1.

G.R. No. 152121 July 29, 2003

EDUARDO G. EVIOTA, Petitioner,

vs.
THE HON. COURT OF APPEALS, THE HON. JOSE BAUTISTA, Presiding Judge of Branch 136,
Regional Trial Court of Makati, and STANDARD CHARTERED BANK, Respondents.

DECISION

CALLEJO, SR., J.:

Before us is a petition for review on certiorari under Rule 45 of the Revised Rules of Court, of the
Decision of the Court of Appeals in CA-G.R. SP No. 60141 denying the petition for certiorari filed by the
petitioner praying the nullification of the Order of the Regional Trial Court of Makati, Branch 136.

Sometime on January 26, 1998, the respondent Standard Chartered Bank and petitioner Eduardo G.
Eviota executed a contract of employment under which the petitioner was employed by the respondent
bank as Compensation and Benefits Manager, VP (M21). However, the petitioner abruptly resigned from
the respondent bank barely a month after his employment and rejoined his former employer.

On June 19, 1998, the respondent bank filed a complaint against the petitioner with the RTC of Makati
City. The respondent bank alleged inter alia in its complaint that:

1. It is a foreign banking institution authorized to do business in the Philippines, with principal

offices at the 5th Floor, Bankmer Bldg., 6756 Ayala Avenue, Makati City.

2. Defendant Eduardo Eviota ("Eviota") is a former employee of the Bank, and may be served with
summons and other court processes at 8 Maple Street, Cottonwoods, Antipolo, Metro Manila.

3. On December 22, 1997, Eviota began negotiating with the Bank on his possible employment
with the latter. Taken up during these negotiations were not only his compensation and benefit
package, but also the nature and demands of his prospective position. The Bank made sure that
Eviota was fully aware of all the terms and conditions of his possible job with the Bank.

4. On January 26, 1998, Eviota indicated his conformity with the Bank’s Offer of Employment by
signing a written copy of such offer dated January 22, 1998 (the "Employment Contract"). A copy
of the Employment Contract between Eviota and the Bank is hereto attached as Annex "A."

5. Acting on the Employment Contract and on Eviota’s uninhibited display of interest in assuming
his position, the Bank promptly proceeded to carry out the terms of the Employment Contract as
well as to facilitate his integration into the workforce. Among others, the Bank: (a) renovated and
refurbished the room which was to serve as Eviota’s office; (b) purchased a 1998 Honda CR-V
(Motor No. PEWED7P101101; Chassis No. PADRD 1830WV00108) for Eviota’s use; (c) purchased a
desktop IBM computer for Eviota’s use; (d) arranged the takeout of Eviota’s loans with Eviota’s
former employer; (e) released Eviota’s signing bonus in the net amount of P300,000.00; (f) booked
Eviota’s participation in a Singapore conference on Y2K project scheduled on March 10 and 11,
1998; and (g) introduced Eviota to the local and regional staff and officers of the Bank via personal
introductions and electronic mail.

6. The various expenses incurred by the Bank in carrying out the above acts are itemized below, as
follows:

a. Signing Bonus P 300,000.00

b. 1 Honda CR-V 800,000.00

c. IBM Desktop Computer 89,995.00

d. Office Reconfiguration 29,815.00

e. 2-Drawer Lateral File

Cabinet 13,200.00

f. 1 Officer’s Chair 31,539.00

 g. 1 Guest Chair 2,200.00

h. 1 Hanging Shelf 2,012.00

i. Staff Loan Processing

Title Verification 375.00

Cost of Appraisal –

Housing Loan 3,500.00

TOTAL P1,272,636.00

An itemized schedule of the above expenses incurred by the Bank is hereto attached as Annex "B."

7. On February 25, 1998, Eviota assumed his position as Compensation and Benefits Manager with
the Bank and began to discharge his duties. At one Human Resources ("HR") Committee meeting
held on March 3, 1998, Eviota energetically presented to senior management his projects for the
year, thus raising the latter’s expectations. The same day, Eviota instructed the Bank’s HR
Administrator to book him a flight for Singapore, where he was scheduled to participate in a Y2K
project on March 10 and 11, 1998. Confident of Eviota’s professed commitment to the Bank, the
latter made the aforementioned airline booking for him. In addition, the Bank allowed Eviota access
to certain sensitive and confidential information and documents concerning the Bank’s operations.

8. After leading the Bank to believe that he had come to stay, Eviota suddenly resigned his
employment with immediate effect to re-join his previous employer. His resignation, which did not
comply with the 30-day prior notice rule under the law and under the Employment Contract, was
so unexpected that it disrupted plans already in the pipeline (e.g., the development of a
salary/matrix grid and salary structure, and the processing of merit promotion recommendations),
aborted meetings previously scheduled among Bank officers, and forced the Bank to hire the
services of a third party to perform the job he was hired to do. For the services of this third party,
the Bank had to pay a total of P208,807.50. A copy of a receipt for the above expenses is hereto
attached as Annex "C" (See also, Annex "B").

9. Aside from causing no small degree of chaos within the Bank by reason of his sudden
resignation, Eviota made off with a computer diskette and other papers and documents containing
confidential information on employee compensation and other Bank matters, such as the salary
schedule of all Corporate and Institutional Banking officers and photocopies of schedules of benefits
provided expatriates being employed by the Bank.

10. With the benefit of hindsight, the Bank realizes that it was simply used by Eviota as a mere
leverage for his selfish efforts at negotiating better terms of employment with his previous
employer. Worse, there is evidence to show that in his attempts to justify his hasty departure from
the Bank and conceal the real reason for his move, Eviota has resorted to falsehoods derogatory to
the reputation of the Bank. In particular, he has been maliciously purveying the canard that he had
hurriedly left the Bank because it had failed to provide him support. His untruthful remarks have
falsely depicted the Bank as a contract violator and an undesirable employer, thus damaging the
Bank’s reputation and business standing in the highly competitive banking community, and
undermining its ability to recruit and retain the best personnel in the labor market.

11. On March 16, 1998, the Bank made a written demand on Eviota to return the aforementioned
computer diskette and other confidential documents and papers, reimburse the Bank for the
various expenses incurred on his account as a result of his resignation (with legal interest), and
pay damages in the amount of at least P500,000.00 for the inconvenience and work/program
disruptions suffered by the Bank.

A copy of the Bank’s demand letter dated March 16, 1998 is hereto attached as Annex "D."

12. In partial compliance with said demand, Eviota made arrangements with his previous employer
to reimburse the Bank for the expenses incurred in connection with the Bank’s purchase of the
Honda CR-V for his use. The Bank informed Eviota that in addition to the Honda CR-V’s purchase
price of P848,000.00 (of which Eviota initially shouldered P48,000.00), incidental costs in the form
of Processing Fees (P1,000.00), FPD/MCAR/98-155684 (P1,232.53) and Fund Transfer Price
(P18,646.84) were incurred, bringing the total cost of the Honda CR-V to P868,881.38. On April 29,
1998, the Bank received two manager’s checks in the aggregate amount of P868,881.38,
representing costs incurred in connection with the purchase of the Honda CR-V, inclusive of
 processing fees and other incidental costs. Previously, Eviota had returned his P300,000.00 signing
bonus, less the P48,000.00 he had advanced for the Honda CR-V’s purchase price.

13. Eviota never complied with the Bank’s demand that he reimburse the latter for the other
expenses incurred on his account, amounting to P360,562.12 (see, Annex "B").

The respondent bank alleged, by way of its causes of action against the petitioner, the following:

First Cause of Action

14. Eviota’s actions constitute a clear violation of Articles 19, 20 and 21 of Republic Act No. 386, as
amended (the "Civil Code"). Assuming arguendo that Eviota had the right to terminate his
employment with the Bank for no reason, the manner in and circumstances under which he
exercised the same are clearly abusive and contrary to the rules governing human relations.

14.1. By his actions and representations, Eviota had induced the Bank to believe that he
was committed to fulfilling his obligations under the Employment Contract. As a result, the
Bank incurred expenses in carrying out its part of the contract (see Annexes "B" and "C").
Less reimbursements received from Eviota, the Bank is entitled to actual damages of
P360,562.12. (See, Annex "C").

Second Cause of Action

15. Under Article 285 (a) of Presidential Decree No. 442, as amended (the Labor Code), an
employee may terminate without just cause the employer-employee relationship by serving written
notice on the employer at least one (1) month in advance. In addition, Section 13 of the
Employment Contract specifically provides that: "Your [i.e., Eviota’s] employment may be
terminated by either party giving notice of at least one month." (Annex "A," p. 5.)

15.1. Eviota’s failure to comply with the above requirement threw a monkey wrench into the
Bank’s operations – Eviota’s sudden resignation aborted meetings previously scheduled
among Bank officers and disrupted plans for a salary/merit review program and
development of a salary structure and merit grid already in the pipeline.

Hence, Eviota is liable to the Bank for damages in the amount of at least P100,000.00.

Third Cause of Action

16. Eviota’s false and derogatory statements that the Bank had failed to deliver what it had
purportedly promised have besmirched the Bank’s reputation and depicted it as a contract violator
and one which does not treat its employees properly. These derogatory statements have injured
the Bank’s business standing in the banking community, and have undermined the Bank’s ability to
recruit and retain the best personnel. Hence, plaintiff is entitled to moral damages of at least
P2,000,000.00.

17. By way of example or correction for the public good, and to deter other parties from
committing similar acts in the future, defendant should be held liable for exemplary damages of at
least P1,000,000.00

18. Eviota’s actions have compelled plaintiff to obtain the services of undersigned counsel for a fee,
in order to protect its interests. Hence, plaintiff is entitled to attorney’s fees of at least
P200,000.00.

The respondent bank prayed, that after due proceedings, judgment be rendered in its favor as follows:

WHEREFORE, it is respectfully prayed that judgment be rendered ordering the defendant to pay the
plaintiff:

1. As actual damages, the amount of P360,562.12, representing expenses referred to in items c to

i of par. 6 and the cost of the third-party services mentioned in par. 8;

2. For violating the 30-day notice requirement under the Labor Code and order (sic) the
Employment Contract, damages in the amount of at least P100,000.00;

3. As moral damages, the amount of P2,000,000.00;

4. As exemplary damages, the amount of P1,000,000.00;

 5. As attorney’s fees, the amount of P200,000.00; and

6. Costs of the suit.

Other just and equitable reliefs are likewise prayed for.

The respondent bank appended to its complaint a copy of the petitioner’s employment contract.

The petitioner filed a motion to dismiss the complaint on the ground that the action for damages of the
respondent bank was within the exclusive jurisdiction of the Labor Arbiter under paragraph 4, Article 217
of the Labor Code of the Philippines, as amended. The petitioner averred that the respondent bank’s claim
for damages arose out of or were in connection with his employer-employee relationship with the
respondent bank or some aspect or incident of such relationship. The respondent bank opposed the
motion, claiming that its action for damages was within the exclusive jurisdiction of the trial court.
Although its claims for damages incidentally involved an employer-employee relationship, the said claims
are actually predicated on the petitioner’s acts and omissions which are separately, specifically and
distinctly governed by the New Civil Code.

On November 29, 1999, the trial court issued an order denying the petitioner’s motion to dismiss,
ratiocinating that the primary relief prayed for by the respondent bank was grounded on the tortious
manner by which the petitioner terminated his employment with the latter, and as such is governed by the
New Civil Code:

The Court holds that here, since the primary relief prayed for by the plaintiff is for damages, grounded on
the tortious manner by which the defendant terminated his employment with the company, the same are
recoverable under the applicable provision of the Civil Code, the present controversy is removed from the
jurisdiction of the Labor Arbiter and brings in within the purview of the regular courts.

The petitioner filed a motion for reconsideration of the said order, but the court issued an order denying
the same. The petitioner filed a petition for certiorari with the Court of Appeals for the nullification of the
orders of the trial court, alleging that the court a quo committed grave abuse of its discretion amounting
to excess or lack of jurisdiction in issuing the said orders. The petitioner further asserted that contrary to
the ruling of the court, the respondent bank claimed damages in its complaint against the petitioner based
on his employment contract, and not on tortious acts.

On November 15, 2001, the CA promulgated a decision dismissing the petition, holding that the trial court
and not the Labor Arbiter had exclusive jurisdiction over the action of the respondent bank. It held that
the latter’s claims for damages were grounded on the petitioner’s sudden and unceremonious severance of
his employment with the respondent bank barely a month after assuming office.

With his motion for reconsideration of the decision having been denied by the CA, the petitioner filed his
petition with this Court contending that:

Suffice to state immediately that on the basis of the allegations in the complaint, it is the Labor Arbiter,
not the Regional Trial Court, which has jurisdiction of the subject matter of the complaint in Civil Case No.
98-1397, the principal cause of action being the alleged omission of petitioner in giving notice to the
respondent Bank employer of termination of their relationship; whereas the claims for other
actual/moral/exemplary damages are well within the competence of the Labor Arbiter.

The petition is barren of merit.

Article 217 of the Labor Code of the Philippines, as amended by Rep. Act No. 6715 which took effect on
March 21, 1989 reads:

ART. 217. Jurisdiction of Labor Arbiters and the Commission.—(a) Except as otherwise provided under this
Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide within thirty (30)
calendar days after the submission of the case by the parties for decision without extension, even in the
absence of stenographic notes, the following cases involving all workers, whether agricultural or non-
agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file involving
wages, rates of pay, hours of work and other terms and conditions of employment;
 4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-
employee relations.

Case law has it that the nature of an action and the subject matter thereof, as well as which court has
jurisdiction over the same, are determined by the material allegations of the complaint and the reliefs
prayed for in relation to the law involved.

Not every controversy or money claim by an employee against the employer or vice-versa is within the
exclusive jurisdiction of the labor arbiter. A money claim by a worker against the employer or vice-versa is
within the exclusive jurisdiction of the labor arbiter only if there is a "reasonable causal connection"
between the claim asserted and employee-employer relation. Absent such a link, the complaint will be
cognizable by the regular courts of justice.

Actions between employees and employer where the employer-employee relationship is merely incidental
and the cause of action precedes from a different source of obligation is within the exclusive jurisdiction of
the regular court. In Georg Grotjahn GMBH & Co. v. Isnani, we held that the jurisdiction of the Labor
Arbiter under Article 217 of the Labor Code, as amended, is limited to disputes arising from an employer-
employee relationship which can only be resolved by reference to the Labor Code of the Philippines, other
labor laws or their collective bargaining agreements. In Singapore Airlines Limited v. Paño, the complaint
of the employer against the employee for damages for wanton justice and refusal without just cause to
report for duty, and for having maliciously and with bad faith violated the terms and conditions of their
agreement for a course of conversion training at the expense of the employer, we ruled that jurisdiction
over the action belongs to the civil court:

On appeal to this court, we held that jurisdiction over the controversy belongs to the civil courts. We
stated that the action was for breach of a contractual obligation, which is intrinsically a civil dispute. We
further stated that while seemingly the cause of action arose from employer-employee relations, the
employer’s claim for damages is grounded on "wanton failure and refusal" without just cause to report to
duty coupled with the averment that the employee "maliciously and with bad faith" violated the terms and
conditions of the contract to the damage of the employer. Such averments removed the controversy from
the coverage of the Labor Code of the Philippines and brought it within the purview of the Civil Law.

Jurisprudence has evolved the rule that claims for damages under paragraph 4 of Article 217, to be
cognizable by the Labor Arbiter, must have a reasonable causal connection with any of the claims provided
for in that article. Only if there is such a connection with the other claims can the claim for damages be
considered as arising from employer-employee relations.

The claims were the natural consequences flowing from a breach of an obligation, intrinsically civil in
nature.

In Medina v. Castro-Bartolome, we held that a complaint of an employee for damages against the
employer for slanderous remarks made against him was within the exclusive jurisdiction of the regular
courts of justice because the cause of action of the plaintiff was for damages for tortious acts allegedly
committed by the employer. The fact that there was between the parties an employer-employee
relationship does not negate the jurisdiction of the trial court.

In Singapore Airlines Ltd. v. Paño, we held that:

Stated differently, petitioner seeks protection under the civil laws and claims no benefits under the Labor
Code.1âwphi1 The primary relief sought is for liquidated damages for breach of a contractual obligation.
The other items demanded are not labor benefits demanded by workers generally taken cognizance of in
labor disputes, such as payment of wages, overtime compensation or separation pay. The items claimed
are the natural consequences flowing from breach of an obligation, intrinsically a civil dispute.

In Dai-Chi Electronics Manufacturing Corporation v. Villarama, Jr., the petitioner sued its employee Adonis
Limjuco for breach of contract which reads:

That for a period of two (2) years after termination of service from EMPLOYER, EMPLOYEE shall not in any
manner be connected, and/or employed, be a consultant and/or be an informative body directly or
indirectly, with any business firm, entity or undertaking engaged in a business similar to or in competition
with that of the EMPLOYER."

The petitioner alleged in its complaint with the trial court that:

Petitioner claimed that private respondent became an employee of Angel Sound Philippines Corporation, a
corporation engaged in the same line of business as that of petitioner, within two years from January 30,
1992, the date of private respondent’s resignation from petitioner’s employ. Petitioner further alleged that
private respondent is holding the position of Head of the Material Management Control Department, the
same position he held while in the employ of petitioner.
The trial court dismissed the case for lack of jurisdiction over the subject matter because the cause of
action for damages arose out of the parties’ employer-employee relationship. We reversed the order of the
trial court and held, thus:

Petitioner does not ask for any relief under the Labor Code of the Philippines. It seeks to recover damages
agreed upon in the contract as redress for private respondent’s breach of his contractual obligation to its
"damage and prejudice" (Rollo, p. 57). Such cause of action is within the realm of Civil Law, and
jurisdiction over the controversy belongs to the regular courts. More so when we consider that the
stipulation refers to the post-employment relations of the parties.

In this case, the private respondent’s first cause of action for damages is anchored on the petitioner’s
employment of deceit and of making the private respondent believe that he would fulfill his obligation
under the employment contract with assiduousness and earnestness. The petitioner volte face when,
without the requisite thirty-day notice under the contract and the Labor Code of the Philippines, as
amended, he abandoned his office and rejoined his former employer; thus, forcing the private respondent
to hire a replacement. The private respondent was left in a lurch, and its corporate plans and program in
jeopardy and disarray. Moreover, the petitioner took off with the private respondent’s computer diskette,
papers and documents containing confidential information on employee compensation and other bank
matters. On its second cause of action, the petitioner simply walked away from his employment with the
private respondent sans any written notice, to the prejudice of the private respondent, its banking
operations and the conduct of its business. Anent its third cause of action, the petitioner made false and
derogatory statements that the private respondent reneged on its obligations under their contract of
employment; thus, depicting the private respondent as unworthy of trust.

It is evident that the causes of action of the private respondent against the petitioner do not involve the
provisions of the Labor Code of the Philippines and other labor laws but the New Civil Code. Thus, the said
causes of action are intrinsically civil. There is no causal relationship between the causes of action of the
private respondent’s causes of action against the petitioner and their employer-employee relationship. The
fact that the private respondent was the erstwhile employer of the petitioner under an existing
employment contract before the latter abandoned his employment is merely incidental. In fact, the
petitioner had already been replaced by the private respondent before the action was filed against the
petitioner.

IN LIGHT OF ALL THE FOREGOING, the Petition is DENIED. The Decision of the Court of Appeals
dismissing the petition of the petitioner is AFFIRMED.

SO ORDERED.

2.

G.R. No. 198587, January 14, 2015

SAUDI ARABIAN AIRLINES (SAUDIA) AND BRENDA J. BETIA, Petitioners, v. MA. JOPETTE M.
REBESENCIO, MONTASSAH B. SACAR-ADIONG, ROUEN RUTH A. CRISTOBAL AND LORAINE S.
SCHNEIDER-CRUZ, Respondents.

DECISION

LEONEN, J.:

All Filipinos are entitled to the protection of the rights guaranteed in the Constitution.

This is a Petition for Review on Certiorari with application for the issuance of a temporary restraining order
and/or writ of preliminary injunction under Rule 45 of the 1997 Rules of Civil Procedure praying that
judgment be rendered reversing and setting aside the June 16, 2011 Decision and September 13, 2011
Resolution of the Court of Appeals in CA-G.R. SP. No. 113006.

Petitioner Saudi Arabian Airlines (Saudia) is a foreign corporation established and existing under the laws
of Jeddah, Kingdom of Saudi Arabia. It has a Philippine office located at 4/F, Metro House Building, Sen.
Gil J. Puyat Avenue, Makati City. In its Petition filed with this court, Saudia identified itself as follows:

1. Petitioner SAUDIA is a foreign corporation established and existing under the Royal Decree No. M/24 of
18.07.1385H (10.02.1962G) in Jeddah, Kingdom of Saudi Arabia ("KSA"). Its Philippine Office is located at
4/F Metro House Building, Sen, Gil J. Puyat Avenue, Makati City (Philippine Office). It may be served with
orders of this Honorable Court through undersigned counsel at 4 th and 6th Floors, Citibank Center Bldg.,
8741 Paseo de Roxas, Makati City. (Emphasis supplied)
Respondents (complainants before the Labor Arbiter) were recruited and hired by Saudia as Temporary
Flight Attendants with the accreditation and approval of the Philippine Overseas Employment
Administration. After undergoing seminars required by the Philippine Overseas Employment Administration
for deployment overseas, as well as training modules offered by Saudia (e.g., initial flight
attendant/training course and transition training), and after working as Temporary Flight Attendants,
respondents became Permanent Flight Attendants. They then entered into Cabin Attendant contracts with
Saudia: Ma. Jopette M. Rebesencio (Ma. Jopette) on May 16, 1990; Montassah B. Sacar-Adiong
(Montassah) and Rouen Ruth A. Cristobal (Rouen Ruth) on May 22, 1993; and Loraine Schneider-Cruz
(Loraine) on August 27, 1995.

Respondents continued their employment with Saudia until they were separated from service on various
dates in 2006.

Respondents contended that the termination of their employment was illegal. They alleged that the
termination was made solely because they were pregnant.

As respondents alleged, they had informed Saudia of their respective pregnancies and had gone through
the necessary procedures to process their maternity leaves. Initially, Saudia had given its approval but
later on informed respondents that its management in Jeddah, Saudi Arabia had disapproved their
maternity leaves. In addition, it required respondents to file their resignation letters.

Respondents were told that if they did not resign, Saudia would terminate them all the same. The threat
of termination entailed the loss of benefits, such as separation pay and ticket discount entitlements.

Specifically, Ma. Jopette received a call on October 16, 2006 from Saudia's Base Manager, Abdulmalik
Saddik (Abdulmalik). Montassah was informed personally by Abdulmalik and a certain Faisal Hussein on
October 20, 2006 after being required to report to the office one (1) month into her maternity
leave. Rouen Ruth was also personally informed by Abdulmalik on October 17, 2006 after being required
to report to the office by her Group Supervisor. Loraine received a call on October 12, 2006 from her
Group Supervisor, Dakila Salvador.

Saudia anchored its disapproval of respondents' maternity leaves and demand for their resignation on its
"Unified Employment Contract for Female Cabin Attendants" (Unified Contract). Under the Unified
Contract, the employment of a Flight Attendant who becomes pregnant is rendered void. It provides:
(H) Due to the essential nature of the Air Hostess functions to be physically fit on board to provide various
services required in normal or emergency cases on both domestic/international flights beside her role in
maintaining continuous safety and security of passengers, and since she will not be able to maintain the
required medical fitness while at work in case of pregnancy, accordingly, if the Air Hostess becomes
pregnant at any time during the term of this contract, this shall render her employment
contract as void and she will be terminated due to lack of medical fitness. (Emphasis supplied)
In their Comment on the present Petition, respondents emphasized that the Unified Contract took effect
on September 23, 2006 (the first day of Ramadan), well after they had filed and had their maternity
leaves approved. Ma. Jopette filed her maternity leave application on September 5, 2006. Montassah filed
her maternity leave application on August 29, 2006, and its approval was already indicated in Saudia's
computer system by August 30, 2006. Rouen Ruth filed her maternity leave application on September 13,
2006, and Loraine filed her maternity leave application on August 22, 2006.

Rather than comply and tender resignation letters, respondents filed separate appeal letters that were all
rejected.

Despite these initial rejections, respondents each received calls on the morning of November 6, 2006 from
Saudia's office secretary informing them that their maternity leaves had been approved. Saudia, however,
was quick to renege on its approval. On the evening of November 6, 2006, respondents again received
calls informing them that it had received notification from Jeddah, Saudi Arabia that their maternity leaves
had been disapproved.

Faced with the dilemma of resigning or totally losing their benefits, respondents executed handwritten
resignation letters. In Montassah's and Rouen Ruth's cases, their resignations were executed on Saudia's
blank letterheads that Saudia had provided. These letterheads already had the word "RESIGNATION"
typed on the subject portions of their headings when these were handed to respondents.

On November 8, 2007, respondents filed a Complaint against Saudia and its officers for illegal dismissal
and for underpayment of salary, overtime pay, premium pay for holiday, rest day, premium, service
incentive leave pay, 13th month pay, separation pay, night shift differentials, medical expense
reimbursements, retirement benefits, illegal deduction, lay-over expense and allowances, moral and
exemplary damages, and attorney's fees. The case was initially assigned to Labor Arbiter Hermino V.
Suelo and docketed as NLRC NCR Case No. 00-11-12342-07.

Saudia assailed the jurisdiction of the Labor Arbiter. It claimed that all the determining points of contact
referred to foreign law and insisted that the Complaint ought to be dismissed on the ground of forum non
conveniens. It added that respondents had no cause of action as they resigned voluntarily.
On December 12, 2008, Executive Labor Arbiter Fatima Jambaro-Franco rendered the Decision dismissing
respondents' Complaint. The dispositive portion of this Decision reads:
WHEREFORE, premises' considered, judgment is hereby rendered DISMISSING the instant complaint
for lack of jurisdiction/merit.
On respondents' appeal, the National Labor Relations Commission's Sixth Division reversed the ruling of
Executive Labor Arbiter Jambaro-Franco. It explained that "[considering that complainants-appellants are
OFWs, the Labor Arbiters and the NLRC has [sic] jurisdiction to hear and decide their complaint for illegal
termination." On the matter of forum non conveniens, it noted that there were no special circumstances
that warranted its abstention from exercising jurisdiction. On the issue of whether respondents were
validly dismissed, it held that there was nothing on record to support Saudia's claim that respondents
resigned voluntarily.

The dispositive portion of the November 19, 2009 National Labor Relations Commission Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered finding the appeal impressed with
merit. The respondents-appellees are hereby directed to pay complainants-appellants the aggregate
amount of SR614,001.24 corresponding to their backwages and separation pay plus ten (10%) percent
thereof as attorney's fees. The decision of the Labor Arbiter dated December 12, 2008 is hereby VACATED
and SET ASIDE. Attached is the computation prepared by this Commission and made an integral part of
this Decision.
In the Resolution dated February 11, 2010, the National Labor Relations Commission denied petitioners'
Motion for Reconsideration.

In the June 16, 2011 Decision, the Court of Appeals denied petitioners' Rule 65 Petition and modified the
Decision of the National Labor Relations Commission with respect to the award of separation pay and
backwages.

The dispositive portion of the Court of Appeals Decision reads:

WHEREFORE, the instant petition is hereby DENIED. The Decision dated November 19, 2009 issued by
public respondent, Sixth Division of the National Labor Relations Commission - National Capital Region
is MODIFIED only insofar as the computation of the award of separation pay and backwages. For greater
clarity, petitioners are ordered to pay private respondents separation pay which shall be computed from
private respondents' first day of employment up to the finality of this decision, at the rate of one month
per year of service and backwages which shall be computed from the date the private respondents were
illegally terminated until finality of this decision. Consequently, the ten percent (10%) attorney's fees shall
be based on the total amount of the award. The assailed Decision is affirmed in all other respects.

The labor arbiter is hereby DIRECTED to make a recomputation based on the foregoing.
In the Resolution dated September 13, 2011, the Court of Appeals denied petitioners' Motion for
Reconsideration.

Hence, this Appeal was filed.

The issues for resolution are the following:

First, whether the Labor Arbiter and the National Labor Relations Commission may exercise jurisdiction
over Saudi Arabian Airlines and apply Philippine law in adjudicating the present dispute;

Second, whether respondents' voluntarily resigned or were illegally terminated; and

Lastly, whether Brenda J. Betia may be held personally liable along with Saudi Arabian Airlines.

Summons were validly served on Saudia and jurisdiction over it validly acquired.

There is no doubt that the pleadings and summons were served on Saudia through its counsel. Saudia,
however, claims that the Labor Arbiter and the National Labor Relations Commission had no jurisdiction
over it because summons were never served on it but on "Saudia Manila." Referring to itself as "Saudia
Jeddah," it claims that "Saudia Jeddah" and not "Saudia Manila" was the employer of respondents
because:

First, "Saudia Manila" was never a party to the Cabin Attendant contracts entered into by respondents;

Second, it was "Saudia Jeddah" that provided the funds to pay for respondents' salaries and benefits; and

Lastly, it was with "Saudia Jeddah" that respondents filed their resignations.

Saudia posits that respondents' Complaint was brought against the wrong party because "Saudia Manila,"
upon which summons was served, was never the employer of respondents.

Saudia is vainly splitting hairs in its effort to absolve itself of liability. Other than its bare allegation, there
is no basis for concluding that "Saudia Jeddah" is distinct from "Saudia Manila."

What is clear is Saudia's statement in its own Petition that what it has is a "Philippine Office . . . located at
4/F Metro House Building, Sen. Gil J. Puyat Avenue, Makati City." Even in the position paper that Saudia
submitted to the Labor Arbiter, what Saudia now refers to as "Saudia Jeddah" was then only referred to as
"Saudia Head Office at Jeddah, KSA," while what Saudia now refers to as "Saudia Manila" was then only
referred to as "Saudia's office in Manila."

By its own admission, Saudia, while a foreign corporation, has a Philippine office.

Section 3(d) of Republic Act No.. 7042, otherwise known as the Foreign Investments Act of 1991, provides
the following:
The phrase "doing business" shall include . . . opening offices, whether called "liaison" offices
or branches; . . . and any other act or acts that imply a continuity of commercial dealings or
arrangements and contemplate to that extent the performance of acts or works, or the exercise of some
of the functions normally incident to, and in progressive prosecution of commercial gain or of the purpose
and object of the business organization. (Emphasis supplied)
A plain application of Section 3(d) of the Foreign Investments Act leads to no other conclusion than that
Saudia is a foreign corporation doing business in the Philippines. As such, Saudia may be sued in the
Philippines and is subject to the jurisdiction of Philippine tribunals.

Moreover, since there is no real distinction between "Saudia Jeddah" and "Saudia Manila" — the latter
being nothing more than Saudia's local office — service of summons to Saudia's office in Manila sufficed to
vest jurisdiction over Saudia's person in Philippine tribunals.

II

Saudia asserts that Philippine courts and/or tribunals are not in a position to make an intelligent decision
as to the law and the facts. This is because respondents' Cabin Attendant contracts require the application
of the laws of Saudi Arabia, rather than those of the Philippines. It claims that the difficulty of ascertaining
foreign law calls into operation the principle of forum non conveniens, thereby rendering improper the
exercise of jurisdiction by Philippine tribunals.

A choice of law governing the validity of contracts or the interpretation of its provisions dees not
necessarily imply forum non conveniens. Choice of law and forum non conveniens are entirely different
matters.

Choice of law provisions are an offshoot of the fundamental principle of autonomy of contracts. Article
1306 of the Civil Code firmly ensconces this:
Article 1306. 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.
In contrast, forum non conveniens is a device akin to the rule against forum shopping. It is designed to
frustrate illicit means for securing advantages and vexing litigants that would otherwise be possible if the
venue of litigation (or dispute resolution) were left entirely to the whim of either party.

Contractual choice of law provisions factor into transnational litigation and dispute resolution in one of or
in a combination of four ways: (1) procedures for settling disputes, e.g., arbitration; (2) forum, i.e.,
venue; (3) governing law; and (4) basis for interpretation. Forum non conveniens relates to, but is not
subsumed by, the second of these.

Likewise, contractual choice of law is not determinative of jurisdiction. Stipulating on the laws of a given
jurisdiction as the governing law of a contract does not preclude the exercise of jurisdiction by tribunals
elsewhere. The reverse is equally true: The assumption of jurisdiction by tribunals does not ipso
facto mean that it cannot apply and rule on the basis of the parties' stipulation. In Hasegawa v. Kitamura:
Analytically, jurisdiction and choice of law are two distinct concepts. Jurisdiction considers whether it is fair
to cause a defendant to travel to this state; choice of law asks the further question whether the
application of a substantive law V'hich will determine the merits of the case is fair to both parties. The
power to exercise jurisdiction does not automatically give a state constitutional authority to apply forum
law. While jurisdiction and the choice of the lex fori will often, coincide, the "minimum contacts" for one do
not always provide the necessary "significant contacts" for the other. The question of whether the law of a
state can be applied to a transaction is different from the question of whether the courts of that state have
jurisdiction to enter a judgment.
As various dealings, commercial or otherwise, are facilitated by the progressive ease of communication
and travel, persons from various jurisdictions find themselves transacting with each other. Contracts
involving foreign elements are, however, nothing new. Conflict of laws situations precipitated by disputes
and litigation anchored on these contracts are not totally novel.

Transnational transactions entail differing laws on the requirements Q for the validity of the formalities
and substantive provisions of contracts and their interpretation. These transactions inevitably lend
themselves to the possibility of various fora for litigation and dispute resolution. As observed by an
eminent expert on transnational law:
The more jurisdictions having an interest in, or merely even a point of contact with, a transaction or
relationship, the greater the number of potential fora for the resolution of disputes arising out of or related
to that transaction or relationship. In a world of increased mobility, where business and personal
transactions transcend national boundaries, the jurisdiction of a number of different fora may easily be
invoked in a single or a set of related disputes.
Philippine law is definite as to what governs the formal or extrinsic validity of contracts. The first
paragraph of Article 17 of the Civil Code provides that "[t]he forms and solemnities of contracts . . . shall
be governed by the laws of the country in which they are executed" (i.e., lex loci celebrationis).

In contrast, there is no statutorily established mode of settling conflict of laws situations on matters
pertaining to substantive content of contracts. It has been noted that three (3) modes have emerged:
(1) lex loci contractus or the law of the place of the making; (2) lex loci solutionis or the law of the place
of performance; and (3) lex loci intentionis or the law intended by the parties.

Given Saudia's assertions, of particular relevance to resolving the present dispute is lex loci intentionis.

An author observed that Spanish jurists and commentators "favor lex loci intentionis." These jurists and
commentators proceed from the Civil Code of Spain, which, like our Civil Code, is silent on what governs
the intrinsic validity of contracts, and the same civil law traditions from which we draw ours.

In this jurisdiction, this court, in Philippine Export and Foreign Loan Guarantee v. V.P. Eusebio
Construction, Inc., manifested preference for allowing the parties to select the law applicable to their
contract":
No conflicts rule on essential validity of contracts is expressly provided for in our laws. The rule followed
by most legal systems, however, is that the intrinsic validity of a contract must be governed by the lex
contractus or "proper law of the contract." This is the law voluntarily agreed upon by the parties (the lex
loci voluntatis) or the law intended by them either expressly or implicitly (the lex loci intentionis). The law
selected may be implied from such factors as substantial connection with the transaction, or the
nationality or domicile of the parties. Philippine courts would do well to adopt the first and most basic rule
in most legal systems, namely, to allow the parties to select the law applicable to their contract, subject to
the limitation that it is not against the law, morals, or public policy of the forum and that the chosen law
must bear a substantive relationship to the transaction. (Emphasis in the original)
Saudia asserts that stipulations set in the Cabin Attendant contracts require the application of the laws of
Saudi Arabia. It insists that the need to comply with these stipulations calls into operation the doctrine
of forum non conveniens and, in turn, makes it necessary for Philippine tribunals to refrain from exercising
jurisdiction.

As mentioned, contractual choice of laws factors into transnational litigation in any or a combination of
four (4) ways. Moreover, forum non conveniens relates to one of these: choosing between multiple
possible fora.

Nevertheless, the possibility of parallel litigation in multiple fora — along with the host of difficulties it
poses — is not unique to transnational litigation. It is a difficulty that similarly arises in disputes well
within the bounds of a singe jurisdiction.

When parallel litigation arises strictly within the context of a single jurisdiction, such rules as those on
forum shopping, litis pendentia, and res judicata come into operation. Thus, in the Philippines, the 1997
Rules on Civil Procedure provide for willful and deliberate forum shopping as a ground not only for
summary dismissal with prejudice but also for citing parties and counsels in direct contempt, as well as for
the imposition of administrative sanctions. Likewise, the same rules expressly provide that a party may
seek the dismissal of a Complaint or another pleading asserting a claim on the ground "[t]hat there is
another action pending between the same parties for the same cause," i.e., litis pendentia, or "[t]hat the
cause of action is barred by a prior judgment," i.e., res judicata.

Forum non conveniens, like the rules of forum shopping, litis pendentia, and res judicata, is a means of
addressing the problem of parallel litigation. While the rules of forum shopping, litis pendentia, and res
judicata are designed to address the problem of parallel litigation within a single jurisdiction, forum non
conveniens is a means devised to address parallel litigation arising in multiple jurisdictions.

Forum non conveniens literally translates to "the forum is inconvenient." It is a concept in private
international law and was devised to combat the "less than honorable" reasons and excuses that litigants
use to secure procedural advantages, annoy and harass defendants, avoid overcrowded dockets, and
select a "friendlier" venue. Thus, the doctrine of forum non conveniens addresses the same rationale that
the rule against forum shopping does, albeit on a multijurisdictional scale.

Forum non conveniens, like res judicata, is a concept originating in common law. However, unlike the rule
on res judicata, as well as those on litis pendentia and forum shopping, forum non conveniens finds no
textual anchor, whether in statute or in procedural rules, in our civil law system. Nevertheless,
jurisprudence has applied forum non conveniens as basis for a court to decline its exercise of jurisdiction.
Forum non conveniens is soundly applied not only to address parallel litigation and undermine a litigant's
capacity to vex and secure undue advantages by engaging in forum shopping on an international scale. It
is also grounded on principles of comity and judicial efficiency.

Consistent with the principle of comity, a tribunal's desistance in exercising jurisdiction on account
of forum non conveniens is a deferential gesture to the tribunals of another sovereign. It is a measure that
prevents the former's having to interfere in affairs which are better and more competently addressed by
the latter. Further, forum non conveniens entails a recognition not only that tribunals elsewhere are better
suited to rule on and resolve a controversy, but also, that these tribunals are better positioned to enforce
judgments and, ultimately, to dispense justice. Forum non conveniens prevents the embarrassment of an
awkward situation where a tribunal is rendered incompetent in the face of the greater capability — both
analytical and practical — of a tribunal in another jurisdiction.

The wisdom of avoiding conflicting and unenforceable judgments is as much a matter of efficiency and
economy as it is a matter of international courtesy. A court would effectively be neutering itself if it insists
on adjudicating a controversy when it knows full well that it is in no position to enforce its judgment.
Doing so is not only an exercise in futility; it is an act of frivolity. It clogs the dockets of a.tribunal and
leaves it to waste its efforts on affairs, which, given transnational exigencies, will be reduced to mere
academic, if not trivial, exercises.

Accordingly, under the doctrine of forum non conveniens, "a court, in conflicts of law cases, may refuse
impositions on its jurisdiction where it is not the most 'convenient' or available forum and the parties are
not precluded from seeking remedies elsewhere." In Puyat v. Zabarte, this court recognized the following
situations as among those that may warrant a court's desistance from exercising jurisdiction:
1) The belief that the matter can be better tried and decided elsewhere, either because the main
aspects of the case transpired in a foreign jurisdiction or the material witnesses have their residence
there;
2) The belief that the non-resident plaintiff sought the forum[,] a practice known as forum shopping[,]
merely to secure procedural advantages or to convey or harass the defendant;
3) The unwillingness to extend local judicial facilities to non residents or aliens when the docket may
already be overcrowded;
4) The inadequacy of the local judicial machinery for effectuating the right sought to be maintained;
and
5) The difficulty of ascertaining foreign law.
In Bank of America, NT&SA, Bank of America International, Ltd. v. Court of Appeals, this court
underscored that a Philippine court may properly assume jurisdiction over a case if it chooses to do so to
the extent: "(1) that the Philippine Court is one to which the parties may conveniently resort to; (2) that
the Philippine Court is in a position to make an intelligent decision as to the law and the facts; and (3)
that the Philippine Court has or is likely to have power to enforce its decision."

The use of the word "may" (i.e., "may refuse impositions on its jurisdiction") in the decisions shows that
the matter of jurisdiction rests on the sound discretion of a court. Neither the mere invocation of forum
non conveniens nor the averment of foreign elements operates to automatically divest a court of
jurisdiction. Rather, a court should renounce jurisdiction only "after 'vital facts are established, to
determine whether special circumstances' require the court's desistance." As the propriety of
applying forum non conveniens is contingent on a factual determination, it is, therefore, a matter of
defense.

The second sentence of Rule 9, Section 1 of the 1997 Rules of Civil Procedure is exclusive in its recital of
the grounds for dismissal that are exempt from the omnibus motion rule: (1) lack of jurisdiction over the
subject matter; (2) litis pendentia; (3) res judicata; and (4) prescription. Moreover, dismissal on account
offorum non conveniens is a fundamentally discretionary matter. It is, therefore, not a matter for a
defendant to foist upon the court at his or her own convenience; rather, it must be pleaded at the earliest
possible opportunity.

On the matter of pleading forum non conveniens, we state the rule, thus: Forum non conveniens must not
only be clearly pleaded as a ground for dismissal; it must be pleaded as such at the earliest possible
opportunity. Otherwise, it shall be deemed waived.

This court notes that in Hasegawa, this court stated that forum non conveniens is not a ground for a
motion to dismiss. The factual ambience of this case however does not squarely raise the viability of this
doctrine. Until the opportunity comes to review the use of motions to dismiss for parallel
litigation, Hasegawa remains existing doctrine.

Consistent with forum non conveniens as fundamentally a factual matter, it is imperative that it proceed
from & factually established basis. It would be improper to dismiss an action pursuant to forum non
conveniens based merely on a perceived, likely, or hypothetical multiplicity of fora. Thus, a defendant
must also plead and show that a prior suit has, in fact, been brought in another jurisdiction.

The existence of a prior suit makes real the vexation engendered by duplicitous litigation, the
embarrassment of intruding into the affairs of another sovereign, and the squandering of judicial efforts in
resolving a dispute already lodged and better resolved elsewhere. As has been noted:
A case will not be stayed o dismissed on [forum] non conveniens grounds unless the plaintiff is shown to
have an available alternative forum elsewhere. On this, the moving party bears the burden of proof.

A number of factors affect the assessment of an alternative forum's adequacy. The statute of limitations
abroad may have run, of the foreign court may lack either subject matter or personal jurisdiction over the
defendant. . . . Occasionally, doubts will be raised as to the integrity or impartiality of the foreign court
(based, for example, on suspicions of corruption or bias in favor of local nationals), as to the fairness of its
judicial procedures, or as to is operational efficiency (due, for example, to lack of resources, congestion
and delay, or interfering circumstances such as a civil unrest). In one noted case, [it was found] that
delays of 'up to a quarter of a century' rendered the foreign forum... inadequate for these purposes.
We deem it more appropriate and in the greater interest of prudence that a defendant not only allege
supposed dangerous tendencies in litigating in this jurisdiction; the defendant must also show that such
danger is real and present in that litigation or dispute resolution has commenced in another
jurisdiction and that a foreign tribunal has chosen to exercise jurisdiction.

III

Forum non conveniens finds no application and does not operate to divest Philippine tribunals of
jurisdiction and to require the application of foreign law.

Saudia invokes forum non conveniens to supposedly effectuate the stipulations of the Cabin Attendant
contracts that require the application of the laws of Saudi Arabia.

Forum non conveniens relates to forum, not to the choice of governing law. Thai forum non
conveniens may ultimately result in the application of foreign law is merely an incident of its application.
In this strict sense, forum non conveniens is not applicable. It is not the primarily pivotal consideration in
this case.

In any case, even a further consideration of the applicability of forum non conveniens on the incidental
matter of the law governing respondents' relation with Saudia leads to the conclusion that it is improper
for Philippine tribunals to divest themselves of jurisdiction.

Any evaluation of the propriety of contracting parties' choice of a forum and'its incidents must grapple
with two (2) considerations: first, the availability and adequacy of recourse to a foreign tribunal; and
second, the question of where, as between the forum court and a foreign court, the balance of interests
inhering in a dispute weighs more heavily.

The first is a pragmatic matter. It relates to the viability of ceding jurisdiction to a foreign tribunal and can
be resolved by juxtaposing the competencies and practical circumstances of the tribunals in alternative
fora. Exigencies, like the statute of limitations, capacity to enforce orders and judgments, access to
records, requirements for the acquisition of jurisdiction, and even questions relating to the integrity of
foreign courts, may render undesirable or even totally unfeasible recourse to a foreign court. As
mentioned, we consider it in the greater interest of prudence that a defendant show, in pleading forum
non conveniens, that litigation has commenced in another jurisdiction and that a foieign tribunal has, in
fact, chosen to exercise jurisdiction.

Two (2) factors weigh into a court's appraisal of the balance of interests inhering in a dispute: first, the
vinculum which the parties and their relation have to a given jurisdiction; and second, the public interest
that must animate a tribunal, in its capacity as an agent of the sovereign, in choosing to assume or
decline jurisdiction. The first is more concerned with the parties, their personal circumstances, and private
interests; the second concerns itself with the state and the greater social order.

In considering the vinculum, a court must look into the preponderance of linkages which the parties and
their transaction may have to either jurisdiction. In this respect, factors, such as the parties' respective
nationalities and places of negotiation, execution, performance, engagement or deployment, come into
play.

In considering public interest, a court proceeds with a consciousness that it is an organ of the state. It
must, thus, determine if the interests of the sovereign (which acts through it) are outweighed by those of
the alternative jurisdiction. In this respect, the court delves into a consideration of public policy. Should it
find that public interest weighs more heavily in favor of its assumption of jurisdiction, it should proceed in
adjudicating the dispute, any doubt or .contrary view arising from the preponderance of linkages
notwithstanding.

Our law on contracts recognizes the validity of contractual choice of law provisions. Where such provisions
exist, Philippine tribunals, acting as the forum court, generally defer to the parties' articulated choice.

This is consistent with the fundamental principle of autonomy of contracts. Article 1306 of the Civ:l Code
expressly provides that "[t]he contracting parties may establish 'such stipulations, clauses, terms and
conditions as they may deem convenient." Nevertheless, while a Philippine tribunal (acting as the forum
court) is called upon to respect the parties' choice of governing law, such respect must not be so
permissive as to lose sight of considerations of law, morals, good customs, public order, or public policy
that underlie the contract central to the controversy.

Specifically with respect to public policy, in Pakistan International Airlines Corporation v. Ople, this court
explained that:
counter-balancing the principle of autonomy of contracting parties is the equally general rule that
provisions of applicable law, especially provisions relating to matters affected with public policy, are
deemed written inta the contract. Put a little differently, the governing principle is that parties may not
contract away applicable provisions of law especially peremptory provisions dealing with matters heavily
impressed with public interest. (Emphasis supplied)
Article II, Section 14 of the 1987 Constitution provides that "[t]he State ... shall ensure the fundamental
equality before the law of women and men." Contrasted with Article II, Section 1 of the 1987
Constitution's statement that "[n]o person shall ... be denied the equal protection of the laws," Article II,
Section 14 exhorts the State to "ensure." This does not only mean that the Philippines shall not
countenance nor lend legal recognition and approbation to measures that discriminate on the basis of
one's being male or female. It imposes an obligation to actively engage in securing the fundamental
equality of men and women.

The Convention on the Elimination of all Forms of Discrimination against Women (CEDAW), signed and
ratified by the Philippines on July 15, 1980, and on August 5, 1981, respectively, is part of the law of the
land. In view of the widespread signing and ratification of, as well as adherence (in practice) to it by
states, it may even be said that many provisions of the CEDAW may have become customary international
law. The CEDAW gives effect to the Constitution's policy statement in Article II, Section 14. Article I of the
CEDAW defines "discrimination against women" as:
any distinction, exclusion or restriction made on the basis of sex which has the effect or purpose of
impairing or nullifying the recognition, enjoyment or exercise by women, irrespective of their marital
status, on a basis of equality of men and women, of human rights and fundamental freedoms in the
political, economic, social, cultural, civil or any other field.
The constitutional exhortation to ensure fundamental equality, as illumined by its enabling law, the
CEDAW, must inform and animate all the actions of all personalities acting on behalf of the State. It is,
therefore, the bounden duty of this court, in rendering judgment on the disputes brought before it, to
ensure that no discrimination is heaped upon women on the mere basis of their being women. This is a
point so basic and central that all our discussions and pronouncements — regardless of whatever
averments there may be of foreign law — must proceed from this premise.

So informed and animated, we emphasize the glaringly discriminatory nature of Saudia's policy. As argued
by respondents, Saudia's policy entails the termination of employment of flight attendants who become
pregnant. At the risk of stating the obvious, pregnancy is an occurrence that pertains specifically to
women. Saudia's policy excludes from and restricts employment on the basis of no other consideration but
sex.

We do not lose sight of the reality that pregnancy does present physical limitations that may render
difficult the performance of functions associated with being a flight attendant. Nevertheless, it would be
the height of iniquity to view pregnancy as a disability so permanent and immutable that, it must entail
the termination of one's employment. It is clear to us that any individual, regardless of gender, may be
subject to exigencies that limit the performance of functions. However, we fail to appreciate how
pregnancy could be such an impairing occurrence that it leaves no other recourse but the complete
termination of the means through which a woman earns a living.

Apart from the constitutional policy on the fundamental equality before the law of men and women, it is
settled that contracts relating to labor and employment are impressed with public interest. Article 1700 of
the Civil Code provides that "[t]he relation between capital and labor are not merely contractual. They are
so impressed with public interest that labor contracts must yield to the common good."

Consistent with this, this court's pronouncements in Pakistan International Airlines Corporation are clear
and unmistakable:
Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement which specifies, firstly,
the law of Pakistan as the applicable law of the agreement, and, secondly, lays the venue for settlement of
any dispute arising out of or in connection with the agreement "only [in] courts of Karachi, Pakistan". The
first clause of paragraph 10 cannot be invoked to prevent the application of Philippine labor laws
and'regulations to the subject matter of this case, i.e., the employer-employee relationship between
petitioner PIA and private respondents. We have already pointed out that the relationship is much affected
with public interest and that the otherwise applicable Philippine laws and regulations cannot be rendered
illusory by the parties agreeing upon some other law to govern their relationship. . . . Under these
circumstances, paragraph 10 of the employment agreement cannot be given effect so as to oust Philippine
agencies and courts of the jurisdiction vested upon them by Philippine law. (Emphasis supplied)
As the present dispute relates to (what the respondents allege to be) the illegal termination of
respondents' employment, this case is immutably a matter of public interest and public policy. Consistent
with clear pronouncements in law and jurisprudence, Philippine laws properly find application in and
govern this case. 'Moreover, as this premise for Saudia's insistence on the application forum non
conveniens has been shattered, it follows that Philippine tribunals may properly assume jurisdiction over
the present controversy. Philippine jurisprudence provides ample illustrations of when a court's
renunciation of jurisdiction on account of forum non conveniens is proper or improper.'

In Philsec Investment Corporation v. Court of Appeals, this court noted that the trial court failed to
consider that one of the plaintiffs was a domestic corporation, that one of the defendants was a Filipino,
and that it was the extinguishment of the latter's debt that was the object of the transaction subject of the
litigation. Thus, this court held, among others, that the trial court's refusal to assume jurisdiction was not
justified by forum non conveniens and remanded the case to the trial court.

In Raytheon International, Inc. v. Rouzie, Jr., this court sustained the trial court's assumption of
jurisdiction considering that the trial court could properly enforce judgment on the petitioner which was a
foreign corporation licensed to do business in the Philippines.

In Pioneer International, Ltd. v. Guadiz, Jr., this court found no reason to disturb the trial court's
assumption of jurisdiction over a case in which, as noted by the trial court, "it is more convenient to hear
and decide the case in the Philippines because Todaro [the plaintiff] resides in the Philippines and the
contract allegedly breached involve[d] employment in the Philippines."

In Pacific Consultants International Asia, Inc. v. Schonfeld, this court held that the fact that the
complainant in an illegal dismissal case was a Canadian citizen and a repatriate did not warrant the
application of forum non conveniens considering that: (1) the Labor Code does not include forum non
conveniens as a ground for the dismissal of a complaint for illegal dismissal; (2) the propriety of
dismissing a case based on forum non conveniens requires a factual determination; and (3) the requisites
for assumption of jurisdiction as laid out in Bank of America, NT&SA were all satisfied.

In contrast, this court ruled in The Manila Hotel Corp. v. National Labor Relations Commission that the
National Labor Relations Q Commission was a seriously inconvenient forum. In that case, private
respondent Marcelo G. Santos was working in the Sultanate of Oman when he received a letter from
Palace Hotel recruiting him for employment in Beijing, China. Santos accepted the offer. Subsequently,
however, he was released from employment supposedly due to business reverses arising from political
upheavals in China (i.e., the Tiananmen Square incidents of 1989). Santos later filed a Complaint for
illegal dismissal impleading Palace Hotel's General Manager, Mr. Gerhard Schmidt, the Manila Hotel
International Company Ltd. (which was, responsible for training Palace Hotel's personnel and staff), and
the Manila Hotel Corporation (which owned 50% of Manila Hotel International Company Ltd.'s capital
stock).

In ruling against the National Labor Relations Commission's exercise of jurisdiction, this court noted that
the main aspects of the case transpired in two (2) foreign jurisdictions, Oman and China, and that the
case involved purely foreign elements. Specifically, Santos was directly hired by a foreign employer
through correspondence sent to Oman. Also, the proper defendants were neither Philippine nationals nor
engaged in business in the Philippines, while the main witnesses were not residents of the Philippines.
Likewise, this court noted that the National Labor Relations Commission was in no position to conduct the
following: first, determine the law governing the employment contract, as it was entered into in foreign
soil; second, determine the facts, as Santos' employment was terminated in Beijing; and third, enforce its
judgment, since Santos' employer, Palace Hotel, was incorporated under the laws of China and was not
even served with summons.

Contrary to Manila Hotel, the case now before us does not entail a preponderance of linkages that favor a
foreign jurisdiction.

Here, the circumstances of the parties and their relation do not approximate the circumstances
enumerated in Puyat, which this court recognized as possibly justifying the desistance of Philippine
tribunals from exercising jurisdiction.

First, there is no basis for concluding that the case can be more conveniently tried elsewhere. As
established earlier, Saudia is doing business in the Philippines. For their part, all four (4) respondents are
Filipino citizens maintaining residence in the Philippines and, apart from their previous employment with
Saudia, have no other connection to the Kingdom of Saudi Arabia. It would even be to respondents'
inconvenience if this case were to be tried elsewhere.

Second, the records are bereft of any indication that respondents filed their Complaint in an effort to
engage in forum shopping or to vex and inconvenience Saudia.

Third, there is no indication of "unwillingness to extend local judicial facilities to non-residents or

aliens." That Saudia has managed to bring the present controversy all the way to this court proves this.

Fourth, it cannot be said that the local judicial machinery is inadequate for effectuating the right sought to
be maintained. Summons was properly served on Saudia and jurisdiction over its person was validly
acquired.
Lastly, there is not even room for considering foreign law. Philippine law properly governs the present
dispute.

As the question of applicable law has been settled, the supposed difficulty of ascertaining foreign law
(which requires the application of forum non conveniens) provides no insurmountable inconvenience or
special circumstance that will justify depriving Philippine tribunals of jurisdiction.

Even if we were to assume, for the sake of discussion, that it is the laws of Saudi Arabia which should
apply, it does not follow that Philippine tribunals should refrain from exercising jurisdiction. To. recall our
pronouncements in Puyat, as well as in Bank of America, NT&SA, it is not so much the mere
applicability of foreign law which calls into operation forum non conveniens. Rather, what justifies a court's
desistance from exercising jurisdiction is "[t]he difficulty of ascertaining foreign law" or the inability of a
"Philippine Court to make an intelligent decision as to the law[.]"

Consistent with lex loci intentionis, to the extent that it is proper and practicable (i.e., "to make an
intelligent decision"), Philippine tribunals may apply the foreign law selected by the parties. In fact, (albeit
without meaning to make a pronouncement on the accuracy and reliability of respondents' citation) in this
case, respondents themselves have made averments as to the laws of Saudi Arabia. In their Comment,
respondents write:
Under the Labor Laws of Saudi Arabia and the Philippines[,] it is illegal and unlawful to terminate the
employment of any woman by virtue of pregnancy. The law in Saudi Arabia is even more harsh and strict
[sic] in that no employer can terminate the employment of a female worker or give her a warning of the
same while on Maternity Leave, the specific provision of Saudi Labor Laws on the matter is hereto quoted
as follows:
"An employer may not terminate the employment of a female worker or give her a warning of the same
while on maternity leave." (Article 155, Labor Law of the Kingdom of Saudi Arabia, Royal Decree No.
M/51.)
All told, the considerations for assumption of jurisdiction by Philippine tribunals as outlined in Bank of
America, NT&SA have been satisfied. First, all the parties are based in the Philippines and all the material
incidents transpired in this jurisdiction. Thus, the parties may conveniently seek relief from Philippine
tribunals. Second, Philippine tribunals are in a position to make an intelligent decision as to the law and
the facts. Third, Philippine tribunals are in a position to enforce their decisions. There is no compelling
basis for ceding jurisdiction to a foreign tribunal. Quite the contrary, the immense public policy
considerations attendant to this case behoove Philippine tribunals to not shy away from their duty to rule
on the case.

IV

Respondents were illegally terminated.

In Bilbao v. Saudi Arabian Airlines, this court defined voluntary resignation as "the voluntary act of an
employee who is in a situation where one believes that personal reasons cannot be sacrificed in favor of
the exigency of the service, and one has no other choice but to dissociate oneself from employment. It is
a formal pronouncement or relinquishment of an office, with the intention of relinquishing the office
accompanied by the act of relinquishment." Thus, essential to the act of resignation is voluntariness. It
must be the result of an employee's exercise of his or her own will.

In the same case of Bilbao, this court advanced a means for determining whether an employee resigned
voluntarily:
As the intent to relinquish must concur with the overt act of relinquishment, the acts of the employee
before and after the alleged resignation must be considered in determining whether he or she, in fact,
intended, to sever his or her employment. (Emphasis supplied)
On the other hand, constructive dismissal has been defined as "cessation of work because 'continued
employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank or
a diminution in pay' and other benefits."

In Penaflor v. Outdoor Clothing Manufacturing Corporation, constructive dismissal has been described as
tantamount to "involuntarily [sic] resignation due to the harsh, hostile, and unfavorable conditions set by
the employer." In the same case, it was noted that "[t]he gauge for constructive dismissal is whether a
reasonable person in the employee's position would feel compelled to give up his employment under the
prevailing circumstances."

Applying the cited standards on resignation and constructive dismissal, it is clear that respondents were
constructively dismissed. Hence, their termination was illegal.

The termination of respondents' employment happened when they were pregnant and expecting to incur
costs on account of child delivery and infant rearing. As noted by the Court of Appeals, pregnancy is a
time when they need employment to sustain their families. Indeed, it goes against normal and reasonable
human behavior to abandon one's livelihood in a time of great financial need.
It is clear that respondents intended to remain employed with Saudia. All they did was avail of their
maternity leaves. Evidently, the very nature of a maternity leave means that a pregnant employee will not
report for work only temporarily and that she will resume the performance of her duties as soon as the
leave allowance expires.

It is also clear that respondents exerted all efforts to' remain employed with Saudia. Each of them
repeatedly filed appeal letters (as much as five [5] letters in the case of Rebesencio) asking Saudia to
reconsider the ultimatum that they resign or be terminated along with the forfeiture of their benefits.
Some of them even went to Saudia's office to personally seek reconsideration.

Respondents also adduced a copy of the "Unified Employment Contract for Female Cabin Attendants." This
contract deemed void the employment of a flight attendant who becomes pregnant and threatened
termination due to lack of medical fitness. The threat of termination (and the forfeiture of benefits that it
entailed) is enough to compel a reasonable person in respondents' position to give up his or her
employment.

Saudia draws attention to how respondents' resignation letters were supposedly made in their own
handwriting. This minutia fails to surmount all the other indications negating any voluntariness on
respondents' part. If at all, these same resignation letters are proof of how any supposed resignation did
not arise from respondents' own initiative. As earlier pointed out, respondents' resignations were executed
on Saudia's blank letterheads that Saudia had provided. These letterheads already had the word
"RESIGNATION" typed on the subject portion of their respective headings when these were handed to
respondents.

"In termination cases, the burden of proving just or valid cause for dismissing an employee rests on the
employer." In this case, Saudia makes much of how respondents supposedly completed their exit
interviews, executed quitclaims, received their separation pay, and took more than a year to file their
Complaint. If at all, however, these circumstances prove only the fact of their occurrence, nothing more.
The voluntariness of respondents' departure from Saudia is non sequitur.

Mere compliance with standard procedures or processes, such as the completion of their exit interviews,
neither negates compulsion nor indicates voluntariness.

As with respondent's resignation letters, their exit interview forms even support their claim of illegal
dismissal and militates against Saudia's arguments. These exit interview forms, as reproduced by Saudia
in its own Petition, confirms the unfavorable conditions as regards respondents' maternity leaves. Ma.
Jopette's and Loraine's exit interview forms are particularly telling:
a. From Ma. Jopette's exit interview form:

3. In what respects has the job met or failed to meet your expectations?

THE SUDDEN TWIST OF DECISION REGARDING THE MATERNITY LEAVE.

b. From Loraine's exit interview form:

1. What are your main reasons for leaving Saudia? What company are you joining?

xxx xxx xxx

Others

CHANGING POLICIES REGARDING MATERNITY LEAVE (PREGNANCY)

As to respondents' quitclaims, in Phil. Employ Services and Resources, Inc. v. Paramio, this court noted
that "[i]f (a) there is clear proof that the waiver was wangled from an unsuspecting or gullible person; or
(b) the terms of the settlement are unconscionable, and on their face invalid, such quitclaims must be
struck down as invalid or illegal." Respondents executed their quitclaims after having been unfairly given
an ultimatum to resign or be terminated (and forfeit their benefits).

Having been illegally and unjustly dismissed, respondents are entitled to full backwages and benefits from
the time of their termination until the finality of this Decision. They are likewise entitled to separation pay
in the amount of one (1) month's salary for every year of service until the fmality of this Decision, with a
fraction of a year of at least six (6) months being counted as one (1) whole year.

Moreover, "[m]oral damages are awarded in termination cases where the employee's dismissal was
attended by bad faith, malice or fraud, or where it constitutes an act oppressive to labor, or where it was
done in a manner contrary to morals, good customs or public policy." 120 In this case, Saudia terminated
respondents' employment in a manner that is patently discriminatory and running afoul of the public
interest that underlies employer-employee relationships. As such, respondents are entitled to moral
damages.
To provide an "example or correction for the public good" 121 as against such discriminatory and callous
schemes, respondents are likewise entitled to exemplary damages.

In a long line of cases, this court awarded exemplary damages to illegally dismissed employees whose
"dismissal[s were] effected in a wanton, oppressive or malevolent manner." 122 This court has awarded
exemplary damages to employees who were terminated on such frivolous, arbitrary, and unjust grounds
as membership in or involvement with labor unions,123 injuries sustained in the course of
employment,124 development of a medical condition due to the employer's own violation of the
employment contract,125 and lodging of a Complaint against the employer. 126 Exemplary damages were
also awarded to employees who were deemed illegally dismissed by an employer in an attempt to evade
compliance with statutorily established employee benefits.127 Likewise, employees dismissed for
supposedly just causes, but in violation of due process requirements, were awarded exemplary
damages.128

These examples pale in comparison to the present controversy. Stripped of all unnecessary complexities,
respondents were dismissed for no other reason than simply that they were pregnant. This is as wanton,
oppressive, and tainted with bad faith as any reason for termination of employment can be. This is no
ordinary case of illegal dismissal. This is a case of manifest gender discrimination. It is an affront not only
to our statutes and policies on employees' security of tenure, but more so, to the Constitution's dictum of
fundamental equality between men and women. 129

The award of exemplary damages is, therefore, warranted, not only to remind employers of the need to
adhere to the requirements of procedural and substantive due process in termination of employment, but
more importantly, to demonstrate that gender discrimination should in no case be countenanced.

Having been compelled to litigate to seek reliefs for their illegal and unjust dismissal, respondents are
likewise entitled to attorney's fees in the amount of 10% of the total monetary award. 130

VI

Petitioner Brenda J. Betia may not be held liable.

A corporation has a personality separate and distinct from those of the persons composing it. Thus, as a
rule, corporate directors and officers are not liable for the illegal termination of a corporation's employees.
It is only when they acted in bad faith or with malice that they become solidarity liable with the
corporation.131

In Ever Electrical Manufacturing, Inc. (EEMI) v. Samahang Manggagawa ng Ever Electrical,132 this court
clarified that "[b]ad faith does not connote bad judgment or negligence; it imports a dishonest purpose or
some moral obliquity and conscious doing of wrong; it means breach of a known duty through some
motive or interest or ill will; it partakes of the nature of fraud." 133

Respondents have not produced proof to show that Brenda J. Betia acted in bad faith or with malice as
regards their termination. Thus, she may not be held solidarity liable with Saudia.cralawred

WHEREFORE, with the MODIFICATIONS that first, petitioner Brenda J. Betia is not solidarity liable with
petitioner Saudi Arabian Airlines, and second, that petitioner Saudi Arabian Airlines is liable for moral and
exemplary damages. The June 16, 2011 Decision and the September 13, 2011 Resolution of the Court of
Appeals in CA-G.R. SP. No. 113006 are hereby AFFIRMED in all other respects. Accordingly, petitioner
Saudi Arabian Airlines is ordered to pay respondents:

(1) Full backwages and all other benefits computed from the respective dates in which each of the
respondents were illegally terminated until the finality of this Decision;
(2) Separation pay computed from the respective dates in which each of the respondents commenced
employment until the finality of this Decision at the rate of one (1) month's salary for every year of
service, with a fraction of a year of at least six (6) months being counted as one (1) whole year;
(3) Moral damages in the amount of P100,000.00 per respondent;
(4) Exemplary damages in the amount of P200,000.00 per respondent; and
(5) Attorney's fees equivalent to 10% of the total award.

Interest of 6% per annum shall likewise be imposed on the total judgment award from the finality of this
Decision until full satisfaction thereof.

This case is REMANDED to the Labor Arbiter to make a detailed computation of the amounts due to
respondents which petitioner Saudi Arabian Airlines should pay without delay.

SO ORDERED.chanroblesvirtuallawlibrary

3.
G.R. No. 198967, March 07, 2016

JOSE EMMANUEL P. GUILLERMO, Petitioner, v. CRISANTO P. USON, Respondent.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul
and set aside the Court of Appeals Decision 1 dated June 8, 2011 and Resolution2 dated October 7, 2011 in
CA G.R. SP No. 115485, which affirmed in toto the decision of the National Labor Relations Commission
(NLRC).

The facts of the case follow.

On March 11, 1996, respondent Crisanto P. Uson (Uson) began his employment with Royal Class Venture
Phils., Inc. (Royal Class Venture) as an accounting clerk.3 Eventually, he was promoted to the position of
accounting supervisor, with a salary of Php13,000.00 a month, until he was allegedly dismissed from
employment on December 20, 2000.4

On March 2, 2001, Uson filed with the Sub-Regional Arbitration . Branch No. 1, Dagupan City, of the NLRC
a Complaint for Illegal Dismissal, with prayers for backwages, reinstatement, salaries and 13 th month pay,
moral and exemplary damages and attorney's fees against Royal Class Venture.5

Royal Class Venture did not make an appearance in the case despite its receipt of summons. 6

On May 15, 2001, Uson filed his Position Paper7 as complainant.

On October 22, 2001, Labor Arbiter Jose G. De Vera rendered a Decision8 in favor of the complainant Uson
and ordering therein respondent Royal Class Venture to reinstate him to his former position and pay his
backwages, 13th month pay as well as moral and exemplary damages and attorney's fees.

Royal Class Venture, as the losing party, did not file an appeal of the decision.9 Consequently, upon Uson's
motion, a Writ of Execution10 dated February 15, 2002 was issued to implement the Labor Arbiter's
decision.

On May 17, 2002, an Alias Writ of Execution 11 was issued. But with the judgment still unsatisfied, a
Second Alias Writ of Execution12 was issued on September 11, 2002.

Again, it was reported in the Sheriff's Return that the Second Alias Writ of Execution dated September 11,
2002 remained "unsatisfied." Thus, on November 14, 2002, Uson filed a Motion for Alias Writ of Execution
and to Hold Directors and Officers of Respondent Liable for Satisfaction of the Decision. 13 The motion
quoted from a portion of the Sheriffs Return, which states:
chanRoblesvirtualLawlibrary

On September 12, 2002, the undersigned proceeded at the stated present business office address of the
respondent which is at Minien East, Sta. Barbara, Pangasinan to serve the writ of execution. Upon arrival,
I found out that the establishment erected thereat is not [in] the respondent's name but JOEL and SONS
CORPORATION, a family corporation owned by the Guillermos of which, Jose Emmanuel F. Guillermo the
General Manager of the respondent, is one of the stockholders who received the writ using his nickname
"Joey," [and who] concealed his real identity and pretended that he [was] the brother of Jose, which
[was] contrary to the statement of the guard-on-duty that Jose and Joey [were] one and the same
person. The former also informed the undersigned that the respondent's (sic) corporation has been
dissolved.

On the succeeding day, as per [advice] by the [complainant's] counsel that the respondent has an account
at the Bank of Philippine Islands Magsaysay Branch, A.B. Fernandez Ave., Dagupan City, the undersigned
immediately served a notice of garnishment, thus, the bank replied on the same day stating that the
respondent [does] not have an account with the branch.14ChanRoblesVirtualawlibrary
On December 26, 2002, Labor Arbiter Irenarco R. Rimando issued an Order15 granting the motion filed by
Uson. The order held that officers of a corporation are jointly and severally liable for the obligations of the
corporation to the employees and there is no denial of due process in holding them so even if the said
officers were not parties to the case when the judgment in favor of the employees was rendered. 16 Thus,
the Labor Arbiter pierced the veil of corporate fiction of Royal Class Venture and held herein petitioner
Jose Emmanuel Guillermo (Guillermo), in his personal capacity, jointly and severally liable with the
corporation for the enforcement of the claims of Uson. 17

Guillermo filed, by way of special appearance, a Motion for Reconsideration/To Set Aside the Order of
December 26, 2002.18 The same, however, was not granted as, this time, in an Order dated November 24,
2003, Labor Arbiter Niña Fe S. Lazaga-Rafols sustained the findings of the labor arbiters before her and
even castigated Guillenno for his unexplained absence in the prior proceedings despite notice, effectively
putting responsibility on Guillermo for the case's outcome against him. 19

On January 5, 2004, Guillermo filed a Motion for Reconsideration of the above Order, 20 but the same was
promptly denied by the Labor Arbiter in an Order dated January 7, 2004.21

On January 26, 2004, Uson filed a Motion for Alias Writ of Execution, 22 to which Guillermo filed a Comment
and Opposition on April 2, 2004.23

On May 18, 2004, the Labor Arbiter issued an Order 24 granting Uson's Motion for the Issuance of an Alias
Writ of Execution and rejecting Guillermo's arguments posed in his Comment and Opposition.

Guillermo elevated the matter to the NLRC by filing a Memorandum of Appeal with Prayer for a (Writ of)
Preliminary Injunction dated June 10, 2004.25cralawred

In a Decision26 dated May 11, 2010, the NLRC dismissed Guillermo's appeal and denied his prayers for
injunction.

On August 20, 2010, Guillermo filed a Petition for Certiorari27 before the Court of Appeals, assailing the
NLRC decision.

On June 8, 2011, the Court of Appeals rendered its assailed Decision 28 which denied Guillermo's petition
and upheld all the findings of the NLRC.

The appellate court found that summons was in fact served on Guillermo as President and General
Manager of Royal Class Venture, which was how the Labor Arbiter acquired jurisdiction over the
company.29 But Guillermo subsequently refused to receive all notices of hearings and conferences as well
as the order to file Royal Class Venture's position paper. 30 Then, it was learned during execution that
Royal Class Venture had been dissolved.31 However, the Court of Appeals held that although the judgment
had become final and executory, it may be modified or altered "as when its execution becomes impossible
or unjust."32 It also noted that the motion to hold officers and directors like Guillermo personally liable, as
well as the notices to hear the same, was sent to them by registered mail, but no pleadings were
submitted and no appearances were made by anyone of them during the said motion's pendency.33 Thus,
the court held Guillermo liable, citing jurisprudence that hold the president of the corporation liable for the
latter's obligation to illegally dismissed employees. 34 Finally, the court dismissed Guillermo's allegation
that the case is an intra-corporate controversy, stating that jurisdiction is determined by the allegations in
the complaint and the character of the relief sought. 35

From the above decision of the appellate court, Guillermo filed a Motion for Reconsideration 36 but the
same was again denied by the said court in the assailed Resolution 37 dated October 7, 2011.

Hence, the instant petition.

Guillermo asserts that he was impleaded in the case only more than a year after its Decision had become
final and executory, an act which he claims to be unsupported in law and jurisprudence. 38 He contends
that the decision had become final, immutable and unalterable and that any amendment thereto is null
and void.39 Guillermo assails the so-called "piercing the veil" of corporate fiction which allegedly
discriminated against him when he alone was belatedly impleaded despite the existence of other directors
and officers in Royal Class Venture.40 He also claims that the Labor Arbiter has no jurisdiction because the
case is one of an intra-corporate controversy, with the complainant Uson also claiming to be a stockholder
and director of Royal Class Venture.41

In his Comment,42 Uson did not introduce any new arguments but merely cited verbatim the disquisitions
of the Court of Appeals to counter Guillermo's assertions in his petition.

To resolve the case, the Court must confront the issue of whether an officer of a corporation may be
included as judgment obligor in a labor case for the first time only after the decision of the Labor Arbiter
had become final and executory, and whether the twin doctrines of "piercing the veil of corporate fiction"
and personal liability of company officers in labor cases apply.

The petition is denied.

In the earlier labor cases of Claparols v. Court of Industrial Relations43 and A.C. Ransom Labor Union-
CCLU v. NLRC,44 persons who were not originally impleaded in the case were, even during execution, held
to be solidarity liable with the employer corporation for the latter's unpaid obligations to complainant-
employees. These included a newly-formed corporation which was considered a mere conduit or alter ego
of the originally impleaded corporation, and/or the officers or stockholders of the latter
corporation.45 Liability attached, especially to the responsible officers, even after final judgment and
during execution, when there was a failure to collect from the employer corporation the judgment debt
awarded to its workers.46 In Naguiat v. NLRC,47 the president of the corporation was found, for the first
time on appeal, to be solidarily liable to the dismissed employees. Then, in Reynoso v. Court of
Appeals,48 the veil of corporate fiction was pierced at the stage of execution, against a corporation not
previously impleaded, when it was established that such corporation had dominant control of the original
party corporation, which was a smaller company, in such a manner that the latter's closure was done by
the former in order to defraud its creditors, including a former worker.

The rulings of this Court in A.C. Ransom, Naguiat, and Reynoso, however, have since been tempered, at
least in the aspects of the lifting of the corporate veil and the assignment of personal liability to directors,
trustees and officers in labor cases. The subsequent cases of McLeod v. NLRC,49Spouses Santos v.
NLRC50 and Carag v. NLRC,51 have all established, save for certain exceptions, the primacy of Section
3152 of the Corporation Code in the matter of assigning such liability for a corporation's debts, including
judgment obligations in labor cases. According to these cases, a corporation is still an artificial being
invested by law with a personality separate and distinct from that of its stockholders and from that of
other corporations to which it may be connected.53 It is not in every instance of inability to collect from a
corporation that the veil of corporate fiction is pierced, and the responsible officials are made liable.
Personal liability attaches only when, as enumerated by the said Section 31 of the Corporation Code, there
is a wilfull and knowing assent to patently unlawful acts of the corporation, there is gross negligence or
bad faith in directing the affairs of the corporation, or there is a conflict of interest resulting in damages to
the corporation.54 Further, in another labor case, Pantranco Employees Association (PEA-PTGWO), et al. v.
NLRC, et al.,55 the doctrine of piercing the corporate veil is held to apply only in three (3) basic areas,
namely: ( 1) defeat of public convenience as when the corporate fiction is used as a vehicle for the
evasion of an existing obligation; (2) fraud cases or when the corporate entity is used to justify a wrong,
protect fraud, or defend a crime; or (3) alter ego cases, where a corporation is merely a farce since it is a
mere alter ego or business conduit of a person, or where the corporation is so organized and controlled
and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of
another corporation. In the absence of malice, bad faith, or a specific provision of law making a corporate
officer liable, such corporate officer cannot be made personally liable for corporate liabilities. 56 Indeed,
in Reahs Corporation v. NLRC,57 the conferment of liability on officers for a corporation's obligations to
labor is held to be an exception to the general doctrine of separate personality of a corporation.

It also bears emphasis that in cases where personal liability attaches, not even all officers are made
accountable. Rather, only the "responsible officer," i.e., the person directly responsible for and who "acted
in bad faith" in committing the illegal dismissal or any act violative of the Labor Code, is held solidarily
liable, in cases wherein the corporate veil is pierced. 58 In other instances, such as cases of so-called
corporate tort of a close corporation, it is the person "actively engaged" in the management of the
corporation who is held liable.59 In the absence of a clearly identifiable officer(s) directly responsible for
the legal infraction, the Court considers the president of the corporation as such officer. 60

The common thread running among the aforementioned cases, however, is that the veil of corporate
fiction can be pierced, and responsible corporate directors and officers or even a separate but related
corporation, may be impleaded and held answerable solidarily in a labor case, even after final judgment
and on execution, so long as it is established that such persons have deliberately used the corporate
vehicle to unjustly evade the judgment obligation, or have resorted to fraud, bad faith or malice in doing
so. When the shield of a separate corporate identity is used to commit wrongdoing and opprobriously
elude responsibility, the courts and the legal authorities in a labor case have not hesitated to step in and
shatter the said shield and deny the usual protections to the offending party, even after final judgment.
The key element is the presence of fraud, malice or bad faith. Bad faith, in this instance, does not connote
bad judgment or negligence but imports a dishonest purpose or some moral obliquity and conscious doing
of wrong; it means breach of a known duty through some motive or interest or ill will; it partakes of the
nature of fraud.61

As the foregoing implies, there is no hard and fast rule on when corporate fiction may be disregarded;
instead, each case must be evaluated according to its peculiar circumstances. 62 For the case at bar,
applying the above criteria, a finding of personal and solidary liability against a corporate officer like
Guillermo must be rooted on a satisfactory showing of fraud, bad

faith or malice, or the presence of any of the justifications for disregarding the corporate fiction. As stated
in McLeod,63 bad faith is a question of fact and is evidentiary, so that the records must first bear evidence
of malice before a finding of such may be made.

It is our finding that such evidence exists in the record. Like the A. C. Ransom, and Naguiat cases, the
case at bar involves an apparent family corporation. As in those two cases, the records of the present case
bear allegations and evidence that Guillermo, the officer being held liable, is the person responsible in the
actual running of the company and for the malicious and illegal dismissal of the complainant; he, likewise,
was shown to have a role in dissolving the original obligor company in an obvious "scheme to avoid
liability" which jurisprudence has always looked upon with a suspicious eye in order to protect the rights of
labor.64

Part of the evidence on record is the second page of the verified Position Paper of complainant (herein
respondent) Crisanto P. Uson, where it was clearly alleged that Uson was "illegally dismissed by the
President/General Manager of respondent corporation (herein petitioner) Jose Emmanuel P. Guillermo
when Uson exposed the practice of the said President/General Manager of dictating and undervaluing the
shares of stock of the corporation."65 The statement is proof that Guillermo was the responsible officer in
charge of running the company as well as the one who dismissed Uson from employment. As this sworn
allegation is uncontroverted - as neither the company nor Guillermo appeared before the Labor Arbiter
despite the service of summons and notices - such stands as a fact of the case, and now functions as clear
evidence of Guillermo's bad faith in his dismissal of Uson from employment, with the motive apparently
being anger at the latter's reporting of unlawful activities.

Then, it is also clearly reflected in the records that it was Guillermo himself, as President and General
Manager of the company, who received the summons to the case, and who also subsequently and without
justifiable cause refused to receive all notices and orders of the Labor Arbiter that followed. 66 This makes
Guillermo responsible for his and his company's failure to participate in the entire proceedings before the
said office. The fact is clearly narrated in the Decision and Orders of the Labor Arbiter, Uson's Motions for
the Issuance of Alias Writs of Execution, as well as in the Decision of the NLRC and the assailed Decision
of the Court of Appeals,67 which Guillermo did not dispute in any of his belated motions or pleadings,
including in his petition for certiorari before the Court of Appeals and even in the petition currently before
this Court.68 Thus, again, the same now stands as a finding of fact of the said lower tribunals which binds
this Court and which it has no power to alter or revisit.69 Guillermo's knowledge of the case's filing and
existence and his unexplained refusal to participate in it as the responsible official of his company, again is
an indicia of his bad faith and malicious intent to evade the judgment of the labor tribunals.

Finally, the records likewise bear that Guillermo dissolved Royal Class Venture and helped incorporate a
new firm, located in the same address as the former, wherein he is again a stockl1older. This is borne by
the Sherif11s Return which reported: that at Royal Class Venture's business address at Minien East, Sta.
Barbara, Pangasinan, there is a new establishment named "Joel and Sons Corporation," a family
corporation owned by the Guillermos in which Jose Emmanuel F. Guillermo is again one of the
stockholders; that Guillermo received the writ of execution but used the nickname "Joey" and denied
being Jose Emmanuel F. Guillermo and, instead, pretended to be Jose's brother; that the guard on duty
confirmed that Jose and Joey are one and the same person; and that the respondent corporation Royal
Class Venture had been dissolved.70 Again, the facts contained in the Sheriffs Return were not disputed
nor controverted by Guillermo, either in the hearings of Uson's Motions for Issuance of Alias Writs of
Execution, in subsequent motions or pleadings, or even in the petition before this Court. Essentially, then,
the facts form part of the records and now stand as further proof of Guillermo's bad faith and malicious
intent to evade the judgment obligation.

The foregoing clearly indicate a pattern or scheme to avoid the obligations to Uson and frustrate the
execution of the judgment award, which this Court, in the interest of justice, will not countenance.

As for Guillermo's assertion that the case is an intra-corporate controversy, the Court sustains the finding
of the appellate court that the nature of an action and the jurisdiction of a tribunal are determined by the
allegations of the complaint at the time of its filing, irrespective of whether or not the plaintiff is entitled to
recover upon all or some of the claims asserted therein.71 Although Uson is also a stockholder and director
of Royal Class Venture, it is settled in jurisprudence that not all conflicts between a stockholder and the
corporation are intra-corporate; an examination of the complaint must be made on whether the
complainant is involved in his capacity as a stockholder or director, or as an employee. 72 If the latter is
found and the dispute does not meet the test of what qualities as an intra-corporate controversy, then the
case is a labor case cognizable by the NLRC and is not within the jurisdiction of any other tribunal. 73 In the
case at bar, Uson's allegation was that he was maliciously and illegally dismissed as an Accounting
Supervisor by Guillermo, the Company President and General Manager, an allegation that was not even
disputed by the latter nor by Royal Class Venture. It raised no intra-corporate relationship issues between
him and the corporation or Guillermo; neither did it raise any issue regarding the regulation of the
corporation. As correctly found by the appellate court, Uson's complaint and redress sought were centered
alone on his dismissal as an employee, and not upon any other relationship he had with the company or
with Guillermo. Thus, the matter is clearly a labor dispute cognizable by the labor tribunals.chanrobleslaw

WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated June 8, 2011 and Resolution
dated October 7, 2011 in CA G.R. SP No. 115485 are AFFIRMED.

SO ORDERED.cralawlawlibrary

4.

January 25, 2016

G.R. No. 201595

ALLAN M. MENDOZA, Petitioner,

vs.
OFFICERS OF MANILA WATER EMPLOYEES UNION (MWEU), namely, EDUARDO B. BORELA,
BUENAVENTURA QUEBRAL, ELIZABETH COMETA, ALEJANDRO TORRES, AMORSOLO TIERRA,
SOLEDAD YEBAN, LUIS RENDON, VIRGINIA APILADO, TERESITA BOLO, ROGELIO BARBERO,
JOSE CASAÑAS, ALFREDO MAGA, EMILIO FERNANDEZ, ROSITA BUENA VENTURA, ALMENIO
CANCINO, ADELA IMANA, MARIO MANCENIDO, WILFREDO MANDILAG, ROLANDO MANLAP AZ,
EFREN MONTEMAYOR, NELSON PAGULAYAN, CARLOS VILLA, RIC BRIONES, and CHITO
BERNARDO, Respondents.

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari1 assails the April 24, 2012 Decision2 of the Court of Appeals (CA)
which dismissed the Petition for Certiorari3 in CA-G.R. SP No. 115639.

Factual Antecedents

Petitioner was a member of the Manila Water Employees Union (MWEU), a Department of Labor and
Employment (DOLE)-registered labor organization consisting of rank-and-file employees within Manila
Water Company (MWC). The respondents herein named – Eduardo B. Borela (Borela), Buenaventura
Quebral (Quebral), Elizabeth Cometa (Cometa), Alejandro Torres (Torres), Amorsolo Tierra (Tierra),
Soledad Yeban (Yeban), Luis Rendon (Rendon), Virginia Apilado (Apilado), Teresita Bolo (Bolo), Rogelio
Barbero (Barbero), Jose Casañas (Casañas), Alfredo Maga (Maga), Emilio Fernandez (Fernandez), Rosita
Buenaventura (Buenaventura), Almenio Cancino (Cancino), Adela Imana, Mario Mancenido (Mancenido),
Wilfredo Mandilag (Mandilag), Rolando Manlapaz (Manlapaz), Efren Montemayor (Montemayor), Nelson
Pagulayan, Carlos Villa, Ric Briones, and Chito Bernardo – were MWEU officers during the period material
to this Petition, with Borela as President and Chairman of the MWEU Executive Board, Quebral as First
Vice-President and Treasurer, and Cometa as Secretary.4

In an April 11, 2007 letter,5 MWEU through Cometa informed petitioner that the union was unable to fully
deduct the increased P200.00 union dues from his salary due to lack of the required December 2006
check-off authorization from him. Petitioner was warned that his failure to pay the union dues would result
in sanctions upon him. Quebral informed Borela, through a May 2, 2007 letter, 6 that for such failure to pay
the union dues, petitioner and several others violated Section 1(g), Article IX of the MWEU’s Constitution
and By-Laws.7 In turn, Borela referred the charge to the MWEU grievance committee for investigation.

On May 21, 2007, a notice of hearing was sent to petitioner, who attended the scheduled hearing. On
June 6, 2007, the MWEU grievance committee recommended that petitioner be suspended for 30 days.

In a June 20, 2007 letter,8 Borela informed petitioner and his corespondents of the MWEU Executive
Board’s "unanimous approval"9 of the grievance committee’s recommendation and imposition upon them
of a penalty of 30 days suspension, effective June 25, 2007.

In a June 26, 2007 letter10 to Borela, petitioner and his co-respondents took exception to the imposition
and indicated their intention to appeal the same to the General Membership Assembly in accordance with
Section 2(g), Article V of the union’s Constitution and By-Laws,11 which grants them the right to appeal
any arbitrary resolution, policy and rule promulgated by the Executive Board to the General Membership
Assembly. In a June 28, 2007 reply,12 Borela denied petitioner’s appeal, stating that the prescribed period
for appeal had expired.

Petitioner and his co-respondents sent another letter13 on July 4, 2007, reiterating their arguments and
demanding that the General Membership Assembly be convened in order that their appeal could be taken
up. The letter was not acted upon.

Petitioner was once more charged with non-payment of union dues, and was required to attend an August
3, 2007 hearing.14 Thereafter, petitioner was again penalized with a 30-day suspension through an August
21, 2007 letter15 by Borela informing petitioner of the Executive Board’s "unanimous approval"16 of the
grievance committee recommendation to suspend him effective August 24, 2007, to which he submitted a
written reply,17 invoking his right to appeal through the convening of the General Membership Assembly.
However, the respondents did not act on petitioner’s plea.

Meanwhile, MWEU scheduled an election of officers on September 14, 2007. Petitioner filed his certificate
of candidacy for Vice-President, but he was disqualified for not being a member in good standing on
account of his suspension.

On October 2, 2007, petitioner was charged with non-payment of union dues for the third time. He did not
attend the scheduled hearing. This time, he was meted the penalty of expulsion from the union, per
"unanimous approval"18 of the members of the Executive Board. His pleas for an appeal to the General
Membership Assembly were once more unheeded.19
In 2008, during the freedom period and negotiations for a new collective bargaining agreement (CBA) with
MWC, petitioner joined another union, the Workers Association for Transparency, Empowerment and
Reform, All-Filipino Workers Confederation (WATER-AFWC). He was elected union President. Other MWEU
members were inclined to join WATER-AFWC, but MWEU director Torres threatened that they would not
get benefits from the new CBA.20

The MWEU leadership submitted a proposed CBA which contained provisions to the effect that in the event
of retrenchment, non-MWEU members shall be removed first, and that upon the signing of the CBA, only
MWEU members shall receive a signing bonus.21

Ruling of the Labor Arbiter

On October 13, 2008, petitioner filed a Complaint 22 against respondents for unfair labor practices,
damages, and attorney’s fees before the National Labor Relations Commission (NLRC), Quezon City,
docketed as NLRC Case No. NCR-10-14255-08. In his Position Paper and other written
submissions,23 petitioner accused the respondents of illegal termination from MWEU in connection with the
events relative to his non-payment of union dues; unlawful interference, coercion, and violation of the
rights of MWC employees to self-organization – in connection with the proposed CBA submitted by MWEU
leadership, which petitioner claims contained provisions that discriminated against non-MWEU members.
Petitioner prayed in his Supplemental Position Paper that respondents be held guilty of unfair labor
practices and ordered to indemnify him moral damages in the amount of P100,000.00, exemplary
damages amounting to P50,000.00, and 10% attorney’s fees.

In their joint Position Paper and other pleadings,24 respondents claimed that the Labor Arbiter had no
jurisdiction over the dispute, which is intra-union in nature; that the Bureau of Labor Relations (BLR) was
the proper venue, in accordance with Article 226 of the Labor Code 25 and Section 1, Rule XI of Department
Order 40-03, series of 2003, of the DOLE;26 and that they were not guilty of unfair labor practices,
discrimination, coercion or restraint.

On May 29, 2009, Labor Arbiter Virginia T. Luyas-Azarraga issued her Decision27 which decreed as follows:

Indeed the filing of the instant case is still premature. Section 5, Article X-Investigation Procedures and
Appeal Process of the Union Constitution and By-Laws provides that:

Section 5. Any dismissed and/or expelled member shall have the rights to appeal to the Executive Board
within seven (7) days from the date of notice of the said dismissal and/or expulsion, which in [turn] shall
be referred to the General Membership Assembly. In case of an appeal, a simple majority of the decision
of the Executive Board is imperative. The same shall be approved/disapproved by a majority vote of the
general membership assembly in a meeting duly called for the purpose.

On the basis of the foregoing, the parties shall exhaust first all the administrative remedies before
resorting to compulsory arbitration. Thus, instant case is referred back to the Union for the General
Assembly to act or deliberate complainant’s appeal on the decision of the Executive Board.

WHEREFORE PREMISES CONSIDERED, instant case is referred back to the Union level for the General
Assembly to act on complainant’s appeal.

SO ORDERED.28

Ruling of the National Labor Relations Commission

Petitioner appealed before the NLRC, where the case was docketed as NLRC LAC No. 07-001913-09. On
March 15, 2010, the NLRC issued its Decision,29 declaring as follows:

Complainant30 imputes serious error to the Labor Arbiter when she decided as follows:

a. Referring back the subject case to the Union level for the General Assembly to act on his appeal.

b. Not ruling that respondents are guilty of ULP as charged.

c. Not granting to complainant moral and exemplary damages and attorney’s fees.

Complainant, in support of his charges, claims that respondents restrained or coerced him in the exercise
of his right as a union member in violation of paragraph "a", Article 249 of the Labor Code, 31 particularly,
in denying him the explanation as to whether there was observance of the proper procedure in the
increase of the membership dues from P100.00 to P200.00 per month. Further, complainant avers that he
was denied the right to appeal his suspension and expulsion in accordance with the provisions of the
Union’s Constitution and By-Laws. In addition, complainant claims that respondents attempted to cause
the management to discriminate against the members of WATER-AFWC thru the proposed CBA.

Pertinent to the issue then on hand, the Labor Arbiter ordered that the case be referred back to the Union
level for the General Assembly to act on complainant’s appeal. Hence, these appeals.

After a careful look at all the documents submitted and a meticulous review of the facts, We find that this
Commission lacks the jurisdictional competence to act on this case.

Article 217 of the Labor Code,32 as amended, specifically enumerates the cases over which the Labor
Arbiters and the Commission have original and exclusive jurisdiction. A perusal of the record reveals that
the causes of action invoked by complainant do not fall under any of the enumerations therein. Clearly,
We have no jurisdiction over the same.

Moreover, pursuant to Section 1, Rule XI, as amended, DOLE Department Order No. 40-03 in particular,
Item A, paragraphs (h) and (j) and Item B, paragraph (a)(3), respectively, provide:

"A. Inter-Intra-Union disputes shall include:

"(h) violation of or disagreements over any provision of the Constitution and By-Laws of a Union or
workers’ association.

"(j) violation of the rights and conditions of membership in a Union or workers’ association.

"B. Other Labor Relations disputes, not otherwise covered by Article 217 of the Labor Code, shall include –

"3. a labor union and an individual who is not a member of said union."

Clearly, the above-mentioned disputes and conflict fall under the jurisdiction of the Bureau of Labor
Relations, as these are inter/intra-union disputes.

WHEREFORE, the decision of the Labor Arbiter a quo dated May 29, 2009 is hereby declared NULL and
VOID for being rendered without jurisdiction and the instant complaint is DISMISSED.

SO ORDERED.33

Petitioner moved for reconsideration,34 but in a June 16, 2010 Resolution,35 the motion was denied and
the NLRC sustained its Decision.

Ruling of the Court of Appeals

In a Petition for Certiorari36 filed with the CA and docketed as CA-G.R. SP No. 115639, petitioner sought to
reverse the NLRC Decision and be awarded his claim for damages and attorney’s fees on account of
respondents’ unfair labor practices, arguing among others that his charge of unfair labor practices is
cognizable by the Labor Arbiter; that the fact that the dispute is inter- or intra-union in nature cannot
erase the fact that respondents were guilty of unfair labor practices in interfering and restraining him in
the exercise of his right to self-organization as member of both MWEU and WATER-AFWC, and in
discriminating against him and other members through the provisions of the proposed 2008 CBA which
they drafted; that his failure to pay the increased union dues was proper since the approval of said
increase was arrived at without observing the prescribed voting procedure laid down in the Labor Code;
that he is entitled to an award of damages and attorney’s fees as a result of respondents’ illegal acts in
discriminating against him; and that in ruling the way it did, the NLRC committed grave abuse of
discretion.

On April 24, 2012, the CA issued the assailed Decision containing the following pronouncement:

The petition lacks merit.

Petitioner’s causes of action against MWEU are inter/intra-union disputes cognizable by the BLR whose
functions and jurisdiction are largely confined to union matters, collective bargaining registry, and labor
education. Section 1, Rule XI of Department Order (D.O.) No. 40-03, Series of 2003, of the Department of
Labor and Employment enumerates instances of inter/intra-union disputes, viz:

Section 1. Coverage. – Inter/intra-union disputes shall include:

xxxx
(b) conduct of election of union and workers’ association officers/nullification of election of union and
workers’ association officers;

(c) audit/accounts examination of union or workers’ association funds;

xxxx

(g) validity/invalidity of impeachment/ expulsion of union and workers’ association officers and members;

xxxx

(j) violations of or disagreements over any provision in a union or workers’ association constitution and
by-laws;

xxxx

(l) violations of the rights and conditions of union or workers’ association membership;

xxxx

(n) such other disputes or conflicts involving the rights to self-organization, union membership and
collective bargaining –

(1) between and among legitimate labor organizations;

(2) between and among members of a union or workers’ association.

In brief, "Inter-Union Dispute" refers to any conflict between and among legitimate labor unions involving
representation questions for purposes of collective bargaining or to any other conflict or dispute between
legitimate labor unions. "Intra-Union Dispute" refers to any conflict between and among union members,
including grievances arising from any violation of the rights and conditions of membership, violation of or
disagreement over any provision of the union’s constitution and by-laws, or disputes arising from
chartering or affiliation of union. On the other hand, the circumstances of unfair labor practices (ULP) of a
labor organization are stated in Article 249 of the Labor Code, to wit:

Article 249. Unfair labor practices of labor organizations. It shall be unlawful for labor organization, its
officers, agents, or representatives to commit any of the following unfair labor practices:

(a) To restrain or coerce employees in the exercise of their right to self-organization; Provided,
That the labor organization shall have the right to prescribe its own rules with respect to the
acquisition or retention of membership;

(b) To cause or attempt to cause an employer to discriminate against an employee, including

discrimination against an employee with respect to whom membership in such organization has
been denied or terminated on any ground other than the usual terms and conditions under which
membership or continuation of membership is made available to other members;

xxxx

Applying the aforementioned rules, We find that the issues arising from petitioner’s right to information on
the increased membership dues, right to appeal his suspension and expulsion according to CBL provisions,
and right to vote and be voted on are essentially intra-union disputes; these involve violations of rights
and conditions of union membership. But his claim that a director of MWEU warned that non-MWEU
members would not receive CBA benefits is an inter-union dispute. It is more of an "interference" by a
rival union to ensure the loyalty of its members and to persuade non-members to join their union. This is
not an actionable wrong because interfering in the exercise of the right to organize is itself a function of
self-organizing.37 As long as it does not amount to restraint or coercion, a labor organization may interfere
in the employees’ right to self-organization.38 Consequently, a determination of validity or illegality of the
alleged acts necessarily touches on union matters, not ULPs, and are outside the scope of the labor
arbiter’s jurisdiction.

As regards petitioner’s other accusations, i.e., discrimination in terms of meting out the penalty of
expulsion against him alone, and attempt to cause the employer, MWC, to discriminate against non-MWEU
members in terms of retrenchment or reduction of personnel, and signing bonus, while We may consider
them as falling within the concept of ULP under Article 249(a) and (b), still, petitioner’s complaint cannot
prosper for lack of substantial evidence. Other than his bare allegation, petitioner offered no proof that
MWEU did not penalize some union members who failed to pay the increased dues. On the proposed
discriminatory CBA provisions, petitioner merely attached the pages containing the questioned provisions
without bothering to reveal the MWEU representatives responsible for the said proposal. Article 249
mandates that "x x x only the officers, members of the governing boards, representatives or agents or
members of labor associations or organizations who have actually participated in, authorized or ratified
unfair labor practices shall be held criminally liable." Plain accusations against all MWEU officers, without
specifying their actual participation, do not suffice. Thus, the ULP charges must necessarily fail.

In administrative and quasi-judicial proceedings, only substantial evidence is necessary to establish the
case for or against a party. Substantial evidence is that amount of relevant evidence which a reasonable
mind might accept as adequate to justify a conclusion. Petitioner failed to discharge the burden of proving,
by substantial evidence, the allegations of ULP in his complaint. The NLRC, therefore, properly dismissed
the case.

FOR THESE REASONS, the petition is DISMISSED.

SO ORDERED.39

Thus, the instant Petition.

Issue

In an August 28, 2013 Resolution,40 this Court resolved to give due course to the Petition, which claims
that the CA erred:

A. IN DECLARING THAT THE PRESENCE OF INTER/INTRA-UNION CONFLICTS NEGATES THE COMPLAINT

FOR UNFAIR LABOR PRACTICES AGAINST A LABOR ORGANIZATION AND ITS OFFICERS, AND IN
AFFIRMING THAT THE NLRC PROPERLY DISMISSED THE CASE FOR ALLEGED LACK OF JURISDICTION.

B. IN NOT RULING THAT RESPONDENTS ARE GUILTY OF UNFAIR LABOR PRACTICES UNDER ARTICLE
249(a) AND (b) OF THE LABOR CODE.

C. IN DECLARING THAT THE THREATS MADE BY A UNION OFFICER AGAINST MEMBERS OF A RIVAL
UNION IS (sic) MERELY AN "INTERFERENCE" AND DO NOT AMOUNT TO "RESTRAINT" OR "COERCION".

D. IN DECLARING THAT PETITIONER FAILED TO PRESENT SUBSTANTIAL EVIDENCE IN PROVING

RESPONDENTS’ SPECIFIC ACTS OF UNFAIR LABOR PRACTICES.

E. IN NOT RULING THAT RESPONDENTS ARE SOLIDARILY LIABLE TO PETITIONER FOR MORAL AND
EXEMPLARY DAMAGES, AND ATTORNEY’S FEES.41

Petitioner’s Arguments

Praying that the assailed CA dispositions be set aside and that respondents be declared guilty of unfair
labor practices under Article 249(a) and (b) and adjudged liable for damages and attorney’s fees as
prayed for in his complaint, petitioner maintains in his Petition and Reply 42 that respondents are guilty of
unfair labor practices which he clearly enumerated and laid out in his pleadings below; that these unfair
labor practices committed by respondents fall within the jurisdiction of the Labor Arbiter; that the Labor
Arbiter, the NLRC, and the CA failed to rule on his accusation of unfair labor practices and simply
dismissed his complaint on the ground that his causes of action are intra- or inter-union in nature; that
admittedly, some of his causes of action involved intra- or inter-union disputes, but other acts of
respondents constitute unfair labor practices; that he presented substantial evidence to prove that
respondents are guilty of unfair labor practices by failing to observe the proper procedure in the imposition
of the increased monthly union dues, and in unduly imposing the penalties of suspension and expulsion
against him; that under the union’s constitution and by-laws, he is given the right to appeal his
suspension and expulsion to the general membership assembly; that in denying him his rights as a union
member and expelling him, respondents are guilty of malice and evident bad faith; that respondents are
equally guilty for violating and curtailing his rights to vote and be voted to a position within the union, and
for discriminating against non-MWEU members; and that the totality of respondents’ conduct shows that
they are guilty of unfair labor practices.

Respondent’s Arguments

In their joint Comment,43 respondents maintain that petitioner raises issues of fact which are beyond the
purview of a petition for review on certiorari; that the findings of fact of the CA are final and conclusive;
that the Labor Arbiter, NLRC, and CA are one in declaring that there is no unfair labor practices committed
against petitioner; that petitioner’s other allegations fall within the jurisdiction of the BLR, as they refer to
intra- or inter-union disputes between the parties; that the issues arising from petitioner’s right to
information on the increased dues, right to appeal his suspension and expulsion, and right to vote and be
voted upon are essentially intra-union in nature; that his allegations regarding supposed coercion and
restraint relative to benefits in the proposed CBA do not constitute an actionable wrong; that all of the
acts questioned by petitioner are covered by Section 1, Rule XI of Department Order 40-03, series of 2003
as intra-/inter-union disputes which do not fall within the jurisdiction of the Labor Arbiter; that in not
paying his union dues, petitioner is guilty of insubordination and deserved the penalty of expulsion; that
petitioner failed to petition to convene the general assembly through the required signature of 30% of the
union membership in good standing pursuant to Article VI, Section 2(a) of MWEU’s Constitution and By-
Laws or by a petition of the majority of the general membership in good standing under Article VI, Section
3; and that for his failure to resort to said remedies, petitioner can no longer question his suspension or
expulsion and avail of his right to appeal.

Our Ruling

The Court partly grants the Petition.

In labor cases, issues of fact are for the labor tribunals and the CA to resolve, as this Court is not a trier of
facts. However, when the conclusion arrived at by them is erroneous in certain respects, and would result
in injustice as to the parties, this Court must intervene to correct the error. While the Labor Arbiter, NLRC,
and CA are one in their conclusion in this case, they erred in failing to resolve petitioner’s charge of unfair
labor practices against respondents.

It is true that some of petitioner’s causes of action constitute intra-union cases cognizable by the BLR
under Article 226 of the Labor Code.

An intra-union dispute refers to any conflict between and among union members, including grievances
arising from any violation of the rights and conditions of membership, violation of or disagreement over
any provision of the union’s constitution and by-laws, or disputes arising from chartering or disaffiliation of
the union. Sections 1 and 2, Rule XI of Department Order No. 40-03, Series of 2003 of the DOLE
enumerate the following circumstances as inter/intra-union disputes x x x.44

However, petitioner’s charge of unfair labor practices falls within the original and exclusive jurisdiction of
the Labor Arbiters, pursuant to Article 217 of the Labor Code. In addition, Article 247 of the same Code
provides that "the civil aspects of all cases involving unfair labor practices, which may include claims for
actual, moral, exemplary and other forms of damages, attorney’s fees and other affirmative relief, shall be
under the jurisdiction of the Labor Arbiters."

Unfair labor practices may be committed both by the employer under Article 248 and by labor
organizations under Article 249 of the Labor Code,45 which provides as follows:

ART. 249. Unfair labor practices of labor organizations. - It shall be unfair labor practice for a labor
organization, its officers, agents or representatives:

(a) To restrain or coerce employees in the exercise of their right to self-organization. However, a
labor organization shall have the right to prescribe its own rules with respect to the acquisition or
retention of membership;

(b) To cause or attempt to cause an employer to discriminate against an employee, including

discrimination against an employee with respect to whom membership in such organization has
been denied or to terminate an employee on any ground other than the usual terms and conditions
under which membership or continuation of membership is made available to other members;

(c) To violate the duty, or refuse to bargain collectively with the employer, provided it is the
representative of the employees;

(d) To cause or attempt to cause an employer to pay or deliver or agree to pay or deliver any
money or other things of value, in the nature of an exaction, for services which are not performed
or not to be performed, including the demand for fee for union negotiations;

(e) To ask for or accept negotiation or attorney’s fees from employers as part of the settlement of
any issue in collective bargaining or any other dispute; or

(f) To violate a collective bargaining agreement.

The provisions of the preceding paragraph notwithstanding, only the officers, members of governing
boards, representatives or agents or members of labor associations or organizations who have actually
participated in, authorized or ratified unfair labor practices shall be held criminally liable. (As amended by
Batas Pambansa Bilang 130, August 21, 1981).
Petitioner contends that respondents committed acts constituting unfair labor practices – which charge
was particularly laid out in his pleadings, but that the Labor Arbiter, the NLRC, and the CA ignored it and
simply dismissed his complaint on the ground that his causes of action were intra- or inter-union in
nature. Specifically, petitioner claims that he was suspended and expelled from MWEU illegally as a result
of the denial of his right to appeal his case to the general membership assembly in accordance with the
union’s constitution and by-laws. On the other hand, respondents counter that such charge is intra-union
in nature, and that petitioner lost his right to appeal when he failed to petition to convene the general
assembly through the required signature of 30% of the union membership in good standing pursuant to
Article VI, Section 2(a) of MWEU’s Constitution and By-Laws or by a petition of the majority of the general
membership in good standing under Article VI, Section 3.

Under Article VI, Section 2(a) of MWEU’s Constitution and By-Laws, the general membership assembly has
the power to "review revise modify affirm or repeal [sic] resolution and decision of the Executive Board
and/or committees upon petition of thirty percent (30%) of the Union in good standing," 46 and under
Section 2(d), to "revise, modify, affirm or reverse all expulsion cases."47 Under Section 3 of the same
Article, "[t]he decision of the Executive Board may be appealed to the General Membership which by a
simple majority vote reverse the decision of said body. If the general Assembly is not in session the
decision of the Executive Board may be reversed by a petition of the majority of the general membership
in good standing."48 And, in Article X, Section 5, "[a]ny dismissed and/or expelled member shall have the
right to appeal to the Executive Board within seven days from notice of said dismissal and/or expulsion
which, in [turn] shall be referred to the General membership assembly. In case of an appeal, a simple
majority of the decision of the Executive Board is imperative. The same shall be approved/disapproved by
a majority vote of the general membership assembly in a meeting duly called for the purpose." 49

In regard to suspension of a union member, MWEU’s Constitution and By-Laws provides under Article X,
Section 4 thereof that "[a]ny suspended member shall have the right to appeal within three (3) working
days from the date of notice of said suspension. In case of an appeal a simple majority of vote of the
Executive Board shall be necessary to nullify the suspension."

Thus, when an MWEU member is suspended, he is given the right to appeal such suspension within three
working days from the date of notice of said suspension, which appeal the MWEU Executive Board is
obligated to act upon by a simple majority vote. When the penalty imposed is expulsion, the expelled
member is given seven days from notice of said dismissal and/or expulsion to appeal to the Executive
Board, which is required to act by a simple majority vote of its members. The Board’s decision shall then
be approved/ disapproved by a majority vote of the general membership assembly in a meeting duly
called for the purpose.1avvphi1

The documentary evidence is clear that when petitioner received Borela’s August 21, 2007 letter informing
him of the Executive Board’s unanimous approval of the grievance committee recommendation to suspend
him for the second time effective August 24, 2007, he immediately and timely filed a written appeal.
However, the Executive Board – then consisting of respondents Borela, Tierra, Bolo, Casañas, Fernandez,
Rendon, Montemayor, Torres, Quebral, Pagulayan, Cancino, Maga, Cometa, Mancenido, and two others
who are not respondents herein – did not act thereon. Then again, when petitioner was charged for the
third time and meted the penalty of expulsion from MWEU by the unanimous vote of the Executive Board,
his timely appeal was again not acted upon by said board – this time consisting of respondents Borela,
Quebral, Tierra, Imana, Rendon, Yeban, Cancino, Torres, Montemayor, Mancenido, Mandilag, Fernandez,
Buenaventura, Apilado, Maga, Barbero, Cometa, Bolo, and Manlapaz.

Thus, contrary to respondents’ argument that petitioner lost his right to appeal when he failed to petition
to convene the general assembly through the required signature of 30% of the union membership in good
standing pursuant to Article VI, Section 2(a) of MWEU’s Constitution and By-Laws or by a petition of the
majority of the general membership in good standing under Article VI, Section 3, this Court finds that
petitioner was illegally suspended for the second time and thereafter unlawfully expelled from MWEU due
to respondents’ failure to act on his written appeals. The required petition to convene the general
assembly through the required signature of 30% (under Article VI, Section 2[a]) or majority (under Article
VI, Section 3) of the union membership does not apply in petitioner’s case; the Executive Board must first
act on his two appeals before the matter could properly be referred to the general membership. Because
respondents did not act on his two appeals, petitioner was unceremoniously suspended, disqualified and
deprived of his right to run for the position of MWEU Vice-President in the September 14, 2007 election of
officers, expelled from MWEU, and forced to join another union, WATER-AFWC. For these, respondents are
guilty of unfair labor practices under Article 249 (a) and (b) – that is, violation of petitioner’s right to self-
organization, unlawful discrimination, and illegal termination of his union membership – which case falls
within the original and exclusive jurisdiction of the Labor Arbiters, in accordance with Article 217 of the
Labor Code.

The primary concept of unfair labor practices is stated 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 interests 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 essence, [unfair labor practice] relates to the commission of acts that transgress the workers’ right to
organize."50 "[A]ll the prohibited acts constituting unfair labor practice in essence relate to the workers’
right to self-organization."51 "[T]he term unfair labor practice refers to that gamut of offenses defined in
the Labor Code which, at their core, violates the constitutional right of workers and employees to self-
organization."52

Guaranteed to all employees or workers is the ‘right to self-organization and to form, join, or assist labor
organizations of their own choosing for purposes of collective bargaining.’ This is made plain by no less
than three provisions of the Labor Code of the Philippines. Article 243 of the Code provides as follows:

ART. 243. Coverage and employees’ right to self-organization. — All persons employed in commercial,
industrial and agricultural enterprises and in religious, charitable, medical, or educational institutions
whether operating for profit or not, shall have the right to self-organization and to form, join, or assist
labor organizations of their own choosing for purposes or collective bargaining. Ambulant, intermittent and
itinerant workers, self-employed people, rural workers and those without any definite employers may form
labor organizations for their mutual aid and protection.

Article 248 (a) declares it to be an unfair labor practice for an employer, among others, to ‘interfere with,
restrain or coerce employees in the exercise of their right to self-organization.’ Similarly, Article 249 (a)
makes it an unfair labor practice for a labor organization to ‘restrain or coerce employees in the exercise
of their rights to self-organization . . .’

xxxx

The right of self-organization includes the right to organize or affiliate with a labor union or determine
which of two or more unions in an establishment to join, and to engage in concerted activities with co-
workers for purposes of collective bargaining through representatives of their own choosing, or for their
mutual aid and protection, i.e., the protection, promotion, or enhancement of their rights and interests.53

As members of the governing board of MWEU, respondents are presumed to know, observe, and apply the
union’s constitution and by-laws. Thus, their repeated violations thereof and their disregard of petitioner’s
rights as a union member – their inaction on his two appeals which resulted in his suspension,
disqualification from running as MWEU officer, and subsequent expulsion without being accorded the full
benefits of due process – connote willfulness and bad faith, a gross disregard of his rights thus causing
untold suffering, oppression and, ultimately, ostracism from MWEU. "Bad faith implies breach of faith and
willful failure to respond to plain and well understood obligation."54 This warrants an award of moral
damages in the amount of P100,000.00. Moreover, the Civil Code provides:

Art. 32. Any public officer or employee, or any private individual, who directly or indirectly obstructs,
defeats, violates or in any manner impedes or impairs any of the following rights and liberties of another
person shall be liable to the latter for damages:

xxxx

(12) The right to become a member of associations or societies for purposes not contrary to law;

In Vital-Gozon v. Court of Appeals,55 this Court declared, as follows:

Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar injury. They may be recovered if they are
the proximate result of the defendant’s wrongful act or omission. The instances when moral damages may
be recovered are, inter alia, ‘acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34 and 35
of the Civil Code,’ which, in turn, are found in the Chapter on Human Relations of the Preliminary Title of
the Civil Code. x x x

Under the circumstances, an award of exemplary damages in the amount of P50,000.00, as prayed for, is
likewise proper. "Exemplary damages are designed to permit the courts to mould behavior that has
socially deleterious consequences, and their imposition is required by public policy to suppress the wanton
acts of the offender."56 This should prevent respondents from repeating their mistakes, which proved
costly for petitioner.1âwphi1

Under Article 2229 of the Civil Code, ‘[e]xemplary or corrective damages are imposed, by way of example
or correction for the public good, in addition to the moral, temperate, liquidated or compensatory
damages.’ As this court has stated in the past: ‘Exemplary damages are designed by our civil law to
permit the courts to reshape behaviour that is socially deleterious in its consequence by creating negative
incentives or deterrents against such behaviour.’57

Finally, petitioner is also entitled to attorney’s fees equivalent to 10 per cent (10%) of the total award.
The unjustified acts of respondents clearly compelled him to institute an action primarily to vindicate his
rights and protect his interest. Indeed, when an employee is forced to litigate and incur expenses to
protect his rights and interest, he is entitled to an award of attorney’s fees. 58

WHEREFORE, the Petition is PARTIALLY GRANTED. The assailed April 24, 2012 Decision of the Court of
Appeals in CA-G.R. SP No. 115639 is hereby MODIFIED, in that all of the respondents - except for Carlos
Villa, Ric Briones, and Chito Bernardo - are declared guilty of unfair labor practices and ORDERED TO
INDEMNIFY petitioner Allan M. Mendoza the amounts of Pl00,000.00 as and by way of moral damages,
PS0,000.00 as exemplary damages, and attorney's fees equivalent to 10 per cent (10%) of the total
award.

SO ORDERED.

5.

G.R. No. 176264 January 10, 2011

PEOPLE OF THE PHILIPPINES, Appellee,

vs.
TERESITA "TESSIE" LAOGO, Appellant.

DECISION

VILLARAMA, JR., J.:

This petition assails the July 31, 2006 Decision 1 of the Court of Appeals (CA) in CA-G.R. CR.-H.C. No.
01664, which affirmed the Decision2 of the Regional Trial Court (RTC), Branch 12, of Malolos, Bulacan in
Criminal Case No. 693-M-2001. The RTC found appellant Teresita "Tessie" Laogo guilty beyond reasonable
doubt of the crime of illegal recruitment in large scale.

Appellant Teresita "Tessie" Laogo was the proprietor and manager of Laogo Travel Consultancy, a travel
agency firm located along Padre Faura Street in Manila. On March 7, 2001, an Information 3 was filed
against appellant and a certain Susan Navarro (Susan) in Malolos, Bulacan charging them of the crime of
Illegal Recruitment (Large Scale). The information reads:

INFORMATION

The undersigned Asst. Provincial Prosecutor accuses Susan Navarro and Tessie [Teresita] Laogo of the
crime of illegal recruitment, penalized under Art. 38 in relation to Art[s]. 34 and 39 of the Labor Code of
the Philippines, as amended by Presidential Decree No. 1412, committed as follows:

That in or about and during the months of May and June 2000, in the municipality of Bulacan, province of
Bulacan, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused,
knowing that they are non-licensee or non-holder of authority from the Department of Labor to recruit
and/or place workers in employment either locally or overseas, conspiring, confederating together and
helping each other, did then and there wi[l]lfully, unlawfully and feloniously engage in illegal recruitment,
placement or deployment activities for a fee, which they received from complainants Edith Bonifacio-
Ulanday, Rogelio Enriquez y Buenavidez, Billy dela Cruz, Jr. y Fernandez, Dante Lopez y Enriquez, Teodulo
dela Cruz y Mendoza, Edwin Enriquez y Panganiban and Gary Bustillos y de Guzman by recruiting and
promising them job placement abroad, more particularly in Guam, which did not materialize, without first
having secured the required license or authority from the Department of Labor and Employment.

That the crime is committed in a large scale tantamount to economic sabotage as the aforementioned
seven persons were [recruited] individually or as a group.

Contrary to law.

The charge stemmed from the following set of facts.

Sometime during the second week of March 2000, Susan invited several individuals including six of the
seven complainants – namely, Teodulo dela Cruz, Billy dela Cruz, Jr., Dante Lopez, Edwin Enriquez,
Rogelio Enriquez, and Gary Bustillos – to her house in Bulacan, Bulacan to celebrate the town fiesta.
Appellant was among the several guests in Susan’s house during the said occasion.
According to Teodulo dela Cruz, during the fiesta, Gary Bustillos introduced him to Susan as somebody
who could help him find work abroad. Since Susan was Gary’s aunt, Teodulo immediately trusted Susan.
Susan told him he can apply as assistant cook and can work in Guam, USA. Upon Susan’s instruction,
Teodulo filled up an application form4 and gave her ₱3,000.00 after the latter promised to process his
application to work abroad.5 On May 22, 2000, Susan accompanied Teodulo to appellant’s travel agency
office in Ermita where he paid an additional ₱15,000.00 for his placement fee. 6 A receipt bearing the logo
and name of Laogo Travel Consultancy was issued to him signed by Susan. 7 Months later, when Susan’s
promise to send him abroad remained unfulfilled, Teodulo, along with several other applicants, went to
appellant’s office and to Susan’s house to follow up their application, but the two always told them that
their visas have yet to be released.8

Similarly, Billy dela Cruz, Jr. also met Susan through Gary, who himself was seeking help from Susan to
work in Guam. At Susan’s house, Billy saw Dante Lopez, Edwin Enriquez, and Rogelio Enriquez. Like him,
the three were also seeking Susan’s help to work abroad.9 Susan introduced Billy to appellant, who
promised him that she will send them abroad within three months. 10 After the meeting, Billy issued to
Susan two Metrobank checks, dated March 11 and May 10, 2000, bearing the amounts ₱23,000.00 and
₱44,000.00, respectively, as partial payment for his placement fee. 11 On May 19, 2000, Billy also went to
appellant’s travel agency in Ermita and personally handed an additional cash of ₱6,000.00 to Susan, who
thereafter gave the money to appellant. Appellant issued a corresponding receipt 12 for the ₱6,000.00 cash
bearing her signature and the name and logo of Laogo Travel Consultancy. After several months, no word
was heard from either Susan or appellant. Sensing that something was wrong, Billy decided to report the
matter to the authorities in Bulacan, Bulacan and filed the complaint against Susan and appellant. 13

Dante Lopez testified that he was also introduced by Gary Bustillos to appellant and Susan. Susan
identified herself as an employee of appellant’s travel agency. The two told him that they can send him
and his companions to Guam within the span of three months. 14 Lopez paid both accused ₱6,000.00 to
process his papers, covered by a receipt dated May 19, 2000 showing appellant’s signature. 15 Appellant’s
promise, however, turned sour after three months. When he confronted appellant, the latter told him that
he would be sent to a different country. Left without a choice, Lopez waited. Again, the promise remained
unfulfilled.16

According to Rogelio Enriquez, he also met appellant during the town fiesta when Susan invited him to
cook for her guests. Susan introduced appellant as someone who could send him to work abroad. Eager
about the prospect, Rogelio immediately gave his ₱3,000.00 cash to Susan for the processing of his visa
and employment documents.17 He saw Susan hand the money to appellant.18 A week later, Rogelio gave
an additional ₱900.00 to Susan.19 No receipts were issued on both payments since Rogelio failed to
complete the required ₱6,000.00 placement fee.20 Months passed but Rogelio heard nothing from either
Susan or appellant. Apprehensive, Rogelio verified the status of the Laogo Travel Consultancy with the
Philippine Overseas Employment Administration (POEA). From the POEA, Rogelio learned that neither of
the accused nor Laogo Travel was licensed to recruit workers for employment abroad. Aggrieved, Rogelio,
together with his six companions, filed the complaint against Susan and appellant.

Edwin Enriquez also paid ₱12,000.00 to Susan as processing fee for his application to work in Guam.
According to him, Susan’s husband and appellant were present when he gave the money to Susan during
the town fiesta.21 Susan issued a receipt dated May 16, 2000 to Edwin. The receipt contained the logo of
Laogo Travel Consultancy and was signed by Susan with a description which says "Payment was for
Placement Fee."22

Two other persons, namely Edith Bonifacio-Ulanday and Gary Bustillos, Susan’s nephew, were among the
seven who filed the complaint against Susan and appellant. The two, however, later decided to withdraw
their complaints after executing their respective affidavits of desistance.23

On March 15, 2001, warrants of arrest24 were issued against Susan and appellant. When arraigned,
appellant pleaded not guilty.25 Susan, meanwhile, remained at large. An alias warrant of arrest 26 was
issued by the trial court against her but to no avail.

During the trial, appellant denied any participation in the illegal activities undertaken by Susan. She
insisted that Susan was not in any way connected with her travel agency and that she confronted the
latter when she came to know of Susan’s recruitment activities. Appellant claimed that she even had to
rename her travel agency to Renz Consultancy and Employment Services to avoid being associated with
Susan’s recruitment activities.27

Appellant admitted having met Rogelio at Susan’s house during the town fiesta, but denied knowing the
other complainants. According to appellant, she came to know Rogelio when Susan specifically identified
him as the one who cooked the dishes after some guests prodded Susan. 28

Unsatisfied with appellant’s explanation, the trial court promulgated a Decision 29 finding her guilty of large
scale illegal recruitment. The fallo of the trial court’s July 16, 2002 Decision reads:
WHEREFORE, finding herein accused Teresita (Tessie) Laogo y Villamor guilty as principal beyond
reasonable doubt of the crime of illegal recruitment in large scale, she is hereby sentenced to suffer the
penalty of life imprisonment and pay a fine of ₱500,000.00 as imposed by law[;] to indemnify the private
offended parties x x x actual damages, as follows: Teodulo dela Cruz – ₱15,000.00, Billy dela Cruz –
₱73,000.00, Dante Lopez – ₱6,000.00, Rogelio Enriquez – ₱3,000.00, and Edwin Enriquez – ₱12,000.00[;]
and to pay the costs of the proceedings.

In the service of her sentence the said accused, a detention prisoner, shall be credited with the full time
during which she had undergone preventive imprisonment, pursuant to the provisions of Art. 29 of the
Revised Penal Code.

Pending the actual apprehension of the other accused Susan Navarro, [who is] still at-large, on the
strength of the warrant of arrest earlier issued, let the record be committed to the archives subject to
recall and reinstatement, should circumstances so warrant for due prosecution against her of this case.

SO ORDERED.30

Appellant filed an appeal before this Court, but said appeal was transferred to the CA following our
pronouncement in People v. Mateo.31

In her Appellant’s Brief32 before the CA, appellant insisted that she had no hand in the recruitment of the
complainants and maintains that the recruitment activities were made solely upon the initiative of accused
Susan Navarro.33 Appellant anchored her defense on the testimonies of the complainants who declared
that the transactions and the payments were made not with her but with Susan. 34 Appellant admitted that
her consultancy firm was merely engaged in the business of assisting clients in the procurement of
passports and visas, and denied that her agency was involved in any recruitment activity as defined under
the Labor Code, as amended.35

On July 31, 2006, the appellate court rendered the assailed decision affirming appellant’s conviction. 36 The
CA noted that although at times, it was Susan with whom the complainants transacted, the records
nevertheless bear that appellant had a hand in the recruitment of the complainants. The CA pointed out
that appellant, together with Susan, repeatedly assured the private complainants that her consultancy
firm could deploy them for overseas employment,37 leading the appellate court to conclude that appellant
consciously and actively participated in the recruitment of the complainants. 38

Aggrieved, appellant brought the case to us on appeal, raising the same arguments she had raised at the
CA.

We affirm appellant’s conviction.

Recruitment and placement refers to the act of canvassing, enlisting, contracting, transporting, utilizing,
hiring or procuring workers, and includes referrals, contract services, promising or advertising for
employment, locally or abroad, whether for profit or not. When a person or entity, in any manner, offers
or promises for a fee employment to two or more persons, that person or entity shall be deemed engaged
in recruitment and placement.39

Article 38(a) of the Labor Code, as amended, specifies that recruitment activities undertaken by non-
licensees or non-holders of authority are deemed illegal and punishable by law. And when the illegal
recruitment is committed against three or more persons, individually or as a group, then it is deemed
committed in large scale and carries with it stiffer penalties as the same is deemed a form of economic
sabotage.401avvphi1

But to prove illegal recruitment, it must be shown that the accused, without being duly authorized by law,
gave complainants the distinct impression that he had the power or ability to send them abroad for work,
such that the latter were convinced to part with their money in order to be employed. 41 It is important
that there must at least be a promise or offer of an employment from the person posing as a recruiter,
whether locally or abroad.42

Here, both the trial court and the CA found that all the five complainants were promised to be sent abroad
by Susan and herein appellant43 as cooks and assistant cooks. The follow up transactions between
appellant and her victims were done inside the said travel agency. Moreover, all four receipts issued to the
victims bear the name and logo of Laogo Travel Consultancy,44 with two of the said receipts personally
signed by appellant herself.45 Indubitably, appellant and her co-accused acting together made
complainants believe that they were transacting with a legitimate recruitment agency and that Laogo
Travel Consultancy had the authority to recruit them and send them abroad for work when in truth and in
fact it had none as certified by the POEA. 46 Absent any showing that the trial court and the CA overlooked
or misappreciated certain significant facts and circumstances, which if properly considered, would change
the result, we are bound by said findings.47
Appellant’s contention that she had to change the name of her travel agency to disassociate herself with
Susan’s recruitment activities is too lame to deserve serious consideration. In light of the testimonies of
the complainants that appellant with her co-accused promised them employment abroad, we find
appellant’s act of closing Laogo Travel Consultancy and establishing a new one under her husband’s
name48 as just an afterthought, a belated decision which cannot undo the damage suffered by the private
offended parties. It could indeed hardly be construed as a simple reaction of an innocent person, as it in
fact smacks of a desperate attempt of a guilty individual to escape liability or to confuse and dishearten
her victims.

WHEREFORE, the appeal is DENIED. The Decision dated July 31, 2006 of the Court of Appeals in CA-G.R.
CR.-H.C. No. 01664 is AFFIRMED in toto.

With costs against the accused-appellant.

SO ORDERED.

6.

G.R. No. 176264 January 10, 2011

PEOPLE OF THE PHILIPPINES, Appellee,

vs.
TERESITA "TESSIE" LAOGO, Appellant.

DECISION

VILLARAMA, JR., J.:

This petition assails the July 31, 2006 Decision1 of the Court of Appeals (CA) in CA-G.R. CR.-H.C. No.
01664, which affirmed the Decision2 of the Regional Trial Court (RTC), Branch 12, of Malolos, Bulacan in
Criminal Case No. 693-M-2001. The RTC found appellant Teresita "Tessie" Laogo guilty beyond reasonable
doubt of the crime of illegal recruitment in large scale.

Appellant Teresita "Tessie" Laogo was the proprietor and manager of Laogo Travel Consultancy, a travel
agency firm located along Padre Faura Street in Manila. On March 7, 2001, an Information3 was filed
against appellant and a certain Susan Navarro (Susan) in Malolos, Bulacan charging them of the crime of
Illegal Recruitment (Large Scale). The information reads:

INFORMATION

The undersigned Asst. Provincial Prosecutor accuses Susan Navarro and Tessie [Teresita] Laogo of the
crime of illegal recruitment, penalized under Art. 38 in relation to Art[s]. 34 and 39 of the Labor Code of
the Philippines, as amended by Presidential Decree No. 1412, committed as follows:

That in or about and during the months of May and June 2000, in the municipality of Bulacan, province of
Bulacan, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused,
knowing that they are non-licensee or non-holder of authority from the Department of Labor to recruit
and/or place workers in employment either locally or overseas, conspiring, confederating together and
helping each other, did then and there wi[l]lfully, unlawfully and feloniously engage in illegal recruitment,
placement or deployment activities for a fee, which they received from complainants Edith Bonifacio-
Ulanday, Rogelio Enriquez y Buenavidez, Billy dela Cruz, Jr. y Fernandez, Dante Lopez y Enriquez, Teodulo
dela Cruz y Mendoza, Edwin Enriquez y Panganiban and Gary Bustillos y de Guzman by recruiting and
promising them job placement abroad, more particularly in Guam, which did not materialize, without first
having secured the required license or authority from the Department of Labor and Employment.

That the crime is committed in a large scale tantamount to economic sabotage as the aforementioned
seven persons were [recruited] individually or as a group.

Contrary to law.

The charge stemmed from the following set of facts.

Sometime during the second week of March 2000, Susan invited several individuals including six of the
seven complainants – namely, Teodulo dela Cruz, Billy dela Cruz, Jr., Dante Lopez, Edwin Enriquez,
Rogelio Enriquez, and Gary Bustillos – to her house in Bulacan, Bulacan to celebrate the town fiesta.
Appellant was among the several guests in Susan’s house during the said occasion.
According to Teodulo dela Cruz, during the fiesta, Gary Bustillos introduced him to Susan as somebody
who could help him find work abroad. Since Susan was Gary’s aunt, Teodulo immediately trusted Susan.
Susan told him he can apply as assistant cook and can work in Guam, USA. Upon Susan’s instruction,
Teodulo filled up an application form4 and gave her ₱3,000.00 after the latter promised to process his
application to work abroad.5 On May 22, 2000, Susan accompanied Teodulo to appellant’s travel agency
office in Ermita where he paid an additional ₱15,000.00 for his placement fee. 6 A receipt bearing the logo
and name of Laogo Travel Consultancy was issued to him signed by Susan. 7 Months later, when Susan’s
promise to send him abroad remained unfulfilled, Teodulo, along with several other applicants, went to
appellant’s office and to Susan’s house to follow up their application, but the two always told them that
their visas have yet to be released.8

Similarly, Billy dela Cruz, Jr. also met Susan through Gary, who himself was seeking help from Susan to
work in Guam. At Susan’s house, Billy saw Dante Lopez, Edwin Enriquez, and Rogelio Enriquez. Like him,
the three were also seeking Susan’s help to work abroad.9 Susan introduced Billy to appellant, who
promised him that she will send them abroad within three months.10 After the meeting, Billy issued to
Susan two Metrobank checks, dated March 11 and May 10, 2000, bearing the amounts ₱23,000.00 and
₱44,000.00, respectively, as partial payment for his placement fee. 11 On May 19, 2000, Billy also went to
appellant’s travel agency in Ermita and personally handed an additional cash of ₱6,000.00 to Susan, who
thereafter gave the money to appellant. Appellant issued a corresponding receipt 12 for the ₱6,000.00 cash
bearing her signature and the name and logo of Laogo Travel Consultancy. After several months, no word
was heard from either Susan or appellant. Sensing that something was wrong, Billy decided to report the
matter to the authorities in Bulacan, Bulacan and filed the complaint against Susan and appellant.13

Dante Lopez testified that he was also introduced by Gary Bustillos to appellant and Susan. Susan
identified herself as an employee of appellant’s travel agency. The two told him that they can send him
and his companions to Guam within the span of three months. 14 Lopez paid both accused ₱6,000.00 to
process his papers, covered by a receipt dated May 19, 2000 showing appellant’s signature. 15 Appellant’s
promise, however, turned sour after three months. When he confronted appellant, the latter told him that
he would be sent to a different country. Left without a choice, Lopez waited. Again, the promise remained
unfulfilled.16

According to Rogelio Enriquez, he also met appellant during the town fiesta when Susan invited him to
cook for her guests. Susan introduced appellant as someone who could send him to work abroad. Eager
about the prospect, Rogelio immediately gave his ₱3,000.00 cash to Susan for the processing of his visa
and employment documents.17 He saw Susan hand the money to appellant.18 A week later, Rogelio gave
an additional ₱900.00 to Susan.19 No receipts were issued on both payments since Rogelio failed to
complete the required ₱6,000.00 placement fee.20 Months passed but Rogelio heard nothing from either
Susan or appellant. Apprehensive, Rogelio verified the status of the Laogo Travel Consultancy with the
Philippine Overseas Employment Administration (POEA). From the POEA, Rogelio learned that neither of
the accused nor Laogo Travel was licensed to recruit workers for employment abroad. Aggrieved, Rogelio,
together with his six companions, filed the complaint against Susan and appellant.

Edwin Enriquez also paid ₱12,000.00 to Susan as processing fee for his application to work in Guam.
According to him, Susan’s husband and appellant were present when he gave the money to Susan during
the town fiesta.21 Susan issued a receipt dated May 16, 2000 to Edwin. The receipt contained the logo of
Laogo Travel Consultancy and was signed by Susan with a description which says "Payment was for
Placement Fee."22

Two other persons, namely Edith Bonifacio-Ulanday and Gary Bustillos, Susan’s nephew, were among the
seven who filed the complaint against Susan and appellant. The two, however, later decided to withdraw
their complaints after executing their respective affidavits of desistance.23

On March 15, 2001, warrants of arrest24 were issued against Susan and appellant. When arraigned,
appellant pleaded not guilty.25 Susan, meanwhile, remained at large. An alias warrant of arrest 26 was
issued by the trial court against her but to no avail.

During the trial, appellant denied any participation in the illegal activities undertaken by Susan. She
insisted that Susan was not in any way connected with her travel agency and that she confronted the
latter when she came to know of Susan’s recruitment activities. Appellant claimed that she even had to
rename her travel agency to Renz Consultancy and Employment Services to avoid being associated with
Susan’s recruitment activities.27

Appellant admitted having met Rogelio at Susan’s house during the town fiesta, but denied knowing the
other complainants. According to appellant, she came to know Rogelio when Susan specifically identified
him as the one who cooked the dishes after some guests prodded Susan.28

Unsatisfied with appellant’s explanation, the trial court promulgated a Decision 29 finding her guilty of large
scale illegal recruitment. The fallo of the trial court’s July 16, 2002 Decision reads:
WHEREFORE, finding herein accused Teresita (Tessie) Laogo y Villamor guilty as principal beyond
reasonable doubt of the crime of illegal recruitment in large scale, she is hereby sentenced to suffer the
penalty of life imprisonment and pay a fine of ₱500,000.00 as imposed by law[;] to indemnify the private
offended parties x x x actual damages, as follows: Teodulo dela Cruz – ₱15,000.00, Billy dela Cruz –
₱73,000.00, Dante Lopez – ₱6,000.00, Rogelio Enriquez – ₱3,000.00, and Edwin Enriquez – ₱12,000.00[;]
and to pay the costs of the proceedings.

In the service of her sentence the said accused, a detention prisoner, shall be credited with the full time
during which she had undergone preventive imprisonment, pursuant to the provisions of Art. 29 of the
Revised Penal Code.

Pending the actual apprehension of the other accused Susan Navarro, [who is] still at-large, on the
strength of the warrant of arrest earlier issued, let the record be committed to the archives subject to
recall and reinstatement, should circumstances so warrant for due prosecution against her of this case.

SO ORDERED.30

Appellant filed an appeal before this Court, but said appeal was transferred to the CA following our
pronouncement in People v. Mateo.31

In her Appellant’s Brief32 before the CA, appellant insisted that she had no hand in the recruitment of the
complainants and maintains that the recruitment activities were made solely upon the initiative of accused
Susan Navarro.33 Appellant anchored her defense on the testimonies of the complainants who declared
that the transactions and the payments were made not with her but with Susan. 34 Appellant admitted that
her consultancy firm was merely engaged in the business of assisting clients in the procurement of
passports and visas, and denied that her agency was involved in any recruitment activity as defined under
the Labor Code, as amended.35

On July 31, 2006, the appellate court rendered the assailed decision affirming appellant’s conviction. 36 The
CA noted that although at times, it was Susan with whom the complainants transacted, the records
nevertheless bear that appellant had a hand in the recruitment of the complainants. The CA pointed out
that appellant, together with Susan, repeatedly assured the private complainants that her consultancy
firm could deploy them for overseas employment,37 leading the appellate court to conclude that appellant
consciously and actively participated in the recruitment of the complainants. 38

Aggrieved, appellant brought the case to us on appeal, raising the same arguments she had raised at the
CA.

We affirm appellant’s conviction.

Recruitment and placement refers to the act of canvassing, enlisting, contracting, transporting, utilizing,
hiring or procuring workers, and includes referrals, contract services, promising or advertising for
employment, locally or abroad, whether for profit or not. When a person or entity, in any manner, offers
or promises for a fee employment to two or more persons, that person or entity shall be deemed engaged
in recruitment and placement.39

Article 38(a) of the Labor Code, as amended, specifies that recruitment activities undertaken by non-
licensees or non-holders of authority are deemed illegal and punishable by law. And when the illegal
recruitment is committed against three or more persons, individually or as a group, then it is deemed
committed in large scale and carries with it stiffer penalties as the same is deemed a form of economic
sabotage.401avvphi1

But to prove illegal recruitment, it must be shown that the accused, without being duly authorized by law,
gave complainants the distinct impression that he had the power or ability to send them abroad for work,
such that the latter were convinced to part with their money in order to be employed. 41 It is important
that there must at least be a promise or offer of an employment from the person posing as a recruiter,
whether locally or abroad.42

Here, both the trial court and the CA found that all the five complainants were promised to be sent abroad
by Susan and herein appellant43 as cooks and assistant cooks. The follow up transactions between
appellant and her victims were done inside the said travel agency. Moreover, all four receipts issued to the
victims bear the name and logo of Laogo Travel Consultancy, 44 with two of the said receipts personally
signed by appellant herself.45 Indubitably, appellant and her co-accused acting together made
complainants believe that they were transacting with a legitimate recruitment agency and that Laogo
Travel Consultancy had the authority to recruit them and send them abroad for work when in truth and in
fact it had none as certified by the POEA. 46 Absent any showing that the trial court and the CA overlooked
or misappreciated certain significant facts and circumstances, which if properly considered, would change
the result, we are bound by said findings.47
Appellant’s contention that she had to change the name of her travel agency to disassociate herself with
Susan’s recruitment activities is too lame to deserve serious consideration. In light of the testimonies of
the complainants that appellant with her co-accused promised them employment abroad, we find
appellant’s act of closing Laogo Travel Consultancy and establishing a new one under her husband’s
name48 as just an afterthought, a belated decision which cannot undo the damage suffered by the private
offended parties. It could indeed hardly be construed as a simple reaction of an innocent person, as it in
fact smacks of a desperate attempt of a guilty individual to escape liability or to confuse and dishearten
her victims.

WHEREFORE, the appeal is DENIED. The Decision dated July 31, 2006 of the Court of Appeals in CA-G.R.
CR.-H.C. No. 01664 is AFFIRMED in toto.

With costs against the accused-appellant.

SO ORDERED.

7.

G.R. No. 180636 March 13, 2013

LORENZO T. TANGGA-AN,* Petitioner,

vs.
PIDLIPPINE TRANSMARINE CARRIERS, INC., UNIVERSE TANKSHIP DELAWARE LLC, and
CARLOS C. SALINAS, Respondents.

DECISION

DEL CASTILLO, J.:

This Court's labor pronouncements must be read and applied with utmost care and caution, taking to mind
that in the very heart of the judicial system, labor cases occupy a special place. More than the State
guarantees of protection of labor and security of tenure, labor disputes involve the fundamental survival of
the employees and their families, who depend -upon the former for all the basic necessities in life.

This Petition for Review on Certiorari 1 seeks a modification of the November 30, 2006 Decision 2 of the
Court of Appeals (CA) in CA-G.R. SP No. 00806. Also assailed is the November 15, 2007
Resolution3 denying petitioner's Motion for Reconsideration.

Factual Antecedents

The facts, as found by the CA, are as follows:

This is a case for illegal dismissal with a claim for the payment of salaries corresponding to the unexpired
term of the contract, damages and attorney’s fees filed by private respondent Lorenzo T. Tangga-an
against the petitioners Philippine Transmarine Carriers, Inc., Universe Tankship Delaware LLC, and Carlos
C. Salinas4 or herein respondents.

In his position paper, Tangga-an alleged that on January 31, 2002, he entered into an overseas
employment contract with Philippine Transmarine Carriers, Inc. (PTC) for and in behalf of its foreign
employer, Universe Tankship Delaware, LLC. Under the employment contract, he was to be employed for
a period of six months as chief engineer of the vessel the S.S. "Kure". He was to be paid a basic salary of
US$5,000.00; vacation leave pay equivalent to 15 days a months [sic] or US$2,500.00 per month and
tonnage bonus in the amount of US$700.00 a month.

On February 11, 2002, Tangga-an was deployed. While performing his assigned task, he noticed that
while they were loading liquid cargo at Cedros, Mexico, the vessel suddenly listed too much at the bow. At
that particular time both the master and the chief mate went on shore leave together, which under
maritime standard was prohibited. To avoid any conflict, he chose to ignore the unbecoming conduct of
the senior officers of the vessel.

On or about March 13, 2002, the vessel berthed at a port in Japan to discharge its cargo. Thereafter, it
sailed to the U.S.A. While the vessel was still at sea, the master required Tangga-an and the rest of the
Filipino Engineer Officers to report to his office where they were informed that they would be repatriated
on account of the delay in the cargo discharging in Japan, which was principally a duty belonging to the
deck officers. He imputed the delay to the non-readiness of the turbo generator and the inoperation of the
boom, since the turbo generator had been prepared and synchronized for 3.5 hours or even before the
vessel arrived in Japan. Moreover, upon checking the boom, they found the same [sic] operational. Upon
verification, they found out that when the vessel berthed in Japan, the cargo hold was not immediately
opened and the deck officers concerned did not prepare the stock. Moreover, while cargo discharging was
ongoing, both the master and the chief mate again went on shore leave together at 4:00 in the afternoon
and returned to the vessel only after midnight. To save face, they harped on the Engine Department for
their mistake. Tangga-an and the other Engineering Officers were ordered to disembark from the vessel
on April 2, 2002 and thereafter repatriated. Thence, the complaint.

Philippine Transmarine Carriers, Inc., Universe Tankship Delaware LLC, and Carlos C. Salinas on the other
hand, contended that sometime on [sic] March 2002, during a test of the cargo discharging conveyor
system, Tangga-an and his assistant engineers failed to start the generator that supplied power to the
conveyor. They spent 3 hours trying to start the generator but failed. It was only the third assistant
engineer who previously served in the same vessel who was able to turn on the generator. When the
master tried to call the engine room to find out the problem, Tangga-an did not answer and merely hang
[sic] up. The master proceeded to the engine room to find out the problem by [sic] Tangga-an and his
assistant engineers were running around trying to appear busy.

At another time, during a cargo discharging operation requiring the use of a generator system and the
conveyor boom, Tangga-an was nowhere to be found. Apparently, he went on shore leave resulting in a
delay of 2 hours because the machine could not be operated well. Both incidents were recorded in the
official logbook. Due to the delay, protests were filed by the charter [sic].

The master required Tangga-an to submit a written explanation to which he did but blamed the captain
and the chief officer. He failed to explain why he did not personally supervise the operation of the
generator system and the conveyor boom during the cargo discharging operations. His explanation not
having been found satisfactory, respondents decided to terminate Tangga-an’s services. Thus, a notice of
dismissal was issued against Tangga-an. He arrived in the Philippines on April 4, 2002.5

Tangga-an filed a Complaint6 for illegal dismissal with prayer for payment of salaries for the unexpired
portion of his contract, leave pay, exemplary and moral damages, attorney’s fees and interest.

On January 27, 2004, Labor Arbiter Jose G. Gutierrez rendered a Decision 7 finding petitioner to have been
illegally dismissed. The Labor Arbiter noted that in petitioner’s letter to respondent Universe Tankship
Delaware, LLC dated April 1, 20028 he categorically denied any negligence on his part relative to the delay
in the discharge of the cargo while the vessel was berthed in Japan. In view thereof, the Labor Arbiter
opined that an investigation should have been conducted in order to ferret out the truth instead of
dismissing petitioner outright. Consequently, petitioner’s dismissal was illegal for lack of just cause and for
failure to comply with the twin requirements of notice and hearing.9

As regards petitioner’s claim for back salaries, the Labor Arbiter found petitioner entitled not to four
months which is equivalent to the unexpired portion of his contract, but only to three months, inclusive of
vacation leave pay and tonnage bonus (or US$8,200 x 3 months = US$24,600) pursuant to Section 10 of
Republic Act (RA) No. 8042 or The Migrant Workers and Overseas Filipinos Act of 2005.

Regarding petitioner’s claim for damages, the same was denied for failure to prove bad faith on the part of
the respondents. However, attorney’s fees equivalent to 10% of the total back salaries was awarded
because petitioner was constrained to litigate.

The dispositive portion of the Labor Arbiter’s Decision, reads:

WHEREFORE, the foregoing premises considered, judgment is hereby rendered finding Tangga-an illegally
dismissed from his employment and directing the respondent Phil. Transmarine Carriers, Inc. to pay
Tangga-an the amount of US$24,600.00 PLUS US$2,460.00 attorney’s fees or a total aggregate amount
of US Dollars: TWENTY SEVEN THOUSAND SIXTY (US$27,060.00) or its peso equivalent at the exchange
rate prevailing at the time of payment.

SO ORDERED.10

Ruling of the National Labor Relations Commission

Respondents appealed to the National Labor Relations Commission (NLRC). They claimed that the Labor
Arbiter committed grave abuse of discretion in finding that petitioner was illegally dismissed; in awarding
unearned vacation leave pay and tonnage bonus when the law and jurisprudence limit recovery to the
employee’s basic salary; and in awarding attorney’s fees despite the absence of proof of bad faith on their
part.

On August 25, 2004, the NLRC issued its Decision,11 the dispositive portion of which reads:

WHEREFORE, the Decision dated January 27, 2004 of the Labor Arbiter is AFFIRMED.
Respondents-appellants’ Memorandum of Appeal, dated 23 March 2004 is DISMISSED for lack of merit.

SO ORDERED.12

The NLRC affirmed the finding of illegal dismissal. It held that no notice of hearing was served upon
petitioner, and no hearing whatsoever was conducted on the charges against him. It ruled that
respondents could not dispense with the twin requirements of notice and hearing, which are essential
elements of procedural due process. For this reason, no valid cause for termination has been shown. The
NLRC likewise found respondents guilty of bad faith in illegally dismissing petitioner’s services.

On the issue covering the award of unearned vacation leave pay and tonnage bonus, the NLRC struck
down respondents’ arguments and held that in illegal dismissal cases, the employee is entitled to all the
salaries, allowances and other benefits or their monetary equivalents from the time his compensation is
withheld from him until he is actually reinstated, in effect citing Article 279 13 of the Labor Code. It held
that vacation leave pay and tonnage bonus are provided in petitioner’s employment contract, which thus
entitles the latter to the same in the event of illegal dismissal.

Finally, on the issue of attorney’s fees, the NLRC held that since respondents were found to be in bad faith
for the illegal dismissal and petitioner was constrained to litigate with counsel, the award of attorney’s
fees is proper.

Respondents moved for reconsideration which was denied by the NLRC in its March 18, 2005 Resolution. 14

Ruling of the Court of Appeals

Respondents went up to the CA by Petition for Certiorari, 15 seeking to annul the Decision of the NLRC,
raising essentially the same issues taken up in the NLRC.

On November 30, 2006, the CA rendered the assailed Decision, the dispositive portion of which reads, as
follows:

WHEREFORE, premises considered, the instant petition is PARTIALLY GRANTED. The Decision of public
respondent is MODIFIED in the following manner:

a. Tangga-an is entitled to three (3) months salary representing the unexpired portion of his
contract in the total amount of US$15,000.00 or its peso equivalent at the exchange rate prevailing
at the time of payment;

b. Tangga-an’s placement fee should be reimbursed with 12% interest per annum;

c. The award of attorney’s fees is deleted.

SO ORDERED.16

The CA adhered to the finding of illegal dismissal. But on the subject of monetary awards, the CA
considered only petitioner’s monthly US$5,000.00 basic salary and disregarded his monthly US$2,500.00
vacation leave pay and US$700.00 tonnage bonus. It likewise held that petitioner’s "unexpired portion of
contract" for which he is entitled to back salaries should only be three months pursuant to Section 1017 of
RA 8042. In addition, petitioner should be paid back his placement fee with interest at the rate of twelve
per cent (12%) per annum.

As to attorney’s fees, the CA did not agree with the NLRC’s finding that bad faith on the part of
respondents was present to justify the award of attorney’s fees. It held that there is nothing from the
facts and proceedings to suggest that respondents acted with dishonesty, moral obliquity or conscious
doing of wrong in terminating petitioner’s services.

Petitioner filed a Motion for (Partial) Reconsideration, 18 which was denied in the assailed November 15,
2007 Resolution. Thus, he filed the instant Petition.

Issues

In this Petition, Tangga-an seeks a modification of the CA Decision and the reinstatement of the monetary
awards as decreed in the Labor Arbiter’s January 27, 2004 Decision, or in the alternative, the grant of
back salaries equivalent to four months which corresponds to the unexpired portion of the contract,
inclusive of vacation leave pay and tonnage bonus, plus 10% thereof as attorney’s fees. 19

Petitioner submits the following issues for resolution:

 I. Whether x x x the CA’s issuance of the writ of certiorari reversing the NLRC decision is in
accordance with law;

II. Whether x x x the indemnity provided in Section 10, R. A. 8042 x x x be limited only to the
seafarer’s basic monthly salary or x x x include, based on civil law concept of damages as well as
Labor Code concept of backwages, allowances/benefits or their monetary equivalent as a further
relief to restore the seafarer’s income that was lost by reason of his unlawful dismissal;

III. Whether x x x the indemnity awarded by the CA in petitioner’s favor consisting only of 3
months’ basic salaries conform with the proper interpretation of Section 10 R. A. 8042 and with the
ruling in Skippers Pacific, Inc. v. Mira, et al., G.R. No. 144314, November 21, 2002 and related
cases or is petitioner entitled to at least 4 months salaries being the unexpired portion of his
contract; and

IV. Whether x x x the CA’s disallowance of the award of attorney’s fees, based on the alleged
absence of bad faith on the part of respondent, is in accordance with law or is the attorney’s fees
awarded by the NLRC to petitioner, who was forced to litigate to enforce his rights, justified x x x.20

Petitioner’s Arguments

Petitioner essentially contends that respondents’ resort to an original Petition for Certiorari in the CA is
erroneous because the issues they raised did not involve questions of jurisdiction but of fact and law. He
adds that the CA Decision went against the factual findings of the labor tribunals which ought to be
binding, given their expertise in matters falling within their jurisdiction.

Petitioner likewise contends that the CA erred in excluding his vacation leave pay and tonnage bonus in
the computation of his back salaries as they form part of his salaries and benefits under his employment
contract with the respondents, a covenant which is deemed to be the law governing their relations. He
adds that under Article 279 of the Labor Code, he is entitled to full backwages inclusive of allowances and
other benefits or their monetary equivalent from the time his compensation was withheld up to the time
he is actually reinstated.

Petitioner accuses the CA of misapplying the doctrine laid down in Skippers Pacific, Inc. v. Skippers
Maritime Services, Ltd.21 He points out that the CA wrongly interpreted and applied what the Court said in
the case, and that the pronouncement therein should have benefited him rather than the respondents.

Petitioner would have the Court reinstate the award of attorney’s fees, on the argument that the presence
of bad faith is not necessary to justify such award. He maintains that the grant of attorney’s fees in labor
cases constitutes an exception to the general requirement that bad faith or malice on the part of the
adverse party must first be proved.

Finally, petitioner prays that this Court reinstate the Labor Arbiter’s monetary awards in his January 27,
2004 Decision or, in the alternative, to grant him full back salaries equivalent to the unexpired portion of
his contract, or four months, plus 10% thereof as attorney’s fees.

Respondents’ Arguments

In seeking affirmance of the assailed CA issuances, respondents basically submit that the CA committed
no reversible error in excluding petitioner’s claims for vacation leave pay, tonnage bonus, and attorney’s
fees. They support and agree with the CA’s reliance upon Skippers Pacific, Inc. v. Skippers Maritime
Services, Ltd.,22 and emphasize that in the absence of bad faith on their part, petitioner may not recover
attorney’s fees.

Our Ruling

The Court grants the Petition.

There remains no issue regarding illegal dismissal. In spite of the consistent finding below that petitioner
was illegally dismissed, respondents did not take issue, which thus renders all pronouncements on the
matter final.

In resolving petitioner’s monetary claims, the CA utterly misinterpreted the Court’s ruling in Skippers
Pacific, Inc. v. Skippers Maritime Services, Ltd., 23 using it to support a view which the latter case precisely
ventured to strike down. In that case, the employee was hired as the vessel’s Master on a six-months
employment contract, but was able to work for only two months, as he was later on illegally dismissed.
The Labor Arbiter, NLRC, and the CA all took the view that the complaining employee was entitled to his
salary for the unexpired portion of his contract, but limited to only three months pursuant to Section
1024 of RA 8042. The Court did not agree and hence modified the judgment in said case. It held that,
following the wording of Section 10 and its ruling in Marsaman Manning Agency, Inc. v. National Labor
Relations Commission,25 when the illegally dismissed employee’s employment contract has a term of less
than one year, he/she shall be entitled to recovery of salaries representing the unexpired portion of
his/her employment contract. Indeed, there was nothing even vaguely confusing in the Court’s citation
therein of Marsaman:

In Marsaman Manning Agency, Inc. vs. NLRC, involving Section 10 of Republic Act No. 8042, we held:

We cannot subscribe to the view that private respondent is entitled to three (3) months salary
only.1âwphi1 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 wording "for every year of the unexpired term" which follows the wording
"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 lawmaking body is presumed to know the meaning of the words employed in the
statute and to have used them advisedly. Ut res magis valeat quam pereat.

It is not disputed that private respondent’s employment contract in the instant case was for six (6)
months. Hence, we see no reason to disregard the ruling in Marsaman that private respondent should be
paid his salaries for the unexpired portion of his employment contract. 26 (Emphases supplied)

At this juncture, the courts, especially the CA, should be reminded to read and apply this Court’s labor
pronouncements with utmost care and caution, taking to mind that in the very heart of the judicial
system, labor cases occupy a special place. More than the State guarantees of protection of labor and
security of tenure, labor disputes involve the fundamental survival of the employees and their families,
who depend upon the former for all the basic necessities in life.

Thus, petitioner must be awarded his salaries corresponding to the unexpired portion of his six-months
employment contract, or equivalent to four months. This includes all his corresponding monthly vacation
leave pay and tonnage bonuses which are expressly provided and guaranteed in his employment contract
as part of his monthly salary and benefit package. These benefits were guaranteed to be paid on a
monthly basis, and were not made contingent. In fact, their monetary equivalent was fixed under the
contract: US$2,500.00 for vacation leave pay and US$700.00 for tonnage bonus each month. Thus,
petitioner is entitled to back salaries of US$32,800 (or US$5,000 + US$2,500 + US$700 = US$8,200 x 4
months). "Article 279 of the Labor Code mandates that an employee’s full backwages shall be inclusive of
allowances and other benefits or their monetary equivalent." 27 As we have time and again held, "it is the
obligation of the employer to pay an illegally dismissed employee or worker the whole amount of the
salaries or wages, plus all other benefits and bonuses and general increases, to which he would have been
normally entitled had he not been dismissed and had not stopped working." 28 This well-defined principle
has likewise been lost on the CA in the consideration of the case.

The CA likewise erred in deleting the award of attorney’s fees on the ground that bad faith may not readily
be attributed to the respondents given the circumstances. The Court’s discussion on the award of
attorney’s fees in Kaisahan at Kapatiran ng mga Manggagawa at Kawani sa MWC-East Zone Union v.
Manila Water Company, Inc.,29 speaking through Justice Brion, is instructive, viz:

Article 111 of the Labor Code, as amended, governs the grant of attorney’s fees in labor cases:

‘Art. 111. Attorney’s fees. – (a) In cases of unlawful withholding of wages, the culpable party may be
assessed attorney’s fees equivalent to ten percent of the amount of wages recovered.

(b) It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings
for the recovery of wages, attorney’s fees which exceed ten percent of the amount of wages recovered.’

Section 8, Rule VIII, Book III of its Implementing Rules also provides, viz.:

‘Section 8. Attorney’s fees. – Attorney’s fees in any judicial or administrative proceedings for the recovery
of wages shall not exceed 10% of the amount awarded. The fees may be deducted from the total amount
due the winning party.’

We explained in PCL Shipping Philippines, Inc. v. National Labor Relations Commission that there are two
commonly accepted concepts of attorney’s fees – the ordinary and extraordinary. In its ordinary concept,
an attorney’s fee is the reasonable compensation paid to a lawyer by his client for the legal services the
former renders; compensation is paid for the cost and/or results of legal services per agreement or as
may be assessed. In its extraordinary concept, attorney’s fees are deemed indemnity for damages ordered
by the court to be paid by the losing party to the winning party. The instances when these may be
awarded are enumerated in Article 2208 of the Civil Code, specifically in its paragraph 7 on actions for
recovery of wages, and is payable not to the lawyer but to the client, unless the client and his lawyer have
agreed that the award shall accrue to the lawyer as additional or part of compensation.

We also held in PCL Shipping that Article 111 of the Labor Code, as amended, contemplates the
extraordinary concept of attorney’s fees and that Article 111 is an exception to the declared policy of strict
construction in the award of attorney’s fees. Although an express finding of facts and law is still necessary
to prove the merit of the award, there need not be any showing that the employer acted maliciously or in
bad faith when it withheld the wages. x x x

We similarly so ruled in RTG Construction, Inc. v. Facto and in Ortiz v. San Miguel Corporation. In RTG
Construction, we specifically stated:

'Settled is the rule that in actions for recovery of wages, or where an employee was forced to litigate and,
thus, incur expenses to protect his rights and interests, a monetary award by way of attorney's fees is
justifiable under Article Ill of the Labor Code; Section 8, Rule VIII, Book III of its Implementing Rules; and
paragraph 7, Article 208 of the Civil Code. The award of attorney's fees is proper, and there need not be
any showing that the employer acted maliciously or in bad faith when it withheld the wages. There need
only be a showing that the lawful wages were not paid accordingly.'

In PCL Shipping, we found the award of attorney's fees due and appropriate since the respondent therein
incurred legal expenses after he was forced to file an action for recovery of his lawful wages and other
benefits to protect his rights. From this perspective and the above precedents, we conclude that the CA
erred in ruling that a finding of the employer's malice or bad faith in withholding wages must precede an
award of attorney's fees under Article Ill of the Labor Code. To reiterate, a plain showing that the lawful
wages were not paid without justification is sufficient.30

In this case, it is already settled that petitioner's employment was illegally terminated. As a result, his
wages as well as allowances were withheld without valid and legal basis. Otherwise stated, he was not
paid his lawful wages without any valid justification. Consequently, he was impelled to litigate to protect
his interests. Thus, pursuant to the above ruling, he is entitled to receive attorney’s fees. An award of
attorney's fees in petitioner’s favor is in order in the amount of US$3, 280 (or US$32, 800 x 10%).

WHEREFORE, the Petition is GRANTED. Petitioner Lorenzo T. Tangga-an is hereby declared ENTITLED to
back salaries for the unexpired portion of his contract, inclusive of vacation leave pay and tonnage bonus
which is equivalent to US$32,800 plus US$3,280 as attorney's fees or a total of US$36,080 or its peso
equivalent at the exchange rate prevailing at the time of payment.

SO ORDERED.

8.

G.R. No. 186475 June 26, 2013

POSEIDON INTERNATIONAL MARITIME SERVICES, INC., Petitioner,

vs.
TITO R. TAMALA, FELIPE S. SAURIN, JR., ARTEMIO A. BO-OC and JOEL S.
FERNANDEZ, Respondents.

DECISION

BRION, J.:

We resolve in this petition for review on certiorari 1 the challenge to the September 30, 2008 Decision 2 and
the February 11, 20093 Resolution of the Court of Appeals (CA) in CA-G.R. SP No. 98783. These CA rulings
set aside the December 29, 2006 and February 12, 2007 Resolutions 4 of the National Labor Relations
Commission (NLRC) in NLRC CA No. 049479-06. The NLRC, in turn, affirmed in toto the May 2006
Decision5 of the labor arbiter (LA) dismissing the complaint for illegal termination of employment filed by
respondents Tito R. Tamala, Felipe S. Saurin, Jr., Artemio A. Bo-oc and Joel S. Fernandez against
petitioner Poseidon International Maritime Services, Inc. (Poseidon), and its principal, Van Doorn Fishing
Pty, Ltd. (Van Doorn).

The Factual Antecedents

In 2004, Poseidon hired the respondents, in behalf of Van Doorn, to man the fishing vessels of Van Doorn
and those of its partners – Dinko Tuna Farmers Pty. Ltd. (Dinko) and Snappertuna Cv. Lda. (Snappertuna)
- at the coastal and offshore area of Cape Verde Islands. The respondents’ contracting dates, positions,
vessel assignments, duration of the contract, basic monthly salaries, guaranteed overtime pay and
vacation leave pay, as reflected in their approved contracts, 6 are summarized below:

Artemio A. Joel S. Felipe S. Tito R.

Bo-oc Fernandez Saurin, Jr. Tamala
Date June 1, 2004 June 24, 2004 July 19, 20047 October 20,
Contracted 2004
Position Third Engineer Chief Mate Third Engineer Ordinary
Seaman
Vessel M/V "Lukoran M/V "Lukoran M/V "Lukoran M/V
Assignment DVA" DVA" Cetriri" "Lukoran
DVA"
Contract Twelve (12) Twelve (12) Twelve (12) Twelve (12)
Duration months months months months
Basic
Monthly US$800.00 US$1,120.00 US$800.00 US$280.00
Salary
Guaranteed US$240.00/mo US$336.00/mo US$240.00/mo US$84.00/mo
Overtime
Pay
Vacation US$66.66 US$93.33 US$66.66 US$23.33
Leave Pay

The fishing operations for which the respondents were hired started on September 17, 2004. On
November 20, 2004, the operations abruptly stopped and did not resume. On May 25, 2005, before the
respondents disembarked from the vessels, Goran Ekstrom of Snappertuna (the respondents’ immediate
employer on board the fishing vessels) and the respondents executed an agreement (May 25, 2005
agreement) regarding the respondents’ salaries.8 The agreement provided that the respondents would get
the full or 100% of their unpaid salaries for the unexpired portion of their pre-terminated contract in
accordance with Philippine laws. The respective amounts the respondents would receive per the May 25,
2005 agreement are:

Artemio A. Bo-oc US$6,047.99

Joel S. Fernandez US$7,767.90
Felipe S. Saurin, Jr. US$6,647.99
Tito R. Tamala US$7,047.99

On May 26, 2005, however, Poseidon and Van Doorn, with Goran of Snappertuna and Dinko Lukin of
Dinko, entered into another agreement (letter of acceptance) reducing the previously agreed amount to
50% of the respondents’ unpaid salaries (settlement pay) for the unexpired portion of their contract.9 On
May 28, 2005, the respondents arrived in Manila. On June 10, 2005, the respondents received the
settlement pay under their letter of acceptance. The respondents then signed a waiver and quitclaim 10 and
the corresponding cash vouchers.11

On November 16, 2005, the respondents filed a complaint 12 before the Labor Arbitration Branch of the
NLRC, National Capital Region for illegal termination of employment with prayer for the payment of their
salaries for the unexpired portion of their contracts; and for non-payment of salaries, overtime pay and
vacation leave pay.13 The respondents also prayed for moral and exemplary damages and attorney’s fees.

The respondents anchored their claim on their May 25, 2005 agreement with Goran, and contended that
their subsequent execution of the waiver and quitclaim in favor of Poseidon and Van Doorn should not be
given weight nor allowed to serve as a bar to their claim. The respondents alleged that their dire need for
cash for their starving families compelled and unduly influenced their decision to sign their respective
waivers and quitclaims. In addition, the complicated language employed in the document rendered it
highly suspect.

In their position paper,14 Poseidon and Van Doorn argued that the respondents had no cause of action to
collect the remaining 50% of their unpaid wages. To Poseidon and Van Doorn, the respondents’ voluntary
and knowing agreement to the settlement pay, which they confirmed when they signed the waivers and
quitclaims, now effectively bars their claim. Poseidon and Van Doorn submitted before the LA the signed
letter of acceptance, the waiver and quitclaim, and the cash vouchers to support their stance.
In a Decision15 dated May 2006, the LA dismissed the respondents’ complaint for lack of merit, declaring
as valid and binding their waivers and quitclaims. The LA explained that while quitclaims executed by
employees are generally frowned upon and do not bar them from recovering the full measure of what is
legally due, excepted from this rule are the waivers knowingly and voluntarily agreed to by the
employees, such as the waivers assailed by the respondents. Citing jurisprudence, the LA added that the
courts should respect, as the law between the parties, those legitimate waivers and quitclaims that
represent voluntary and reasonable settlement of employees’ claims. In the respondents’ case, this
pronouncement holds more weight, as they understood fully well the contents of their waivers and knew
the consequences of their acts.

The LA did not give probative weight to the May 25, 2005 agreement considering that the entities which
contracted the respondents’ services - Poseidon and Van Doorn – did not actively participate. Moreover,
the LA noted that the respondents’ signed letter of acceptance superseded this agreement. The LA
likewise considered the respondents’ belated filing of the complaint as a mere afterthought.

Finally, the LA dismissed the issue of illegal dismissal, noting that the respondents already abandoned this
issue in their pleadings. The respondents appealed16 the LA’s decision before the NLRC.

The Ruling of the NLRC

By Resolution17 dated December 29, 2006, the NLRC affirmed in toto the LA’s decision. As the LA did, the
NLRC ruled that the respondents’ knowing and voluntary acquiescence to the settlement and their
acceptance of the payments made bind them and effectively bar their claims. The NLRC also regarded the
amounts the respondents received as settlement pay to be reasonable; despite the cessation of the fishing
operations, the respondents were still paid their full wages from December 2004 to January 2005 and
50% of their wages from February 2005 until their repatriation in May 2005.

On February 12, 2007, the NLRC denied18 the respondents’ motion for reconsideration,19 prompting them
to file with the CA a petition for certiorari 20 under Rule 65 of the Rules of Court.

The Ruling of the CA

In its September 30, 2008 Decision,21 the CA granted the respondents’ petition and ordered Poseidon and
Van Doorn to pay the respondents the amounts tabulated below, representing the difference between the
amounts they were entitled to receive under the May 25, 2005 agreement and the amounts that they
received as settlement pay:

Artemio A. Bo-oc US$3,705.00

Joel S. Fernandez US$4,633.57
Felipe S. Saurin, Jr. US$4,008.62
Tito R. Tamala US$4,454.20

In setting aside the NLRC’s ruling, the CA considered the waivers and quitclaims invalid and highly
suspicious. The CA noted that the respondents in fact questioned in their pleadings the letter’s due
execution. In contrast with the NLRC, the CA observed that the respondents were coerced and unduly
influenced into accepting the 50% settlement pay and into signing the waivers and quitclaims because of
their financial distress. The CA moreover considered the amounts stated in the May 25, 2005 agreement
with Goran to be more reasonable and in keeping with Section 10 of Republic Act (R.A.) No. 8042 or the
Migrant Workers and Overseas Filipinos Act of 1995.

The CA also pointed out with emphasis that the pre-termination of the respondents’ employment contract
was simply the result of Van Doorn’s decision to stop its operations.

Finally, the CA did not consider the respondents’ complaint as a mere afterthought; the respondents are
precisely given under the Labor Code a three-year prescriptive period to allow them to institute such
actions.

Poseidon filed the present petition after the CA denied its motion for Reconsideration 22 in the CA’s
February 11, 2009 Resolution.23

The Petition

Poseidon’s petition argues that the labor tribunals’ findings are not only binding but are fully supported by
evidence. Poseidon contends that the CA’s application of Section 10 of R.A. No. 8042 to justify the
amounts it awarded to the respondents is misplaced, as the respondents never raised the issue of illegal
dismissal before the NLRC and the CA. It claims that the respondents, in assailing the NLRC ruling before
the CA, mainly questioned the validity of the waivers and quitclaims they signed and their binding effect
on them. While the respondents raised the issue of illegal dismissal before the LA, they eventually
abandoned it in their pleadings – a matter the LA even pointed out in her May 2006 Decision.

Poseidon further argues that the NLRC did not exceed its jurisdiction nor gravely abuse its discretion in
deciding the case in its favor, pointing out that the respondents raised issues pertaining to mere errors of
judgment before the CA. Thus, as matters stood, these issues did not call for the grant of a writ of
certiorari as this prerogative writ is limited to the correction of errors of jurisdiction committed through
grave abuse of discretion, not errors of judgment.

Finally, Poseidon maintains that it did not illegally dismiss the respondents. Highlighting the CA’s
observation and the respondents’ own admission in their various pleadings, Poseidon reiterates that it
simply ceased its fishing operations as a business decision in the exercise of its management prerogative.

The Case for the Respondents

The respondents point out in their comment 24 that the petition raises questions of fact, which are not
proper for a Rule 45 petition. They likewise point out that the petition did not specifically set forth the
grounds as required under Rule 45 of the Rules of Court. On the merits, and relying on the CA ruling, the
respondents argue that Poseidon dismissed them without a valid cause and without the observance of due
process.

The Issues

At the core of this case are the validity of the respondents’ waivers and quitclaims and the issue of
whether these should bar their claim for unpaid salaries. At the completely legal end is the question of
whether Section 10 of R.A. No. 8042 applies to the respondents’ claim.

The Court’s Ruling

We resolve to partly GRANT the petition.

Preliminary considerations

The settled rule is that a petition for review on certiorari under Rule 45 is limited to the review of
questions of law,25 i.e., to legal errors that the CA may have committed in its decision, 26 in contrast with
the review for jurisdictional errors that we undertake in original certiorari actions under Rule 65. 27 In
reviewing the legal correctness of a CA decision rendered under Rule 65 of the Rules of Court, we examine
the CA decision from the prism of whether it correctly determined the presence or absence of grave abuse
of discretion in the NLRC decision before it, and not strictly on the basis of whether the NLRC decision
under review is intrinsically correct. 28 In other words, we have to be keenly aware that the CA undertook a
Rule 65 review, not a review on appeal, of the NLRC decision challenged before it. 29

Viewed in this light, we do not re-examine the factual findings of the NLRC and the CA, nor do we
substitute our own judgment for theirs,30 as their findings of fact are generally conclusive on this Court.
We cannot touch on factual questions "except in the course of determining whether the CA correctly ruled
in determining whether or not the NLRC committed grave abuse of discretion in considering and
appreciating the factual [issues before it]."31

On the Merits of the Case

The core issue decided by the tribunals below is the validity of the respondents’ waivers and quitclaims.
The CA set aside the NLRC ruling for grave abuse of discretion; the CA essentially found the waivers and
quitclaims unreasonable and involuntarily executed, and could not have superseded the May 25, 2005
agreement. In doing so, and in giving weight to the May 25, 2005 agreement, the CA found justification
under Section 10 of R.A. No. 8042.

The respondents are not entitled to

the unpaid portion of their salaries
under Section 10 of R.A. No. 8042

The application of Section 10 of R.A. No. 8042 presumes a finding of illegal dismissal. The pertinent
portion of Section 10 of R.A. No. 8042 reads:

SEC. 10. MONEY CLAIMS. – x x x

xxxx
In case of termination of overseas employment without just, valid or authorized cause as defined by law
or contract. [emphasis and italics ours]

A plain reading of this provision readily shows that it applies only to cases of illegal dismissal or dismissal
without any just, authorized or valid cause and finds no application in cases where the overseas Filipino
worker was not illegally dismissed.32 We found the occasion to apply this rule in International Management
Services v. Logarta,33 where we held that Section 10 of R.A. No. 8042 applies only to an illegally dismissed
overseas contract worker or a worker dismissed from overseas employment without just, valid or
authorized cause.34

Whether the respondents in the present case were illegally dismissed is a question we resolve in the
negative for three reasons.

First, the respondents’ references to illegal dismissal in their several pleadings were mere cursory
declarations rather than a definitive demand for redress. The LA’s May 2006 Decision clearly enunciated
this point when she dismissed the respondents’ claim of illegal dismissal "as complainants themselves
have lost interest to pursue the same."35

Second, the respondents, in their motion for reconsideration filed before the NLRC, positively argued that
the fishing operations for which they were hired ceased as a result of the business decision of Van Doorn
and of its partners;36 thus, negating by omission any claim for illegal dismissal.

Third, the CA, in its assailed decision, likewise made the very same inference – that the fishing operations
ceased as a result of a business decision of Van Doorn and of its partners. In other words, the manner of
dismissal was not a contested issue; the records clearly showed that the respondents’ employment was
terminated because Van Doorn and its partners simply decided to stop their fishing operations in the
exercise of their management prerogative, which prerogative even our labor laws recognize.

We confirm in this regard that, by law and subject to the State’s corollary right to review its
determination,37 management has the right to regulate the business and control its every
aspect.38 Included in this management right is the freedom to close or cease its operations for any reason,
as long as it is done in good faith and the employer faithfully complies with the substantive and procedural
requirements laid down by law and jurisprudence.39 Article 283 of our 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. x x x In case of retrenchment to prevent losses and in cases of closures or cessation of operations
of establishment or undertaking not due to serious business losses or financial reverses, the separation
pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of
service, whichever is higher. A fraction of at least six (6) months shall be considered as one (1) whole
year. [Italics, underscores and emphases ours]

This provision applies in the present case as under the contract the employer and the workers signed and
submitted to the Philippine Overseas Employment Agency (POEA), the Philippine labor law expressly
applies.

This legal reality is reiterated under Section 18-B, paragraph 2,40 in relation with Section 2341 of the POEA
Standard Employment Contract (POEA-SEC) (which is deemed written into every overseas employment
contract) which recognizes the validity of the cessation of the business operations as a valid ground for
the termination of an overseas employment. This recognition is subject to compliance with the following
requisites:

1. The decision to close or cease operations must be bona fide in character;

2. Service of written notice on the affected employees and on the Department of Labor and
Employment (DOLE) at least one (1) month prior to the effectivity of the termination; and

3. Payment to the affected employees of termination or separation pay equivalent to one (1)
month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. 42

We are sufficiently convinced, based on the records, that Van Doorn’s termination of the respondents’
employment arising from the cessation of its fishing operations complied with the above requisites and is
thus valid.
We observe that the records of the case do not show that Van Doorn ever intended to defeat the
respondents’ rights under our labor laws when it undertook its decision to close its fishing operations on
November 20, 2004. From this date until six months after, the undertaking was at a complete halt. That
Van Doorn and its partners might have suffered losses during the six-month period is not entirely remote.
Yet, Van Doorn did not immediately repatriate the respondents or hire another group of seafarers to
replace the respondents in a move to resume its fishing operations. Quite the opposite, the respondents,
although they were no longer rendering any service or doing any work, still received their full salary for
November 2004 up to January 2005. In fact, from February 2005 until they were repatriated to the
Philippines in May 2005, the respondents still received wages, albeit half of their respective basic monthly
salary rate. Had Van Doorn intended to stop its fishing operations simply to terminate the respondents’
employment, it would have immediately repatriated the respondents to the Philippines soon after, in order
that it may hire other seafarers to replace them – a possibility that did not take place.

Considering therefore the absence of any indication that Van Doorn stopped its fishing operations to
circumvent the protected rights of the respondents, our courts have no basis to question the reason that
might have impelled Van Doorn to reach its closure decision.43

In sum, since Poseidon ceased its fishing operations in the valid exercise of its management prerogative,
Section 10 of R.A. No. 8042 finds no application. Consequently, we find that the CA erroneously imputed
grave abuse of discretion on the part of the NLRC in not applying Section 10 of R.A. No. 8042 and in
awarding the respondents the unpaid portion of their full salaries.

The waivers and quitclaims signed by

the respondents are valid and
binding

We cannot support the CA’s act of giving greater evidentiary weight to the May 25, 2005 agreement over
the respondents’ waivers and quitclaims; not only do we find the latter documents to be reasonable and
duly executed, we also find that they superseded the May 25, 2005 agreement.

Generally, this Court looks with disfavor at quitclaims executed by employees for being contrary to public
policy.44 Where the person making the waiver, however, has done so voluntarily, with a full understanding
of its terms and with the payment of credible and reasonable consideration, we have no option but to
recognize the transaction to be valid and binding.45

We find the requisites for the validity of the respondents’ quitclaim present in this case. We base this
conclusion on the following observations:

First, the respondents acknowledged in their various pleadings, as well as in the very document
denominated as "waiver and quitclaim," that they voluntarily signed the document after receiving the
agreed settlement pay.

Second, the settlement pay is reasonable under the circumstances, especially when contrasted with the
amounts to which they were respectively entitled to receive as termination pay pursuant to Section 23 of
the POEA-SEC and Article 283 of the Labor Code. The comparison of these amounts is tabulated below:

1âwphi1
Settlement Pay Termination Pay
Joel S. Fernandez US$3134.33 US$1120.00
Artemio A. Bo-oc US$2342.37 US$800.00
Felipe S. Saurin, Jr. US$2639.37 US$800.00
Tito R. Tamala US$2593.79 US$280.00

Thus, the respondents undeniably received more than what they were entitled to receive under the law as
a result of the cessation of the fishing operations.

Third, the contents of the waiver and quitclaim are clear, unequivocal and uncomplicated so that the
respondents could fully understand the import of what they were signing and of its
consequences.46 Nothing in the records shows that what they received was different from what they
signed for.

Fourth, the respondents are mature and intelligent individuals, with college degrees, and are far from the
naive and unlettered individuals they portrayed themselves to be.1âwphi1

Fifth, while the respondents contend that they were coerced and unduly influenced in their decision to
accept the settlement pay and to sign the waivers and quitclaims, the records of the case do not support
this claim. The respondents’ claims that they were in "dire need for cash" and that they would not be paid
anything if they would not sign do not constitute the coercion nor qualify as the undue influence
contemplated by law sufficient to invalidate a waiver and quitclaim, 47 particularly in the circumstances
attendant in this case. The records show that the respondents, along with their other fellow seafarers,
served as each other’s witnesses when they agreed and signed their respective waivers and quitclaims.

Sixth, the respondents’ voluntary and knowing conformity to the settlement pay was proved not only by
the waiver and quitclaim, but by the letters of acceptance and the vouchers evidencing payment. With
these documents on record, the burden shifts to the respondents to prove coercion and undue influence
other than through their bare self-serving claims. No such evidence appeared on record at any stage of
the proceedings.

In these lights and in the absence of any evidence showing that fraud, deception or misrepresentation
attended the execution of the waiver and quitclaim, we are sufficiently convinced that a valid transaction
took place. Consequently, we find that the CA erroneously imputed grave abuse of discretion in
misreading the submitted evidence, and in relying on the May 25, 2005 agreement and on Section 10 of
R.A. No. 8042.

The respondents are entitled to

nominal damages for failure of Van
Doorn to observe the procedural
requisites for the termination of
employment under Article 283 of the
Labor Code

As a final note, we observe that while Van Doorn has a just and valid cause to terminate the respondents’
employment, it failed to meet the requisite procedural safeguards provided under Article 283 of the Labor
Code. In the termination of employment under Article 283, Van Doorn, as the employer, is required to
serve a written notice to the respondents and to the DOLE of the intended termination of employment at
least one month prior to the cessation of its fishing operations. Poseidon could have easily filed this notice,
in the way it represented Van Doorn in its dealings in the Philippines. While this omission does not affect
the validity of the termination of employment, it subjects the employer to the payment of indemnity in the
form of nominal damages.48

Consistent with our ruling in Jaka Food Processing Corporation v. Pacot, 49 we deem it proper to award the
respondents nominal damages in the amount of ₱30,000.00 as indemnity for the violation of the required
statutory procedures. Poseidon shall be solidarily liable to the respondents for the payment of these
damages.50

WHEREFORE, in view of these considerations, we hereby GRANT in PART the petition and accordingly
REVERSE and SET ASIDE the Decision dated September 30, 2008 and the Resolution dated February 11,
2009 of the Court of Appeals in CA-G.R. SP No. 98783. We REINSTATE the Resolution dated December 29,
2006 of the National Labor Relations Commission with the MODIFICATION that petitioner Poseidon
International Maritime Services, Inc. is ordered to pay each of the respondents nominal damages in the
amount of ₱30,000.00. Costs against the respondents.

SO ORDERED.

9.

G.R. No. 200811, June 19, 2019

JULITA M. ALDOVINO, JOAN B. LAGRIMAS, WINNIE B. LINGAT, CHITA A. SALES, SHERLY L.

GUINTO, REVILLA S. DE JESUS, AND LAILA V. ORPILLA, PETITIONERS, v. GOLD AND GREEN
MANPOWER MANAGEMENT AND DEVELOPMENT SERVICES, INC., SAGE INTERNATIONAL
DEVELOPMENT COMPANY, LTD., AND ALBERTO C. ALVINA, RESPONDENTS.

DECISION

LEONEN, J.:

The clause "or for three (3) months for every year of the unexpired term, whichever is less" as reinstated
in Section 7 of Republic Act No. 10022 is unconstitutional, and has no force and effect of law. It violates
due process as it deprives overseas workers of their monetary claims without any discernable valid
purpose.1

This Court resolves a Petition for Review on Certiorari 2 assailing the September 29, 2011 Decision3 and
January 26, 2012 Resolution4 of the Court of Appeals. The Court of Appeals ruled that Julita M. Aldovino
(Aldovino), Joan B. Lagrimas, Winnie B. Lingat, Chita A. Sales, Sherly L. Guinto, Revilla S. De Jesus (De
Jesus), and Laila V. Orpilla were all illegally dismissed from service.

Aldovino and her co-applicants applied for work at Gold and Green Manpower Management and
Development Services, Inc. (Gold and Green Manpower), a local manning agency whose foreign principal
is Sage International Development Company, Ltd. (Sage International). 5

Eventually, they were hired as sewers for Dipper Semi-Conductor Company, Ltd. (Dipper Semi-
Conductor), a Taiwan-based company. Their respective employment contracts provided an eight (8)-hour
working day, a fixed monthly salary, and entitlement to overtime pay, among others. 6

Before they could be deployed for work, Gold and Green Manpower required each applicant to pay a
P72,000.00 placement fee. But since the applicants were unable to produce the amount on their own,
Gold and Green Manpower referred them to E-Cash Paylite and Financing, Inc. (E-Cash Paylite), where
they loaned their placement fees.7

Once Aldovino and her co-workers arrived in Taiwan, Gold and Green Manpower took all their travel
documents, including their passports. They were then made to sign another contract that provides that
they would be paid on a piece-rate basis instead of a fixed monthly salary. 8

During their employment, Aldovino and her co-workers toiled from 8:00 a.m. to 9:00 p.m. for six (6) days
a week. At times, they were forced to work on Sundays without any overtime premium. 9 Because they
were paid on a piece-rate basis, they received less than the fixed monthly salary stipulated in their
original contract. When Aldovino and her co-workers inquired, Dipper Semi-Conductor refused to disclose
the schedule of payment on a piece-rate basis. Eventually, they defaulted on their loan obligations with E-
Cash Paylite.10

On January 19, 2009, Aldovino and her co-workers, except De Jesus, filed before a local court in Taiwan a
Complaint against their employers, Dipper Semi-Conductor and Sage International.11

On March 26, 2009, the parties met before the Bureau of Labor Affairs for a dialogue. There, Dipper Semi-
Conductor ordered Aldovino and her co-workers to return to the Philippines as it was no longer interested
in their services. They were then made to immediately pack their belongings, after which they were
dropped off at a train station in Taipei. After a few hours, a friend brought them to the Manila Economic
and Cultural Office, where they stayed for a week. They were then transferred to Hope Shelter, where
they remained for four (4) months while the case was pending.12

Eventually, the parties entered into a Compromise Agreement,13 which read:

1. Event:

A. Reconciliation Part:

This issue is pertaining to the labor Case No. 86 of 2009 at Ban Qiao District Court, wherein Party A
is asking for the payment of salary, etc. from party B. This was caused by the differences in
interpreting the basic salary and the method in calculation of piece work salary. Both parties is
hereby reach (sic) a reconciliation.

B. Compensation Part:

With regard to the damages and fees incurred in the process of this controversy, Party B shall
voluntarily give monetary compensation to Party A.

2. Amount of Payment:

A. Amount of Reconciliation: NT$500,000.00

B. Amount of Compensation: On top of the fees incurred by Party A during the period Party A left the
company of Party B and waiting for going back to their home country, including board and lodging,
livelihood cost, the loss of Recruitment Agency's commission borne by Party A, airplane ticket, etc.
Party B shall pay another compensation of NT$1 Million.

C. Aside from this, Party A can't ask for compensation of any kind, and all the civil cases involved
shall be cancelled.

3. Mode of Payment

A. When this case reach (sic) reconciliation, Party B will pay to the appointed lawyer of Party A an
amount of NT$500,000 in cash in one transaction. This will be witness (sic) by the Philippine Labor
Center.
 B. Both parties will present the following civil and criminal case requests and affidavit of waiver to the
related agencies, lawyers of both will change the documents, and Party B will secure a RECEIPT
AND RELEASE/QUITCLAIM (as in attachment A) signed by TORZAR SIONY TARROZA, after which,
Party B will pay to the appointed lawyer of Party A an amount of NT$1 Million in cash in one
transaction. This will be witness (sic) by the Philippine Labor Center.

. . . .

6. After the effectivity of this reconciliation agreement, Party A shall withdraw the case from the civil court
of the Taiwan Banqiao Local court, Party A shall bear the cost of civil proceeding.

7. After the effectivity of this reconciliation agreement, Party A shall give up all other rights of
compensation. They shall not ask for any compensation based on any other causes. 14
Based on the Compromise Agreement, Aldovino and her co-workers, except De Jesus, executed an
Affidavit of Quitclaim and Release.15 On July 28, 2009, all of them returned to the Philippines. 16 They
eventually filed before the Labor Arbiter a case for illegal termination, underpayment of salaries, human
trafficking, illegal signing of papers,17 and other money claims such as overtime pay, return of placement
fees, and moral and exemplary damages.18

In its April 8, 2010 Decision,19 the Labor Arbiter dismissed the Complaint for illegal dismissal but ordered
Gold and Green Manpower and Sage International to pay each of the workers P20,000.00 as financial
assistance.

On appeal, the National Labor Relations Commission, in its July 29, 2010 Decision, 20 affirmed the Labor
Arbiter's Decision. It found that Aldovino and her co-workers were not illegally dismissed and that they
voluntarily returned to the Philippines. Moreover, the Compromise Agreement barred any further claims
arising from their employment.21

Additionally, the National Labor Relations Commission deleted the award of financial assistance for lack of
factual and legal bases.22

Aldovino and her co-workers moved for reconsideration, but their Motion was denied for lack of merit in
the National Labor Relations Commission August 31, 2010 Resolution. 23 Hence, they filed before the Court
of Appeals a Petition for Certiorari.24

In its September 29,2011 Decision,25 the Court of Appeals reversed the labor tribunals' rulings. It not only
ruled that Aldovino and her co-workers had been illegally dismissed from service, but also declared that
the Compromise Agreement did not bar them from filing an illegal dismissal case. 26

Accordingly, the Court of Appeals ordered Gold and Green Manpower and Sage International to pay the
workers their salaries "for the unexpired portion of their contract in accordance with Section 7 of [Republic
Act No.] 1002227 and pursuant to Serrano v. Gallant Maritime Services, Inc.,"28 among others. The
dispositive portion of the Court of Appeals Decision read:
WHEREFORE, premises considered, the petition is hereby GRANTED. The Decision dated July 29,2010 and
Order dated August 31, 2010 of the NLRC in NLRC LAC (OFW-L) 05-000409-10, are hereby REVERSED
and SET ASIDE. Respondents Gold and Green Manpower Management and Development Services, Inc.
and Sage International Development Co., Ltd. are hereby ordered to reimburse petitioners their placement
fee with interest at twelve percent (12%) per annum, and to pay the salaries of petitioners for the
unexpired portion of their respective employment contracts or for three (3) months for every year of the
unexpired term, whichever is less.

SO ORDERED.29
Aldovino and her co-workers moved for partial reconsideration,30 praying that the three (3)-month cap
stated in the Decision's dispositive portion be annulled, pursuant to Serrano.31 However, their Motion was
denied in the Court of Appeals' January 26, 2012 Resolution. 32

Thus, Aldovino and her co-workers filed a Petition for Review on Certiorari.33

On June 15, 2012, respondents filed their Comment,34 to which petitioners filed a Reply on September 5,
2016.35

Petitioners again question the three (3)-month salary cap stated in the dispositive portion of the Court of
Appeals Decision. Citing Serrano, they assert that the three (3)-month cap in Section 10 of Republic Act
No. 8042, or the Migrant Workers and Overseas Filipinos Act of 1995, as reenacted in Republic Act No.
10022, has already been declared unconstitutional. 36

Petitioners thus assert that they are entitled to the payment of their salaries for the unexpired portion of
their employment contracts.37

On the other hand, respondents question the legality of the monetary damages awarded to petitioners.
They assert that the Court of Appeals erred in nullifying the parities' Compromise Agreement, pointing out
that the labor tribunals had already rendered it valid.38 The agreement, they further argue, released them
from liability on petitioners' other claims.39

The chief issue for this Court's resolution is whether or not petitioners Julita M. Aldovino, Joan B.
Lagrimas, Winnie B. Lingat, Chita A. Sales, Sherly L. Guinto, Revilla S. De Jesus, and Laila V. Orpilla are
entitled to the payment of their salaries for the unexpired portion of their employment contract.
Subsumed under this is the issue of whether or not Section 7 of Republic Act No. 10022, which reinstated
the three (3)-month cap, has the force and effect of law.

To pass upon this issue, this Court must resolve the following:

First, whether or not the Compromise Agreement barred all other claims against respondents Gold and
Green Manpower Management and Development Services, Inc. and Sage International Development
Company, Ltd., and Alberto C. Alvina; and

Second, whether or not petitioners were illegally dismissed and, consequently, entitled to the
reimbursement of their placement fees and payment of moral and exemplary damages and attorney's
fees.

The Petition is meritorious.

It must be noted that this case is governed by Philippine laws. Both the Constitution 40 and the Labor
Code41 guarantee the security of tenure. It is not stripped off when Filipinos work in a different
jurisdiction.42 We follow the lex loci contractus principle, which means that the law of the place where the
contract is executed governs the contract.

In Triple Eight Integrated Services, Inc. v National Labor Relations Commission:43

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 forum's 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. . . .

. . . .

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.44 (Citation omitted)
Indeed, because petitioners' employment contracts were executed in the Philippines, Philippine laws
govern them. Respondents, then, must answer and be held liable under our laws.

Respondents claim that the Compromise Agreement barred petitioners from holding them liable for claims.
This is outright erroneous.

Waivers and quitclaims executed by employees are generally frowned upon for being contrary to public
policy. This is based on the recognition that employers and employees do not stand on equal footing.45

In Land and Housing Development Corporation v. Esquillo:46

We have heretofore explained that the reason why quitclaims are commonly frowned upon as contrary to
public policy, and why they are held to be ineffective to bar claims for the full measure of the workers'
legal rights, is the fact that the employer and the employee obviously do not stand on the same footing.
The employer drove the employee to the wall. The latter must have to get hold of money. Because, out of
a job, he had to face the harsh necessities of life. He thus found himself in no position to resist money
proffered. His, then, is a case of adherence, not of choice. One thing sure, however, is that petitioners did
not relent on their claim. They pressed it. They are deemed not [to] have waived any of their
rights. Renuntiatio non praesumitur.

Along this line, we have more trenchantly declared that quitclaims and/or complete releases executed by
the employees do not estop them from pursuing their claims arising from unfair labor practices of the
employer. The basic reason for this is that such quitclaims and/or complete releases are against public
policy and, therefore, null and void. The acceptance of termination does not divest a laborer of the right to
prosecute his employer for unfair labor practice acts.47 (Emphasis in the original)
Quitclaims do not bar employees from filing labor complaints and demanding benefits to which they are
legally entitled.48 They are "ineffective in barring recovery of the full measure of a worker's rights, and the
acceptance of benefits therefrom does not amount to estoppel." 49 The law does not recognize agreements
that result in compensation less than what is mandated by law. These quitclaims do not prevent
employees from subsequently claiming benefits to which they are legally entitled. 50

In Am-Phil Food Concepts, Inc. v. Padilla,51 this Court held that quitclaims do not negate charges for illegal
dismissal:
The law looks with disfavor upon quitclaims and releases by employees pressured into signing by
unscrupulous employers minded to evade legal responsibilities. As a rule, deeds of release or quitclaim
cannot bar employees from demanding benefits to which they are legally entitled or from contesting the
legality of their dismissal. The acceptance of those benefits would not amount to estoppel. The amounts
already received by the retrenched employees as consideration for signing the quitclaims should, however,
be deducted from their respective monetary awards.52
Here, the parties entered into the Compromise Agreement to terminate the case for underpayment of
wages, which petitioners had previously filed against respondents in Taiwan. The object and foundation of
the Compromise Agreement was to settle the payment of salaries and overtime premiums to which
petitioners were legally entitled. Hence, it should not be construed as a restriction on petitioners' right to
prosecute other legitimate claims they may have against respondents.

Paragraph 7 of the Compromise Agreement, which stipulates that petitioners "shall give up other rights of
compensation . . . [and] shall not ask for any compensation based on any other causes[,]" 53 cannot bar
petitioners from filing this case and from being indemnified should respondents be adjudged liable.
Blanket waivers exonerating employers from liability on the claims of their employees are ineffective. 54

Besides, at the time the parties' Compromise Agreement was executed, respondents had just terminated
petitioners from employment. Petitioners, therefore, had no other choice but to accede to the terms and
conditions of the agreement to recover the difference in their salaries and overtime pay. With no means of
livelihood, they signed the Compromise Agreement out of dire necessity.

II

Respondents further justify the dismissal by arguing that petitioners voluntarily severed their employment
when they signed the Compromise Agreement.

This argument is also untenable.

Under the Labor Code, employers may only terminate employment for a just or authorized cause and after
complying with procedural due process requirements. Articles 297 and 300 of the Labor Code enumerate
the causes of employment termination either by employers or employees:
ARTICLE 297. [282] Termination by employer. — An employer may terminate an employment for any of
the following causes:

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

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

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;

(d) Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representatives; and

(e) Other causes analogous to the foregoing.

. . . .

ARTICLE 300. [285] Termination by employee. — (a) An employee may terminate without just cause the
employee-employer relationship by serving a written notice on the employer at least one (1) month in
advance. The employer upon whom no such notice was served may hold the employee liable for damages.

An employee may put an end to the relationship without serving any notice on the employer for any
(b)
of the following just causes:

1. Serious insult by the employer or his representative on the honor and person of the employee;

2. Inhuman and unbearable treatment accorded the employee by the employer or his representative;

3. Commission of a crime or offense by the employer or his representative against the person of the
employee or any of the immediate members of his family; and
 4. Other causes analogous to any of the foregoing.

In illegal dismissal cases, the burden of proof that employees were validly dismissed rests on the
employers. Failure to discharge this burden means that the dismissal is illegal. 55

A review of the records here shows that the termination of petitioners' employment was effected merely
because respondents no longer wanted their services. This is not an authorized or just cause for dismissal
under the Labor Code. Employment contracts cannot be terminated on a whim.

Moreover, petitioners did not voluntarily sever their employment when they signed the Compromise
Agreement, which, again, cannot be used to justify a dismissal.

Furthermore, petitioners were not accorded due process. A valid dismissal must comply with substantive
and procedural due process: there must be a valid cause and a valid procedure. The employer must
comply with the two (2)-notice requirement, while the employee must be given an opportunity to be
heard.56 Here, petitioners were only verbally dismissed, without any notice given or having been informed
of any just cause for their dismissal.

This Court cannot rest easy on respondents' insistence that petitioners voluntarily terminated their
employment. Contrary to their assertion, petitioners were left with no choice but to accept the
Compromise Agreement and to go back to the Philippines.

After accumulating a huge amount of debt to work abroad, petitioners were burdened to continue working
for respondents that they were constrained to sign the piece-rate-based contract upon arriving in Taiwan.
As a result, they were paid less than if they were paid on a monthly basis and, worse, they were deprived
of their overtime premium. Petitioners inevitably defaulted on their loan obligations. To make matters
worse, they were terminated from employment on a whim and were left homeless.

One can only imagine how all these compounded a heavy burden upon petitioners. Overseas Filipino
workers venture out into unfamiliar lands in the hope of providing a better future for their families. They
endure years of being away from their loved ones while bearing a life of toil abroad. Our laws afford
protection to our workers, whether employed locally or abroad. It is this Court's bounden duty to uphold
these laws and dispense justice for petitioners. With their right to substantive and procedural due process
denied, it is clear that petitioners were illegally dismissed from service.

As a consequence of the illegal dismissal, petitioners are also entitled to moral damages, exemplary
damages, and attorney's fees. In Torreda v. Investment and Capital Corporation of the Philippines:57
Moral damages are recoverable when the dismissal of an employee is attended by bad faith or fraud or
constitutes an act oppressive to labor, or is done in a manner contrary to good morals, good customs or
public policy. Exemplary damages, on the other hand, are recoverable when the dismissal was done in a
wanton, oppressive, or malevolent manner.58
Petitioners have sufficiently shown how bad faith attended respondents' actions. They were made to sign a
new employment contract on a piece-rate basis, which violates the Migrant Workers and Overseas
Filipinos Act. Under that contract, petitioners were underpaid and deprived of their overtime premium.

Moreover, petitioners' employment contracts were unilaterally terminated. After their meeting before the
Bureau of Labor, respondents told petitioners that they were no longer employed. As the Court of Appeals
noted, respondents did not refute petitioners' narration that they were immediately escorted back to the
factory, ordered to pack their possessions, and were left at a train station.59 Petitioners were forced to
stay in shelters for months without any means of livelihood. Worse, they were deprived of due process
when they were terminated without any notice or opportunity to be heard.

Being deprived of their hard-earned salaries and, eventually, of their employment, caused petitioners
mental anguish, wounded feelings, and serious anxiety. The award of moral damages is but appropriate.

Consequently, the award of exemplary damages is necessary to deter future employers from committing
the same acts.

Additionally, petitioners are also entitled to the award of attorney's fees under Article 2208 of the Civil
Code:
ARTICLE. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial
costs, cannot be recovered, except:

(1) When exemplary damages are awarded;

. . . .

(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly
valid, just and demandable claim;
. . . .

(7) In actions for the recovery of wages of household helpers, laborers and skilled workers[.]
The award of attorney's fees is proper because: (1) exemplary damages is also awarded; (2) respondents
acted in gross bad faith in refusing to pay petitioners their hard-earned salaries in form of overtime
premiums; and (3) this case is also a complaint for recovery of wages.

In addition, we further sustain the Court of Appeals' ruling in having ordered the reimbursement of
petitioners' placement fees. As they were terminated without just, valid, or authorized cause, petitioners
are entitled to the full reimbursement of their placement fees with interest at 12% per annum in
accordance with Section 7 of Republic Act No. 10022.60

III

In Serrano, this Court ruled that the clause "or for three (3) months for every year of the unexpired term,
whichever is less" under Section 1061 of the Migrant Workers and Overseas Filipinos Act is unconstitutional
for violating the equal protection and substantive due process clauses.

Later, however, this clause was kept when the law was amended by Republic Act No. 10022 in 2010.
Section 7 of the new law mirrors the same clause:
SECTION 7. Section 10 of Republic Act No. 8042, as amended, is hereby amended to read as follows:

"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. 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 solidarity
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 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, or any unauthorized deductions from the migrant worker's salary, the worker shall be entitled
to the full reimbursement of 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 judgment 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 judgment
award.

Noncompliance with the mandatory periods for resolutions of cases provided under this section shall
subject the responsible officials to any or all of the following penalties:

(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;

(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 incurred under other existing laws or rules and regulations as a consequence of
violating the provisions of this paragraph. (Emphasis supplied)
In Sameer Overseas Placement Agency, Inc. v. Cabiles,62 this Court was confronted with the question of
the constitutionality of the reinstated clause in Republic Act No. 10022. Reiterating our finding in Serrano,
we ruled 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." 63 In
striking down the clause, we ruled:
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. 64
This case should be no different from Serrano and Sameer.

A statute declared unconstitutional "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." 65 Incorporating a similarly worded
provision in a subsequent legislation does not cure its unconstitutionality. Without any discemable change
in the circumstances warranting a reversal, this Court will not hesitate to strike down the same provision.

As such, we reiterate our ruling in Sameer that the reinstated clause in Section 7 of Republic Act No.
10022 has no force and effect of law. It is unconstitutional.66

Hence, petitioners are entitled to the award of salaries based on the actual unexpired portion of their
employment contracts. The award of petitioners' salaries, in relation to the three (3)-month cap, must be
modified accordingly.

WHEREFORE, the Petition is GRANTED. The September 29, 2011 Decision of the Court of Appeals in CA-
G.R. SP No. 116953 is AFFIRMED with MODIFICATION. Respondents Gold and Green Manpower
Management and Development Services, Inc., Sage International Development Company, Ltd., and
Alberto C. Alvina are ORDERED to pay petitioners Julita M. Aldovino, Joan B. Lagrimas, Winnie B. Lingat,
Chita A. Sales, Sherly L. Guinto, Revilla S. De Jesus, and Laila V. Orpilla the following:

(a) the amount equivalent to their salary for the unexpired portion of their employment contract;

(b) the amount equivalent to their placement fee with an interest of twelve percent (12%) per annum;

(c) moral damages in the amount of Fifty Thousand Pesos (P50,000.00) each;

(d) exemplary damages in the amount of Twenty-Five Thousand Pesos (P25,000.00) each;

(e) attorney's fees equivalent to ten percent (10%) of their respective monetary awards; and

(f) legal interest of six percent (6%) per annum of the total monetary awards, except for the
reimbursement of placement fee, which has an interest of 12% per annum, computed from the
finality of this Decision until its full satisfaction.67

SO ORDERED.

10.

G.R. No. 210961, January 24, 2018

LEO V. MAGO AND LEILANIE E. COLOBONG, Petitioners, v. SUN POWER MANUFACTURING

LIMITED, Respondent.

DECISION

REYES, JR., J.:

This is a petition for review on certiorari1 under Rule 45 of the Rules of Court, seeking the review of the
Decision2 dated October 8, 2013 and Resolution3 dated January 13, 2014 of the Court of Appeals (CA) in
CA-G.R. SP No. 131059. In these assailed issuances, the CA reversed the decision 4 of the National Labor
Relations Commission (NLRC) declaring Leo V. Mago (Leo) and Leilanie E. Colobong (Leilanie) (petitioners)
as employees of Sunpower Philippines Manufacturing Limited (Sunpower) and consequently, holding that
Jobcrest Manufacturing, Incorporated (Jobcrest) was a labor-only contractor. The NLRC in turn reversed
the ruling5 of the labor arbiter (LA) dismissing the petitioners' complaint for illegal dismissal.

Factual Antecedents

The petitioners are former employees of Jobcrest, a corporation duly organized under existing laws of the
Philippines, engaged in the business of contracting management consultancy and services.6 Jobcrest was
licensed by the Department of Labor and Employment (DOLE) through Certificate of Registration No. NCR-
MUNTA-64209-0910-087-R.7 During the time material to this case, the petitioners' co-habited together.8

On October 10, 2008, Jobcrest and Sunpower entered into a Service Contract Agreement, in which
Jobcrest undertook to provide business process services for Sunpower, a corporation principally engaged
in the business of manufacturing automotive computer and other electronic parts.9 Jobcrest then trained
its employees, including the petitioners, for purposes of their engagement in Sunpower. 10 After the
satisfactory completion of this training, the petitioners were assigned to Sunpower's plant in Laguna
Technopark. Leo was tasked as a Production Operator in the Coinstacking Station on July 25,
2009,11 while Leilanie was assigned as a Production Operator, tasked with final visual inspection in the
Packaging Station on June 27, 2009. 12 Jobcrest's On-site Supervisor, Allan Dimayuga (Allan), supervised
the petitioners during their assignment with Sunpower. 13

It was alleged that sometime in October 2011, Sunpower conducted an operational alignment, which
affected some of the services supplied by Jobcrest. Sunpower decided to terminate the
Coinstacking/Material Handling segment and the Visual Inspection segment. 14 Meanwhile, Leo and Leilanie
were respectively on paternity and maternity leave because Leilanie was due to give birth to their common
child.15

When Leo reported for work to formally file his paternity leave, Allan purportedly informed Leo that his
employment was terminated due to his absences. Leo, however, further alleged that he was asked to
report to Jobcrest on December 14, 2011 for his assignment to Sunpower. 16 In their defense, both
Jobcrest and Allan denied terminating Leo's employment from Jobcrest. 17

Leo complied with the directive to go to Jobcrest's office on December 14, 2011. While he was there,
Jobcrest's Human Resource Manager, Noel J. Pagtalunan (Noel), served Leo with a "Notice of Admin
Charge/Explanation Slip."18 The notice stated that Leo violated the Jobcrest policy against falsification or
tampering because he failed to disclose his relationship with Leilanie. Leo denied the charges and
explained that he already filed a complaint for illegal dismissal with the NLRC. 19

Leilanie, on the other hand, alleged that when she reported for work at Jobcrest on November 29, 2011,
she was informed by one of the Jobcrest personnel that she will be transferred to another client company.
She was likewise provided a referral slip for a medical examination, pursuant to her new assignment. 20

Instead of complying with Jobcrest's directives, Leo and Leilanie filed a complaint for illegal dismissal and
regularization on December 15, 2011, with the NLRC Regional Arbitration Branch No. IV. Leo alleged that
he was dismissed on October 30, 2011, while Leilanie alleged that she was dismissed from employment on
December 4, 2011.21 Despite the filing of the complaint, Leilanie returned to Jobcrest on December 16,
2011, where she was served with a similar "Notice of Admin Charge/Explanation Slip," requiring her to
explain why she failed to disclose her co-habitation status with Leo.22

During the mandatory conference, Jobcrest clarified that the petitioners were not dismissed from
employment and offered to accept them when they report back to work. The petitioners refused and
insisted that they were regular employees of Sunpower, not Jobcrest. 23

There being no amicable settlement of the matter among the parties, they proceeded to file their
respective position papers.24

Ruling of the LA

In a Decision25 dated July 3, 2012, the LA held that Jobcrest is a legitimate independent contractor and
the petitioners' statutory employer:

WHEREFORE, premises considered, the complaint for illegal dismissal against [Sunpower] and Dwight
Deato is DISMISSED for lack of employer-employee relationship. [Jobcrest] is declared as the statutory
employer and is ordered to reinstate complainants sans backwages to substantially equivalent positions
within ten (10) days from receipt hereof.

SO ORDERED.26
The LA found the capital of Jobcrest substantial enough to comply with the requirements for an
independent contractor, and that Jobcrest exercised control over the petitioners' work.27 The LA likewise
rejected the petitioners' claim that they were illegally dismissed, ruling that the petitioners failed to
establish the fact of dismissal itself.28

Jobcrest partially appealed the LA's Decision dated July 3, 2012. Among its arguments is the assertion
that the petitioners refused to be reinstated. Hence, they were considered constructively resigned from
their employment with Jobcrest, especially because they obtained a job somewhere else. As an alternative
relief, Jobcrest prayed that it be directed to pay the petitioners' separation pay instead of reinstating them
to their former positions.29

The petitioners, on the other hand, attributed serious error on the LA for ruling against their complaint. 30

Ruling of the NLRC

The NLRC reversed the LA's findings in its Decision 31 dated April 24, 2013 and ruled favorably for the
petitioners, viz.:

WHEREFORE, the decision appealed from is hereby SET ASIDE and a NEW ONE ENTERED declaring that
[the petitioners] are regular employees of respondent [Sunpower], respondent [Jobcrest] being a mere
labor-only contractor that [petitioners] were illegally dismissed; hence, respondent [Sunpower] is hereby
ordered to reinstate them to their former position with full backwages, from the time they were refused to
work on October 31, 2011 until reinstated, within ten (10) days from notice plus 10% of the total
monetary awards as and for attorney's fees.

SO ORDERED.32

According to the NLRC, the contract between Jobcrest and Sunpower was for the sole supply of
manpower. The tools and equipment for the performance of the work were for the account of Sunpower,
which supposedly contradicted the claim that Jobcrest has the required capital for a legitimate
contractor.33 The NLRC also disagreed that Jobcrest exercised control over the petitioners and likewise
gave more credence to the petitioners' sworn statements, which narrate that Sunpower employees
allegedly supervised their work.34 Lastly, on the basis of the "Notice of Administrative Charge/Explanation
Slip" furnished to the petitioners, the NLRC reversed the LA's ruling and held that the petitioners were
illegally dismissed from employment.35

Sunpower moved for the reconsideration of the NLRC's Decision dated April 24, 2013. 36 Unconvinced, the
NLRC denied this motion in its Resolution37 dated May 28, 2013 as follows:

WHEREFORE, the instant Motion for Reconsideration is hereby DENIED for lack of merit.

No further motion of this nature shall be entertained.

SO ORDERED.38

As a result of the NLRC's ruling, Sunpower filed a petition for certiorari with the CA, with a prayer for the
issuance of an injunctive writ.39 Sunpower attributed grave abuse of discretion, amounting to lack or
excess of jurisdiction, on the NLRC for holding that the petitioners were regular employees of Sunpower
despite evidence to the contrary.40 Sunpower also disagreed that Jobcrest is a labor-only contractor, and
further submitted that the NLRC misinterpreted its Service Contract Agreement with Jobcrest. 41

Ruling of the CA

In a Decision42 dated October 8, 2013, the CA granted Sunpower's petition for certiorari and enjoined the
implementation of the assailed NLRC ruling:

WHEREFORE, premises considered, the Petition is GRANTED. The Decision dated 24 April 2013 and
Resolution dated 28 May 2013 of the [NLRC] (Second Division) in NLRC-LAC No. 09-002582-12; NLRC
RAB-IV-12-01978-11-B are NULLIFIED. All the respondents and/or persons acting for and on their behalf
are ENJOINED from enforcing or implementing the same. The Decision dated 03 July 2012 of LA Renell
Joseph R. Dela Cruz is hereby REINSTATED. No pronouncement as to costs.

SO ORDERED.43

The CA ruled that Sunpower was able to overcome the presumption that Jobcrest was a labor-only
contractor, especially considering that the DOLE Certificate of Registration issued in favor of Jobcrest
carries the presumption of regularity. In contrast with the NLRC ruling, the CA found that the Service
Contract Agreement between Sunpower and Jobcrest specifically stated the job or task contracted out by
stating that it was for the performance of various business process services. 44 The CA also held that
Jobcrest has substantial capital and as such, it was no longer necessary to prove that it has investment in
the form of tools, equipment, machinery, and work premises.45

Also, the CA found that there is an employer-employee relationship between Jobcrest and the petitioners
under the four-fold test. The CA appreciated the affidavits of Jobcrest employees, as well as the sworn
statements of Sunpower employees who the petitioners claim to supervise their work. In these
statements, the Sunpower employees categorically denied under oath that they supervised the manner of
the petitioners' work. Taken together with other pieces of evidence, the CA ruled that there was no
employer-employee relationship between Sunpower and the petitioners. Finally, the CA held that any form
of supervision, which Sunpower exercised over the results of the petitioners' work, was necessary and
allowable under the circumstances.46

Consequently, the CA rejected the claim that the petitioners were illegally dismissed from employment,
especially in light of Jobcrest's earlier offer to accept the petitioners' return to work. 47

Following their receipt of the CA's Decision dated October 8, 2013, the petitioners filed their Motions for
Reconsideration and to Investigate the Reviewer Who Recommended the Palpably Erroneous
Decision.48 The CA firmly denied these motions in its Resolution 49 dated January 13, 2014 for failure to
raise any substantial argument that would warrant the reconsideration of its decision:

WHEREFORE, premises considered, the Motions for Reconsideration and to Investigate the Reviewer Who
Recommended the Palpably Erroneous Decision are DENIED for sheer lack of merit.

SO ORDERED.50

The petitioners are now before this Court, seeking to reverse and set aside the CA's issuances, and to
reinstate the NLRC's decision.51 The petitioners insist that Jobcrest is a labor-only contractor, and that the
DOLE Certificate of Registration is not conclusive of Jobcrest's legitimate status as a contractor. 52 They
further argue that, aside from lacking substantial capital, Jobcrest only supplied manpower to
Sunpower.53 These services, the petitioners allege, are directly related and necessary to Sunpower's
business.54

Furthermore, the petitioners submit that it was Sunpower that controlled their work. They refute the
evidentiary weight and value of the sworn statements of Jobcrest and Sunpower employees. 55 The
petitioners assert that the NLRC was correct in ruling that Sunpower was their statutory employer, and in
ordering their reinstatement with payment of full backwages and attorney's fees. 56 The petitioners thus
pray that this Court reverse and set aside the Decision dated October 8, 2013 and Resolution dated
January 13, 2014 of the CA.57

Ruling of the Court

The Court resolves to deny the petition.

Jobcrest is a legitimate and independent contractor.

Article 106 of the Labor Code defines labor-only contracting as a situation "where the person supplying
workers to an employer does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by such person are
performing activities which are directly related to the principal business of such employer." 58

DOLE Department Order (DO) No. 18-02, the regulation in force at the time of the petitioners' assignment
to Sunpower, reiterated the language of the Labor Code:

Section 5. Prohibition against labor-only contracting. x x x [L]abor-only contracting shall refer to an

arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform
a job, work or service for a principal, and any of the following elements are present:

i) The contractor or subcontractor does not have substantial capital or investment which relates to the
job, work or service to be performed and the employees recruited, supplied or placed by such
contractor or subcontractor are performing activities which are directly related to the main business of
the principal; or

ii) the contractor does not exercise the right to control over the performance of the work of the
contractual employee.
Thus, in order to become a legitimate contractor, the contractor must have substantial capital or
investment, and must carry a distinct and independent business free from the control of the principal. In
addition, the Court requires the agreement between the principal and the contractor or subcontractor to
assure the contractual employees' entitlement to all labor and occupational safety and health standards,
free exercise of the right to self-organization, security of tenure, and social welfare benefits.59

Furthermore, the Court considers job contracting or subcontracting as permissible when the principal
agrees to farm out the performance of a specific job, work or service to the contractor, for a definite or
predetermined period of time, regardless of whether such job, work, or service is to be performed or
completed within or outside the premises of the principal. 60 Ordinarily, a contractor is presumed to be a
labor-only contractor, unless the contractor is able to discharge the burden of overcoming this
presumption. In cases when it's the principal claiming the legitimacy of the contractor, then the burden is
borne by the principal.61

Preliminarily, the Court finds that there is no such burden resting on either Sunpower or Jobcrest in this
case. It is true that Sunpower maintained its position that Jobcrest is a legitimate and independent
contractor.62 But since the petitioners do not dispute that Jobcrest was a duly-registered contractor under
Section 11 of DOLE DO No. 18-02,63 there is no operative presumption that Jobcrest is a labor-only
contractor.64

Conversely, the fact of registration with DOLE does not necessarily create a presumption that Jobcrest is a
legitimate and independent contractor. The Court emphasizes, however, that the DOLE Certificate
of Registration issued in favor of Jobcrest is presumed to have been issued in the regular
performance of official duty.65 In other words, the DOLE officer who issued the certificate in favor of
Jobcrest is presumed, unless proven otherwise, to have evaluated the application for registration in
accordance with the applicable rules and regulations.66 The petitioners must overcome the presumption of
regularity accorded to the official act of DOLE, which is no less than the agency primarily tasked with the
regulation of job contracting.67

For the reasons discussed below, the Court is constrained to give more weight to the substantiated
allegations of Sunpower, as opposed to the unfounded self-serving accusations of the petitioners.

Jobcrest has substantial capital.

The law and the relevant regulatory rules require the contractor to have substantial capital or investment,
in order to be considered a legitimate and independent contractor. Substantial capital or investment was
defined in DOLE DO No. 18-02 as "capital stocks and subscribed capitalization in the case of corporations,
tools, equipment, implements, machineries and work premises, actually and directly used by the
contractor or subcontractor in the performance or completion of the job, work or service contracted out."
DOLE initially did not provide a specific amount as to what constitutes substantial capital. It later on
specified in its subsequent issuance, DOLE DO No. 18-A, series of 2011, that substantial capital refers to
paid-up capital stocks/shares of at least Php 3,000,000.00 in the case of corporations. 68 Despite
prescribing a threshold amount under DO No. 18-A, certificates of registration issued under DO No. 18-02,
such as that of Jobcrest, remained valid until its expiration.69

The records show that as early as the proceedings before the LA, Jobcrest established that it had an
authorized capital stock of Php 8,000,000.00, Php 2,000,000.00 of which was subscribed, and a paid-up
capital stock of Php 500,000.00, in full compliance with Section 13 of the Corporation Code. 70 For the
year ended December 31, 2011, the paid-up capital of Jobcrest increased to Php
8,000,000.00,71 notably more than the required capital under DOLE DO No. 18-A.72

The balance sheet submitted by Jobcrest for the year ending on December 31, 2010 also reveals that
its total assets for the year 2009 amounted to Php 11,280,597.94, and Php 16,825,271.30 for
the year 2010, which were comprised of office furniture, fixtures and equipment, land,
building, and motor vehicles, among others.73 As of December 31, 2012, the total assets for the
years 2011 and 2012 also increased to Php 35,631,498.58 and Php 42,603,167.16, respectively. 74

Evidently, Jobcrest had substantial capital to perform the business process services it provided Sunpower.
It has its own office, to which the petitioners admittedly reported to, possessed numerous assets for the
conduct of its business, and even continuously earned profit as a result. 75 The Court can therefore
reasonably conclude from Jobcrest's financial statements that it carried its own business independent from
and distinctly outside the control of its principals.

The petitioners argue that the amount of substantial capital is irrelevant because Sunpower provided the
tools and owned the work premises. These supposedly negate the claim that Jobcrest has substantial
capital.76 The Court does not agree with the petitioners.

DOLE DO No. 18-02 and DO No. 18-A, as well as Article 106 of the Labor Code itself, all use the
conjunctive term "or" in prescribing that the contractor should have substantial capital or investment.
Having established that Jobcrest had substantial capital, it is unnecessary for this Court to determine
whether it had sufficient investment in the form of tools, equipment, machinery and work premises.

In Neri v. NLRC,77 the Court rejected the same argument put forward by the petitioners, arid ruled that
proof of either substantial capital or investment is sufficient for purposes of determining whether the first
element of labor-only contracting is absent:

Based on the foregoing, BCC cannot be considered a "labor-only" contractor because it has substantial
capital. While there may be no evidence that it has investment in the form of tools, equipment,
machineries, work premises, among others, it is enough that it has substantial capital, as was established
before the Labor Arbiter as well as the NLRC. In other words, the law does not require both substantial
capital and investment in the form of tools, equipment, machineries, etc. This is clear from the use of the
conjunction "or". If the intention was to require the contractor to prove that he has both capital
and the requisite investment, then the conjunction "and" should have been used. But, having
established that it has substantial capital, it was no longer necessary for BCC to further adduce evidence
to prove that it does not fall within the purview of "labor-only" contracting. There is even no need for it to
refute petitioners' contention that the activities they perform are directly related to the principal business
of respondent bank.78 (Emphasis Ours)

The agreement between Jobcrest and Sunpower also complied with the statutory requirement of ensuring
the observance of the contractual employees' rights under the law. Specifically, paragraph 7 of the Service
Contract Agreement obligates Jobcrest to observe all laws, rules and regulations pertaining to the
employment of its employees.79

Suncrest does not control the manner by which the petitioners accomplished their work.

In most cases, despite proof of substantial capital, the Court declared a contractor as a labor-only
contractor whenever it is established that the principal—not the alleged legitimate contractor—actually
controls the manner of the employees' work. 80 The element of control was defined under DOLE DO No. 18-
02 as:

The "right to control" shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the manner
and means to be used in reaching that end.81

In other words, the contractor should undertake the performance of the services under its contract
according to its own manner and method, free from the control and supervision of the
principal.82 Otherwise, the contractor is deemed an illegitimate or labor-only contractor.

The control over the employees' performance of the work is, as the Court ruled in some cases, usually
manifested through the power to hire, fire, and pay the contractor's employees,83 the power to discipline
the employees and impose the corresponding penalty,84 and more importantly, the actual supervision of
the employees' performance.85 On this point, the petitioners claim that Sunpower employees supervised
their work while in the premises of Sunpower's own plant. They also disclaim the affidavits of Sunpower
employees, which denied exercising any form of supervision over the petitioners, 86 by alleging that these
are self-serving assertions. The petitioners also refute the veracity of the sworn statements of Jobcrest's
employees.87

Upon review of the records, the Court finds that the evidence clearly points to Jobcrest as the entity that
exercised control over the petitioners' work with Sunpower. Upon the petitioners' assignment to
Sunpower, Jobcrest conducted a training and certification program, during which time, the petitioners
reported directly to the designated Jobcrest trainer.88 The affidavit of Jobcrest's Operations Manager,
Kathy T. Morales (Kathy), states that operational control over Jobcrest employees was exercised to make
sure that they conform to the quantity and time specifications of the service agreements with Jobcrest's
clients. She narrated that manager and shift supervisors were assigned to the premises of Sunpower, with
the task to oversee the accomplishment of the target volume of work. She also mentioned that there is
administrative control over Jobcrest employees because they monitor the employees' attendance and
punctuality, and the employees' observance of other rules and regulations. 89

The affidavit of Kathy was markedly corroborated by the sworn statement of Jobcrest's On-site
Supervisor, Allan, in which he affirmed that he directly supervised the petitioners while they were
stationed in Sunpower. He also confirmed that during this period, he issued several memoranda to the
petitioners for violating rules and regulations, and provided their hourly output performance assessment,
which "determine[s] their fitness to continue their employment with Jobcrest."90

The petitioners' very own sworn statements further establish this point. In his statement, Leo
averred that when he reported for work to file his application for paternity leave, he reported to Allan,
Jobcrest's supervisor, who then approved his leave application. He likewise narrated that it was Jobcrest's
Human Resource Manager, Noel, who informed Leo about the disciplinary charge against him for allegedly
violating the Jobcrest Code of Conduct.91

The same conclusion holds for Leilanie. In her statement, Leilanie narrated that she reported for work to
the Jobcrest office on November 29, 2011 after giving birth to her second child. She also alleged in her
affidavit that similar to Leo, it was Noel who informed her of the disciplinary action against her, through
the service of a copy of the "Notice of Admin Charge/Explanation Slip." 92

Notably, other documentary evidence plainly show that Leo's paternity leave application was indeed filed
with Jobcrest,93 and the respective notices of disciplinary action against the petitioners were prepared and
signed by the Jobcrest Human Resource Manager.94 These are clear indications that Jobcrest exercised
control over the petitioners' work.

The fact that the petitioners were working within the premises of Sunpower, by itself, does not negate
Jobcrest's control over the means, method, and result of the petitioners' work. 95 Job contracting is
permissible "whether such job, work, or service is to be performed or completed within or outside the
premises of the principal"96 for as long as the elements of a labor-only contractor are not present. Since
Jobcrest was a provider of business process services, its employees would necessarily work within the
premises of its client companies in order for Jobcrest to perform its contractual undertaking. Mere physical
presence in Sunpower's plant does not necessarily mean that Sunpower controlled the means and method
of the petitioners' work. The petitioners, despite working in Sunpower's plant for most of the time, admit
that whenever they file their leave application, or whenever required by their supervisors in Jobcrest, they
report to the Jobcrest office. Designated on-site supervisors from Jobcrest were the ones who oversaw the
performance of the employees' work within the premises of Sunpower.

Besides, while the Court repeatedly recognizes that there are employers who abuse the system of
subcontracting, we also acknowledge that contracts for services does not necessarily provide
"untrammeled freedom" to the contractor in undertaking the engagement. 97 What is important,
as incontrovertibly established in this case, is that the principal's right to control is limited to the results of
the work of the contractor's employees.

The petitioners were regular employees of Jobcrest.

The four-fold test is the established standard for determining the existence of an employer-employee
relationship:98 (a) the selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the power of control over the employee's conduct. Of the four elements, the
power of control is the most important.99 Having found that Jobcrest exercised control over the petitioners'
work, the Court is constrained to determine whether the petitioners were regular employees of Jobcrest by
virtue of the three other elements of the four-fold test.

The petitioners themselves admit that they were hired by Jobcrest. 100 In their subsequent engagement to
Sunpower, it was Jobcrest that selected and trained the petitioners.101 Despite their assignment to
Sunpower, Jobcrest paid the petitioners' wages, including their contributions to the Social Security System
(SSS), Philippine Health Insurance Corporation (Philhealth), and Home Development Mutual Fund (HDMF,
also known as Pag-IBIG).102 The power to discipline the petitioners was also retained by Jobcrest, as
evidenced by the "Notice of Admin Charge/Explanation Slip" furnished the petitioners through Jobcrest's
Human Resource department.103

The Court further notes that on December 27, 2010 and January 25, 2011, Leilanie and Leo were
respectively confirmed as regular employees of Jobcrest. 104 Jobcrest did not even deny that the petitioners
were their regular employees. Consequently, the petitioners cannot be terminated from employment
without just or authorized cause.105

A review of the petitioners' repeated submissions reveals that while they claim to have been illegally
dismissed from employment,106 Jobcrest actually intended to assign Leo again to Sunpower, and provide
Leilanie with another engagement with a different client company. The petitioners all admitted to these
facts in their sworn statement, heavily quoted in their position paper filed with the LA: 107

41. Noong December 14, 2011, ako [Leo Mago] ay tinawagan sa aking cellular phone ng
nagpakilalang Julie at taga HR ng JOBCREST at ang sabi sa akin ay magreport umano ako
sa opisina upang ipadala sa SUNPOWER;

xxxx

44. Noong November 29, 2011, ako [Leilani Colobong] ay nagreport sa JOBCREST at aking
nakausap ang isa sa staff ng JOBCREST na hindi ko alam ang pangalan at ang sabi niya sa
 akin ay ililipat umano ako sa kompanyang FIRST SUMIDEN dahil hindi na umano ako pwedeng
m[a]gtrabaho sa SUNPOWER na hindi niya sinabi kung anu ang dahilan;

45. Noong December 1, 2011, ako ay bumalik sa JOBCREST at ako ay binigyan nila ng referral para
magpamedical para sa aking bagong requirements diumano sa aking bagong trabaho sa FIRST
SUMIDEN dahil hindi na talaga umano ako tatanggapin sa SUNPOWER sa aking pagbabalik trabaho
ng December 4, 2011 na hindi naman niya sinabi kung anu ang dahilan; Kalakip nito ang nas[a]bing
referral slip bilang Exhibit "S"108 (Emphasis Ours)

It was also uncontroverted that Jobcrest offered to accept the petitioners' return to work, but they refused
this offer during the mandatory conference.109 Clearly, the petitioners were not illegally dismissed, much
less terminated from their employment. There is nothing on record that established the dismissal of the
petitioners in the first place.

In MZR Industries, et al. v. Colambot,110 the employee claimed to have been illegally dismissed through a
verbal directive. The employer denied this and alleged waiting for the employee to report for work, only to
later find out that a complaint for illegal dismissal was filed against them. The Court recognized that while
the employer is generally required to establish the legality of the employee's termination, the employee
should first establish the fact of dismissal from service. Failing such, as in this case, the Court cannot rule
that the employee was illegally dismissed.

The "Notice of Admin Charge/Explanation Slip" is also insufficient proof of the petitioners' termination from
employment. The notice merely required the petitioners to explain whether they violated Jobcrest's Code
of Conduct. No penalty was imposed on the petitioners yet when they were furnished with a copy of the
notices.111 In fact, Jobcrest was unable to take the appropriate action on the charge, considering that the
petitioners immediately filed their complaint for illegal dismissal with the NLRC the following day, or on
December 15, 2011.112

All things considered, Sunpower is not the statutory employer of the petitioners. The circumstances
obtaining in this case, as supported by the evidence on record, establish that Jobcrest was a legitimate
and independent contractor. There is no reason for this Court to depart from the CA's findings.

WHEREFORE, premises considered, the present petition is hereby DENIED for lack of merit. The Court of
Appeals' Decision dated October 8, 2013 and Resolution dated January 13, 2014 in CA-G.R. SP No.
131059 are AFFIRMED, which nullified the National Labor Relations Commission's Decision dated April
24, 2013 and Resolution dated May 28, 2013, and reinstated the Labor Arbiter's Decision dated July 3,
2012. No costs.

SO ORDERED.

11.

G.R. No. 207252, January 24, 2018

PHILIPPINE GEOTHERMAL, INC. EMPLOYEES UNION (PGIEU), Petitioner, v. CHEVRON

GEOTHERMAL PHILS. HOLDINGS, INC., Respondent.

DECISION

REYES, JR., J.:

This is a Petition for Review on Certiorari1 pursuant to Rule 45 of the Rules of Court, as amended, seeking
to reverse and set aside the Decision 2 dated November 5, 2012 of the Court of Appeals (CA) in CA-G.R.
SP. No. 115796, dismissing the Petition for Review entitled "Philippine Geothermal, Inc. Employees Union
(PGIEU) vs. Chevron Geothermal Phils. Holdings, Inc.'' as well as the Resolution3 dated May 17, 2013
denying Philippine Geothermal, Inc. Employees Union's (petitioner) Motion 4 for Reconsideration dated
November 27, 2012.

The Facts

Petitioner is a legitimate labor organization and the certified bargaining agent of the rank-and-file
employees of Chevron Geothermal Phils. Holdings, Inc. (respondent).5

On July 31, 2008, the petitioner and respondent formally executed a Collective Bargaining Agreement
(CBA) which was made effective for the period from November 1, 2007 until October 31, 2012. Under
Article VII, Section 1 thereof, there is a stipulation governing salary increases of the respondent's rank-
and-file employees, as follows:

Section 1. WAGE INCREASE

The COMPANY will grant the following:

- Effective Nov. 1, 2007, P260,000.00 - lump sum payment for the 1st year of this agreement (taxable).
- Effective Nov. 1, 2008, across the board increase on the monthly salary in the amount of P1,500.00.
- Effective Nov. 1, 2009, across the board increase on the monthly salary in the amount of P1,500.00. 6

In implementing the foregoing provision, the parties agreed on the following guidelines appended as
Annex D of said CBA, viz.:

Employment Status P260K P1500 P1500

Lump Sum (Nov. 1, 2008) (Nov. 1, 2009)

Regularized on or before April 30, 2008 / / /

Regularized between May 1, 2008 and October 31, 2008 X / /

Regularized on or before April 30, 2009 X / /

Regularized between May 1, 2009 and October 31, 2009 X X /

Regularized on or before April 30, 2010 X X /

On October 6, 2009, a letter dated September 20, 2009 was sent by the petitioner's President to
respondent expressing, on behalf of its members, the concern that the aforesaid CBA provision and
implementing rules were not being implemented properly pursuant to the guidelines and that, if not
addressed, might result to a salary distortion among union members.7

On even date, respondent responded by letter denying any occurrence of salary distortion among union
members and reiterating its remuneration philosophy of having "similar values for similar jobs", which
means that employees in similarly-valued jobs would have similar salary rates. It explained that to attain
such objective, it made annual reviews and necessary adjustments of the employees' salaries and hiring
rates based on the computed values for each job.8

Finding the explanation not satisfactory, petitioner, with respondent's approval, referred the subject
dispute to the Voluntary Arbitration of the National Conciliation and Mediation Board (NCMB). It averred
that respondent breached their CBA provision on worker's wage increase because it granted salary
increase even to probationary employees in contravention of the express mandate of that particular CBA
article and implementing guidelines that salary increases were to be given only to regular employees. 9

To cite an example, petitioner alleged that respondent granted salary increases of One Thousand Five
Hundred Pesos (P1,500.00) each to then probationary employees Sherwin Lanao (Lanao) and Jonel
Cordovales (Cordovales) at a time when they have not yet attained regular status. They (Lanao and
Cordovales) were regularized only on January 1, 2010 and April 16, 2010, respectively, yet they were
given salary increase for November 1, 2008. As a consequence of their accelerated increases, wages of
said probationary workers equated the wage rates of the regular employees, thereby obliterating the wage
rates distinction based on merit, skills and length of service. Therefore, the petitioner insisted that its
members' salaries must necessarily be increased so as to maintain the higher strata of their salaries from
those of the probationary employees who were given the said premature salary increases. 10

On the other hand, respondent maintained that it did not commit any violation of that CBA provision and
its implementing guidelines; in fact, it complied therewith. It reasoned that the questioned increases given
to Lanao and Cordovales' salaries were granted, not during their probationary employment, but after they
were already regularized. It further asseverated that there was actually no salary distortion in this case
since the disparity or difference of salaries between Lanao and Cordovales with that of the other company
employees were merely a result of their being hired on different dates, regularization at different
occasions, and differences in their hiring rates at the time of their employment. 11

After due proceedings, the Voluntary Arbitrator rendered a Decision 12 dated August 16, 2010 in favor of
respondent, ruling that petitioner failed to duly substantiate its allegations that the former prematurely
gave salary increases to its probationary employees and that there was a resultant distortion in the salary
scale of its regular employees.13
Thereafter, a Petition14 for Review under Rule 65 was filed with the CA on September 22, 2010.

On November 5, 2012, the CA rendered its Decision. 15 It dismissed the petition for review and sustained
the Voluntary Arbitrator's decision. The pertinent and dispositive portion of the assailed decision reads as
follows:

In fine, We hold that the Voluntary Arbitrator of NCMB did not commit grave abuse of discretion in
dismissing petitioner union's complaint against respondent company. 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, and they are binding when supported by
substantial evidence. In this case, these findings are supported by competent and convincing evidence.

WHEREFORE, premises considered, the instant petition is DISMISSED. The Decision dated 16 August
2010 of the Voluntary Arbitrator of the NCMB Regional Branch No. IV is SUSTAINED.

SO ORDERED.16

On November 28, 2012, petitioner filed its Motion 17 for Reconsideration. This was, however, denied by the
CA in its Resolution18 dated May 17, 2013.

Hence, this petition.

The Issues

I.

WHETHER OR NOT THE CA GRAVELY ERRED IN HOLDING THAT RESPONDENT DID NOT VIOLATE THE CBA
IN GRANTING WAGE INCREASE OF P1,500.00 TO LANAO AND CORDOVALES AT A TIME WHEN THEY HAD
NOT YET ATTAINED REGULAR STATUS

II.

WHETHER OR NOT THE CA GRAVELY ERRED IN HOLDING THAT THE GRANT OF WAGE INCREASE TO
LANAO AND CORDOVALES IS A VALID EXERCISE OF MANAGEMENT PREROGATIVES BY RESPONDENT

III.

WHETHER OR NOT THE CA ERRED IN NOT ORDERING RESPONDENT TO LIKEWISE INCREASE THE RATES
OF OTHER REGULAR EMPLOYEES IN ORDER TO MAINTAIN THE DIFFERENCE BETWEEN THEIR RATES AND
THOSE OF THE EMPLOYEES WHO WERE ALLEGEDLY GRANTED PREMATURE WAGE INCREASES

Ruling of the Court

The petition is devoid of merit.

Petitioner and respondent entered into an agreement whereby employees will be granted a wage increase
depending on the date of their regularization, viz.:

Employment Status P260K P1500 P1500

Lump Sum (Nov. 1, 2008) (Nov. 1, 2009)

Regularized on or before April 30, 2008 / / /

Regularized between May 1, 2008 and October 31, 2008 X / /

Regularized on or before April 30, 2009 X / /

Regularized between May 1, 2009 and October 31, 2009 X X /

Regularized on or before April 30, 2010 X X /

Petitioner claims that Lanao and Cordovales having been regularized only on January 1, 2010 and April
16, 2010, respectively, are not covered by the P260,000.00 lump sum and the initial P1500.00 wage
increase effective on Nov. 1, 2008. It appears, however, that based on the actual pay slips of union
members, Lanao and Cordovales both received wage increase in the amount of P1500.00 effective Nov. 1,
2008 and that such increase was immediately granted to them at the time of their hiring which resulted to
the increase of their salaries to P36,500.00 per month.

It is further stressed by petitioner that the increase granted by respondent to Lanao and Cordovales are
violative of the terms of the CBA, specifically Section 1, Article VII and Annex D, for the reason that these
employees have not yet attained "Regular" status at the time they were granted a wage increase and thus
resulting to a salary/wage distortion.

Respondent, for its part, claims that the alleged "increase" in the wages of these employees was not due
to application of the provisions of Article VII and Annex D of the CBA, rather it was brought about by the
increase in the hiring rates at the time these employees were hired. As a matter of fact, a careful scrutiny
of the records reveals that respondent have complied with the terms agreed upon in the CBA.

Notably, respondent's reply to the petitioner's letter accusing them of violation of the terms of the CBA
and holding them responsible for the alleged wage distortion, clarified the ambiguity with regard to the
hiring rates, viz.:

As for the perceived salary distortion among Union members resulting from the non-implementation of the
guidelines on Article VH-Salaries and Allowances, Section 1 - Wage Increase, Annex D of the CBA 2007-
2012, we would like to reiterate our discussion during the recent NLMC meeting of September 16, on
Chevron's remuneration philosophy of having "similar value for similar jobs" which simply states that
employees in similarly valued jobs will have similar salary rates. Salaries and hiring rates are reviewed
annually and adjusted as necessary based on the computed values of each job, an employee's tenure or
seniority in his/her current position will not influence the value of the job.19 (Underlining Ours)

Clearly then, the increase in the salaries of Lanao and Cordovales was not pursuant to the wage increase
agreed upon in CBA 2007-2012 rather it was the result of the increase in hiring rates at the time they
were hired.

To illustrate, in its Reply,20 respondent discussed the difference in the hiring rates of employees Lanao and
Robert Gawat, viz.:

Mr. Robert Gawat was regularized on April 16, 2007 having been hired on October 16, 2007 while Mr.
Lanao as shown in the Company's position paper was regularized on January 1, 2010, having been hired
only on July 1, 2009. At the time of Mr. Gawat's hiring, the hiring rate for Pay Grade 12 was
P31,800.00. On April 16, 2007, Mr. Gawat was given a CBA salary increase under the 2002-2007 CBA of
P1,700.00 per month which increased his pay to P33,500.00 per month. He received another CBA salary
increase of P1,500.00 under the 2007-2012 CBA on November 1, 2008, thus increasing his pay to
P35,000.00. On November 1, 2009, he received another salary increase of P1,500.00 under the 2007-
2012 CBA which further increased his pay to P36,500.00 per month until the present.

On the other hand, when Mr. Lanao was hired on July 9, 2009, the hiring rate at the time for
employees falling under Pay Grade 12 was already P35,000.00, having been adjusted by the
company in accordance with market and industry practice. On January 1, 2010, Mr. Lanao was regularized
and as dictated by the CBA, he was given a CBA salary increase of P1,500.00 per month effective January
1, 2010 which increased his monthly pay at the present to P36,500.00.21 (Emphasis and underlining Ours)

As shown above, the respondent never violated the CBA and in fact, complied with it to the letter. Clearly,
the petitioner only used the respondent's alleged violation of the CBA when its true gripe is related to the
respondent's prerogative of setting the hiring rate of the employees over which the petitioner neither has
the personality nor the privilege to meddle or interfere with.22

The second and third issue, being interrelated, shall be discussed jointly.

Upon the enactment of Republic Act (R.A.) No. 6727 (Wage Rationalization Act, amending among others,
Article 124 of the Labor Code) on June 9, 1989, the term "Wage Distortion" was explicitly defined as "a
situation where an increase in prescribed wage rates results in the elimination or severe contraction of
intentional quantitative differences in wage or salary rate between and among employee groups an
establishment as to effectively obliterate the distinctions embodied in such wage structure based on skills,
length of service or other logical bases of differentiation."23

Contrary to petitioner's claim of alleged "wage distortion", Article 124 of the Labor Code of the Philippines
only cover wage adjustments and increases due to a prescribed law or wage order, viz.:

Article 124. Standards/Criteria for Minimum Wage Fixing.

xxxx
Where the application of any prescribed wage increase by virtue of a law or Wage Order issued by
any Regional Board results in distortions of the wage structure within an establishment, the employer
and union shall negotiate to correct the distortions. Any dispute arising from the wage distortions shall be
resolved through the grievance procedure under their collective bargaining agreement and, if it remains
unresolved, through voluntary arbitration.24 (Emphasis Ours)

Prubankers Association v. Prudential Bank and Trust Company 25 laid down the four elements of wage
distortion, to wit: (1) an existing hierarchy of positions with corresponding salary rates; (2) a significant
change in the salary rate of a lower pay class without a concomitant increase in the salary rate of a higher
one; (3) the elimination of the distinction between the two levels; and (4) the existence of the distortion
in the same region of the country.

The apparent increase in Lanao and Cordovales' salaries as compared to the other company workers who
also have the same salary/pay grade with them should not be interpreted to mean that they were given a
premature increase for November 1, 2008, thus resulting to a wage distortion. The alleged increase in
their salaries was not a result of the erroneous application of Article VII and Annex D of the CBA, rather, it
was because when they were hired by respondent in 2009, when the hiring rates were relatively higher as
compared to those of the previous years. Verily, the setting and implementation of such various
engagement rates were purely an exercise of the respondent's business prerogative in order to attract or
lure the best possible applicants in the market and which We will not interfere with, absent any showing
that it was exercised in bad faith.

Management prerogative gives an employer freedom to regulate according to their discretion and best
judgment, all aspects of employment including work assignment, working methods, the processes to be
followed, working regulations, transfer of employees, work supervision, lay-off of workers and the
discipline, dismissal and recall of workers.26 This right is tempered only by these limitations: that it must
be exercised in good faith and with due regard to the rights of the employees. 27

Petitioner claims that the wages of other employees should also be increased in order to maintain the
difference between their salaries and those of employees granted a "premature" wage increase. Such a
situation may be remedied if it falls under the concept of a wage distortion as defined by Article 124 of the
Labor Code of the Philippines. However, as already discussed, there is no wage distortion in the case at
bench. Not all increases in salary which obliterate the salary differences of certain employees should be
perceived as wage distortion.

In the case of Bankard Employees Union-Workers Alliance Trade Unions v. National Labor Relations
Commission,28 the Court discussed the possible implication of an expanded interpretation of the concept of
Wage Distortion, to wit:

If the compulsory mandate under Article 124 to correct "wage distortion" is applied to voluntary and
unilateral increases by the employer in fixing hiring rates which is inherently a business judgment
prerogative, then the hands of the employer would be completely tied even in cases where an increase in
wages of a particular group is justified due to a re-evaluation of the high productivity of a particular group,
or as in the present case, the need to increase the competitiveness of Bankard's hiring rate. An employer
would be discouraged from adjusting the salary rates of a particular group of employees for fear that it
would result to a demand by all employees for a similar increase, especially if the financial conditions the
business cannot address an across-the-board increase.29

The Court's ruling in the case of Bankard seek to address and resolve conflicting opinions regarding the
true concept of a wage distortion like the one presented in this case whereby a legitimate exercise by an
employer of its management prerogative is being taken against it in the guise of an allegation that it is
circumventing labor laws. An employer should not be held hostage by the whims and caprices of its
employees especially when it has faithfully complied with and executed the terms of the CBA.

It is the prerogative of management to regulate, according to its discretion and judgment all aspects of
employment. This flows from the established rule that labor law does not authorize the substitution of the
judgment of the employer in the conduct of its business. Such management prerogative may be availed of
without fear of any liability so long as it is 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 agreements and are not exercised in a malicious, harsh, oppressive, vindictive or wanton manner
or out of malice or spite.30

On a final note, the Court has ruled time and again 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 and affirmed by the CA, in the exercise
of its expanded jurisdiction to review findings of the National Labor Relations Commission.

WHEREFORE, premises considered, the petition is DENIED. The Decision dated November 5, 2012 of the
Court of Appeals in CA-G.R. SP No. 115796 is hereby AFFIRMED.
SO ORDERED.

12.

G.R. No. 229404, January 24, 2018

MARILYN B. ASENTISTA, Petitioner, v. JUPP & COMPANY, INC., AND/OR MR. JOSEPH V.
ASCUTIA, Respondents.

DECISION

REYES, JR., J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 filed by Marilyn B. Asentista
(Asentista) seeking to set aside the Decision dated August 31, 2016 and Resolution dated November 17,
2016 of the Court of Appeals (CA), in CA-G.R. SP No. 06747-MIN, which set aside and nullified the
Resolutions dated November 28, 2014 and February 27, 2015 of the National Labor Relations Commission
(NLRC), ordering respondents JUPP & Company, Inc. (JUPP) and/or its President Joseph V. Ascutia
(Ascutia) to pay Asentista her remaining unpaid sales commissions in the amount of P210,077.95 plus ten
percent (10%) total monetary award as attorney's fees.

Asentista was employed by JUPP as sales secretary on April 16, 2007. On March 14, 2008, she became a
regular employee of the company as a sales assistant and was later appointed in July 2010 as a sales
agent of JUPP for its Northern Mindanao area. As a sales agent, Asentista became entitled to a sales
commission of two percent for every attained monthly quota. However, despite reaching her monthly
quota, JUPP failed to give Asentista her earned sales commission despite repeated requests.

Meanwhile in 2011, JUPP, through its Administrative and Finance Officer Malou Ramiro, issued a new
Toyota Avanza vehicle to Asentista in view of her sales performance in the Cagayan De Oro area. The
ownership of the car, however, remains with the company. Notwithstanding lack of agreement, JUPP
deducted car plan participation payment amounting to P113,000.00 and one year rental payment of
P68,721.36 from her unpaid sales commission.

On February 4, 2013, Asentista tendered her resignation effective February 28, 2013 and returned the
Avanza vehicle to JUPP through Emmanuel P. Pabon. Thereafter, she filed a claim for unpaid commission
and refund for car plan deduction based on the computation sent by Ascutia, summarized as follows:

2010--------------------------- P 5,361.61

2011--------------------------- P 178,105.06

2012--------------------------- P 143,295.53

Total Amount: P 334,117.20

Less: P85,305.31 (Cash Advances - Asentista's total debts to JUPP)

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

Total Amount: P248,811.89

Less: P38,733.94 (deposited commission to Asentista's account)

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

Total Sales Commission due: P 210,077.99

As a result of the respondents' incessant refusal to pay, Asentista filed a complaint against JUPP and
Ascutia before the NLRC Regional Arbitration Branch No. 10, Cagayan de Oro City for non-payment for
sales commission.

For their part, the respondents opposed the allegations of Aseptista, arguing the burden of proof to
substantiate her claim for unpaid commission and car participation refund rested upon her. Since the
employment agreement signed by Asentista did not include any remuneration for a sales commission and
car participation plan, her claim lacked any legal basis for entitlement Further, Asentista was only allowed
to use the Toyota Avanza with car participation during the amortization period for both her personal and
official use due to the generosity of JUPP.
On the other hand, JUPP admitted that despite lack of explicit provision in the employment agreement,
Asentista was given during her employment discretionary sales commission subject to the sole prerogative
of the company. JUPP likewise acknowledged sole discretion to allow Asentista to own the vehicle after the
amortization period.

In a Decision dated November 28, 2013, Labor Arbiter (LA) Rammex C. Tiglao dismissed the complaint of
Asentista for lack of merit. In so ruling, the LA emphasized the non-entitlement of Asentista to claim for
sales commission or refund for amortization payment for the use of the company's car as shown by the
employment agreement between JUPP and the complainant. Furthermore, the LA opined on the
improbability of omission of the entitlement of unpaid commission in the resignation letter of the
complainant, given her six years of employment and educational attainment. Finally, the affidavit and
supporting documents of Asentista were disregarded for being self-serving, unreliable and unsubstantial
evidence. Thus, it was ruled:

WHEREFORE the instant complaint is DISMISSED for lack of merit.

The respondents' counter-claims for exemplary damages and attorney's fees are dismissed for want of
jurisdiction and/or lack of merit.

On appeal, the NLRC in a Resolution dated November 28, 2014 reversed the decision of the LA and gave
more credence on Asentista's claim for unpaid commission based on Ascutia's electronic messages.
Further, in the absence of express stipulation, the respondents lacked authority to forfeit Asentista's sales
commission and apply the same as rentals for the personal use of the vehicle. Accordingly, it was held
that:

WHEREFORE, the appeal is GRANTED.

Respondents are hereby ORDERED to pay Complainant her remaining unpaid sales commissions in the
amount of P210,077.95 plus ten percent of the total monetary award as attorney's fees.

SO ORDERED.

The motion for reconsideration filed by the respondents was denied for lack of merit in a Resolution dated
February 27, 2015.

Aggrieved, the respondents filed a petition for certiorari under Rule 65 of the Rules of Court before the CA
alleging grave abuse of discretion on the part of NLRC for reversing the ruling of the LA and ordering them
to pay the complainant the unpaid sales commissions with additional 10% of the total monetary award as
attorney's fees.

In a Decision dated August 31, 2016, the CA ruled favorably on the petition and reinstated the decision of
the LA. CA agreed with the respondents that Asentista is not entitled to the grant of sales commission
based on the "Job Offer for Regular Status of Employment." Further, the CA rejected the email allegedly
sent by Ascutia for being "self-serving, unreliable and unsubstantial evidence."

"Nowhere could it be read in the contract that private respondent [Asentista] is entitled to the claimed
unpaid commission. The Court cannot give credence to the email allegedly sent by petitioner Ascutia to
private respondent detailing the computation of her claimed unpaid commission. x x x."

Granting the petition, it was held that:

WHEREFORE, the petition is GRANTED. The Resolutions dated November 28, 2014 and February 27,
2015 of the National Labor Relations Commission, Eight Division, Cagayan De Oro City is hereby SET
ASIDE and NULLIFIED, having been issued in grave abuse of discretion. The Decision of the Labor
Arbiter dated November 28, 2013 is hereby REINSTATED.

SO ORDERED.

Hence, this petition.

Ruling of the Court

Before this Court, Asentista argues entitlement to sales commission and refund for car plan participation
and amortization payment. She avers that the respondents can no longer refute her allegations since they
have already admitted her entitlement to a discretionary commission and deduction in the amount of
P113,000.00 and P68,721.36 as payment for her car plan participation and amortization payment.

In their Comment, the respondents reiterate their opposition since the employment agreement did not
include sales commission as part of her salary and benefits. The respondents likewise refute the
evidentiary value of the alleged email messages of Ascutia for being unsubstantiated and unfounded.

The petition is granted.

The Court reverses the CA's ruling that the respondents have sufficiently established Asentista's non-
entitlement in view of the absence of any specific provision in her employment agreement including sales
commission as part of her remuneration.

At the outset, the respondents can no longer refute Asentista's entitlement to a discretionary commission
since an admission can already be deduced in their position paper. Moreover, the silence of the
employment agreement including sales commission as part of remuneration does not affect her
entitlement. As provided by Section 97(f) of the Labor Code, employee's wage has been defined as
"remuneration of earnings, however designated, capable of being expressed in terms of money, whether
fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the
same, which is payable by an employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for services rendered or to be rendered and includes the fair
and reasonable value, as determined by the Secretary of Labor and Employment, of board, lodging, or
other facilities customarily furnished by the employer to the employee."

In Toyota Pasig, Inc. v. De Peralta[ citing Iran v. NLRC, the Court affirmed the inclusion of sales
commission as part of a salesman's remuneration for services rendered to the company. In explaining the
wisdom behind the inclusion, it was held that:

This definition explicitly includes commissions as part of wages. While commissions are, indeed, incentives
or forms of encouragement to inspire employees to put a little more industry on the jobs particularly
assigned to them, still these commissions are direct remunerations for services rendered. In fact,
commissions have been defined as the recompense, compensation or reward of an agent, salesman,
executor, trustee, receiver, factor, broker or bailee, when the same is calculated as a percentage on the
amount of his transactions or on the profit to the principal. The nature of the work of a salesman and the
reason for such type of remuneration for services rendered demonstrate clearly that commissions are part
of a salesman's wage or salary.

In the same way, the Court cannot subscribe to the assertion of the respondents that the burden of proof
to prove monetary claims rests on the employee.

It is a settled labor doctrine that in cases involving non-payment of monetary claims of employees, the
employer has the burden of proving that the employees did receive their wages and benefits and that the
same were paid in accordance with law.[As elucidated in De Guzman v. NLRC, et al.:

It is settled that once the employee has set out with particularity in his complaint, position paper,
affidavits and other documents the labor standard benefits he is entitled to, and which he alleged that the
employer failed to pay him, it becomes the employer's burden to prove that it has paid these money
claims. One who pleads payment has the burden of proving it, and even where the employees must allege
non-payment, the general rule is that the burden rests on the defendant to prove payment, rather than on
the plaintiff to prove non-payment.

The rule finds merit in view of the fact that the accessibility over the employment records, pertinent
personnel files, payrolls, remittances, and other similar documents which will show that overtime,
differentials, service incentive leave, and other claims have been paid to the employee is exclusively
within the custody and absolute control of the employer. Otherwise, the feasibility of proving non-payment
of monetary claims or benefits will hardly result to fruition.

In this case, the Court agrees with Asentista that she has already set out the particularities of her unpaid
monetary claims against the respondents based on the electronic messages of Ascutia. The respondents
should have presented evidentiary proof based on the employment records and personnel files that
Asentista was already paid of her benefits, instead of attributing the burden of proof back to her.

As held in Toyota Pasig, the employer's act of simply dismissing the employee's claim "for being purely
self-serving and unfounded without even presenting any tinge or proof showing that respondent
(employee) was already paid of such benefits or that she was entitled thereto" was rebutted by the
Court. Failure on the part of the employer to discharge the burden tilts the balance in favor of the
employee.

Similarly, the Court concurs with Asentista that in the absence of any express stipulation, the respondents
cannot deduct car participation and amortization payment from her unpaid sales commission.

The case of Locsin v. Mekeni is instructive:

In the absence of specific terms and conditions governing a car plan agreement between the employer
and employee, the former may not retain the installment payments made by the latter on the car plan and
treat them as rents for the use of the service vehicle, in the event that the employee ceases his
employment and is unable to complete the installment payments on the vehicle. The underlying reason is
that the service vehicle was precisely used in the former's business; any personal benefit obtained by the
employee from its use is merely incidental.

The Court agrees with the factual findings of NLRC that the respondents and Asentista did not agree on
any car participation plan. Since the inception of the complaint, Asentista has been adamant that she did
not authorize the respondents to deduct a car plan participation payment from her sales commission.

In contrast, the Court disagrees with the justification advanced by the respondents as guided by the
principle of equity, since "it would be more equitable if Asentista shares such amount with the company as
rentals for the utilization of the company vehicle." Even granting that Asentista was allowed to use the
company car even for personal and family use, the sole the amortization period remains with the
respondents.

Any benefit or privilege enjoyed by Asentista from using the service vehicle was merely incidental and
insignificant, because for the most part the vehicle was under the respondents' control and supervision.
Given the high monthly quota requirement imposed upon Asentista to generate sales for the company, the
service vehicle given to her was an absolute necessity. In truth, the respondents were the ones reaping
the full benefits of the vehicle assigned to Asentista in the performance of her function.

Under the principle of unjust enrichment, no person may unjustly enrich oneself at the expense of
another. As embodied in Article 22 of the New Civil Code, every person who through an act of
performance by another, or any other means, acquires or comes into possession of something at the
expense of the latter without just or legal ground, shall return the same to him.

In this case, the respondents committed unjust enrichment against Asentista when it allowed her to use
the company vehicle to further the performance of her function as a sales agent then unilaterally, without
any consent, deduct car participation and amortization payment to Asentista's sales commission, to the
latter's prejudice.

Applying the guiding principles explicated in Locsin:

In the absence of specific terms and conditions governing the car plan arrangement between the
petitioner and Mekeni, a quasi-contractual relation was created between them. Consequently, Mekeni may
not enrich itself by charging petitioner for the use of its vehicle which is otherwise absolutely necessary to
the full and effective promotion of its business. It may not, under the claim that petitioner's payments
constitute rents for the use of the company vehicle, refuse to refund what petitioner had paid, for the
reasons that the car plan did not carry such a condition; the subject vehicle is an old car that is
substantially, if not fully, depreciated; the car plan arrangement benefited Mekeni for the most part; and
any personal benefit obtained by petitioner from using the vehicle was merely incidental.

Finally, following the legal precepts laid down in Nacar v. Gallery Frames, et al. and Rivero v. Spouses
Chua, the total amount adjudged in this Decision in favour of Asentista shall further earn legal interest at
the rate of six percent (6%) per annum computed from its finality until full payment thereof, the interim
period being deemed to be a forbearance of credit.

WHEREFORE, after judicious review of the records, the Court resolves to GRANT the instant petition
and REVERSE AND SET ASIDE the Decision dated August 31, 2016 and Resolution dated November 17,
2016 of the Court of Appeals in CA-G.R. SP No. 06747-MIN. The Resolution dated November 28, 2014 of
the National Labor Relations Commission is hereby REINSTATED. Respondents JUPP & Company, Inc.
and/or Joseph V. Ascutia are hereby ORDERED to pay Marilyn B. Asentista the amount of P210,077.95
plus ten percent (10%) of the total monetary award as attorney's fees and legal interest at the rate of six
percent (6%) per annum computed from its finality until full payment thereof.

SO ORDERED.

13.

G.R. No. 172161 March 2, 2011

SLL INTERNATIONAL CABLES SPECIALIST and SONNY L. LAGON, Petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, 4th DIVISION, ROLDAN LOPEZ, EDGARDO
ZUÑIGA and DANILO CAÑETE, Respondents.

DECISION

MENDOZA, J.:
Assailed in this petition for review on certiorari are the January 11, 2006 Decision and the March 31, 2006
Resolution of the Court of Appeals (CA), in CA-G.R. SP No. 00598 which affirmed with modification the
March 31, 2004 Decision and December 15, 2004 Resolution of the National Labor Relations
Commission (NLRC). The NLRC Decision found the petitioners, SLL International Cables
Specialist (SLL) and its manager, Sonny L. Lagon (petitioners), not liable for the illegal dismissal of Roldan
Lopez, Danilo Cañete and Edgardo Zuñiga (private respondents) but held them jointly and severally liable
for payment of certain monetary claims to said respondents.

A chronicle of the factual antecedents has been succinctly summarized by the CA as follows:

Sometime in 1996, and January 1997, private respondents Roldan Lopez (Lopez for brevity) and Danilo
Cañete (Cañete for brevity), and Edgardo Zuñiga (Zuñiga for brevity) respectively, were hired by
petitioner Lagon as apprentice or trainee cable/lineman. The three were paid the full minimum wage and
other benefits but since they were only trainees, they did not report for work regularly but came in as
substitutes to the regular workers or in undertakings that needed extra workers to expedite completion of
work. After their training, Zuñiga, Cañete and Lopez were engaged as project employees by the
petitioners in their Islacom project in Bohol. Private respondents started on March 15, 1997 until
December 1997. Upon the completion of their project, their employment was also terminated. Private
respondents received the amount of ₱145.00, the minimum prescribed daily wage for Region VII. In July
1997, the amount of ₱145 was increased to ₱150.00 by the Regional Wage Board (RWB) and in October of
the same year, the latter was increased to ₱155.00. Sometime in March 1998, Zuñiga and Cañete were
engaged again by Lagon as project employees for its PLDT Antipolo, Rizal project, which ended sometime
in (sic) the late September 1998. As a consequence, Zuñiga and Cañete’s employment was terminated.
For this project, Zuñiga and Cañete received only the wage of ₱145.00 daily. The minimum prescribed
wage for Rizal at that time was ₱160.00.

Sometime in late November 1998, private respondents re-applied in the Racitelcom project of Lagon in
Bulacan. Zuñiga and Cañete were re-employed. Lopez was also hired for the said specific project. For this,
private respondents received the wage of ₱145.00. Again, after the completion of their project in March
1999, private respondents went home to Cebu City.

On May 21, 1999, private respondents for the 4th time worked with Lagon’s project in Camarin, Caloocan
City with Furukawa Corporation as the general contractor. Their contract would expire on February 28,
2000, the period of completion of the project. From May 21, 1997-December 1999, private respondents
received the wage of ₱145.00. At this time, the minimum prescribed rate for Manila was ₱198.00. In
January to February 28, the three received the wage of ₱165.00. The existing rate at that time was
₱213.00.

For reasons of delay on the delivery of imported materials from Furukawa Corporation, the Camarin
project was not completed on the scheduled date of completion. Face[d] with economic problem[s], Lagon
was constrained to cut down the overtime work of its worker[s][,] including private respondents. Thus,
when requested by private respondents on February 28, 2000 to work overtime, Lagon refused and told
private respondents that if they insist, they would have to go home at their own expense and that they
would not be given anymore time nor allowed to stay in the quarters. This prompted private respondents
to leave their work and went home to Cebu. On March 3, 2000, private respondents filed a complaint for
illegal dismissal, non-payment of wages, holiday pay, 13th month pay for 1997 and 1998 and service
incentive leave pay as well as damages and attorney’s fees.

In their answers, petitioners admit employment of private respondents but claimed that the latter were
only project employees[,] for their services were merely engaged for a specific project or undertaking and
the same were covered by contracts duly signed by private respondents. Petitioners further alleged that
the food allowance of ₱63.00 per day as well as private respondents allowance for lodging house,
transportation, electricity, water and snacks allowance should be added to their basic pay. With these,
petitioners claimed that private respondents received higher wage rate than that prescribed in Rizal and
Manila.

Lastly, petitioners alleged that since the workplaces of private respondents were all in Manila, the
complaint should be filed there. Thus, petitioners prayed for the dismissal of the complaint for lack of
jurisdiction and utter lack of merit. (Citations omitted.)

On January 18, 2001, Labor Arbiter Reynoso Belarmino (LA) rendered his decision declaring that his office
had jurisdiction to hear and decide the complaint filed by private respondents. Referring to Rule IV, Sec. 1
(a) of the NLRC Rules of Procedure prevailing at that time, the LA ruled that it had jurisdiction because the
"workplace," as defined in the said rule, included the place where the employee was supposed to report
back after a temporary detail, assignment or travel, which in this case was Cebu.

As to the status of their employment, the LA opined that private respondents were regular employees
because they were repeatedly hired by petitioners and they performed activities which were usual,
necessary and desirable in the business or trade of the employer.
With regard to the underpayment of wages, the LA found that private respondents were underpaid. It
ruled that the free board and lodging, electricity, water, and food enjoyed by them could not be included
in the computation of their wages because these were given without their written consent.

The LA, however, found that petitioners were not liable for illegal dismissal. The LA viewed private
respondents’ act of going home as an act of indifference when petitioners decided to prohibit overtime
work.

In its March 31, 2004 Decision, the NLRC affirmed the findings of the LA. In addition, the NLRC noted that
not a single report of project completion was filed with the nearest Public Employment Office as required
by the Department of Labor and Employment (DOLE) Department Order No. 19, Series of 1993. The NLRC
later denied the motion for reconsideration subsequently filed by petitioners.

When the matter was elevated to the CA on a petition for certiorari, it affirmed the findings that the
private respondents were regular employees. It considered the fact that they performed functions which
were the regular and usual business of petitioners. According to the CA, they were clearly members of a
work pool from which petitioners drew their project employees.

The CA also stated that the failure of petitioners to comply with the simple but compulsory requirement to
submit a report of termination to the nearest Public Employment Office every time private respondents’
employment was terminated was proof that the latter were not project employees but regular employees.

The CA likewise found that the private respondents were underpaid. It ruled that the board and lodging,
electricity, water, and food enjoyed by the private respondents could not be included in the computation
of their wages because these were given without their written consent. The CA added that the private
respondents were entitled to 13th month pay.

The CA also agreed with the NLRC that there was no illegal dismissal. The CA opined that it was the
petitioners’ prerogative to grant or deny any request for overtime work and that the private respondents’
act of leaving the workplace after their request was denied was an act of abandonment.

In modifying the decision of the labor tribunal, however, the CA noted that respondent Roldan Lopez did
not work in the Antipolo project and, thus, was not entitled to wage differentials. Also, in computing the
differentials for the period January and February 2000, the CA disagreed in the award of differentials
based on the minimum daily wage of ₱223.00, as the prevailing minimum daily wage then was only
₱213.00. Petitioners sought reconsideration but the CA denied it in its March 31, 2006 Resolution.

In this petition for review on certiorari, petitioners seek the reversal and setting aside of the CA decision
anchored on this lone:

GROUND/ASSIGNMENT OF ERROR

THE PUBLIC RESPONDENT NLRC COMMITTED A SERIOUS ERROR IN LAW IN AWARDING WAGE
DIFFERENTIALS TO THE PRIVATE COMPLAINANTS ON THE BASES OF MERE TECHNICALITIES, THAT IS,
FOR LACK OF WRITTEN CONFORMITY x x x AND LACK OF NOTICE TO THE DEPARTMENT OF LABOR AND
EMPLOYMENT (DOLE)[,] AND THUS, THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING WITH
MODIFICATION THE NLRC DECISION IN THE LIGHT OF THE RULING IN THE CASE OF JENNY M. AGABON
and VIRGILIO AGABON vs, NLRC, ET AL., GR NO. 158963, NOVEMBER 17, 2004, 442 SCRA 573, [AND
SUBSEQUENTLY IN THE CASE OF GLAXO WELLCOME PHILIPPINES, INC. VS. NAGAKAKAISANG
EMPLEYADO NG WELLCOME-DFA (NEW –DFA), ET AL., GR NO. 149349, 11 MARCH 2005], WHICH FINDS
APPLICATION IN THE INSTANT CASE BY ANALOGY.

Petitioners reiterated their position that the value of the facilities that the private respondents enjoyed
should be included in the computation of the "wages" received by them. They argued that the rulings in
Agabon v. NLRC and Glaxo Wellcome Philippines, Inc. v. Nagkakaisang Empleyado Ng Wellcome-
DFA should be applied by analogy, in the sense that the lack of written acceptance of the employees of
the facilities enjoyed by them should not mean that the value of the facilities could not be included in the
computation of the private respondents’ "wages."

On November 29, 2006, the Court resolved to issue a Temporary Restraining Order (TRO) enjoining the
public respondent from enforcing the NLRC and CA decisions until further orders from the Court.

After a thorough review of the records, however, the Court finds no merit in the petition.

This petition generally involves factual issues, such as, whether or not there is evidence on record to
support the findings of the LA, the NLRC and the CA that private respondents were project or regular
employees and that their salary differentials had been paid. This calls for a re-examination of the
evidence, which the Court cannot entertain. Settled is the rule that factual findings of labor officials, who
are deemed to have acquired expertise in matters within their respective jurisdiction, are generally
accorded not only respect but even finality, and bind the Court when supported by substantial evidence. It
is not the Court’s function to assess and evaluate the evidence

all over again, particularly where the findings of both the Labor tribunals and the CA concur.

As a general rule, on payment of wages, a party who alleges payment as a defense has the burden of
proving it. Specifically with respect to labor cases, the burden of proving payment of monetary claims
rests on the employer, the rationale being that the pertinent personnel files, payrolls, records, remittances
and other similar documents — which will show that overtime, differentials, service incentive leave and
other claims of workers have been paid — are not in the possession of the worker but in the custody and
absolute control of the employer.

In this case, petitioners, aside from bare allegations that private respondents received wages higher than
the prescribed minimum, failed to present any evidence, such as payroll or payslips, to support their
defense of payment. Thus, petitioners utterly failed to discharge the onus probandi.

Private respondents, on the other hand, are entitled to be paid the minimum wage, whether they are
regular or non-regular employees.

Section 3, Rule VII of the Rules to Implement the Labor Code specifically enumerates those who are not
covered by the payment of minimum wage. Project employees are not among them.

On whether the value of the facilities should be included in the computation of the "wages" received by
private respondents, Section 1 of DOLE Memorandum Circular No. 2 provides that an employer may
provide subsidized meals and snacks to his employees provided that the subsidy shall not be less that
30% of the fair and reasonable value of such facilities. In such cases, the employer may deduct from the
wages of the employees not more than 70% of the value of the meals and snacks enjoyed by the latter,
provided that such deduction is with the written authorization of the employees concerned.

Moreover, before the value of facilities can be deducted from the employees’ wages, the following
requisites must all be attendant: first, proof must be shown that such facilities are customarily furnished
by the trade; second, the provision of deductible facilities must be voluntarily accepted in writing by the
employee; and finally, facilities must be charged at reasonable value. Mere availment is not sufficient to
allow deductions from employees’ wages.

These requirements, however, have not been met in this case. SLL failed to present any company policy
or guideline showing that provisions for meals and lodging were part of the employee’s salaries. It also
failed to provide proof of the employees’ written authorization, much less show how they arrived at their
valuations. At any rate, it is not even clear whether private respondents actually enjoyed said facilities.

The Court, at this point, makes a distinction between "facilities" and "supplements." It is of the view that
the food and lodging, or the electricity and water allegedly consumed by private respondents in this case
were not facilities but supplements. In the case of Atok-Big Wedge Assn. v. Atok-Big Wedge Co., the two
terms were distinguished from one another in this wise:

"Supplements," therefore, constitute extra remuneration or special privileges or benefits given to or

received by the laborers over and above their ordinary earnings or wages. "Facilities," on the other hand,
are items of expense necessary for the laborer's and his family's existence and subsistence so that by
express provision of law (Sec. 2[g]), they form part of the wage and when furnished by the employer are
deductible therefrom, since if they are not so furnished, the laborer would spend and pay for them just the
same.

In short, the benefit or privilege given to the employee which constitutes an extra remuneration above
and over his basic or ordinary earning or wage is supplement; and when said benefit or privilege is part of
the laborers' basic wages, it is a facility. The distinction lies not so much in the kind of benefit or item
(food, lodging, bonus or sick leave) given, but in the purpose for which it is given. In the case at bench,
the items provided were given freely by SLL for the purpose of maintaining the efficiency and health of its
workers while they were working at their respective projects.1avvphi1

For said reason, the cases of Agabon and Glaxo are inapplicable in this case. At any rate, these were cases
of dismissal with just and authorized causes. The present case involves the matter of the failure of the
petitioners to comply with the payment of the prescribed minimum wage.

The Court sustains the deletion of the award of differentials with respect to respondent Roldan Lopez. As
correctly pointed out by the CA, he did not work for the project in Antipolo.
WHEREFORE, the petition is DENIED. The temporary restraining order issued by the Court on November
29, 2006 is deemed, as it is hereby ordered, DISSOLVED.

SO ORDERED.

14.

G.R. No. 204651 August 6, 2014

OUR HAUS REALTY DEVELOPMENT CORPORATION, Petitioner,

vs.
ALEXANDER PARIAN, JAY C. ERINCO, ALEXANDER CANLAS, BERNARD TENEDERO and JERRY
SABULAO, Respondents.

DECISION

BRION, J.:

We resolve in this petition for review on certiorari the challenge to the May 7, 2012 decision and the
November 27, 2012 resolution (assailed CA rulings) of the Court of Appeals (CA) in CA-G.R. SP No.
123273. These assailed CA rulings affirmed the July 20, 2011 decision and the December 2, 2011
resolution (NLRC rulings) of the National Labor Relations Commission (NLRC) in NLRC LAC No. 02-000489-
11 (NLRC NCR Case No. 06-08544-10). The NLRC rulings in turn reversed and set aside the December 10,
2010 decision of the labor arbiter (LA).

Factual Antecedents

Respondents Alexander Parian, Jay Erinco, Alexander Canlas, Jerry Sabulao and Bernardo Tenederowere
all laborers working for petitioner Our Haus Realty Development Corporation (Our Haus), a company
engaged in the construction business.The respondents’ respective employment records and daily wage
rates from 2007 to 2010 are summarized in the table7 below:

Years of Daily
Name Date Hired Year and Place of Assignment
Service Rate
Alexander M. October
10 years 2007-2010- Quezon City ₱353.50
Parian 1999
January 2008- Quezon City 2009-
Jay C. Erinco 10 years ₱342.00
2000 Antipolo 2010- Quezon City
Alexander R.
2005 5 years 2007-2010- Quezon City ₱312.00
Canlas
Jerry Q. August 2008- Quezon City 2009-
10 years ₱342.00
Sabulao 1999 Antipolo 2010- Quezon City
Bernardo N.
1994 16 years 2007-2010- Quezon City ₱383.50
Tenedero

Sometime in May 2010, Our Haus experienced financial distress. To alleviate its condition, Our Haus
suspended some of its construction projects and asked the affected workers, including the respondents, to
take vacation leaves.

Eventually, the respondents were asked to report back to work but instead of doing so, they filed with the
LA a complaint for underpayment of their daily wages. They claimed that except for respondent Bernardo
N. Tenedero, their wages were below the minimum rates prescribed in the following wage orders from
2007 to 2010:

1. Wage Order No. NCR-13, which provides for a daily minimum wage rate of ₱362.00for the non-
agriculture sector (effective from August 28, 2007 until June 13, 2008); and

2. Wage Order No. NCR-14, which provides for a daily minimum wage rate of ₱382.00for the non-
agriculture sector (effective from June 14, 2008 until June 30, 2010).

The respondents also alleged that Our Haus failed to pay them their holiday, service incentive leave (SIL),
13th month and overtime pays.

The Labor Arbitration Rulings

Before the LA, Our Haus primarily argued that the respondents’ wages complied with the law’s minimum
requirement. Aside from paying the monetary amount of the respondents’ wages, Our Haus also
subsidized their meals (3 times a day), and gave them free lodging near the construction project they
were assigned to. In determining the total amount of the respondents’ daily wages, the value of these
benefits should be considered, in line with Article 97(f) of the Labor Code.

Our Haus also rejected the respondents’ other monetary claims for lack of proof that they were entitled to
it.

On the other hand, the respondents argued that the value of their meals should not be considered in
determining their wages’ total amount since the requirements set under Section 4 of DOLE Memorandum
Circular No. 2 were not complied with.

The respondents pointed out that Our Haus never presented any proof that they agreed in writing to the
inclusion of their meals’ value in their wages. Also, Our Haus failed to prove that the value of the facilities
it furnished was fair and reasonable. Finally, instead of deducting the maximum amount of 70% of the
value of the meals, Our Haus actually withheld its full value (which was Php290.00 per week for each
employee).

The LA ruled in favor of Our Haus. He held that if the reasonable values of the board and lodging would be
taken into account, the respondents’ daily wages would meet the minimum wage rate. As to the other
benefits, the LA found that the respondents were not able to substantiate their claims for it.

The respondents appealed the LA’s decision to the NLRC, which in turn, reversed it. Citing the case of
Mayon Hotel & Restaurant v. Adana, the NLRC noted that the respondents did not authorize Our Haus in
writing to charge the values of their board and lodging to their wages. Thus, the same cannot be credited.

The NLRC also ruled that the respondents are entitled to their respective proportionate 13th month
payments for the year 2010 and SIL payments for at least three years, immediately preceding May 31,
2010, the date when the respondents left Our Haus. However, the NLRC sustained the LA’s ruling that the
respondents were not entitled to overtime pay since the exact dates and times when they rendered
overtime work had not been proven.

Our Haus moved for the reconsideration of the NLRC’s decision and submitted new evidence (the five
kasunduans) to show that the respondents authorized Our Haus in writing to charge the values of their
meals and lodging to their wages.

The NLRC denied Our Haus’ motion, thus it filed a Rule 65 petition with the CA. In its petition, Our Haus
propounded a new theory. It made a distinction between deduction and charging. A written authorization
is only necessary if the facility’s value will be deducted and will not be needed if it will merely be charged
or included in the computation of wages. Our Haus claimed that it did not actually deduct the values of the
meals and housing benefits. It only considered these in computing the total amount of wages paid to the
respondents for purposes of compliance with the minimum wage law. Hence, the written authorization
requirement should not apply.

Our Haus also asserted that the respondents’ claim for SIL pay should be denied as this was not included
in their pro form a complaint. Lastly, it questioned the respondents’ entitlement to attorney’s fees because
they were not represented by a private lawyer but by the Public Attorney’s Office (PAO).

The CA’s Ruling

The CA dismissed Our Haus’ certiorari petition and affirmed the NLRC rulings in toto. It found no real
distinction between deduction and charging, and ruled that the legal requirements before any deduction or
charging can be made, apply to both. Our Haus, however, failed to prove that it complied with any of the
requirements laid down in Mabeza v. National Labor Relations Commission. Accordingly, it cannot consider
the values of its meal and housing facilities in the computation of the respondents’ total wages.

Also, the CA ruled that since the respondents were able to allege non-payment of SIL in their position
paper, and Our Haus, in fact, opposed it in its various pleadings, then the NLRC properly considered it as
part of the respondents’ causes of action. Lastly, the CA affirmed the respondent’s entitlement to
attorney’s fees.

Our Haus filed a motion for reconsideration but the CA denied its motion, prompting it to file the present
petition for review on certiorari under Rule 45.

The Petition
Our Haus submits that the CA erred in ruling that the legal requirements apply without distinction
―whether the facility’s value will be deducted or merely included in the computation of the wages. At any
rate, it complied with the requirements for deductibility of the value of the facilities. First, the five
kasunduans executed by the respondents constitute the written authorization for the inclusion of the
board and lodging’s values to their wages. Second, Our Haus only withheld the amount of ₱290.00 which
represents the food’s raw value; the weekly cooking cost (cook’s wage, LPG, water) at ₱239.40 per person
is a separate expense that Our Haus did not withhold from the respondents’ wages. This disproves the
respondents’ claim that it deducted the full amount of the meals’ value.

Lastly, the CA erred in ruling that the claim for SIL pay may still be granted though not raised in the
complaint; and that the respondents are entitled to an award of attorney’s fees.

The Case for the Respondents

The respondents prayed for the denial of the petition. They maintained that the CA did not err inruling
that the values of the board and lodging cannot be deducted from their wages for failure to comply with
the requirements set by law. And though the claim for SIL pay was not included in their pro forma
complaint, they raised their claims in their position paper and Our Haus had the opportunity to contradict
it in its pleadings.

Finally, under the PAO law, the availment of the PAO’s legal services does not exempt its clients from an
award of attorney’s fees.

The Court’s Ruling

We resolve to DENY the petition.

The nature of a Rule 45 petition ― only questions of law

Basic is the rule that only questions of law may be raised in a Rule 45 petition. However, in this case,
weare confronted with mixed questions of fact and law that are subsumed under the issue of whether Our
Haus complied with the legal requirements on the deductibility of the value of facilities. Strictly, factual
issues cannot be considered under Rule 45 except in the course of resolving if the CA correctly determined
whether or not the NLRC committed grave abuse of discretion in considering and appreciating the factual
issues before it.

In ruling for legal correctness, we have to view the CA decision in the same context that the petition for
certiorari it ruled upon was presented to it; we have to examine the CA decision from the prism of
whether it correctly determined the presence or absence of grave abuse of discretion in the NLRC decision
before it, not on the basis of whether the NLRC decision, on the merits of the case, was correct. In other
words, we have to be keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of
the NLRC decision challenged before it. This is the approach that should be basic in a Rule 45 review of a
CA ruling in a labor case. In question form, the question to ask in the present case is: did the CA correctly
determine that the NLRC did not commit grave abuse of discretion in ruling on the case? We rule that the
CA correctly did.

No substantial distinction between deducting and charging a facility’s value from the employee’s wage; the
legal requirements for creditability apply to both

To justify its non-compliance with the requirements for the deductibility of a facility, Our Haus asks us to
believe that there is a substantial distinction between the deduction and the charging of a facility’s value
to the wages. Our Haus explains that in deduction, the amount of the wage (which may already be below
the minimum) would still be lessened by the facility’s value, thus needing the employee’s consent. On the
other hand, in charging, there is no reduction of the employee’s wage since the facility’s value will just be
theoretically added to the wage for purposes of complying with the minimum wage requirement.

Our Haus’ argument is a vain attempt to circumvent the minimum wage law by trying to create a
distinction where none exists.

In reality, deduction and charging both operate to lessen the actual take-home pay of an employee; they
are two sides of the same coin. In both, the employee receives a lessened amount because supposedly,
the facility’s value, which is part of his wage, had already been paid to him in kind. As there is no
substantial distinction between the two, the requirements set by law must apply to both.

As the CA correctly ruled, these requirements, as summarized in Mabeza, are the following:

a. proof must be shown thatsuch facilities are customarily furnished by the trade;
 b. the provision of deductiblefacilities must be voluntarily accepted in writingby the employee; and

c. The facilities must be charged at fair and reasonable value.

We examine Our Haus’ compliance with each of these requirements in seriatim.

a. The facility must be customarily furnished by the trade

In a string of cases, we have concluded that one of the badges to show that a facility is customarily
furnished by the trade is the existence of a company policy or guideline showing that provisions for a
facility were designated as part of the employees’ salaries. To comply with this, Our Haus presented in its
motion for reconsideration with the NLRC the joint sinumpaang salaysayof four of its alleged employees.
These employees averred that they were recipients of free lodging, electricity and water, as well as
subsidized meals from Our Haus.

We agree with the NLRC’s finding that the sinumpaang salaysay statements submitted by Our Haus are
self-serving.1âwphi1 For one, Our Haus only produced the documents when the NLRC had already earlier
determined that Our Haus failed to prove that it was traditionally giving the respondents their board and
lodging. This document did not state whether these benefits had been consistently enjoyed by the rest of
Our Haus’ employees. Moreover, the records reveal that the board and lodging were given on a per
project basis. Our Haus did not show if these benefits were also provided in its other construction projects,
thus negating its claimed customary nature. Even assuming the sinumpaang salaysay to be true, this
document would still work against Our Haus’ case. If Our Haus really had the practice of freely giving
lodging, electricity and water provisions to its employees, then Our Haus should not deduct its values from
the respondents’ wages. Otherwise, this will run contrary to the affiants’ claim that these benefits were
traditionally given free of charge.

Apart from company policy, the employer may also prove compliance with the first requirement by
showing the existence of an industry-wide practice of furnishing the benefits in question among
enterprises engaged in the same line of business. If it were customary among construction companies to
provide board and lodging to their workers and treat their values as part of their wages, we would have
more reason to conclude that these benefits were really facilities.

However, Our Haus could not really be expected to prove compliance with the first requirement since the
living accommodation of workers in the construction industry is not simply a matter of business practice.
Peculiar to the construction business are the occupational safety and health (OSH) services which the law
itself mandates employers to provide to their workers. This isto ensure the humane working conditions of
construction employees despite their constant exposure to hazardous working environments. Under
Section 16 of DOLE Department Order (DO) No. 13, series of 1998, employers engaged in the construction
business are required to provide the following welfare amenities:

16.1 Adequate supply of safe drinking water

16.2 Adequate sanitary and washing facilities

16.3 Suitable living accommodation for workers, and as may be applicable, for their families

16.4 Separate sanitary, washing and sleeping facilities for men and women workers. [emphasis
ours]

Moreover, DOLE DO No. 56, series of 2005, which sets out the guidelines for the implementation of DOLE
DO No. 13, mandates that the cost of the implementation of the requirements for the construction safety
and health of workers, shall be integrated to the overall project cost. The rationale behind this is to ensure
that the living accommodation of the workers is not substandard and is strictly compliant with the DOLE’s
OSH criteria.

As part of the project cost that construction companies already charge to their clients, the value of the
housing of their workers cannot be charged again to their employees’ salaries. Our Haus cannot pass the
burden of the OSH costs of its construction projects to its employees by deducting it as facilities. This is
Our Haus’ obligation under the law.

Lastly, even if a benefit is customarily provided by the trade, it must still pass the purpose testset by
jurisprudence. Under this test, if a benefit or privilege granted to the employee is clearly for the
employer’s convenience, it will not be considered as a facility but a supplement. Here, careful
consideration is given to the nature of the employer’s business in relation to the work performed by the
employee. This test is used to address inequitable situations wherein employers consider a benefit
deductible from the wages even if the factual circumstances show that it clearly redounds to the
employers’ greater advantage.
While the rules serve as the initial test in characterizing a benefit as a facility, the purpose test additionally
recognizes that the employer and the employee do not stand at the same bargaining positions on benefits
that must or must not formpart of an employee’s wage. In the ultimate analysis, the purpose test seeks to
prevent a circumvention of the minimum wage law.

a1. The purpose test in jurisprudence

Under the law, only the value of the facilities may be deducted from the employees’ wages but not the
value of supplements. Facilities include articles or services for the benefit of the employee or his family
but exclude tools of the trade or articles or services primarily for the benefit of the employer or necessary
to the conduct of the employer’s business.

The law also prescribes that the computation of wages shall exclude whatever benefits, supplementsor
allowances given to employees. Supplements are paid to employees on top of their basic pay and are free
of charge. Since it does not form part of the wage, a supplement’s value may not be includedin the
determination of whether an employer complied with the prescribed minimum wage rates.

In the present case, the board and lodging provided by Our Haus cannot be categorized asfacilities but as
supplements. In SLL International Cables Specialist v. National Labor Relations Commission, this Court
was confronted with the issue on the proper characterization of the free board and lodging provided by the
employer. We explained:

The Court, at this point, makes a distinction between "facilities" and "supplements". It is of the view that
the food and lodging, or the electricity and water allegedly consumed by private respondents in this case
were not facilities but supplements. In the case of Atok-Big Wedge Assn. v. Atok-Big Wedge Co., the two
terms were distinguished from one another in this wise:

"Supplements", therefore, constitute extra remuneration or special privileges or benefits given to or

received by the laborers overand above their ordinary earnings or wages. "Facilities", on the other hand,
are items of expense necessary for the laborer's and his family's existence and subsistence so thatby
express provision of law (Sec. 2[g]), they form part of the wage and when furnished by the employer are
deductible therefrom, since if they are not so furnished, the laborer would spend and pay for them just the
same.

In short, the benefit or privilege given to the employee which constitutes an extra remuneration above
and over his basic or ordinary earning or wage is supplement; and when said benefit or privilege is part of
the laborers' basic wages, it is a facility. The distinction lies not so much in the kind of benefit or item
(food, lodging, bonus or sick leave) given, but in the purpose for which it is given.In the case at bench,
the items provided were given freely by SLLfor the purpose of maintaining the efficiency and health of its
workers while they were working attheir respective projects.

Ultimately, the real difference lies not on the kind of the benefit but on the purpose why it was given by
the employer. If it is primarily for the employee’s gain, then the benefit is a facility; if its provision is
mainly for the employer’s advantage, then it is a supplement. Again, this is to ensure that employees are
protected in circumstances where the employer designates a benefit as deductible from the wages even
though it clearly works to the employer’s greater convenience or advantage.

Under the purpose test, substantial consideration must be given to the nature of the employer’s business
inrelation to the character or type of work performed by the employees involved.

Our Haus is engaged in the construction business, a laborintensive enterprise. The success of its projects
is largely a function of the physical strength, vitality and efficiency of its laborers. Its business will be
jeopardized if its workers are weak, sickly, and lack the required energy to perform strenuous physical
activities. Thus, by ensuring that the workers are adequately and well fed, the employer is actually
investing on its business.

Unlike in office enterprises where the work is focused on desk jobs, the construction industry relies heavily
and directly on the physical capacity and endurance of its workers. This is not to say that desk jobs do not
require muscle strength; wesimply emphasize that in the construction business, bulk of the work
performed are strenuous physical activities.

Moreover, in the construction business, contractors are usually faced with the problem ofmeeting target
deadlines. More often than not, work is performed continuously, day and night, in order to finish the
project on the designated turn-over date. Thus, it will be more convenient to the employer if itsworkers
are housed near the construction site to ensure their ready availability during urgent or emergency
circumstances. Also, productivity issues like tardiness and unexpected absences would be minimized. This
observation strongly bears in the present case since three of the respondents are not residents of the
National Capital Region. The board and lodging provision might have been a substantial consideration in
their acceptance of employment in a place distant from their provincial residences.
Based on these considerations, we conclude that even under the purpose test, the subsidized meals and
free lodging provided by Our Haus are actually supplements. Although they also work to benefit the
respondents, an analysis of the nature of these benefits in relation to Our Haus’ business shows that they
were given primarily for Our Haus’ greater convenience and advantage. If weighed on a scale, the balance
tilts more towards Our Haus’ side. Accordingly, their values cannot be considered in computing the total
amount of the respondents’ wages. Under the circumstances, the dailywages paid to the respondents are
clearly below the prescribed minimum wage rates in the years 2007-2010.

b. The provision of deductible facilities must be voluntarily accepted in writing by the employee

In Mayon Hotel, we reiterated that a facility may only be deducted from the wage if the employer was
authorized in writingby the concerned employee. As it diminishes the take-home pay of an employee, the
deduction must be with his express consent.

Again, in the motion for reconsideration with the NLRC, Our Haus belatedly submitted five kasunduans,
supposedly executed by the respondents, containing their conformity to the inclusion of the values of the
meals and housing to their total wages. Oddly, Our Haus only offered these documents when the NLRC
had already ruled that respondents did not accomplish any written authorization, to allow deduction from
their wages. These five kasunduans were also undated, making us wonder if they had reallybeen executed
when respondents first assumed their jobs.

Moreover, in the earlier sinumpaang salaysay by Our Haus’ four employees, it was not mentioned that
they also executed a kasunduanfor their board and lodging benefits. Because of these surrounding
circumstances and the suspicious timing when the five kasunduanswere submitted as evidence, we agree
withthe CA that the NLRC committed no grave abuse of discretion in disregarding these documents for
being self serving.

c. The facility must be charged at a fair and reasonable value

Our Haus admitted that it deducted the amount of ₱290.00 per week from each of the respondents for
their meals. But it now submits that it did not actually withhold the entire amount as it did not figure in
the computation the money it expended for the salary of the cook, the water, and the LPG used for
cooking, which amounts to ₱249.40 per week per person. From these, it appears that the total meal
expense per week for each person is ₱529.40,making Our Haus’ ₱290.00 deduction within the 70% ceiling
prescribed by the rules.

However, Our Haus’ valuation cannotbe plucked out of thin air. The valuation of a facility must
besupported by relevant documents such as receipts and company records for it to be considered as fair
and reasonable. In Mabeza, we noted:

Curiously, in the case at bench, the only valuations relied upon by the labor arbiter in his decision were
figures furnished by the private respondent's own accountant, without corroborative evidence.On the
pretext that records prior to the July 16, 1990 earthquake were lost or destroyed, respondent failed to
produce payroll records, receipts and other relevant documents, where he could have, as has been
pointedout in the Solicitor General's manifestation, "secured certified copies thereof from the nearest
regional office of the Department of Labor, the SSS or the BIR". [emphasis ours]

In the present case, Our Haus never explained how it came up with the valuesit assigned for the benefits
it provided; it merely listed its supposed expenses without any supporting document. Since Our Haus is
using these additional expenses (cook’s salary, water and LPG) to support its claim that it did not withhold
the full amount of the meals’ value, Our Haus is burdened to present evidence to corroborate its claim.
The records however, are bereft of any evidence to support Our Haus’ meal expense computation.
Eventhe value it assigned for the respondents’ living accommodations was not supported by any
documentary evidence. Without any corroborative evidence, it cannot be said that Our Haus complied
withthis third requisite.

A claim not raised in the pro forma complaint may still beraised in the position paper.

Our Haus questions the respondents’ entitlement to SIL pay by pointing out that this claim was not
included in the pro forma complaint filed with the NLRC. However, we agree with the CA that such
omission does not bar the labor tribunals from touching upon this cause of action since this was raised and
discussed inthe respondents’ position paper. In Samar-Med Distribution v. National Labor Relations
Commission, we held:

Firstly, petitioner’s contention that the validity of Gutang’s dismissal should not be determined because it
had not been included in his complaint before the NLRC is bereft of merit. The complaint of Gutang was a
mere checklist of possible causes of action that he might have against Roleda. Such manner of preparing
the complaint was obviously designed to facilitate the filing of complaints by employees and laborers who
are thereby enabled to expediently set forth their grievances in a general manner. But the non-inclusion in
the complaint of the issue on the dismissal did not necessarily mean that the validity of the dismissal
could not be an issue.The rules of the NLRC require the submission of verified position papers by the
parties should they fail to agree upon an amicable settlement, and bar the inclusion of any cause of action
not mentioned in the complaint or position paper from the time of their submission by the parties. In view
of this, Gutang’s cause of action should be ascertained not from a reading of his complaint alone but also
from a consideration and evaluation of both his complaint and position paper.

The respondents’ entitlement to the other monetary benefits

Generally a party who alleges payment as a defense has the burden of proving it.Particularly in labor
cases, the burden of proving payment of monetary claims rests on the employeron the reasoning that the
pertinent personnel files, payrolls, records, remittances and other similar documents — which will show
that overtime, differentials, service incentive leave and other claims of workers have been paid — are not
in the possession of the worker but in the custody and absolute control of the employer.

Unfortunately, records will disclose the absence of any credible document which will show that
respondents had been paid their 13th month pay, holiday and SIL pays. Our Haus merely presented a
handwritten certification from its administrative officer that its employees automatically become entitled to
five days of service incentive leave as soon as they pass probation. This certification was not even
subscribed under oath. Our Haus could have at least submitted its payroll or copies of the pay slips of
respondents to show payment of these benefits. However, it failed to do so.

Respondents are entitled to attorney’s fees.

Finally, we affirm that respondents are entitled to attorney’s fees. Our Haus’ asserts that respondents’
availment of free legal services from the PAO disqualifies them from such award. We find this untenable.

It is settled that in actions for recovery of wages or where an employee was forced to litigate and, thus,
incur expenses to protect his rights and interest, the award of attorney's fees is legally and morally
justifiable. Moreover, under the PAO Law or Republic Act No. 9406, the costs of the suit, attorney's fees
and contingent fees imposed upon the adversary of the PAO clients after a successful litigation shall be
deposited in the National Treasury as trust fund and shall be disbursed for special allowances of
authorized officials and lawyers of the PAO.

Thus, the respondents are still entitled to attorney's fees. The attorney's fees awarded to them shall be
paid to the PAO. It serves as a token recompense to the PAO for its provision of free legal services to
litigants who have no means of hiring a private lawyer.

WHEREFORE, in light of these considerations, we conclude that the Court of Appeals correctly found that
the National Labor Relations Commission did not abuse its discretion in its decision of July 20, 2011 and
Resolution of December 2, 2011.1âwphi1 Consequently we DENY the petition and AFFIRM the Court of
Appeals' decision dated May 7, 2012 and resolution dated November 27, 2012 in CA-G.R. SP No. 123273.
No costs.

SO ORDERED.

15.

G.R. No. 162324 February 4, 2009

RFM CORPORATION-FLOUR DIVISION and SFI FEEDS DIVISION, Petitioner,

vs.
KASAPIAN NG MANGGA-GAWANG PINAGKAISA-RFM (KAMPI-NAFLU-KMU) and SANDIGAN AT
UGNAYAN NG MANGGAGAWANG PINAGKAISA-SFI (SUMAPI-NAFLU-KMU) Respondents.

DECISION

CARPIO MORALES, J.:

Petitioner RFM Corporation (RFM) is a domestic corporation engaged in flour-milling and animal feeds
manufacturing. Sometime in 2000, its Flour Division and SFI Feeds Division entered into collective
bargaining agreements (CBAs) with their respective labor unions, the Kasapian ng Manggagawang
Pinagkaisa-RFM (KAMPI-NAFLU-KMU) for the Flour Division, and Sandigan at Ugnayan ng Manggagawang
Pinagkaisa-SFI (SUMAPI-NAFLU-KMU) for the Feeds Division (respondents). The CBAs, which contained
similar provisions, were effective for five years, from July 1, 2000 up to June 30, 2005.

Sec. 3, Art. XVI of each of the CBAs reads:

Section. 3. Special Holidays with Pay – The COMPANY agrees to make payment to all daily paid
employees, in respect of any of the days enumerated hereunto if declared as special holidays by the
national government:

a) Black Saturday

b) November 1

c) December 31

The compensation rate shall be the regular rate. Any work beyond eight (8) hours shall be paid the
standard ordinary premium. (Emphasis and underscoring supplied)

During the first year of the effectivity of the CBAs in 2000, December 31 which fell on a Sunday was
declared by the national government as a special holiday. Respondents thus claimed payment of their
members’ salaries, invoking the above-stated CBA provision. Petitioner refused the claims for payment,
averring that December 31, 2000 was not compensable as it was a rest day. The controversy resulted in a
deadlock, drawing the parties to submit the same for voluntary arbitration.

Following the submission by the parties of their respective position papers, Voluntary Arbitrator (VA)
Bernardino M. Volante, by Decision1 of October 11, 2001, declared that the above-quoted provision of the
CBA is clear. It accordingly ruled in favor of respondents and ordered petitioner to pay the salaries of
respondents’ members for December 31, 2000, and to pay attorney’s fees to respondents equivalent to
10% of the monetary award.

Its motion for reconsideration of the VA ruling having been denied, 2 petitioner appealed to the Court of
Appeals which affirmed the same by Decision3 dated October 30, 2003.

The appellate court held that if it was indeed petitioner’s intent to pay the salaries of daily-paid employees
during a special holiday, even if unworked, only if such special holiday fell on weekdays, then it should
have been clearly and expressly stipulated in the CBAs. And it held inapplicable Kimberly Clark Philippines
v. Lorredo4 cited by petitioner which case held that whenever there is a conflict between the words in the
CBA and the evident intention of the parties, the latter prevails. For, so the appellate court explained,
there were no words or provisions in the CBAs which would result in an absurd interpretation vis a vis the
parties’ true intention.1avvphi1

In sustaining the award of attorney’s fees, the appellate court ruled that respondents were entitled thereto
as they were compelled to engage a lawyer to pursue their claims.

Petitioner’s motion for reconsideration having been denied, the present petition was filed.

Petitioner insists that the CBA provision in question was intended to protect the employees from reduction
of their take-home pay, hence, it was not meant to remunerate them on Sundays, which are rest days,
nor to increase their salaries.

On the award of attorney’s fees, petitioner argues that it is not warranted as it did not arbitrarily refuse to
pay respondents’ demands.

The petition is bereft of merit.

If the terms of a CBA are clear and have no doubt upon the intention of the contracting parties, as in the
herein questioned provision, the literal meaning thereof shall prevail. That is settled. 5 As such, the daily-
paid employees must be paid their regular salaries on the holidays which are so declared by the national
government, regardless of whether they fall on rest days.

Holiday pay is a legislated benefit enacted as part of the Constitutional imperative that the State shall
afford protection to labor. Its purpose is not merely "to prevent diminution of the monthly income of the
workers on account of work interruptions. In other words, although the worker is forced to take a rest, he
earns what he should earn, that is, his holiday pay."6 (Emphasis and underscoring supplied)1avvphi1.zw+

The CBA is the law between the parties, hence, they are obliged to comply with its provisions.7 Indeed, if
petitioner and respondents intended the provision in question to cover payment only during holidays
falling on work or weekdays, it should have been so incorporated therein.

Petitioner maintains, however, that the parties failed to foresee a situation where the special holiday
would fall on a rest day. The Court is not persuaded. The Labor Code specifically enjoins that in case of
doubt in the interpretation of any law or provision affecting labor, it should be interpreted in favor of
labor.8
Respondents having been compelled to litigate as a result of petitioner’s failure to satisfy their valid claim,
the Court deems it just and equitable to sustain the award of attorney’s fees.

WHEREFORE, the petition is DENIED.

SO ORDERED.

16.

G.R. No. 177524 July 23, 2014

NATIONAL UNION OF WORKERS IN HOTEL RESTAURANT AND ALLIED INDUSTRIES

(NUWHRAIN-APL-IUF), PHILIPPINE PLAZA CHAPTER, Petitioner,
vs.
PHILIPPINE PLAZA HOLDINGS, INC., Respondent.

DECISION

BRION, J.:

We resolve the petition for review on certiorari, 1 challenging the January 31, 2007 decision 2 and the April
20, 2007 resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 93698.

This CA decision reversed the July 4, 2005 decision 4 of the National Labor Relations Commission (NLRC) in
NLRC NCR CA No. 031977-02 (NLRC NCR-30-05-02011-01) that in tum, reversed and set aside the April
30, 2002 decision5 of the Labor Arbiter (LA).

The LA dismissed the complaint for non-payment of service charges filed by petitioner National Union of
Workers in Hotel Restaurant and Allied Industries (NUWHRAIN-APL-IUF), Philippine Plaza Chapter (Union).

The Factual Antecedents

The Union is the collective bargaining agent of the rank-and-file employees of respondent Philippine Plaza
Holdings, Inc. (PPHI).

On November 24, 1998, the PPHI and the Union executed the "Third Rank-and-File Collective Bargaining
Agreement as Amended"6 (CBA). The CBA provided, among others, for the collection, by the PPHI, of a
ten percent (10%) service charge on the saleof food, beverage, transportation, laundry and rooms. The
pertinent CBA provisions read:

SECTION 68. COLLECTION. The HOTEL shall continue to collect ten percent (10%) service charge on the
sale of food, beverage, transportation, laundry and rooms except on negotiated contracts and special
rates. [Emphasis supplied]

SECTION 69. DISTRIBUTION. The service charge to be distributed shall consist of the following:

Effective Food & Beverage Room, Transportation & valet

1998 95% 100%
1997 95% 100%

The distributable amount will beshared equally by all HOTEL employees, including managerial employees
but excluding expatriates, with three shares to be given to PPHI Staff and three shares to the UNION (one
for the national and two for the local funds) that may be utilized by them for purposes for which the
UNION may decide.

These provisions merely reiterated similar provisions found in the PPHIUnion’s earlier collective bargaining
agreement executed on August 29, 1995.7

On February 25, 1999, the Union’s Service Charge Committee informed the Union President, through an
audit report (1st audit report),8 of uncollected service charges for the last quarter of 1998 amounting to
₱2,952,467.61. Specifically, the audit report referred to the service charges from the following items: (1)
"Journal Vouchers;" (2) "Banquet Other Revenue;" and (3) "Staff and Promo." The Union presented this
audit report to the PPHI’s management during the February 26, 1999 Labor Management Cooperation
Meeting (LMCM).9 The PPHI’s management responded that the Hotel Financial Controller would need to
verify the audit report.
Through a letter dated June 9, 1999,10 the PPHI admitted liability for ₱80,063.88 out of the ₱2,952,467.61
thatthe Union claimed as uncollected service charges. The PPHI denied the rest of the Union’s claims
because: (1) they were exempted from the service charge being revenues from "special promotions"
(revenue from the Westin Gold Card sales) or "negotiated contracts" (alleged revenue from the Maxi-
Media contract); (2) the revenues did not belong to the PPHI but to third-party suppliers; and (3) no
revenue was realized from these transactions as they were actually expenses incurred for the benefit of
executives or by way of good-will to clients and government officials.

During the July 12, 1999 LMCM,11 the Union maintained its position on uncollected service charges so that
a deadlock on the issue ensued. The parties agreed to refer the matter to a third party for the solution.
They considered two options – voluntary arbitration or court action – and promised to get back to each
other on their chosen option.

In its formal reply (to the PPHI’sJune 9, 1999 letter) dated July 21, 1999 (2nd audit report), 12 the Union
modified its claims. It claimed uncollected service charges from: (1) "Journal Vouchers - Westin Gold
Revenue and Maxi-Media" (F&B and Rooms Barter); (2) "Banquet and Other Revenue;" and (3) "Staff and
Promo."

On August 10, 2000, the Union’s Service Charge Committee made another service charge audit report for
the years 1997, 1998 and 1999 (3rd audit report). 13 This 3rd audit report reflected total uncollected
service charges of ₱5,566,007.62 from the following entries: (1) "Journal Vouchers;" (2) "Guaranteed No
Show;" (3) "Promotions;" and (4) "F & B Revenue." The Union President presented the 3rd audit report to
the PPHI on August 29, 2000.

When the parties failed to reachan agreement, the Union, on May 3, 2001, filed before the LA (Regional
Arbitration Branch of the NLRC) a complaint14 for non-payment of specified service charges. The Union
additionally charged the PPHI with unfair labor practice (ULP) under Article 248 of the Labor Code, i.e., for
violation of their collective bargaining agreement.

In its decision15 dated April 30, 2002, the LA dismissed the Union’s complaint for lack of merit. The LA
declared that the Union failed to show, by law, contract and practice, its entitlement to the payment of
service charges from the entries specified in its audit reports (specified entries/transactions).

The LA pointed out that Section 68 of the CBA explicitly requires, as a precondition for the distribution of
service charges in favor of the covered employees, the collection of the 10% service charge on the "sale of
food, beverage, transportation, laundry and rooms;" at the same time, the provision exempts from its
coverage "negotiated contracts" and "special rates" that the LA deemed as non-revenue generating
transactions involving "food, beverage, transportation, laundry and rooms." The Union failed to prove that
the PPHI collected 10% service charges on the specified entries/transactions that could have triggered the
PPHI’s obligation under this provision.

Particularly, the LA pointed out that, first, the only evidence on record that could have formed the basis of
the Union’s claim for service charges was the PPHI’s admission that, as a matter of policy, it has been
charging, collecting and distributing to the covered employees 10% service charge on the fifty percent
(50%) of the total selling price of the "Maxi-Media F & B" and on the "Average House" rate of the "Maxi-
Media Rooms." And it did so, notwithstanding the fact that the "Maxi-Media F & B and Rooms Barter" is a
"negotiated contract" and/or "special rate" that Section 68 explicitly excludes from the service charge
coverage.

Second,while the PPHI derived revenues from the sale of the Westin Gold Cards (Westin Gold Revenue),
the PPHI did not and could not have collected a 10% service charge as these transactions could not be
considered as sale of food, beverage, transportation, laundry and rooms that Section 68 contemplates.

Third, the "Staff and Business Promotion and Banquet" entry refers to the expenses incurred by the PPHI’s
Marketing Department and Department Heads and Hotel executives either as part of their perks or the
PPHI’s marketing tool/public relations. These are special rates that are essentially non-revenue generating
items.

Fourth, the "Backdrop" entry refers to services undertaken by third parties payment for which were made
of course to them; hence, this entry/transaction could not likewise be considered as sale of services by
PPHI for which collection of the 10% service charge was warranted.

Lastly, the LA equally brushed aside the Union’s claim of ULP declaring that the PPHI was well within its
legal and contractual right to refuse payment of service charges for entries from which it did not collect
any service charge pursuant tothe provision of their CBA.

The NLRC’s ruling

In its decision16 of July 4, 2005, the NLRC reversed the LA’s decision and considered the specified
entries/transactions as "service chargeable." As the PPHI failed to prove that it paid or remitted the
required service charges, the NLRC held the PPHI liable to pay the Union ₱5,566,007.62 representing the
claimed uncollected service charges for the years 1997, 1998 and 1999 per the 3rd audit report.

The PHHI went to the CA on a petition for certiorari 17 after the NLRC denied its motion for
reconsideration.18

The CA’s ruling

The CA granted the PPHI’s petition in its January 31, 2007 decision. 19 It affirmed the LA’s decision but
ordered the PPHI to pay the Union the amount of ₱80,063.88 as service charges that it found was due
under the circumstances. The CA declared that no service charges were due from the specified
entries/transactions; either these constituted "negotiated contracts" and "special rates" that Section 68 of
the CBA explicitly excludes from the coverage of service charges, or they were cited bases that the Union
failed to sufficiently prove.

The CA pointed out that: one, the "Westin Gold Card Revenues" entry involved the sale, not of food,
beverage, transportation, laundry and rooms, but of a "contractual right" to be charged a lesser rate for
the products and services that the Hotel and the stores within it provide. At any rate, the PPHI charges,
collects and distributes to the covered employees the CBAagreed service charges whenever any Westin
Gold Card member purchases food, beverage, etc. Two, the "Maxi-Media F & B and Rooms and Barter"
entry did not involve any sale transaction that Section 68 contemplates. The CA pointed out that the
arrangement20 between the PPHI and Maxi-Media International, Inc. was not one of sale but an
innominate contract of facio ut des, i.e., in exchange for the professional entertainment services provided
by Maxi-Media, the Hotel agreed to give the former ₱2,800,000.00 worth of products and services.The CA
added that this agreement falls under "negotiated contracts" that Section 68 explicitly exempts. Three,
the sale of "Gift Certificates" does not involve the CBA-contemplated "sale of food, beverage, etc." Four,
the Union failed to show the source of its computations for its "Guaranteed No Show" and "F & B Revenue"
claims. Five, the "Business Promotions" entry likewise did not involve any sale; these were part of the
PPHI’s business expenses in the form of either signing benefits for the PPHI’s executives or asmarketing
tool used by the PPHI’s marketing personnel to generate goodwill. And six, the Union’s claims for service
charges that the PPHI allegedly collected prior to May 3, 1998 or three years before the Union filed
itscomplaint on May 3, 2001 had already prescribed per Article 291 of the Labor Code.

The Union filed the present petition after the CA denied its motion for Reconsideration21

in the CA’s April 20, 2007 resolution.22

The Petition

The Union argues that the CA clearly misapprehended and misappreciated, with grave abuse of discretion,
the facts and evidence on record. It maintains that the specified entries/transactions are revenue based
transactions which, per Section 68 and 69 of the CBA, clearly called for the collection and distribution of a
10% service charge in favor of the covered employees. Particularly, the Union argues that: (1) the
"Westin Gold Cards" serve not only as a discount card but also as a "pre-paid" card that provide its
purchasing members complimentary amenities for which the Hotel employees rendered services and
should, therefore, had been subjected to the 10% service charge; (2) the PPHI failed to prove that it had
paid and distributed to the covered employees the service charge due on the actual discounted sales of
food, beverage, etc., generated by the "Westin Gold Cards;" (3) the Hotel employees likewise rendered
services whenever the Maxi-Media International, Inc. consumed or availed part of the 2,800,000.00 worth
of goods and services pursuant to its agreement with the PPHI; (4) the "Maxi-Media" discounts should be
charged to the PPHI as part of its expenses and not the Union’s share in the service charges; (5) the PPHI
has a separate budget for promotions, hence the "Business Promotions" entry should likewise had been
subjected to the 10% service charge; (6) the sale of "Gift Certificates," recorded in the PPHI’s "Journal
Vouchers" as "other revenue/income," constituted a revenue transaction for which service charges were
due; (7) the PPHI admitted that service charges from "Guaranteed No Show" were due; and (8) it
properly identified through reference numbers the uncollected service charges from "Food and Beverage
Revenue."

The Union contends that inrefusing to collect and remit the CBA-mandated service charges that the PPHI
insists were non-revenue transactions falling under "Negotiated Contracts" and/or "Special Rates," the
PPHI, in effect, contravened the employees’ rights to service charges under the law and the CBA. The
Union also contends that the term "Negotiated Contracts" should be applied to "airline contracts" only that
they (the Union and the PPHI) intended when they executed the CBA. It points out that at the time the
CBA was executed, the PPHI had an existing agreement with Northwest Airlines to which the term
"Negotiated Contracts" clearly referred to. Further, the Union argues that its claim for unpaid services
charges for the year 1997 and part of 1998 had not yet prescribed. Applying Article 1155 of the Civil Code
in relation toArticle 291 of the Labor Code, the Union points out that the running of the prescriptive period
for the filing of its claim was interrupted when it presented to the PPHI its 1st audit report during the
February 26, 1999 LMCMand when the PPHI admitted the service charges due to the Union inthe PPHI’s
June 9, 1999 letter.

The Union additionally argues that the PPHI failed to conform to the generally accepted accounting
standards when it reclassified the revenue items as expense items.

Finally, the Union contends that the PPHI’s refusal, despite repeated demands, to distribute the
unremitted service charges and recognize its right to service charges on the specified entries; the PPHI’s
deliberate failure to disclose its financial transactions and audit reports; and the PPHI’s reclassification of
the revenues into expense items constitute gross violation of the CBA that amounts to whatthe law
considers as ULP.

The Case for the Respondent

The PPHI primarily counters, in its comment,23 that the Union’s call for the Court to thoroughly re-
examinethe records violates the Rule 45 proscription against questions of facts.The PPHI points out that
Rule 45 of the Rules of Court under which the petition is filed requires that only questions of law be raised.
In addition, the factual findings of the LA that had been affirmed by the CA deserve not only respect but
even finality.

On the petition’s merits, the PPHI argues that the specified entries/transactions for which the Union claims
service charges: (1) were not revenue generating transactions; (2) that did not involve a sale of food,
beverage, rooms, transportation or laundry; and/or (3) were in the nature of negotiated contracts and
special rates that Section 68 of the CBA specifically excepts from the collection of service charges.
Correlatively, Article 96 of the Labor Code requires the collection of service charges as a condition
precedent to its distribution or payment. Thus, as no service charges were collected on the specified
entries/transactions that the CBA expressly excepts, the Union’s claim for unpaid service charges clearly
had no basis.

To be precise, the PPHI points out that, first, the sale per se of the "Westin Gold Cards" did not involve a
sale of food, beverage, etc. that Section 68 of the CBA contemplates. The discounted sales of food,
beverage, etc. to Westin Gold Card holders, on the other hand, had already been subjected to service
charges inclusive of the discount, i.e., computed on the gross sales of food, beverage, etc. to the card
holders, and which service charges it had already distributed to the covered employees. Second, its
agreement with Maxi-Media involved an exchange or barter transaction, i.e., its food and Hotel services in
exchange for Maxi-Media’s entertainment services that did not generate income. This agreement likewise
falls under "Negotiated Contracts" that Section 68 clearly excepts. And, in any case, it had already
collected, and distributed to the covered employees, the service charges on the food, beverage, etc. that
Maxi-Media consumed based on the monthly average rate of the rooms and on the 50% rate of the price
of the consumed food and beverage. Third, the Union failed to prove its claims for uncollected service
charges from "Guaranteed No Show" and "Business Promotions." Fourth, the "Food and Beverage other
Revenue" entry refers to the PPHI’s transactions with external service providers the payment for whose
services could not be considered as the PPHI’s revenue. Fifth, the sale per se of the "Gift Certificates" also
did not involve the Section 68-contemplated sale of food, beverage, etc. and the Union failed to prove that
the presented Gift Certificateshad actually been consumed, i.e., used within the Hotel premises for food,
beverage, etc. And sixth, it had never been its practice to collect service charges on the specified
entries/transactions that could have otherwise resulted in what the Union considers as "partial abolition of
service charges" when it refused to collect service charges from them.

The PPHI also disputes what it considers as the Union’s strained interpretation of the CBA exception of
"Negotiated Contracts" as applicable to airline contracts only. It points out that the clear wordings of
Section 68 of the CBA plainly show the intent to except, in a general and broad sense, "Negotiated
Contracts" and "Special Rates" as to include the "Westin Gold Cards" and "Maxi-Media" barter agreement.
The PPHI additionally argues that the CBA’s exception of "Negotiated Contracts" and "Special Rates" from
the collection of service charges does not violate Article 96 of the Labor Code. It points out that Article 96
merely provides for the minimum percentage distribution, between it (the PPHI) as the employer and the
Hotel’s covered employees, of the collected service charges which their CBA more than satisfied. It also
points out that Article 96 does not prohibit the exception of certain transactions from the coverage and/or
collection of service charges that it (as the employer) and the Union (in behalf of the covered Hotel
employees) had voluntarily and mutually agreed on in their CBA.1âwphi1 And in fact, the Union’s refusal
to recognize these clear and express exceptions constituted a violation of their agreement.

Further, the PPHI maintains that the Union’s claim for the alleged uncollected service charges for the year
1997 and the early months of 1998 had already prescribed per Article 291 of the Labor Code.

Finally, the PPHI points out that the issue in this case is not whether service charges had been paid.
Rather, the clear issue is whether or not service charges should have been collected (and distributed to
the covered employees) for the specified entries/transactions that the LA and the CA correctly addressed
and which the NLRC clearly missed as it rendered a decision without any factual or legal basis.

The Court's Ruling

We find the petition unmeritorious.

Preliminary considerations: jurisdictional limitations of the Court’s Rule 45 review of the CA’s Rule 65
decision in labor cases; the Montoya ruling and factual-issue-bar-rule

In a petition for review on certiorari under Rule 45 of the Rules of Court, we review the legal errors that
the CA may have committed in the assailed decision, in contrastwith the review for jurisdictional errors
that we undertake in an original certiorari action. In reviewing the legal correctness of the CA decision in a
labor case taken under Rule 65 of the Rules of Court, we examine the CA decision in the context that it
determined the presence or the absence of grave abuse of discretion in the NLRC decision before it and
not on the basis of whether the NLRC decision, on the merits of the case, was correct. In other words, we
proceed from the premise that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC
decision challenged before it. Within this limited scope of our Rule 45 review, the question that we ask is:
Did the CA correctly determine whether the NLRC committed grave abuse of discretion in ruling on the
case?24

In addition, the Court’s jurisdiction in a Rule 45 petition for review on certiorari is limited to resolving only
questions of law. A question of law arises when the doubt or controversy exists as to what law pertains to
a particular set of facts; and a question of fact arises when the doubt or controversy pertains to the truth
or falsity of the alleged facts.25

The present petition essentially raises the question – whether the Union may collect from the PPHI, under
the terms of the CBA, its share of the service charges. This is a clear question of law that falls well within
the Court’s power in a Rule 45 petition.

Resolution of this question of law, however, is inextricably linked with the largely factual issue of whether
the specified entries/transactions fall within the generally covered sale of food, beverage, transportation,
etc. from which service charges are due or within the CBA excepted "Negotiated Contracts" and "Special
Rates." It also unavoidably requires resolution of another factual issue, i.e., whether the Union’s claim for
service charges collected for the year 1997 and the early months of 1998 had already prescribed. As
questions of fact, they are proscribed by our Rule 45 jurisdiction; we generally cannot address these
factual issues except to the extent necessary to determine whether the CA correctly found the NLRC in
grave abuse of discretion in granting the Union’s claim for service charges from the specified
entries/transactions.

The jurisdictional limitations of our Rule 45 review of the CA’s Rule 65 decision in labor cases constrain us
to deny the present petition for clear lack of legal error in the CA’s decision.Our consideration of the facts
taken within this limited scope of our factual review power, convinces us that grave abuse of discretion
attended the NLRC’s decision. At what point and to what extent the NLRC gravely abusedits discretion is
the matter we shall discuss below.

The NLRC’s patently erroneous appreciation of the real issue in the present controversy, along with the
facts and the evidence, amounted to grave abuse of discretion

In granting the Union’s claim, the NLRC simply declared that the PPHI "has not shown any proof that it
paid or remitted what is due to the Union and its members" and concluded that the specified
entries/transactions were "service chargeable." This NLRC conclusion plainly failed to appreciate that it
involved only the alleged uncollected service charges from the specified entries/transactions. The NLRC
likewise, in the course of its ruling, did not point to any evidence supporting its conclusion.

In deciding as it did, the NLRC patently proceeded from the wrong premise, i.e., that the PPHI did not at
all distribute to the Hotel’s covered employees their share in the collected service charges. It likewise
erroneously assumed that all the specified entries/transactions were subject to service charges and that
the PPHI collected service charges from them as its ruling was patently silent on this point. The NLRC also
erroneously assumed that each and every transaction that the PPHI entered into was subject to a service
charge.

What the NLRC clearly and conveniently overlooked was the underlying issue of whether service charges
are due from the specified entries/transactions, i.e., whether the specified entries/transactions are
covered by the CBA’s general-rule provisions on the collection of service charges or whether they are
excepted because they fall within the excepted "Negotiated Contracts" and "Special Rates" or simply did
not involve a "sale of food, beverage, etc." from which service charges are due. This understanding of this
case’s real issue is an indispensable requisite in the proper resolution of the controversy and a task that
the NLRC, as a tribunal exercising quasi-judicial power, mustperform with circumspection and utmost
diligence. The patent failure led to its manifestly flawed conclusions that were belied by the underlying
facts. By so doing, the NLRC acted outside the clear contemplation of the law. 26

Accordingly, we affirm the CA’s decision to be legally correct as it correctly reversed the NLRC decision for
grave abuse of discretion.

Nature of a CBA; rules inthe interpretation of CBA provisions

A collective bargaining agreement, as used in Article 252 (now Article 262) 27 of the Labor Code, is a
contract executed at the request of either the employer or the employees’ exclusive bargaining
representative with respect to wages, hours of work and all other terms and conditions of employment,
including proposals for adjusting any grievances or questions under such agreement. 28 Jurisprudence
settles that a CBA is the law between the contracting parties who are obliged under the law to comply with
its provisions.29

As a contract and the governing law between the parties, the general rules of statutory construction apply
in the interpretation of its provisions. Thus, if the terms of the CBA are plain, clear and leave no doubt on
the intention of the contracting parties, the literal meaning of its stipulations, as they appear on the face
of the contract, shall prevail.30 Only when the words used are ambiguous and doubtful or leading to
several interpretations of the parties’ agreement that a resort to interpretation and construction is called
for.31

No service charges were due from the specified entries/transactions; they either fall within the CBA-
excepted "Negotiated Contracts" and "Special Rates" or did not involve "a sale of food, beverage, etc."

The Union anchors its claim for services charges on Sections 68 and 69 of the CBA, in relation with
Article96 of the Labor Code. Section 68 states that the sale of food, beverage, transportation, laundry and
rooms are subject to service charge at the rate often percent (10%). Excepted from the coverage of the
10% service charge are the so-called "negotiated contracts" and "special rates."

Following the wordings of Section 68 of the CBA, three requisites must be present for the provisions on
service charges to operate: (1) the transaction from which service charge is sought to be collected is a
sale; (2) the sale transaction covers food, beverage, transportation, laundry and rooms; and (3) the sale
does not result from negotiated contracts and/or at special rates.

In plain terms, all transactions involving a "sale of food, beverage, transportation, laundry and rooms" are
generally covered. Excepted from the coverage are, first, non-sale transactions or transactions that do not
involve any sale even though they involve "food, beverage, etc." Second, transactions that involve a sale
but do not involve "food, beverage, etc." And third, transactions involving "negotiated contracts" and
"special rates" i.e., a "sale of food, beverage, etc." resulting from "negotiated contracts" or at "special
rates;" non-sale transactions involving "food, beverage, etc." resulting from "negotiated contracts" and/or
"special rates;" and sale transactions, but not involving "food, beverage, etc.," resulting from "negotiated
contracts" and "special rates." Notably, the CBA does not specifically define the terms "negotiated
contracts" and "special rates." Nonetheless, the CBA likewise does not explicitly limit the use of these
terms to specified transactions. With particular reference to "negotiated contracts," the CBA does not
confine its application to "airline contracts" as argued by the Union. Thus, as correctly declared by the CA,
the term "negotiated contracts" should be read as applying to all types of negotiated contracts and not to
"airlines contracts" only. This is in line with the basic rule of construction that when the terms are clear
and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations
shall prevail. A constricted interpretation of this term, i.e., as applicable to "airlines contracts" only, must
be positively shown either by the wordings of the CBA or by sufficient evidence of the parties’ intention to
limit its application. The Union completely failed to provide support for its constricted reading of the term
"negotiated contracts," either from the wordings of the CBA or from the evidence.

In reversing the NLRC’s ruling and denying the Union’s claim, the CA found the specified
entries/transactions as either falling under the excepted negotiated contracts and/or special rates or not
involving a sale of food, beverage, etc. Specifically, it considered the entries "Westin Gold

Cards Revenue" and "Maxi Media Barter" to be negotiated contracts or contracts under special rates, and
the entries "Business Promotions" and "Gift Certificates" as contracts that did not involve a sale of food,
beverage, etc. The CA also found no factual and evidentiary basis to support the Union’s claim for service
charges on the entries "Guaranteed No show" and "F & B Revenue."

Our consideration of the records taken under our limited factual review power convinces us that these
specified entries/transactions are indeed not subject to a 10% service charge. We thus see no reason to
disturb the CA’s findings on these points.

The PPHI did not violate Article 96 of the Labor Code when they refused the Union’s claim for service
charges on the specified entries/transactions
Article 96 of the Labor Code provides for the minimum percentage distribution between the employer and
the employees of the collected service charges, and its integration inthe covered employees’ wages in the
event the employer terminates its policy of providing for its collection. It pertinently reads:

Art. 96. Service Charges.

x x x In case the service charge is abolished, the share of the covered employees shall be considered
integrated in their wages.

This last paragraph of Article 96 of the Labor Code presumes the practice of collecting service charges and
the employer’s termination of this practice. When this happens, Article 96 requires the employer to
incorporate the amount that the employees had been receiving as share of the collected service charges
into their wages. Incases where no service charges had previously been collected (as where the employer
never had any policy providing for collection of service charges or had never imposed the collection of
service charges on certain specified transactions), Article 96 will not operate.

In this case, the CA found that the PPHI had not in fact been collecting services charges on the specified
entries/transactions that we pointed out as either falling under "negotiated contracts" and/or "special
rates" or did not involve a "sale of food, beverage, etc." Accordingly, Article 96 of the Labor Code finds no
application in this case; the PPHI did not abolish or terminate the implementation of any company policy
providing for the collection of service charges on specified

entries/transactions that could have otherwise rendered it liable to pay an amount representing the
covered employees’ share in the alleged abolished service charges.

The Union’s claim for service charges for the year 1997 and the early months of 1998 could not have yet
prescribed at the time it filed its complaint on May 3, 2001; Article 1155 of the Civil Code applies
suppletorily to Article 291 of the Labor Code

Article 291 (now Article 305)32 of the Labor Code states that "all money claims arising from employer-
employee relations x x x shall be filed within three (3) years from the time the cause of action accrued;
otherwise, they shall forever be barred." [Emphasis supplied]

Like other causes of action, the prescriptive period for money claims under Article 291 of the Labor Code
is subject to interruption. And, in the absence of an equivalent Labor Codeprovision for determining
whether Article 291’s three-year prescriptive period may be interrupted, Article 1155 of the Civil
Code33 may be applied. Thus, the period of prescription of money claims under Article 291 is interrupted
by: (1) the filing of an action; (2) a written extrajudicial demand by the creditor; and (3) a written
acknowledgment of the debt by the debtor.

In the present petition, the facts indisputably showed that as early as 1998, the Union demanded, via the
1st audit report, from the PPHI the payment and/or distribution of the alleged uncollected service charges
for the year 1997. From thereon, the parties went through negotiations (LCMC) to settle and reconcile on
their respective positions and claims.

Under these facts – the Union’s written extrajudicial demand through its 1st audit report and the
successive negotiation meetings between the Union and the PPHI – the running of the three-year
prescriptive period under Article 291 of the Labor Code could have effectively been interrupted.
Consequently, the Union’s claims for the alleged uncollected service charges for the year 1997 could not
have yet prescribed at the time it filed its complaint on May 3, 2001.

This non-barring effect of prescription, notwithstanding (i.e., that the running of the three-year
prescriptive period had effectively been interrupted – by the Union's written extrajudicial demand on the
PPHI), the CA, as it affirmed the LA, still correctly denied the Union's claims for the alleged uncollected
and/or undistributed service charges on the specified entries/transactions for the year 1997 and the early
part of 1998. As the CA found and discussed in its decision, and with which we agree as amply supported
by factual and legal bases, the nature of these specified entries/transactions as either excepted from the
collection of service charges or not constituting a "sale of food, beverage, etc.," and the Union's failure to
support its claims by sufficient evidence warranted, without doubt, the denial of the Union's action.

In sum, we find the CA's denial of the Union's claim for service charges from the specified
entries/transactions legally correct and to be well supported by the facts and the law. The CA correctly
reversed for grave abuse of discretion the NLRC's decision.

WHEREFORE, in light of these considerations, we hereby DENY the petition. We AFFIRM the decision dated
January 31, 2007 and resolution dated April 20, 2007 of the Court of Appeals in CA-G.R. Sp No. 93698.

SO ORDERED.
17.

G.R. No. 146530 January 17, 2005

PEDRO CHAVEZ, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, SUPREME PACKAGING, INC. and ALVIN LEE, Plant
Manager, respondents.

DECISION

CALLEJO, SR., J.:

Before the Court is the petition for review on certiorari of the Resolution 1 dated December 15, 2000 of the
Court of Appeals (CA) reversing its Decision dated April 28, 2000 in CA-G.R. SP No. 52485. The assailed
resolution reinstated the Decision dated July 10, 1998 of the National Labor Relations Commission (NLRC),
dismissing the complaint for illegal dismissal filed by herein petitioner Pedro Chavez. The said NLRC
decision similarly reversed its earlier Decision dated January 27, 1998 which, affirming that of the Labor
Arbiter, ruled that the petitioner had been illegally dismissed by respondents Supreme Packaging, Inc. and
Mr. Alvin Lee.

The case stemmed from the following facts:

The respondent company, Supreme Packaging, Inc., is in the business of manufacturing cartons and other
packaging materials for export and distribution. It engaged the services of the petitioner, Pedro Chavez,
as truck driver on October 25, 1984. As such, the petitioner was tasked to deliver the respondent
company’s products from its factory in Mariveles, Bataan, to its various customers, mostly in Metro Manila.
The respondent company furnished the petitioner with a truck. Most of the petitioner’s delivery trips were
made at nighttime, commencing at 6:00 p.m. from Mariveles, and returning thereto in the afternoon two
or three days after. The deliveries were made in accordance with the routing slips issued by respondent
company indicating the order, time and urgency of delivery. Initially, the petitioner was paid the sum of
₱350.00 per trip. This was later adjusted to ₱480.00 per trip and, at the time of his alleged dismissal, the
petitioner was receiving ₱900.00 per trip.

Sometime in 1992, the petitioner expressed to respondent Alvin Lee, respondent company’s plant
manager, his (the petitioner’s) desire to avail himself of the benefits that the regular employees were
receiving such as overtime pay, nightshift differential pay, and 13th month pay, among others. Although
he promised to extend these benefits to the petitioner, respondent Lee failed to actually do so.

On February 20, 1995, the petitioner filed a complaint for regularization with the Regional Arbitration
Branch No. III of the NLRC in San Fernando, Pampanga. Before the case could be heard, respondent
company terminated the services of the petitioner. Consequently, on May 25, 1995, the petitioner filed an
amended complaint against the respondents for illegal dismissal, unfair labor practice and non-payment of
overtime pay, nightshift differential pay, 13th month pay, among others. The case was docketed as NLRC
Case No. RAB-III-02-6181-95.

The respondents, for their part, denied the existence of an employer-employee relationship between the
respondent company and the petitioner. They averred that the petitioner was an independent contractor
as evidenced by the contract of service which he and the respondent company entered into. The said
contract provided as follows:

That the Principal [referring to Supreme Packaging, Inc.], by these presents, agrees to hire and the
Contractor [referring to Pedro Chavez], by nature of their specialized line or service jobs, accepts the
services to be rendered to the Principal, under the following terms and covenants heretofore mentioned:

1. That the inland transport delivery/hauling activities to be performed by the contractor to the
principal, shall only cover travel route from Mariveles to Metro Manila. Otherwise, any change to
this travel route shall be subject to further agreement by the parties concerned.

2. That the payment to be made by the Principal for any hauling or delivery transport services fully
rendered by the Contractor shall be on a per trip basis depending on the size or classification of the
truck being used in the transport service, to wit:

a) If the hauling or delivery service shall require a truck of six wheeler, the payment on a
per trip basis from Mariveles to Metro Manila shall be THREE HUNDRED PESOS (₱300.00)
and EFFECTIVE December 15, 1984.
 b) If the hauling or delivery service require a truck of ten wheeler, the payment on a per
trip basis, following the same route mentioned, shall be THREE HUNDRED FIFTY (₱350.00)
Pesos and Effective December 15, 1984.

3. That for the amount involved, the Contractor will be to [sic] provide for [sic] at least two (2)
helpers;

4. The Contractor shall exercise direct control and shall be responsible to the Principal for the cost
of any damage to, loss of any goods, cargoes, finished products or the like, while the same are in
transit, or due to reckless [sic] of its men utilized for the purpose above mentioned;

5. That the Contractor shall have absolute control and disciplinary power over its men working for
him subject to this agreement, and that the Contractor shall hold the Principal free and harmless
from any liability or claim that may arise by virtue of the Contractor’s non-compliance to the
existing provisions of the Minimum Wage Law, the Employees Compensation Act, the Social
Security System Act, or any other such law or decree that may hereafter be enacted, it being
clearly understood that any truck drivers, helpers or men working with and for the Contractor, are
not employees who will be indemnified by the Principal for any such claim, including damages
incurred in connection therewith;

6. This contract shall take effect immediately upon the signing by the parties, subject to renewal on
a year-to-year basis.2

This contract of service was dated December 12, 1984. It was subsequently renewed twice, on July 10,
1989 and September 28, 1992. Except for the rates to be paid to the petitioner, the terms of the contracts
were substantially the same. The relationship of the respondent company and the petitioner was allegedly
governed by this contract of service.

The respondents insisted that the petitioner had the sole control over the means and methods by which
his work was accomplished. He paid the wages of his helpers and exercised control over them. As such,
the petitioner was not entitled to regularization because he was not an employee of the respondent
company. The respondents, likewise, maintained that they did not dismiss the petitioner. Rather, the
severance of his contractual relation with the respondent company was due to his violation of the terms
and conditions of their contract. The petitioner allegedly failed to observe the minimum degree of diligence
in the proper maintenance of the truck he was using, thereby exposing respondent company to
unnecessary significant expenses of overhauling the said truck.

After the parties had filed their respective pleadings, the Labor Arbiter rendered the Decision dated
February 3, 1997, finding the respondents guilty of illegal dismissal. The Labor Arbiter declared that the
petitioner was a regular employee of the respondent company as he was performing a service that was
necessary and desirable to the latter’s business. Moreover, it was noted that the petitioner had discharged
his duties as truck driver for the respondent company for a continuous and uninterrupted period of more
than ten years.

The contract of service invoked by the respondents was declared null and void as it constituted a
circumvention of the constitutional provision affording full protection to labor and security of tenure. The
Labor Arbiter found that the petitioner’s dismissal was anchored on his insistent demand to be regularized.
Hence, for lack of a valid and just cause therefor and for their failure to observe the due process
requirements, the respondents were found guilty of illegal dismissal. The dispositive portion of the Labor
Arbiter’s decision states:

WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring respondent SUPREME
PACKAGING, INC. and/or MR. ALVIN LEE, Plant Manager, with business address at BEPZ, Mariveles,
Bataan guilty of illegal dismissal, ordering said respondent to pay complainant his separation pay
equivalent to one (1) month pay per year of service based on the average monthly pay of ₱10,800.00 in
lieu of reinstatement as his reinstatement back to work will not do any good between the parties as the
employment relationship has already become strained and full backwages from the time his compensation
was withheld on February 23, 1995 up to January 31, 1997 (cut-off date) until compliance, otherwise, his
backwages shall continue to run. Also to pay complainant his 13th month pay, night shift differential pay
and service incentive leave pay hereunder computed as follows:

a) Backwages ………………….. ₱248,400.00

b) Separation Pay ………….…... ₱140,400.00

c) 13th month pay ………….……₱ 10,800.00

d) Service Incentive Leave Pay .. 2,040.00

 TOTAL ₱401,640.00

Respondent is also ordered to pay ten (10%) of the amount due the complainant as attorney’s fees.

SO ORDERED.3

The respondents seasonably interposed an appeal with the NLRC. However, the appeal was dismissed by
the NLRC in its Decision4 dated January 27, 1998, as it affirmed in toto the decision of the Labor Arbiter.
In the said decision, the NLRC characterized the contract of service between the respondent company and
the petitioner as a "scheme" that was resorted to by the respondents who, taking advantage of the
petitioner’s unfamiliarity with the English language and/or legal niceties, wanted to evade the effects and
implications of his becoming a regularized employee.5

The respondents sought reconsideration of the January 27, 1998 Decision of the NLRC. Acting thereon, the
NLRC rendered another Decision6 dated July 10, 1998, reversing its earlier decision and, this time, holding
that no employer-employee relationship existed between the respondent company and the petitioner. In
reconsidering its earlier decision, the NLRC stated that the respondents did not exercise control over the
means and methods by which the petitioner accomplished his delivery services. It upheld the validity of
the contract of service as it pointed out that said contract was silent as to the time by which the petitioner
was to make the deliveries and that the petitioner could hire his own helpers whose wages would be paid
from his own account. These factors indicated that the petitioner was an independent contractor, not an
employee of the respondent company.

The NLRC ruled that the contract of service was not intended to circumvent Article 280 of the Labor Code
on the regularization of employees. Said contract, including the fixed period of employment contained
therein, having been knowingly and voluntarily entered into by the parties thereto was declared valid
citing Brent School, Inc. v. Zamora.7 The NLRC, thus, dismissed the petitioner’s complaint for illegal
dismissal.

The petitioner sought reconsideration of the July 10, 1998 Decision but it was denied by the NLRC in its
Resolution dated September 7, 1998. He then filed with this Court a petition for certiorari, which was
referred to the CA following the ruling in St. Martin Funeral Home v. NLRC .8

The appellate court rendered the Decision dated April 28, 2000, reversing the July 10, 1998 Decision of
the NLRC and reinstating the decision of the Labor Arbiter. In the said decision, the CA ruled that the
petitioner was a regular employee of the respondent company because as its truck driver, he performed a
service that was indispensable to the latter’s business. Further, he had been the respondent company’s
truck driver for ten continuous years. The CA also reasoned that the petitioner could not be considered an
independent contractor since he had no substantial capital in the form of tools and machinery. In fact, the
truck that he drove belonged to the respondent company. The CA also observed that the routing slips that
the respondent company issued to the petitioner showed that it exercised control over the latter. The
routing slips indicated the chronological order and priority of delivery, the urgency of certain deliveries and
the time when the goods were to be delivered to the customers.

The CA, likewise, disbelieved the respondents’ claim that the petitioner abandoned his job noting that he
just filed a complaint for regularization. This actuation of the petitioner negated the respondents’
allegation that he abandoned his job. The CA held that the respondents failed to discharge their burden to
show that the petitioner’s dismissal was for a valid and just cause. Accordingly, the respondents were
declared guilty of illegal dismissal and the decision of the Labor Arbiter was reinstated.

In its April 28, 2000 Decision, the CA denounced the contract of service between the respondent company
and the petitioner in this wise:

In summation, we rule that with the proliferation of contracts seeking to prevent workers from attaining
the status of regular employment, it is but necessary for the courts to scrutinize with extreme caution
their legality and justness. Where from the circumstances it is apparent that a contract has been entered
into to preclude acquisition of tenurial security by the employee, they should be struck down and
disregarded as contrary to public policy and morals. In this case, the "contract of service" is just another
attempt to exploit the unwitting employee and deprive him of the protection of the Labor Code by making
it appear that the stipulations of the parties were governed by the Civil Code as in ordinary transactions. 9

However, on motion for reconsideration by the respondents, the CA made a complete turn around as it
rendered the assailed Resolution dated December 15, 2000 upholding the contract of service between the
petitioner and the respondent company. In reconsidering its decision, the CA explained that the extent of
control exercised by the respondents over the petitioner was only with respect to the result but not to the
means and methods used by him. The CA cited the following circumstances: (1) the respondents had no
say on how the goods were to be delivered to the customers; (2) the petitioner had the right to employ
workers who would be under his direct control; and (3) the petitioner had no working time.
The fact that the petitioner had been with the respondent company for more than ten years was,
according to the CA, of no moment because his status was determined not by the length of service but by
the contract of service. This contract, not being contrary to morals, good customs, public order or public
policy, should be given the force and effect of law as between the respondent company and the petitioner.
Consequently, the CA reinstated the July 10, 1998 Decision of the NLRC dismissing the petitioner’s
complaint for illegal dismissal.

Hence, the recourse to this Court by the petitioner. He assails the December 15, 2000 Resolution of the
appellate court alleging that:

(A)

THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OF

JURISDICTION IN GIVING MORE CONSIDERATION TO THE "CONTRACT OF SERVICE" ENTERED INTO BY
PETITIONER AND PRIVATE RESPONDENT THAN ARTICLE 280 OF THE LABOR CODE OF THE PHILIPPINES
WHICH CATEGORICALLY DEFINES A REGULAR EMPLOYMENT NOTWITHSTANDING ANY WRITTEN
AGREEMENT TO THE CONTRARY AND REGARDLESS OF THE ORAL AGREEMENT OF THE PARTIES;

(B)

THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OF

JURISDICTION IN REVERSING ITS OWN FINDINGS THAT PETITIONER IS A REGULAR EMPLOYEE AND IN
HOLDING THAT THERE EXISTED NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN PRIVATE
RESPONDENT AND PETITIONER IN AS MUCH AS THE "CONTROL TEST" WHICH IS CONSIDERED THE MOST
ESSENTIAL CRITERION IN DETERMINING THE EXISTENCE OF SAID RELATIONSHIP IS NOT PRESENT. 10

The threshold issue that needs to be resolved is whether there existed an employer-employee relationship
between the respondent company and the petitioner. We rule in the affirmative.

The elements to determine the existence of an employment relationship are: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
employer’s power to control the employee’s conduct. 11 The most important element is the employer’s
control of the employee’s conduct, not only as to the result of the work to be done, but also as to the
means and methods to accomplish it.12 All the four elements are present in this case.

First. Undeniably, it was the respondents who engaged the services of the petitioner without the
intervention of a third party.

Second. Wages are defined as "remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task, piece or commission basis, or
other method of calculating the same, which is payable by an employer to an employee under a written or
unwritten contract of employment for work done or to be done, or for service rendered or to be
rendered."13 That the petitioner was paid on a per trip basis is not significant. This is merely a method of
computing compensation and not a basis for determining the existence or absence of employer-employee
relationship. One may be paid on the basis of results or time expended on the work, and may or may not
acquire an employment status, depending on whether the elements of an employer-employee relationship
are present or not.14 In this case, it cannot be gainsaid that the petitioner received compensation from the
respondent company for the services that he rendered to the latter.

Moreover, under the Rules Implementing the Labor Code, every employer is required to pay his
employees by means of payroll.15 The payroll should show, among other things, the employee’s rate of
pay, deductions made, and the amount actually paid to the employee. Interestingly, the respondents did
not present the payroll to support their claim that the petitioner was not their employee, raising
speculations whether this omission proves that its presentation would be adverse to their case. 16

Third. The respondents’ power to dismiss the petitioner was inherent in the fact that they engaged the
services of the petitioner as truck driver. They exercised this power by terminating the petitioner’s
services albeit in the guise of "severance of contractual relation" due allegedly to the latter’s breach of his
contractual obligation.

Fourth. As earlier opined, of the four elements of the employer-employee relationship, the "control test" is
the most important. Compared to an employee, an independent contractor is one who carries on a distinct
and independent business and undertakes to perform the job, work, or service on its own account and
under its own responsibility according to its own manner and method, free from the control and direction
of the principal in all matters connected with the performance of the work except as to the results
thereof.17 Hence, while an independent contractor enjoys independence and freedom from the control and
supervision of his principal, an employee is subject to the employer’s power to control the means and
methods by which the employee’s work is to be performed and accomplished. 18
Although the respondents denied that they exercised control over the manner and methods by which the
petitioner accomplished his work, a careful review of the records shows that the latter performed his work
as truck driver under the respondents’ supervision and control. Their right of control was manifested by
the following attendant circumstances:

1. The truck driven by the petitioner belonged to respondent company;

2. There was an express instruction from the respondents that the truck shall be used exclusively
to deliver respondent company’s goods; 19

3. Respondents directed the petitioner, after completion of each delivery, to park the truck in either
of two specific places only, to wit: at its office in Metro Manila at 2320 Osmeña Street, Makati City
or at BEPZ, Mariveles, Bataan;20 and

4. Respondents determined how, where and when the petitioner would perform his task by issuing
to him gate passes and routing slips. 21

a. The routing slips indicated on the column REMARKS, the chronological order and priority
of delivery such as 1st drop, 2nd drop, 3rd drop, etc. This meant that the petitioner had to
deliver the same according to the order of priority indicated therein.

b. The routing slips, likewise, showed whether the goods were to be delivered urgently or
not by the word RUSH printed thereon.

c. The routing slips also indicated the exact time as to when the goods were to be delivered
to the customers as, for example, the words "tomorrow morning" was written on slip no.
2776.

These circumstances, to the Court’s mind, prove that the respondents exercised control over the means
and methods by which the petitioner accomplished his work as truck driver of the respondent company.
On the other hand, the Court is hard put to believe the respondents’ allegation that the petitioner was an
independent contractor engaged in providing delivery or hauling services when he did not even own the
truck used for such services. Evidently, he did not possess substantial capitalization or investment in the
form of tools, machinery and work premises. Moreover, the petitioner performed the delivery services
exclusively for the respondent company for a continuous and uninterrupted period of ten years.

The contract of service to the contrary notwithstanding, the factual circumstances earlier discussed
indubitably establish the existence of an employer-employee relationship between the respondent
company and the petitioner. It bears stressing that the existence of an employer-employee relationship
cannot be negated by expressly repudiating it in a contract and providing therein that the employee is an
independent contractor when, as in this case, the facts clearly show otherwise. Indeed, the employment
status of a person is defined and prescribed by law and not by what the parties say it should be.22

Having established that there existed an employer-employee relationship between the respondent
company and the petitioner, the Court shall now determine whether the respondents validly dismissed the
petitioner.

As a rule, the employer bears the burden to prove that the dismissal was for a valid and just cause. 23 In
this case, the respondents failed to prove any such cause for the petitioner’s dismissal. They insinuated
that the petitioner abandoned his job. To constitute abandonment, these two factors must concur: (1) the
failure to report for work or absence without valid or justifiable reason; and (2) a clear intention to sever
employer-employee relationship.24 Obviously, the petitioner did not intend to sever his relationship with
the respondent company for at the time that he allegedly abandoned his job, the petitioner just filed a
complaint for regularization, which was forthwith amended to one for illegal dismissal. A charge of
abandonment is totally inconsistent with the immediate filing of a complaint for illegal dismissal, more so
when it includes a prayer for reinstatement.25

Neither can the respondents’ claim that the petitioner was guilty of gross negligence in the proper
maintenance of the truck constitute a valid and just cause for his dismissal. Gross negligence implies a
want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It evinces a
thoughtless disregard of consequences without exerting any effort to avoid them. 26 The negligence, to
warrant removal from service, should not merely be gross but also habitual.27 The single and isolated act
of the petitioner’s negligence in the proper maintenance of the truck alleged by the respondents does not
amount to "gross and habitual neglect" warranting his dismissal.

The Court agrees with the following findings and conclusion of the Labor Arbiter:
… As against the gratuitous allegation of the respondent that complainant was not dismissed from the
service but due to complainant’s breach of their contractual relation, i.e., his violation of the terms and
conditions of the contract, we are very much inclined to believe complainant’s story that his dismissal from
the service was anchored on his insistent demand that he be considered a regular employee. Because
complainant in his right senses will not just abandon for that reason alone his work especially so that it is
only his job where he depends chiefly his existence and support for his family if he was not aggrieved by
the respondent when he was told that his services as driver will be terminated on February 23, 1995. 28

Thus, the lack of a valid and just cause in terminating the services of the petitioner renders his dismissal
illegal. Under Article 279 of the Labor Code, an employee who is unjustly dismissed is entitled to
reinstatement, without loss of seniority rights and other privileges, and to the payment of full backwages,
inclusive of allowances, and other benefits or their monetary equivalent, computed from the time his
compensation was withheld from him up to the time of his actual reinstatement. 29 However, as found by
the Labor Arbiter, the circumstances obtaining in this case do not warrant the petitioner’s reinstatement. A
more equitable disposition, as held by the Labor Arbiter, would be an award of separation pay equivalent
to one month for every year of service from the time of his illegal dismissal up to the finality of this
judgment in addition to his full backwages, allowances and other benefits.

WHEREFORE, the instant petition is GRANTED. The Resolution dated December 15, 2000 of the Court of
Appeals reversing its Decision dated April 28, 2000 in CA-G.R. SP No. 52485 is REVERSED and SET ASIDE.
The Decision dated February 3, 1997 of the Labor Arbiter in NLRC Case No. RAB-III-02-6181-5, finding
the respondents guilty of illegally terminating the employment of petitioner Pedro Chavez, is REINSTATED.

SO ORDERED.

18.

G.R. No. 167217 February 4, 2008

P.I. MANUFACTURING, INCORPORATED, petitioner,

vs.
P.I. MANUFACTURING SUPERVISORS AND FOREMAN ASSOCIATION and the NATIONAL LABOR
UNION, respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

The Court has always promoted the policy of encouraging employers to grant wage and allowance
increases to their employees higher than the minimum rates of increases prescribed by statute or
administrative regulation. Consistent with this, the Court also adopts the policy that
requires recognition and validation of wage increases given by employers either unilaterally or as a
result of collective bargaining negotiations in an effort to correct wage distortions.1

Before us is a motion for reconsideration of our Resolution dated April 18, 2005 denying the present
petition for review on certiorari for failure of the petitioner to show that a reversible error has been
committed by the Court of Appeals in its (a) Decision dated July 21, 2004 and (b) Resolution dated
February 18, 2005.

The facts are:

Petitioner P.I. Manufacturing, Incorporated is a domestic corporation engaged in the manufacture and sale
of household appliances. On the other hand, respondent P.I. Manufacturing Supervisors and Foremen
Association (PIMASUFA) is an organization of petitioner’s supervisors and foremen, joined in this case by
its federation, the National Labor Union (NLU).

On December 10, 1987, the President signed into law Republic Act (R.A.) No. 66402 providing, among
others, an increase in the statutory minimum wage and salary rates of employees and workers in the
private sector. Section 2 provides:

SEC. 2. The statutory minimum wage rates of workers and employees in the private sector,
whether agricultural or non-agricultural, shall be increased by ten pesos (P10.00) per day, except
non-agricultural workers and employees outside Metro Manila who shall receive an increase of
eleven pesos (P11.00) per day: Provided, That those already receiving above the minimum
wage up to one hundred pesos (P100.00) shall receive an increase of ten pesos (P10.00)
per day. Excepted from the provisions of this Act are domestic helpers and persons employed in
the personal service of another.
Thereafter, on December 18, 1987, petitioner and respondent PIMASUFA entered into a new Collective
Bargaining Agreement (1987 CBA) whereby the supervisors were granted an increase of P625.00 per
month and the foremen, P475.00 per month. The increases were made retroactive to May 12, 1987, or
prior to the passage of R.A. No. 6640, and every year thereafter until July 26, 1989. The pertinent
portions of the 1987 CBA read:

ARTICLE IV

SALARIES AND OVERTIME

Section 1. The COMPANY shall grant to all regular supervisors and foremen within the coverage of
the unit represented by the ASSOCIATION, wage or salary increases in the amount set forth as
follows:

A. For FOREMEN

Effective May 12, 1987, an increase of P475,00 per month to all qualified regular foremen who are
in the service of the COMPANY as of said date and who are still in its employ on the signing of this
Agreement, subject to the conditions set forth in sub-paragraph (d) hereunder;

a) Effective July 26, 1988, an increase of P475.00 per month/employee to all covered foremen;

b) Effective July 26, 1989, an increase of P475.00 per month/per employee to all covered
foremen;

c) The salary increases from May 12, 1987 to November 30, 1987 shall be excluding and without
increment on fringe benefits and/or premium and shall solely be on basic salary.

B. For SUPERVISORS

a) Effective May 12, 1987, an increase of P625.00 per month/employee to all qualified regular
supervisors who are in the service of the COMPANY as of said date and who are still in its employ
on the signing of the Agreement, subject to the conditions set forth in subparagraph (d)
hereunder;

b) Effective July 26, 1988, an increase of P625.00 per month/employee to all covered supervisors;

c) Effective July 26, 1989, an increase of P625.00 per month/employee to all covered supervisors;

d) The salary increase from May 12, 1987 to November 30, 1987 shall be excluding and without
increment on fringe benefits and/or premiums and shall solely be on basic salary.

On January 26, 1989, respondents PIMASUFA and NLU filed a complaint with the Arbitration Branch of the
National Labor Relations Commission (NLRC), docketed as NLRC-NCR Case No. 00-01-00584, charging
petitioner with violation of R.A. No. 6640.3 Respondents attached to their complaint a numerical
illustration of wage distortion resulting from the implementation of R.A. No. 6640.

On March 19, 1990, the Labor Arbiter rendered his Decision in favor of respondents. Petitioner was
ordered to give the members of respondent PIMASUFA wage increases equivalent to 13.5% of their basic
pay they were receiving prior to December 14, 1987. The Labor Arbiter held:

As regards the issue of wage distortion brought about by the implementation of R.A. 6640 – It is
correctly pointed out by the union that employees cannot waive future benefits, much less those
mandated by law. That is against public policy as it would render meaningless the law. Thus, the
waiver in the CBA does not bar the union from claiming adjustments in pay as a result of distortion
of wages brought about by the implementation of R.A. 6640.

Just how much are the supervisors and foremen entitled to correct such distortion is now the
question. Pursuant to the said law, those who on December 14, 1987 were receiving less
than P100.00 are all entitled to an automatic across- the-board increase of P10.00 a day. The
percentage in increase given those who received benefits under R.A. 6640 should be the
same percentage given to the supervisors and foremen.

The statutory minimum pay then was P54.00 a day. With the addition of P10.00 a day, the said
minimum pay raised to P64.00 a day. The increase of P10.00 a day is P13.5% of the minimum
wage prior to December 14, 1987. The same percentage of the pay of members of petitioner prior
to December 14, 1987 should be given them.
 Finally, the claim of respondent that the filing of the present case, insofar as the provision of R.A.
6640 is concerned, is premature does not deserve much consideration considering that as of
December 1988, complainant submitted in grievance the aforementioned issue but the same was
not settled.4

On appeal by petitioner, the NLRC, in its Resolution dated January 8, 1991, affirmed the Labor Arbiter’s
judgment.

Undaunted, petitioner filed a petition for certiorari with this Court. However, we referred the petition to
the Court of Appeals pursuant to our ruling in St. Martin Funeral Homes v. NLRC.5 It was docketed therein
as CA-G.R. SP No. 54379.

On July 21, 2004, the appellate court rendered its Decision affirming the Decision of the NLRC with
modification by raising the 13.5% wage increase to 18.5%. We quote the pertinent portions of the Court
of Appeals Decision, thus:

Anent the fourth issue, petitioner asseverates that the wage distortion issue is already barred by
Sec. 2 Article IV of the Contract denominated as "The Company and Supervisors and Foremen
Contract" dated December 18, 1987 declaring that it "absolves, quit claims and releases the
COMPANY for any monetary claim they have, if any there might be or there might have
been previous to the signing of this agreement." Petitioner interprets this as absolving it from
any wage distortion brought about by the implementation of the new minimum wage law. Since the
contract was signed on December 17, 1987, or after the effectivity of Republic Act No. 6640,
petitioner claims that private respondent is deemed to have waived any benefit it may have under
the new law.

We are not persuaded.

Contrary to petitioner’s stance, the increase resulting from any wage distortion caused by the
implementation of Republic Act 6640 is not waivable. As held in the case of Pure Foods Corporation
vs. National Labor Relations Commission, et al.:

"Generally, quitclaims by laborers are frowned upon as contrary to public policy and are
held to be ineffective to bar recovery for the full measure of the worker’s rights. The reason
for the rule is that the employer and the employee do not stand on the same footing."

Moreover, Section 8 of the Rules Implementing RA 6640 states:

No wage increase shall be credited as compliance with the increase prescribed herein unless
expressly provided under valid individual written/collective agreements; and provided
further that such wage increase was granted in anticipation of the legislated wage increase
under the act. But such increases shall not include anniversary wage increases provided in
collective bargaining agreements.

Likewise, Article 1419 of the Civil Code mandates that:

When the law sets, or authorizes the setting of a minimum wage for laborers, and a contract
is agreed upon by which a laborer accepts a lower wage, he shall be entitled to recover the
deficiency.

Thus, notwithstanding the stipulation provided under Section 2 of the Company and Supervisors
and Foremen Contract, we find the members of private respondent union entitled to the increase of
their basic pay due to wage distortion by reason of the implementation of RA 6640.

On the last issue, the increase of 13.5% in the supervisors and foremen’s basic salary must further
be increased to 18.5% in order to correct the wage distortion brought about by the implementation
of RA 6640. It must be recalled that the statutory minimum pay before RA 6640 was P54.00 a day.
The increase of P10.00 a day under RA 6640 on the prior minimum pay of P54.00 is 18.5% and not
13.5%. Thus, petitioner should be made to pay the amount equivalent to 18.5% of the basic pay of
the members or private respondent union in compliance with the provisions of Section 3 of RA
6640."

Petitioner filed a motion for reconsideration but it was denied by the appellate court in its Resolution dated
February 18, 2005.

Hence, the present recourse, petitioner alleging that the Court of Appeals erred:
 1) In awarding wage increase to respondent supervisors and foremen to cure an alleged wage
distortion that resulted from the implementation of R.A. No. 6640.

2) In disregarding the wage increases granted under the 1987 CBA correcting whatever wage
distortion that may have been created by R.A. No. 6640.

3) In awarding wage increase equivalent to 18.5% of the basic pay of the members of respondent
PIMASUFA in violation of the clear provision of R.A. No. 6640 excluding from its coverage
employees receiving wages higher than P100.00.

4) In increasing the NLRC’s award of wage increase from 13.5% to 18.5%, which increase is very
much higher than the P10.00 daily increase mandated by R.A. No. 6640.

Petitioner contends that the findings of the NLRC and the Court of Appeals as to the existence of a wage
distortion are not supported by evidence; that Section 2 of R.A. No. 6640 does not provide for an increase
in the wages of employees receiving more than P100.00; and that the 1987 CBA has obliterated any
possible wage distortion because the increase granted to the members of respondent PIMASUFA in the
amount of P625.00 and P475.00 per month substantially widened the gap between the foremen and
supervisors and as against the rank and file employees.

Respondents PIMASUFA and NLU, despite notice, failed to file their respective comments.

In a Minute Resolution dated April 18, 2005, we denied the petition for petitioner’s failure to show that the
Court of Appeals committed a reversible error.

Hence, this motion for reconsideration.

We grant the motion.

In the ultimate, the issue here is whether the implementation of R.A. No. 6640 resulted in a wage
distortion and whether such distortion was cured or remedied by the 1987 CBA.

R.A. No. 6727, otherwise known as the Wage Rationalization Act, explicitly defines "wage distortion" as:

x x x a situation where an increase in prescribed wage rates results in the elimination or severe
contraction of intentional quantitative differences in wage or salary rates between and among
employee groups in an establishment as to effectively obliterate the distinctions embodied in such
wage structure based on skills, length of service, or other logical bases of differentiation.

Otherwise stated, wage distortion means the disappearance or virtual disappearance of pay
differentials between lower and higher positions in an enterprise because of compliance with a wage
order.6

In this case, the Court of Appeals correctly ruled that a wage distortion occurred due to the
implementation of R.A. No. 6640. The numerical illustration submitted by respondents7 shows such
distortion, thus:

II WAGE DISTORTION REGARDING RA-6640 (P10.00 per day increase effective December 31,
1987)

Illustration of Wage Distortion and corresponding wage adjustments as provided in RA-6640

NAME OF SUPERVISOR RATE RATE AFTER P109.01 P118.80 P128.08

(S) BEFORE INCREASE OVER- OVER- OVER-
AND INCREASE OF PASSED PASSED PASSED
FOREMAN (F) OF RA- P108.80 P118.08 P123.76
RA- 6640 P10.00 RATE AFTER RATE AFTER RATE AFTER
6640 P10.00 ADJUSTMENT ADJUSTMENT ADJUSTMENT
P10.00 P10.00 P10.00
1. ALCANTARA, V (S) P 99.01 P 109.01
2. MORALES, A (F) 94.93 104.93
3. SALVO, R (F) 96.45 106.45
Note: No. 1 to 3 with increase of RA-6640
4.BUENCUCHILLO, C 102.38 102.38 P 112.38
(S)
 5. MENDOZA, D (F) 107.14 107.14 117.14
6. DEL PRADO, M (S) 108.80 108.80 118.80
7. PALENSO, A (F) 109.71 109.71 P 119.71
8. OJERIO, E (S) 111.71 111.71 121.71
9. REYES, J (S) 114.98 114.98 124.98
10. PALOMIQUE, S (F) 116.79 116.79 126.79
11. PAGLINAWAN, A 116.98 116.98 126.98
(S)
12. CAMITO, M (S) 117.04 117.04 127.04
13. TUMBOCON, P (S) 117.44 117.44 127.44
14. SISON JR., B (S) 118.08 118.08 128.08
15. BORJA, R (S) 119.80 119.80 P 129.80
16. GINON, D (S) 123.76 123.76 133.76
17. GINON, T (S) 151. 49 151.49
18. ANDRES, M (S) 255.72 255.72
Note: No. 4 to 18 no increase in R.A. No. 6640

Notably, the implementation of R.A. No. 6640 resulted in the increase of P10.00 in the wage rates
of Alcantara, supervisor, and Morales and Salvo, both foremen. They are petitioner’s lowest paid
supervisor and foremen. As a consequence, the increased wage rates of foremen
Morales and Salvo exceeded that of supervisor Buencuchillo. Also, the increased wage rate
of supervisor Alcantara exceeded those of supervisors Buencuchillo and Del Prado. Consequently,
the P9.79 gap or difference between the wage rate of supervisor Del Prado and that of supervisor
Alcantara was eliminated. Instead, the latter gained a P.21 lead over Del Prado. Like a domino effect,
these gaps or differences between and among the wage rates of all the above employees have
been substantially altered and reduced. It is therefore undeniable that the increase in the wage rates
by virtue of R.A. No. 6640 resulted in wage distortion or the elimination of the intentional quantitative
differences in the wage rates of the above employees.

However, while we find the presence of wage distortions, we are convinced that the same were cured or
remedied when respondent PIMASUFA entered into the 1987 CBA with petitioner after the effectivity of
R.A. No. 6640. The 1987 CBA increased the monthly salaries of the supervisors by P625.00 and the
foremen, by P475.00, effective May 12, 1987. These increases re-established and broadened the
gap, not only between the supervisors and the foremen, but also between them and the rank-and-file
employees. Significantly, the 1987 CBA wage increases almost doubled that of the P10.00 increase
under R.A. No. 6640. The P625.00/month means P24.03 increase per day for the supervisors, while
the P475.00/month means P18.26 increase per day for the foremen. These increases were to be
observed every year, starting May 12, 1987 until July 26, 1989. Clearly, the gap between the wage
rates of the supervisors and those of the foremen was inevitably re-established. It continued to broaden
through the years.

Interestingly, such gap as re-established by virtue of the CBA is more than a substantial compliance with
R.A. No. 6640. We hold that the Court of Appeals erred in not taking into account the provisions of the
CBA viz-a-viz the wage increase under the said law. In National Federation of Labor v. NLRC,8 we held:

We believe and so hold that the re-establishment of a significant gap or differential between
regular employees and casual employees by operation of the CBA was more than substantial
compliance with the requirements of the several Wage Orders (and of Article 124 of the Labor
Code). That this re-establishment of a significant differential was the result of collective
bargaining negotiations, rather than of a special grievance procedure, is not a legal basis
for ignoring it. The NLRC En Banc was in serious error when it disregarded the differential
of P3.60 which had been restored by 1 July 1985 upon the ground that such differential
"represent[ed] negotiated wage increase[s] which should not be considered covered and in
compliance with the Wage Orders. x x x"

In Capitol Wireless, Inc. v. Bate,9 we also held:

x x x The wage orders did not grant across-the-board increases to all employees in the National
Capital Region but limited such increases only to those already receiving wage rates not more than
P125.00 per day under Wage Order Nos. NCR-01 and NCR-01-A and P142.00 per day under Wage
Order No. NCR-02. Since the wage orders specified who among the employees are entitled to the
statutory wage increases, then the increases applied only to those mentioned therein. The
 provisions of the CBA should be read in harmony with the wage orders, whose benefits
should be given only to those employees covered thereby.

It has not escaped our attention that requiring petitioner to pay all the members of respondent PIMASUFA
a wage increase of 18.5%, over and above the negotiated wage increases provided under the
1987 CBA, is highly unfair and oppressive to the former. Obviously, it was not the intention of R.A. No.
6640 to grant an across-the-board increase in pay to all the employees of petitioner. Section 2 of R.A. No.
6640 mandates only the following increases in the private sector: (1) P10.00 per day for the employees in
the private sector, whether agricultural or non-agricultural, who are receiving the statutory minimum
wage rates; (2) P11.00 per day for non-agricultural workers and employees outside Metro Manila; and
(3) P10.00 per day for those already receiving the minimum wage up to P100.00. To be sure, only
those receiving wages P100.00 and below are entitled to the P10.00 wage increase. The apparent
intention of the law is only to upgrade the salaries or wages of the employees specified
therein.10 As the numerical illustration shows, almost all of the members of respondent PIMASUFA have
been receiving wage rates above P100.00 and, therefore, not entitled to the P10.00 increase.
Only three (3) of them are receiving wage rates below P100.00, thus, entitled to such increase. Now, to
direct petitioner to grant an across-the-board increase to all of them, regardless of the amount of wages
they are already receiving, would be harsh and unfair to the former. As we ruled in Metropolitan Bank and
Trust Company Employees Union ALU-TUCP v. NLRC:11

x x x To compel employers simply to add on legislative increases in salaries or

allowances without regard to what is already being paid, would be to penalize employers
who grant their workers more than the statutory prescribed minimum rates of increases.
Clearly, this would be counter-productive so far as securing the interests of labor is
concerned.

Corollarily, the Court of Appeals erred in citing Pure Foods Corporation v. National Labor Relations
Commission12 as basis in disregarding the provisions of the 1987 CBA. The case involves, not wage
distortion, but illegal dismissal of employees from the service. The Release and Quitclaim executed therein
by the Pure Food’s employees were intended to preclude them from questioning the termination of their
services, not their entitlement to wage increase on account of a wage distortion.

At this juncture, it must be stressed that a CBA constitutes the law between the
parties when freely and voluntarily entered into.13 Here, it has not been shown that respondent
PIMASUFA was coerced or forced by petitioner to sign the 1987 CBA. All of its thirteen (13) officers
signed the CBA with the assistance of respondent NLU. They signed it fully aware of the passage of R.A.
No. 6640. The duty to bargain requires that the parties deal with each other with open and fair minds. A
sincere endeavor to overcome obstacles and difficulties that may arise, so that employer-employee
relations may be stabilized and industrial strife eliminated, must be apparent. 14 Respondents cannot
invoke the beneficial provisions of the 1987 CBA but disregard the concessions it voluntary extended to
petitioner. The goal of collective bargaining is the making of agreements that will stabilize business
conditions and fix fair standards of working conditions.15 Definitely, respondents’ posture contravenes this
goal.

In fine, it must be emphasized that in the resolution of labor cases, this Court has always been guided by
the State policy enshrined in the Constitution that the rights of workers and the promotion of their welfare
shall be protected. However, consistent with such policy, the Court cannot favor one party, be it labor or
management, in arriving at a just solution to a controversy if the party concerned has no valid support to
its claim, like respondents here.

WHEREFORE, we GRANT petitioner’s motion for reconsideration and REINSTATE the petition we
likewise GRANT. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 54379 is REVERSED.

SO ORDERED.

19.

G.R. No. 157098 June 30, 2005

NORKIS FREE AND INDEPENDENT WORKERS UNION, Petitioner,

vs.
NORKIS TRADING COMPANY, INC. Respondent.

DECISION

PANGANIBAN, J.:

Wage Order No. ROVII-06, issued by the Regional Tripartite Wages and Productivity Board (RTWPB),
merely fixed a new minimum wage rate for private sector employees in Region VII; hence, respondent
cannot be compelled to grant an across-the-board increase to its employees who, at the time of the
promulgation of the Wage Order, were already being paid more than the existing minimum wage.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to set aside the July 30,
2002 Decision2 and the January 16, 2003 Resolution3 of the Court of Appeals (CA) in CA-GR SP No. 54611.
The disposition of the assailed Decision reads as follows:

"ACCORDINGLY, We GRANT the instant petition for certiorari. The Decision of public respondent
Voluntary Arbitrator in VA Case No. 374-VII-09-014-98E dated July 8, 1999, and Order dated August 13,
1999, denying petitioner’s ‘Motion for Reconsideration’, are hereby SET ASIDE. Petitioner is hereby
declared to have lawfully complied with Wage Order No. ROVII-06. No pronouncement as to costs."4

The Decision5 of Voluntary Arbitrator Perfecto R. de los Reyes III, 6 reversed by the CA, disposed as
follows:

"WHEREFORE, premises considered, this Office hereby decides in favor of Complainant. Respondent is
hereby ordered to grant its employees the amount of increases granted under RTWPB Wage Order ROVII-
06 in an across-the-board manner retroactive to the dates provided for under the said Wage Order." 7

The January 16, 2003 Resolution denied petitioner’s Motion for Reconsideration.

The Facts

The CA summarized the undisputed factual antecedents as follows:

"The instant case arose as a result of the issuance of Wage Order No. ROVII-06 by the Regional Tripartite
Wages and Productivity Board (RTWPB) increasing the minimum daily wage by ₱10.00, effective October
1, 1998.

"Prior to said issuance, herein parties entered into a Collective Bargaining Agreement (CBA) effective from
August 1, 1994 to July 31, 1999.

‘Sec. 1. Salary Increase. The Company shall grant a FIFTEEN (₱15.00) PESOS per day increase to all its
regular or permanent employees effective August 1, 1994.’

‘Sec. 2. Minimum Wage Law Amendment. In the event that a law is enacted increasing minimum
wage, an across-the-board increase shall be granted by the company according to the provisions of the
law.’

"On January 27, 1998, a re-negotiation of the CBA was terminated and pursuant to which a Memorandum
of Agreement was forged between the parties. It was therein stated that petitioner shall grant a salary
increase to all regular and permanent employees as follows:

‘Ten (10) pesos per day increase effective August 1, 1997; Ten (10) pesos per day increase
effective August 1, 1998.’

"Pursuant to said Memorandum of Agreement, the employees received wage increases of ₱10.00 per day
effective August 1, 1997 and ₱10.00 per day effective August 1, 1998. As a result, the agreed ₱10.00 re-
negotiated salary increase effectively raised the daily wage of the employees to ₱165.00 retroactive
August 1, 1997; and another increase of ₱10.00, effective August 1, 1998, raising the employees[’] daily
wage to ₱175.00.

"On March 10, 1998, the Regional Tripartite Wage Productivity Board (RTWPB) of Region VII issued Wage
Order ROVII-06 which established the minimum wage of ₱165.00, by mandating a wage increase of five
(₱5.00) pesos per day beginning April 1, 1998, thereby raising the daily minimum wage to ₱160.00 and
another increase of five (₱5.00) pesos per day beginning October 1, 1998, thereby raising the daily
minimum wage to ₱165.00 per day.

"In accordance with the Wage Order and Section 2, Article XII of the CBA, [petitioner] demanded an
across-the-board increase. [Respondent], however, refused to implement the Wage Order, insisting that
since it has been paying its workers the new minimum wage of ₱165.00 even before the issuance of the
Wage Order, it cannot be made to comply with said Wage Order.

"Thus, [respondent] argued that long before the passage of Wage Order ROVII-06 on March 10, 1998, and
by virtue of the Memorandum of Agreement it entered with herein [petitioner], [respondent] was already
paying its employees a daily wage of ₱165.00 per day retroactive on August 1, 1997, while the minimum
wage at that time was still ₱155.00 per day. On August 1, 1998, [respondent] again granted an increase
from ₱165.00 per day to ₱175.00, so that at the time of the effectivity of Wage Order No. 06 on October
1, 1998 prescribing the new minimum wage of ₱165.00 per day, [respondent’s] employees were already
receiving ₱175.00 per day.

"For failure of the parties to settle this controversy, a preventive mediation complaint was filed by herein
[petitioner] before the National Conciliation and Mediation Board, pursuant to which the parties selected
public respondent Voluntary Arbitrator to decide said controversy.

"Submitted for arbitral resolution is the sole issue of whether or not [respondent] has complied with Wage
Order No. ROVII-06, in relation to the CBA provision mandating an across-the-board increase in case of
the issuance of a Wage Order.

"In his decision, public respondent arbitrator found herein [respondent] not to have complied with the
wage order, through the following dispositions:

‘The CBA provision in question (providing for an across-the-board increase in case of a wage order) is
worded and couched in a vague and unclear manner.

‘x x x In order to judge the intention of the contracting parties, their contemporaneous and subsequent
acts shall be principally considered (Art. 1371, New Civil Code). Thus, this Office x x x required the parties
to submit additional evidence in order to be able to know and interpret the parties working intent and
application of Wage Order No. 06 issued by the Regional Tripartite Wages and Productivity Board, Regional
Office VII in relation to Section 2, Article XII provided for in the parties[’] existing CBA.

‘x x x Viewed from the foregoing facts and evidence, the working intent and application of RTWPB Wage
Order ROVII-06 in relation to Section 2, Article XII of the parties[’] existing CBA is clearly established. The
evidence submitted by the parties, all point to the fact that their true intention on how to implement
existing wage orders is to grant such wage orders in an across-the-board manner in relation to the
provisions of Section 2, Article XII of their existing CBA. Respondent in this case [has] failed to comply
with its contractual obligation of implementing the increase under RTWPB Wage Order ROVII-06 in an
across-the-board manner as provided in Section 2, Article XII of its CBA with [petitioner].

‘x x x x x x x x x’"8

Respondent elevated the case to the CA via a Petition for Certiorari and Prohibition under Rule 65 of the
Rules of Court.

Ruling of the Court of Appeals

The CA noted that the grant of an across-the-board increase, provided under Section 2 of Article XII of the
CBA, was qualified by the phrase "according to the provisions of the law." It thus stressed the necessity of
determining the import of Wage Order No. ROVII-06, the law involved in the present controversy. Taking
into consideration the opinion of the RTWPB, Region VII, the appellate court held that respondent had
sufficiently complied with Wage Order No. ROVII-06. The Board had opined that "since adjustments
granted are only to raise the minimum wage or the floor wage as a matter of policy, x x x wages granted
over the above amount set by this Board is deemed a compliance."

The CA added that the policy and intent of the Wage Order was to cushion the impact of the regional
economic crisis upon both the workers and the employers, not to enrich the employees at the expense of
the employers. Further, it held that to compel respondent to grant an across-the-board wage increase,
notwithstanding that it was already paying salaries to its employees above the minimum wage, would be
to penalize generous employers and effectively make them "wait for the passage of a new wage order
before granting any increase. This would be counter-productive [insofar] as securing the interests of labor
is concerned."9

The appellate court said that the Wage Order exempted from compliance those enterprises already paying
salaries equal to or more than the prescribed minimum wage; thus, the Order effectively made the
previous voluntary increases given by respondent to its employees creditable against the law-mandated
increase. Consequently, there was no need for the Collective Bargaining Agreement (CBA) to provide
expressly for such creditability.

Finally, the CA sustained respondent’s explanation that the across-the-board increases provided in the
CBA was required only when a minimum wage law caused a distortion in the wage structure.

Hence, this Petition.10

Issues
In its Memorandum, petitioner submits the following issues for our consideration:

"I. Whether or not the Honorable Court of Appeals gravely abused its discretion in setting aside the
decision and resolution of the honorable voluntary arbitrator[.]

II. Whether or not the Honorable Court of Appeals gravely abused its discretion in considering the
Supplemental Memorandum of respondent and giving merit to evidence presented for the first time
on appeal and filed after the lapse of the non[-]extendible period of time to file memorandum and
despite an extension granted to respondent[.]

III. Whether or not the Honorable Court of Appeals gravely abused its discretion in disregarding
established jurisprudence on statutory construction."11

The main issue is whether respondent violated the CBA in its refusal to grant its employees an across-the-
board increase as a result of the passage of Wage Order No. ROVII-06. Also raised is the procedural issue
relating to the propriety of the admission by the CA of RTWPB’s letter-opinion, which was attached to
respondent’s Supplemental Memorandum submitted to that court on August 30, 2000, beyond the July 17,
2000 extended deadline.

The Court’s Ruling

The Petition lacks merit.

Main Issue:

Effect of Wage Order No. ROVII-06 on the Parties’ CBA

Petitioner insists that respondent should have granted to the employees the increase stated in Wage Order
No. ROVII-06. In addition to the increases both parties had mutually agreed upon, the CBA supposedly
imposed upon respondent the obligation to implement the increases mandated by law without any
condition or qualification. To support its claim, petitioner repeatedly invokes Section 2 of Article XII of the
CBA, which reads:

"SECTION 2. Minimum Wage Law Amendment. In the event that a law is enacted increasing minimum
wage, an across-the-board increase shall be granted by the Company according to the provisions of the
law."

Interestingly, petitioner disregards altogether in its argument the qualifying phrase "according to the
provisions of the law" and merely focuses its attention on the "across-the-board increase" clause. Given
the entire sentence, it is clear that the above-quoted CBA provision does not support the unyielding view
of petitioner that the issuance of Wage Order No. ROVII-06 entitles its members to an across-the-board
increase, absolutely and without any condition.

Stipulations in a contract must be read together,12 not in isolation from one another. When the terms of its
clauses are clear and leave no room for doubt as to the intention of the contracting parties, it would not
be necessary to interpret those terms, whose literal meanings should prevail. 13

The CA correctly observed that the import of Wage Order No. ROVII-06 should be considered in the
implementation of the government-decreed increase. The present Petition makes no denial or refutation of
this finding, but merely an averment of the silence of the CBA on the creditability of increases provided
under the Agreement against those in the minimum wage under a wage order. It insists that the parties
intended no such creditability; otherwise, they would have expressly stated such intent in the CBA.

We hold that the issue here is not about creditability, but the applicability of Wage Order No. ROVII-06 to
respondent’s employees. The Wage Order was intended to fix a new minimum wage only, not to grant
across-the-board wage increases to all employees in Region VII. The intent of the Order is indicated in its
title, "Establishing New Minimum Wage Rates," as well as in its preamble: the purpose, reason or
justification for its enactment was "to adjust the minimum wage of workers to cushion the impact brought
about by the latest economic crisis not only in the Philippines but also in the Asian region."

In Cagayan Sugar Milling Company v. Secretary of Labor and Employment 14 and Manila Mandarin
Employees Union v. NLRC,15 the Wage Orders that were the subjects of those cases were substantially and
similarly worded as Wage Order No. ROVII-06. In those cases, this Court construed the Orders along the
same line that it follows now: as providing for an increase in the prevailing statutory minimum wage rates
of workers. No across-the-board increases were granted.

Parenthetically, there are two methods of adjusting the minimum wage. In Employers Confederation of
the Phils. v. National Wages and Productivity Commission,16 these were identified as the "floor wage" and
the "salary-ceiling" methods. The "floor wage" method involves the fixing of a determinate amount to be
added to the prevailing statutory minimum wage rates. On the other hand, in the "salary-ceiling" method,
the wage adjustment was to be applied to employees receiving a certain denominated salary ceiling. In
other words, workers already being paid more than the existing minimum wage (up to a certain amount
stated in the Wage Order) are also to be given a wage increase.

A cursory reading of the subject Wage Order convinces us that the intention of the Regional Board of
Region VII was to prescribe a minimum or "floor wage"; not to determine a "salary ceiling." Had the latter
been its intention, the Board would have expressly provided accordingly. The text of Sections 2 and 3 of
the Order states:

"Section 2. AMOUNT AND MANNER OF INCREASE. Upon the effectivity of this Order, the daily minimum
wage rates for all the workers and employees in the private sector shall be increased by Ten Pesos
(₱10.00) per day to be given in the following manner:

i. Five Pesos (₱5.00) per day effective April 1, 1998, and

ii. Additional Five Pesos (₱5.00) per day effective October 1, 1998.

"Section 3. UNIFORM WAGE RATE PER AREA CLASSIFICATION. To effect a uniform wage rate pursuant to
Section 1 hereof, the prescribed minimum wage after full implementation of this Order for each area
classification shall be as follows:

Area Classification Non-Agriculture Sector Agriculture Sector

Class A 165.00 150.00

Class B 155.00 140.00

Class C 145.00 130.00

Class D 135.00 120.00"

These provisions show that the prescribed minimum wage after full implementation of the ₱10 increase in
the Wage Order is ₱165 for Class A private non-agriculture sectors. It would be reasonable and logical,
therefore, to infer that those employers already paying their employees more than ₱165 at the time of the
issuance of the Order are sufficiently complying with the Order.

Further supporting this construction of Wage Order No. ROVII-06 is the opinion of its drafter, the RTWPB
Region VII. In its letter-opinion17 answering respondent’s queries, the Board gave a similar interpretation
of the essence of the Wage Order: to fix a new floor wage or to upgrade the wages of the employees
receiving lower than the minimum wage set by the Order.

Notably, the RTWPB was interpreting only its own issuance, not a statutory provision. The best authority
to construe a rule or an issuance is its very source,18 in this case the RTWPB. Without a doubt, the Board,
like any other executive agency, has the authority to interpret its own rules and issuances; any phrase
contained in its interpretation becomes a part of those rules or issuances themselves. 19 Therefore, it was
proper for the CA to consider the letter dated June 13, 2000, written by the RTWPB to explain the scope
and import of the latter’s own Order, as such interpretation is deemed a part of the Order itself. That the
letter was belatedly submitted to that Court is not fatal in the determination of this particular case.

We cannot sustain petitioner, even if we assume that its contention is right and that the implementation of
any government-decreed increase under the CBA is absolute. The CBA is no ordinary contract, but one
impressed with public interest. 20 Therefore, it is subject to special orders on wages, 21 such as those issued
by the RTWPB. Capitol Wireless v. Bate22 is squarely in point. The union in that case claimed that all
government-mandated increases in salaries should be granted to all employees across-the-board without
any qualification whatsoever, pursuant to the CBA provision that any government-mandated wage
increases should be over and above the benefits granted in the CBA. The Court denied such claim and held
that the provisions of the Agreement should be read in harmony with the Wage Orders. Applying that
ruling to the present case, we hold that the implementation of a wage increase for respondent’s
employees should be controlled by the stipulations of Wage Order No. ROVII-06.

At the risk of being repetitive, we stress that the employees are not entitled to the claimed salary
increase, simply because they are not within the coverage of the Wage Order, as they were already
receiving salaries greater than the minimum wage fixed by the Order. Concededly, there is an increase
necessarily resulting from raising the minimum wage level, but not across-the-board. Indeed, a "double
burden" cannot be imposed upon an employer except by clear provision of law. 23 It would be unjust,
therefore, to interpret Wage Order No. ROVII-06 to mean that respondent should grant an across-the-
board increase. Such interpretation of the Order is not sustained by its text. 24

In the resolution of labor cases, this Court has always been guided by the State policy enshrined in the
Constitution: social justice25 and the protection of the working class.26 Social justice does not, however,
mandate that every dispute should be automatically decided in favor of labor. In every case, justice is to
be granted to the deserving and dispensed in the light of the established facts and the applicable law and
doctrine.27

WHEREFORE, the Petition is DENIED, and the assailed Decision and Resolution AFFIRMED. Costs against
petitioner.

SO ORDERED.

20.

G.R. No. 173648 January 16, 2012

ABDULJUAHID R. PIGCAULAN,* Petitioner,

vs.
SECURITY and CREDIT NVESTIGATION, INC. and/or RENE AMBY REYES, Respondents.

DECISION

DEL CASTILLO, J.:

It is not for an employee to prove non-payment of benefits to which he is entitled by law. Rather, it is on
the employer that the burden of proving payment of these claims rests.

This Petition for Review on Certiorari1 assails the February 24, 2006 Decision 2 of the Court of Appeals (CA)
in CA-G.R. SP No. 85515, which granted the petition for certiorari filed therewith, set aside the March 23,
20043 and June 14, 20044 Resolutions of the National Labor Relations Commission (NLRC), and dismissed
the complaint filed by Oliver R. Canoy (Canoy) and petitioner Abduljuahid R. Pigcaulan (Pigcaulan) against
respondent Security and Credit Investigation, Inc. (SCII) and its General Manager, respondent Rene Amby
Reyes. Likewise assailed is the June 28, 2006 Resolution 5 denying Canoy’s and Pigcaulan’s Motion for
Reconsideration.6

Factual Antecedents

Canoy and Pigcaulan were both employed by SCII as security guards and were assigned to SCII’s different
clients. Subsequently, however, Canoy and Pigcaulan filed with the Labor Arbiter separate complaints 7 for
underpayment of salaries and non-payment of overtime, holiday, rest day, service incentive leave and
13th month pays. These complaints were later on consolidated as they involved the same causes of
action.

Canoy and Pigcaulan, in support of their claim, submitted their respective daily time records reflecting the
number of hours served and their wages for the same. They likewise presented itemized lists of their
claims for the corresponding periods served.

Respondents, however, maintained that Canoy and Pigcaulan were paid their just salaries and other
benefits under the law; that the salaries they received were above the statutory minimum wage and the
rates provided by the Philippine Association of Detective and Protective Agency Operators (PADPAO) for
security guards; that their holiday pay were already included in the computation of their monthly salaries;
that they were paid additional premium of 30% in addition to their basic salary whenever they were
required to work on Sundays and 200% of their salary for work done on holidays; and, that Canoy and
Pigcaulan were paid the corresponding 13th month pay for the years 1998 and 1999. In support thereof,
copies of payroll listings8 and lists of employees who received their 13th month pay for the periods
December 1997 to November 1998 and December 1998 to November 1999 9 were presented. In addition,
respondents contended that Canoy’s and Pigcaulan’s monetary claims should only be limited to the past
three years of employment pursuant to the rule on prescription of claims.

Ruling of the Labor Arbiter

Giving credence to the itemized computations and representative daily time records submitted by Canoy
and Pigcaulan, Labor Arbiter Manuel P. Asuncion awarded them their monetary claims in his
Decision10 dated June 6, 2002. The Labor Arbiter held that the payroll listings presented by the
respondents did not prove that Canoy and Pigcaulan were duly paid as same were not signed by the latter
or by any SCII officer. The 13th month payroll was, however, acknowledged as sufficient proof of
payment, for it bears Canoy’s and Pigcaulan’s signatures. Thus, without indicating any detailed
computation of the judgment award, the Labor Arbiter ordered the payment of overtime pay, holiday pay,
service incentive leave pay and proportionate 13th month pay for the year 2000 in favor of Canoy and
Pigcaulan, viz:

WHEREFORE, the respondents are hereby ordered to pay the complainants: 1) their salary differentials in
the amount of ₱166,849.60 for Oliver Canoy and ₱121,765.44 for Abduljuahid Pigcaulan; 2) the sum of
₱3,075.20 for Canoy and ₱2,449.71 for Pigcaulan for service incentive leave pay and; [3]) the sum of
₱1,481.85 for Canoy and ₱1,065.35 for Pigcaulan as proportionate 13th month pay for the year 2000. The
rest of the claims are dismissed for lack of sufficient basis to make an award.

SO ORDERED.11

Ruling of the National Labor Relations Commission

Respondents appealed to the NLRC. They alleged that there was no basis

for the awards made because aside from the self-serving itemized computations, no representative daily
time record was presented by Canoy and Pigcaulan. On the contrary, respondents asserted that the
payroll listings they submitted should have been given more probative value. To strengthen their cause,
they attached to their Memorandum on Appeal payrolls 12 bearing the individual signatures of Canoy and
Pigcaulan to show that the latter have received their salaries, as well as copies of transmittal letters13 to
the bank to show that the salaries reflected in the payrolls were directly deposited to the ATM accounts of
SCII’s employees.

The NLRC, however, in a Resolution 14 dated March 23, 2004, dismissed the appeal and held that the
evidence show underpayment of salaries as well as non-payment of service incentive leave benefit.
Accordingly, the Labor Arbiter’s Decision was sustained. The motion for reconsideration thereto was
likewise dismissed by the NLRC in a Resolution15 dated June 14, 2004.

Ruling of the Court of Appeals

In respondents’ petition for certiorari with prayer for the issuance of a temporary restraining order and
preliminary injunction16 before the CA, they attributed grave abuse of discretion on the part of the NLRC in
finding that Canoy and Pigcaulan are entitled to salary differentials, service incentive leave pay and
proportionate 13th month pay and in arriving at amounts without providing sufficient bases therefor.

The CA, in its Decision17 dated February 24, 2006, set aside the rulings of

both the Labor Arbiter and the NLRC after noting that there were no factual and legal bases mentioned in
the questioned rulings to support the conclusions made. Consequently, it dismissed all the monetary
claims of Canoy and Pigcaulan on the following rationale:

First. The Labor Arbiter disregarded the NLRC rule that, in cases involving money awards and at all
events, as far as practicable, the decision shall embody the detailed and full amount awarded.

Second. The Labor Arbiter found that the payrolls submitted by SCII have no probative value for being
unsigned by Canoy, when, in fact, said payrolls, particularly the payrolls from 1998 to 1999 indicate the
individual signatures of Canoy.

Third. The Labor Arbiter did not state in his decision the substance of the evidence adduced by Pigcaulan
and Canoy as well as the laws or jurisprudence that would show that the two are indeed entitled to the
salary differential and incentive leave pays.

Fourth. The Labor Arbiter held Reyes liable together with SCII for the payment of the claimed salaries and
benefits despite the absence of proof that Reyes deliberately or maliciously designed to evade SCII’s
alleged financial obligation; hence the Labor Arbiter ignored that SCII has a corporate personality separate
and distinct from Reyes. To justify solidary liability, there must be an allegation and showing that the
officers of the corporation deliberately or maliciously designed to evade the financial obligation of the
corporation.18

Canoy and Pigcaulan filed a Motion for Reconsideration, but same was denied by the CA in a
Resolution19 dated June 28, 2006.

Hence, the present Petition for Review on Certiorari.

Issues
The petition ascribes upon the CA the following errors:

I. The Honorable Court of Appeals erred when it dismissed the complaint on mere alleged failure of
the Labor Arbiter and the NLRC to observe the prescribed form of decision, instead of remanding
the case for reformation of the decision to include the desired detailed computation.

II. The Honorable Court of Appeals erred when it [made] complainants suffer the consequences of
the alleged non-observance by the Labor Arbiter and NLRC of the prescribed forms of decisions
considering that they have complied with all needful acts required to support their claims.

III. The Honorable Court of Appeals erred when it dismissed the complaint allegedly due to absence
of legal and factual [bases] despite attendance of substantial evidence in the records. 20

It is well to note that while the caption of the petition reflects both the names of Canoy and Pigcaulan as
petitioners, it appears from its body that it is being filed solely by Pigcaulan. In fact, the Verification and
Certification of Non-Forum Shopping was executed by Pigcaulan alone.

In his Petition, Pigcaulan submits that the Labor Arbiter and the NLRC are not strictly bound by the rules.
And even so, the rules do not mandate that a detailed computation of how the amount awarded was
arrived at should be embodied in the decision. Instead, a statement of the nature or a description of the
amount awarded and the specific figure of the same will suffice. Besides, his and Canoy’s claims were
supported by substantial evidence in the form of the handwritten detailed computations which the Labor
Arbiter termed as "representative daily time records," showing that they were not properly compensated
for work rendered. Thus, the CA should have remanded the case instead of outrightly dismissing it.

In their Comment,21 respondents point out that since it was only Pigcaulan who filed the petition, the CA
Decision has already become final and binding upon Canoy. As to Pigcaulan’s arguments, respondents
submit that they were able to present sufficient evidence to prove payment of just salaries and benefits,
which bits of evidence were unfortunately ignored by the Labor Arbiter and the NLRC. Fittingly, the CA
reconsidered these pieces of evidence and properly appreciated them. Hence, it was correct in dismissing
the claims for failure of Canoy and Pigcaulan to discharge their burden to disprove payment.

Pigcaulan, this time joined by Canoy, asserts in his Reply22 that his filing of the present petition redounds
likewise to Canoy’s benefit since their complaints were consolidated below. As such, they maintain that
any kind of disposition made in favor or against either of them would inevitably apply to the other. Hence,
the institution of the petition solely by Pigcaulan does not render the assailed Decision final as to Canoy.
Nonetheless, in said reply they appended Canoy’s affidavit 23 where he verified under oath the contents and
allegations of the petition filed by Pigcaulan and also attested to the authenticity of its annexes. Canoy,
however, failed to certify that he had not filed any action or claim in another court or tribunal involving the
same issues. He likewise explains in said affidavit that his absence during the preparation and filing of the
petition was caused by severe financial distress and his failure to inform anyone of his whereabouts.

Our Ruling

The assailed CA Decision is considered final as to Canoy.

We have examined the petition and find that same was filed by Pigcaulan solely on his own behalf. This is
very clear from the petition’s prefatory which is phrased as follows:

COMES NOW Petitioner Abduljuahid R. Pigcaulan, by counsel, unto this Honorable Court x x x.
(Emphasis supplied.)

Also, under the heading "Parties", only Pigcaulan is mentioned as petitioner and consistent with this, the
body of the petition refers only to a "petitioner" and never in its plural form "petitioners". Aside from the
fact that the Verification and Certification of Non-Forum Shopping attached to the petition was executed
by Pigcaulan alone, it was plainly and particularly indicated under the name of the lawyer who prepared
the same, Atty. Josefel P. Grageda, that he is the "Counsel for Petitioner Adbuljuahid Pigcaulan" only. In
view of these, there is therefore, no doubt, that the petition was brought only on behalf of Pigcaulan.
Since no appeal from the CA Decision was brought by Canoy, same has already become final and
executory as to him.

Canoy cannot now simply incorporate in his affidavit a verification of the contents and allegations of the
petition as he is not one of the petitioners therein. Suffice it to state that it would have been different had
the said petition been filed in behalf of both Canoy and Pigcaulan. In such a case, subsequent submission
of a verification may be allowed as non-compliance therewith or a defect therein does not necessarily
render the pleading, or the petition as in this case, fatally defective. 24 "The court may order its submission
or correction, or act on the pleading if the attending circumstances are such that strict compliance with
the Rule may be dispensed with in order that the ends of justice may be served thereby. Further, a
verification is deemed substantially complied with when one who has ample knowledge to swear to the
truth of the allegations in the complaint or petition signs the verification, and when matters alleged in the
petition have been made in good faith or are true and correct."25 However, even if it were so, we note that
Canoy still failed to submit or at least incorporate in his affidavit a certificate of non-forum shopping.

The filing of a certificate of non-forum shopping is mandatory so much so that non-compliance could only
be tolerated by special circumstances and compelling reasons.26 This Court has held that when there are
several petitioners, all of them must execute and sign the certification against forum shopping; otherwise,
those who did not sign will be dropped as parties to the case. 27 True, we held that in some cases,
execution by only one of the petitioners on behalf of the other petitioners constitutes substantial
compliance with the rule on the filing of a certificate of non-forum shopping on the ground of common
interest or common cause of action or defense. 28 We, however, find that common interest is not present in
the instant petition. To recall, Canoy’s and Pigcaulan’s complaints were consolidated because they both
sought the same reliefs against the same respondents. This does not, however, mean that they share a
common interest or defense. The evidence required to substantiate their claims may not be the same. A
particular evidence which could sustain Canoy’s action may not effectively serve as sufficient to support
Pigcaulan’s claim.

Besides, assuming that the petition is also filed on his behalf, Canoy failed to show any reasonable cause
for his failure to join Pigcaulan to personally sign the Certification of Non-Forum Shopping. It is his duty,
as a litigant, to be prudent in pursuing his claims against SCII, especially so, if he was indeed suffering
from financial distress. However, Canoy failed to advance any justifiable reason why he did not inform
anyone of his whereabouts when he knows that he has a pending case against his former employer.
Sadly, his lack of prudence and diligence cannot merit the court’s consideration or sympathy. It must be
emphasized at this point that procedural rules should not be ignored simply because their non-observance
may result in prejudice to a party’s substantial rights. The Rules of Court should be followed except only
for the most persuasive of reasons.29

Having declared the present petition as solely filed by Pigcaulan, this Court shall consider the subsequent
pleadings, although apparently filed under his and Canoy’s name, as solely filed by the former.

There was no substantial evidence to support the grant of overtime pay.

The Labor Arbiter ordered reimbursement of overtime pay, holiday pay, service incentive leave pay and
13th month pay for the year 2000 in favor of Canoy and Pigcaulan. The Labor Arbiter relied heavily on the
itemized computations they submitted which he considered as representative daily time records to
substantiate the award of salary differentials. The NLRC then sustained the award on the ground that
there was substantial evidence of underpayment of salaries and benefits.

We find that both the Labor Arbiter and the NLRC erred in this regard. The handwritten itemized
computations are self-serving, unreliable and unsubstantial evidence to sustain the grant of salary
differentials, particularly overtime pay. Unsigned and unauthenticated as they are, there is no way of
verifying the truth of the handwritten entries stated therein. Written only in pieces of paper and solely
prepared by Canoy and Pigcaulan, these representative daily time records, as termed by the Labor Arbiter,
can hardly be considered as competent evidence to be used as basis to prove that the two were underpaid
of their salaries. We find nothing in the records which could substantially support Pigcaulan’s contention
that he had rendered service beyond eight hours to entitle him to overtime pay and during Sundays to
entitle him to restday pay. Hence, in the absence of any concrete proof that additional service beyond the
normal working hours and days had indeed been rendered, we cannot affirm the grant of overtime pay to
Pigcaulan.

Pigcaulan is entitled to holiday pay, service incentive leave pay and proportionate 13th month pay for year
2000.

However, with respect to the award for holiday pay, service incentive leave

pay and 13th month pay, we affirm and rule that Pigcaulan is entitled to these benefits.

Article 94 of the Labor Code provides that:

ART. 94. RIGHT TO HOLIDAY PAY. – (a) Every worker shall be paid his regular daily wage during
regular holidays, except in retail and service establishments regularly employing less than ten (10)
workers;

xxxx

While Article 95 of the Labor Code provides:

ART. 95. RIGHT TO SERVICE INCENTIVE LEAVE. – (a) Every employee who has rendered at least one
year of service shall be entitled to a yearly service incentive of five days with pay.

xxxx

Under the Labor Code, Pigcaulan is entitled to his regular rate on holidays even if he does not
work.30 Likewise, express provision of the law entitles him to service incentive leave benefit for he
rendered service for more than a year already. Furthermore, under Presidential Decree No. 851, 31 he
should be paid his 13th month pay. As employer, SCII has the burden of proving that it has paid these
benefits to its employees.32

SCII presented payroll listings and transmittal letters to the bank to show that Canoy and Pigcaulan
received their salaries as well as benefits which it claimed are already integrated in the employees’
monthly salaries. However, the documents presented do not prove SCII’s allegation. SCII failed to show
any other concrete proof by means of records, pertinent files or similar documents reflecting that the
specific claims have been paid. With respect to 13th month pay, SCII presented proof that this benefit was
paid but only for the years 1998 and 1999. To repeat, the burden of proving payment of these monetary
claims rests on SCII, being the employer. It is a rule that one who pleads payment has the burden of
proving it. "Even when the plaintiff alleges non-payment, still the general rule is that the burden rests on
the defendant to prove payment, rather than on the plaintiff to prove non-payment."33 Since SCII failed to
provide convincing proof that it has already settled the claims, Pigcaulan should be paid his holiday pay,
service incentive leave benefits and proportionate 13th month pay for the year 2000.

The CA erred in dismissing the claims instead of remanding the case to the Labor Arbiter for a detailed
computation of the judgment award.

Indeed, the Labor Arbiter failed to provide sufficient basis for the monetary awards granted.lawphi1 Such
failure, however, should not result in prejudice to the substantial rights of the party.1avvphi1 While we
disallow the grant of overtime pay and restday pay in favor of Pigcaulan, he is nevertheless entitled, as a
matter of right, to his holiday pay, service incentive leave pay and 13th month pay for year 2000. Hence,
the CA is not correct in dismissing Pigcaulan’s claims in its entirety.

Consistent with the rule that all money claims arising from an employer-employee relationship shall be
filed within three years from the time the cause of action accrued, 34 Pigcaulan can only demand the
amounts due him for the period within three years preceding the filing of the complaint in 2000.
Furthermore, since the records are insufficient to use as bases to properly compute Pigcaulan’s claims, the
case should be remanded to the Labor Arbiter for a detailed computation of the monetary benefits due to
him.

WHEREFORE, the petition is GRANTED. The Decision dated February 24, 2006 and Resolution dated
June 28, 2006 of the Court of Appeals in CA-G.R. SP No. 85515 are REVERSED and SET ASIDE.
Petitioner Abduljuahid R. Pigcaulan is hereby declared entitled to holiday pay and service incentive leave
pay for the years 1997-2000 and proportionate 13th month pay for the year 2000.

The case is REMANDED to the Labor Arbiter for further proceedings to determine the exact amount and
to make a detailed computation of the monetary benefits due Abduljuahid R. Pigcaulan which Security and
Credit Investigation Inc. should pay without delay.

SO ORDERED.

21.

G.R. No. 188169 November 28, 2011

NIÑA JEWELRY MANUFACTURING OF METAL ARTS, INC. (otherwise known as NIÑA

MANUFACTURING AND METAL ARTS, INC.) and ELISEA B. ABELLA, Petitioners,
vs.
MADELINE C. MONTECILLO and LIZA M. TRINIDAD, Respondents.

DECISION

REYES, J.:

The Case

Before us is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court assailing the January
9, 2009 Decision2 and the May 26, 2009 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No.
01755. The dispositive portion of the assailed Decision reads:
WHEREFORE, the Decision dated August 31, 2005 and Resolution dated October 28, 2005 of the National
Labor Relations Commission (NLRC), Fourth Division, Cebu City, in NLRC Case No. V-000363-2005
are REVERSED and SET ASIDE, and a new one rendered ordering Niña Jewelry Manufacturing:

(1) to reinstate petitioners to their respective positions as goldsmiths without loss of seniority
rights and other privileges; and

(2) to pay petitioners their full backwages inclusive of allowances and other benefits or their
monetary equivalent computed from the time their compensation was withheld up to their actual
reinstatement.

The case is REMANDED to the Labor Arbiter for the RECOMPUTATION of the total monetary award due
to petitioners in accord with this decision. The Labor Arbiter is ORDERED to submit his compliance within
thirty (30) days from notice of this decision, with copies furnished to the parties. 4 (citations omitted)

The assailed Resolution denied the petitioners' Motion for Reconsideration. 5

The Factual Antecedents

Madeline Montecillo (Madeline) and Liza Trinidad (Liza), hereinafter referred to collectively as the
respondents, were first employed as goldsmiths by the petitioner Niña Jewelry Manufacturing of Metal
Arts, Inc. (Niña Jewelry) in 1996 and 1994, respectively. Madeline's weekly rate was ₱1,500.00 while
Liza's was ₱2,500.00. Petitioner Elisea Abella (Elisea) is Niña Jewelry's president and general manager.

There were incidents of theft involving goldsmiths in Niña Jewelry's employ.

On August 13, 2004, Niña Jewelry imposed a policy for goldsmiths requiring them to post cash bonds or
deposits in varying amounts but in no case exceeding 15% of the latter's salaries per week. The deposits
were intended to answer for any loss or damage which Niña Jewelry may sustain by reason of the
goldsmiths' fault or negligence in handling the gold entrusted to them. The deposits shall be returned
upon completion of the goldsmiths' work and after an accounting of the gold received.

Niña Jewelry alleged that the goldsmiths were given the option not to post deposits, but to sign
authorizations allowing the former to deduct from the latter's salaries amounts not exceeding 15% of their
take home pay should it be found that they lost the gold entrusted to them. The respondents claimed
otherwise insisting that Niña Jewelry left the goldsmiths with no option but to post the deposits. The
respondents alleged that they were constructively dismissed by Niña Jewelry as their continued
employments were made dependent on their readiness to post the required deposits.

Niña Jewelry averred that on August 14, 2004, the respondents no longer reported for work and signified
their defiance against the new policy which at that point had not even been implemented yet.

On September 7, 2004, the respondents filed against Niña Jewelry complaints 6 for illegal dismissal and for
the award of separation pay.

On September 20, 2004, the respondents filed their amended complaints7 which excluded their earlier
prayer for separation pay but sought reinstatement and payment of backwages, attorney's fees and
13th month pay.

Labor Arbiter Jose Gutierrez (LA Gutierrez) dismissed the respondents' complaints for lack of merit but
ordered Niña Jewelry to pay Madeline the sum of ₱3,750.00, and Liza, ₱6,250.00, representing their
proportionate entitlements to 13th month pay for the year 2004. LA Gutierrez ratiocinated that:

Their [respondents] claim is self-serving. As evidence to (sic) their claims that they were made to sign
blank trust receipts, complainants presented Annexes 'A'[,] 'B' and 'C'. Our examination, however, shows
that they are not blank trust receipts but rather they are filled up trust receipts.

The undisputed facts show that complainants were piece workers of the respondent who are engaged in
the processing of gold into various jewelry pieces. Because of the nature of its business, respondent was
plagued with too many incidents of theft from its piece workers. x x x This deposit [not exceeding 15% of
the salary for the week of the piece worker] is released back upon completion of work and after
accounting of the gold received by him or her. There is an alternative, however, the piece worker may opt
not to give a deposit, instead sign an authorization to allow the respondent to deduct from the salary an
amount not to exceed 15% of his take home pay, should it be found out that he lost the gold [entrusted]
to him or her due to his or her fault or negligence. The complainants did not like to post a deposit, or sign
an authorization. They instead told their fellow goldsmiths that they will bring the matter to the Labor
Commission. Complainants did not anymore report for work and did not anymore perform their tasks. The
fact of complainants not being dismissed from employment was duly attested to by his co-workers who
executed their Joint Affidavit under oath, Annex '4'.

As further evidence to prove that they were dismissed, complainants presented the minutes of [the] Sept.
7, 2004 conference.

We examined the statements therein, we find that there is no admission on the part of the respondents
that they terminate[d] the complainants from employment. Respondents only inform[ed] the complainants
to put up the appropriate cash bond before they could be allowed to return back to work which they
previously refused to perform, as a sign of their protest to the requirement to post cash bond or to sign an
authorization.

xxxx

x x x It is clearly shown that complainants were paid with their 13 th month pay for the year 2001, 2002
and 2003. However, for the year 2004, considering that complainants have worked until the month of
August, we rule to grant them the proportionate 13 th month pay as there is no showing that they were
already paid. The other money claims are denied for lack of merit. x x x. 8

The respondents filed an appeal before the NLRC which affirmed LA Gutierrez's dismissal of the amended
complaints but deleted the award of 13th month pay based on findings that the former had contracted
unpaid individual loans from Niña Jewelry. The NLRC found that:

x x x [I]t was complainants who refused to work with the respondents when they were required to post
cash bond or sign an authorization for deduction for the gold material they received and to be
manufactured into various jewelries. x x x We find it logically sound for the latter [Niña Jewelry] to
innovate certain policy or rule to protect its own business. To deprive them of such prerogative
[management prerogative] will be likened to 'killing the goose that lays the golden eggs.'

x x x [C]omplainants failed to prove their affirmative allegations in the respective complaints that they
were indeed dismissed. On the contrary, respondents have convincingly shown that if (sic) were
complainants who voluntarily abandoned from (sic) their work by refusing to abide with the newly adopted
company policy of putting up a cash bond or signing an authorization for deduction for the gold materials
entrusted to them in case of loss or pilferage.

x x x [B]oth complainants are still indebted with (sic) the respondents in the amounts of ₱5,118.63 in the
case of Madeline Montecillo and ₱7,963.11 in the case of Liza Montecillo. Such being the case[,] Madeline
Montecillo has still on account payable of ₱1,368.63 while Liza Montecillo is still indebted of ₱1,713.71.
This principle of offsetting of credit should be allowed to preclude unjust enrichment at the expense of the
respondents.9

The respondents filed a Petition for Certiorari10 before the CA ascribing patent errors in the appreciation of
facts and application of jurisprudence on the part of the NLRC when it ruled that what occurred was not a
case of illegal dismissal but of abandonment of work.

On January 9, 2009, the CA rendered the now assailed Decision 11 reversing the findings of the LA and the
NLRC. The CA ruled:

According to [the] private respondents, they required a deposit or cash bond from [the] petitioners in
order to secure their interest against gold thefts committed by some of their employees. If the employee
fails to make the required deposit, he will not be given gold to work on. Further, [the] private respondents
admitted during the conciliation proceedings before Executive Labor Arbiter Violeta Ortiz-Bantug that [the]
petitioners would only be allowed back to work after they had posted the proportionate cash bond.

The Labor Code of the Philippines provides:

ART. 113. Wage Deduction. – No employer, in his own behalf or in behalf of any person, shall make any
deduction from the wages of his employees, except:

(a) In cases where the worker is insured with his consent by the employer, and the deduction is to
recompense the employer for the amount paid by him as premium on the insurance;

(b) For union dues, in cases where the right of the worker or his union to check-off has been
recognized by the employer or authorized in writing by the individual worker concerned; and

(c) In cases where the employer is authorized by law or regulations issued by the Secretary of
Labor.
Article 114. Deposits for loss or damage. – No employer shall require his worker to make deposits from
which deductions shall be made for the reimbursement of loss of or damage to tools, materials, or
equipment supplied by the employer, except when the employer is engaged in such trades, occupations or
business where the practice of making deposits is a recognized one, or is necessary or desirable as
determined by the Secretary of Labor in appropriate rules and regulations.

Applying these provisions to the case at bar, before [the] petitioners may be required to deposit cash or
agree to a salary deduction proportionate to the value of gold delivered to them, the employer must
comply with the relevant conditions imposed by law. Hence, the latter must prove that there is an existing
law or regulation authorizing it to impose such burden on its employees. And, in case of deposit, that it is
engaged in a trade, occupation or business where such requirement is a recognized practice. Niña Jewelry
obviously failed in this respect.1âwphi1 Surely, mere invocation of management prerogative cannot
exempt it from compliance with the strict requirements of law. Accordingly, [w]e hold that Niña Jewelry's
unilateral imposition of cash deposit or salary deduction on [the] petitioners is illegal. For that matter,
when Ni[ñ]a Jewelry refused to give assignment to [the] petitioners or to admit them back to work
because they failed to give cash deposit or agree to a salary deduction, it was deemed to have
constructively dismissed [the] petitioners. Obviously, such deposit or salary deduction was imposed as a
condition for [the] petitioners' continuing employment. Non-compliance indubitably meant termination of
[the] petitioners' employment. Suldao vs. Cimech System Construction, Inc.12 enunciated:

Constructive dismissal or a constructive discharge has been defined as quitting because continued
employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank
and a diminution in pay. There is constructive dismissal when the continued employment is rendered
impossible so as to foreclose any choice on the employee's part except to resign from such employment.

The fact that [the] petitioners lost no time in filing the complaint for illegal dismissal lucidly negates [the]
private respondents' claim that the former had abandoned their work. A contrary notion would not only be
illogical but also absurd.13 Indeed, prompt filing of a case for illegal dismissal, on one hand, is anathema
to the concept of abandonment, on the other.

Finally, under Article 279 of the Labor Code, an illegally dismissed employee is entitled to reinstatement
without loss of seniority rights and other privileges; full backwages, inclusive of allowances; and other
benefits or their monetary equivalent computed from the time his compensation was withheld from him up
to the time of his actual reinstatement.14 x x x.

As for damages, it is a rule that moral damages may be recovered where the dismissal of the employee
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. x x x [w]e find that private respondents did not act with
oppression, bad faith or fraud. They imposed a cash bond or deposit on herein petitioners in the honest
belief that it was the best way to protect their interest against gold theft in the company. x x x. 15 (some
citations omitted)

The Issues

The following are to be resolved in the instant Petition for Review: 16

I.

WHETHER OR NOT THE COURT OF APPEALS GROSSLY ERRED IN GIVING DUE COURSE TO THE
PETITION [under Rule 65 of the Rules of Court], IN EFFECT, FINDING GRAVE ABUSE OF
DISCRETION, AMOUNTING TO LACK OR EXCESS OF JURISDICTION ON THE PART OF THE NLRC,
DESPITE THE FACT THAT THE SUBJECT DECISION AND RESOLUTION THEREIN ARE IN PERFECT
ACCORD WITH THE EVIDENCE ON RECORD AND APPLICABLE LAWS.

II.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THERE WAS
CONSTRUCTIVE DISMISSAL IN THE PRESENT CASE AND ORDERING RESPONDENTS'
REINSTATEMENT AS WELL AS THE PAYMENT OF THEIR BACKWAGES AND OTHER MONETARY
BENEFITS WITHOUT FACTUAL OR LEGAL BASES.17

The petitioners now argue that the CA should have outrightly dismissed the petition filed before it as the
respondents had resorted to an erroneous mode of appeal. The arguments raised in the petition were the
same ones already passed upon by the LA and the NLRC. What the respondents sought was the CA's re-
evaluation of the facts and evidence. The petition was thus based on purported errors of judgment which
are beyond the province of a petition for certiorari.

The petitioners likewise insist that the respondents abandoned their work without due notice and to the
prejudice of the former. The respondents' co-workers attested to the foregoing circumstance.18 The
respondents are goldsmiths whose skills are indispensable to a jewelry manufacturing business, thus, it is
not in accord with both logic and experience for the petitioners to just fire them only to train new workers.
Moreover, in the complaints and amended complaints, the respondents did not claim for reinstatement,
hence, implying their admission that they were not terminated.

Further, under Articles 114 and 11519 of the Labor Code, an employer may require a worker to post a
deposit even before a loss or damage has occurred, provided that deductions from the deposit can be
made only upon proof that the worker is liable for the loss or damage. In case no loss or damage is
incurred, the deposit shall be returned to the worker after the conduct of an accounting which was what
happened in the case at bar. This is a valid exercise of management prerogative the scope of which
includes the setting of policies relative to working methods, procedures to be followed and working
regulations.20

The petitioners stress that they did not transgress the respondents' rights. The respondents, who
expressed to their co-workers their lack of fear to have their employment severed, are motivated by their
greed to extract money from the petitioners.

The petitioners conclude that the CA should have accorded respect to the findings of the LA and the NLRC
especially since they were not arrived at arbitrarily or in disregard of the evidence on record.

In the respondents' Comment,21 they reiterate the arguments they had presented in the proceedings
below. The respondents emphasize that when they pleaded for reinstatement during the conference with
the petitioners on September 7, 2004, the latter openly admitted without reservation that the former will
only be allowed to return to work if they will post the required cash bond.

Further, the respondents claim that there was no plausible reason for them to abandon their employment
considering the length of their service and the fact that they were being paid rates above the minimum
wage. Citing Hantex Trading Co. Inc. v. Court of Appeals, 22 the respondents argue that no employee in his
right mind would recklessly abandon his job to join the ranks of the unemployed and choose to unduly
expose his family to hunger and untold hardship.

Besides, in Anflo Management & Investment Corp. v. Rodolfo Bolanio,23 this Court had the occasion to
state that the filing of a complaint for illegal dismissal is inconsistent with a charge of abandonment, for
an employee who takes steps to protest his lay off cannot by any logic be said to have abandoned his
work.

The respondents also claim that the petitioners misrepresented to this Court that the former did not pray
for reinstatement as the dorsal portions of the amended complaints indicate otherwise.

Moreover, the petitioners failed to prove their authority granted by either the law, or regulations issued by
the Secretary of Labor, allowing them to require their workers to post deposits. The petitioners also failed
to establish that Niña Jewelry is engaged in a trade, occupation or business where the practice of making
deposits is a recognized one or is considered as necessary or desirable by the Secretary of Labor.

Citing Sections 12,24 1325 and 14,26 Book III, Rule VIII of the Omnibus Rules Implementing the Labor Code
(Omnibus Rules), the respondents posit that salary deductions made prior to the occurrence of loss or
damage are illegal and constitute as undue interferences in the workers' disposal of their wages. Further,
the workers must first be given the opportunity to show cause why deductions should not be made. If to
be made, deductions should be fair, reasonable and should not exceed the actual loss or damage. In the
case at bar, the respondents were required to post cash bonds even when there is no proof yet of their
fault or negligence.

In the petitioners' Reply,27 they averred that the day after Niña Jewelry required from its employees the
posting of deposits and even before the policy was actually implemented, the respondents promptly
stopped reporting for work despite Elisea's attempt to get in touch with them. The petitioners convened
the employees to discuss the propriety of imposing the new policy and to afford them ample opportunity
to air their concerns. The respondents' acts contravene Article 19 of the New Civil Code (NCC) which
requires every person to act with justice, give everyone his due and observe honesty and good faith.

Further, it is clear in the Minutes of the Conciliation Proceedings 28 before the LA that the respondents were
not willing to be reinstated and preferred instead the payment of separation pay. Hence, no prayer for
reinstatement was indicated in the original complaints filed by them. As an afterthought, however, they
amended their complaints to reflect that they were likewise seeking for reinstatement.

The petitioners also point out that the doctrines in Hantex29 and Anflo Management30 cited by the
respondents find no application in the case at bar. In Hantex, the employer presented mere cash vouchers
to prove abandonment by the employee. In the case before us, sufficient evidence show that the
respondents abandoned their work. In Anflo Management, the employer expressly uttered words
terminating the employee who in turn filed a complaint the day right after the incident. In the case now
under our consideration, the respondents merely made a bare claim of illegal dismissal. Rightly so in Abad
v. Roselle Cinema,31 it was ruled that an employer's claim of not having terminated an employee, when
supported by substantial evidence, should not be outrightly overcome by the argument that an employee
would not have filed a complaint for illegal dismissal if he were not really dismissed. The circumstances
surrounding the separation from employment should be taken into account.

Under Article 114 of the Labor Code, the Secretary of Labor is conferred the authority to promulgate rules
determining the circumstances when the making of deposits is deemed recognized, necessary or
desirable. However, Section 14,32 Book III, Rule VIII of the Omnibus Rules does not define those
circumstances. What is defined is the circumstances when deductions can be made. It can thus be inferred
that the intention is for the courts to determine on a case to case basis what should be considered
as recognized, necessary or desirable especially in the light of the existence of myriads of businesses
which are practically impossible to enumerate in modern society. The petitioners hence argue that the
validity of requiring cash deposits should be scrutinized with due consideration of its reasonableness and
necessity. Further, Article 1306 of the NCC allows contracting parties to establish stipulations, clauses,
terms and conditions which they may deem convenient provided they do not contravene the law, morals,
good customs, public order or public policy. In the case at bar, the policy adopted by the petitioners was
neither unreasonable nor oppressive. It was intended to benefit all the contracting parties.

Lastly, while the respondents raise the issue of the illegality of deductions, the petitioners stress that it is
academic because no deduction was actually made yet.

The Court's Ruling

The instant petition is partially meritorious.

The petitioners raise the procedural issue of whether or not the CA validly gave due course to the petition
for certiorari filed before it under Rule 65 of the Rules of Court. As the substantive issue of whether or not
the petitioners constructively dismissed the respondents is closely-intertwined with the procedural
question raised, they will be resolved jointly.

Yolanda Mercado, et al. v. AMA Computer College-Parañaque City, Inc.33 is instructive as to the nature of
a petition for review on certiorari under Rule 45, and a petition for certiorari under Rule 65, viz:

x x x [R]ule 45 limits us to the review of questions of law raised against the assailed CA decision. In ruling
for legal correctness, we have to view the CA decision in the same context that the petition for certiorari it
ruled upon was presented to it; we have to examine the CA decision from the prism of whether it correctly
determined the presence or absence of grave abuse of discretion in the NLRC decision before it, not on the
basis of whether the NLRC decision on the merits of the case was correct. In other words, we have to be
keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision
challenged before it. This is the approach that should be basic in a Rule 45 review of a CA ruling in a labor
case. In question form, the question to ask is: Did the CA correctly determine whether the NLRC
committed grave abuse of discretion in ruling on the case?34

It is thus settled that this Court is bound by the CA's factual findings. The rule, however, admits of
exceptions, among which is when the CA's findings are contrary to those of the trial court or
administrative body exercising quasi-judicial functions from which the action originated.35 The case
before us falls under the aforementioned exception.

The petitioners argue that the respondents resorted to an erroneous mode of appeal as the issues raised
in the petition lodged before the CA essentially sought a re-evaluation of facts and evidence, hence, based
on purported errors of judgment which are outside the ambit of actions which can be aptly filed under
Rule 65.

We agree.

Again in Mercado,36 we ruled that:

x x x [I]n certiorari proceedings under Rule 65 of the Rules of Court, the appellate court does not assess
and weigh the sufficiency of evidence upon which the Labor Arbiter and the NLRC based their conclusion.
The query in this proceeding is limited to the determination of whether or not the NLRC acted without or in
excess of its jurisdiction or with grave abuse of discretion in rendering its decision. However, as an
exception, the appellate court may examine and measure the factual findings of the NLRC if the same are
not supported by substantial evidence. x x x. 37

In the case at bench, in the petition for certiorari under Rule 65 filed by the respondents before the CA,
the following issues were presented for resolution:
 I.

WHETHER OR NOT PUBLIC RESPONDENT [NLRC] committed patent errors in the appreciation of
facts and application of pertinent jurisprudence amounting to grave abuse of discretion or lack or in
excess of jurisdiction WHEN IT HELD THAT PRIVATE RESPONDENTS [herein petitioners] ARE NOT
GUILTY OF ILLEGAL DISMISSAL BECAUSE IT WAS THE PETITIONERS [herein private respondents]
WHO ABANDONED THEIR JOB AND REFUSED TO WORK WITH RESPONDENTS WHEN THEY WERE
REQUIRED TO PUT UP CASH BOND OR SIGN AN AUTHORIZATION FOR DEDUCTION.

II.

WHETHER OR NOT PUBLIC RESPONDENT committed patent errors in the appreciation of facts and
application of pertinent jurisprudence amounting to grave abuse of discretion or lack or in excess of
jurisdiction WHEN IT DID NOT ORDER THE REINSTATEMENT OF HEREIN PETITIONERS AND
DELETED THE AWARD OF 13th MONTH PAY AND DENIED THE CLAIMS OF ATTORNEY'S FEES,
DAMAGES AND FULL BACKWAGES.38

Essentially, the issues raised by the respondents for resolution by the CA were anchored on an alleged
misappreciation of facts and evidence by the NLRC and the LA when they both ruled that abandonment of
work and not constructive dismissal occurred.

We agree with the petitioners that what the respondents sought was a re-evaluation of evidence, which as
a general rule cannot be properly done in a petition for certiorari under Rule 65, save in cases where
substantial evidence to support the NLRC's findings are wanting.

In Honorable Ombudsman Simeon Marcelo v. Leopoldo Bungubung, 39 the Court defined substantial
evidence and laid down guidelines relative to the conduct of judicial review of decisions rendered by
administrative agencies in the exercise of their quasi-judicial power, viz:

x x x Substantial evidence is more than a mere scintilla of evidence. It means such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion, even if other minds equally
reasonable might conceivably opine otherwise. Second, in reviewing administrative decisions of the
executive branch of the government, the findings of facts made therein are to be respected so long as
they are supported by substantial evidence. Hence, it is not for the reviewing court to weigh the conflicting
evidence, determine the credibility of witnesses, or otherwise substitute its judgment for that of the
administrative agency with respect to the sufficiency of evidence. Third, administrative decisions in
matters within the executive jurisdiction can only be set aside on proof of gross abuse of discretion, fraud,
or error of law. These principles negate the power of the reviewing court to re-examine the sufficiency of
the evidence in an administrative case as if originally instituted therein, and do not authorize the court to
receive additional evidence that was not submitted to the administrative agency concerned. 40 (citations
omitted)

We find the factual findings of the LA and the NLRC that the respondents were not dismissed are
supported by substantial evidence.

In the Joint Affidavit41 executed by Generoso Fortunaba, Erdie Pilares and Crisanto Ignacio, all goldsmiths
under Niña Jewelry's employ, they expressly stated that they have personal knowledge of the fact that the
respondents were not terminated from employment. Crisanto Ignacio likewise expressed that after Elisea
returned from the United States in the first week of September of 2004, the latter even called to inquire
from him why the respondents were not reporting for work. We observe that the respondents had neither
ascribed any ill-motive on the part of their fellow goldsmiths nor offered any explanation as to why the
latter made declarations adverse to their cause. Hence, the statements of the respondents' fellow
goldsmiths deserve credence. This is especially true in the light of the respondents' failure to present any
notice of termination issued by the petitioners. It is settled that there can be dismissal even in the
absence of a termination notice.42 However, in the case at bench, we find that the acts of the petitioners
towards the respondents do not at all amount to constructive dismissal.

Constructive dismissal occurs when there is cessation of work because continued employment is rendered
impossible, unreasonable or unlikely; when there is a demotion in rank or diminution in pay or both; or
when a clear discrimination, insensibility, or disdain by an employer becomes unbearable to the
employee.43

In the case now under our consideration, the petitioners did not whimsically or arbitrarily impose the
policy to post cash bonds or make deductions from the workers' salaries. As attested to by the
respondents' fellow goldsmiths in their Joint Affidavit, the workers were convened and informed of the
reason behind the implementation of the new policy. Instead of airing their concerns, the respondents just
promptly stopped reporting for work.
Although the propriety of requiring cash bonds seems doubtful for reasons to be discussed hereunder, we
find no grounds to hold that the respondents were dismissed expressly or even constructively by the
petitioners. It was the respondents who merely stopped reporting for work. While it is conceded that the
new policy will impose an additional burden on the part of the respondents, it was not intended to result in
their demotion. Neither is a diminution in pay intended because as long as the workers observe due
diligence in the performance of their tasks, no loss or damage shall result from their handling of the gold
entrusted to them, hence, all the amounts due to the goldsmiths shall still be paid in full. Further, the
imposition of the new policy cannot be viewed as an act tantamount to discrimination, insensibility or
disdain against the respondents. For one, the policy was intended to be implemented upon all the
goldsmiths in Niña Jewelry's employ and not solely upon the respondents. Besides, as stressed by the
petitioners, the new policy was intended to merely curb the incidences of gold theft in the work place. The
new policy can hardly be said to be disdainful or insensible to the workers as to render their continued
employment unreasonable, unlikely or impossible.

On September 7, 2004, or more or less three weeks after the imposition of the new policy, the
respondents filed their complaints for illegal dismissal which include their prayer for the payment of
separation pay. On September 20, 2004, they filed amended complaints seeking for reinstatement
instead.

The CA favored the respondents' argument that the latter could not have abandoned their work as it can
be presumed that they would not have filed complaints for illegal dismissal had they not been really
terminated and had they not intended themselves to be reinstated. We find that the presumption relied
upon by the CA pales in comparison to the substantial evidence offered by the petitioners that it was the
respondents who stopped reporting for work and were not dismissed at all.

In sum, we agree with the petitioners that substantial evidence support the LA's and the NLRC's findings
that no dismissal occurred. Hence, the CA should not have given due course to and granted the petition
for certiorari under Rule 65 filed by the respondents before it.

In view of our disquisition above that the findings of the LA and the NLRC that no constructive dismissal
occurred are supported by substantial evidence, the CA thus erred in giving due course to and granting
the petition filed before it. Hence, it is not even necessary anymore to resolve the issue of whether or not
the policy of posting cash bonds or making deductions from the goldsmiths' salaries is proper. However,
considering that there are other goldsmiths in Niña Jewelry's employ upon whom the policy challenged by
the respondents remain to be enforced, in the interest of justice and to put things to rest, we shall resolve
the issue.

Article 113 of the Labor Code is clear that there are only three exceptions to the general rule that no
deductions from the employees' salaries can be made. The exception which finds application in the instant
petition is in cases where the employer is authorized by law or regulations issued by the Secretary of
Labor to effect the deductions. On the other hand, Article 114 states that generally, deposits for loss or
damages are not allowed except in cases where the employer is engaged in such trades, occupations or
business where the practice of making deposits is a recognized one, or is necessary or desirable as
determined by the Secretary of Labor in appropriate rules or regulations.

While employers should generally be given leeways in their exercise of management prerogatives, we
agree with the respondents and the CA that in the case at bar, the petitioners had failed to prove that
their imposition of the new policy upon the goldsmiths under Niña Jewelry's employ falls under the
exceptions specified in Articles 113 and 114 of the Labor Code.

The petitioners point out that Section 14, Book III, Rule VIII of the Omnibus Rules does not define the
circumstances when the making of deposits is deemed recognized, necessary or desirable. The petitioners
then argue that the intention of the law is for the courts to determine on a case to case basis what should
be regarded as recognized, necessary or desirable and to test an employer's policy of requiring deposits
on the bases of its reasonableness and necessity.

We are not persuaded.

Articles 113 and 114 of the Labor Code are clear as to what are the exceptions to the general prohibition
against requiring deposits and effecting deductions from the employees' salaries. Hence, a statutory
construction of the aforecited provisions is not called for. Even if we were however called upon to interpret
the provisions, our inclination would still be to strictly construe the same against the employer because
evidently, the posting of cash bonds and the making of deductions from the wages would inarguably
impose an additional burden upon the employees.

While the petitioners are not absolutely precluded from imposing the new policy, they can only do so upon
compliance with the requirements of the law.44 In other words, the petitioners should first establish that
the making of deductions from the salaries is authorized by law, or regulations issued by the Secretary of
Labor. Further, the posting of cash bonds should be proven as a recognized practice in the jewelry
manufacturing business, or alternatively, the petitioners should seek for the determination by the
Secretary of Labor through the issuance of appropriate rules and regulations that the policy the former
seeks to implement is necessary or desirable in the conduct of business. The petitioners failed in this
respect. It bears stressing that without proofs that requiring deposits and effecting deductions are
recognized practices, or without securing the Secretary of Labor's determination of the necessity or
desirability of the same, the imposition of new policies relative to deductions and deposits can be made
subject to abuse by the employers. This is not what the law intends.

In view of the foregoing, we hold that no dismissal, constructive or otherwise, occurred. The findings of
the NLRC and the LA that it was the respondents who stopped reporting for work are supported by
substantial evidence. Hence, the CA erred when it re-evaluated the parties' respective evidence and
granted the petition filed before it. However, we agree with the CA that it is baseless for Niña Jewelry to
impose its new policy upon the goldsmiths under its employ without first complying with the strict
requirements of the law.

WHEREFORE, the instant petition is PARTIALLY GRANTED. The assailed Decision and Resolution of the
CA dated January 9, 2009 and May 26, 2009, respectively, are REVERSED only in so far as they declared
that the respondents were constructively dismissed and entitled to reinstatement and payment of
backwages, allowances and benefits. However, the CA's ruling that the petitioners' imposition of its new
policy upon the respondents lacks legal basis, stands.

SO ORDERED.

22.

G.R. No. 168654 March 25, 2009

ZAYBER JOHN B. PROTACIO, Petitioner,

vs.
LAYA MANANGHAYA & CO. and/or MARIO T. MANANGHAYA, Respondents.

DECISION

TINGA, J.:

Before the Court is a petition for review on certiorari 1 under Rule 45 of the 1997 Rules of Civil Procedure,
assailing the decision2 and resolution3 of the Court of Appeals in CA-G.R. SP No. 85038. The Court of
Appeals’ decision reduced the monetary award granted to petitioner by the National Labor Relations
Commission (NLRC) while the resolution denied petitioner’s motion for reconsideration for lack of merit.

The following factual antecedents are matters of record.

Respondent KPMG Laya Mananghaya & Co. (respondent firm) is a general professional partnership duly
organized under the laws of the Philippines. Respondent firm hired petitioner Zayber John B. Protacio as
Tax Manager on 01 April 1996. He was subsequently promoted to the position of Senior Tax Manager. On
01 October 1997, petitioner was again promoted to the position of Tax Principal. 4

However, on 30 August 1999, petitioner tendered his resignation effective 30 September 1999. Then, on
01 December 1999, petitioner sent a letter to respondent firm demanding the immediate payment of his
13th month pay, the cash commutation of his leave credits and the issuance of his 1999 Certificate of
Income Tax Withheld on Compensation. Petitioner sent to respondent firm two more demand letters for
the payment of his reimbursement claims under pain of the legal action.5

Respondent firm failed to act upon the demand letters. Thus, on 15 December 1999, petitioner filed before
the NLRC a complaint for the non-issuance of petitioner’s W-2 tax form for 1999 and the non-payment of
the following benefits: (1) cash equivalent of petitioner’s leave credits in the amount of ₱55,467.60; (2)
proportionate 13th month pay for the year 1999; (3) reimbursement claims in the amount of ₱19,012.00;
and (4) lump sum pay for the fiscal year 1999 in the amount of ₱674,756.70. Petitioner also sought moral
and exemplary damages and attorney’s fees. Respondent Mario T. Managhaya was also impleaded in his
official capacity as respondent firm’s managing partner.6

In his complaint,7 petitioner averred, inter alia, that when he was promoted to the position of Tax Principal
in October 1997, his compensation package had consisted of a monthly gross compensation of
₱60,000.00, a 13th month pay and a lump sum payment for the year 1997 in the amount of ₱240,000.00
that was paid to him on 08 February 1998.

According to petitioner, beginning 01 October 1998, his compensation package was revised as follows: (a)
monthly gross compensation of ₱95,000.00, inclusive of nontaxable allowance; (b) 13th month pay; and
(c) a lump sum amount in addition to the aggregate monthly gross compensation. On 12 April 1999,
petitioner received the lump sum amount of ₱573,000.00 for the fiscal year ending 1998. 8

Respondent firm denied it had intentionally delayed the processing of petitioner’s claims but alleged that
the abrupt departure of petitioner and three other members of the firm’s Tax Division had created
problems in the determination of petitioner’s various accountabilities, which could be finished only by
going over voluminous documents. Respondents further averred that they had been taken aback upon
learning about the labor case filed by petitioner when all along they had done their best to facilitate the
processing of his claims.9

During the pendency of the case before the Labor Arbiter, respondent firm on three occasions sent check
payments to petitioner in the following amounts: (1) ₱71,250.00, representing petitioner’s 13th month
pay; (2) ₱54,824.18, as payments for the cash equivalent of petitioner’s leave credits and reimbursement
claims; and (3) ₱10,762.57, for the refund of petitioner’s taxes withheld on his vacation leave credits.
Petitioner’s copies of his withholding tax certificates were sent to him along with the check
payments.10 Petitioner acknowledged the receipt of the 13th month pay but disputed the computation of
the cash value of his vacation leave credits and reimbursement claims.11

On 07 June 2002, Labor Arbiter Eduardo J. Carpio rendered a decision, 12 the dispositive portion of which
reads:

WHEREFORE, judgment is hereby rendered ordering respondents to jointly and solidarily pay
complainant the following:

₱12,681.00 - representing the reimbursement claims of complainant;

₱28,407.08 - representing the underpayment of the cash equivalent of the unused leave credits of
complainant;

₱573,000.00 - representing complainant’s 1999 year-end lump sum payment; and

10% of the total judgment awards way of attorney’s fees.

SO ORDERED.13

The Labor Arbiter awarded petitioner’s reimbursement claims on the ground that respondent firm’s refusal
to grant the same was not so much because the claim was baseless but because petitioner had failed to
file the requisite reimbursement forms. He held that the formal defect was cured when petitioner filed
several demand letters as well as the case before him.14

The Labor Arbiter held that petitioner was not fully paid of the cash equivalent of the leave credits due him
because respondent firm had erroneously based the computation on a basic pay of ₱61,000.00. He held
that the evidence showed that petitioner’s monthly basic salary was ₱95,000.00 inclusive of the other
benefits that were deemed included and integrated in the basic salary and that respondent firm had
computed petitioner’s 13th month pay based on a monthly basic pay of ₱95,000.00; thus, the cash
commutation of the leave credits should also be based on this figure. 15

The Labor Arbiter also ruled that petitioner was entitled to a year-end payment of ₱573,000.00 on the
basis of the company policy of granting yearly lump sum payments to petitioner during all the years of
service and that respondent firm had failed to give petitioner the same benefit for the year 1999 without
any explanation.16

Aggrieved, respondent firm appealed to the NLRC. On 21 August 2003, the NLRC rendered a modified
judgment,17 the dispositive portion of which states:

WHEREFORE, the Decision dated June 7, 2002 is hereby Affirmed with the modification that the
complainant is only entitled to receive ₱2,301.00 as reimbursement claims. The award of ₱12,681.00
representing the reimbursement claims of complainant is set aside for lack of basis.

SO ORDERED.18

From the amount of ₱12,681.00 awarded by the Labor Arbiter as payment for the reimbursement claims,
the NLRC lowered the same to ₱2,301.00 representing the amount which remained unpaid. 19 As regards
the issues on the lump sum payments and cash equivalent of the leave credits, the NLRC affirmed the
findings of the Labor Arbiter.

Respondents filed a motion for reconsideration20 but the NLRC denied the motion for lack of
merit.21 Hence, respondents elevated the matter to the Court of Appeals via a petition for certiorari. 22
In the assailed Decision dated 19 April 2005, the Court of Appeals further reduced the total money award
to petitioner, to wit:

WHEREFORE, in the light of the foregoing, the assailed resolution of public respondent NLRC dated
August 21, 2003 in NLRC NCR Case No. 30-12-00927-99 (CA No. 032304-02) is hereby MODIFIED,
ordering petitioner firm to pay private respondent the following:

(1) ₱2,301.00 representing private respondent’s reimbursement claims;

(2) ₱9,802.83 representing the underpayment of the cash equivalent of private respondent’s
unused leave credits;

(3) ₱10,000.00 attorney’s fees.

SO ORDERED.23

Petitioner sought reconsideration. In the assailed Resolution dated 27 June 2005, the Court of Appeals
denied petitioner’s motion for reconsideration for lack of merit.

Hence, the instant petition, raising the following issues:

I.

WHETHER PUBLIC RESPONDENT COURT OF APPEALS’ SUMMARY DENIAL OF PETITIONER’S MOTION FOR
RECONSIDERATION VIOLATES THE CONSTITUTIONAL REQUIREMENT THAT COURT DECISIONS MUST
STATE THE LEGAL AND FACTUAL BASIS [THEREOF].

II

WHETHER PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AND
ACTED IN WANTON EXCESS OF JURISDICTION IN TAKING COGNIZANCE OF [RESPONDENTS] PETITION
FOR CERTIORARI WHEN THE RESOLUTION THEREOF HINGES ON MERE EVALUATION OF EVIDENCE.

III.

WHETHER PUBLIC RESPONDENT COURT OF APPEALS WANTONLY ABUSED ITS DISCRETION IN

EMPLOYING A LARGER DIVISOR TO COMPUTE PETITIONER’S DAILY SALARY RATE THEREBY DIMINISHING
HIS BENEFITS, IN [VIOLATION] OF THE LABOR CODE.

IV.

WHETHER PUBLIC RESPONDENT COURT OF APPEALS CAPRICIOUSLY ABUSED ITS DISCRETION IN

REVERSING THE [CONCURRING] FINDINGS OF BOTH LABOR ARBITER AND NLRC ON THE COMPENSABLE
NATURE OF PETITIONER’S YEAR END [LUMP] SUM PLAY [sic] CLAIM.24

Before delving into the merits of the petition, the issues raised by petitioner adverting to the Constitution
must be addressed. Petitioner contends that the Court of Appeals’ resolution which denied his motion for
reconsideration violated Article VIII, Section 14 of the Constitution, which states:

Section 14. No decision shall be rendered by any court without expressing therein clearly and distinctly
the facts and the law on which it is based.

No petition for review or motion for reconsideration of a decision of the court shall be refused due course
or denied without stating the legal basis therefor.

Obviously, the assailed resolution is not a "decision" within the meaning of the Constitutional requirement.
This mandate is applicable only in cases "submitted for decision," i.e., given due course and after filing of
briefs or memoranda and/or other pleadings, as the case may be. 25 The requirement is not applicable to a
resolution denying a motion for reconsideration of the decision. What is applicable is the second paragraph
of the above-quoted Constitutional provision referring to "motion for reconsideration of a decision of the
court." The assailed resolution complied with the requirement therein that a resolution denying a motion
for reconsideration should state the legal basis of the denial. It sufficiently explained that after reading the
pleadings filed by the parties, the appellate court did not find any cogent reason to reverse itself.

Next, petitioner argues that the Court of Appeals erred in giving due course to the petition for certiorari
when the resolution thereof hinged on mere evaluation of evidence. Petitioner opines that respondents
failed to make its case in showing that the Labor Arbiter and the NLRC had exercised their discretion in an
arbitrary and despotic manner.
As a general rule, in certiorari proceedings under Rule 65 of the Rules of Court, the appellate court does
not assess and weigh the sufficiency of evidence upon which the Labor Arbiter and the NLRC based their
conclusion. The query in this proceeding is limited to the determination of whether or not the NLRC acted
without or in excess of its jurisdiction or with grave abuse of discretion in rendering its decision. However,
as an exception, the appellate court may examine and measure the factual findings of the NLRC if the
same are not supported by substantial evidence. 26 The Court has not hesitated to affirm the appellate
court’s reversals of the decisions of labor tribunals if they are not supported by substantial evidence.27

The Court is not unaware that the appellate court had reexamined and weighed the evidence on record in
modifying the monetary award of the NLRC. The Court of Appeals held that the amount of the year-end
lump sum compensation was not fully justified and supported by the evidence on record. The Court fully
agrees that the lump sum award of ₱573,000.00 to petitioner seemed to have been plucked out of thin
air. Noteworthy is the fact that in his position paper, petitioner claimed that he was entitled to the amount
of ₱674,756.70.28 The variance between the claim and the amount awarded, with the record bereft of any
proof to support either amount only shows that the appellate court was correct in holding that the award
was a mere speculation devoid of any factual basis. In the exceptional circumstance as in the instant case,
the Court finds no error in the appellate court’s review of the evidence on record.

After an assessment of the evidence on record, the Court of Appeals reversed the findings of the NLRC
and the Labor Arbiter with respect to the award of the year-end lump sum pay and the cash value of
petitioner’s leave credits. The appellate court held that while the lump sum payment was in the nature of
a proportionate share in the firm’s annual income to which petitioner was entitled, the payment thereof
was contingent upon the financial position of the firm. According to the Court of Appeals, since no
evidence was adduced showing the net income of the firm for fiscal year ending 1999 as well as
petitioner’s corresponding share therein, the amount awarded by the labor tribunals was a baseless
speculation and as such must be deleted.29

On the other hand, the NLRC affirmed the Labor Arbiter’s award of the lump sum payment in the amount
of ₱573,000.00 on the basis that the payment thereof had become a company policy which could not be
withdrawn arbitrarily. Furthermore, the NLRC held that respondent firm had failed to controvert
petitioner’s claim that he was responsible for generating some ₱7,365,044.47 in cash revenue during the
fiscal year ending 1999.

The evidence on record establishes that aside from the basic monthly compensation, 30 petitioner received
a yearly lump sum amount during the first two years 31 of his employment, with the payments made to
him after the annual net incomes of the firm had been determined. Thus, the amounts thereof varied and
were dependent on the firm’s cash position and financial performance. 32 In one of the letters of
respondent Mananghaya to petitioner, the amount was referred to as petitioner’s "share in the incentive
compensation program."33

While the amount was drawn from the annual net income of the firm, the distribution thereof to non-
partners or employees of the firm was not, strictly speaking, a profit-sharing arrangement between
petitioner and respondent firm contrary to the Court of Appeals’ finding. The payment thereof to non-
partners of the firm like herein petitioner was discretionary on the part of the chairman and managing
partner coming from their authority to fix the compensation of any employee based on a share in the
partnership’s net income.34 The distribution being merely discretionary, the year-end lump sum payment
may properly be considered as a year-end bonus or incentive. Contrary to petitioner’s claim, the granting
of the year-end lump sum amount was precisely dependent on the firm’s net income; hence, the same
was payable only after the firm’s annual net income and cash position were determined.

By definition, a "bonus" is a gratuity or act of liberality of the giver. It is something given in addition to
what is ordinarily received by or strictly due the recipient. 35 A bonus is granted and paid to an employee
for his industry and loyalty which contributed to the success of the employer’s business and made possible
the realization of profits.36 Generally, a bonus is not a demandable and enforceable obligation. It is so only
when it is made part of the wage or salary or compensation. When considered as part of the compensation
and therefore demandable and enforceable, the amount is usually fixed. If the amount would be a
contingent one dependent upon the realization of the profits, the bonus is also not demandable and
enforceable.37

In the instant case, petitioner’s claim that the year-end lump sum represented the balance of his total
compensation package is incorrect. The fact remains that the amounts paid to petitioner on the two
occasions varied and were always dependent upon the firm’s financial position.

Moreover, in Philippine Duplicators, Inc. v. NLRC,38 the Court held that if the bonus is paid only if profits
are realized or a certain amount of productivity achieved, it cannot be considered part of wages. If the
desired goal of production is not obtained, of the amount of actual work accomplished, the bonus does not
accrue.39 Only when the employer promises and agrees to give without any conditions imposed for its
payment, such as success of business or greater production or output, does the bonus become part of the
wage.40
Petitioner’s assertion that he was responsible for generating revenues amounting to more than ₱7 million
remains a mere allegation in his pleadings. The records are absolutely bereft of any supporting evidence
to substantiate the allegation.

The granting of a bonus is basically a management prerogative which cannot be forced upon the employer
who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside from
the employees’ basic salaries or wages.41 Respondents had consistently maintained from the start that
petitioner was not entitled to the bonus as a matter of right. The payment of the year-end lump sum
bonus based upon the firm’s productivity or the individual performance of its employees was well within
respondent firm’s prerogative. Thus, respondent firm was also justified in declining to give the bonus to
petitioner on account of the latter’s unsatisfactory performance.

Petitioner failed to present evidence refuting respondents’ allegation and proof that they received a
number of complaints from clients about petitioner’s "poor services." For purposes of determining whether
or not petitioner was entitled to the year-end lump sum bonus, respondents were not legally obliged to
raise the issue of substandard performance with petitioner, unlike what the Labor Arbiter had suggested.
Of course, if what was in question was petitioner’s continued employment vis-à-vis the allegations of
unsatisfactory performance, then respondent firm was required under the law to give petitioner due
process to explain his side before instituting any disciplinary measure. However, in the instant case, the
granting of the year-end lump sum bonus was discretionary and conditional, thus, petitioner may not
question the basis for the granting of a mere privilege.1avvph!1

With regard to the computation of the cash equivalent of petitioner’s leave credits, the Court of Appeals
used a base figure of ₱71,250.00 representing petitioner’s monthly salary as opposed to ₱95,000.00 used
by the Labor Arbiter and NLRC. Meanwhile, respondents insist on a base figure of only ₱61,000.00, which
excludes the advance incentive pay of ₱15,000.00, transportation allowance of ₱15,000.00 and
representation allowance of ₱4,000.00, which petitioner regularly received every month. Because of a
lower base figure (representing the monthly salary) used by the appellate court, the cash equivalent of
petitioner’s leave credits was lowered from ₱28,407.08 to ₱9,802.83.lawphil.net

The monthly compensation of ₱71,250.00 used as base figure by the Court of Appeals is totally without
basis. As correctly held by the Labor Arbiter and the NLRC, the evidence on record reveals that petitioner
was receiving a monthly compensation of ₱95,000.00 consisting of a basic salary of ₱61,000.00, advance
incentive pay of ₱15,000.00, transportation allowance of ₱15,000.00 and representation allowance of
₱4,000.00. These amounts totaling ₱95,000.00 are all deemed part of petitioner’s monthly compensation
package and, therefore, should be the basis in the cash commutation of the petitioner’s leave credits.
These allowances were customarily furnished by respondent firm and regularly received by petitioner on
top of the basic monthly pay of ₱61,000.00. Moreover, the Labor Arbiter noted that respondent firm’s act
of paying petitioner a 13th month-pay at the rate of ₱95,000.00 was an admission on its part that
petitioner’s basic monthly salary was ₱95,000.00

The Court of Appeals, Labor Arbiter and NLRC used a 30-working day divisor instead of 26 days which
petitioner insists. The Court of Appeals relied on Section 2, Rule IV, Book III 42 of the implementing rules of
the Labor Code in using the 30-working day divisor. The provision essentially states that monthly-paid
employees are presumed to be paid for all days in the month whether worked or not.

The provision has long been nullified in Insular Bank of Asia and American Employees’ Union (IBAAEU) v.
Hon. Inciong, etc., et al.,43 where the Court ruled that the provision amended the Labor Code’s provisions
on holiday pay by enlarging the scope of their exclusion. 44 In any case, the provision is inapplicable to the
instant case because it referred to the computation of holiday pay for monthly-paid employees.

Petitioner’s claim that respondent firm used a 26-working day divisor is supported by the evidence on
record. In a letter addressed to

petitioner,45 respondents’ counsel expressly admitted that respondent used a 26-working day divisor. The
Court is perplexed why the tribunals below used a 30-day divisor when there was an express admission on
respondents’ part that they used a 26-day divisor in the cash commutation of leave credits. Thus, with a
monthly compensation of ₱95,000.00 and using a 26-working day divisor, petitioner’s daily rate is
₱3,653.85.46 Based on this rate, petitioner’s cash equivalent of his leave credits of 23.5 is
₱85,865.48.47 Since petitioner has already received the amount ₱46,009.67, a balance of ₱39,855.80
remains payable to petitioner.

WHEREFORE, the instant petition for review on certiorari is PARTLY GRANTED. The Decision of the
Court of Appeals in CA-G.R. SP No. 85038 is AFFIRMED with the MODIFICATION that respondents are
liable for the underpayment of the cash equivalent of petitioner’s leave credits in the amount of
₱39,855.80.

SO ORDERED.
23.

G.R. No. 151966 July 8, 2005

JPL MARKETING PROMOTIONS, Petitioner,

vs.
COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, NOEL GONZALES, RAMON
ABESA III and FAUSTINO ANINIPOT, Respondents.

DECISION

Tinga, J.:

This is a petition for review of the Decision1 of the Court of Appeals in CA-G.R. SP No. 62631 dated 03
October 2001 and its Resolution2 dated 25 January 2002 denying petitioner’s Motion for Reconsideration,
affirming the Resolution of the National Labor Relations Commission (NLRC), Second Division, dated 27
July 2000, awarding separation pay, service incentive leave pay, and 13th month pay to private
respondents.

JPL Marketing and Promotions (hereinafter referred to as "JPL") is a domestic corporation engaged in the
business of recruitment and placement of workers. On the other hand, private respondents Noel Gonzales,
Ramon Abesa III and Faustino Aninipot were employed by JPL as merchandisers on separate dates and
assigned at different establishments in Naga City and Daet, Camarines Norte as attendants to the display
of California Marketing Corporation (CMC), one of petitioner’s clients.

On 13 August 1996, JPL notified private respondents that CMC would stop its direct merchandising activity
in the Bicol Region, Isabela, and Cagayan Valley effective 15 August 1996. 3 They were advised to wait for
further notice as they would be transferred to other clients. However, on 17 October 1996, 4 private
respondents Abesa and Gonzales filed before the National Labor Relations Commission Regional
Arbitration Branch (NLRC) Sub V complaints for illegal dismissal, praying for separation pay, 13th month
pay, service incentive leave pay and payment for moral damages.5 Aninipot filed a similar case thereafter.

After the submission of pertinent pleadings by all of the parties and after some clarificatory hearings, the
complaints were consolidated and submitted for resolution. Executive Labor Arbiter Gelacio L. Rivera, Jr.
dismissed the complaints for lack of merit.6 The Labor Arbiter found that Gonzales and Abesa applied with
and were employed by the store where they were originally assigned by JPL even before the lapse of the
six (6)-month period given by law to JPL to provide private respondents a new assignment. Thus, they
may be considered to have unilaterally severed their relation with JPL, and cannot charge JPL with illegal
dismissal.7 The Labor Arbiter held that it was incumbent upon private respondents to wait until they were
reassigned by JPL, and if after six months they were not reassigned, they can file an action for separation
pay but not for illegal dismissal.8 The claims for 13th month pay and service incentive leave pay was also
denied since private respondents were paid way above the applicable minimum wage during their
employment.9

Private respondents appealed to the NLRC. In its Resolution,10 the Second Division of the NLRC agreed
with the Labor Arbiter’s finding that when private respondents filed their complaints, the six-month period
had not yet expired, and that CMC’s decision to stop its operations in the areas was beyond the control of
JPL, thus, they were not illegally dismissed. However, it found that despite JPL’s effort to look for clients to
which private respondents may be reassigned it was unable to do so, and hence they are entitled to
separation pay.11 Setting aside the Labor Arbiter’s decision, the NLRC ordered the payment of:

1. Separation pay, based on their last salary rate and counted from the first day of their employment with
the respondent JPL up to the finality of this judgment;

2. Service Incentive Leave pay, and 13th month pay, computed as in No.1 hereof.12

Aggrieved, JPL filed a petition for certiorari under Rule 65 of the Rules of Court with the Court of Appeals,
imputing grave abuse of discretion on the part of the NLRC. It claimed that private respondents are not by
law entitled to separation pay, service incentive leave pay and 13th month pay.

The Court of Appeals dismissed the petition and affirmed in toto the NLRC resolution. While conceding that
there was no illegal dismissal, it justified the award of separation pay on the grounds of equity and social
justice.13 The Court of Appeals rejected JPL’s argument that the difference in the amounts of private
respondents’ salaries and the minimum wage in the region should be considered as payment for their
service incentive leave and 13th month pay.14 Notwithstanding the absence of a contractual agreement on
the grant of 13th month pay, compliance with the same is mandatory under the law. Moreover, JPL failed
to show that it was exempt from paying service incentive leave pay. JPL filed a motion for reconsideration
of the said resolution, but the same was denied on 25 January 2002. 15
In the instant petition for review, JPL claims that the Court of Appeals committed reversible error in
rendering the assailed Decision and Resolution.16 The instant case does not fall under any of the instances
where separation pay is due, to wit: installation of labor-saving devices, redundancy, retrenchment or
closing or cessation of business operation,17 or disease of an employee whose continued employment is
prejudicial to him or co-employees,18 or illegal dismissal of an employee but reinstatement is no longer
feasible.19 Meanwhile, an employee who voluntarily resigns is not entitled to separation unless stipulated
in the employment contract, or the collective bargaining agreement, or is sanctioned by established
practice or policy of the employer. 20 It argues that private respondents’ good record and length of service,
as well as the social justice precept, are not enough to warrant the award of separation pay. Gonzales and
Aninipot were employed by JPL for more than four (4) years, while Abesa rendered his services for more
than two (2) years, hence, JPL claims that such short period could not have shown their worth to JPL so as
to reward them with payment of separation pay.21

In addition, even assuming arguendo that private respondents are entitled to the benefits awarded, the
computation thereof should only be from their first day of employment with JPL up to 15 August 1996, the
date of termination of CMC’s contract, and not up to the finality of the 27 July 2000 resolution of the
NLRC.22 To compute separation pay, 13th month pay, and service incentive leave pay up to 27 July 2000
would negate the findings of both the Court of Appeals and the NLRC that private respondents were not
unlawfully terminated.23 Additionally, it would be erroneous to compute service incentive leave pay from
the first day of their employment up to the finality of the NLRC resolution since an employee has to render
at least one (1) year of service before he is entitled to the same. Thus, service incentive leave pay should
be counted from the second year of service.24

On the other hand, private respondents maintain that they are entitled to the benefits being claimed as
per the ruling of this Court in Serrano v. NLRC, et al.25 They claim that their dismissal, while not illegal,
was tainted with bad faith.26 They allege that they were deprived of due process because the notice of
termination was sent to them only two (2) days before the actual termination.27 Likewise, the most that
JPL offered to them by way of settlement was the payment of separation pay of seven (7) days for every
year of service.28

Replying to private respondents’ allegations, JPL disagrees that the notice it sent to them was a notice of
actual termination. The said memo merely notified them of the end of merchandising for CMC, and that
they will be transferred to other clients.29 Moreover, JPL is not bound to observe the thirty (30)-day notice
rule as there was no dismissal to speak of. JPL counters that it was private respondents who acted in bad
faith when they sought employment with another establishment, without even the courtesy of informing
JPL that they were leaving for good, much less tender their resignation.30 In addition, the offer of seven
(7) days per year of service as separation pay was merely an act of magnanimity on its part, even if
private respondents are not entitled to a single centavo of separation pay.31

The case thus presents two major issues, to wit: whether or not private respondents are entitled to
separation pay, 13th month pay and service incentive leave pay, and granting that they are so entitled,
what should be the reckoning point for computing said awards.

Under Arts. 283 and 284 of the Labor Code, separation pay is authorized only in cases of dismissals due to
any of these reasons: (a) installation of labor saving devices; (b) redundancy; (c) retrenchment; (d)
cessation of the employer's business; and (e) when the employee is suffering from a disease and his
continued employment is prohibited by law or is prejudicial to his health and to the health of his co-
employees. However, separation pay shall be allowed as a measure of social justice in those cases where
the employee is validly dismissed for causes other than serious misconduct or those reflecting on his
moral character, but only when he was illegally dismissed. 32 In addition, Sec. 4(b), Rule I, Book VI of the
Implementing Rules to Implement the Labor Code provides for the payment of separation pay to an
employee entitled to reinstatement but the establishment where he is to be reinstated has closed or has
ceased operations or his present position no longer exists at the time of reinstatement for reasons not
attributable to the employer.

The common denominator of the instances where payment of separation pay is warranted is that the
employee was dismissed by the employer. 33 In the instant case, there was no dismissal to speak of.
Private respondents were simply not dismissed at all, whether legally or illegally. What they received from
JPL was not a notice of termination of employment, but a memo informing them of the termination of
CMC’s contract with JPL. More importantly, they were advised that they were to be reassigned. At that
time, there was no severance of employment to speak of.

Furthermore, Art. 286 of the Labor Code allows the bona fide suspension of the operation of a business or
undertaking for a period not exceeding six (6) months, wherein an employee/employees are placed on the
so-called "floating status." When that "floating status" of an employee lasts for more than six months, he
may be considered to have been illegally dismissed from the service. Thus, he is entitled to the
corresponding benefits for his separation, and this would apply to suspension either of the entire business
or of a specific component thereof.34
As clearly borne out by the records of this case, private respondents sought employment from other
establishments even before the expiration of the six (6)-month period provided by law. As they admitted
in their comment, all three of them applied for and were employed by another establishment after they
received the notice from JPL.35 JPL did not terminate their employment; they themselves severed their
relations with JPL. Thus, they are not entitled to separation pay.

The Court is not inclined in this case to award separation pay even on the ground of compassionate
justice. The Court of Appeals relied on the cases36 wherein the Court awarded separation pay to legally
dismissed employees on the grounds of equity and social consideration. Said cases involved employees
who were actually dismissed by their employers, whether for cause or not. Clearly, the principle applies
only when the employee is dismissed by the employer, which is not the case in this instance. In seeking
and obtaining employment elsewhere, private respondents effectively terminated their employment with
JPL.

In addition, the doctrine enunciated in the case of Serrano37 cited by private respondents has already
been abandoned by our ruling in Agabon v. National Labor Relations Commission. 38 There we ruled that an
employer is liable to pay indemnity in the form of nominal damages to a dismissed employee if, in
effecting such dismissal, the employer failed to comply with the requirements of due process. However,
private respondents are not entitled to the payment of damages considering that there was no violation of
due process in this case. JPL’s memo dated 13 August 1996 to private respondents is not a notice of
termination, but a mere note informing private respondents of the termination of CMC’s contract and their
re-assignment to other clients. The thirty (30)-day notice rule does not apply.

Nonetheless, JPL cannot escape the payment of 13th month pay and service incentive leave pay to private
respondents. Said benefits are mandated by law and should be given to employees as a matter of right.

Presidential Decree No. 851, as amended, requires an employer to pay its rank and file employees a 13th
month pay not later than 24 December of every year. However, employers not paying their employees a
13th month pay or its equivalent are not covered by said law. 39 The term "its equivalent" was defined by
the law’s implementing guidelines as including Christmas bonus, mid-year bonus, cash bonuses and other
payment amounting to not less than 1/12 of the basic salary but shall not include cash and stock
dividends, cost-of-living-allowances and all other allowances regularly enjoyed by the employee, as well as
non-monetary benefits.40

On the other hand, service incentive leave, as provided in Art. 95 of the Labor Code, is a yearly leave
benefit of five (5) days with pay, enjoyed by an employee who has rendered at least one year of service.
Unless specifically excepted, all establishments are required to grant service incentive leave to their
employees. The term "at least one year of service" shall mean service within twelve (12) months, whether
continuous or broken reckoned from the date the employee started working. 41 The Court has held in
several instances that "service incentive leave is clearly demandable after one year of service." 42

Admittedly, private respondents were not given their 13th month pay and service incentive leave pay
while they were under the employ of JPL. Instead, JPL provided salaries which were over and above the
minimum wage. The Court rules that the difference between the minimum wage and the actual salary
received by private respondents cannot be deemed as their 13th month pay and service incentive leave
pay as such difference is not equivalent to or of the same import as the said benefits contemplated by law.
Thus, as properly held by the Court of Appeals and by the NLRC, private respondents are entitled to the
13th month pay and service incentive leave pay.

However, the Court disagrees with the Court of Appeals’ ruling that the 13th month pay and service
incentive leave pay should be computed from the start of employment up to the finality of the NLRC
resolution. While computation for the 13th month pay should properly begin from the first day of
employment, the service incentive leave pay should start a year after commencement of service, for it is
only then that the employee is entitled to said benefit. On the other hand, the computation for both
benefits should only be up to 15 August 1996, or the last day that private respondents worked for JPL. To
extend the period to the date of finality of the NLRC resolution would negate the absence of illegal
dismissal, or to be more precise, the want of dismissal in this case. Besides, it would be unfair to require
JPL to pay private respondents the said benefits beyond 15 August 1996 when they did not render any
service to JPL beyond that date. These benefits are given by law on the basis of the service actually
rendered by the employee, and in the particular case of the service incentive leave, is granted as a
motivation for the employee to stay longer with the employer. There is no cause for granting said
incentive to one who has already terminated his relationship with the employer.

The law in protecting the rights of the employees authorizes neither oppression nor self-destruction of the
employer. It should be made clear that when the law tilts the scale of justice in favor of labor, it is but
recognition of the inherent economic inequality between labor and management. The intent is to balance
the scale of justice; to put the two parties on relatively equal positions. There may be cases where the
circumstances warrant favoring labor over the interests of management but never should the scale be so
tilted if the result is an injustice to the employer. Justitia nemini neganda est (Justice is to be denied to
none).43

WHEREFORE, the petition is GRANTED IN PART. The Decision and Resolution of the Court of Appeals in
CA-G.R. SP No. 62631 are hereby MODIFIED. The award of separation pay is deleted. Petitioner is ordered
to pay private respondents their 13th month pay commencing from the date of employment up to 15
August 1996, as well as service incentive leave pay from the second year of employment up to 15 August
1996. No pronouncement as to costs.

SO ORDERED.

24.

G.R. No. 148130 June 16, 2006

PETROLEUM SHIPPING LIMITED (formerly ESSO INTERNATIONAL SHIPPING (BAHAMAS) CO.,

LTD.) and TRANS-GLOBAL MARITIME AGENCY, INC., Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and FLORELLO W. TANCHICO, Respondents.

DECISION

CARPIO, J.:

The Case

Before the Court is a petition for review1 assailing the 25 January 2001 Decision 2 and 7 May 2001
Resolution3 of the Court of Appeals in CA-G.R. SP No. 54756.

The Antecedent Facts

On 6 March 1978, Esso International Shipping (Bahamas) Co., Ltd., ("Esso") through Trans-Global
Maritime Agency, Inc. ("Trans-Global") hired Florello W. Tanchico ("Tanchico") as First Assistant Engineer.
In 1981, Tanchico became Chief Engineer. On 13 October 1992, Tanchico returned to the Philippines for a
two-month vacation after completing his eight-month deployment.

On 8 December 1992, Tanchico underwent the required standard medical examination prior to boarding
the vessel. The medical examination revealed that Tanchico was suffering from "Ischemic Heart Disease,
Hypertensive Cardio-Muscular Disease and Diabetes Mellitus." Tanchico took medications for two months
and a subsequent stress test showed a negative result. However, Esso no longer deployed Tanchico.
Instead, Esso offered to pay him benefits under the Career Employment Incentive Plan. Tanchico accepted
the offer.

On 26 April 1993, Tanchico filed a complaint against Esso, Trans-Global and Malayan Insurance Co., Inc.
("Malayan") before the Philippine Overseas Employment Administration (POEA) for illegal dismissal with
claims for backwages, separation pay, disability and medical benefits and 13th month pay. In view of the
enactment of Republic Act No. 8042 ("RA 8042") 4 transferring to the National Labor Relations Commission
(NLRC) the jurisdiction over money claims of overseas workers, the case was indorsed to the Arbitration
Branch of the National Capital Region. In a Decision 5 dated 16 October 1996, Labor Arbiter Jose G. De
Vera ("Labor Arbiter De Vera") dismissed the complaint for lack of merit. Tanchico appealed to the NLRC.

The Ruling of the NLRC

In its Resolution6 of 3 September 1998, the NLRC affirmed the Decision of Labor Arbiter De Vera. Tanchico
filed a motion for reconsideration. In a Resolution 7 promulgated on 29 March 1999, the NLRC reconsidered
its 3 September 1998 Resolution, as follows:

On the claim of illegal dismissal, the same is unavailing as complainant had been declared as one with
partial permanent disability. Thus, he should be entitled to disability benefit of 18 days for every year of
credited service of fourteen (14) years less the amount he already received under the Company’s
Disability Plan.

On the claim of 13th month pay, the respondent Agency not falling under the enumerated exempted
employers under P.D. 851 and in the absence of any proof that respondent is already paying its
employees a 13th month pay or more in a calendar year, perforce, respondent agency should pay
complainant his monthly pay computed at [sic] the actual month [sic] worked, which is 8 months.
Since complainant was forced to litigate his case, he is hereby awarded 10% of the total award as
attorney’s fees.

SO ORDERED.8

Esso and Trans-Global moved for the reconsideration of the 29 March 1999 Resolution. 9 In its 27 July
1999 Resolution,10 the NLRC denied their motion.

Esso, now using the name Petroleum Shipping Limited ("Petroleum Shipping"), and Trans-Global
(collectively referred to as "petitioners") filed a petition for certiorari before the Court of Appeals assailing
the 29 March 1999 and 27 July 1999 Resolutions of the NLRC.

The Ruling of the Court of Appeals

In its Decision promulgated on 25 January 2001, the Court of Appeals affirmed in toto the 29 March 1999
Resolution of the NLRC.

The Court of Appeals ruled that Tanchico was a regular employee of Petroleum Shipping. The Court of
Appeals held that petitioners are not exempt from the coverage of Presidential Decree No. 851, as
amended ("PD 851")11 which mandates the payment of 13th month pay to all employees. The Court of
Appeals further ruled that Tanchico is entitled to disability benefits based on his 14 years of tenure with
petitioners. The Court of Appeals stated that the employer-employee relationship subsisted even during
the period of Tanchico’s vacation. The Court of Appeals noted that petitioners were aware of Tanchico’s
medical history yet they still deployed him for 14 years. Finally, the Court of Appeals sustained the award
of attorney’s fees.

Petitioners moved for the reconsideration of the Decision. In its 7 May 2001 Resolution, the Court of
Appeals modified its Decision by deducting Tanchico’s vacation from his length of service. Thus:

WHEREFORE, our decision is hereby MODIFIED. The petitioners are ordered to pay to the private
respondent the following: (1) disability wages equivalent to 18 days per year multiplied by 10 years less
any amount already received under the company’s disability plan; prorated 13th month pay corresponding
to eight (8) months of actual work; and attorney’s fee equivalent to 10% of the total award.

SO ORDERED.12

Petitioners went to this Court for relief on the following grounds:

I. The Court of Appeals decided a question of substance not in accord with law, applicable decision
of this Court and International Maritime Law when it ruled that private respondent, a seafarer, was
a regular employee;

II. The Court of Appeals decided a question of substance not in accord with law when it held that
the private respondent was entitled to greater disability benefit than he was [sic];

III. The Court of Appeals decided a question of substance not heretofore determined by this Court
when it ruled that private respondent was entitled to 13th month pay although it was not provided
for in the contract of employment between petitioners and private respondent; and

IV. The Court of Appeals decided a question of substance not in accord with law when it awarded
private respondent attorney’s fees despite the Labor Arbiter’s and the public respondent’s, albeit
initially, dismissal of the complaint.13

The Issues

The issues are as follows:

1. Whether Tanchico is a regular employee of petitioners; and

2. Whether Tanchico is entitled to 13th month pay, disability benefits and attorney’s fees.

The Ruling of This Court

The petition is partly meritorious.

Seafarers are Contractual Employees

The issue on whether seafarers are regular employees is already a settled matter.

In Ravago v. Esso Eastern Marine, Ltd.,14 the Court traced its ruling in a number of cases that
seafarers are contractual, not regular, employees. Thus, in Brent School, Inc. v. Zamora,15 the Court
cited overseas employment contract as an example of contracts where the concept of regular employment
does not apply, whatever the nature of the engagement and despite the provisions of Article 280 of the
Labor Code. In Coyoca v. NLRC,16 the Court held that the agency is liable for payment of a seaman’s
medical and disability benefits in the event that the principal fails or refuses to pay the benefits or wages
due the seaman although the seaman may not be a regular employee of the agency.

The Court squarely passed upon the issue in Millares v. NLRC17 where one of the issues raised was
whether seafarers are regular or contractual employees whose employment are terminated everytime
their contracts of employment expire. The Court explained:

[I]t is clear that seafarers are considered contractual employees. They can not be considered as regular
employees under Article 280 of the Labor Code. Their employment is governed by the contracts they sign
everytime they are rehired and their employment is terminated when the contract expires. Their
employment is contractually fixed for a certain period of time. They fall under the exception of Article 280
whose employment has been fixed for a specific project or undertaking the completion or termination of
which has been determined at the time of engagement of the employee or where the work or services to
be performed is seasonal in nature and the employment is for the duration of the season. We need not
depart from the rulings of the Court in the two aforementioned cases which indeed constitute stare decisis
with respect to the employment status of seafarers.

Petitioners insist that they should be considered regular employees, since they have rendered services
which are usually necessary and desirable to the business of their employer, and that they have rendered
more than twenty (20) years of service. While this may be true, the Brent case has, however, held that
there are certain forms of employment which also require the performance of usual and desirable
functions and which exceed one year but do not necessarily attain regular employment status under
Article 280. Overseas workers including seafarers fall under this type of employment which are governed
by the mutual agreements of the parties.

In this jurisdiction and as clearly stated in the Coyoca case, Filipino seamen are governed by the Rules
and Regulations of the POEA. The Standard Employment Contract governing the employment of All Filipino
Seamen on Board Ocean-Going Vessels of the POEA, particularly in Part I, Sec. C specifically provides that
the contract of seamen shall be for a fixed period. And in no case should the contract of seamen be longer
than 12 months. It reads:

Section C. Duration of Contract

The period of employment shall be for a fixed period but in no case to exceed 12 months and shall be
stated in the Crew Contract. Any extension of the Contract period shall be subject to the mutual consent
of the parties.

Moreover, it is an accepted maritime industry practice that employment of seafarers are for a fixed period
only. Constrained by the nature of their employment which is quite peculiar and unique in itself, it is for
the mutual interest of both the seafarer and the employer why the employment status must be
contractual only or for a certain period of time. Seafarers spend most of their time at sea and
understandably, they can not stay for a long and an indefinite period of time at sea. Limited access to
shore society during the employment will have an adverse impact on the seafarer. The national, cultural
and lingual diversity among the crew during the COE is a reality that necessitates the limitation of its
period.

Petitioners make much of the fact that they have been continually re-hired or their contracts renewed
before the contracts expired (which has admittedly been going on for twenty (20) years). By such
circumstance they claim to have acquired regular status with all the rights and benefits appurtenant to it.

Such contention is untenable. Undeniably, this circumstance of continuous re-hiring was dictated by
practical considerations that experienced crew members are more preferred. Petitioners were only given
priority or preference because of their experience and qualifications but this does not detract the fact that
herein petitioners are contractual employees. They can not be considered regular employees. x x x 18

The Court reiterated the Millares ruling in Gu-Miro v. Adorable19 where it held that a radio officer on
board a vessel cannot be considered as a regular employee notwithstanding that the work he performs is
necessary and desirable in the business of the company.

Thus, in the present case, the Court of Appeals erred in ruling that Tanchico was a regular employee of
Petroleum Shipping.
On 13th Month Pay

The Court of Appeals premised its grant of 13th month pay on its ruling that Tanchico was a regular
employee. The Court of Appeals also ruled that petitioners are not exempt from the coverage of PD 851
which requires all employers to pay their employees a 13th month pay.

We do not agree with the Court of Appeals. Again, Tanchico was a contractual, not a regular, employee.
Further, PD 851 does not apply to seafarers. The WHEREAS clauses of PD 851 provides:

WHEREAS, it is necessary to further protect the level of real wages from ravages of world-wide inflation;

WHEREAS, there has been no increase in the legal minimum wage rates since 1970;

WHEREAS, the Christmas season is an opportune time for society to show its concern for the plight of the
working masses so they may properly celebrate Christmas and New Year.

PD 851 contemplates the situation of land-based workers, and not of seafarers who generally earn more
than domestic land-based workers.

Tanchico’s employment is governed by his Contract of Enlistment ("Contract"). 20 The Contract has been
approved by the POEA in accordance with Title I, Book One of the Labor Code and the POEA Rules
Governing Employment.21 The coverage of the Contract includes Compensation, Overtime, Sundays and
Holidays, Vacations, Living Allowance, Sickness, Injury and Death, Transportation and Travel Expense,
Subsistence and Living Quarters. It does not provide for the payment of 13th month pay. The Contract of
Employment,22 which is the standard employment contract of the POEA, likewise does not provide for the
payment of 13th month pay.

In Coyoca v. NLRC which involves a claim for separation pay, this Court held:

Furthermore, petitioner’s contract did not provide for separation benefits. In this connection, it is
important to note that neither does POEA standard employment contract for Filipino seamen provide for
such benefits.

As a Filipino seaman, petitioner is governed by the Rules and Regulations Governing Overseas
Employment and the said Rules do not provide for separation or termination pay. x x x23

Hence, in the absence of any provision in his Contract governing the payment of 13th month pay,
Tanchico is not entitled to the benefit.

On Disability Benefits

Petitioners allege that Tanchico’s Contract ended on 13 October 1992 when he returned to Manila. They
allege that the vacation period is not part of the period of employment.

We cannot accept petitioners’ contention.

The duration of the Contract was for eight months. The Contract also provides:

Article V
VACATIONS

Vacation days shall be earned at the rate of seven and one-half days (7.5) days for each thirty (30) days
of continuous service, calculated from date of departure from Manila and until date of return to Manila.
Vacation begins on the day following arrival in Manila.

Every effort will be made to grant earned vacations promptly after eight (8) months of service; however,
the COMPANY shall have the right to advance or delay vacations to coincide with vessel repairs, for
operational reasons or due to personal requirements. SEAFARER shall receive vacation compensation for
each thirty (30) days of continuous service in accordance with the rates listed in Addendum No. 1, Column
(12), to be paid in Manila. Amounts shall be pro-rated according to the ranks/ratings and period of time in
which the SEAFARER served. For period of less than thirty (30) days service, vacations and compensation
shall be reduced proportionately.

Time off for illness, injury, vacation, leave of absence or stand-by shall not be considered service under
the provisions of this Article.

It is the COMPANY’s intention that each SEAFARER enjoy his full vacation period. Because of urgent fleet
needs, however, it occasionally may be necessary to recall a SEAFARER early from vacation.24
Since Tanchico received compensation during his vacation, the Contract did not terminate on the day he
returned to Manila. The Contract remained in force during Tanchico’s vacation period.

However, the Court of Appeals erred when it ruled that Tanchico is entitled to disability benefits of 18 days
for every year of service. The Court of Appeals ruled that Tanchico’s employment was continuous and that
his tenure with petitioners was for 14 years. Again, the Court of Appeals assumed that Tanchico was a
regular employee. The Court of Appeals failed to consider that Tanchico’s employment terminated with the
end of each contract.

The Contract provides:

Article VIII
SICKNESS-INJURY/DEATH

A. The COMPANY shall provide, during the period of the Contract, Insurance coverage for the
SEAFARER against loss of life, permanent disability, temporary disability, injury, occupational
illness, hospital and medical expense in such amounts as the COMPANY shall determine but not
lower than what the COMPANY would have to pay under the Philippine Overseas Employment
Administration’s requirements or the vessel’s flag state requirements (whichever is higher).

B. If SEAFARER is removed from a vessel for medical treatment he shall be entitled to receive a
disability benefit equal to his monthly wage rate (or pro-rata thereof) from date of disembarkation
until date of rejoining his vessel, assignment to another vessel or until date of repatriation to
Manila if still disabled. Medical, surgical, hospital, or clinical treatment shall be recommended by a
doctor approved by the COMPANY and SEAFARER must follow all medical advices. SEAFARER will
not be entitled to disability benefit payments for disability resulting from his own misconduct,
negligence, unlawful acts, altercations, vice, etc.

C. After disembarkation from a vessel, the SEAFARER is entitled to one hundred percent (100%) of
his wages until he is declared fit or the degree of permanent disability has been assessed by the
COMPANY’s physician for a maximum period of 120 days commencing on date of such
disembarkation. Upon the expiration of such 120 days and if the SEAFARER is still disabled, the
SEAFARER shall be paid his wages equivalent to 18 days for every year of credited service.

In special instances and at the discretion of the COMPANY, the maximum number of days of
COMPANY benefits may be extended beyond 120 days for a SEAFARER with over 80 months
credited COMPANY service, or in such other case as may be determined by the COMPANY.

Upon expiration of COMPANY benefits and if still disabled, the following amounts shall be paid up to
maximum of 365 days, inclusive of the period of the above benefits.

All Ranks ................................................ US $10 per day

D. If disability should occur while SEAFARER is on vacation, he must, within 3 days from
date thereof, notify the COMPANY’s Agent in the Philippines in order that the latter shall
be able to certify as to his condition. Certification of disability required for payment of
any disability benefits must be approved by a doctor appointed by the COMPANY and
SEAFARER must be disabled seven (7) days or more to be eligible to benefits and sick
leave status, COMPANY benefits shall be limited to a maximum of 18 days.

Benefits under the COMPANY Disability Plan shall be made only to the extent and in such amounts
as are equal to the differential between any payments which may be due SEAFARER under
COMPANY’s obligation as set forth in the 1st paragraph of this Article VIII and 90 percent of
SEAFARER’s last wage rate.

E. In case of death at sea or at a foreign port, the tradition of the sea and requirements of the laws
of such foreign port will be observed. If practical, every effort will be made on the part of the
COMPANY to return the remains of a deceased SEAFARER to Manila at COMPANY expense.

F. The SEAFARER acknowledges that even without signed receipts, any wage payments made to
him for a period during which he is entitled to benefits under any law by reason of death,
temporary or permanent disability, shall be deemed an advance payment of compensation benefits
due to him under such law, but only to the extent of benefits due for the period of disability during
which wages are paid.

Wages, as set forth in Addendum No. 1, Column (1), shall be the basis for any calculation of benefits due
SEAFARER under this Article VIII.25 (Emphasis supplied)
Indications that Tanchico was suffering from ischemia were detected on 8 December 1992 during
Tanchico’s vacation period. Thus, petitioners paid him disability benefits for 18 days in accordance with
the Contract. Tanchico cannot claim that he only acquired the illness during his last deployment since the
Medical Report26 he submitted to the NLRC showed that he has been hypertensive since 1983 and diabetic
since 1987. In the absence of concrete proof that Tanchico acquired his disability during

his last deployment and not during his vacation, he is only entitled to disability benefits for 18 days.

Petitioners claim that they already paid Tanchico his disability benefits for 18 days but he refused to sign
the receipt.27 Tanchico alleged that he was only paid under the Career Employment Incentive Plan.28 This
is a factual matter which this Court cannot resolve. This matter has to be remanded to the Labor Arbiter
for resolution.

WHEREFORE, we GRANT the petition. We REVERSE and SET ASIDE the 25 January 2001 Decision and
7 May 2001 Resolution of the Court of Appeals in CA-G.R. SP No. 54756. We REINSTATE the 16 October
1996 Decision of Labor Arbiter Jose G. De Vera dismissing the complaint for illegal dismissal and the
claims for backwages, separation pay and 13th month pay. We REMAND the case to the Labor Arbiter to
determine if Florello Tanchico has been paid his disability benefits for 18 days in accordance with his
Contract of Enlistment. If no payment has been made, the Labor Arbiter is DIRECTED to determine the
amount Tanchico is entitled.

SO ORDERED.

25.

G.R. No. 166208 June 29, 2007

KING OF KINGS TRANSPORT INC., CLAIRE DELA FUENTE and MELISSA LIM, petitioners,
vs.
SANTIAGO O. MAMAC, respondent.

DECISION

VELASCO, JR., J.:

Is a verbal appraisal of the charges against the employee a breach of the procedural due process? This is
the main issue to be resolved in this plea for review under Rule 45 of the September 16, 2004 Decision1 of
the Court of Appeals (CA) in CA-GR SP No. 81961. Said judgment affirmed the dismissal of bus conductor
Santiago O. Mamac from petitioner King of Kings Transport, Inc. (KKTI), but ordered the bus company to
pay full backwages for violation of the twin-notice requirement and 13th-month pay. Likewise assailed is
the December 2, 2004 CA Resolution2 rejecting KKTI’s Motion for Reconsideration.

The Facts

Petitioner KKTI is a corporation engaged in public transportation and managed by Claire Dela Fuente and
Melissa Lim.

Respondent Mamac was hired as bus conductor of Don Mariano Transit Corporation (DMTC) on April 29,
1999. The DMTC employees including respondent formed the Damayan ng mga Manggagawa, Tsuper at
Conductor-Transport Workers Union and registered it with the Department of Labor and Employment.
Pending the holding of a certification election in DMTC, petitioner KKTI was incorporated with the
Securities and Exchange Commission which acquired new buses. Many DMTC employees were
subsequently transferred to KKTI and excluded from the election.

The KKTI employees later organized the Kaisahan ng mga Kawani sa King of Kings (KKKK) which was
registered with DOLE. Respondent was elected KKKK president.

Respondent was required to accomplish a "Conductor’s Trip Report" and submit it to the company after
each trip. As a background, this report indicates the ticket opening and closing for the particular day of
duty. After submission, the company audits the reports. Once an irregularity is discovered, the company
issues an "Irregularity Report" against the employee, indicating the nature and details of the irregularity.
Thereafter, the concerned employee is asked to explain the incident by making a written statement or
counter-affidavit at the back of the same Irregularity Report. After considering the explanation of the
employee, the company then makes a determination of whether to accept the explanation or impose upon
the employee a penalty for committing an infraction. That decision shall be stated on said Irregularity
Report and will be furnished to the employee.
Upon audit of the October 28, 2001 Conductor’s Report of respondent, KKTI noted an irregularity. It
discovered that respondent declared several sold tickets as returned tickets causing KKTI to lose an
income of eight hundred and ninety pesos. While no irregularity report was prepared on the October 28,
2001 incident, KKTI nevertheless asked respondent to explain the discrepancy. In his letter, 3 respondent
said that the erroneous declaration in his October 28, 2001 Trip Report was unintentional. He explained
that during that day’s trip, the windshield of the bus assigned to them was smashed; and they had to cut
short the trip in order to immediately report the matter to the police. As a result of the incident, he got
confused in making the trip report.

On November 26, 2001, respondent received a letter 4 terminating his employment effective November 29,
2001. The dismissal letter alleged that the October 28, 2001 irregularity was an act of fraud against the
company. KKTI also cited as basis for respondent’s dismissal the other offenses he allegedly committed
since 1999.

On December 11, 2001, respondent filed a Complaint for illegal dismissal, illegal deductions, nonpayment
of 13th-month pay, service incentive leave, and separation pay. He denied committing any infraction and
alleged that his dismissal was intended to bust union activities. Moreover, he claimed that his dismissal
was effected without due process.

In its April 3, 2002 Position Paper, 5 KKTI contended that respondent was legally dismissed after his
commission of a series of misconducts and misdeeds. It claimed that respondent had violated the trust
and confidence reposed upon him by KKTI. Also, it averred that it had observed due process in dismissing
respondent and maintained that respondent was not entitled to his money claims such as service incentive
leave and 13th-month pay because he was paid on commission or percentage basis.

On September 16, 2002, Labor Arbiter Ramon Valentin C. Reyes rendered judgment dismissing
respondent’s Complaint for lack of merit.6

Aggrieved, respondent appealed to the National Labor Relations Commission (NLRC). On August 29, 2003,
the NLRC rendered a Decision, the dispositive portion of which reads:

WHEREFORE, the decision dated 16 September 2002 is MODIFIED in that respondent King of Kings
Transport Inc. is hereby ordered to indemnify complainant in the amount of ten thousand pesos (P10,000)
for failure to comply with due process prior to termination.

The other findings are AFFIRMED.

SO ORDERED.7

Respondent moved for reconsideration but it was denied through the November 14, 2003 Resolution8 of
the NLRC.

Thereafter, respondent filed a Petition for Certiorari before the CA urging the nullification of the NLRC
Decision and Resolution.

The Ruling of the Court of Appeals

Affirming the NLRC, the CA held that there was just cause for respondent’s dismissal. It ruled that
respondent’s act in "declaring sold tickets as returned tickets x x x constituted fraud or acts of dishonesty
justifying his dismissal."9

Also, the appellate court sustained the finding that petitioners failed to comply with the required
procedural due process prior to respondent’s termination. However, following the doctrine in Serrano v.
NLRC,10 it modified the award of PhP 10,000 as indemnification by awarding full backwages from the time
respondent’s employment was terminated until finality of the decision.

Moreover, the CA held that respondent is entitled to the 13th-month pay benefit.

Hence, we have this petition.

The Issues

Petitioner raises the following assignment of errors for our consideration:

Whether the Honorable Court of Appeals erred in awarding in favor of the complainant/private respondent,
full back wages, despite the denial of his petition for certiorari.
Whether the Honorable Court of Appeals erred in ruling that KKTI did not comply with the requirements of
procedural due process before dismissing the services of the complainant/private respondent.

Whether the Honorable Court of Appeals rendered an incorrect decision in that [sic] it awarded in favor of
the complaint/private respondent, 13th month pay benefits contrary to PD 851.11

The Court’s Ruling

The petition is partly meritorious.

The disposition of the first assigned error depends on whether petitioner KKTI complied with the due
process requirements in terminating respondent’s employment; thus, it shall be discussed secondly.

Non-compliance with the Due Process Requirements

Due process under the Labor Code involves two aspects: first, substantive––the valid and authorized
causes of termination of employment under the Labor Code; and second, procedural––the manner of
dismissal.12 In the present case, the CA affirmed the findings of the labor arbiter and the NLRC that the
termination of employment of respondent was based on a "just cause." This ruling is not at issue in this
case. The question to be determined is whether the procedural requirements were complied with.

Art. 277 of the Labor Code provides the manner of termination of employment, thus:

Art. 277. Miscellaneous Provisions.––x x x

(b) Subject to the constitutional right of workers to security of tenure and their right to be protected
against dismissal except for a just and authorized cause without prejudice to the requirement of notice
under Article 283 of this Code, the employer shall furnish the worker whose employment is sought to be
terminated a written notice containing a statement of the causes for termination and shall afford the latter
ample opportunity to be heard and to defend himself with the assistance of his representative if he so
desires in accordance with company rules and regulations promulgated pursuant to guidelines set by the
Department of Labor and Employment. Any decision taken by the employer shall be without prejudice to
the right of the worker to contest the validity or legality of his dismissal by filing a complaint with the
regional branch of the National Labor Relations Commission. The burden of proving that the termination
was for a valid or authorized cause shall rest on the employer.

Accordingly, the implementing rule of the aforesaid provision states:

SEC. 2. Standards of due process; requirements of notice.––In all cases of termination of employment,
the following standards of due process shall be substantially observed:

I. For termination of employment based on just causes as defined in Article 282 of the Code:

(a) A written notice served on the employee specifying the ground or grounds for termination, and giving
said employee reasonable opportunity within which to explain his side.

(b) A hearing or conference during which the employee concerned, with the assistance of counsel if he so
desires is given opportunity to respond to the charge, present his evidence, or rebut the evidence
presented against him.

(c) A written notice of termination served on the employee, indicating that upon due consideration of all
the circumstances, grounds have been established to justify his termination. 13

In case of termination, the foregoing notices shall be served on the employee’s last known address. 14

To clarify, the following should be considered in terminating the services of employees:

(1) The first written notice to be served on the employees should contain the specific causes or grounds
for termination against them, and a directive that the employees are given the opportunity to submit their
written explanation within a reasonable period. "Reasonable opportunity" under the Omnibus Rules means
every kind of assistance that management must accord to the employees to enable them to prepare
adequately for their defense.15 This should be construed as a period of at least five (5) calendar days from
receipt of the notice to give the employees an opportunity to study the accusation against them, consult a
union official or lawyer, gather data and evidence, and decide on the defenses they will raise against the
complaint. Moreover, in order to enable the employees to intelligently prepare their explanation and
defenses, the notice should contain a detailed narration of the facts and circumstances that will serve as
basis for the charge against the employees. A general description of the charge will not suffice. Lastly, the
notice should specifically mention which company rules, if any, are violated and/or which among the
grounds under Art. 282 is being charged against the employees.

(2) After serving the first notice, the employers should schedule and conduct a hearing or conference
wherein the employees will be given the opportunity to: (1) explain and clarify their defenses to the
charge against them; (2) present evidence in support of their defenses; and (3) rebut the evidence
presented against them by the management. During the hearing or conference, the employees are given
the chance to defend themselves personally, with the assistance of a representative or counsel of their
choice. Moreover, this conference or hearing could be used by the parties as an opportunity to come to an
amicable settlement.

(3) After determining that termination of employment is justified, the employers shall serve the
employees a written notice of termination indicating that: (1) all circumstances involving the charge
against the employees have been considered; and (2) grounds have been established to justify the
severance of their employment.

In the instant case, KKTI admits that it had failed to provide respondent with a "charge sheet." 16 However,
it maintains that it had substantially complied with the rules, claiming that "respondent would not have
issued a written explanation had he not been informed of the charges against him."17

We are not convinced.

First, respondent was not issued a written notice charging him of committing an infraction. The law is clear
on the matter. A verbal appraisal of the charges against an employee does not comply with the first notice
requirement. In Pepsi Cola Bottling Co. v. NLRC,18 the Court held that consultations or conferences are not
a substitute for the actual observance of notice and hearing. Also, in Loadstar Shipping Co., Inc. v.
Mesano,19 the Court, sanctioning the employer for disregarding the due process requirements, held that
the employee’s written explanation did not excuse the fact that there was a complete absence of the first
notice.

Second, even assuming that petitioner KKTI was able to furnish respondent an Irregularity Report
notifying him of his offense, such would not comply with the requirements of the law. We observe from
the irregularity reports against respondent for his other offenses that such contained merely a general
description of the charges against him. The reports did not even state a company rule or policy that the
employee had allegedly violated. Likewise, there is no mention of any of the grounds for termination of
employment under Art. 282 of the Labor Code. Thus, KKTI’s "standard" charge sheet is not sufficient
notice to the employee.

Third, no hearing was conducted. Regardless of respondent’s written explanation, a hearing was still
necessary in order for him to clarify and present evidence in support of his defense. Moreover, respondent
made the letter merely to explain the circumstances relating to the irregularity in his October 28, 2001
Conductor’s Trip Report. He was unaware that a dismissal proceeding was already being effected. Thus, he
was surprised to receive the November 26, 2001 termination letter indicating as grounds, not only his
October 28, 2001 infraction, but also his previous infractions.

Sanction for Non-compliance with Due Process Requirements

As stated earlier, after a finding that petitioners failed to comply with the due process requirements, the
CA awarded full backwages in favor of respondent in accordance with the doctrine in Serrano v.
NLRC.20 However, the doctrine in Serrano had already been abandoned in Agabon v. NLRC by ruling that if
the dismissal is done without due process, the employer should indemnify the employee with nominal
damages.21

Thus, for non-compliance with the due process requirements in the termination of respondent’s
employment, petitioner KKTI is sanctioned to pay respondent the amount of thirty thousand pesos (PhP
30,000) as damages.

Thirteenth (13th)-Month Pay

Section 3 of the Rules Implementing Presidential Decree No. 851 22 provides the exceptions in the
coverage of the payment of the 13th-month benefit. The provision states:

SEC. 3. Employers covered.––The Decree shall apply to all employers except to:

xxxx

e) Employers of those who are paid on purely commission, boundary, or task basis, and those who are
paid a fixed amount for performing a specific work, irrespective of the time consumed in the performance
thereof, except where the workers are paid on piece-rate basis in which case the employer shall be
covered by this issuance insofar as such workers are concerned.

Petitioner KKTI maintains that respondent was paid on purely commission basis; thus, the latter is not
entitled to receive the 13th-month pay benefit. However, applying the ruling in Philippine Agricultural
Commercial and Industrial Workers Union v. NLRC,23 the CA held that respondent is entitled to the said
benefit.

It was erroneous for the CA to apply the case of Philippine Agricultural Commercial and Industrial Workers
Union. Notably in the said case, it was established that the drivers and conductors praying for 13th-
month pay were not paid purely on commission. Instead, they were receiving a commission in addition to
a fixed or guaranteed wage or salary. Thus, the Court held that bus drivers and conductors who are paid a
fixed or guaranteed minimum wage in case their commission be less than the statutory minimum, and
commissions only in case where they are over and above the statutory minimum, are entitled to a 13th-
month pay equivalent to one-twelfth of their total earnings during the calendar year.

On the other hand, in his Complaint,24 respondent admitted that he was paid on commission only.
Moreover, this fact is supported by his pay slips25 which indicated the varying amount of commissions he
was receiving each trip. Thus, he was excluded from receiving the 13th-month pay benefit.

WHEREFORE, the petition is PARTLY GRANTED and the September 16, 2004 Decision of the CA is
MODIFIED by deleting the award of backwages and 13th-month pay. Instead, petitioner KKTI is ordered to
indemnify respondent the amount of thirty thousand pesos (PhP 30,000) as nominal damages for failure
to comply with the due process requirements in terminating the employment of respondent.

No costs.

SO ORDERED.

26.

G.R. NO. 156225 January 29, 2008

LETRAN CALAMBA FACULTY and EMPLOYEES ASSOCIATION, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and COLEGIO DE SANJUAN DE LETRAN CALAMBA,
INC., respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

Assailed in the present Petition for Review on Certiorari under Rule 45 of the Rules of Court is the
Decision1 of the Court of Appeals (CA) promulgated on May 14, 2002 in CA-G.R. SP No. 61552 dismissing
the special civil action for certiorari filed before it; and the Resolution 2 dated November 28, 2002, denying
petitioner's Motion for Reconsideration.

The facts of the case are as follows:

On October 8, 1992, the Letran Calamba Faculty and Employees Association (petitioner) filed with
Regional Arbitration Branch No. IV of the National Labor Relations Commission (NLRC) a
Complaint3 against Colegio de San Juan de Letran, Calamba, Inc. (respondent) for collection of various
monetary claims due its members. Petitioner alleged in its Position Paper that:

xxxx

2) [It] has filed this complaint in behalf of its members whose names and positions appear in the
list hereto attached as Annex "A".

3) In the computation of the thirteenth month pay of its academic personnel, respondent does not
include as basis therefor their compensation for overloads. It only takes into account the pay the
faculty members receive for their teaching loads not exceeding eighteen (18) units. The teaching
overloads are rendered within eight (8) hours a day.

4) Respondent has not paid the wage increases required by Wage Order No. 5 to its employees
who qualify thereunder.
 5) Respondent has not followed the formula prescribed by DECS Memorandum Circular No. 2 dated
March 10, 1989 in the computation of the compensation per unit of excess load or overload of
faculty members. This has resulted in the diminution of the compensation of faculty members.

6) The salary increases due the non-academic personnel as a result of job grading has not been
given. Job grading has been an annual practice of the school since 1980; the same is done for the
purpose of increasing the salaries of non-academic personnel and as the counterpart of the ranking
systems of faculty members.

7) Respondent has not paid to its employees the balances of seventy (70%) percent of the tuition
fee increases for the years 1990, 1991 and 1992.

8) Respondent has not also paid its employees the holiday pay for the ten (10) regular holidays as
provided for in Article 94 of the Labor Code.

9) Respondent has refused without justifiable reasons and despite repeated demands to pay its
obligations mentioned in paragraphs 3 to 7 hereof.

x x x x4

The complaint was docketed as NLRC Case No. RAB-IV-10-4560-92-L.

On January 29, 1993, respondent filed its Position Paper denying all the allegations of petitioner.

On March 10, 1993, petitioner filed its Reply.

Prior to the filing of the above-mentioned complaint, petitioner filed a separate complaint against the
respondent for money claims with Regional Office No. IV of the Department of Labor and Employment
(DOLE).

On the other hand, pending resolution of NLRC Case No. RAB-IV-10-4560-92-L, respondent filed with
Regional Arbitration Branch No. IV of the NLRC a petition to declare as illegal a strike staged by petitioner
in January 1994.

Subsequently, these three cases were consolidated. The case for money claims originally filed by
petitioner with the DOLE was later docketed as NLRC Case No. RAB-IV-11-4624-92-L, while the petition to
declare the subject strike illegal filed by respondent was docketed as NLRC Case No. RAB-IV-3-6555-94-L.

On September 28, 1998, the Labor Arbiter (LA) handling the consolidated cases rendered a Decision with
the following dispositive portion:

WHEREFORE, premises considered, judgment is hereby rendered, as follows:

1. The money claims cases (RAB-IV-10-4560-92-L and RAB-IV-11-4624-92-L) are hereby

dismissed for lack of merit;

2. The petition to declare strike illegal (NLRC Case No. RAB-IV-3-6555-94-L) is hereby dismissed,
but the officers of the Union, particularly its President, Mr. Edmundo F. Marifosque, Sr., are hereby
reprimanded and sternly warned that future conduct similar to what was displayed in this case will
warrant a more severe sanction from this Office.

SO ORDERED.5

Both parties appealed to the NLRC.

On July 28, 1999, the NLRC promulgated its Decision 6 dismissing both appeals. Petitioner filed a Motion for
Reconsideration7 but the same was denied by the NLRC in its Resolution 8 dated June 21, 2000.

Petitioner then filed a special civil action for certiorari with the CA assailing the above-mentioned NLRC
Decision and Resolution.

On May 14, 2002, the CA rendered the presently assailed judgment dismissing the petition.

Petitioner filed a Motion for Reconsideration but the CA denied it in its Resolution promulgated on
November 28, 2002.

Hence, herein petition for review based on the following assignment of errors:
 I

THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE FACTUAL FINDINGS OF THE
NATIONAL LABOR RELATIONS COMMISSION CANNOT BE REVIEWED IN CERTIORARI
PROCEEDINGS.

II

THE COURT OF APPEALS GRAVELY ERRED IN REFUSING TO RULE SQUARELY ON THE ISSUE OF
WHETHER OR NOT THE PAY OF FACULTY MEMBERS FOR TEACHING OVERLOADS SHOULD BE
INCLUDED AS BASIS IN THE COMPUTATION OF THEIR THIRTEENTH MONTH PAY.

III

THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE DECISION OF THE NATIONAL
LABOR RELATIONS COMMISSION IS SUPPORTED BY SUBSTANTIAL EVIDENCE AND IN NOT
GRANTING PETITIONER'S MONETARY CLAIMS.9

Citing Agustilo v. Court of Appeals,10 petitioner contends that in a special civil action for certiorari brought
before the CA, the appellate court can review the factual findings and the legal conclusions of the NLRC.

As to the inclusion of the overloads of respondent's faculty members in the computation of their 13th-
month pay, petitioner argues that under the Revised Guidelines on the Implementation of the 13th-Month
Pay Law, promulgated by the Secretary of Labor on November 16, 1987, the basic pay of an employee
includes remunerations or earnings paid by his employer for services rendered, and that excluded
therefrom are the cash equivalents of unused vacation and sick leave credits, overtime, premium, night
differential, holiday pay and cost-of-living allowances. Petitioner claims that since the pay for excess loads
or overloads does not fall under any of the enumerated exclusions and considering that the said overloads
are being performed within the normal working period of eight hours a day, it only follows that the
overloads should be included in the computation of the faculty members' 13th-month pay.

To support its argument, petitioner cites the opinion of the Bureau of Working Conditions of the DOLE that
payment of teaching overload performed within eight hours of work a day shall be considered in the
computation of the 13th-month pay.11

Petitioner further contends that DOLE-DECS-CHED-TESDA Order No. 02, Series of 1996 (DOLE Order)
which was relied upon by the LA and the NLRC in their respective Decisions cannot be applied to the
instant case because the DOLE Order was issued long after the commencement of petitioner's complaints
for monetary claims; that the prevailing rule at the time of the commencement of petitioner's complaints
was to include compensations for overloads in determining a faculty member's 13th-month pay; that to
give retroactive application to the DOLE Order issued in 1996 is to deprive workers of benefits which have
become vested and is a clear violation of the constitutional mandate on protection of labor; and that, in
any case, all doubts in the implementation and interpretation of labor laws, including implementing rules
and regulations, should be resolved in favor of labor.

Lastly, petitioner avers that the CA, in concluding that the NLRC Decision was supported by substantial
evidence, failed to specify what constituted said evidence. Thus, petitioner asserts that the CA acted
arbitrarily in affirming the Decision of the NLRC.

In its Comment, respondent contends that the ruling in Agustilo is an exception rather than the general
rule; that the general rule is that in a petition for certiorari, judicial review by this Court or by the CA in
labor cases does not go so far as to evaluate the sufficiency of the evidence upon which the proper labor
officer or office based his or its determination but is limited only to issues of jurisdiction or grave abuse of
discretion amounting to lack of jurisdiction; that before a party may ask that the CA or this Court review
the factual findings of the NLRC, there must first be a convincing argument that the NLRC acted in a
capricious, whimsical, arbitrary or despotic manner; and that in its petition for certiorari filed with the CA,
herein petitioner failed to prove that the NLRC acted without or in excess of jurisdiction or with grave
abuse of discretion.

Respondent argues that Agustilo is not applicable to the present case because in the former case, the
findings of fact of the LA and the NLRC are at variance with each other; while in the present case, the
findings of fact and conclusions of law of the LA and the NLRC are the same.

Respondent also avers that in a special civil action for certiorari, the discretionary power to review factual
findings of the NLRC rests upon the CA; and that absent any findings by the CA of the need to resolve any
unclear or ambiguous factual findings of the NLRC, the grant of the writ of certiorari is not warranted.
Further, respondent contends that even granting that the factual findings of the CA, NLRC and the LA may
be reviewed in the present case, petitioner failed to present valid arguments to warrant the reversal of the
assailed decision.

Respondent avers that the DOLE Order is an administrative regulation which interprets the 13th-Month
Pay Law (P.D. No. 851) and, as such, it is mandatory for the LA to apply the same to the present case.

Moreover, respondent contends that the Legal Services Office of the DOLE issued an opinion dated March
4, 1992,12 that remunerations for teaching in excess of the regular load, which includes overload pay for
work performed within an eight-hour work day, may not be included as part of the basic salary in the
computation of the 13th-month pay unless this has been included by company practice or policy; that
petitioner intentionally omitted any reference to the above-mentioned opinion of the Legal Services Office
of the DOLE because it is fatal to its cause; and that the DOLE Order is an affirmation of the opinion
rendered by the said Office of the DOLE.

Furthermore, respondent claims that, contrary to the asseveration of petitioner, prior to the issuance of
the DOLE Order, the prevailing rule is to exclude excess teaching load, which is akin to overtime, in the
computation of a teacher's basic salary and, ultimately, in the computation of his 13th-month pay.

As to respondent's alleged non-payment of petitioner's consolidated money claims, respondent contends

that the findings of the LA regarding these matters, which were affirmed by the NLRC and the CA, have
clear and convincing factual and legal bases to stand on.

The Court’s Ruling

The Court finds the petition bereft of merit.

As to the first and third assigned errors, petitioner would have this Court review the factual findings of the
LA as affirmed by the NLRC and the CA, to wit.

With respect to the alleged non-payment of benefits under Wage Order No. 5, this Office is
convinced that after the lapse of the one-year period of exemption from compliance with Wage
Order No. 5 (Exhibit "1-B), which exemption was granted by then Labor Minister Blas Ople, the
School settled its obligations to its employees, conformably with the agreement reached during the
management-employees meeting of June 26, 1985 (Exhibits "4-B" up to "4-D", also Exhibit "6-x-
1"). The Union has presented no evidence that the settlement reached during the June 26, 1985
meeting was the result of coercion. Indeed, what is significant is that the agreement of June 26,
1985 was signed by Mr. Porferio Ferrer, then Faculty President and an officer of the complaining
Union. Moreover, the samples from the payroll journal of the School, identified and offered in
evidence in these cases (Exhibits "1-C" and 1-D"), shows that the School paid its employees the
benefits under Wage Order No. 5 (and even Wage Order No. 6) beginning June 16, 1985.

Under the circumstances, therefore, the claim of the Union on this point must likewise fail.

The claim of the Union for salary differentials due to the improper computation of compensation
per unit of excess load cannot hold water for the simple reason that during the Schoolyears in point
there were no classes from June 1-14 and October 17-31. This fact was not refuted by the Union.
Since extra load should be paid only when actually performed by the employees, no salary
differentials are due the Union members.

The non-academic members of the Union cannot legally insist on wage increases due to "Job
Grading". From the records it appears that "Job Grading" is a system adopted by the School by
which positions are classified and evaluated according to the prescribed qualifications therefor. It is
akin to a merit system whereby salary increases are made dependent upon the classification,
evaluation and grading of the position held by an employee.

The system of Job Grading was initiated by the School in Schoolyear 1989-1990. In 1992, just
before the first of the two money claims was filed, a new Job Grading process was initiated by the
School.

Under the circumstances obtaining, it cannot be argued that there were repeated grants of salary
increases due to Job Grading to warrant the conclusion that some benefit was granted in favor of
the non-academic personnel that could no longer be eliminated or banished under Article 100 of
the Labor Code. Since the Job Grading exercises of the School were neither consistent nor for a
considerable period of time, the monetary claims attendant to an increase in job grade are non-
existent.
 The claim of the Union that its members were not given their full share in the tuition fee increases
for the Schoolyears 1989-1990, 1990-1991 and 1991-1992 is belied by the evidence presented by
the School which consists of the unrefuted testimony of its Accounting Coordinator, Ms. Rosario
Manlapaz, and the reports extrapolated from the journals and general ledgers of the School
(Exhibits "2", "2-A" up to "2-G"). The evidence indubitably shows that in Schoolyear 1989-1990,
the School incurred a deficit of P445,942.25, while in Schoolyears 1990-1991 and 1991-1992, the
School paid out, 91% and 77%, respectively, of the increments in the tuition fees collected.

As regards the issue of non-payment of holiday pay, the individual pay records of the School's
employees, a sample of which was identified and explained by Ms. Rosario Manlapaz (Exhibit "3"),
shows that said School employees are paid for all days worked in the year. Stated differently, the
factor used in computing the salaries of the employees is 365, which indicates that their regular
monthly salary includes payment of wages during all legal holidays.13

This Court held in Odango v. National Labor Relations Commission 14 that:

The appellate court’s jurisdiction to review a decision of the NLRC in a petition for certiorari is
confined to issues of jurisdiction or grave abuse of discretion. An extraordinary remedy, a petition
for certiorari is available only and restrictively in truly exceptional cases. The sole office of the writ
of certiorari is the correction of errors of jurisdiction including the commission of grave abuse of
discretion amounting to lack or excess of jurisdiction. It does not include correction of the NLRC’s
evaluation of the evidence or of its factual findings. Such findings are generally accorded not only
respect but also finality. A party assailing such findings bears the burden of showing that the
tribunal acted capriciously and whimsically or in total disregard of evidence material to the
controversy, in order that the extraordinary writ of certiorari will lie. 15

In the instant case, the Court finds no error in the ruling of the CA that since nowhere in the petition is
there any acceptable demonstration that the LA or the NLRC acted either with grave abuse of discretion or
without or in excess of its jurisdiction, the appellate court has no reason to look into the correctness of the
evaluation of evidence which supports the labor tribunals' findings of fact.

Settled is the rule that the findings of the LA, when affirmed by the NLRC and the CA, are binding on the
Supreme Court, unless patently erroneous.16 It is not the function of the Supreme Court to analyze or
weigh all over again the evidence already considered in the proceedings below. 17 In a petition for review
on certiorari, this Court’s jurisdiction is limited to reviewing errors of law in the absence of any showing
that the factual findings complained of are devoid of support in the records or are glaringly
erroneous.18 Firm is the doctrine that this Court is not a trier of facts, and this applies with greater force in
labor cases.19 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 great
respect but even finality.20 They are binding upon this Court unless there is a showing of grave abuse of
discretion or where it is clearly shown that they were arrived at arbitrarily or in utter disregard of the
evidence on record.21 We find none of these exceptions in the present case.

In petitions for review on certiorari like the instant case, the Court invariably sustains the unanimous
factual findings of the LA, the NLRC and the CA, specially when such findings are supported by substantial
evidence and there is no cogent basis to reverse the same, as in this case. 22

The second assigned error properly raises a question of law as it involves the determination of whether or
not a teacher's overload pay should be considered in the computation of his or her 13th-month pay. In
resolving this issue, the Court is confronted with conflicting interpretations by different government
agencies.

On one hand is the opinion of the Bureau of Working Conditions of the DOLE dated December 9, 1991,
February 28, 1992 and November 19, 1992 to the effect that if overload is performed within a teacher's
normal eight-hour work per day, the remuneration that the teacher will get from the additional teaching
load will form part of the basic wage.23

This opinion is affirmed by the Explanatory Bulletin on the Inclusion of Teachers' Overload Pay in the 13th-
Month Pay Determination issued by the DOLE on December 3, 1993 under then Acting DOLE Secretary
Cresenciano B. Trajano. Pertinent portions of the said Bulletin read as follows:

1. Basis of the 13th-month pay computation

The Revised Implementing Guidelines of the 13th-Month Pay Law (P.D. 851, as amended) provides
that an employee shall be entitled to not less than 1/12 of the total basic salary earned within a
calendar year for the purpose of computing such entitlement. The basic wage of an employee shall
include:
 "x x x all remunerations or earnings paid by his employer for services rendered but do not include
allowances or monetary benefits which are not considered or integrated as part of the regular
or basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime,
premium, night differential and holiday pay, and cost-of-living allowances. However, these salary-
related benefits should be included as part of the basic salary in the computation of the 13th
month pay if by individual or collective agreement, company practice or policy, the same are
treated as part of the basic salary of the employees."

Basic wage is defined by the Implementing Rules of RA 6727 as follows:

"Basic Wage" means all remuneration or earnings paid by an employer to a worker for services
rendered on normal working days and hours but does not include cost of living allowances, 13th-
month pay or other monetary benefits which are not considered as part of or integrated into the
regular salary of the workers xxx.

The foregoing definition was based on Article 83 of the Labor Code which provides that
"the normal hours of work of any employee shall not exceed eight (8) hours a day." This means
that the basic salary of an employee for the purpose of computing the 13th-month pay shall
include all remunerations or earnings paid by an employer for services rendered during normal
working hours.

2. Overload work/pay

Overload on the other hand means "the load in excess of the normal load of private school teachers
as prescribed by the Department of Education, Culture and Sports (DECS) or the policies, rules and
standards of particular private schools." In recognition of the peculiarities of the teaching
profession, existing DECS and School Policies and Regulations for different levels of instructions
prescribe a regular teaching load, the total actual teaching or classroom hours of which a teacher
can generally perform in less than eight (8) hours per working day. This is because teaching may
also require the teacher to do additional work such as handling an advisory class, preparation of
lesson plans and teaching aids, evaluation of students and other related activities. Where, however
a teacher is engaged to undertake actual additional teaching work after completing his/her regular
teaching load, such additional work is generally referred to as overload. In short, additional work in
excess of the regular teaching load is overload work. Regular teaching load and overload
work, if any, may constitute a teacher's working day.

Where a teacher is required to perform such overload within the eight (8) hours normal
working day, such overload compensation shall be considered part of the basic pay for
the purpose of computing the teacher's 13th-month pay. "Overload work" is sometimes
misunderstood as synonymous to "overtime work" as this term is used and understood in the Labor
Code. These two terms are not the same because overtime work is work rendered in excess of
normal working hours of eight in a day (Art. 87, Labor Code). Considering that overload work may
be performed either within or outside eight hours in a day, overload work may or may not be
overtime work.

3. Concluding Statement

In the light of the foregoing discussions, it is the position of this Department that all basic
salary/wage representing payments earned for actual work performed during or within the eight
hours in a day, including payments for overload work within eight hours, form part of basic wage
and therefore are to be included in the computation of 13th-month pay mandated by PD 851, as
amended.24 (Underscoring supplied)

On the other hand, the Legal Services Department of the DOLE holds in its opinion of March 4, 1992 that
remunerations for teaching in excess of the regular load shall be excluded in the computation of the 13th-
month pay unless, by school policy, the same are considered as part of the basic salary of the qualified
teachers.25

This opinion is later affirmed by the DOLE Order, pertinent portions of which are quoted below:

xxxx

2. In accordance with Article 83 of the Labor Code of the Philippines, as amended, the normal
hours of work of school academic personnel shall not exceed eight (8) hours a day. Any work
done in addition to the eight (8) hours daily work shall constitute overtime work.

3. The normal hours of work of teaching or academic personnel shall be based on their normal or
regular teaching loads. Such normal or regular teaching loads shall be in accordance with the
policies, rules and standards prescribed by the Department of Education, Culture and Sports, the
 Commission on Higher Education and the Technical Education and Skills Development
Authority. Any teaching load in excess of the normal or regular teaching load shall be
considered as overload. Overload partakes of the nature of temporary extra assignment and
compensation therefore shall be considered as an overload honorarium if performed within the 8-
hour work period and does not form part of the regular or basic pay. Overload performed
beyond the eight-hour daily work is overtime work.26 (Emphasis supplied)

It was the above-quoted DOLE Order which was used by the LA as basis for ruling against herein
petitioner.

The petitioner’s claim that the DOLE Order should not be made to apply to the present case because said
Order was issued only in 1996, approximately four years after the present case was initiated before the
Regional Arbitration Branch of the NLRC, is not without basis. The general rule is that administrative
rulings and circulars shall not be given retroactive effect.27

Nevertheless, it is a settled rule that when an administrative or executive agency renders an

opinion or issues a statement of policy, it merely interprets a pre-existing law and the
administrative interpretation is at best advisory for it is the courts that finally determine what
the law means.28

In the present case, while the DOLE Order may not be applicable, the Court finds that overload pay should
be excluded from the computation of the 13th-month pay of petitioner's members.

In resolving the issue of the inclusion or exclusion of overload pay in the computation of a teacher's 13th-
month pay, it is decisive to determine what "basic salary" includes and excludes.

In this respect, the Court's disquisition in San Miguel Corporation v. Inciong29 is instructive, to wit:

Under Presidential Decree 851 and its implementing rules, the basic salary of an employee is used
as the basis in the determination of his 13th month pay. Any compensations or remunerations
which are deemed not part of the basic pay is excluded as basis in the computation of the
mandatory bonus.

Under the Rules and Regulations Implementing Presidential Decree 851, the following
compensations are deemed not part of the basic salary:

a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of Instruction
No. 174;

b) Profit sharing payments;

c) All allowances and monetary benefits which are not considered or integrated as part of the
regular basic salary of the employee at the time of the promulgation of the Decree on December
16, 1975.

Under a later set of Supplementary Rules and Regulations Implementing Presidential Decree 851
issued by the then Labor Secretary Blas Ople, overtime pay, earnings and other remunerations are
excluded as part of the basic salary and in the computation of the 13 th-month pay.

The exclusion of cost-of-living allowances under Presidential Decree 525 and Letter of Instruction
No. 174 and profit sharing payments indicate the intention to strip basic salary of other payments
which are properly considered as "fringe" benefits. Likewise, the catch-all exclusionary phrase "all
allowances and monetary benefits which are not considered or integrated as part of the basic
salary" shows also the intention to strip basic salary of any and all additions which may be in the
form of allowances or "fringe" benefits.

Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree 851 is even
more emphatic in declaring that earnings and other remunerations which are not part of the basic
salary shall not be included in the computation of the 13th-month pay.

While doubt may have been created by the prior Rules and Regulations Implementing Presidential
Decree 851 which defines basic salary to include all remunerations or earnings paid by an employer
to an employee, this cloud is dissipated in the later and more controlling Supplementary Rules and
Regulations which categorically, exclude from the definition of basic salary earnings and other
remunerations paid by employer to an employee. A cursory perusal of the two sets of Rules
indicates that what has hitherto been the subject of a broad inclusion is now a subject of broad
exclusion. The Supplementary Rules and Regulations cure the seeming tendency of the former
rules to include all remunerations and earnings within the definition of basic salary.
 The all-embracing phrase "earnings and other remunerations" which are deemed not part of the
basic salary includes within its meaning payments for sick, vacation, or maternity leaves, premium
for works performed on rest days and special holidays, pay for regular holidays and night
differentials. As such they are deemed not part of the basic salary and shall not be considered in
the computation of the 13th-month pay. If they were not so excluded, it is hard to find any
"earnings and other remunerations" expressly excluded in the computation of the 13 th-month pay.
Then the exclusionary provision would prove to be idle and with no purpose.

This conclusion finds strong support under the Labor Code of the Philippines. To cite a few
provisions:

"Art. 87 – Overtime work. Work may be performed beyond eight (8) hours a day provided that the
employee is paid for the overtime work, additional compensation equivalent to his regular wage
plus at least twenty-five (25%) percent thereof."

It is clear that overtime pay is an additional compensation other than and added to the regular
wage or basic salary, for reason of which such is categorically excluded from the definition of basic
salary under the Supplementary Rules and Regulations Implementing Presidential Decree 851.

In Article 93 of the same Code, paragraph

"c.) work performed on any special holiday shall be paid an additional compensation of at least
thirty percent (30%) of the regular wage of the employee."

It is likewise clear that premium for special holiday which is at least 30% of the regular wage is
an additional compensation other than and added to the regular wage or basic salary. For similar
reason it shall not be considered in the computation of the 13th -month pay.30

In the same manner that payment for overtime work and work performed during special holidays is
considered as additional compensation apart and distinct from an employee's regular wage or basic salary,
an overload pay, owing to its very nature and definition, may not be considered as part of a teacher's
regular or basic salary, because it is being paid for additional work performed in excess of the regular
teaching load.

The peculiarity of an overload lies in the fact that it may be performed within the normal eight-hour
working day. This is the only reason why the DOLE, in its explanatory bulletin, finds it proper to include a
teacher's overload pay in the determination of his or her 13th-month pay. However, the DOLE loses sight
of the fact that even if it is performed within the normal eight-hour working day, an overload is still an
additional or extra teaching work which is performed after the regular teaching load has been completed.
Hence, any pay given as compensation for such additional work should be considered as extra and not
deemed as part of the regular or basic salary.

Moreover, petitioner failed to refute private respondent's contention that excess teaching load is paid by
the hour, while the regular teaching load is being paid on a monthly basis; and that the assignment of
overload is subject to the availability of teaching loads. This only goes to show that overload pay is not
integrated with a teacher's basic salary for his or her regular teaching load. In addition, overload varies
from one semester to another, as it is dependent upon the availability of extra teaching loads. As such, it
is not legally feasible to consider payments for such overload as part of a teacher's regular or basic salary.
Verily, overload pay may not be included as basis for determining a teacher's 13th-month pay.

WHEREFORE, the instant petition is DENIED. The assailed Decision and Resolution of the Court of
Appeals are AFFIRMED.

SO ORDERED.

27.

G.R. No. 152894 August 17, 2007

CENTURY CANNING CORPORATION, Petitioner,

vs.
COURT OF APPEALS and GLORIA C. PALAD, Respondents.

DECISION

CARPIO, J.:

The Case
This is a petition for review1 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 agreement 3 with
petitioner. Palad received an apprentice allowance of ₱138.75 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 THIRTY-TWO PESOS (₱1,632.00), representing
her last salary and the amount of SEVEN THOUSAND TWO HUNDRED TWENTY EIGHT (₱7,228.00) 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 ₱7,176.00 (₱138.75 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

(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

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)

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)

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 pre-requisite 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)

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.1avvphil 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)

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 termination 30 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.

28.

G.R. No. 180636 March 13, 2013

LORENZO T. TANGGA-AN,* Petitioner,

vs.
PIDLIPPINE TRANSMARINE CARRIERS, INC., UNIVERSE TANKSHIP DELAWARE LLC, and
CARLOS C. SALINAS, Respondents.

DECISION

DEL CASTILLO, J.:

This Court's labor pronouncements must be read and applied with utmost care and caution, taking to mind
that in the very heart of the judicial system, labor cases occupy a special place. More than the State
guarantees of protection of labor and security of tenure, labor disputes involve the fundamental survival of
the employees and their families, who depend -upon the former for all the basic necessities in life.

This Petition for Review on Certiorari1 seeks a modification of the November 30, 2006 Decision 2 of the
Court of Appeals (CA) in CA-G.R. SP No. 00806. Also assailed is the November 15, 2007
Resolution3 denying petitioner's Motion for Reconsideration.

Factual Antecedents

The facts, as found by the CA, are as follows:

This is a case for illegal dismissal with a claim for the payment of salaries corresponding to the unexpired
term of the contract, damages and attorney’s fees filed by private respondent Lorenzo T. Tangga-an
against the petitioners Philippine Transmarine Carriers, Inc., Universe Tankship Delaware LLC, and Carlos
C. Salinas4 or herein respondents.

In his position paper, Tangga-an alleged that on January 31, 2002, he entered into an overseas
employment contract with Philippine Transmarine Carriers, Inc. (PTC) for and in behalf of its foreign
employer, Universe Tankship Delaware, LLC. Under the employment contract, he was to be employed for
a period of six months as chief engineer of the vessel the S.S. "Kure". He was to be paid a basic salary of
US$5,000.00; vacation leave pay equivalent to 15 days a months [sic] or US$2,500.00 per month and
tonnage bonus in the amount of US$700.00 a month.

On February 11, 2002, Tangga-an was deployed. While performing his assigned task, he noticed that
while they were loading liquid cargo at Cedros, Mexico, the vessel suddenly listed too much at the bow. At
that particular time both the master and the chief mate went on shore leave together, which under
maritime standard was prohibited. To avoid any conflict, he chose to ignore the unbecoming conduct of
the senior officers of the vessel.

On or about March 13, 2002, the vessel berthed at a port in Japan to discharge its cargo. Thereafter, it
sailed to the U.S.A. While the vessel was still at sea, the master required Tangga-an and the rest of the
Filipino Engineer Officers to report to his office where they were informed that they would be repatriated
on account of the delay in the cargo discharging in Japan, which was principally a duty belonging to the
deck officers. He imputed the delay to the non-readiness of the turbo generator and the inoperation of the
boom, since the turbo generator had been prepared and synchronized for 3.5 hours or even before the
vessel arrived in Japan. Moreover, upon checking the boom, they found the same [sic] operational. Upon
verification, they found out that when the vessel berthed in Japan, the cargo hold was not immediately
opened and the deck officers concerned did not prepare the stock. Moreover, while cargo discharging was
ongoing, both the master and the chief mate again went on shore leave together at 4:00 in the afternoon
and returned to the vessel only after midnight. To save face, they harped on the Engine Department for
their mistake. Tangga-an and the other Engineering Officers were ordered to disembark from the vessel
on April 2, 2002 and thereafter repatriated. Thence, the complaint.

Philippine Transmarine Carriers, Inc., Universe Tankship Delaware LLC, and Carlos C. Salinas on the other
hand, contended that sometime on [sic] March 2002, during a test of the cargo discharging conveyor
system, Tangga-an and his assistant engineers failed to start the generator that supplied power to the
conveyor. They spent 3 hours trying to start the generator but failed. It was only the third assistant
engineer who previously served in the same vessel who was able to turn on the generator. When the
master tried to call the engine room to find out the problem, Tangga-an did not answer and merely hang
[sic] up. The master proceeded to the engine room to find out the problem by [sic] Tangga-an and his
assistant engineers were running around trying to appear busy.

At another time, during a cargo discharging operation requiring the use of a generator system and the
conveyor boom, Tangga-an was nowhere to be found. Apparently, he went on shore leave resulting in a
delay of 2 hours because the machine could not be operated well. Both incidents were recorded in the
official logbook. Due to the delay, protests were filed by the charter [sic].

The master required Tangga-an to submit a written explanation to which he did but blamed the captain
and the chief officer. He failed to explain why he did not personally supervise the operation of the
generator system and the conveyor boom during the cargo discharging operations. His explanation not
having been found satisfactory, respondents decided to terminate Tangga-an’s services. Thus, a notice of
dismissal was issued against Tangga-an. He arrived in the Philippines on April 4, 2002.5

Tangga-an filed a Complaint6 for illegal dismissal with prayer for payment of salaries for the unexpired
portion of his contract, leave pay, exemplary and moral damages, attorney’s fees and interest.

On January 27, 2004, Labor Arbiter Jose G. Gutierrez rendered a Decision 7 finding petitioner to have been
illegally dismissed. The Labor Arbiter noted that in petitioner’s letter to respondent Universe Tankship
Delaware, LLC dated April 1, 20028 he categorically denied any negligence on his part relative to the delay
in the discharge of the cargo while the vessel was berthed in Japan. In view thereof, the Labor Arbiter
opined that an investigation should have been conducted in order to ferret out the truth instead of
dismissing petitioner outright. Consequently, petitioner’s dismissal was illegal for lack of just cause and for
failure to comply with the twin requirements of notice and hearing.9

As regards petitioner’s claim for back salaries, the Labor Arbiter found petitioner entitled not to four
months which is equivalent to the unexpired portion of his contract, but only to three months, inclusive of
vacation leave pay and tonnage bonus (or US$8,200 x 3 months = US$24,600) pursuant to Section 10 of
Republic Act (RA) No. 8042 or The Migrant Workers and Overseas Filipinos Act of 2005.

Regarding petitioner’s claim for damages, the same was denied for failure to prove bad faith on the part of
the respondents. However, attorney’s fees equivalent to 10% of the total back salaries was awarded
because petitioner was constrained to litigate.

The dispositive portion of the Labor Arbiter’s Decision, reads:

WHEREFORE, the foregoing premises considered, judgment is hereby rendered finding Tangga-an illegally
dismissed from his employment and directing the respondent Phil. Transmarine Carriers, Inc. to pay
Tangga-an the amount of US$24,600.00 PLUS US$2,460.00 attorney’s fees or a total aggregate amount
of US Dollars: TWENTY SEVEN THOUSAND SIXTY (US$27,060.00) or its peso equivalent at the exchange
rate prevailing at the time of payment.

SO ORDERED.10

Ruling of the National Labor Relations Commission

Respondents appealed to the National Labor Relations Commission (NLRC). They claimed that the Labor
Arbiter committed grave abuse of discretion in finding that petitioner was illegally dismissed; in awarding
unearned vacation leave pay and tonnage bonus when the law and jurisprudence limit recovery to the
employee’s basic salary; and in awarding attorney’s fees despite the absence of proof of bad faith on their
part.

On August 25, 2004, the NLRC issued its Decision,11 the dispositive portion of which reads:

WHEREFORE, the Decision dated January 27, 2004 of the Labor Arbiter is AFFIRMED.

Respondents-appellants’ Memorandum of Appeal, dated 23 March 2004 is DISMISSED for lack of merit.

SO ORDERED.12

The NLRC affirmed the finding of illegal dismissal. It held that no notice of hearing was served upon
petitioner, and no hearing whatsoever was conducted on the charges against him. It ruled that
respondents could not dispense with the twin requirements of notice and hearing, which are essential
elements of procedural due process. For this reason, no valid cause for termination has been shown. The
NLRC likewise found respondents guilty of bad faith in illegally dismissing petitioner’s services.
On the issue covering the award of unearned vacation leave pay and tonnage bonus, the NLRC struck
down respondents’ arguments and held that in illegal dismissal cases, the employee is entitled to all the
salaries, allowances and other benefits or their monetary equivalents from the time his compensation is
withheld from him until he is actually reinstated, in effect citing Article 279 13 of the Labor Code. It held
that vacation leave pay and tonnage bonus are provided in petitioner’s employment contract, which thus
entitles the latter to the same in the event of illegal dismissal.

Finally, on the issue of attorney’s fees, the NLRC held that since respondents were found to be in bad faith
for the illegal dismissal and petitioner was constrained to litigate with counsel, the award of attorney’s
fees is proper.

Respondents moved for reconsideration which was denied by the NLRC in its March 18, 2005 Resolution.14

Ruling of the Court of Appeals

Respondents went up to the CA by Petition for Certiorari, 15 seeking to annul the Decision of the NLRC,
raising essentially the same issues taken up in the NLRC.

On November 30, 2006, the CA rendered the assailed Decision, the dispositive portion of which reads, as
follows:

WHEREFORE, premises considered, the instant petition is PARTIALLY GRANTED. The Decision of public
respondent is MODIFIED in the following manner:

a. Tangga-an is entitled to three (3) months salary representing the unexpired portion of his
contract in the total amount of US$15,000.00 or its peso equivalent at the exchange rate prevailing
at the time of payment;

b. Tangga-an’s placement fee should be reimbursed with 12% interest per annum;

c. The award of attorney’s fees is deleted.

SO ORDERED.16

The CA adhered to the finding of illegal dismissal. But on the subject of monetary awards, the CA
considered only petitioner’s monthly US$5,000.00 basic salary and disregarded his monthly US$2,500.00
vacation leave pay and US$700.00 tonnage bonus. It likewise held that petitioner’s "unexpired portion of
contract" for which he is entitled to back salaries should only be three months pursuant to Section 1017 of
RA 8042. In addition, petitioner should be paid back his placement fee with interest at the rate of twelve
per cent (12%) per annum.

As to attorney’s fees, the CA did not agree with the NLRC’s finding that bad faith on the part of
respondents was present to justify the award of attorney’s fees. It held that there is nothing from the
facts and proceedings to suggest that respondents acted with dishonesty, moral obliquity or conscious
doing of wrong in terminating petitioner’s services.

Petitioner filed a Motion for (Partial) Reconsideration, 18 which was denied in the assailed November 15,
2007 Resolution. Thus, he filed the instant Petition.

Issues

In this Petition, Tangga-an seeks a modification of the CA Decision and the reinstatement of the monetary
awards as decreed in the Labor Arbiter’s January 27, 2004 Decision, or in the alternative, the grant of
back salaries equivalent to four months which corresponds to the unexpired portion of the contract,
inclusive of vacation leave pay and tonnage bonus, plus 10% thereof as attorney’s fees. 19

Petitioner submits the following issues for resolution:

I. Whether x x x the CA’s issuance of the writ of certiorari reversing the NLRC decision is in
accordance with law;

II. Whether x x x the indemnity provided in Section 10, R. A. 8042 x x x be limited only to the
seafarer’s basic monthly salary or x x x include, based on civil law concept of damages as well as
Labor Code concept of backwages, allowances/benefits or their monetary equivalent as a further
relief to restore the seafarer’s income that was lost by reason of his unlawful dismissal;

III. Whether x x x the indemnity awarded by the CA in petitioner’s favor consisting only of 3
months’ basic salaries conform with the proper interpretation of Section 10 R. A. 8042 and with the
 ruling in Skippers Pacific, Inc. v. Mira, et al., G.R. No. 144314, November 21, 2002 and related
cases or is petitioner entitled to at least 4 months salaries being the unexpired portion of his
contract; and

IV. Whether x x x the CA’s disallowance of the award of attorney’s fees, based on the alleged
absence of bad faith on the part of respondent, is in accordance with law or is the attorney’s fees
awarded by the NLRC to petitioner, who was forced to litigate to enforce his rights, justified x x x.20

Petitioner’s Arguments

Petitioner essentially contends that respondents’ resort to an original Petition for Certiorari in the CA is
erroneous because the issues they raised did not involve questions of jurisdiction but of fact and law. He
adds that the CA Decision went against the factual findings of the labor tribunals which ought to be
binding, given their expertise in matters falling within their jurisdiction.

Petitioner likewise contends that the CA erred in excluding his vacation leave pay and tonnage bonus in
the computation of his back salaries as they form part of his salaries and benefits under his employment
contract with the respondents, a covenant which is deemed to be the law governing their relations. He
adds that under Article 279 of the Labor Code, he is entitled to full backwages inclusive of allowances and
other benefits or their monetary equivalent from the time his compensation was withheld up to the time
he is actually reinstated.

Petitioner accuses the CA of misapplying the doctrine laid down in Skippers Pacific, Inc. v. Skippers
Maritime Services, Ltd.21 He points out that the CA wrongly interpreted and applied what the Court said in
the case, and that the pronouncement therein should have benefited him rather than the respondents.

Petitioner would have the Court reinstate the award of attorney’s fees, on the argument that the presence
of bad faith is not necessary to justify such award. He maintains that the grant of attorney’s fees in labor
cases constitutes an exception to the general requirement that bad faith or malice on the part of the
adverse party must first be proved.

Finally, petitioner prays that this Court reinstate the Labor Arbiter’s monetary awards in his January 27,
2004 Decision or, in the alternative, to grant him full back salaries equivalent to the unexpired portion of
his contract, or four months, plus 10% thereof as attorney’s fees.

Respondents’ Arguments

In seeking affirmance of the assailed CA issuances, respondents basically submit that the CA committed
no reversible error in excluding petitioner’s claims for vacation leave pay, tonnage bonus, and attorney’s
fees. They support and agree with the CA’s reliance upon Skippers Pacific, Inc. v. Skippers Maritime
Services, Ltd.,22 and emphasize that in the absence of bad faith on their part, petitioner may not recover
attorney’s fees.

Our Ruling

The Court grants the Petition.

There remains no issue regarding illegal dismissal. In spite of the consistent finding below that petitioner
was illegally dismissed, respondents did not take issue, which thus renders all pronouncements on the
matter final.

In resolving petitioner’s monetary claims, the CA utterly misinterpreted the Court’s ruling in Skippers
Pacific, Inc. v. Skippers Maritime Services, Ltd., 23 using it to support a view which the latter case precisely
ventured to strike down. In that case, the employee was hired as the vessel’s Master on a six-months
employment contract, but was able to work for only two months, as he was later on illegally dismissed.
The Labor Arbiter, NLRC, and the CA all took the view that the complaining employee was entitled to his
salary for the unexpired portion of his contract, but limited to only three months pursuant to Section
1024 of RA 8042. The Court did not agree and hence modified the judgment in said case. It held that,
following the wording of Section 10 and its ruling in Marsaman Manning Agency, Inc. v. National Labor
Relations Commission,25 when the illegally dismissed employee’s employment contract has a term of less
than one year, he/she shall be entitled to recovery of salaries representing the unexpired portion of
his/her employment contract. Indeed, there was nothing even vaguely confusing in the Court’s citation
therein of Marsaman:

In Marsaman Manning Agency, Inc. vs. NLRC, involving Section 10 of Republic Act No. 8042, we held:

We cannot subscribe to the view that private respondent is entitled to three (3) months salary
only.1âwphi1 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 wording "for every year of the unexpired term" which follows the wording
"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 lawmaking body is presumed to know the meaning of the words employed in the
statute and to have used them advisedly. Ut res magis valeat quam pereat.

It is not disputed that private respondent’s employment contract in the instant case was for six (6)
months. Hence, we see no reason to disregard the ruling in Marsaman that private respondent should be
paid his salaries for the unexpired portion of his employment contract. 26 (Emphases supplied)

At this juncture, the courts, especially the CA, should be reminded to read and apply this Court’s labor
pronouncements with utmost care and caution, taking to mind that in the very heart of the judicial
system, labor cases occupy a special place. More than the State guarantees of protection of labor and
security of tenure, labor disputes involve the fundamental survival of the employees and their families,
who depend upon the former for all the basic necessities in life.

Thus, petitioner must be awarded his salaries corresponding to the unexpired portion of his six-months
employment contract, or equivalent to four months. This includes all his corresponding monthly vacation
leave pay and tonnage bonuses which are expressly provided and guaranteed in his employment contract
as part of his monthly salary and benefit package. These benefits were guaranteed to be paid on a
monthly basis, and were not made contingent. In fact, their monetary equivalent was fixed under the
contract: US$2,500.00 for vacation leave pay and US$700.00 for tonnage bonus each month. Thus,
petitioner is entitled to back salaries of US$32,800 (or US$5,000 + US$2,500 + US$700 = US$8,200 x 4
months). "Article 279 of the Labor Code mandates that an employee’s full backwages shall be inclusive of
allowances and other benefits or their monetary equivalent."27 As we have time and again held, "it is the
obligation of the employer to pay an illegally dismissed employee or worker the whole amount of the
salaries or wages, plus all other benefits and bonuses and general increases, to which he would have been
normally entitled had he not been dismissed and had not stopped working." 28 This well-defined principle
has likewise been lost on the CA in the consideration of the case.

The CA likewise erred in deleting the award of attorney’s fees on the ground that bad faith may not readily
be attributed to the respondents given the circumstances. The Court’s discussion on the award of
attorney’s fees in Kaisahan at Kapatiran ng mga Manggagawa at Kawani sa MWC-East Zone Union v.
Manila Water Company, Inc.,29 speaking through Justice Brion, is instructive, viz:

Article 111 of the Labor Code, as amended, governs the grant of attorney’s fees in labor cases:

‘Art. 111. Attorney’s fees. – (a) In cases of unlawful withholding of wages, the culpable party may be
assessed attorney’s fees equivalent to ten percent of the amount of wages recovered.

(b) It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings
for the recovery of wages, attorney’s fees which exceed ten percent of the amount of wages recovered.’

Section 8, Rule VIII, Book III of its Implementing Rules also provides, viz.:

‘Section 8. Attorney’s fees. – Attorney’s fees in any judicial or administrative proceedings for the recovery
of wages shall not exceed 10% of the amount awarded. The fees may be deducted from the total amount
due the winning party.’

We explained in PCL Shipping Philippines, Inc. v. National Labor Relations Commission that there are two
commonly accepted concepts of attorney’s fees – the ordinary and extraordinary. In its ordinary concept,
an attorney’s fee is the reasonable compensation paid to a lawyer by his client for the legal services the
former renders; compensation is paid for the cost and/or results of legal services per agreement or as
may be assessed. In its extraordinary concept, attorney’s fees are deemed indemnity for damages ordered
by the court to be paid by the losing party to the winning party. The instances when these may be
awarded are enumerated in Article 2208 of the Civil Code, specifically in its paragraph 7 on actions for
recovery of wages, and is payable not to the lawyer but to the client, unless the client and his lawyer have
agreed that the award shall accrue to the lawyer as additional or part of compensation.

We also held in PCL Shipping that Article 111 of the Labor Code, as amended, contemplates the
extraordinary concept of attorney’s fees and that Article 111 is an exception to the declared policy of strict
construction in the award of attorney’s fees. Although an express finding of facts and law is still necessary
to prove the merit of the award, there need not be any showing that the employer acted maliciously or in
bad faith when it withheld the wages. x x x
We similarly so ruled in RTG Construction, Inc. v. Facto and in Ortiz v. San Miguel Corporation. In RTG
Construction, we specifically stated:

'Settled is the rule that in actions for recovery of wages, or where an employee was forced to litigate and,
thus, incur expenses to protect his rights and interests, a monetary award by way of attorney's fees is
justifiable under Article Ill of the Labor Code; Section 8, Rule VIII, Book III of its Implementing Rules; and
paragraph 7, Article 208 of the Civil Code. The award of attorney's fees is proper, and there need not be
any showing that the employer acted maliciously or in bad faith when it withheld the wages. There need
only be a showing that the lawful wages were not paid accordingly.'

In PCL Shipping, we found the award of attorney's fees due and appropriate since the respondent therein
incurred legal expenses after he was forced to file an action for recovery of his lawful wages and other
benefits to protect his rights. From this perspective and the above precedents, we conclude that the CA
erred in ruling that a finding of the employer's malice or bad faith in withholding wages must precede an
award of attorney's fees under Article Ill of the Labor Code. To reiterate, a plain showing that the lawful
wages were not paid without justification is sufficient.30

In this case, it is already settled that petitioner's employment was illegally terminated. As a result, his
wages as well as allowances were withheld without valid and legal basis. Otherwise stated, he was not
paid his lawful wages without any valid justification. Consequently, he was impelled to litigate to protect
his interests. Thus, pursuant to the above ruling, he is entitled to receive attorney’s fees. An award of
attorney's fees in petitioner’s favor is in order in the amount of US$3, 280 (or US$32, 800 x 10%).

WHEREFORE, the Petition is GRANTED. Petitioner Lorenzo T. Tangga-an is hereby declared ENTITLED to
back salaries for the unexpired portion of his contract, inclusive of vacation leave pay and tonnage bonus
which is equivalent to US$32,800 plus US$3,280 as attorney's fees or a total of US$36,080 or its peso
equivalent at the exchange rate prevailing at the time of payment.

SO ORDERED.

29.

G.R. No. 163419 February 13, 2008

TSPIC CORPORATION, petitioner,

vs.
TSPIC EMPLOYEES UNION (FFW), representing MARIA FE FLORES, FE CAPISTRANO, AMY
DURIAS,1 CLAIRE EVELYN VELEZ, JANICE OLAGUIR, JERICO ALIPIT, GLEN BATULA, SER JOHN
HERNANDEZ, RACHEL NOVILLAS, NIMFA ANILAO, ROSE SUBARDIAGA, VALERIE CARBON,
OLIVIA EDROSO, MARICRIS DONAIRE, ANALYN AZARCON, ROSALIE RAMIREZ, JULIETA
ROSETE, JANICE NEBRE, NIA ANDRADE, CATHERINE YABA, DIOMEDISA ERNI, 2 MARIO
SALMORIN, LOIDA COMULLO,3 MARIE ANN DELOS SANTOS, 4 JUANITA YANA, and SUZETTE
DULAY, respondents.

DECISION

VELASCO, JR., J.:

The path towards industrial peace is a two-way street. Fundamental fairness and protection to labor
should always govern dealings between labor and management. Seemingly conflicting provisions should
be harmonized to arrive at an interpretation that is within the parameters of the law, compassionate to
labor, yet, fair to management.

In this Petition for Review on Certiorari under Rule 45, petitioner TSPIC Corporation (TSPIC) seeks to
annul and set aside the October 22, 2003 Decision5 and April 23, 2004 Resolution6 of the Court of Appeals
(CA) in CA-G.R. SP No. 68616, which affirmed the September 13, 2001 Decision 7 of Accredited Voluntary
Arbitrator Josephus B. Jimenez in National Conciliation and Mediation Board Case No. JBJ-AVA-2001-07-
57.

TSPIC is engaged in the business of designing, manufacturing, and marketing integrated circuits to serve
the communication, automotive, data processing, and aerospace industries. Respondent TSPIC Employees
Union (FFW) (Union), on the other hand, is the registered bargaining agent of the rank-and-file employees
of TSPIC. The respondents, Maria Fe Flores, Fe Capistrano, Amy Durias, Claire Evelyn Velez, Janice
Olaguir, Jerico Alipit, Glen Batula, Ser John Hernandez, Rachel Novillas, Nimfa Anilao, Rose Subardiaga,
Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice
Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos
Santos, Juanita Yana, and Suzette Dulay, are all members of the Union.
In 1999, TSPIC and the Union entered into a Collective Bargaining Agreement (CBA) 8 for the years 2000
to 2004. The CBA included a provision on yearly salary increases starting January 2000 until January
2002. Section 1, Article X of the CBA provides, as follows:

Section 1. Salary/ Wage Increases.––Employees covered by this Agreement shall be granted

salary/wage increases as follows:

a) Effective January 1, 2000, all employees on regular status and within the bargaining unit
on or before said date shall be granted a salary increase equivalent to ten percent (10%) of
their basic monthly salary as of December 31, 1999.

b) Effective January 1, 2001, all employees on regular status and within the bargaining unit
on or before said date shall be granted a salary increase equivalent to twelve (12%) of their
basic monthly salary as of December 31, 2000.

c) Effective January 1, 2002, all employees on regular status and within the bargaining unit
on or before said date shall be granted a salary increase equivalent to eleven percent (11%)
of their basic monthly salary as of December 31, 2001.

The wage salary increase of the first year of this Agreement shall be over and above the
wage/salary increase, including the wage distortion adjustment, granted by the COMPANY on
November 1, 1999 as per Wage Order No. NCR-07.

The wage/salary increases for the years 2001 and 2002 shall be deemed inclusive of the mandated
minimum wage increases under future Wage Orders, that may be issued after Wage Order No.
NCR-07, and shall be considered as correction of any wage distortion that may have been brought
about by the said future Wage Orders. Thus the wage/salary increases in 2001 and 2002 shall be
deemed as compliance to future wage orders after Wage Order No. NCR-07.

Consequently, on January 1, 2000, all the regular rank-and-file employees of TSPIC received a 10%
increase in their salary. Accordingly, the following nine (9) respondents (first group) who were already
regular employees received the said increase in their salary: Maria Fe Flores, Fe Capistrano, Amy Durias,
Claire Evelyn Velez, Janice Olaguir, Jerico Alipit, Glen Batula, Ser John Hernandez, and Rachel Novillas. 9

The CBA also provided that employees who acquire regular employment status within the year but after
the effectivity of a particular salary increase shall receive a proportionate part of the increase upon
attainment of their regular status. Sec. 2 of the CBA provides:

SECTION 2. Regularization Increase.––A covered daily paid employee who acquires regular status
within the year subsequent to the effectivity of a particular salary/wage increase mentioned in
Section 1 above shall be granted a salary/wage increase in proportionate basis as follows:

Regularization Period Equivalent Increase

- 1 Quarter
st
100%
- 2 nd
Quarter 75%
- 3 rd
Quarter 50%
- 4th Quarter 25%

Thus, a daily paid employee who becomes a regular employee covered by this Agreement only on
May 1, 2000, i.e., during the second quarter and subsequent to the January 1, 2000 wage increase
under this Agreement, will be entitled to a wage increase equivalent to seventy-five percent (75%)
of ten percent (10%) of his basic pay. In the same manner, an employee who acquires regular
status on December 1, 2000 will be entitled to a salary increase equivalent to twenty-five percent
(25%) of ten percent (10%) of his last basic pay.

On the other hand, any monthly-paid employee who acquires regular status within the term of the
Agreement shall be granted regularization increase equivalent to 10% of his regular basic salary.

Then on October 6, 2000, the Regional Tripartite Wage and Productivity Board, National Capital Region,
issued Wage Order No. NCR-0810 (WO No. 8) which raised the daily minimum wage from PhP 223.50 to
PhP 250 effective November 1, 2000. Conformably, the wages of 17 probationary employees, namely:
Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie
Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin,
Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and Suzette Dulay (second group), were increased
to PhP 250.00 effective November 1, 2000.
On various dates during the last quarter of 2000, the above named 17 employees attained regular
employment11 and received 25% of 10% of their salaries as granted under the provision on regularization
increase under Article X, Sec. 2 of the CBA.

In January 2001, TSPIC implemented the new wage rates as mandated by the CBA. As a result, the nine
employees (first group), who were senior to the above-listed recently regularized employees, received less
wages.

On January 19, 2001, a few weeks after the salary increase for the year 2001 became effective, TSPIC’s
Human Resources Department notified 24 employees,12 namely: Maria Fe Flores, Janice Olaguir, Rachel
Novillas, Fe Capistrano, Jerico Alipit, Amy Durias, Glen Batula, Claire Evelyn Velez, Ser John Hernandez,
Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie
Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin,
Loida Comullo, and Marie Ann Delos Santos, that due to an error in the automated payroll system, they
were overpaid and the overpayment would be deducted from their salaries in a staggered basis, starting
February 2001. TSPIC explained that the correction of the erroneous computation was based on the
crediting provision of Sec. 1, Art. X of the CBA.

The Union, on the other hand, asserted that there was no error and the deduction of the alleged
overpayment from employees constituted diminution of pay. The issue was brought to the grievance
machinery, but TSPIC and the Union failed to reach an agreement.

Consequently, TSPIC and the Union agreed to undergo voluntary arbitration on the solitary issue of
whether or not the acts of the management in making deductions from the salaries of the affected
employees constituted diminution of pay.

On September 13, 2001, Arbitrator Jimenez rendered a Decision, holding that the unilateral deduction
made by TSPIC violated Art. 100 13 of the Labor Code. The fallo reads:

WHEREFORE, in the light of the law on the matter and on the facts adduced in evidence, judgment
is hereby rendered in favor of the Union and the named individual employees and against the
company, thereby ordering the [TSPIC] to pay as follows:

1) to the sixteen (16) newly regularized employees named above, the amount of
P12,642.24 a month or a total of P113,780.16 for nine (9) months or P7,111.26 for each of
them as well as an additional P12,642.24 (for all), or P790.14 (for each), for every month
after 30 September 2001, until full payment, with legal interests for every month of delay;

2) to the nine (9) who were hired earlier than the sixteen (16); also named above, their
respective amount of entitlements, according to the Union’s correct computation, ranging
from P110.22 per month (or P991.98 for nine months) to P450.58 a month (or P4,055.22
for nine months), as well as corresponding monthly entitlements after 30 September 2001,
plus legal interests until full payment,

3) to Suzette Dulay, the amount of P608.14 a month (or P5,473.26), as well as

corresponding monthly entitlements after 30 September 2001, plus legal interest until full
payment,

4) Attorney’s fees equal to 10% of all the above monetary awards.

The claim for exemplary damages is denied for want of factual basis.

The parties are hereby directed to comply with their joint voluntary commitment to abide by this
Award and thus, submit to this Office jointly, a written proof of voluntary compliance with this
DECISION within ten (10) days after the finality hereof.

SO ORDERED.14

TSPIC filed a Motion for Reconsideration which was denied in a Resolution dated November 21, 2001.

Aggrieved, TSPIC filed before the CA a petition for review under Rule 43 docketed as CA-G.R. SP No.
68616. The appellate court, through its October 22, 2003 Decision, dismissed the petition and affirmed in
toto the decision of the voluntary arbitrator. The CA declared TSPIC’s computation allowing PhP 287 as
daily wages to the newly regularized employees to be correct, noting that the computation conformed to
WO No. 8 and the provisions of the CBA. According to the CA, TSPIC failed to convince the appellate court
that the deduction was a result of a system error in the automated payroll system. The CA explained that
when WO No. 8 took effect on November 1, 2000, the concerned employees were still probationary
employees who were receiving the minimum wage of PhP 223.50. The CA said that effective November 1,
2000, said employees should have received the minimum wage of PhP 250. The CA held that when
respondents became regular employees on November 29, 2000, they should be allowed the salary
increase granted them under the CBA at the rate of 25% of 10% of their basic salary for the year 2000;
thereafter, the 12% increase for the year 2001 and the 10% increase for the year 2002 should also be
made applicable to them.15

TSPIC filed a Motion for Reconsideration which was denied by the CA in its April 23, 2004 Resolution.

TSPIC filed the instant petition which raises this sole issue for our resolution: Does the TSPIC’s decision to
deduct the alleged overpayment from the salaries of the affected members of the Union constitute
diminution of benefits in violation of the Labor Code?

TSPIC maintains that the formula proposed by the Union, adopted by the arbitrator and affirmed by the
CA, was flawed, inasmuch as it completely disregarded the "crediting provision" contained in the last
paragraph of Sec. 1, Art. X of the CBA.

We find TSPIC’s contention meritorious.

A Collective Bargaining Agreement is the law between the parties

It is familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they
are obliged to comply with its provisions.16 We said so in Honda Phils., Inc. v. Samahan ng Malayang
Manggagawa sa Honda:

A collective bargaining agreement or CBA refers to the negotiated contract between a legitimate
labor organization and the employer concerning wages, hours of work and all other terms and
conditions of employment in a bargaining unit. As in all contracts, the parties in a CBA may
establish such stipulations, clauses, terms and conditions as they may deem convenient provided
these are not contrary to law, morals, good customs, public order or public policy. Thus, where the
CBA is clear and unambiguous, it becomes the law between the parties and compliance therewith is
mandated by the express policy of the law. 17

Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of their stipulations shall control. 18 However, sometimes, as in this
case, though the provisions of the CBA seem clear and unambiguous, the parties sometimes arrive at
conflicting interpretations. Here, TSPIC wants to credit the increase granted by WO No. 8 to the increase
granted under the CBA. According to TSPIC, it is specifically provided in the CBA that "the salary/wage
increase for the year 2001 shall be deemed inclusive of the mandated minimum wage increases under
future wage orders that may be issued after Wage Order No. 7." The Union, on the other hand, insists that
the "crediting" provision of the CBA finds no application in the present case, since at the time WO No. 8
was issued, the probationary employees (second group) were not yet covered by the CBA, particularly by
its crediting provision.

As a general rule, in the interpretation of a contract, the intention of the parties is to be pursued. 19 Littera
necat spiritus vivificat. An instrument must be interpreted according to the intention of the parties. It is
the duty of the courts to place a practical and realistic construction upon it, giving due consideration to the
context in which it is negotiated and the purpose which it is intended to serve. 20 Absurd and illogical
interpretations should also be avoided. Considering that the parties have unequivocally agreed to
substitute the benefits granted under the CBA with those granted under wage orders, the agreement must
prevail and be given full effect.

Paragraph (b) of Sec. 1 of Art. X of the CBA provides for the general agreement that, effective January 1,
2001, all employees on regular status and within the bargaining unit on or before said date shall be
granted a salary increase equivalent to twelve (12%) of their basic monthly salary as of December 31,
2000. The 12% salary increase is granted to all employees who (1) are regular employees and (2) are
within the bargaining unit.

Second paragraph of (c) provides that the salary increase for the year 2000 shall not include the increase
in salary granted under WO No. 7 and the correction of the wage distortion for November 1999.

The last paragraph, on the other hand, states the specific condition that the wage/salary increases for the
years 2001 and 2002 shall be deemed inclusive of the mandated minimum wage increases under future
wage orders, that may be issued after WO No. 7, and shall be considered as correction of the wage
distortions that may be brought about by the said future wage orders. Thus, the wage/salary increases in
2001 and 2002 shall be deemed as compliance to future wage orders after WO No. 7.

Paragraph (b) is a general provision which allows a salary increase to all those who are qualified. It,
however, clashes with the last paragraph which specifically states that the salary increases for the years
2001 and 2002 shall be deemed inclusive of wage increases subsequent to those granted under WO No. 7.
It is a familiar rule in interpretation of contracts that conflicting provisions should be harmonized to give
effect to all.21 Likewise, when general and specific provisions are inconsistent, the specific provision shall
be paramount to and govern the general provision. 22 Thus, it may be reasonably concluded that TSPIC
granted the salary increases under the condition that any wage order that may be subsequently issued
shall be credited against the previously granted increase. The intention of the parties is clear: As long as
an employee is qualified to receive the 12% increase in salary, the employee shall be granted the
increase; and as long as an employee is granted the 12% increase, the amount shall be credited against
any wage order issued after WO No. 7.

Respondents should not be allowed to receive benefits from the CBA while avoiding the counterpart
crediting provision. They have received their regularization increases under Art. X, Sec. 2 of the CBA and
the yearly increase for the year 2001. They should not then be allowed to avoid the crediting provision
which is an accompanying condition.

Respondents attained regular employment status before January 1, 2001. WO No. 8, increasing the
minimum wage, was issued after WO No. 7. Thus, respondents rightfully received the 12% salary increase
for the year 2001 granted in the CBA; and consequently, TSPIC rightfully credited that 12% increase
against the increase granted by WO No. 8.

Proper formula for computing the salaries for the year 2001

Thus, the proper computation of the salaries of individual respondents is as follows:

(1) With regard to the first group of respondents who attained regular employment status before the
effectivity of WO No. 8, the computation is as follows:

For respondents Jerico Alipit and Glen Batula:23

Wage rate before WO No. 8………………………… PhP 234.67

Increase due to WO No. 8
setting the minimum wage at PhP 250.……………... 15.33
Total Salary upon effectivity of WO No. 8…………. PhP 250.00
Increase for 2001 (12% of 2000 salary)…….....……. PhP 30.00
Less the wage increase under WO No. 8……………. 15.33
Total difference between the wage increase
for 2001 and the increase granted under WO No.
8.. PhP 14.67
Wage rate by December 2000………………………. PhP 250.00
Plus total difference between the wage increase for
2001 and the increase granted under WO No.
8…….. 14.67
Total (Wage rate range beginning January 1,
2001) PhP 264.67

For respondents Ser John Hernandez and Rachel Novillas:24

Wage rate range before WO No. 8………………….. PhP 234.68

Increase due to WO No. 8
setting the minimum wage at PhP 250……………… 15.32
Total Salary upon effectivity of WO No. 8.………… PhP 250.00
Increase for 2001 (12% of 2000 salary)…………….. PhP 30.00
Less the wage increase under WO No. 8…………… 15.32
Total difference between the wage increase
for 2001 and the increase granted under WO No.
8… PhP 14.68
Wage rate by December 2000………………………. PhP 250.00
Plus total difference between the wage increase for
2001 and the increase granted under WO No. 8…… 14.68
Total (Wage rate range beginning January 1,
2001) PhP 264.68

For respondents Amy Durias, Claire Evelyn Velez, and Janice Olaguir:25
 Wage rate range before WO No. 8………….. PhP 240.26
Increase due to WO No. 8
setting the minimum wage at PhP 250……… 9.74
Total Salary upon effectivity of WO No. 8…. PhP 250.00
Increase for 2001 (12% of 2000 salary)…………… PhP 30.00
Less the wage increase under WO No. 8…………… 9.74
Total difference between the wage increase for
2001
and the increase granted under WO No. 8………… PhP 20.26
Wage rate by December 2000……………………… PhP 250.00
Plus total difference between the wage increase for
2001 and the increase granted under WO No. 8…… 20.26
Total (Wage rate range beginning January 1,
2001) PhP 270.26

For respondents Ma. Fe Flores and Fe Capistrano:26

Wage rate range before WO No. 8…………… PhP 245.85

Increase due to WO No. 8
setting the minimum wage at PhP 250……….. 4.15
Total Salary upon effectivity of WO No. 8…... PhP 250.00
Increase for 2001 (12% of 2000 salary)…………… PhP 30.00
Less the wage increase under WO No. 8………......... 4.15
Total difference between the wage increase for
2001
and the increase granted under WO No. 8………… PhP 25.85
Wage rate by December 2000……………………… PhP 250.00
Plus total difference between the wage increase for
2001 and the increase granted under WO No. 8…… 25.85
Total (Wage rate range beginning January 1,
2001) PhP 275.85

(2) With regard to the second group of employees, who attained regular employment status after the
implementation of WO No. 8, namely: Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso,
Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine
Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and Suzette
Dulay, the proper computation of the salaries for the year 2001, in accordance with the CBA, is as follows:

Compute the increase in salary after the implementation of WO No. 8 by subtracting the minimum wage
before WO No. 8 from the minimum wage per the wage order to arrive at the wage increase, thus:

PhP
Minimum Wage per Wage Order………….. 250.00
Wage rate before Wage Order…………….. 223.50
Wage Increase………………………………. PhP 26.50

Upon attainment of regular employment status, the employees’ salaries were increased by 25% of 10% of
their basic salaries, as provided for in Sec. 2, Art. X of the CBA, thus resulting in a further increase of PhP
6.25, for a total of PhP 256.25, computed as follows:

Wage rate after WO No. 8………………………………. PhP 250.00

Regularization increase (25 % of 10% of basic
salary) 6.25
Total (Salary for the end of year 2000)…………………. PhP 256.25

To compute for the increase in wage rates for the year 2001, get the increase of 12% of the employees’
salaries as of December 31, 2000; then subtract from that amount, the amount increased in salaries as
granted under WO No. 8 in accordance with the crediting provision of the CBA, to arrive at the increase in
salaries for the year 2001 of the recently regularized employees. Add the result to their salaries as of
December 31, 2000 to get the proper salary beginning January 1, 2001, thus:
 Increase for 2001 (12% of 2000 salary)………………... PhP 30.75
Less the wage increase under WO No. 8………………. 26.50
Difference between the wage increase
for 2001 and the increase granted under WO No.
8…… PhP 4.25
Wage rate after regularization increase………………... PhP 256.25
Plus total difference between the wage increase and
the increase granted under WO No. 8…………………. 4.25
Total (Wage rate beginning January 1,
2001)…………. PhP 260.50

With these computations, the crediting provision of the CBA is put in effect, and the wage distortion
between the first and second group of employees is cured. The first group of employees who attained
regular employment status before the implementation of WO No. 8 is entitled to receive, starting January
1, 2001, a daily wage rate within the range of PhP 264.67 to PhP 275.85, depending on their wage rate
before the implementation of WO No. 8. The second group that attained regular employment status after
the implementation of WO No. 8 is entitled to receive a daily wage rate of PhP 260.50 starting January 1,
2001.

Diminution of benefits

TSPIC also maintains that charging the overpayments made to the 16 respondents through staggered
deductions from their salaries does not constitute diminution of benefits.

We agree with TSPIC.

Diminution of benefits is the unilateral withdrawal by the employer of benefits already enjoyed by the
employees. There is diminution of benefits when it is shown that: (1) the grant or benefit is founded on a
policy or has ripened into a practice over a long period; (2) the practice is consistent and deliberate; (3)
the practice is not due to error in the construction or application of a doubtful or difficult question of law;
and (4) the diminution or discontinuance is done unilaterally by the employer. 27

As correctly pointed out by TSPIC, the overpayment of its employees was a result of an error. This error
was immediately rectified by TSPIC upon its discovery. We have ruled before that an erroneously granted
benefit may be withdrawn without violating the prohibition against non-diminution of benefits. We ruled
in Globe-Mackay Cable and Radio Corp. v. NLRC:

Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous
application of the law. Payment may be said to have been made by reason of a mistake in the
construction or application of a "doubtful or difficult question of law". (Article 2155, in relation to
Article 2154 of the Civil Code). Since it is a past error that is being corrected, no vested right may
be said to have arisen nor any diminution of benefit under Article 100 of the Labor Code may be
said to have resulted by virtue of the correction.28

Here, no vested right accrued to individual respondents when TSPIC corrected its error by crediting the
salary increase for the year 2001 against the salary increase granted under WO No. 8, all in accordance
with the CBA.

Hence, any amount given to the employees in excess of what they were entitled to, as computed above,
may be legally deducted by TSPIC from the employees’ salaries. It was also compassionate and fair that
TSPIC deducted the overpayment in installments over a period of 12 months starting from the date of the
initial deduction to lessen the burden on the overpaid employees. TSPIC, in turn, must refund to individual
respondents any amount deducted from their salaries which was in excess of what TSPIC is legally allowed
to deduct from the salaries based on the computations discussed in this Decision.

As a last word, it should be reiterated that though it is the state’s responsibility to afford protection to
labor, this policy should not be used as an instrument to oppress management and capital. 29 In resolving
disputes between labor and capital, fairness and justice should always prevail. We ruled in Norkis Union v.
Norkis Trading that in the resolution of labor cases, we have always been guided by the State policy
enshrined in the Constitution: social justice and protection of the working class. Social justice does not,
however, mandate that every dispute should be automatically decided in favor of labor. In any case,
justice is to be granted to the deserving and dispensed in the light of the established facts and the
applicable law and doctrine.30

WHEREFORE, premises considered, the September 13, 2001 Decision of the Labor Arbitrator in National
Conciliation and Mediation Board Case No. JBJ-AVA-2001-07-57 and the October 22, 2003 CA Decision in
CA-G.R. SP No. 68616 are hereby AFFIRMED with MODIFICATION. TSPIC is hereby ORDERED to pay
respondents their salary increases in accordance with this Decision, as follows:

Name of Employee Daily Wage No. of No. of Total Salary

Rate Working Days Months in a for 2001
in a Month Year
Nimfa Anilao 260.5 26 12 81,276.00
Rose Subardiaga 260.5 26 12 81,276.00
Valerie Carbon 260.5 26 12 81,276.00
Olivia Edroso 260.5 26 12 81,276.00
Maricris Donaire 260.5 26 12 81,276.00
Analyn Azarcon 260.5 26 12 81,276.00
Rosalie Ramirez 260.5 26 12 81,276.00
Julieta Rosete 260.5 26 12 81,276.00
Janice Nebre 260.5 26 12 81,276.00
Nia Andrade 260.5 26 12 81,276.00
Catherine Yaba 260.5 26 12 81,276.00
Diomedisa Erni 260.5 26 12 81,276.00
Mario Salmorin 260.5 26 12 81,276.00
Loida Camullo 260.5 26 12 81,276.00
Marie Ann Delos Santos 260.5 26 12 81,276.00
Juanita Yana 260.5 26 12 81,276.00
Suzette Dulay 260.5 26 12 81,276.00
Jerico Alipit 264.67 26 12 82,577.04
Glen Batula 264.67 26 12 82,577.04
Ser John Hernandez 264.68 26 12 82,580.16
Rachel Novillas 264.68 26 12 82,580.16
Amy Durias 270.26 26 12 84,321.12
Claire Evelyn Velez 270.26 26 12 84,321.12
Janice Olaguir 270.26 26 12 84,321.12
Maria Fe Flores 275.85 26 12 86,065.20
Fe Capistrano 275.85 26 12 86,065.20

The award for attorney’s fees of ten percent (10%) of the total award is MAINTAINED.

SO ORDERED.

30.

G.R. No. 189851, June 22, 2016

INTEC CEBU INC., AKIHIKO KAMBAYASHI AND WATARU SATO, Petitioners, v. HON. COURT OF
APPEALS, ROWENA REYES, ROWENA ODIONG, HYDEE AYUDA, TERESITA BERIDO, CRISTINA
LABAPIZ, GEMMA JUMAO-AS, SIGMARINGA BAROLO, LIGAYA B. ANADON, DONALINE DELA
TORRE, JOY P. LOMOD, JACQUELINE A. FLORES, SUSAN T. ALIÑO, ANALYN P. ABALLE,
CAROLINE A. LABATOS, LENITH F. ROMANO, LEONILA B. FLORES, CECILIA G. PAPELLERO,
AGNES C. CASIO, VIOLETA O. MATCHETE, CANDIDA I. CRUJIDO, CLAUDIA B. CUTAMORA,
ROSALIE R. POLICIOS, GENELYN C. MUÑEZ, ALOME MIGUE, ELSIE ALCOS, LYDIALYN B.
GODINEZ AND MYRNA S. LOGAOS, Respondents.

DECISION

PEREZ, J.:

For our resolution is this Petition for Certiorari under Rule 65 of the Rules of Court assailing the
Decision1 dated 22 April 2009 and Resolution2 dated 31 July 2009 of the Court of Appeals in CA-G.R. SP
No. 03471. The challenged decision reversed the judgment 3 of the National Labor Relations Commission
(NLRC) and reinstatement of the Decision 4 of the Labor Arbiter. The Labor Arbiter ruled that respondent
employees were constructively dismissed.

As culled from the records of the case, the following antecedent facts appear:

chanRoblesvirtualLawlibraryPetitioner Intec Cebu Inc. (Intec) is engaged in the manufacture and assembly
of mechanical system and printed circuit board for cassette tape recorder, CD and CD ROM player while
the following respondents were hired by Intec in 1997 and 1998, respectively, as production
workers:ChanRoblesVirtualawlibrary

1. Rowena Reyes

2. Rowena R. Odiong

3. Hydee P. Ayuda

4. Teresita C. Berido

5. Cristina S. Labapiz

6. Gemma T. Jumao-as

7. Sigmaringa B. Barolo

8. Ligaya B. Anadon

9. Donaline dela Torre

10. Joy P. Lomod

11. Jacqueline A. Flores

12. Susan T. Alino

13. Analyn P. Aballe

14. Caroline A. Labatos

15. Lenith F. Romano

16. Leonila B. Flores

17. Cecilia G. Papellero

18. Agnes C. Casio

19. Violeta O. Matchete

20. Candida I. Crujido

21. Claudia B. Cutamora

22. Rosalie R. Policios

23. Genelyn C. Muñez

24. Alome Migue,

25. Elsie Alcos

26. Lydialyn B. Godinez

27. Myrna S. Logaos

28. Jenife Espinosa

29. Maria Fe Tomo

30. Jocelyn Casiban

31. Ailyn Bagyao

32. Josephine Casino

33. Pilar Batajoy

34. Juliet Teofilo

 35. Cheryl Sugarol

36. Rechel Daitol

37. Janette Quidong5

Respondents alleged that in 2005, their working days were reduced from 6 to 2-4 days. Intec apparently
explained that reduction in working days was due to lack of job orders. However, respondents discovered
that Intec hired around 188 contractual employees tasked to perform tasks which respondents were
regularly doing. On 17 May 2006, private respondents claimed that they were effectively terminated from
employment as shown in the Establishment Termination Report6 submitted to the Department of Labor
and Employment (DOLE). Two (2) days later, respondents filed a complaint for illegal dismissal.

Intec, for its part, claimed that the company was established to supply the required materials of Kenwood
Precision Corporation (Kenwood). When Kenwood stopped its operations in the Philippines, Intec's
business operations were severely affected, prompting Intec to set up a new product line exclusively for
Pentax Cebu Phils. Corporation (Pentax). In December 2005, Intec's job orders from Pentax declined. On
4 January 2006, a memorandum was issued informing the employees that the working days would be
reduced to 3-4 days from the normal 6 day-work week. The reduced work week policy was extended from
April to June 2006. A corresponding memorandum was issued and a copy thereof was submitted to the
DOLE.

On 17 May 2007, Labor Arbiter Jermelina Pasignajen Ay-ad declared that respondents were illegally
dismissed and adjudged Intec and its officials liable for payment of separation pay and backwages. Labor
Arbiter Ay-ad found that Intec hired casual employees to replace respondents. As regards the other
monetary claims of respondents, Labor Arbiter Ay-ad ruled that Intec was able to prove, by presenting
copies of the payroll, that private respondents were properly paid. The dispositive portion of the Labor
Arbiter's Decision reads:ChanRoblesVirtualawlibrary
WHEREFORE, judgment is hereby rendered declaring complainants to have been illegally (constructively)
dismissed from their employment. Consequently, the respondents INTEC CEBU, INC., WATARU SATO
AND AKIHIRO KAMBAYASHI, are hereby directed to PAY jointly and severally the following
complainants of the amounts indicated opposite their names as appearing in the attached Computation
sheet consisting of two (2) pages, in concept of separation pay and backwages in the total amount of SIX
MILLION NINE HUNDRED SIXTY-SEVEN THOUSAND NINE HUNDRED TWENTY-FOUR PESOS
(P6,967,924.00), in cash or in check payable to NLRC-RAB VII, Cebu City, through the Cashier of this
Arbitration Branch within ten (10) days from receipt of this Decision.

All other claims are DISMISSED for insufficiency of evidence and for lack of jurisdiction. The claims and
the case against respondents Feliciana Tero and Cheryl Inso are DISMISSED for lack of
merit.7chanroblesvirtuallawlibrary
On 14 December 2007, the NLRC set aside the Decision of the Labor Arbiter and held that Intec suffered
tremendous financial losses which justified the reduction of working days. The dispositive portion of the
decision reads:ChanRoblesVirtualawlibrary
WHEREFORE, the assailed decision is SET ASIDE and a new one entered declaring that complainants
were not dismissed either actually or constructively. Considering, however, all attendant factors as
discussed, respondent Intec Cebu, Inc. is hereby directed to give all thirty-seven (37) complainants their
respective separation pay based on one-half month salary per year of service, or the grand total amount
of ONE MILLION ONE HUNDRED TWENTY-FIVE THOUSAND SEVEN HUNDRED THIRTY-FIVE PESOS
(P1,125,735.00) as earlier computed per assailed decision.

Complainants are NOT entitled to backwages.8chanroblesvirtuallawlibrary

Intec elevated the matter to the Court of Appeals. In a Decision dated 22 April 2009, the Court of Appeals
reversed the NLRC and reinstated the Decision of the Labor Arbiter with respect to respondents herein. As
for Jenife Espinosa, Maria Fe Tomo, Jocelyn Casiban, Ailyn Bagyao, Josephine Casino, Pilar Batajoy, Juliet
Teofilo, Cheryl Sugarol, Rechel Daitol and Janette Quidong, the case was dismissed for their failure to sign
the verification of certification of non-forum shopping in their petition.

The instant petition is one for certiorari with Intec attributing grave abuse of discretion on the part of the
Court of Appeals for the following acts:ChanRoblesVirtualawlibrary
FIRST: BY OVERTURNING ITS OWN RESOLUTION DISMISSING OUTRIGHT THE PRIVATE RESPONDENTS'
PETITION FOR CERTIORARI, AND THEREBY GIVING DUE COURSE TO THEIR MOTION FOR
RECONSIDERATION, WITH THE MANIFEST ADVANCE PRONOUNCEMENT THAT THE SAID MOTION WOULD
EVENTUALLY BE GRANTED.

SECOND: BY DISREGARDING THE FACTUAL FINDINGS OF THE HONORABLE NATIONAL LABOR

RELATIONS COMMISSION, 4th DIVISION, CEBU CITY, THAT THE PRIVATE RESPONDENTS "WERE NOT
DISMISSED EITHER ACTUALLY OR CONSTRUCTIVELY."

THIRD: BY CAPRICIOUSLY ASSERTING THAT THE FINANCIAL STATEMENTS OF THE PETITIONERS ARE
SELF-SERVING AND OF DOUBTFUL VERACITY AS THEY WERE NOT PREPARED BY AN INDEPENDENT
AUDITOR, WHICH ASSERTION IS IN EFFECT AN ASSAULT UPON THE INTEGRITY AND HONESTY OF THE
AUDITOR.

FOURTH: BY CIRCUMVENTING THE DOCTRINE LAID DOWN BY THIS HONORABLE COURT IN THE CASE OF
"JARDINE DAVIS, INC. vs. THE NLRC, ET AL.", G.R. 26272, JULY 28, 1999, THAT RESORT TO JUDICIAL
REVIEW OF THE DECISION OF THE NLRC BY WAY OF SPECIAL CIVIL ACTION FOR CERTIORARI UNDER
RULE 65 OF THE RULES OF COURT IS CONFINED ONLY TO ISSUES OF WANT OF JURISDICTION AND
GRAVE ABUSE OF DISCRETION ON THE PART OF THE LABOR TRIBUNAL, BARRING AN INQUIRY AS TO
THE CORRECTNESS OF THE EVALUATION OF EVIDENCE WHICH HAS THE BASIS OF LABOR
AGENCY IN REACHING A CONCLUSION;

FIFTH: ASSUMING, WITHOUT HOWEVER ADMITTING, THAT THE PRIVATE RESPONDENTS ARE ENTITLED
TO SEPARATION PAY AND BACKWAGES, AS DETERMINED BY THE LABOR ARBITER, THE COMPUTATION
OF BENEFITS RECEIVEABLE - WHICH CONTAINS GLARING SERIOUS ERROR, IF REINSTATED, AS THE
COURT OF APPEALS, 18th DIVISION, WANTED IT TO BE.9chanroblesvirtuallawlibrary
Intec claims that the reduction of the number of working days was undertaken to forestall business losses
as proven by the audited financial statements of Intec for the years 2001-2006. Intec insists that the
workers they employed from TESDA and Sisters of Mary were on-the-job trainees and they were already
employed prior to the implementation of the reduced working days policy of the company. Moreover, Intec
stresses that these workers were retained to enable the company to comply with the urgent off-and-on
job orders of Pentax which could not be accomplished by the regular employees.

Intec reiterates that respondents voluntarily resigned or abandoned their work when they filed their
application for leave following the issuance of the second memorandum extending the implementation of
the reduced number of working days. According to Intec, respondents had categorically declared that they
would no longer report for work.

Respondents urge this Court to affirm the findings of the Labor Arbiter and the Court of Appeals that they
were constructively dismissed. Respondents refutes Intec's claim that it is suffering from business
reverses when it just hired additional workers from TESDA and Sisters of Mary despite the fact that
respondents were under reduced work days.

The charge of constructive dismissal is predicated on the claim that the implementation of the reduced
work week is illegal.

The Court has held that management is free to regulate, according to its own discretion and judgment, all
aspects of employment, including hiring, work assignments, working methods, time, place, and manner of
work, processes to be followed, supervision of workers, working regulations, transfer of employees, work
supervision, lay-off of workers, and discipline, dismissal and recall of workers. The exercise of
management prerogative, however, is not absolute as it must be exercised in good faith and with due
regard to the rights of labor.10chanrobleslaw

Thus, it was incumbent upon Intec to prove that that the implementation of the reduced working days is
valid and done in good faith. Intec claims that it implemented a reduction of work days scheme to forestall
its losses.

Two memoranda were allegedly sent to the affected employees informing them of the reduction of work
days. The first memorandum was dated 4 January 2006 and submitted to the DOLE only on 9 January
2006. In 2006, there was no specific rule or guideline covering the reduction of workdays. It was only in
January 2009 where the DOLE issued Department Advisory No. 2, Series of 2009 which requires the
employer to notify DOLE of the reduction of work days prior to its implementation. If the reportorial
requirement in retrenchment under Article 283 is to be followed, the DOLE should be notified at least one
month prior to the intended date of retrenchment. Be that as it may, Intec submitted its report after the
reduction of workdays was implemented. Moreover, there is nothing on the records which show that a
second notice was sent to the employees informing them of the extension of the reduced work days to
June 2006.

Intec presented its financial statements from the years 2001-2006 to prove that the company was
suffering from financial losses owing to the decline of its job orders. The summary of Intec's net
income/loss for the years 2001-2006 is illustrated below:ChanRoblesVirtualawlibrary
SUMMARY OF INTEC'S NET INCOME (LOSS) 31 APRIL 2001-2006

Net Income Net Loss Totals

April 30, 2001 (9,708,820.00) (9,708,820.00)

April 30, 2002 (5,928,636.00) (5,928,636.00)

April 30, 2003 4,669,180.00 4,669,180.00

 April 30, 2004 4,726,326.00 4,726,326.00

April 30, 2005 (9,240,929.00) (9,240,929.00)

April 30, 2006 9,568,674.00 9,568,674.00

TOTAL 18,964,180.00 (24,878,385.00) (5,914,205.00)11

An examination of Intec's financial statements for 2005-2006 shows that while Intec suffered a net loss of
P9,240,929.00 in 2005, it earned a net income of P9,568,674.00 in 2006. The period covered in the
financial statement of 2006 is from May 2005-April 2006. It was only on the 9 th month of operation did
Intec decide to carry out the reduced work day scheme. Note that the reduced work day scheme was
implemented only in January 2006. Unless evidence is shown by the company that the income for 2006
was earned only between the months of January to April, it is safe to presume that at the time the
reduced work day scheme was being implemented, the company was still benefiting from its gains as
shown in the numbers for 2006.

Furthermore, the loss incurred in 2005 may be attributed to the acquisition of property and equipment
amounting to P9,218,967.0012 in 2005. There is also no indication in the financial statements, much less
an observation made by the independent auditor, that a reduction in demand would necessitate a
reduction in the employees' work days.

We cannot give weight to the evidence presented by Intec to prove the slump in demand. First, the two-
page delivery data are lacking in specifics. The report did not indicate when it was prepared. Second, the
report was prepared by Intec employees and approved by their President. Third, the report appeared to be
mere projections because it was not supported by corresponding sales or delivery receipts. The actual
sales may vary from the projected demand, thus, the report cannot be made as basis of a slump in
demand or a slow-down.

In addition, the hiring of 188 workers, whether they be trainees or casual employees, necessarily incurred
cost to the company. No proof was submitted that these newly-hired employees were performing work
different from the regular workers.

In sum, there is no reason to implement a cost-cutting measure in the form of reducing the employees'
working days.

Intec committed illegal reduction of work hours. Constructive dismissal occurs when there is cessation of
work because continued employment is rendered impossible, unreasonable or unlikely; when there is a
demotion in rank or diminution in pay or both; or when a clear discrimination, insensibility, or disdain by
an employer becomes unbearable to the employee. 13chanrobleslaw

Intec's unilateral and arbitrary reduction of the work day scheme had significantly greatly reduced
respondents' salaries thereby rendering it liable for constructive dismissal.

There is no merit to Intec's charge of abandonment against respondents. To constitute abandonment,

there must be clear proof of deliberate and unjustified intent to sever the employer-employee relationship.
Clearly, the operative act is still the employee's ultimate act of putting an end to his employment.
Furthermore, it is a settled doctrine that the filing of a complaint for illegal dismissal is inconsistent with
abandonment of employment. An employee who takes steps to protest his dismissal cannot logically be
said to have abandoned his work. The filing of such complaint is proof enough of his desire to return to
work, thus negating any suggestion of abandonment. 14chanrobleslaw

We affirm the Court of Appeals' finding that there is no proof that respondents committed unauthorized
absences or had otherwise refused to work. The complaint for constructive dismissal is the best evidence
against abandonment because the filing of a complaint for illegal dismissal is incompatible to
abandonment.

Lastly, we note that Intec availed of the wrong mode of appeal. For certiorari to prosper, the following
requisites must concur: (1) the writ is directed against a tribunal, a board or any officer exercising judicial
or quasi-judicial functions; (2) such tribunal, board or officer has acted without or in excess of jurisdiction,
or with grave abuse of discretion amounting to lack or excess of jurisdiction; and (3) there is no appeal or
any plain, speedy and adequate remedy in the ordinary course of law. 15chanrobleslaw

Well-settled is the rule that a petition for certiorari against a court which has jurisdiction over a case will
prosper only if grave abuse of discretion is manifested. The burden is on the part of the petitioner to prove
not merely reversible error, but grave abuse of discretion amounting to lack or excess of jurisdiction on
the part of the public respondent issuing the impugned order. Mere abuse of discretion is not enough; it
must be grave. The term grave abuse of discretion is defined as a capricious and whimsical exercise of
judgment so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform
a duty enjoined by law, as where the power is exercised in an arbitrary and despotic manner because of
passion or hostility.16chanrobleslaw
A writ of certiorari will not issue where the remedy of appeal is available to the aggrieved party.17 In this
case, appeal under Rule 45 of the Rules of Court was clearly available to Intec.

Finding no grave abuse of discretion in this case, the certiorari petition should be dismissed.

WHEREFORE, the instant petition is DISMISSED and the Decision dated 22 April 2009 and Resolution
dated 31 July 2009 of the Court of Appeals in CA-G.R. SP No. 03471 are AFFIRMED.

SO ORDERED.chanRoblesvirtualLawlibrar

31.

January 27, 2016

G.R. No. 212070

CEBU PEOPLE'S MULTI-PURPOSE COOPERATIVE and MACARIO G. QUEVEDO, Petitioners,

vs.
NICERATO E. CARBONILLA, JR., Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated June 25, 2013 and the
Resolution3 dated March 17, 2014 of the Court of Appeals (CA) in CA-G.R. CEB SP No. 05403, which
reversed and set aside the Decision4 dated April 29, 2010 and the Resolution5 dated June 30, 2010 of the
National Labor Relations Commission (NLRC) in NLRC Case No. VAC-10-000977-2009, and accordingly,
declared respondent Nicerato E. Carbonilla, Jr. (Carbonilla, Jr.) to have been illegally dismissed by
petitioner Cebu People's Multi-Purpose Cooperative (CPMPC).

The Facts

On November 14, 2005, CPMPC hired Carbonilla, Jr. as a Credit and Collection Manager and, as such, was
tasked with the handling of the credit and collection activities of the cooperative, which included
recommending loan approvals, formulating and implementing credit and collection policies, and conducting
trainings.6 Sometime in 2007, CPMPC underwent a reorganization whereby Carbonilla, Jr. was also
assigned to perform the duties of Human Resources Department (HRD) Manager, i.e., assisting in the
personnel hiring, firing, and handling of labor disputes.7 In 2008, he was appointed as Legal Officer and
subsequently, held the position of Legal and Collection Manager.8

However, beginning February 2008, CPMPC, through its HRD Manager, Ma. Theresa R. Marquez (HRD
Manager Marquez), sent various memoranda to Carbonilla, Jr. seeking explanation on the various
infractions he allegedly committed. The aforesaid memoranda, as well as his replies thereto, are detailed
as follows:

CPMPC'S MEMORANDA: CARBONILLA, JR.'S REPLIES:

HRD 202 File 2008.02.19.017 dated He claimed that he was belatedly informed
February 19, 20089 and was not given any written notification
of the said meeting, and that he did not
- Memorandum relative to his non- find any relation of the said meeting to his
attendance to the CLIMBS HOME PROTEK job as a Legal Officer.
10

Dinner Meeting.

HRD 202 File 2008.02.26.034 dated No reply.

February 26, 200811- Memorandum
relative to his non-submission of Weekly
Executive Summary Reports and Itinerary
for the months of January and February.

HRD 202 File 2008.02.26.035 dated
February 26, 200812 - Memorandum on
why he allowed Joelito Aguipo (Aguipo), a
contractual collector for the Bantayan
Branch, to drive a motorcycle without a
driver's license and not being the owner
thereof.
He stated that there was no policy
requiring field collectors to own – in a
strict legal sense - a motorcycle, but
merely to possess the same so he can
effect collections more efficiently. Besides,
Aguipo was allowed to drive due to the
urgency of collecting from the Bantayan
 Branch. In any case, there is an Affidavit
of Undertaking13 exonerating CPMPC from
any liability.14

HRD 202 File 2008.02.26.036 dated He sought clarification of the charges

against him, and at the same time,
February 26, 200815- Memorandum on threatened HRD Manager Marquez that if
why he failed to: (a) account for a this Memorandum is "proven malicious,
motorcycle being used by a former [she] might be answerable to a certain
employee under his branch; and degree of civil liability which the 1987
( b) reclassify the vehicle of another Constitution has given to individuals."16
employee.

HRD 202 File 2008.06.26.086 dated He dismissed the charge as made with
June 26, 200817 malicious intent and aimed to discredit his
person, claiming that he only had a
- Memorandum on why he insulted his discussion with his superior, particularly,
superior, CPMPC Chief Operation Officer about Alfonso Vasquez (Vasquez), who
Agustina L. Bentillo (COO Bentillo), in was unsystematically pulled out from his
front of her subordinates, with the department without his consent. He added
statement: "Ikaw ra may di mosalig ba, that if COO Bentillo was indeed offended
ka kwalipikado adto niya, maski by his remarks, then it should not have
mag contest pa mo, lupigon gani ka" 18 or taken almost a month before his attention
"You're the only one who doesn't trust was called regarding the matter.
20

her, she is very qualified, you even lose in

comparison to her."19

HRD 202 File 2008.06.26.087 dated Citing the Philippine Law Dictionary, he
June 26, 200821 explained that "[i]nsubordination means a
quality or state of being insubordinate to a
- Memorandum on his alleged acts of person in authority." He maintained that
insubordination and gross disrespect when he did not commit insubordination as he
he questioned the authority of HRD merely sought clarification about the
Manager Marquez to refuse the hiring of a deferment of the hiring of a working
new staff. student by HRD Manager Marquez despite
having prior approval of CPMPC Chief
Executive Officer (CEO), petitioner
Macario G. Quevedo (CEO Quevedo ).22

HRD 202 File 2008.06.26.088 dated Reiterating the definition of

June 26, 200823 "insubordination" in Philippine Law
Dictionary, he maintained that his act of
- Memorandum on his alleged acts of clarifying with the CEO the policy on hiring
insubordination and gross disrespect when working students did not constitute
he insisted before CEO Quevedo that he insubordination, but rather, was made in
had the authority as Legal and Collection the exercise of his right to express.
24

Manager to hire a new staff.

HRD 202 File 2008.06.27.091 dated He only reviewed the subject documents
and they were never entrusted to him for
June 27, 200825 safekeeping.27

- Memorandum asking Carbonilla, Jr. to

tum-over to the officer-in-charge custody
of the following documents: Banco de Oro
contract on staff loans, CPMPC firearm
contracts and licenses, branch offices
rentals, and others.26

HRD 202 File 2008.07.03.094 dated He interposed the following

July 3, 200828
- Memorandum on his alleged acts of
gross negligence in: (a) failing to submit
the employment assessment of one
Marcelina M. Remonde (Remonde );
( b) promoting one Mary Grace R. Batain
(Batain) despite lack of any performance
appraisal; ( c) failing to report the
defenses:29 (a) he was not responsible for
employment assessments having been
transferred to the Legal Department;
( b) as then HRD Manager, it was within
his discretion to promote Batain whose
appointment has been previously
concurred in by the CEO; ( c) he was not
informed of the shortage committed by
Batain nor was it within his primary
obligation to disclose the same; (d) the
printing of invitation was managed only by
shortage of Batain
amounting to
Pl08,254.55; (d) disseminating a wrong
schedule of mediation activity which
caused confusion and pressure among
branch managers; ( e) failing to annotate
the encumbrance on the certificate of title
offered as collateral to CPMPC; (j) failing
to review and verify its contract with the
BISDA Security Agency (agency) which
exposed CPMPC to third-party liability for
failure of the agency to remit the Social
Security System, Philhealth and Pag-IBIG
premiums of its security guards to the
government; (g) failing to inform the
branch managers of any
settlements or compromise agreements
entered into by the head office resulting in
confusion as to payments; and (h) failing
to submit to HRD Manager Marquez the
status of the firearms and licenses
assigned to the branch managers.
his legal assistant, Joel Semblante
(Semblante) and Vasquez. However, the
latter was unexpectedly transferred to
another job assignment, leaving only
Semblante to do the job, which may have
caused the unintentional mistake;30 (e) a
certain Brenda Dela Cruz was the one
responsible for the annotation of the
encumbrances of real and personal
properties; (j) he was not responsible for
the review of the contract between the
agency and its security guards as CPMPC
had no employer-employee relationship
with them; (g) he was unaware of the
complaints of the branch managers
regarding the payment confusion as a
result of settlements or compromise
agreements; and (h) it was not his duty to
determine the status, custody, and
licenses of the firearms.31

HRD 202 File 2008.07.04.095 dated His acts did not constitute gross
July 4, 200832 misconduct, gross disrespect, or loss of
trust and confidence as he only
- Memorandum on the allegations he questioned the suspicious transactions of
made against the CEO during the Board of CEO Quevedo regarding the sale of a titled
Directors' inquiry hearing, which parcel of land owned by the cooperative
constituted gross misconduct, gross for an inadequate consideration. He then
disrespect, and loss of trust and added that as a member of CPMPC, he has
confidence. the right to demand transparency of all
the transactions made by CEO Quevedo,
of which its consequences will affect the
cooperative.33

HRD 202 File 2008.07 .08.098 dated The said meeting was scheduled outside
July 8, 200834 the regular meeting day and he was only
informed about it on the day of the
- Memorandum on his failure to attend the meeting at which time, he was personally
management and operations committee handling collection cases.
35

meeting held on July 7, 2008 despite prior

notices.

HRD 202 File 2008.07.09.103 dated
July 9, 200836 – Memorandum relative to
the mediation settlements which were
forwarded for notarization to one Atty.
Miñoza who is not the authorized legal
retainer of CPMPC.
He admitted that as head of the Legal
Department, he endorsed the documents
for notarization to his friend who only
charged P50.00 per document as
compared to the legal retainers who
charged Pl00.00 per document. He added
that "[t]he same is more advantageous
and secured rather than having it
notarized- by a 'murio-murio' notary
public at the back of the Cebu City Hall."37

HRD 202 File 2008.07.09.104 dated The two cases were re-filed before the
July 9, 200838 Regional Trial Court on May 29, 2008 as
the amounts involved were beyond the
- Memorandum on his failure to update jurisdiction of the Municipal Trial Court
the CEO and management committee of (MTC). He also explained that he was not
the dismissal of the cases filed by CPMPC aware of the filing of these cases before
against Spouses Alex and Alma Monisit in the MTC as he was occupying the position
Civil Case No. R-52633 and against of the HRD Manager at that time.
39

Spouses Helen and Rogelio Lopez in Civil

Case No. R-53274.

HRD 202 File 2008.07.15.106 dated He explained that as head of the Legal
Department, he was responsible for the
 July 15, 200840
- Memorandum relative to Carbonilla, Jr.
's instruction to Semblante to pull out
important records and vital
documents, i.e., Compromise/ Settlement
Agreement, Mediation Tracking Form,
Agreement to Mediate, Mediator's Report,
Evaluation of Mediation, among others,
from the head office without the
knowledge and approval of the
management, which documents were later
on returned tampered and altered.
proper disposal of all legal documents and
contracts, and the cancellation of said
documents were done to protect the
interest of the cooperative. Moreover, he
claimed that the erasures were caused by
the
cancellation of the notarial subscription
since Carbonilla, Jr. found the
requirements of the notary public - which
required all 125 respondents to appear
personally and present their community
tax certificates - impractical. Moreover, he
claimed that the cancellation of the
documents "was not for the purpose of
falsifying or tampering the same[,] but
merely to protect the interest of the
cooperative against possible sanctions [or]
circulating bogus documents. "41

HRD 202 File 2008.07.16.107 dated
July 16, 200842 – Memorandum relative
to the unliquidated cash advances of the
notarial transactions of the mediation
agreements.43
The delay in liquidation was due to the
"agreement" he had with the notary public
about the disposition of the notarized
documents. He claimed that in the
afternoon of the same day, he turned over
the amount of P6,250.00 to the
Accounting Department.44

HRD 202 File 2008.07.19.111 dated No reply.

July 19, 200845 - Memorandum on the
alleged tampering and loss of CPMPC's
vital records and documents, i.e., two (2)
copies of the compromise settlement
agreement.

Unconvinced by Carbonilla, Jr.'s explanations, CPMPC scheduled several clarificatory hearings, 46 but the
former failed to attend despite due notice.47 Later, CPMPC conducted a formal investigation where it
ultimately found Carbonilla, Jr. to have committed acts prejudicial to CPMPC's interests.48 As such, CPMPC,
CEO Quevedo, sent Carbonilla, Jr. a Notice of Dismissal49 dated August 5, 2008 informing the latter of his
termination on the grounds of: (a) loss of trust and confidence; (b) gross disrespect; (c) serious
misconduct; (d) gross negligence; (e) commission of a crime of falsification/inducing Aguipo to violate the
law or the Land Transportation and Traffic Code; and (e) committing acts highly prejudicial to the interest
of the cooperative.50

Consequently, Carbonilla, Jr. filed the instant case for illegal dismissal, non-payment of salaries, 13th
month pay, as well as damages and backawages, against CPMPC, before the NLRC, docketed as NLRC RAB
VII-08-1856-2008.51 In support of his claims, Carbonilla, Jr. denied the administrative charges against
him, asserting that the Management and Board of Directors of CPMPC merely orchestrated means to
unjustly dismiss him from employment.52

In defense, CPMPC maintained that the totality of Carbonilla, Jr.'s infractions was sufficient to warrant his
dismissal, and that it had complied with the procedural due process in terminating him. 53 Further, CPMPC
pointed out that Carbonilla, Jr. had been fully paid of all his benefits, notwithstanding his unsettled
obligations to it in the form of loans, insurance policy premiums, and cash advances, among others,
amounting to a total of P129,455.00.54

The LA Ruling

In a Decision55 dated July 1, 2009, the Labor Arbiter (LA) dismissed Carbonilla, Jr.' s complaint for lack of
merit.56 The LA found that Carbonilla, Jr. committed a litany of infractions, the totality of which constituted
just cause for the termination of his employment. 57 Likewise, it was determined that CPMPC afforded
Carbonilla, Jr. procedural due process prior to his termination, as evinced by the former's issuance of a
series of memoranda, as well as its conduct of investigation with notices to the latter. 58 Furthermore, the
LA denied his claims for unpaid salaries and 13th month pay, as records show that the aggregate amount
of his monetary claims is not even enough to pay his accountabilities to CPMPC in the total amount of
P129,455.00.59

Aggrieved, Carbonilla, Jr. appealed to the NLRC, which was docketed as NLRC Case No. VAC-10-000977-
2009.60
The NLRC Ruling

In a Decision61 dated April 29, 2010, the NLRC affirmed the LA ruling. It found CPMPC to have
substantially proven the existence of just causes in dismissing Carbonilla, Jr., i.e., abuse of authority;
disrespect to his colleagues and superiors; being remiss in his duties; and commission of acts of
misrepresentation.62 It further held that Carbonilla, Jr. was given the opportunity to present his side and
to disprove the charges against him, but failed to do so.63 Finally, the NLRC explained that while
Carbonilla, Jr. may indeed be entitled to his claims for unpaid salaries and 13th month pay, the same
cannot be granted as his accountabilities with CPMPC were larger than said claims. 64

Carbonilla, Jr. moved for reconsideration,65 which was, however, denied in a Resolution 66 dated June 30,
2010. Undaunted, he elevated the matter to the CA via a petition for certiorari.67

The CA Ruling

In a Decision68 dated June 25, 2013, the CA reversed and set aside the NLRC ruling and accordingly,
ordered Carbonilla, Jr.'s reinstatement and the remand of the case to the LA for the computation of his full
backwages, inclusive of allowances and other benefits, as well as attorney's fees.69 It held that the NLRC
gravely abused its discretion in declaring Carbonilla, Jr.'s dismissal as valid, considering that, other than
CPMPC's series of memoranda and self-serving allegations, it did not present substantial documents to
support a conclusion that would warrant Carbonilla, Jr.'s valid dismissal. 70 In fine, CPMPC failed to
discharge the burden of proving that Carbonilla, Jr. 's dismissal was for just causes. 71

Dissatisfied, petitioners moved for reconsideration,72 but the same was denied in a Resolution 73 dated
March 17, 2014; hence, this petition.

The Issue Before the Court

The core issue for the Court's resolution is whether or not the CA correctly ascribed grave abuse of
discretion on the part of the NLRC in ruling that Carbonilla, Jr. 's dismissal was valid.

The Court's Ruling

The petition is impressed with merit.

To justify the grant of the extraordinary remedy of certiorari, petitioner must satisfactorily show that the
court or quasi-judicial authority gravely abused the discretion conferred upon it. Grave abuse of discretion
connotes a capricious and whimsical exercise of judgment, done in a despotic manner by reason of
passion or personal hostility, the character of which being so patent and gross as to amount to an evasion
of positive duty or to a virtual refusal to perform the duty enjoined by or to act at all in contemplation of
law.74

In labor disputes, grave abuse of discretion may be ascribed to the NLRC when, inter alia, its findings and
conclusions are not supported by substantial evidence, or that amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion. 75

Guided by the foregoing considerations, the Court finds that the CA committed reversible error in granting
Carbonilla, Jr. 's certiorari petition since the NLRC did not gravely abuse its discretion in ruling that he was
validly dismissed from employment as CPMPC was able to prove, through substantial evidence, the
existence of just causes warranting the same.

Basic is the rule that an employer may validly terminate the services of an employee for any of the just
causes enumerated under Article 296 (formerly Article 282) of the Labor Code, 76 namely:

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

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

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;

(d) Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representatives; and

(e) Other causes analogous to the foregoing.

As may be gathered from the tenor of CPMPC's Notice of Dismissal, it is apparent that Carbonilla, Jr.'s
employment was terminated on the grounds of, among others, serious misconduct and loss of trust and
confidence.77

On the first ground, case law characterizes misconduct as a transgression of some established and definite
rule of action, a forbidden act, a dereliction of duty, willful in character and implies wrongful intent and not
mere error injudgment.78 For misconduct to be considered as a just cause for termination, the following
requisites must concur: (a) the misconduct must be serious; (b) it must relate to the performance of the
employee's duties showing that the employee has become unfit to continue working for the employer; and
(c) it must have been performed with wrongful intent. 79

All of the foregoing requisites have been duly established in this case. Records reveal that Carbonilla, Jr. 's
serious misconduct consisted of him frequently exhibiting disrespectful and belligerent behavior, not only
to his colleagues, but also to his superiors. He even used his stature as a law graduate to insist that he is
"above" them, often using misguided legalese to weasel his way out of the charges against him, as well as
to strong-arm his colleagues and superiors into succumbing to his arrogance. Carbonilla Jr.'s obnoxious
attitude is highlighted by the following documents on record: (a) his reply to HRD 202 File 2008.02.26.036
dated February 26, 2008 wherein he threatened HRD Manager Marquez with a lawsuit, stating that if the
memorandum is "proven malicious, [she] might be answerable to a certain degree of civil liability which
the 1987 Constitution has given to individuals"; 80 (b) HRD 202 File 2008.06.26.086 dated June 26,
200881 wherein he berated COO Bentillo in front of her subordinates with the statement: "[i]kaw ra may di
mosalig ba, ka kwalipikado adto niya, maski mag contest pa mo, lupigon gani ka"82 or "[y ]ou're the only
one who doesn't trust her, she is very qualified, you even lose in comparison to her[,]" 83 and his reply
thereto wherein he dismissed the charge as made with malicious intent and aimed to discredit his
person;84 (c) HRD 202 File 2008.06.26.088 dated June 26, 2008 85 wherein he argued with the CEO
Quevedo, insisting that he had the authority to hire a new staff, and his reply thereto where he cited the
Philippine Law Dictionary to maintain that his act did not amount to insubordination; 86 (d) HRD 202 File
2008.06.26.087 dated June 26, 2008 87 wherein he openly questioned the authority of HRD Manager
Marquez in refusing to hire a new staff and his reply thereto where he again cited the Philippine Law
Dictionary to insist that he did not commit acts of insubordination; 88 and (e) HRD 202 File 2008.07.04.095
dated July 4, 200889 wherein he openly and improperly confronted the CPMPC CEO during a Board of
Directors' inquiry hearing, to which he again maintained that his acts did not constitute misconduct, gross
disrespect, and loss of trust and confidence as he was only looking after the welfare of the cooperative. 90

Indisputably, Carbonilla, Jr. 's demeanor towards his colleagues and superiors is serious in nature as it is
not only reflective of defiance but also breeds of antagonism in the work environment. Surely, within the
bounds of law, management has the rightful prerogative to take away dissidents and undesirables from
the workplace. It should not be forced to deal with difficult personnel, especially one who occupies a
position of trust and confidence, as will be later discussed, else it be compelled to act against the best
interest of its business. Carbonilla, Jr.'s conduct is also clearly work-related as all were incidents which
sprung from the performance of his duties. Lastly, the misconduct was performed with wrongful intent as
no justifiable reason was presented to excuse the same. On the contrary, Carbonilla, Jr. comes off as a
smart aleck who would even go to the extent of dangling whatever knowledge he had of the law against
his employer in a combative manner. As succinctly put by CPMPC, "[e]very time [Carbonilla, Jr.'s]
attention was called for some inappropriate actions, he would always show his Book, Philippine Law
Dictionary and would ask the CEO or HRD Manager under what provision of the law he would be liable for
the complained action or omission."91 Irrefragably, CPMPC is justified in no longer tolerating the grossly
discourteous attitude of Carbonilla, Jr. as it constitutes conduct unbecoming of his managerial position and
a serious breach of order and discipline in the workplace.92

With all these factored in, CPMPC's dismissal of Carbonilla, Jr. on the ground of serious misconduct was
amply warranted.1âwphi1

For another, Carbonilla, Jr. 's dismissal was also justified on the ground of loss of trust and confidence.
According to jurisprudence, loss of trust and confidence will validate an employee's dismissal when it is
shown that: (a) the employee concerned holds a position of trust and confidence; and ( b) he performs an
act that would justify such loss of trust and confidence.93 There are two (2) classes of positions of
trust: first, managerial employees whose primary duty consists of the management of the establishment
in which they are employed or of a department or a subdivision thereof, and to other officers or members
of the managerial staff; and second, fiduciary rank-and-file employees, such as cashiers, auditors,
property custodians, or those who, in the normal exercise of their functions, regularly handle significant
amounts of money or property. These employees, though rank-and-file, are routinely charged with the
care and custody of the employer's money or property, and are thus classified as occupying positions of
trust and confidence.94

Records reveal that Carbonilla, Jr. occupied a position of trust and confidence as he was employed as
Credit and Collection Manager, and later on, as Legal and Collection Manager, tasked with the duties of,
among others, handling the credit and collection activities of the cooperative, which included
recommending loan approvals, formulating and implementing credit and collection policies, and conducting
trainings.95 With such responsibilities, it is fairly evident that Carbonilla, Jr. is a managerial employee
within the ambit of the first classification of employees afore-discussed. The loss of CPMPC's trust and
confidence in Carbonilla, Jr., as imbued in that position, was later justified in light of the latter's
commission of the following acts: (a) the forwarding of the mediation settlements for notarization to a
lawyer who was not the authorized legal retainer of CPMPC (HRD 202 File 2008.07.09.103 dated July 9,
200896); (b) the pull-out of important records and vital documents from the office premises, which were
either lost or returned already tampered and altered (HRD 202 File 2008.07.15.106 dated July 15,
200897 and HRD 202 File 2008.07.19.111 dated July 19, 2008 98); and (c) the incurring of unliquidated
cash advances related to the notarial transactions of the mediation agreements (HRD 202 File
2008.07.16.107 dated July 16, 200899). While Carbonilla, Jr. posited that these actuations were resorted
with good intentions as he was only finding ways for CPMPC to save up on legal fees, this defense can
hardly hold, considering that all of these transactions were not only highly irregular, but also done without
the prior knowledge and consent of CPMPC's management. Cast against this light, Carbonilla, Jr.'s
performance of the said acts therefore gives CPMPC more than enough reason to lose trust and confidence
in him. To this, it must be emphasized that "employers are allowed a wider latitude of discretion in
terminating the services of employees who perform functions by which their nature require the employer's
full trust and confidence. Mere existence of basis for believing that the employee has breached the trust
and confidence of the employer is sufficient and does not require proof beyond reasonable doubt. Thus,
when an employee has been guilty of breach of trust or his employer has ample reason to distrust him, a
labor tribunal cannot deny the employer the authority to dismiss him," 100 as in this case.

Perforce, having established the actual breaches of duty committed by Carbonilla, Jr. and CPMPC's
observance of due process, the Court no longer needs to further examine the other charges against
Carbonilla, Jr., as it is already clear that the CA erred in ascribing grave abuse of discretion on the part of
the NLRC when the latter declared that CPMPC validly dismissed Carbonilla, Jr. from his job. The totality
and gravity of Carbonilla, Jr. 's infractions throughout the course of his employment completely justified
CPMPC's decision to finally terminate his employment. The Court's pronouncement in Realda v. New Age
Graphics, Inc.101 is instructive on this matter, to wit:

The totality of infractions or the number of violations committed during the period of
employment shall be considered in determining the penalty to be imposed upon an erring
employee. The offenses committed by petitioner should not be taken singly and separately.
Fitness for continued employment cannot be compartmentalized into tight little cubicles of
aspects of character, conduct and ability separate and independent of each other. While it may
be true that petitioner was penalized for his previous infractions, this does not and should not mean that
his employment record would be wiped clean of his infractions. After all, the record of an employee is a
relevant consideration in determining the penalty that should be meted out since an employee's past
misconduct and present behavior must be taken together in determining the proper imposable penalty[.]
Despite the sanctions imposed upon petitioner, he continued to commit misconduct and exhibit
undesirable behavior on board. Indeed, the employer cannot be compelled to retain a misbehaving
employee, or one who is guilty of acts inimical to its interests. 102 (Emphases and underscoring
supplied)

On a final point, the Court notes that Carbonilla, Jr.'s award of unpaid salaries and 13th month pay were
validly offset by his accountabilities to CPMPC in the amount of P129,455.00.103 Pursuant to Article
1278104 in relation to Article 1706105 of the Civil Code and Article 113 (c)106 of the Labor Code,
compensation can take place between two persons who are creditors and debtors of each
other.107 Considering that Carbonilla, Jr. had existing debts to CPMPC which were incurred during the
existence of the employer-employee relationship, the amount which may be due him in wages was
correctly deducted therefrom.

WHEREFORE, the petition is GRANTED. The Decision dated June 25, 2013 and the Resolution dated
March 17, 2014 of the Court of Appeals in CA-G.R. CEB SP No. 05403 are hereby REVERSED and SET
ASIDE. Accordingly, the Decision dated April 29, 2010 and the Resolution dated June 30, 2010 of the
National Labor Relations Commission in NLRC Case No. VAC-10-000977-2009 declaring respondent
Nicerato E. Carbonilla, Jr. to have been validly dismissed by petitioner Cebu People's Multi-Purpose
Cooperative are REINSTATED.

SO ORDERED.

32.

G.R. No. 211015, June 20, 2016

CAGAYAN ELECTRIC POWER & LIGHT COMPANY, INC. (CEPALCO) AND CEPALCO ENERGY
SERVICES CORPORATION (CESCO), FORMERLY CEPALCO ENERGY SERVICES & TRADING
CORPORATION (CESTCO), Petitioners, v. CEPALCO EMPLOYEE'S LABOR UNION-ASSOCIATED
LABOR UNIONS-TRADE UNION CONGRESS OF THE PHILIPPINES (TUCP), Respondent.

G.R. No. 213835

CAGAYAN ELECTRIC POWER & LIGHT COMPANY, INC. (CEPALCO) AND CEPALCO ENERGY
SERVICES CORPORATION (CESCO), FORMERLY CEPALCO ENERGY SERVICES & TRADING
CORPORATION (CESTCO), Petitioners, v. CEPALCO EMPLOYEE'S LABOR UNION-ASSOCIATED
LABOR UNIONS-TRADE UNION CONGRESS OF THE PHILIPPINES (TUCP), Respondent.

DECISION

PERLAS-BERNABE, J.:

Before the Court are petitions for review on certiorari1 which assail: (a) in G.R. No. 211015, the
Decision2 dated September 14, 2012 and the Resolution 3 dated January 15, 2014 of the Court of Appeals
(CA) in CA-G.R. SP No. 03169-MIN; and (b) in G.R. No. 213835, the Decision4 dated November 11, 2013
and the Resolution5 dated July 17, 2014 of the CA in CA-G.R. SP No. 04296-MIN. In both cases, the CA
absolved herein petitioners Cagayan Electric Power & Light Company, Inc. (CEPALCO) and CEPALCO
Energy Services Corporation (CESCO), formerly CEPALCO Energy Services & Trading Corporation, 6 from
the charges of Unfair Labor Practice (ULP) filed by herein respondent CEPALCO Employee's Labor Union-
Associated Labor Unions-Trade Union Congress of the Philippines (respondent), but nonetheless,
pronounced that CESCO was engaged in labor-only contracting and that, in consequence, the latter's
employees are actually the regular employees of CEPALCO in the same manner and extent as if they were
directly employed by CEPALCO.

The Facts

Respondent is the duly certified bargaining representative of CEPALCO's regular rank-and-file employees.
On the other hand, CEPALCO is a domestic corporation engaged in electric distribution in Cagayan de Oro
and other municipalities in Misamis Oriental; while CESCO is a business entity engaged in trading and
services.7chanrobleslaw

On February 19, 2007, CEPALCO and CESCO (petitioners) entered into a Contract for Meter Reading
Work8 where CESCO undertook to perform CEPALCO's meter-reading activities. As a result, several
employees and union members of CEPALCO were relieved, assigned in floating positions, and replaced
with CESCO workers,9 prompting respondent to file a complaint10 for ULP against petitioners, docketed
as NLRC Case No. RAB-10-07-00408-2007. Respondent alleged that when CEPALCO engaged CESCO
to perform its meter-reading activities, its intention was to evade its responsibilities under the Collective
Bargaining Agreement (CBA) and labor laws, and that it would ultimately result in the dissipation of
respondent's membership in CEPALCO.11 Thus, respondent claimed that CEPALCO's act of contracting out
services, which used to be part of the functions of the regular union members, is violative of Article 259
(c)12 of the Labor Code, as amended,13 governing ULP of employers. It further averred that for engaging in
labor-only contracting, the workers placed by CESCO must be deemed regular rank-and-file employees of
CEPALCO, and that the Contract for Meter Reading Work be declared null and void. 14chanrobleslaw

In defense,15 petitioners averred that CESCO is an independent job contractor and that the contracting out
of the meter-reading services did not interfere with CEPALCO's regular workers' right to self-organize,
denying that none of respondent's members was put on floating status. 16 Moreover, they argued that the
case is only a labor standards issue, and that respondent is not the proper party to raise the issue
regarding the status of CESCO's employees and, hence, cannot seek that the latter be declared as
CEPALCO's regular employees.17chanrobleslaw

In a Decision18 dated August 20, 2008, the Labor Arbiter (LA) dismissed the complaint for lack of merit.
The LA found that petitioners have shown by substantial evidence that CESCO carries on an independent
business of contracting services, in this case for CEPALCO's meter-reading work, and that CESCO has an
authorized capital stock of P100,000,000.00, as well as equipment and materials necessary to carry out its
business.19 As an independent contractor, CESCO is the statutory employer of the workers it supplied to
CEPALCO pursuant to their contract.20 Thus, there is no factual basis to say that CEPALCO committed ULP
as there can be no splitting or erosion of the existing rank-and-file bargaining unit that negates
interference with the exercise of CEPALCO workers' right to self-organize.21chanrobleslaw

On appeal22 by respondent, the National Labor Relations Commission (NLRC), in a Decision23 dated April
30, 2009, affirmed the LA's ruling in toto, finding that the evidence proffered by respondent proved
inadequate in establishing that the service contract amounted to the interference of the right of the union
members to self-organization and collective bargaining.24chanrobleslaw

Respondent's motion for reconsideration25cralawred was denied in a Resolution26 dated June 30, 2009;
hence, it filed a petition for certiorari27 before the CA, docketed as CA-G.R. SP No. 03169-MIN.

Pending resolution of CA-G.R. SP No. 03169-MIN, or on January 5, 2010, CEPALCO and CESCO entered
into another Contract of Service,28 this time for the warehousing works of CEPALCO. Alleging that three
(3) union members who were assigned at the warehouse of the logistics department were transferred to
other positions and departments without their conformity and, eventually, were replaced by workers
recruited by CESCO, respondent filed another complaint29 for ULP against petitioners, docketed as NLRC
Case No. RAB-10-12-00602-2009, similarly decrying that CEPALCO was engaged in labor-only
contracting and, thus, committed ULP.30chanrobleslaw

As in the first case against them, petitioners posited31 that CEPALCO did not engage in ULP when it
contracted out its warehousing works32 and that CESCO is an independent contractor.33 They further
reiterated their argument that respondent is not the proper party to seek any form of relief for the CESCO
employees.34chanrobleslaw

In a Decision35 dated July 29, 2010, the LA dismissed the case for lack of merit, citing its earlier decision
in NLRC Case No. RAB-10-07-00408-2007. It explained that the only difference between the previous
case and the present case was that in the former, CEPALCO contracted out its meter-reading activities,
while in the latter, it contracted out its warehousing works. However, both cases essentially raised the
same issue between the same parties, i.e., whether or not the contracting out of services being performed
by the union members constitute ULP.36 As such, the NLRC applied the principle of res judicata under the
rule on eonclusiveness of judgment and dismissed the complaint for ULP. 37 At any rate, it found that
respondent failed to present substantial evidence that CEPALCO's contracting out of the warehousing
works constituted ULP.38chanrobleslaw

On appeal39 by respondent, the NLRC, in a Resolution 40 dated February 21, 2011, dismissed the appeal
and affirmed the LA's ruling in toto. Respondent's motion for reconsideration 41 was denied in a
Resolution42 dated April 15, 2011; hence, it elevated the matter to the CA via petition
for certiorari,43 docketed as CA-G.R. SP No. 04296-MIN.

The Ruling in CA-G.R. SP No. 03169-MIN

In a Decision44 dated September 14, 2012, the CA partially granted respondent's certiorari petition and
reversed and set aside the assailed NLRC issuances.

Preliminarily, the CA found that CESCO was engaged in labor-only contracting in view of the following
circumstances: (a) there was absolutely no evidence to show that CESCO exercised control over its
workers, as it was CEPALCO that established the working procedure and methods, supervised CESCO's
workers, and evaluated them;45 (b) there is no substantial evidence to show that CESCO had substantial
capitalization as it only had a paid-up capital of P51,000.00 as of May 30, 1984, and there was nothing on
CESCO's list of machineries and equipment that could have been used for the performance of the meter-
reading activities contracted out to it;46 and (c) the workers of CESCO performed activities that are
directly related to CEPALCO's main line of business.47 Moreover, while CESCO presented a Certificate of
Registration48 with the Department of Labor and Employment, the CA held that it was not a conclusive
evidence of CESCO's status as an independent contractor. 49 Consequently, the workers hired by CESCO
pursuant to the service contract for the meter-reading activities were declared regular employees of
CEPALCO.50chanrobleslaw

However, the CA found no substantial evidence that CEPALCO was engaged in ULP, there being no
showing that when it contracted out the meter-reading activities to CESCO, CEPALCO was motivated by ill
will, bad faith or malice, or that it was aimed at interfering with its employees' right to self-
organize.51chanrobleslaw

Petitioners' motion for reconsideration52 was denied in a Resolution53 dated January 15, 2014; hence, the
present petition docketed as G.R. No. 211015.

The Ruling in CA-G.R. SP No. 04296-MIN

In a Decision54 dated November 11, 2013, the CA partially granted respondent's petition, finding that
CESCO was a labor-only contractor as it had no substantial capitalization, as well as tools, equipment, and
machineries used in the work contracted out by CEPALCO. 55 As such, it stated that CESCO is merely an
agent of CEPALCO, and that the latter is still responsible to the workers recruited by CESCO in the same
manner and extent as if those workers were directly employed by CEPALCO.56chanrobleslaw

Nonetheless, same as the ruling in CA-G.R. SP No. 03169-MIN, the CA found that CEPALCO committed
no ULP for lack of substantial evidence to establish the same. 57chanrobleslaw

Petitioners' motion for reconsideration58 was denied in a Resolution59 dated July 17, 2014; hence, the
present petition docketed as G.R. No. 213835.

The Issues Before the Court

In both G.R. Nos. 211015 and 213835,60 petitioners lament that the CA erred in declaring CESCO as a
labor-only contractor notwithstanding the fact that CEPALCO has already been absolved of the charges of
ULP. To this, petitioners argue that the issue of whether or not CESCO is an independent contractor was
mooted by the finality of the finding that there was no ULP on the part of CEPALCO.61 Also, they aver that
respondent is not a party-in-interest in this issue because the declaration of the CA t&at the employees of
CESCO are considered regular employees will not even benefit the respondent. 62 If there is anyone who
stands to benefit from such rulings, they are the employees of the CESCO who are not impleaded in these
cases. In any event, petitioners insist that CESCO is a legitimate contractor. Overall, they prayed that the
assailed CA rulings be reversed and set aside insofar as the CA found CESCO as engaged in labor-only
contracting and that its employees are actually the regular employees of CEPALCO. 63chanrobleslaw

The Court's Ruling

The petitions are partly meritorious.

At the outset, it is well to note that the status of CESCO as a labor-only contractor was raised in
respondent's complaints before the labor tribunals only in relation to the charges of ULP. In particular,
respondent, in its complaint in NLRC Case No. RAB-10-07-00408-2007, mainly argued that the
"[labor-only] contracting agreement between CEPALCO and [CESCO] discriminates regular union member
employees and will ultimately result in the dissipation of its ranks in the line maintenance and construction
department."64 This is similar to the thrust of its complaint in NLRC Case No. RAB-10-12-00602-2009,
wherein they averred that "the [labor-only] contracting arrangement between CEPALCO and [CESCO]
discriminates union members and restrains or coerces employees in the exercise of their rights to [self-
organization] and collective bargaining[,] and amounts to union busting." 65 As the LA in the latter case
aptly observed, "the essential issue between the same parties remain[s] identical: whether the contracting
out of activities or services being performed by [u]nion members constitute [ULP]."66chanrobleslaw

Under Article 10667 of the Labor Code, as amended, labor-only contracting is an arrangement where the
contractor, who does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, supplies workers to an employer and the workers recruited
are performing activities which are directly related to the principal business of such employer. Section 5
of Department Order No. 18-02, Series of 2002, otherwise known as the "Rules Implementing
Articles 106 to 109 of the Labor Code, As Amended" (DO 18-02), provides the following criteria
to gauge whether or not an arrangement constitutes labor-only contracting:
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared
prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal,
and any of the following elements are present:

chanRoblesvirtualLawlibrary
i) The contractor or subcontractor does not have substantial capital or investment which
relates to the job, work or service to be performed and the employees recruited, supplied
or placed by such contractor or subcontractor are performing activities which are directly
related to the main business of the principal; or

ii) the contractor does not exercise the right to control over the performance of the work of
the contractual employee.

The foregoing provisions shall be without prejudice to the application of Article 248 (C) of the Labor Code,
as amended.

"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises, actually and directly used by
the contractor or subcontractor in the performance or completion of the job, work or service contracted
out.

The "right to control" shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the manner
and means to be used in reaching that end. (Emphases supplied)
Labor-only contracting is considered as a form of ULP when the same is devised by the employer to
"interfere with, restrain or coerce employees in the exercise of their rights to self-organization."68 Article
259 of the Labor Code, as amended, which enumerates certain prohibited activities constitutive of ULP,
provides:ChanRoblesVirtualawlibrary
Article 259. Unfair Labor Practices of Employers. - It shall be unlawful for an employer to commit any of
the following unfair labor practice:

chanRoblesvirtualLawlibrary
xxxx

(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.

x x x x (Emphasis and underscoring supplied)

The need to determine whether or not the contracting out of services (or any particular activity or scheme
devised by the employer for that matter) was intended to defeat the workers' right to self-organization is
impelled by the underlying concept of ULP. This is stated in Article 258 of the Labor Code, as amended, to
wit:ChanRoblesVirtualawlibrary
Article 258. 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 interests 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.

x x x x (Emphases and underscoring supplied)

Thus, in Great Pacific Employees Union v. Great Pacific Life Assurance Corporation,69 the Court
observed:ChanRoblesVirtualawlibrary
There should be no dispute that all the prohibited acts constituting unfair labor practice in essence relate
to the workers' right to self-organization. Thus, an employer may be held liable under this provision
if his conduct affects in whatever manner the right of an employee to self-
organize.70chanroblesvirtuallawlibrary
Similarly, in Bankard, Inc. v. NLRC:71
The Court has ruled that the prohibited acts considered as ULP relate to the workers' right to self-
organization and to the observance of a CBA. It refers to "acts that violate the workers' right to
organize." Without that element, the acts, even if unfair, are not ULP. 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.72 (Emphasis and underscoring supplied)
In these cases, the Court agrees with the CA that CEPALCO was engaged in labor-only contracting as its
Contract for Meter-Reading Work dated February 19, 2007 and Contract of Service To Perform
Warehousing Works dated January 5, 2010 (subject contracts) with CESCO fit the criteria provided for in
Section 5 of DO 18-02, as above-highlighted.

To be specific, petitioners failed to show that CESCO has substantial capital or investment which relates to
the job, work or service to be performed. While it is true that: (a) CESCO's Amended Articles of
Incorporation73 as of November 26, 2008 shows that CESCO's authorized capital stock is P200,000,000.00
as of September 26, 2008,74 which was increased from P100,000,000.0075 on May 30, 2007; and (b) its
financial statement76 as of 2010 and 2011 shows that its paid-up capital stock is in the sum of
P81,063,000.00,77 there is no available document to show CESCO's authorized capital stock at the time of
the contracting out of CEPALCO's meter-reading activities to CESCO on February 19, 2007. As it is,
the increases in its authorized capital stock and paid-up capital were only made after November 26, 2008,
hence, are only relevant with regard to the time CEPALCO contracted out its warehousing works to CESCO
on January 5, 2010. Since the amount of CESCO's authorized capital stock at the time CEPALCO
contracted out its meter-reading activities was not shown, the Court has no means of determining
whether it had substantial capital at the time the contract therefor was entered into. Furthermore, the
list78 of CESCO's office equipment, furniture and fixtures, and vehicles offered in evidence by petitioners
does not satisfy the requirement that they could have been used in the performance of the specific work
contracted out, i.e., meter-reading service. As the CA aptly pointed out,79 the tools and equipment utilized
by CESCO in the meter-reading activities are owned by CEPALCO, emphasizing the fact that CESCO has no
basic equipment to carry out the service contracted out by CEPALCO.

It is also evident that meter-reading is a job that is directly related to the main business of CEPALCO,
considering that the latter is an electric distribution utility,80 which is necessarily tasked with the
evaluation and appraisal of meters in order to bill its clients.

More significantly, records are devoid of evidence to prove that the work undertaken in furtherance of the
meter-reading contract was made under the sole control and supervision of CESCO. Instead, as noted 81 by
the CA, it was CEPALCO that established the working procedure and methods and supervised CESCO's
workers in their tasks.

On the other hand, although it may be said that CESCO had substantial capital when CEPALCO contracted
out its warehousing works on January 5, 2010, there is, however, lack of credible evidence to show that
CESCO had the aforesaid substantial investment in the form of equipment, tools, implements,
machineries, and work premises to perform the warehousing activities on its own account. Similarly, the
job contracted out is directly related to CEPALCO's electric distribution business, which involves logistics,
inventories, accounting, billing services, and other related operations. Lastly, same as above, no evidence
has been offered to establish that CESCO exercised control with respect to the manner and methods of
achieving the warehousing works, or that it supervised the workers assigned to perform the same.

The foregoing findings notwithstanding, the Court, similar to the CA and the labor tribunals, finds that
CEPALCO's contracting arrangements with CESCO did not amount to ULP. This is because respondent was
not able to present any evidence to show that such arrangements violated CEPALCO's workers' right to
self-organization, which, as above-mentioned, constitutes the core of ULP. Records do not show that this
finding was further appealed by respondent. Thus, the complaints filed by respondent should be
dismissed with finality.
At this juncture, it should be made clear that the disposition of these cases should be limited only to the
foregoing declaration. Again, the complaints filed by respondent were only for ULP. While there is nothing
infirm in passing upon the matter of labor-only contracting since it was vigorously litigated in these
proceedings, the resolution of the same must only be read in relation to the charges of ULP. As earlier
stated, labor-only contracting was invoked by respondent as a prohibited act under Article 259 (c) of the
Labor Code, as amended. As it turned out, however, respondent failed to relate the arrangement to the
defining element of ULP, i.e., that it violated the workers' right to self-organization. Hence, being a
preliminary matter actively argued by respondent to prove the charges of ULP, the same was not rendered
moot and academic by the eventual dismissal of the complaints as an issue only becomes moot and
academic if it becomes a "dead" issue, devoid of any practical value or use to be passed upon.
In Pormento v. Estrada:82
An action is considered "moot" when it no longer presents a justiciable controversy because the issues
involved have become academic or dead or when the matter in dispute has already been resolved and
hence, one is not entitled to judicial intervention unless the issue is likely to be raised again between the
parties. There is nothing for the court to resolve as the determination thereof has been overtaken by
subsequent events.83chanroblesvirtuallawlibrary
For another, the Court also observes that while respondent did ask for the nullification of the subject
contracts between petitioners, and even sought that the employees provided by CESCO to CEPALCO be
declared as the latter's own employees, petitioners correctly argue that respondent is not a real party-in-
interest and hence, had no legal standing insofar as these matters are concerned. This is because
respondent failed to demonstrate how it stands to be benefited or injured by a judgment on the same, or
that any personal or direct injury would be sustained by it if these reliefs were not granted. In Joya v.
Presidential Commission on Good Government,84 the Court explained:ChanRoblesVirtualawlibrary
"Legal standing" means a personal and substantial interest in the case such that the party has sustained
or will sustain direct injury as a result of the x x x act being challenged. The term "interest" is material
interest, an interest in issue and to be affected by the decree, as distinguished from mere interest in the
question involved, or a mere incidental interest. Moreover, the interest of the party plaintiff must be
personal and not one based on a desire to vindicate the constitutional right of some third and unrelated
party.85chanroblesvirtuallawlibrary
If at all, it would be the employees of CESCO who are entitled to seek the foregoing reliefs since in cases
of labor-only contracting, "the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and extent as if the latter were
directly employed by him."86 However, they have not been impleaded in these cases. Thus, as prayed for
by petitioners, the Court must set aside the portions of the assailed CA Decisions declaring: (a) the
workers hired by CESCO, pursuant to the contracts subject of these cases, as regular employees of
CEPALCO; and (b) the latter responsible to said workers in the same manner and extent as if they were
directly employed by it. This pronouncement not only squares with the rules on real party-in-interest and
legal standing, but also with the precept that no one shall be affected by any proceeding to which he is a
stranger, and that strangers to a case are not bound by any judgment rendered by the
court.87chanrobleslaw

With the principal issues already resolved, the Court sees no need to delve into other ancillary issues that
would have no effect to the conclusion of these cases.

WHEREFORE, the petitions are PARTLY GRANTED. The portions of the Decisions and Resolutions of the
Court of Appeals (CA) in CA-G.R. SP No. 03169-MIN and CA-G.R. SP No. 04296-MIN declaring that the
workers hired by CESCO, pursuant to the contracts subject of these cases, are regular employees of
CEPALCO, and that the latter is responsible to said workers in the same manner and extent as if those
workers were directly employed by CEPALCO are hereby DELETED. The rest of the CA Decisions stand.

SO ORDERED.chanRoblesvirtualLawlibrary