46. MANUEL D. YNGSON v. PHILIPPINE NATIONAL BANK, GR No.

171132, 2012-08-15

Facts:

ARCAM & Company, Inc. (ARCAM) is engaged in the operation of a sugar mill in Pampanga.[5] Between
1991 and 1993, ARCAM applied for and was granted a loan by respondent Philippine National Bank
(PNB).[6] To secure the loan, ARCAM... executed a Real Estate Mortgage over a 350,004square meter
parcel of land covered by TCT No. 340592-R and a Chattel Mortgage over various personal properties
consisting of machinery, generators, field transportation and heavy equipment.

ARCAM, however, defaulted on its obligations to PNB. Thus, on November 25, 1993, pursuant to the
provisions of the Real Estate Mortgage and Chattel Mortgage, PNB initiated extrajudicial foreclosure
proceedings in the Office of the Clerk of Court/Ex Officio Sheriff of the

Regional Trial Court (RTC) of Guagua, Pampanga.[7] The public auction was scheduled on December 29,
1993 for the mortgaged real properties and December 8, 1993 for the mortgaged personal properties.

On December 7, 1993, ARCAM filed before the SEC a Petition for Suspension of Payments, Appointment
of a Management or Rehabilitation Committee, and Approval of Rehabilitation Plan, with application for
issuance of a temporary restraining order (TRO) and writ of preliminary... injunction. The SEC issued a
TRO and subsequently a writ of preliminary injunction, enjoining PNB and the Sheriff of the RTC of
Guagua, Pampanga from proceeding with the foreclosure sale of the mortgaged properties.[8] An
interim management committee was... also created.

On February 9, 2000, the SEC ruled that ARCAM can no longer be rehabilitated. The SEC noted that the
petition for suspension of payment was filed in December 1993 and six years had passed but the
potential "white knight" investor had not infused the much needed capital to bail... out ARCAM from its
financial difficulties.[9] Thus, the SEC decreed that ARCAM be dissolved and placed under liquidation.

Contending that foreclosure during liquidation was improper, petitioner filed with the SEC a Motion for
the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction to enjoin the
foreclosure sale of ARCAM's assets. The SEC en banc issued a TRO... effective for seventy-two (72) hours,
but said TRO lapsed without any writ of preliminary injunction being issued by the SEC.

Consequently, on July 28, 2000, PNB resumed the proceedings for the extrajudicial foreclosure sale of
the mortgaged properties.[12]

PNB emerged as the highest winning bidder in the auction sale, and certificates of sale were issued in its
favor.

On November 16, 2000, petitioner filed with the SEC a motion to nullify the auction sale.[13] Petitioner
posited that all actions against companies which are under liquidation, like ARCAM, are suspended
because liquidation is a continuation of the petition... for suspension proceedings. Petitioner argued
that the prohibition against foreclosure subsisted during liquidation because payment of all of ARCAM's
obligations was proscribed except those authorized by the Commission. Moreover, petitioner asserted
that the mortgaged assets... should be included in the liquidation and the proceeds shared with the
unsecured creditors.

Issue: Whether PNB, as a secured creditor, can foreclose on the mortgaged properties of a corporation
under liquidation... without the knowledge and prior approval of the liquidator or the SEC.

Ruling: In the case of Consuelo Metal Corporation v. Planters Development Bank,[26] which involved
factual antecedents similar to the present case, the court has already settled the above question and
upheld the right of the secured creditor to foreclose the... mortgages in its favor during the liquidation
of a debtor corporation.

In Rizal Commercial Banking Corporation v. Intermediate Appellate Court, we held that if rehabilitation
is no longer feasible and the assets of the corporation are finally liquidated, secured creditors shall enjoy
preference over unsecured creditors, subject... only to the provisions of the Civil Code on concurrence
and preference of credits. Creditors of secured obligations may pursue their security interest or lien, or
they may choose to abandon the preference and prove their credits as ordinary claims.

In this case, Planters Bank, as a secured creditor, enjoys preference over a specific mortgaged property
and has a right to foreclose the mortgage under Section 2248 of the Civil Code. The creditor-mortgagee
has the right to foreclose the mortgage over a specific real... property whether or not the debtor-
mortgagor is under insolvency or liquidation proceedings. The right to foreclose such mortgage is merely
suspended upon the appointment of a management committee or rehabilitation receiver or upon the
issuance of a stay order by the trial... court. However, the creditor-mortgagee may exercise his right to
foreclose the mortgage upon the termination of the rehabilitation proceedings or upon the lifting of the
stay order.[

It is worth mentioning that under Republic Act No. 10142, otherwise known as the Financial
Rehabilitation and Insolvency Act (FRIA) of 2010, the right of a secured creditor to enforce his lien during
liquidation proceedings is retained. Section 114 of said law thus... provides:

SEC. 114. Rights of Secured Creditors. The Liquidation Order shall not affect the right of a secured
creditor to enforce his lien in accordance with the applicable contract or law. A secured creditor may:

(a) waive his rights under the security or lien, prove his claim in the liquidation proceedings and share in
the distribution of the assets of the debtor; or

(b) maintain his rights under his security or lien;

In this case, PNB elected to maintain its rights under the security or lien; hence, its right to foreclose the
mortgaged properties should be respected, in line with our pronouncement in Consuelo Metal
Corporation.

47. RUBBERWORLD (PHILS), INC. v. NLRC, GR no. 126773 | 4-14-1999

FACTS:
Rubberworld, Inc. (petitioner) is a domestic corporation which used to be in the business of
manufacturing footwear, bags and garments. On 24 Nov 1994, it filed with the SEC a petition requesting
that their corporation be declared in a state of suspension of payments and that their creditors be
restrained from enforcing their claims against the corporation. A creation of management committee
and the approval of a proposed rehabilitation plan were also prayed for. The SEC ruled in favor of the
corporation. Accordingly, because of the creation of a management committee, ALL ACTIONS FOR
CLAIMS against Rubberworld, Inc. pending before any court are hereby deemed SUSPENDED. Private
petitioners, on the other hand, are employees of the said corporation. They filed against the latter
several complaints, among others: illegal dismissal, unfair labor practice, etc. (take note that these are
labor-related issues). The petitioner moved to have the complaints dismissed on the strength of the SEC
order (that which suspends all actions for claims against them). The labor arbiter denied the petitioner’s
motion. Petitioner then appealed to the NLRC but the same also dismissed their motion. And now we’re
here. NLRC contended that the SEC order does not cover labor cases because those are within their
exclusive jurisdiction to hear anddecide labor cases, quoting Article 217 of the Labor Code. They further
contended that the right of workers and employees must be preferred.

ISSUE:

WON NLRC was correct in affirming labor arbiter’s order despite SEC’s order?

HELD:

No. NLRC should not have upheld decision of labor arbiter. The applicable law in this case PD 902-A and
not the Labor Code. PD 902-A will apply when the petition filed is: (1) for declaration of a state of
suspension of payments due to a recognition of the inability to pay one’s debts and liabilities, and (2)
where the petitioning corporation either: a] has sufficient property to cover all its debts but foresees the
impossibility of meeting them when they fall due (solvent but illiquid) b] has no sufficient property
(insolvent) but is under the management of a rehabilitation receiver or management committee. Section
6 (c) provides that: “upon appointment of a management committee, the rehabilitation receiver, board
or body … ALL ACTIONS for claims against corporations … shall be SUSPENDED accordingly.” It is to
enable the mgmt committee or any rehabilitation receiver to effectively exercise its/his powers free
from any judicial or extrajudicial interference that might unduly hinder or prevent the rescue of the
debtor company. Such claims would only pose as burden to the mgmt committee, whose time would be
severely wasted in defending claims against the corporation instead of focusing on rehabilitation alone.
NLRC’s contention that labor cases are not within the scope of the SEC order was misplaced as there was
no exception mentioned in the law. Elementary stat con: when the law does not distinguish, you do not
distinguish. Hence, article 217 of the Labor Code should be construed in harmony with PD 902-A in order
to avoid conflict. As for the preferential right of workers and employees (article 110, LC), it may only be
invoked ONLY upon the institution of insolvency or judicial liquidation. REHABILITATION PROCEEDINGS:
to enable the company to gain a new lease on life and thereby allow creditors to be paid their claims
from its earnings. INSOLVENCY PROCEEDINGS: the company stops operating, and the claims of the
creditors are satisfied from the assets of the insolvent corporation. The present case involves
rehabilitation and not insolvency or liquidation. The petition is granted. NLRC’s decision was reversed
and set aside.

48. Kaisahan at Kapatiran ng mga Manggagawa at Kawani sa MWC-East Zone Unit vs. Manila Water
Company [GR No. 174179, November 16, 2011]

Facts: The Union is the duly-recognized bargaining agent of the rank-and-file employees of the
respondent Manila Water Company, Inc. (Company) while Borela is the Union President. On February
21, 1997, the Metropolitan Waterworks and Sewerage System (MWSS) entered into a Concession
Agreement(Agreement) with the Company to privatize the operations of the MWSS. Article 6.1.3 of the
Agreement provides that "the Concessionaire shall grant [its] employees benefits no less favorable than
those granted to MWSS employees at the time of [their] separation from MWSS." 7 Among the benefits
enjoyed by the employees of the MWSS were the amelioration allowance (AA) and the cost-of-living
allowance (COLA) granted in August 1979, pursuant to Letter of Implementation No. 97 issued by the
Office of the President.

The payment of the AA and the COLA was discontinued pursuant to Republic Act No. 6758, otherwise
known as the "Salary Standardization Law," which integrated the allowances into the standardized
salary. Nonetheless, in 2001, the Union demanded from the Company the payment of the AA and the
COLA during the renegotiation of the parties' Collective Bargaining Agreement (CBA). The Company
initially turned down this demand, however, it subsequently agreed to an amendment of the CBA on the
matter. Thereafter, the Company integrated the AA into the monthly payroll of all its employees
beginning August 1, 2002, payment of the AA and the COLA after an appropriation was made and
approved by the MWSS Board of Trustees. The Company, however, did not subsequently include the
COLA since the Commission on Audit disapproved its payment because the Company had no funds to
cover this benefit. TCaI

As a result, the Union and Borela filed on April 15, 2003 a complaint against the Company for payment
of the AA, COLA, moral and exemplary damages, legal interest, and attorney's fees before the National
Labor Relations Commission (NLRC).

Issue: (1) Whether the CA can review the factual findings of the NLRC in a Rule 65 petition; and (2)
Whether the NLRC gravely abused its discretion in awarding ten percent (10%) attorney's fees to the
petitioners.

Ruling:

The CA cannot undertake a re-assessment of the evidence presented in the case in certiorari
proceedings under Rule 65 of the Rules of Court. However, the rule admits of exceptions. In Mercado v.
AMA Computer College-Parañaque City, Inc., the SC held that the CA may examine the factual findings of
the NLRC to determine whether or not its conclusions are supported by substantial evidence, whose
absence justifies a finding of grave abuse of discretion.
In this case, the CA decision shows that the CA erred in ruling that the NLRC gravely abused its discretion
in awarding the petitioners ten percent (10%) attorney's fees without basis in fact and in law. On the
Award of Attorney's Fees Article 111 of the Labor Code, as amended, governs the grant of attorney's
fees in labor cases: CSaITD 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. In the present case, the ten percent (10%) attorney's fees awarded by the NLRC
on the basis of Article 111 of the Labor Code accrue to the Union's members as indemnity for damages
and not to the Union's counsel as compensation for his legal services, unless, they agreed that the
award shall be given to their counsel as additional or part of his compensation; in this case the Union
bound itself to pay 10% attorney's fees to its counsel under the MOA and also gave up the attorney's
fees awarded to the Union's members in favor of their counsel. This is supported by Borela's affidavit
which stated that "[t]he 10% attorney's fees paid by the members/employees is separate and distinct
from the obligation of the company to pay the 10% awarded attorney's fees which we also gave to our
counsel as part of our contingent fee agreement." The limit to this agreement is that the indemnity for
damages imposed by the NLRC on the losing party (i.e., the Company) cannot exceed ten percent (10%).
Properly viewed from this perspective, the award cannot be taken to mean an additional grant of
attorney's fees, in violation of the ten percent (10%) limit under Article 111 of the Labor Code since it
rests on an entirely different legal obligation than the one contracted under the MOA. Simply stated, the
attorney's fees contracted under the MOA do not refer to the amount of attorney's fees awarded by the
NLRC; the MOA provision on attorney's fees does not have any bearing at all to the attorney's fees
awarded by the NLRC under Article 111 of the Labor Code. Based on these considerations, it is clear that
the CA erred in ruling that the LA's award of attorney's fees violated the maximum limit of ten percent
(10%) fixed by Article 111 of the Labor Code

49. PEOPLES BROADCASTING SERVICE (BOMBO RADYO PHILS., INC.) vs. THE SECRETARY OF THE
DEPARTMENT OF LABOR AND EMPLOYMENT, THE REGIONAL DIRECTOR, DOLE REGION VII,
andJANDELEON JUEZAN

G.R. No. 179652 March 6, 2012

DOCTRINE:

Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully empowered to make
adetermination as to the existence of an employer-employee relationship in the exercise of its visitorial
andenforcement power, subject to judicial review, not review by the NLRC.

FACTS:
Jandeleon Juezan filed a complaint against Peoples Broadcasting Service (Bombo) with the DOLE
RegionalOffice No. VII, Cebu City, for illegal deduction, nonpayment of service incentive leave, 13th
month pay, amongothers. After the conduct of summary investigations, and after the parties submitted
their position papers, theDOLE Regional Director found that Juezan was an employee of Bombo, and
was entitled to his moneyclaims. Bombo sought reconsideration of the Directors Order, but failed.The
Acting DOLE Secretary dismissed Bombo’s appeal.

When the matter was brought before the CA, whereBombo claimed that it had been denied due
process, it was held that Bombo was accorded due process as it hadbeen given the opportunity to be
heard, and that the DOLE Secretary had jurisdiction over the matter, as the jurisdictional limitation
imposed by Article 129 of the Labor Code on the power of the DOLE Secretary under Art.128(b) of the
Code had been repealed by Republic Act No. (RA) 7730.SC reversed the CA Decision and the complaint
against Bombo was dismissed. The Court found that there wasno employer-employee relationship
between Bombo and Juezan. It was held that while the DOLE may make adetermination of the existence
of an employer-employee relationship, this function could not be co-extensive withthe visitorial and
enforcement power provided in Art. 128(b) of the Labor Code, as amended by RA 7730. TheNLRC was
held to be the primary agency in determining the existence of an employer-employee relationship.From
this Decision, the Public Attorneys Office (PAO) filed a Motion for Clarification of Decision (with Leave
ofCourt). The PAO sought to clarify as to when the visitorial and enforcement power of the DOLE be not
consideredas co-extensive with the power to determine the existence of an employer-employee
relationship. The SC revisitsits former conclusion.

ISSUE:

Whether DOLE can make a determination of the existence of employer-employee relationship.

SC RULING:YES.

No limitation in the law was placed upon the power of the DOLE to determine the existence of an
employer-employee relationship. No procedure was laid down where the DOLE would only make a
preliminary finding, thatthe power was primarily held by the NLRC. The law did not say that the

DOLE would first seek the NLRC’s

determination of the existence of an employer-employee relationship, or that should the existence of

the employer-employee relationship be disputed, the DOLE would refer the matter to the NLRC. The
DOLE must have thepower to determine whether or not an employer-employee relationship exists, and
from there to decide whetheror not to issue compliance orders in accordance with Art. 128(b) of the
Labor Code, as amended by RA 7730.The determination of the existence of an employer-employee
relationship by the DOLE must be respected. Theexpanded visitorial and enforcement power of the
DOLE granted by RA 7730 would be rendered nugatory if thealleged employer could, by the simple
expedient of disputing the employer-employee relationship, force thereferral of the matter to the NLRC.
If the DOLE makes a finding that there is an existing employer-employeerelationship, it takes cognizance
of the matter, to the exclusion of the NLRC. The DOLE would have no jurisdictiononly if the employer-
employee relationship has already been terminated, or it appears, upon review, that noemployer-
employee relationship existed in the first place.If a complaint is brought before the DOLE to give effect
to the labor standards provisions of the Labor Code orother labor legislation, and there is a finding by
the DOLE that there is an existing employer-employee relationship,the DOLE exercises jurisdiction to the
exclusion of the NLRC. If the DOLE finds that there is no employer-employee relationship, the
jurisdiction is properly with the NLRC. If a complaint is filed with the DOLE, and it is accompanied by a
claim for reinstatement, the jurisdiction is properly with the Labor Arbiter, under Art. 217(3) ofthe Labor
Code. If a complaint is filed with the NLRC, and there is still an existing employer-employee
relationship,the jurisdiction is properly with the DOLE. The findings of the DOLE, however, may still be
questioned through apetition for certiorari under Rule 65 of the Rules of Court.

50. VICTOR METEORO v. CREATIVE CREATURES, GR No. 171275, 2009-07-13

Facts: Respondent is a domestic corporation engaged in the business of producing, providing, or

procuring the production of set designs and set construction services

On the other hand, petitioners were hired by respondent on various dates as artists, carpenters and
welders.

petitioners filed their respective complaints for non-payment of night shift differential pay, overtime
pay, holiday pay, 13th month pay, premium pay for Sundays and/or rest days, service incentive leave
pay, paternity... leave pay, educational assistance, rice benefits, and illegal and/or unauthorized
deductions from salaries against respondent, before the Department of Labor and Employment

In its position paper, respondent argued that the DOLE-NCR had no jurisdiction over the complaint of
the petitioners because of the absence of an employer-employee relationship. It added that petitioners
were free-lance individuals, performing special services with skills and... expertise

DOLE Regional Director Maximo Baguyot Lim issued an Order... directing respondent to pay petitioners

The Regional Director sustained petitioners' claim on the existence of an employer-employee

relationship using the determinants set forth by the Labor Code, specifically, the elements of control and
supervision, power of dismissal, payment of wages, and the selection and... engagement of employees.
He added that since the petitioners had worked for more than one year doing the same routine work,
they were regular employees with respect to the activity in which they were employed.

respondent elevated the matter to the Court of Appeal... s... the instant petition is GRANTED. For lack of
jurisdiction... the Orders... issued by respondent Secretary are hereby declared NULL and VOID.

Issues: Whether or not the Court of Appeals committed an error when it ruled that the instant case falls
within the exception clause of Article 128 (b) of the Labor Code... whether or not petitioners were
independent contractors/project employees/free lance workers

Ruling: We sustain the appellate court's conclusion that the instant case falls within the exclusive
jurisdiction of the NLRC.
The DOLE Secretary and her authorized representatives, such as the DOLE-NCR Regional Director, have
jurisdiction to enforce compliance with labor standards laws under the broad visitorial and enforcement
powers conferred by Article 128 of the Labor Code

The last sentence of Article 128 (b) of the Labor Code, otherwise known as the "exception clause,"
provides an instance when the Regional Director or his... representatives may be divested of jurisdiction
over a labor standards case.

Under prevailing jurisprudence, the so-called "exception clause" has the following elements, all of which
must concur:

(a) that the employer contests the findings of the labor regulations officer and raises issues thereon;

(b) that in order to resolve such issues, there is a need to examine evidentiary matters; and

(c) that such matters are not verifiable in the normal course of inspection.

In the present case, the CA aptly applied the "exception clause."

To resolve the issue raised by respondent, that is, the existence of an employer-employee relationship,
there is need to examine evidentiary matters.

Some businessmen, however, try to avoid an employer-employee relationship from arising in their
enterprises, because that juridical relation spawns obligations connected with workmen's
compensation, social security, medicare, termination pay, and unionism.

The most important index of an... employer-employee relationship is the so-called "control test," that is,
whether the employer controls or has reserved the right to control the employee, not only as to the
result of the work to be done, but also as to the means and methods by which the same is to be...
accomplished.

the petition is DENIED for lack of merit.

51. Metropolitan Bank and Trust Company vs. NWPC and RTWPB

G.R. No.144322, February 6, 2007

Facts: On October 17, 1995, the Regional Tripartite Wages and Productivity Board, Region II,
Tuguegarao, Cagayan (RTWPB), by virtue of Republic Act No. 6727 (R.A. No. 6727), otherwise known as
the Wage Rationalization Act, issued Wage Order No. R02-03 (Wage Order), as follows: Section 1. Upon
effectivity of this Wage Order, all employees/workers in the private sector throughout Region II,
regardless of the status of employment are granted an across-the-board increase of P15.00 daily.

The Wage Order was published in a newspaper of general circulation on December 2, 1995 and took
effect on January 1, 1996. Its Implementing Rules were approved on February 14, 1996. Per Section 13
of the Wage Order, any party aggrieved by the Wage Order may file an appeal with the National Wages
and Productivity Commission (NWPC) through the RTWPB within 10 calendar days from the publication
of the Wage Order.

Banker’s Council in a letter inquiry to NWPC requested for ruling to seek exemption from coverage of
the wage order since the members bank are paying more than the regular wage. NWPC replied that the
member banks are covered by the wage order and does not fall with the exemptible categories.

In another letter inquiry, Metrobank asked for the interpretation of the applicability of the wage order.
NWPC referred it to RTWPB. RTWPB in return clarified that establishments in Region 2 are covered by
the wage order. Petitioner filed a petition with the CA and denied the petition.

Issue: Whether or not the wage order is void thus it has no legal effect and the RTWPB acted in excess of
its jurisdiction.

Ruling: The Court finds that Section 1, Wage Order No. R02-03 is void insofar as it grants a wage
increase to employees earning more than the minimum wage rate; and pursuant to the separability
clause of the Wage Order, Section 1 is declared valid with respect to employees earning the prevailing
minimum wage rate.

The powers of NWPC are enumerated in ART. 121. Powers and Functions of the Commission. - The
Commission shall have the following powers and functions: (d) To review regional wage levels set by the
Regional Tripartite Wages and Productivity Boards to determine if these are in accordance with
prescribed guidelines and national development plans; (f) To review plans and programs of the Regional
Tripartite Wages and Productivity Boards to determine whether these are consistent with national
development plans; (g) To exercise technical and administrative supervision over the Regional Tripartite
Wages and Productivity Boards.

R.A. No. 6727 declared it a policy of the State to rationalize the fixing of minimum wages and to
promote productivity-improvement and gain-sharing measures to ensure a decent standard of living for
the workers and their families; to guarantee the rights of labor to its just share in the fruits of
production; to enhance employment generation in the countryside through industrial dispersal; and to
allow business and industry reasonable returns on investment, expansion and growth.

In line with its declared policy, R.A. No. 6727 created the NWPC, vested with the power to prescribe
rules and guidelines for the determination of appropriate minimum wage and productivity measures at
the regional, provincial or industry levels; and authorized the RTWPB to determine and fix the minimum
wage rates applicable in their respective regions, provinces, or industries therein and issue the
corresponding wage orders, subject to the guidelines issued by the NWPC. Pursuant to its wage fixing
authority, the RTWPB may issue wage orders which set the daily minimum wage rates, based on the
standards or criteria set by Article 124 of the Labor Code.

The Court declared that there are two ways of fixing the minimum wage: the "floor-wage" method and
the "salary-ceiling" method. 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.

In the present case, the RTWPB did not determine or fix the minimum wage rate by the "floor-wage
method" or the "salary-ceiling method" in issuing the Wage Order. The RTWPB did not set a wage level
nor a range to which a wage adjustment or increase shall be added. Instead, it granted an across-the-
board wage increase of P15.00 to all employees and workers of Region 2. In doing so, the RTWPB
exceeded its authority by extending the coverage of the Wage Order to wage earners receiving more
than the prevailing minimum wage rate, without a denominated salary ceiling. As correctly pointed out
by the OSG, the Wage Order granted additional benefits not contemplated by R.A. No. 6727.

52. SHS Perforated Materials, Inc. vs. Diaz

G.R. No. 185814 October 13, 2010

FACTS:
SHS is a start-up corporation organized and existing under the Philippines and registered with the
PEZA. Petitioner Hartmannshenn, a German national, is its president, in which capacity he
determines the administration and direction of the day-to-day business affairs of SHS. Petitioner
Schumacher, also a German national, is the treasurer and one of the board directors. As such, he is
authorized to pay all bills, payrolls, and other just debts of SHS of whatever nature upon maturity.
Schumacher is also the EVP of the European Chamber of Commerce of the Philippines (ECCP)
which is a separate entity from SHS. Both entities have an arrangement where ECCP handles the
payroll requirements of SHS to simplify business operations and minimize operational expenses.
Thus, the wages of SHS employees are paid out by ECCP, through its Accounting Services
Department headed by Taguiang.

Respondent Diaz was hired by petitioner SHS as Manager for Business Development on probationary
status from July 18, 2005 to January 18, 2006, with a monthly salary of P100,000.00. He was tasked
to perform sales/marketing functions, represent the company in its events, perform all functions,
duties and responsibilities to be assigned by the employer in due course, among others. In addition to
the above-mentioned responsibilities, respondent was also instructed by Hartmannshenn to report to
the SHS office and plant at least two (2) days every work week to observe technical processes
involved in the manufacturing of perforated materials, and to learn about the products of the
company, which respondent was hired to market and sell.

During respondentʼs employment, Hartmannshenn was often abroad and, because of business
exigencies, his instructions to respondent were either sent by electronic mail or relayed through
telephone or mobile phone. When he would be in the Philippines, he and the respondent held
meetings. As to respondentʼs work, there was no close supervision by him. However, during meetings
with the respondent, Hartmannshenn expressed his dissatisfaction over respondentʼs poor
performance. Respondent allegedly failed to make any concrete business proposal or implement any
specific measure to improve the productivity of the SHS office. In addition, respondent was said not to
have returned Hartmannshenn's calls and e-mails, to which Diaz denied.

Hartmannshenn instructed Taguiang not to release respondentʼs salary. Later that afternoon,
respondent called and inquired about his salary. Taguiang informed him that it was being withheld
and that he had to immediately communicate with Hartmannshenn. The next day, respondent served
on SHS a demand letter and a resignation letter, citing illegal and unfair labor practices.

ISSUES:
• WON the temporary withholding of respondentʼs salary/wages by petitioners was a valid
exercise of management prerogative
• WON respondent voluntarily resigned

HELD:
FIRST ISSUE- NO. Management prerogative refers “to the right of an employer to regulate all aspects
of employment, such as the freedom to prescribe work assignments, working methods, processes to
be followed, regulation regarding transfer of employees, supervision of their work, lay-off and
discipline, and dismissal and recall of work.” Although management prerogative refers to “the right to
regulate all aspects of employment,” it cannot be understood to include the right to temporarily
withhold salary/wages without the consent of the employee. To sanction such an interpretation would
be contrary to Article 116 of the Labor Code.

Any withholding of an employeeʼs wages by an employer may only be allowed in the form of wage
deductions under the circumstances provided in Article 113 of the Labor Code, as set forth below:

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.

As correctly pointed out by the LA, “absent a showing that the withholding of complainantʼs wages
falls under the exceptions provided in Article 113, the withholding thereof is thus unlawful.”

The Court finds petitionersʼ evidence insufficient to prove that respondent did not work from
November 16 to November 30, 2005. As can be gleaned from respondentʼs Contract of Probationary
Employment and the exchanges of electronic mail messages between Hartmannshenn and
respondent, the latterʼs duties as manager for business development entailed cultivating business
ties, connections, and clients in order to make sales. Such duties called for meetings with prospective
clients outside the office rather than reporting for work on a regular schedule. In other words, the
nature of respondentʼs job did not allow close supervision and monitoring by petitioners. Neither was
there any prescribed daily monitoring procedure established by petitioners to ensure that respondent
was doing his job. Therefore, granting that respondent failed to answer Hartmannshennʼs mobile calls
and to reply to two electronic mail messages and given the fact that he admittedly failed to report to
work at the SHS plant twice each week during the subject period, such cannot be taken to signify that
he did not work from November 16 to November 30, 2005.
SECOND ISSUE
The Court, however, agrees with the LA and the CA that respondent was forced to resign and was,
thus, constructively dismissed. In Duldulao v. Court of Appeals, it was written: "There is constructive
dismissal if an act of clear discrimination, insensibility, or disdain by an employer becomes so
unbearable on the part of the employee that it would foreclose any choice by him except to forego his
continued employment. It exists where there is cessation of work because continued employment is
rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank and a
diminution in pay."

What made it impossible, unreasonable or unlikely for respondent to continue working for SHS was
the unlawful withholding of his salary. For said reason, he was forced to resign.

53. G.R. No. 202961, February 04, 2015

EMER MILAN, RANDY MASANGKAY, WILFREDO JAVIER, RONALDO DAVID, BONIFACIO MATUNDAN,
NORA MENDOZA, ET AL., Petitioners, v. NATIONAL LABOR RELATIONS COMMISSION, SOLID MILLS,
INC., AND/OR PHILIP ANG, Respondents.

FACTS: Petitioners are Solid Mills, Inc.’s employees. They are represented by the National Federation of
Labor Unions (NAFLU), their collective bargaining agent.2chanroblesvirtuallawlibrary

Petitioners and their families were allowed to occupy SMI Village, a property owned by Solid Mills oout
of liberality and for the convenience of its employees . . . [and] on the condition that the employees . . .
would vacate the premises anytime the Company deems fit.”4chanroblesvirtuallawlibrary

Petitioners were informed that effective October 10, 2003, Solid Mills would cease its operations due to
serious business losses. NAFLU recognized Solid Mills’ closure due to serious business losses in the
memorandum of agreement. The memorandum of agreement provided for Solid Mills’ grant of
separation pay less accountabilities, accrued sick leave benefits, vacation leave benefits, and 13th
month pay to the employees.

Later, Solid Mills, sent to petitioners individual notices to vacate SMI Village. They were required to sign
a memorandum of agreement with release and quitclaim before their pay would be released.
Petitioners refused to sign the documents and demanded to be paid their benefits and separation pay.

Hence, petitioners filed complaints before the Labor Arbiter for alleged non-payment. They argued that
their accrued benefits and separation pay should not be withheld because their payment is based on
company policy and practice. Moreover, the 13th month pay is based on law. Their possession of Solid
Mills property is not an accountability that is subject to clearance procedures.

Petitioners argue that respondent Solid Mills and NAFLU’s memorandum of agreement has no provision
stating that benefits shall be paid only upon return of the possession of respondent Solid Mills’ property.
It only provides that the benefits shall be “less accountabilities,” which should not be interpreted to
include such possession.

ISSUE: WON PAYMENT OF THE MONETARY CLAIMS OF PETITIONERS SHOULD BE HELD IN ABEYANCE
PENDING COMPLIANCE OF THEIR ACCOUNTABILITIES TO RESPONDENT SOLID MILLS BY TURNING OVER
THE SUBJECT LOTS THEY RESPECTIVELY OCCUPY AT SMI VILLAGE, SUCAT, MUNTINLUPA CITY.

HELD: YES. Requiring clearance before the release of last payments to the employee is a standard
procedure among employers, whether public or private. Clearance procedures are instituted to ensure
that the properties, real or personal, belonging to the employer but are in the possession of the
separated employee, are returned to the employer before the employee’s departure.

As a general rule, employers are prohibited from withholding wages from employees. The Labor Code
provides:

Art. 116. Withholding of wages and kickbacks prohibited.

Art. 100. Prohibition against elimination or diminution of benefits.

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:

3. In cases where the employer is authorized by law or regulations issued by the Secretary of Labor and
Employment.

The Civil Code provides that the employer is authorized to withhold wages for debts due:

Article 1706. Withholding of the wages, except for a debt due, shall not be made by the employer.

“Debt” in this case refers to any obligation due from the employee to the employer. It includes any
accountability that the employee may have to the employer. There is no reason to limit its scope to
uniforms and equipment, as petitioners would argue.

“Accountability,” in its ordinary sense, means obligation or debt. As long as the debt or obligation was
incurred by virtue of the employer-employee relationship, generally, it shall be included in the
employee’s accountabilities that are subject to clearance procedures.

In this case, respondent Solid Mills claims that its properties are in petitioners’ possession by virtue of
their status as its employees. Respondent Solid Mills allowed petitioners to use its property as an act of
liberality. Put in other words, it would not have allowed petitioners to use its property had they not
been its employees.

It may be true that not all employees enjoyed the privilege of staying in respondent Solid Mills’
property. However, this alone does not imply that this privilege when enjoyed was not a result of the
employer-employee relationship. Petitioners’ possession should, therefore, be included in the term
“accountability.”
The return of the property’s possession became an obligation or liability on the part of the employees
when the employer-employee relationship ceased. Thus, respondent Solid Mills has the right to
withhold petitioners’ wages and benefits because of this existing debt or liability.

The law does not sanction a situation where employees who do not even assert any claim over the
employer’s property are allowed to take all the benefits out of their employment while they
simultaneously withhold possession of their employer’s property for no rightful reason.

Withholding of payment by the employer does not mean that the employer may renege on its obligation
to pay employees their wages, termination payments, and due benefits. The employees’ benefits are
also not being reduced. It is only subjected to the condition that the employees return properties
properly belonging to the employer. This is only consistent with the equitable principle that “no one
shall be unjustly enriched or benefited at the expense of another.”

54. Philippine Telegraph and Telephone Company vs. NLRC and Grace de Guzman [272 SCRA 596 May
23, 1997]

Facts:

Grace de Guzman was initially hired by PT&T as a reliever (Supernumerary Project Worker) for a fixed
period from November 21, 1990 until April 20, 1991 vice one C.F. Tenorio who went on maternity leave.
Under the Reliever Agreement she signed, her employment was to be immediately terminated upon
expiration of the agreed period. From June 10, 1991 to July 1, 1991 and from July 19, 1991 to August 8,
1991, De Guzman‘s services as reliever were again engaged in replacement of one Erlinda F. Dizon who
went on leave during both periods. After August 8, 1991, and pursuant to their Reliever Agreement, her
services were terminated. On September 2, 1991, de Guzman was asked to join the company as a
probationary employee for 150 days. In the application form, she indicated that her civil status was
single although she had contracted marriage a few months earlier and appears that she had made the
same representation in the two successive reliever agreements. When PT&T learned about it, de
Guzman was required to explain and was reminded about the company‘s policy of not accepting married
women for employment. De Guzman alleged she was unaware of PT&T‘s policy regarding married
women at the time and had not deliberately hidden her true civil status. De Guzman was dismissed
which she contested by initiating a complaint for illegal dismissal.

Issue:

Whether or not the dismissal of the Grace de Guzman on the account of her married status against the
company policy of PT&T was lawful.

SC Ruling:

Court ruled that the dismissal was unlawful and violative of Art. 36 of the Labor Code –Stipulation
against marriage. Court ruled that petitioner‘s policy of not accepting or considering as disqualified from
work any woman worker who contracts marriage runs afoul of the test of, and the right against,
discrimination, afforded all women workers by our labor laws and by no less than the Constitution.
Contrary to PT&T‘s assertion that it dismissed private respondent from employment on account of her
dishonesty, the record discloses clearly that her ties with the company were dissolved principally
because of the company‘s policy that married women are not qualified for employment in PT&T, and
not merely because of her supposed acts of dishonesty.

The government abhors any stipulation or policy in the nature of that adopted by PT&T. The Labor Code
states, in no uncertain terms, as follows:

ART. 136. Stipulation against marriage. - It shall be unlawful for an employer to require as a condition of
employment or continuation of employment that a woman shall not get married, or to stipulate
expressly or tacitly that upon getting married, a woman employee shall be deemed resigned or
separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a woman employee
merely by reason of marriage.

PT&T‘s policy is not only in derogation of the provisions of Article 136 of the Labor Code on the right of a
woman to be free from any kind of stipulation against marriage in connection with her employment, but
it likewise assaults good morals and public policy, tending as it does to deprive a woman of the freedom
to choose her status, a privilege that by all accounts inheres in the individual as an intangible and
inalienable right. Hence, while it is true that the parties to a contract may establish any agreements,
terms, and conditions that they may deem convenient, the same should not be contrary to law, morals,
good customs, public order, or public policy. Carried to its logical consequences, it may even be said that
PT&T‘s policy against legitimate marital bonds would encourage illicit or common-law relations and
subvert the sacrament of marriage.

55. Star Paper Corporation vs. Ronaldo Simbol G.R. No. 164774, April 12, 2006

FACTS: Simbol was employed by the company and met a co-employee and they eventually had a
relationship and got married. Prior to the marriage, the manager advise the couple that should they
decide to get married, one of them should resign pursuant to a company policy: 1) new applicant will
not be allowed to be hired if he/she has a relative, up to 3rd degree of consanguinity, already employed
by the company. 2) if the two employees got married, one of them should resign to preserve the policy
stated first. Simbol resigned.

ISSUE: Whether or not the policy of the employer banning spouse from working in the same company, a
valid exercise of management prerogative.

RULING: No, it is not a valid exercise of management prerogative and violates the rights of employees
under the constitution. The case at bar involves Article 136 of the Labor Code which provides “it shall be
unlawful for an employer to require as a condition of employment or continuation of employment that a
woman employee shall not get married, or to stipulate expressly or tacitly that upon getting married, a
woman employee shall be deemed resigned or separated , or to actually dismiss, discharge ,
discriminate or otherwise prejudice a woman employee merely by reason of her marriage.” The
company policy of Star Paper, to be upheld, must clearly establish the requirement of reasonableness. In
the case at bar, there was no reasonable business necessity. Petitioners failed to show how the marriage
of Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then an employee of the Repacking
Section, could be detrimental to its business operations. The questioned policy may not facially violate
Article 136 of the Labor Code but it creates a disproportionate effect and under the disparate impact
theory, the only way it could pass judicial scrutiny is a showing that it is reasonable despite the
discriminatory, albeit disproportionate, effect. Lastly, the absence of a statute expressly prohibiting
marital discrimination in our jurisdiction cannot benefit the petitioners.

56. BABAS V. LORENZO SHIPPING (G.R. NO. 186091; DECEMBER 15, 2010)

FACTS: Lorenzo Shipping Corporation (LSC) is a duly organized domestic corporation engaged in the
shipping industry; it owns several equipment necessary for its business. LSC entered into an Agreement
with Best Manpower Services, Inc. (BMSI). Under the Agreement, BMSI undertook to provide
maintenance and repair services to LSCs container vans, heavy equipment, trailer chassis, and generator
sets. BMSI further undertook to provide checkers to inspect all containers received for loading to and/or
unloading from its vessels. Simultaneous with the execution of the Agreement, LSC leased its
equipment, tools, and tractors to BMSI. The period of lease was coterminous with the Agreement.

BMSI then hired petitioners on various dates to work at LSC as checkers, welders, utility men, clerks,
forklift operators, motor pool and machine shop workers, technicians, trailer drivers, and mechanics.
Years later, LSC entered into another contract with BMSI, this time, a service contract.

In September 2003, petitioners filed with the Labor Arbiter a complaint for regularization against LSC
and BMSI. LSC terminated the Agreement. Consequently, petitioners lost their employment.

LA dismissed the complaint finding that petitioners were employees of BMSI. It was BMSI which hired
petitioners, paid their wages, and exercised control over them. On appeal, NLRC reversed the decision.
The CA reversed the NLRC ruling holding the BMSI is an independent contractor.

ISSUE: Did the CA erred in ignoring the clear evidence of record that BMSI was engaged in labor-only
contracting?

HELD: In distinguishing between prohibited labor-only contracting and permissible job contracting, the
totality of the facts and the surrounding circumstances of the case are to be considered.

Labor-only contracting, a prohibited act, is an arrangement where the contractor or subcontractor

merely recruits, supplies, or places workers to perform a job, work, or service for a principal. In labor-
only contracting, the following elements are present: (a) the contractor or subcontractor does not have
substantial capital or investment to actually perform the job, work, or service under its own account and
responsibility; and (b) the employees recruited, supplied, or placed by such contractor or subcontractor
perform activities which are directly related to the main business of the principal.

On the other hand, permissible job contracting or subcontracting refers to an arrangement whereby a
principal agrees to put out or farm out with the contractor or subcontractor the performance or
completion of a specific job, work, or service within a definite or predetermined period, regardless of
whether such job, work, or service is to be performed or completed within or outside the premises of
the principal.

The SS sustained the petitioners position that BMSI is engaged labor-only contracting. First, petitioners
worked at LSCs premises, and nowhere else. Other than the provisions of the Agreement, there was no
showing that it was BMSI which established petitioners working procedure and methods, which
supervised petitioners in their work, or which evaluated the same. There was absolute lack of evidence
that BMSI exercised control over them or their work, except for the fact that petitioners were hired by
BMSI. Second, LSC was unable to present proof that BMSI had substantial capital. The record is bereft of
any proof pertaining to the contractors capitalization, nor to its investment in tools, equipment, or
implements actually used in the performance or completion of the job, work, or service that it was
contracted to render. What is clear was that the equipment used by BMSI were owned by, and merely
rented from, LSC. Third, petitioners performed activities which were directly related to the main
business of LSC. The work of petitioners as checkers, welders, utility men, drivers, and mechanics could
only be characterized as part of, or at least clearly related to, and in the pursuit of, LSCs business.
Logically, when petitioners were assigned by BMSI to LSC, BMSI acted merely as a labor-only contractor.

Lastly, as found by the NLRC, BMSI had no other client except for LSC, and neither BMSI nor LSC refuted
this finding, thereby bolstering the NLRC finding that BMSI is a labor-only contractor.