1

CULILI vs.
EASTERN TELECOMMUNICATIONS PHILIPPINES, INC

whichever is higher. A fraction of at least six (6) months shall be

considered one (1) whole year.

Facts: Petitioner Nelson A. Culili (Culili) was employed by ETPI as

a Technician in its Field Operations Department on January 27,
1981. On December 12, 1996, Culili was promoted to Senior
Technician in the Customer Premises Equipment Management Unit
of the Service Quality Department and his basic salary was
increased.8

There is redundancy when the service capability of the workforce is

greater than what is reasonably required to meet the demands of
the business enterprise. A position becomes redundant when it is
rendered superfluous by any number of factors such as over-hiring
of workers, decrease in volume of business, or dropping a particular
product line or service activity previously manufactured or
undertaken by the enterprise.36

In 1998, due to business troubles and losses, ETPI was compelled

to implement a Right-Sizing Program which consisted of two
phases: the first phase involved the reduction of ETPIs workforce
to only those employees that were necessary and which ETPI could
sustain; the second phase entailed a company-wide reorganization
which would result in the transfer, merger, absorption or abolition of
certain departments of ETPI.11
As part of the first phase, ETPI, on December 10, 1998, offered to
its employees who had rendered at least fifteen years of service,
the Special Retirement Program, which consisted of the option to
voluntarily retire at an earlier age and a retirement package
equivalent to two and a half (2) months salary for every year of
service.12 This offer was initially rejected by the Eastern
Telecommunications Employees Union (ETEU), ETPIs duly
recognized bargaining agent, which threatened to stage a strike.
ETPI explained to ETEU the exact details of the Right-Sizing
Program and the Special Retirement Program and after
consultations with ETEUs members, ETEU agreed to the
implementation of both programs.13 Thus, on February 8, 1999,
ETPI re-offered the Special Retirement Program and the
corresponding retirement package to the one hundred two (102)
employees who qualified for the program.14 Of all the employees
who qualified to avail of the program, only Culili rejected the offer.15
On March 5, 1999, Culili discovered that his name was omitted in
ETPIs New Table of Organization. Culili, along with three of his coemployees who were similarly situated, wrote their union president
to protest such omission.18In a letter dated March 8, 1999, ETPI,
through its Assistant Vice President Stella Garcia, informed Culili of
his termination from employment effective April 8, 1999. On
February 8, 2000, Culili filed a complaint against ETPI and its
officers for illegal dismissal, unfair labor practice, and money claims
before the Labor Arbiter. On April 30, 2001, the Labor Arbiter
rendered a decision finding ETPI guilty of illegal dismissal and
unfair labor practice, The Labor Arbiter believed Culilis claim that
ETPI intended to dismiss him even before his position was declared
redundant. On appeal, the NLRC affirmed the Labor Arbiters
decision but modified the amount of moral and exemplary damages
awarded, ETPI filed a Petition for Certiorari under Rule 65 of the
Rules of Civil Procedure before the Court of Appeals on the ground
of grave abuse of discretion. The Court of Appeals found that
Culilis position was validly abolished due to redundancy.
Issue: Legality of Dismissal
Culili asserted that he was illegally dismissed because there was no
valid cause to terminate his employment. He claimed that ETPI
failed to prove that his position had become redundant and that
ETPI was indeed incurring losses. Culili further alleged that his
functions as a Senior Technician could not be considered a
superfluity because his tasks were crucial and critical to ETPIs
business.
Under our laws, an employee may be terminated for reasons
involving measures taken by the employer due to business
necessities. Article 283 of the Labor Code provides:
Art. 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee
due to the installation of labor saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the closing is
for the purpose of circumventing the provisions of this Title, by
serving a written notice on the workers and the Department of
Labor and Employment at least one (1) month before the intended
date thereof. In case of termination due to the installation of laborsaving devices or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least his one (1) month
pay or to at least one (1) month pay for every year of service,
whichever is higher. In case of retrenchment to prevent losses and
in cases of closures or cessation of operations of establishment or
undertaking not due to serious business losses or financial
reverses, the separation pay shall be equivalent to one (1) month
pay or at least one-half (1/2) month pay for every year of service,

However, an employer cannot simply declare that it has become

over manned and dismiss its employees without producing
adequate proof to sustain its claim of redundancy.38 Among the
requisites of a valid redundancy program are: (1) the good faith of
the employer in abolishing the redundant position; and (2) fair and
reasonable criteria in ascertaining what positions are to be declared
redundant,39 such as but not limited to: preferred status, efficiency,
and seniority.40
In deciding which positions to retain and which to abolish, ETPI
chose on the basis of efficiency, economy, versatility and flexibility.
It needed to reduce its workforce to a sustainable level while
maintaining functions necessary to keep it operating. Culili
maintains that ETPI had already decided to dismiss him even
before the second phase of the Right-Sizing Program was
implemented as evidenced by the December 7, 1998 letter.
The December 7, 1998 termination letter signed by ETPIs AVP
Stella Garcia hardly suffices to prove bad faith on the part of the
company. The fact remains that the said letter was never officially
transmitted and Culili was not terminated at the end of the first
phase of ETPIs Right-Sizing Program. ETPI had given an adequate
explanation for the existence of the letter and considering that it had
been transparent with its employees, through their union ETEU, so
much so that ETPI even gave ETEU this unofficial letter, there is no
reason to speculate and attach malice to such act. That Culili would
be subsequently terminated during the second phase of the RightSizing Program is not evidence of undue discrimination or "singling
out" since not only Culilis position, but his entire unit was abolished
and absorbed by another department.
Unfair Labor Practice
Culili also alleged that ETPI is guilty of unfair labor practice for
violating Article 248(c) and (e) of the Labor Code, to wit:
Art. 248. Unfair labor practices of employers. - It shall be
unlawful for an employer to commit any of the following unfair labor
practice:
c. To contract out services or functions being performed by union
members when such will interfere with, restrain or coerce
employees in the exercise of their rights to self-organization;
xxxx
e. To discriminate in regard to wages, hours of work, and other
terms and conditions of employment in order to encourage or
discourage membership in any labor organization. Nothing in this
Code or in any other law shall stop the parties from requiring
membership in a recognized collective bargaining agent as a
condition for employment, except those employees who are already
members of another union at the time of the signing of the collective
bargaining agreement. Employees of an appropriate collective
bargaining unit who are not members of the recognized collective
bargaining agent may be assessed a reasonable fee equivalent to
the dues and other fees paid by members of the recognized
collective bargaining agent, if such non-union members accept the
benefits under the collective agreement: Provided, that the
individual authorization required under Article 242, paragraph (o) of
this Code shall not apply to the non-members of the recognized
collective bargaining agent.
Culili asserted that ETPI is guilty of unfair labor practice because
his functions were sourced out to labor-only contractors and he was
discriminated against when his co-employees were treated
differently when they were each offered an additional motorcycle to
induce them to avail of the Special Retirement Program. ETPI
denied hiring outside contractors and averred that the motorcycles
were not given to his co-employees but were purchased by them
pursuant to their Collective Bargaining Agreement, which allowed a
retiring employee to purchase the motorcycle he was assigned
during his employment.

2
The concept of unfair labor practice is provided in Article 247 of the
Labor Code which states:
Article 247. Concept of unfair labor practice and procedure for
prosecution thereof. -- Unfair labor practices violate the
constitutional right of workers and employees to self-organization,
are inimical to the legitimate interest of both labor and
management, including their right to bargain collectively and
otherwise deal with each other in an atmosphere of freedom and
mutual respect, disrupt industrial peace and hinder the promotion of
healthy and stable labor-management relations.
In the past, we have ruled that "unfair labor practice refers to acts
that violate the workers' right to organize. The prohibited acts are
related to the workers' right to self-organization and to the
observance of a CBA."45 We have likewise declared that "there
should be no dispute that all the prohibited acts constituting unfair
labor practice in essence relate to the workers' right to selforganization."46 Thus, an employer may only be held liable for unfair
labor practice if it can be shown that his acts affect in whatever
manner the right of his employees to self-organize.47
There is no showing that ETPI, in implementing its Right-Sizing
Program, was motivated by ill will, bad faith or malice, or that it was
aimed at interfering with its employees right to self-organize. In
fact, ETPI negotiated and consulted with ETEU before
implementing its Right-Sizing Program.
Both the Labor Arbiter and the NLRC found ETPI guilty of unfair
labor practice because of its failure to dispute Culilis allegations.
According to jurisprudence, "basic is the principle that good faith is
presumed and he who alleges bad faith has the duty to prove the
same."48 By imputing bad faith to the actuations of ETPI, Culili has
the burden of proof to present substantial evidence to support the
allegation of unfair labor practice. Culili failed to discharge this
burden and his bare allegations deserve no credit.
Observance of Procedural Due Process
Although the Court finds Culilis dismissal was for a lawful cause
and not an act of unfair labor practice, ETPI, however, was remiss
in its duty to observe procedural due process in effecting the
termination of Culili.
We have previously held that "there are two aspects which
characterize the concept of due process under the Labor Code: one
is substantive whether the termination of employment was based
on the provision of the Labor Code or in accordance with the
prevailing jurisprudence; the other is procedural the manner in
which the dismissal was effected."49
Section 2(d), Rule I, Book VI of the Rules Implementing the Labor
Code provides:
(d) In all cases of termination of employment, the following
standards of due process shall be substantially observed:
xxxx
For termination of employment as defined in Article 283 of the Labor
Code, the requirement of due process shall be deemed complied
with upon service of a written notice to the employee and the
appropriate Regional Office of the Department of Labor and
Employment at least thirty days before effectivity of the termination,
specifying the ground or grounds for termination.
Accordingly, it is wise to hold that: (1) if the dismissal is based on a
just cause under Article 282 but the employer failed to comply with
the notice requirement, the sanction to be imposed upon him should
be tempered because the dismissal process was, in effect, initiated
by an act imputable to the employee; and (2) if the dismissal is
based on an authorized cause under Article 283 but the employer
failed to comply with the notice requirement, the sanction should be
stiffer because the dismissal process was initiated by the
employer's exercise of his management prerogative.60
Hence, since it has been established that Culilis termination was
due to an authorized cause and cannot be considered unfair labor
practice on the part of ETPI, his dismissal is valid. However, in view
of ETPIs failure to comply with the notice requirements under the
Labor Code, Culili is entitled to nominal damages in addition to his
separation pay.1avvphi1

In illegal dismissal cases, moral damages are awarded only where

the dismissal was attended by bad faith or fraud, or constituted an
act oppressive to labor, or was done in a manner contrary to
morals, good customs or public policy.62 Exemplary damages may
avail if the dismissal was effected in a wanton, oppressive or
malevolent manner to warrant an award for exemplary damages.63
It is our considered view that Culili has failed to prove that his
dismissal was orchestrated by the individual respondents herein for
the mere purpose of getting rid of him. In fact, most of them have
not even dealt with Culili personally. Moreover, it has been
established that his termination was for an authorized cause, and
that there was no bad faith on the part of ETPI in implementing its
Right-Sizing Program, which involved abolishing certain positions
and departments for redundancy. It is not enough that ETPI failed to
comply with the due process requirements to warrant an award of
damages, there being no showing that the companys and its
officers acts were attended with bad faith or were done
oppressively.
WHEREFORE, the instant petition is DENIED and the assailed
February 5, 2004 Decision and September 13, 2004 Resolution of
the Court of Appeals in CA-G.R. SP No. 75001 are AFFIRMED with
the MODIFICATION that petitioner Nelson A. Culilis dismissal is
declared valid but respondent Eastern Telecommunications
Philippines, Inc. is ordered to pay petitioner Nelson A. Culili the
amount of Fifty Thousand Pesos (P50,000.00) representing nominal
damages for non-compliance with statutory due process, in addition
to the mandatory separation pay required under Article 283 of the
Labor Code.
SAN MIGUEL CORPORATION EMPLOYEES UNION-PTGWO, vs.
HON. JESUS G. BERSAMIRA,.
Facts: Sometime in 1983 and 1984, SanMig entered into contracts
for merchandising services with Lipercon and D'Rite (Annexes K
and I, SanMig's Comment, respectively). These companies are
independent contractors duly licensed by the Department of Labor
and Employment (DOLE). SanMig entered into those contracts to
maintain its competitive position and in keeping with the imperatives
of efficiency, business expansion and diversity of its operation. In
said contracts, it was expressly understood and agreed that the
workers employed by the contractors were to be paid by the latter
and that none of them were to be deemed employees or agents of
SanMig. There was to be no employer-employee relation between
the contractors and/or its workers, on the one hand, and SanMig on
the other.
Petitioner San Miguel Corporation Employees Union-PTWGO (the
Union, for brevity) is the duly authorized representative of the
monthly paid rank-and-file employees of SanMig with whom the
latter executed a Collective Bargaining Agreement (CBA) effective 1
July 1986 to 30 June 1989 (Annex A, SanMig's Comment). Section
1 of their CBA specifically provides that "temporary, probationary, or
contract employees and workers are excluded from the bargaining
unit and, therefore, outside the scope of this Agreement."
In a letter, dated 20 November 1988 (Annex C, Petition), the Union
advised SanMig that some Lipercon and D'Rite workers had signed
up for union membership and sought the regularization of their
employment with SMC. The Union alleged that this group of
employees, while appearing to be contractual workers supposedly
independent contractors, have been continuously working for
SanMig for a period ranging from six (6) months to fifteen (15) years
and that their work is neither casual nor seasonal as they are
performing work or activities necessary or desirable in the usual
business or trade of SanMig. Thus, it was contended that there
exists a "labor-only" contracting situation. It was then demanded
that the employment status of these workers be regularized.
On 12 January 1989 on the ground that it had failed to receive any
favorable response from SanMig, the Union filed a notice of strike
for unfair labor practice, CBA violations, and union busting (Annex
D, Petition).
Respondent Court found the Complaint sufficient in form and
substance and issued a Temporary Restraining Order for the
purpose of maintaining the status quo, and set the application for
Injunction for hearing.
In the meantime, on 13 March 1989, the Union filed a Motion to
Dismiss SanMig's Complaint on the ground of lack of jurisdiction
over the case/nature of the action, which motion was opposed by

3
SanMig. That Motion was denied by respondent Judge in an Order
dated 11 April 1989.
On 3 May 1989, the National Conciliation and Mediation Board
(NCMB) called the parties to conciliation. The Union stated that it
would lift the strike if the thirty (30) Lipercon and D'Rite employees
were recalled, and discussion on their other demands, such as
wage distortion and appointment of coordinators, were made. In
turn, the Union would immediately lift the pickets and return to work.
Petitioners take the position that 'it is beyond dispute that the
controversy in the court a quo involves or arose out of a labor
dispute and is directly connected or interwoven with the cases
pending with the NCMB-DOLE, and is thus beyond the ambit of the
public respondent's jurisdiction. That the acts complained of (i.e.,
the mass concerted action of picketing and the reliefs prayed for by
the private respondent) are within the competence of labor
tribunals, is beyond question" On the other hand, SanMig denies
the existence of any employer-employee relationship and
consequently of any labor dispute between itself and the Union.
SanMig submits, in particular, that "respondent Court is vested with
jurisdiction and judicial competence to enjoin the specific type of
strike staged by petitioner union and its officers herein complained
of," .

As the case is indisputably linked with a labor dispute, jurisdiction

belongs to the labor tribunals. As explicitly provided for in Article
217 of the Labor Code, prior to its amendment by R.A. No. 6715 on
21 March 1989, since the suit below was instituted on 6 March
1989, Labor Arbiters have original and exclusive jurisdiction to hear
and decide the following cases involving all workers including "1.
unfair labor practice cases; 2. those that workers may file involving
wages, hours of work and other terms and conditions of
employment; ... and 5. cases arising from any violation of Article
265 of this Code, including questions involving the legality of striker
and lockouts. ..." Article 217 lays down the plain command of the
law.
We recognize the proprietary right of SanMig to exercise an
inherent management prerogative and its best business judgment
to determine whether it should contract out the performance of
some of its work to independent contractors. However, 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 (Section 3, Article XIII, 1987
Constitution) equally call for recognition and protection. Those
contending interests must be placed in proper perspective and
equilibrium.
Writ of certiorari is GRANTED

Issue: for determination is whether or not respondent Court

correctly assumed jurisdiction over the present controversy and
properly issued the Writ of Preliminary Injunction to the resolution of
that question, is the matter of whether, or not the case at bar
involves, or is in connection with, or relates to a labor dispute.
Ruling: A "labor dispute" as defined in Article 212 (1) of the Labor
Code includes "any controversy or matter concerning terms and
conditions of employment or the association or representation of
persons in negotiating, fixing, maintaining, changing, or arranging
the terms and conditions of employment, regardless of whether the
disputants stand in the proximate relation of employer and
employee."
While it is SanMig's submission that no employer-employee
relationship exists between itself, on the one hand, and the
contractual workers of Lipercon and D'Rite on the other, a labor
dispute can nevertheless exist "regardless of whether the
disputants stand in the proximate relationship of employer and
employee" (Article 212 [1], Labor Code, supra) provided the
controversy concerns, among others, the terms and conditions of
employment or a "change" or "arrangement" thereof (ibid). Put
differently, and as defined by law, the existence of a labor dispute is
not negative by the fact that the plaintiffs and defendants do not
stand in the proximate relation of employer and employee.
That a labor dispute, as defined by the law, does exist herein is
evident. At bottom, what the Union seeks is to regularize the status
of the employees contracted by Lipercon and D'Rite in effect, that
they be absorbed into the working unit of SanMig. This matter
definitely dwells on the working relationship between said
employees vis-a-vis SanMig. Terms, tenure and conditions of their
employment and the arrangement of those terms are thus involved
bringing the matter within the purview of a labor dispute. Further,
the Union also seeks to represent those workers, who have signed
up for Union membership, for the purpose of collective bargaining.
SanMig, for its part, resists that Union demand on the ground that
there is no employer-employee relationship between it and those
workers and because the demand violates the terms of their CBA.
Obvious then is that representation and association, for the purpose
of negotiating the conditions of employment are also involved. In
fact, the injunction sought by SanMig was precisely also to prevent
such representation. Again, the matter of representation falls within
the scope of a labor dispute
The precedent in Layno vs. de la Cruz (G.R. No. L-29636, 30 April
1965, 13 SCRA 738) relied upon by SanMig is not controlling as in
that case there was no controversy over terms, tenure or
conditions, of employment or the representation of employees that
called for the application of labor laws. In that case, what the
petitioning union demanded was not a change in working terms and
conditions, or the representation of the employees, but that its
members be hired as stevedores in the place of the members of a
rival union, which petitioners wanted discharged notwithstanding
the existing contract of the arrastre company with the latter union.
Hence, the ruling therein, on the basis of those facts unique to that
case, that such a demand could hardly be considered a labor
dispute.

STERLING PRODUCTS INTERNATIONAL, INC. vs.LORETA C.

SOL
Facts: Loreta C. Sol charged the herein petitioners Sterling
Products International and its Radio Director V. San Pedro with
having committed an unfair labor practice act. In her complaint she
alleged among others that she has been a regular Radio Monitor of
respondents-petitioners; that on January 8, 1960, she filed a
complaint against the said firm for underpayment, money equivalent
of her vacation leave from 1952 to 1959, and Christmas bonus for
1959, equivalent to one month salary. The complaint resulted in her
dismissal, without just cause, on December 16, 1960.
In their answer petitioners herein denied the charges and by way of
affirmative defenses, alleged that complainant is an independent
contractor whose services were retained by petitioners to submit
reports of radio monitoring work performed outside of their
(petitioners') office; that petitioners no longer required complainant's
services and therefore, it gave her notice of termination, as it did in
fact terminate her services, as an independent contractor; that
petitioners terminated the services of complainant-respondent for
good and justifiable reasons and in accordance with business
requirements; that the complaint states no cause of action and that
petitioners did not and are not engaged in unfair labor practice acts
against the complainant within the meaning of Sec. 4(a), subsection
5 of the Industrial Peace Act.
Judge Tabigne of the Court of Industrial Relations in a decision
dated October 8, 1960 held that the complainant is not an employee
of the respondent firm but only an independent contractor and that
respondent firm was justified in dismissing the complainant due to
economic reasons.
Complainant filed a motion to reconsider the decision, raising the
question as to whether she is an employee or an independent
contractor. The lower court reversed the decision of Judge Tabigne,
ruling that complainant was an employee and not an independent
contractor, and ordered her reinstatement with back wages.
In consequence the court held that the respondent was an
employee. It also found that the petitioners herein are guilty of
unfair labor practice, so it ordered petitioners to reinstate
respondent Loreta C. Sol, with back wages from the date of her
dismissal until her reinstatement. Two judges dissented to this
decision.
In the petition now brought to Us by certiorari it is urged that
respondent Sol was an independent contractor because in the
performance of her work, the elements of control and direction are
lacking, hence, no relationship of employer and employee must
have existed, citing in support of this contention Section 3, 35 Am.
Jur. 445-446; and that since respondent was employed to work
according to her own methods and without being subject to control
except as to its final result, she may not be considered as an

4
employee. (Ibid.) We cannot accept this argument. Respondent Sol
was directed to listen to certain broadcasts, directing her, in the
instructions given her, when to listen and what to listen, petitioners
herein naming the stations to be listened to, the hours of
broadcasts, and the days when listening was to be done.
Respondent Sol had to follow these directions. The mere fact that
while performing the duties assigned to her she was not under the
supervision of the petitioners does not render her a contractor,
because what she has to do, the hours that she has to work and the
report that she has to submit all these are according to
instructions given by the employer. It is not correct to say, therefore,
that she was an independent contractor, for an independent
contractor is one who does not receive instructions as to what to do,
how to do, without specific instructions.
Finally, the very act of respondent Sol in demanding vacation leave,
Christmas bonus and additional wages shows that she considered
herself an employee. A contractor is not entitled to a vacation leave
or to a bonus nor to a minimum wage. This act of hers in
demanding these privileges are inconsistent with the claim that she
was an independent contractor.
Issue: whether or not the petitioners herein are guilty of unfair
labor practice.
Ruling: The court below found that there is an employment contract
(Exhibit "3") between petitioners and respondent Sol in which it was
expressly agreed that Sol could be dismissed upon fifteen days'
advance notice, if petitioners herein desire. Respondent Sol was
dismissed on January 13, 1959 and therefore the dismissal should
be governed by the provisions of Republic Act 1787, which took
effect on June 21, 1957. Section 1 of the Act provides:
SECTION 1. In cases of employment, without a definite
period, in a commercial, industrial, or agricultural
establishment or enterprise, the employer or the
employee may terminate at any time the employment with
just cause; or without just cause in the case of an
employee by serving written notice on the employer at
least one month in advance, or in the case of an
employer, by serving such notice to the employee at least
one month in advance or one-half month for every year of
service of the employee, whichever is longer, a fraction of
at least six months being considered as one whole year.
The employer upon whom no such notice was served in
case of termination of employment without just cause
may hold the employee liable for damages.
The following are just causes for terminating an
employment without a definite period:
1. By the employer
a. The closing or cessation of operation of the
establishment or enterprise, unless the closing
is for the purpose of defeating the intention of
this law.
The contract between the petitioners and the respondent Sol
providing that the respondent Sol can be dismissed upon fifteen
days' notice is therefore null and void. Inasmuch as respondent Sol
was employed since the year 1952 and was in the employment of
the petitioners from that time up to 1959, or a period of seven years,
she is entitled to three and one-half months pay in accordance with
the above quoted section 1 of the Act.
WHEREFORE, that portion of the decision finding the petitioners
herein guilty of unfair labor practice and sentencing petitioners to
reinstate respondent Sol in her former work is hereby set aside, and
the petitioners are sentenced to pay, as separation pay, three and
one-half months' pay to respondent Sol. In all other respects the
decision is affirmed.

AMERICAN PRESIDENT LINES, v. CLAVE

SYNOPSIS
Petitioners one-year contract with the Marine Security Agency for
the protection of its vessels while moored at the port of Manila was
terminated upon prior notice at the expiration of its term. A new

contract was subsequently executed also for the same purpose and
period with the Philippine Scout Veterans Security and Investigation
Agency. Private respondent Union protested the termination of its
contract and filed a complaint against petitioner for unfair labor
practice. The Labor Arbiter of the National Labor Relations
Commission (NLRC) to whom the case was transferred upon the
dissolution of the Court of Industrial Relations found petitioner to be
the employer of the private respondent union and the individual
complainants and guilty of the charge. Reinstatement was ordered.
This decision was affirmed by the NLRC and by the Minister of
Labor. Petitioner appealed to the Office of the President. Upon
dismissal thereof, this petition for certiorari was filed for the setting
aside of the affirmatory judgment.
In resolving the issues of whether or not there existed an employeremployee relationship between the petitioner and the individual
watchmen of the Marine Security Agency who are alleged to be
members of the respondent union; and whether or not petitioner
refused to negotiate a collective bargaining agreement with said
individual watchmen and discriminated against them in respect to
their tenure of employment by terminating their contract because of
their union activities, the Supreme Court, following the ruling in
Viana v. Al-Lagadan and Pica, 99 Phil. 408, 411-412, held that the
complaining watchmen cannot be considered as employees of
petitioner for it is the agency that recruits, hires and assigns them
work; determines and pays their wages; and has the power to
dismiss them. To hold the complaining watchmen entitled to labor
benefits as such, after the expiration of the contract with respondent
Agency would violate petitioners exclusive prerogative to make a
contract in relation to its business.
In view of the absence of employer-employee relationship between
petitioner and the members of respondent agency, petitioner cannot
be guilty of unfair labor practice as charged, for the termination of
the contract had no bearing with the alleged union activities of the
individual members of the agency. In view of the foregoing, the
order assailed was reversed and the complaint for unfair labor
practice against petitioner was dismissed.

SYLLABUS

1. LABOR LAWS; CONTRACT FOR THE EMPLOYMENT OF

SECURITY SERVICES; NON-EXISTENCE OF EMPLOYEREMPLOYEE RELATIONSHIP; CASE AT BAR. In the light of the
standards set forth in Viana v. Al-Lagadan and Pica, 99 Phil. 408,
411-12, enumerating the elements considered in determining the
existence of employer-employee relationship, We fail to see how
the complaining watchmen of the Marine Security Agency can be
considered as employees of the petitioner. It is the agency that
recruits, hires, and assigns the work of its watchmen. Hence, a
watchman cannot perform any security service for the petitioners
vessel unless the agency first accepts him as its watchman. With
respect to his wages, the amount to be paid to a security guard is
beyond the power of the petitioner to determine. Certainly, the lump
sum amount paid by the petitioner to the agency in consideration of
the latters service is much more than the wages of any one
watchman. In point of fact, it is the agency that quantifies and pays
the wages to which a watchman is entitled. Neither does the
petitioner have any power to dismiss the security guards. In fact,
We fail to see any evidence in the record that it wielded such a
power. It is true that it may request the agency to change a
particular guard. But this, precisely, is proof that the power lies in
the hands of the agency. Since the petitioner has to deal with the
agency, and not the individual watchmen, on matters pertaining to
the contracted task, it stands to reason that the petitioner does not
exercise any power over the watchmens conduct. Always, the
agency stands between the petitioner and the watchmen; and it is
the agency that is answerable to the petitioner for the conduct of its
guards.
2. ID.; ID.; ID.; OPERATION OF WATCHMENS SECURITY
AGENCY LIMITED TO HELPING CITIZENS OR CORPORATIONS
WHOLLY OWNED AND CONTROLLED BY FILIPINO CITIZENS;
PETITIONER CANNOT BE THE EMPLOYER OF WATCHMEN.
Moreover, the operation of a watchmens security agency is
governed by Republic Act No. 5487, as amended by Presidential
Decrees Nos. 11 and 100. Petitioner is a foreign corporation. While
Republic Act No. 5487 was enacted after the execution on January
4, 1960 of the security service contract between the petitioner and
the respondent agency, petitioner is not thereby exempted from the
provision of the law. Nothing in the law allows such an exemption.
On the contrary, it is the clear intent of the lawmakers to reserve the
business of operating a security agency exclusively for Filipino
citizens or 100% Filipino entities, and to subject all security
agencies to the strict control and regulation of the Philippine
Constabulary. It is inconceivable how the purposes of the law could
be served if a foreign corporation like the petitioner were allowed to
operate a security and watchmans service, which is a situation that
would naturally result if the complaining members of the respondent
agency are considered as the petitioners employees. In other

5
words, We cannot uphold an employer-employee relationship when
to do so would violate the letter and spirit of the law.
3. ID.; ID.; ID.; NO UNFAIR LABOR PRACTICE COMMITTED IN
CASE AT BAR. In view of Our finding that there is no employeremployee relationship between the petitioner and the members of
the respondent agency, it should necessarily follow that the
petitioner cannot be guilty of unfair labor practice as charged by the
private respondents. Under Republic Act 837, Section 13, an unfair
labor practice may be committed only within the context of an
employer-employee relationship.
AQUINO, J., concurring:chanrob1es virtual 1aw library
1. LABOR LAWS; CONTRACT FOR THE EMPLOYMENT OF
SECURITY SERVICES; EXISTENCE OF EMPLOYER-EMPLOYEE
RELATIONSHIP. The watchmen were employees of the
American President Lines while guarding the ships (Associated
Watchmen and Security Union v. United States Line, 101 Phil. 896).
This was the holding of the Court of Industrial Relations in Maritime
Security Union, Et. Al. v. American President Lines, Case 1938-V in
its decision dated July 26, 1963 where the parties are the same as
the parties herein.
2. ID.; ID.; ID.; NON-RENEWAL OF CONTRACT OF
EMPLOYMENT DOES NOT CONSTITUTE UNFAIR LABOR
PRACTICE. In the instant case, since the watchmen were hired
only for a period of one year, they ceased, after that period, to be
employees of the American President Lines. APL was not obligated
to renew the contract of employment. Hence, the non-renewal of
their employment and the act of the American President Lines in
hiring the watchmen of another security agency cannot be regarded
as an unfair labor practice.
3. ID.; ID.; ID.; EFFECT OF DELAY IN THE FILING OF
COMPLAINT FOR UNFAIR LABOR PRACTICE. The Watchmen
in filing their complaint for unfair labor practice and reinstatement
only two years and two months after the expiration of their
employment contract were guilty of laches.

On August 12, 1996, respondent company sent her a notice asking

her to submit an explanation why she failed to implement marketing
projects. Again, on September 13, 1996, she was required to
comment on the complaint charging her with misappropriation of
company funds, falsification and tampering of company records,
and submission of false reports. This prompted petitioner SELU to
file with the National Conciliation and Mediation Board (NCMB) a
notice of strike on the grounds of unfair labor practice and union
busting. But the notice of strike was dismissed by the NCMB in its
Resolution dated October 2, 1996. Subsequently, respondents sent
petitioner Sereneo a Memorandum dated October 11, 1996
terminating her services for loss of trust and confidence.
In their answer, respondents denied the allegations in the
complaint. They claimed that petitioner Sereneo, being a
professional medical representative, performed various functions to
ensure a profitable sale of its pharmaceutical products. These are:
visiting hospitals and physicians concerned; preparing and
submitting periodic reports of her call visits to various doctors,
itinerary, and expenses. However, she failed to perform these
duties, prompting respondent company to send her two (2) letters
dated September 5, 1996 and September 13, 1996, charging her
with willful violation of company rules and regulations 3 and directing
her to submit a written explanation. But she refused to submit her
explanation, prompting respondents to evaluate her records. They
found her guilty of dishonesty, willful breach of trust and willful
disobedience. Respondents then sent her a notice terminating her
services effective October 11, 1996.
On June 27, 1997, the Labor Arbiter rendered a Decision finding
respondents guilty of unfair labor practice for dismissing petitioner
Sereneo illegally and ordering them (1) to reinstate her to her
former position of medical representative without loss of seniority
rights and other privileges; and (2) to pay her, jointly and severally,
backwages and attorneys fee equivalent to 10% of the monetary
awards.

ABAD SANTOS, J., dissenting

1. LABOR LAWS; CONTRACT FOR THE EMPLOYMENT OF
SECURITY SERVICES; EXISTENCE OF EMPLOYER-EMPLOYEE
RELATIONSHIP; FINDINGS OF FACT OF OFFICE OF THE
EXECUTIVE DEPARTMENT ENTITLED TO GREAT RESPECT.
The Executive Department of the Government starting from the
Labor Arbiter, to the National Labor Relations Commission, the
Minister of Labor and finally the Office of the President found as a
fact that there was an employer-employee relationship. This finding
of fact is supported by substantial evidence which is discussed in
the comment of the Solicitor General. The findings of officers who
are tasked with the enforcement of laws are entitled to great respect
and their acts must be upheld in the absence of grave abuse of
discretion lack of jurisdiction or clear misapplication of the law.
SCHERING EMPLOYEES LABOR UNION (SELU) vs. SCHERING
PLOUGH CORPORATION
Facts: The instant controversy stemmed from a complaint for unfair
labor practice and illegal dismissal filed with the Labor Arbiter by
Schering Employees Labor Union (SELU) and Lucia P. Sereneo,
SELUs president, petitioners, against Schering Plough Corporation,
Epitacio Titong, Jr., Jose L. Estingor, Danny T. Yu, Leo Loquinario,
and Roberto Tada.
Petitioners, in their complaint, alleged that sometime in January
1977, petitioner Lucia P. Sereneo was employed as a professional
medical representative by respondent company. Eventually, she
became a field sales training manager with a monthly salary of
P22,200.00. During her employment, she received several awards
from respondent in recognition of her remarkable marketing
excellence. However, on January 22, 1996, when she was elected
president of SELU and started the re-negotiation with respondent
company on the collective bargaining agreement (CBA),
respondents suddenly became dissatisfied with her sales
performance.

Upon appeal, the National Labor Relations Commission (NLRC)

promulgated a Decision dated February 27, 1998 reversing the
Arbiters Decision and dismissing petitioner Sereneos complaint.
Petitioners then filed a motion for reconsideration but was denied by
the NLRC in a Resolution dated April 30, 1998. Hence, they filed
with this Court a petition for certiorari which we referred to the Court
of Appeals pursuant to our ruling in St. Martins Funeral Home vs.
NLRC.4
On December 10, 1999, the Appellate Court rendered a Decision
affirming the NLRCs Decision.
Furthermore, this Court fully agrees with the observations of
respondent NLRC:
Moreover, on the issue of willful disobedience to a lawful order,
records also disclosed that despite two (2) memos issued by the
respondent to the complainant, the latter never bothered to answer
nor explain her side to the former. Of course complainant tried to
justify her inaction by claiming that it would have been futile anyway
to explain since respondent was bent in getting rid of her. Such
reaction, however, in the light of what we perceived as lack of
substantial evidence to warrant a finding of unfair labor practice
only gives an impression that complainant had indeed been
remised in her duties. This impression can clearly be gleaned
from the alterations in the copies of call cards submitted. If at all,
complainants failure to refute point by point the specific charges
leveled against her worked to her disadvantage. All told, it would
appear that it was not respondent who relied on the general
principles of law but rather the complainant and unfortunately the
Labor Arbiter a quo who opted to brush aside the claim of valid
dismissal through a sweeping statement that no supporting
substantial evidence were presented by respondent when in truth
and in fact, there were. Relatedly, even the claim of denial of due
process should not have escaped the Labor Arbiters judicious eyes
had he been more prudent. The records clearly show that
complainant was accorded the right to be heard as she was given
ample time to explain and answer the charges against her but opted
not to on account of the mistaken notion that to do so would only be
an exercise in futility. It has already been ruled by the highest court
due process simply means the opportunity to be heard before
judgment is rendered. Respondent could, therefore, not be faulted if
it decided to exercise its management prerogative to impose
discipline on an erring employee.

6
This Court rejects the contention of petition that the decision of
respondent NLRC is null and void because it was prepared by only
two Commissioners. Sec. 4 (b), Rule VII of the New Rules of
Procedure of the National Labor Relations Commission states: The
presence of at least two (2) Commissioners of a Division shall
constitute a quorum to decide any case/matter before it. The
concurrence of two (2) Commissioners of a Division shall be
necessary for the pronouncement of a judgment or resolution.
Whenever the required membership in a Division is not complete
and the concurrence of two (2) Commissioners to arrive at a
judgment or resolution cannot be obtained, the Chairman shall
designate such number of additional Commissioners from the other
Divisions as may be necessary from the same sector.
ISSUE: for our determination is whether petitioner Sereneo was
illegally dismissed from employment.
RULING: After a close review of the records, we sustain the
findings of the NLRC, affirmed by the Court of Appeals, that she
falsified company call cards by altering the dates of her actual visits
to physicians. On August 27, 1997, she was found guilty of
misappropriation of company funds by falsifying food receipts.
These infractions show that she is dishonest. Clearly, she breached
the trust reposed in her by respondents. Hence, her dismissal from
the service is in order.

Under Article 282 of the Labor Code, as amended,5 fraud or willful

breach by the employee of trust reposed in him by his employer or
duly authorized representative is a ground for terminating an
employment. Petitioners accusation of union busting is bereft of
any proof. We scanned the records very carefully and failed to
discern any evidence to sustain such charge.
In Tiu vs. NLRC,6 we held:
"x x x. It is the union, therefore, who had the burden of proof to
present substantial evidence to support its allegations (of unfair
labor practices committed by management).
"x x x, but in the case at bar the facts and the evidence did not
establish even at least a rational basis why the union would wield a
strike based on alleged unfair labor practices it did not even bother
to substantiate during the conciliation proceedings. It is not enough
that the union believed that the employer committed acts of unfair
labor practice when the circumstances clearly negate even a prima
facie showing to warrant such a belief."
The petition is DENIED.