise
agreement executed by Costales and Almoite. It submits the following arguments:
First. The CA's conclusion that the respondent workers were company employees before they
were engaged as apprentices was primarily based on the Monthly Report[16] and the Production
and Work Schedule for March 7-12, 2005,[17] in total disregard of the Master List[18] prepared by
the company accountant, Emelita M. Bernardo. The names of Costales, Almoite, Sebolino and
Sagun do not appear as employees in the Master List which "contained the names of all the
persons who were employed by and at petitioner."[19]
Atlanta faults the CA for relying on the Production and Work Schedule and the Monthly Report
which were not sworn to, and in disregarding the Master List whose veracity was sworn to by
Bernardo and by Alex Go who headed the company's accounting division. It maintains that the
CA should have given more credence to the Master List.

Second. In declaring invalid the apprenticeship agreements it entered into with the respondent
workers, the CA failed to recognize the rationale behind the law on apprenticeship. It submits
that under the law,[20] apprenticeship agreements are valid, provided they do not exceed six (6)
months and the apprentices are paid the appropriate wages of at least 75% of the applicable
minimum wage.
The respondents initially executed a five-month apprenticeship program with Atlanta, at the end
of which, they "voluntarily and willingly entered into another apprenticeship agreement with the
petitioner for the training of a second skill"[21] for five months; thus, the petitioners committed no
violation of the apprenticeship period laid down by the law.
Further, the apprenticeship agreements, entered into by the parties, complied with the requisites
under Article 62 of the Labor Code; the company's authorized representative and the respondents
signed the agreements and these were ratified by the company's apprenticeship committee. The
apprenticeship program itself was approved and certified by the TESDA.[22] The CA, thus, erred
in overturning the NLRC's finding that the apprenticeship agreements were valid.
Third. There was no illegal dismissal as the respondent workers' tenure ended with the
expiration of the apprenticeship agreement they entered into. There was, therefore, no regular
employer-employee relationship between Atlanta and the respondent workers.
The Case for Costales, Almoite, Sebolino and Sagun
In a Comment filed on August 6, 2009,[23] Costales, Almoite, Sebolino and Sagun pray for a
denial of the petition for being procedurally defective and for lack of merit.
The respondent workers contend that the petition failed to comply with Section 4, Rule 45 of the
Rules of Court which requires that the petition be accompanied by supporting material portions
of the records. The petitioners failed to attach to the petition a copy of the Production and Work
Schedule despite their submission that the CA relied heavily on the document in finding the
respondent workers' prior employment with Atlanta. They also did not attach a copy of the
compromise agreement purportedly executed by Costales and Almoite. For this reason, the
respondent workers submit that the petition should be dismissed.
The respondents posit that the CA committed no error in holding that they were already Atlanta's
employees before they were engaged as apprentices, as confirmed by the company's Production
and Work Schedule.[24] They maintain that the Production and Work Schedule meets the
requirement of substantial evidence as the petitioners failed to question its authenticity.
They point out that the schedule was prepared by Rose A. Quirit and approved by Adolfo R.
Lope, head of the company's PE/Spiral Section. They argue that it was highly unlikely that the
head of a production section of the company would prepare and assign work to the complainants
if the latter had not been company employees.
The respondent workers reiterate their mistrust of the Master List[25] as evidence that they were
not employees of the company at the time they became apprentices. They label the Master List as
"self-serving, dubious and even if considered as authentic, its content contradicts a lot of
petitioner's claim and allegations,"[26] thus -

1. Aside from the fact that the Master List is not legible, it contains only the names of inactive
employees. Even those found by the NLRC to have been employed in the company (such as
Almoite, Costales and Sagun) do not appear in the list. If Costales and Almoite had been
employed with Atlanta since January 11, 2006, as the company claimed,[27] their names would
have been in the list, considering that the Master List accounts for all employees "as of May
2006" - the notation carried on top of each page of the document.
2. There were no entries of employees hired or resigned in the years 2005 and 2006 despite the
"as of May 2006" notation; several pages making up the Master List contain names of employees
for the years 1999 - 2004.
3. The fact that Atlanta presented the purported Master List instead of the payroll raised serious
doubts on the authenticity of the list.
In sum, the respondent workers posit that the presentation of the Master List revealed the
"intention of the herein petitioner[s] to perpetually hide the fact of [their] prior employment."[28]
On the supposed apprenticeship agreements they entered into, Costales, Almoite, Sebolino and
Sagun refuse to accept the agreements' validity, contending that the company's apprenticeship
program is merely a ploy "to continually deprive [them] of their rightful wages and benefits
which are due them as regular employees."[29] They submit the following "indubitable facts and
ratiocinations:"[30]
1. The apprenticeship agreements were submitted to TESDA only in 2005 (with dates of receipt
on "1/4/05" & "2/22/05"[31]), when the agreements were supposed to have been executed in April
or May 2004. Thus, the submission was made long after the starting date of the workers'
apprenticeship or even beyond the agreement's completion/termination date, in violation of
Section 23, Rule VI, Book II of the Labor Code.
2. The respondent workers were made to undergo apprenticeship for occupations different from
those allegedly approved by TESDA. TESDA approved Atlanta's apprenticeship program on
"Plastic Molder"[32] and not for extrusion molding process, engineering, pelletizing process and
mixing process.
3. The respondents were already skilled workers prior to the apprenticeship program as they had
been employed and made to work in the different job positions where they had undergone
training. Sagun and Sebolino, together with Mabanag, Pedregoza, dela Cruz, Chiong, Magalang
and Alegria were even given production assignments and work schedule at the PE/Spiral Section
from May 11, 2004 to March 23, 2005, and some of them were even assigned to the 3:00 p.m. 11:00 p.m. and graveyard shifts (11:00 p.m. - 7:00 a.m.) during the period.[33]
4. The respondent workers were required to continue as apprentices beyond six months. The
TESDA certificate of completion indicates that the workers' apprenticeship had been completed
after six months. Yet, they were suffered to work as apprentices beyond that period.

Costales, Almoite, Sebolino and Sagun resolutely maintain that they were illegally dismissed, as
the reason for the termination of their employment - notice of the completion of the second
apprenticeship agreement - did not constitute either a just or authorized cause under Articles 282
and 283 of the Labor Code.
Finally, Costales and Almoite refuse to be bound by the compromise agreement[34] that Atlanta
presented to defeat the two workers' cause of action. They claim that the supposed agreement is
invalid as against them, principally because they did not sign it.
The Court's Ruling
The procedural issue
The respondent workers ask that the petition be dismissed outright for the petitioners' failure to
attach to the petition a copy of the Production and Work Schedule and a copy of the compromise
agreement Costales and Almoite allegedly entered into -- material portions of the record that
should accompany and support the petition, pursuant to Section 4, Rule 45 of the Rules of Court.
In Mariners Polytechnic Colleges Foundation, Inc. v. Arturo J. Garchitorena[35] where the Court
addressed essentially the same issue arising from Section 2(d), Rule 42 of the Rules of Court,[36]
we held that the phrase "of the pleadings and other material portions of the record xxx as would
support the allegation of the petition clearly contemplates the exercise of discretion on the part of
the petitioner in the selection of documents that are deemed to be relevant to the petition. The
crucial issue to consider then is whether or not the documents accompanying the petition
sufficiently supported the allegations therein."[37]
As in Mariners, we find that the documents attached to the petition sufficiently support the
petitioners' allegations. The accompanying CA decision[38] and resolution,[39] as well as those of
the labor arbiter[40] and the NLRC,[41] referred to the parties' position papers and even to their
replies and rejoinders. Significantly, the CA decision narrates the factual antecedents, defines the
complainants' cause of action, and cites the arguments, including the evidence the parties
adduced. If any, the defect in the petition lies in the petitioners' failure to provide legible copies
of some of the material documents mentioned, especially several pages in the decisions of the
labor arbiter and of the NLRC. This defect, however, is not fatal as the challenged CA decision
clearly summarized the labor tribunal's rulings. We, thus, find no procedural obstacle in
resolving the petition on the merits.
The merits of the case
We find no merit in the petition. The CA committed no reversible error in nullifying the NLRC
decision[42] and in affirming the labor arbiter's ruling,[43] as it applies to Costales, Almoite,
Sebolino and Sagun. Specifically, the CA correctly ruled that the four were illegally dismissed
because (1) they were already employees when they were required to undergo apprenticeship and
(2) apprenticeship agreements were invalid.
The following considerations support the CA ruling.

First. Based on company operations at the time material to the case, Costales, Almoite, Sebolino
and Sagun were already rendering service to the company as employees before they were made
to undergo apprenticeship. The company itself recognized the respondents' status through
relevant operational records - in the case of Costales and Almoite, the CPS monthly report for
December 2003[44] which the NLRC relied upon and, for Sebolino and Sagun, the production and
work schedule for March 7 to 12, 2005[45] cited by the CA.
Under the CPS monthly report, Atlanta assigned Costales and Almoite to the first shift (7:00 a.m.
to 3:00 p.m.) of the Section's work. The Production and Work Schedules, in addition to the one
noted by the CA, showed that Sebolino and Sagun were scheduled on different shifts vis- -vis
the production and work of the company's PE/Spiral Section for the periods July 5-10, 2004;[46]
October 25-31, 2004;[47] November 8-14, 2004;[48] November 16-22, 2004;[49] January 3-9,
2005;[50] January 10-15, 2005;[51] March 7-12, 2005[52] and March 17-23, 2005.[53]
We stress that the CA correctly recognized the authenticity of
the operational documents, for the failure of Atlanta to raise a challenge against
these documents before the labor arbiter, the NLRC and the CA itself.
The appellate court, thus, found the said documents sufficient to establish the employment of
the respondents before their engagement as apprentices.
Second. The Master List[54] (of employees) that the petitioners heavily rely upon as proof of their
position that the respondents were not Atlanta's employees, at the time they were engaged as
apprentices, is unreliable and does not inspire belief.
The list, consisting of several pages, is hardly legible. It requires extreme effort to sort out the
names of the employees listed, as well as the other data contained in the list. For this reason
alone, the list deserves little or no consideration. As the respondents also pointed out, the list
itself contradicts a lot of Atlanta's claims and allegations, thus: it lists only the names of inactive
employees; even the names of those the NLRC found to have been employed by Atlanta, like
Costales and Almoite, and those who even Atlanta claims attained regular status on January 11,
2006,[55] do not appear in the list when it was supposed to account for all employees "as of May
6, 2006." Despite the "May 6, 2006" cut off date, the list contains no entries of employees who
were hired or who resigned in 2005 and 2006. We note that the list contains the names of
employees from 1999 to 2004.
We cannot fault the CA for ignoring the Master List even if Bernardo, its head office accountant,
swore to its correctness and authenticity.[56] Its substantive unreliability gives it very minimal
probative value. Atlanta would have been better served, in terms of reliable evidence, if true
copies of the payroll (on which the list was based, among others, as Bernardo claimed in her
affidavit) were presented instead.
Third. The fact that Costales, Almoite, Sebolino and Sagun were already rendering service to
the company when they were made to undergo apprenticeship (as established by the evidence)
renders the apprenticeship agreements irrelevant as far as the four are concerned. This reality is
highlighted by the CA finding that the respondents occupied positions such as machine operator,
scaleman and extruder operator - tasks that are usually necessary and desirable in Atlanta's usual

business or trade as manufacturer of plastic building materials.[57] These tasks and their nature
characterized the four as regular employees under Article 280 of the Labor Code. Thus, when
they were dismissed without just or authorized cause, without notice, and without the
opportunity to be heard, their dismissal was illegal under the law.[58]
Even if we recognize the company's need to train its employees through apprenticeship, we can
only consider the first apprenticeship agreement for the purpose. With the expiration of the first
agreement and the retention of the employees, Atlanta had, to all intents and purposes,
recognized the completion of their training and their acquisition of a regular employee status. To
foist upon them the second apprenticeship agreement for a second skill which was not even
mentioned in the agreement itself,[59] is a violation of the Labor Code's implementing rules[60]
and is an act manifestly unfair to the employees, to say the least. This we cannot allow.
Fourth. The compromise agreement[61] allegedly entered into by Costales and Almoite, together
with Ramos, Villagomez and Alegria, purportedly in settlement of the case before the NLRC, is
not binding on Costales and Almoite because they did not sign it. The company itself admitted[62]
that while Costales and Almoite were initially intended to be a part of the agreement, it did not
pursue their inclusion "due to their regularization as early as January 11, 2006."[63]
cralaw

WHEREFORE, premises considered, we hereby DENY the petition for lack of merit. The
assailed decision and resolution of the Court of Appeals are AFFIRMED. Costs against the
petitioner Atlanta Industries, Inc.
SO ORDERED.