Labor Law Cases-1-27
Labor Law Cases-1-27
Labor Law Cases-1-27
LEONEN, J.:
An employer is allowed to withhold terminal pay and benefits pending the employee's return of its
properties.
Petitioners are respondent Solid Mills, Inc.' s (Solid Mills) employees. They are represented by the
1
As Solid Mills’ employees, petitioners and their families were allowed to occupy SMI Village, a
property owned by Solid Mills. According to Solid Mills, this was "[o]ut of liberality and for the
3
convenience of its employees . . . [and] on the condition that the employees . . . would vacate the
premises anytime the Company deems fit." 4
In September 2003, 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
5
serious business losses in the memorandum of agreement dated September 1, 2003. The 6
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. Pertinent portions of the agreement provide:
7
WHEREAS, the COMPANY has incurred substantial financial losses and is currently experiencing
further severe financial losses;
WHEREAS, in view of such irreversible financial losses, the COMPANY will cease its operations on
October 10, 2003;
WHEREAS, all employees of the COMPANY on account of irreversible financial losses, will be
dismissed from employment effective October 10, 2003;
1. That UNION acknowledges that the COMPANY is experiencing severe financial losses
and as a consequence of which, management is constrained to cease the company’s
operations.
2. The UNION acknowledges that under Article 283 of the Labor Code, separation pay is
granted to employees who are dismissed due to closures or cessation of operations NOT
DUE to serious business losses.
3. The UNION acknowledges that in view of the serious business losses the Company has
been experiencing as seen in their audited financial statements, employees ARE NOT
granted separation benefits under the law.
4. The COMPANY, by way of goodwill and in the spirit of generosity agrees to grant financial
assistance less accountabilities to members of the Union based on length of service to be
computed as follows: (Italics in this paragraph supplied)
5. In view of the above, the members of the UNION will receive such financial assistance on
an equal monthly installments basis based on the following schedule:
First Check due on January 5, 2004 and every 5th of the month thereafter until December 5,
2004.
6. The COMPANY commits to pay any accrued benefits the Union members are entitled to,
specifically those arising from sick and vacation leave benefits and 13th month pay, less
accountabilities based on the following schedule:
....
8. The foregoing agreement is entered into with full knowledge by the parties of their rights
under the law and they hereby bind themselves not to conduct any concerted action of
whatsoever kind, otherwise the grant of financial assistance as discussed above will be
withheld. (Emphasis in the original)
8
Solid Mills filed its Department of Labor and Employment termination report on September 2, 2003. 9
Later, Solid Mills, through Alfredo Jingco, sent to petitioners individual notices to vacate SMI
Village.
10
Petitioners were no longer allowed to report for work by October 10, 2003. They were required to
11
sign a memorandum of agreement with release and quitclaim before their vacation and sick leave
benefits, 13th month pay, and separation pay would be released. Employees who signed the
12
memorandum of agreement were considered to have agreed to vacate SMI Village, and to the
demolition of the constructed houses inside as condition for the release of their termination benefits
and separation pay. Petitioners refused to sign the documents and demanded to be paid their
13
Hence, petitioners filed complaintsbefore the Labor Arbiter for alleged non-payment of separation
pay, accrued sick and vacation leaves, and 13th month pay. They argued that their accrued
15
benefits and separation pay should not be withheld becausetheir payment is based on company
policy and practice. Moreover, the 13th month pay is based on law, specifically, Presidential Decree
16
No. 851. Their possession of Solid Mills property is not an accountability that is subject to clearance
17
procedures. They had already turned over to SolidMills their uniforms and equipment when Solid
18
On the other hand, Solid Mills argued that petitioners’ complaint was premature because they had
not vacated its property.
20
The Labor Arbiter ruled in favor of petitioners. According to the Labor Arbiter, Solid Mills illegally
21
withheld petitioners’ benefits and separation pay. Petitioners’ right to the payment of their benefits
22
and separation pay was vested by law and contract. The memorandum of agreement dated
23
September 1, 2003 stated no condition to the effect that petitioners must vacate SolidMills’ property
before their benefits could be given to them. Petitioners’ possession should not be construed as
24
petitioners’ "accountabilities" that must be cleared first before the release of benefits. Their
25
possession "is not by virtue of any employer-employee relationship." It is a civil issue, which
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3) Nine (9) individual complaintsviz., of Maria Agojo, Joey Suarez, Ronaldo Vergara, Ronnie
Vergara, Antonio R. Dulo, Sr., Bryan D. Durano, Silverio P. Durano, Sr., Elizabeth Duarte
and Purificacion Malabanan are DISMISSED WITH PREJUDICE due to amicable settlement,
whereas, that of [RONIE ARANAS], [EMILITO NAVARRO], [NONILON PASCO],
[GENOVEVA PASCO], [OLIMPIO A. PASCO] are DISMISSED WITHOUT PREJUDICE, for
lack of interest and/or failure to prosecute.
The Computation and Examination unit is directed to cause the computation of the award in Pars. 2
and 3 above. (Emphasis in the original)
28
Solid Mills appealed to the National Labor Relations Commission. It prayed for, among others, the
29
dismissal of the complaints against it and the reversal of the Labor Arbiter’s decision.
30
The National Labor Relations Commission affirmed paragraph 3 of the Labor Arbiter’s dispositive
portion, but reversed paragraphs 1 and 2. Thus:
WHEREFORE, the Decision of Labor Arbiter Renaldo O. Hernandez dated 10/17/05 is AFFIRMED
in so far as par. 3 thereof is concerned but modified in that paragraphs 1 and 2 thereof are
REVERSED and SET ASIDE. Accordingly, the following complainants, namely: Emir Milan, Ramon
Masangkay, Alfredo Javier, Ronaldo David, Bonifacio Matundan, Nora Mendoza, Myrna Igcas, Raul
De Las Alas, Renato Estolano, Rex S. Dimaf[e]lix, Maura Milan, Jessica Baybayon, Alfredo
Mendoza, Roberto Igcas, Cleopatra Zacarias and Jerry L. Sesma’s monetary claims in the form of
separation pay, accrued 13th month pay for 2003, accrued vacation and sick leave pays are held in
abeyance pending compliance of their accountabilities to respondent company by turning over the
subject lots they respectively occupy at SMI Village Sucat
The National Labor Relations Commission noted that complainants Marilou Linga, Renato Linga,
IsmaelMata, and Carlito Damian were already paid their respective separation pays and
benefits. Meanwhile, Teodora Mahilom already retired long before Solid Mills’ closure. She was
32 33
The National Labor Relations Commission ruled that because of petitioners’ failure to vacate Solid
Mills’ property, Solid Mills was justified in withholding their benefits and separation pay. Solid Mills
35
granted the petitioners the privilege to occupy its property on account of petitioners’ employment. It 36
had the prerogative to terminate such privilege. The termination of Solid Mills and petitioners’
37
employer-employee relationship made it incumbent upon petitioners to turn over the property to
Solid Mills. 38
Petitioners filed a motion for partial reconsideration on October 18, 2010, but this was denied in the
39
Petitioners, thus, filed a petition for certiorari before the Court of Appeals to assail the National
41
LaborRelations Commission decision of August 31, 2010 and resolution of November 30, 2010. 42
On January 31, 2012, the Court of Appeals issued a decision dismissing petitioners’ petition, thus:
43
The Court of Appeals ruled that Solid Mills’ act of allowing its employees to make temporary
dwellings in its property was a liberality on its part. It may be revoked any time at its discretion. As a
45
consequence of Solid Mills’ closure and the resulting termination of petitioners, the employer-
employee relationship between them ceased to exist. There was no more reason for them to stay in
Solid Mills’ property. Moreover, the memorandum of agreement between Solid Mills and the union
46
representing petitioners provided that Solid Mills’ payment of employees’ benefits should be "less
accountabilities." 47
On petitioners’ claim that there was no evidence that Teodora Mahilom already received her
retirement pay, the Court of Appeals ruled that her complaint filed before the Labor Arbiter did not
include a claim for retirement pay. The issue was also raised for the first time on appeal, which is not
allowed. In any case, she already retired before Solid Mills ceased its operations.
48 49
The Court of Appeals agreed with the National Labor Relations Commission’s deletion of interest
since it found that Solid Mills’ act of withholding payment of benefits and separation pay was proper.
Petitioners’ terminal benefits and pay were withheld because of petitioners’ failure to vacate Solid
Mills’ property. 50
Finally, the Court of Appeals noted that Carlito Damian already received his separation pay and
benefits. Hence, he should no longer be awarded these claims.
51 52
In the resolution promulgated on July 16, 2012, the Court of Appeals denied petitioners’ motion for
reconsideration. 53
!Digest!
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
55
The fact that majority of NAFLU’s members were not occupants of respondent Solid Mills’ property is
evidence that possession of the property was not contemplated in the agreement. "Accountabilities"
57
should be interpreted to refer only to accountabilities that were incurred by petitioners while they
were performing their duties as employees at the worksite. 58
Moreover, applicable laws, company practice, or policies do not provide that 13th month pay, and
sick and vacation leave pay benefits, may be withheld pending satisfaction of liabilities by the
employee. 59
Petitioners also point out that the National Labor Relations Commission and the Court of Appeals
have no jurisdiction to declare that petitioners’ act of withholding possession of respondent Solid
Mills’ property is illegal. The regular courts have jurisdiction over this issue. It is independent from
60 61
For these reasons, and because, according to petitioners, the amount of monetary award is no
longer in question, petitioners are entitled to 12% interest per annum. 63
Petitioners also argue that Teodora Mahilom and Carlito Damian are entitled to their claims. They
insistthat Teodora Mahilom did not receive her retirement benefits and that Carlito Damian did not
receive his separation benefits. 64
Respondents Solid Mills and Philip Ang,in their joint comment, argue that petitioners’ failure to turn
over respondent Solid Mills’ property "constituted an unsatisfied accountability" for which reason
"petitioners’ benefits could rightfully be withheld."
65
The term "accountability" should be given its natural and ordinary meaning. 66
On the removal of the award of 12% interest per annum, respondents argue that such removal was
proper since respondent Solid Mills was justified in withholding the monetary claims. 69
Respondents argue that Teodora Mahilom had no more cause of action for retirement benefits
claim. She had already retired more than a decade before Solid Mills’ closure. She also already
70
Teodora Mahilom’s claim was also not included in the complaint filed before the Labor Arbiter.It was
improper to raise this claim for the first time on appeal. In any case, Teodora Mahilom’s claim was
asserted long after the three-year prescriptive period provided in Article 291 of the Labor Code. 72
Lastly, according to respondents, it would be unjust if Carlito Damian would be allowed to receive
monetary benefits again, which he, admittedly, already received from Solid Mills. 73
ISSUE/S:
HELD:
NO. The National Labor Relations Commission may preliminarily determine issues related to
rights arising from an employer-employee relationship.
The National Labor Relations Commission has jurisdiction to determine, preliminarily, the parties’
rights over a property, when it is necessary to determine an issue related to rights or claims arising
from an employer-employee relationship.
Article 217 provides that the Labor Arbiter, in his or her original jurisdiction, and the National Labor
Relations Commission, in its appellate jurisdiction, may determine issues involving claims arising
from employeremployee relations. Thus:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. – (1) 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
workers, whether agricultural or non-agricultural:
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;
5. Cases arising from any violation of Article 264 of this Code, including questions involving
the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity
benefits, all other claims, arising from employer-employee relations including those of
persons in domestic or household service, involving an amount exceeding five thousand
pesos (₱5,000.00), regardless of whether accompanied with a claim for reinstatement.
(2) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor
Arbiters. (Emphasis supplied)
Petitioners’ claim that they have the right to the immediate release of their benefits as employees
separated from respondent Solid Mills is a question arising from the employer-employee relationship
between the parties.
Claims arising from an employer-employee relationship are not limited to claims by an employee.
Employers may also have claims against the employee, which arise from the same relationship .
In Bañez v. Valdevilla, this court ruled that Article 217 of the Labor Code also applies to employers’
74
claim for damages, which arises from or is connected with the labor issue. Thus: Whereas this Court
in a number of occasions had applied the jurisdictional provisions of Article 217 to claims for
damages filed by employees, we hold that by the designating clause "arising from the employer-
employee relations" Article 217 should apply with equal force to the claim of an employer for actual
damages against its dismissed employee, where the basis for the claim arises from or is necessarily
connected with the fact of termination, and should be entered as a counterclaim in the illegal
dismissal case. 75
Bañez was cited in Domondon v. National Labor Relations Commission. One of the issues in
76
Domondon is whether the Labor Arbiter has jurisdiction to decide an issue on the transfer of
ownership of a vehicle assigned to the employee. It was argued that only regular courts have
jurisdiction to decide the issue. This court ruled that since the transfer of ownership of the vehicle to
77
the employee was connected to his separation from the employer and arose from the employer-
employee relationship of the parties, the employer’s claim fell within the LaborArbiter’s jurisdiction.
78
As a general rule, therefore, a claim only needs to be sufficiently connected to the labor issue raised
and must arise from an employer employee relationship for the labor tribunals to have jurisdiction.
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. The return of its properties in petitioners’ possession by virtue of their status as
employees is an issue that must be resolved to determine whether benefits can be released
immediately.
The issue raised by the employer is, therefore, connected to petitioners’ claim for benefits and is
sufficiently intertwined with the parties’ employer-employee relationship. Thus, it is properly within
the labor tribunals’ jurisdiction.
II
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 tothe 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. It shall be unlawful for any person, directly
or indirectly, to withhold any amount from the wages of a worker or induce him to give up any part of
his wages by force, stealth, intimidation, threat or by any other means whatsoever without the
worker’s consent.
The Labor Code also prohibits the elimination or diminution of benefits. Thus: Art. 100. Prohibition
against elimination or diminution of benefits. Nothing in this Book shall be construed to eliminate or
in any way diminish supplements, or other employee benefits being enjoyed at the time of
promulgation of this Code.
However, our law supports the employers’ institution of clearance procedures before the release of
wages. As an exception to the general rule that wages may not be withheld and benefits may not be
diminished, the Labor Code 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:
1. 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;
2. 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
3. In cases where the employer is authorized by law or regulations issued by the Secretary of
Labor and Employment. (Emphasis supplied)
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.
More importantly, respondent Solid Mills and NAFLU, the union representing petitioners, agreed that
the release of petitioners’ benefits shall be "less accountabilities."
"Accountability," in its ordinary sense, means obligation or debt. The ordinary meaning of the term
"accountability" does not limit the definition of accountability to those incurred in the worksite. 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.
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. Those who did avail of the privilege were employees of respondent
Solid Mills. Petitioners’ possession should, therefore, be included in the term "accountability."
Accountabilities of employees are personal. They need not be uniform among all employees in order
to be included in accountabilities incurred by virtue of an employer-employee relationship.
Petitioners do not categorically deny respondent Solid Mills’ ownership of the property, and they do
not claim superior right to it. What can be gathered from the findings ofthe Labor Arbiter, National
Labor Relations Commission, and the Court of Appeals is that respondent Solid Mills allowed the
use of its property for the benefit of petitioners as its employees. Petitioners were merely allowed to
possess and use it out of respondent Solid Mills’ liberality. The employer may, therefore, demand the
property at will.
79
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.
In Solas v. Power and Telephone Supply Phils., Inc., et al., this court recognized this right of the
employer when it ruled that the employee in that case was not constructively dismissed. Thus:
80
There was valid reason for respondents’ withholding of petitioner’s salary for the month of February
2000. Petitioner does not deny that he is indebted to his employer in the amount of around
95,000.00. Respondents explained that petitioner’s salary for the period of February 1-15, 2000 was
applied as partial payment for his debt and for withholding taxes on his income; while for the period
of February 15-28, 2000, petitioner was already on absence without leave, hence, was not entitled to
any pay.81
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
imultaneously 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." 82
For these reasons, we cannot hold that petitioners are entitled to interest of their withheld separation
benefits. These benefits were properly withheld by respondent Solid Mills because of their refusal to
return its property.
III
IV
Both the National Labor Relations Commission and the Court of Appeals found that Teodora
Mahilom already retired long before respondent Solid Mills’ closure. They found that she already
received her retirement benefits. We have no reason to disturb this finding. This court is not a trier of
facts. Findings of the National Labor Relations Commission, especially when affirmed by the Court
of Appeals, are binding upon this court.83
Moreover, Teodora Mahilom’s claim for retirement benefits was not included in her complaint filed
before the Labor Arbiter. Hence, it may not be raised in the appeal.
Similarly, the National Labor Relations Commission and the Court of Appeals found that Carlito
Damian already received his terminal benefits. Hence, he may no longer claim terminal benefits. The
fact that respondent Solid Mills has not yet demolished Carlito Damian’s house in SMI Village is not
evidence that he did not receive his benefits. Both the National Labor Relations Commission and the
Court of Appeals found that he executed an affidavit stating that he already received the benefits.
Absent any showing that the National Labor Relations Commission and the Court of Appeals
misconstrued these facts, we will not reverse these findings.
Our laws provide for a clear preference for labor. This is in recognition of the asymmetrical power of
those with capital when they are left to negotiate with their workers without the standards and
protection of law. In cases such as these, the collective bargaining unit of workers are able to get
more benefits and in exchange, the owners are able to continue with the program of cutting their
losses or wind down their operations due to serious business losses. The company in this case did
all that was required by law.
The preferential treatment given by our law to labor, however, is not a license for abuse. It is 84
not a signal to commit acts of unfairness that will unreasonably infringe on the property
rights of the company. Both labor and employer have social utility, and the law is not so
biased that it does not find a middle ground to give each their due.
Clearly, in this case, it is for the workers to return their housing in exchange for the release of their
benefits. This is what they agreed upon. It is what is fair in the premises.
1âwphi1
LEONEN, J.:
It is the burden of the employer to prove that a person whose services it pays for is an independent
contractor rather than a regular employee with or without a fixed term. That a person has a disease
does not per se entitle the employer to terminate his or her services. Termination is the last resort. At
the very least, a competent public health authority must certify that the disease cannot be cured
within six ( 6) months, even with appropriate treatment.
We decide this petition for review on certiorari filed by Fuji Television Network, Inc., seeking the
1
reversal of the Court of Appeals’ Decision dated June 25, 2012, affirming with modification the
2
In 2005, Arlene S. Espiritu ("Arlene") was engaged by Fuji Television Network, Inc. ("Fuji") as a news
correspondent/producer "tasked to report Philippine news to Fuji through its Manila Bureau field
4
office." Arlene’s employment contract initially provided for a term of one (1) year but was
5
successively renewed on a yearly basis with salary adjustment upon every renewal. Sometime in
6
January 2009, Arlene was diagnosed with lung cancer. She informed Fuji about her condition. In
7
turn, the Chief of News Agency of Fuji, Yoshiki Aoki, informed Arlene "that the company will have a
problem renewing her contract" since it would be difficult for her to perform her job. She "insisted
8 9
that she was still fit to work as certified by her attending physician."
10
After several verbal and written communications, Arlene and Fuji signed a non-renewal contract on
11
May 5, 2009 where it was stipulated that her contract would no longer be renewed after its expiration
on May 31, 2009. The contract also provided that the parties release each other from liabilities and
responsibilities under the employment contract. 12
In consideration of the non-renewal contract, Arlene "acknowledged receipt of the total amount of
US$18,050.00 representing her monthly salary from March 2009 to May 2009, year-end bonus, mid-
year bonus, and separation pay." However, Arlene affixed her signature on the nonrenewal contract
13
On May 6, 2009, the day after Arlene signed the non-renewal contract, she filed a complaint for
illegal dismissal and attorney’s fees with the National Capital Region Arbitration Branch of the
National Labor Relations Commission. She alleged that she was forced to sign the nonrenewal
contract when Fuji came to know of her illness and that Fuji withheld her salaries and other benefits
for March and April 2009 when she refused to sign. 15
Arlene claimed that she was left with no other recourse but to sign the non-renewal contract, and it
was only upon signing that she was given her salaries and bonuses, in addition to separation pay
equivalent to four (4) years.16
In the decision dated September 10, 2009, Labor Arbiter Corazon C. Borbolla dismissed Arlene’s
17
complaint. Citing Sonza v. ABS-CBN and applying the four-fold test, the Labor Arbiter held that
18 19
Arlene appealed before the National Labor Relations Commission. In its decision dated March 5,
2010, the National Labor Relations Commission reversed the Labor Arbiter’s decision. It held that
21
Arlene was a regular employee with respect to the activities for which she was employed since she
continuously rendered services that were deemed necessary and desirable to Fuji’s business. The 22
National Labor Relations Commission ordered Fuji to pay Arlene backwages, computed from the
date of her illegal dismissal. The dispositive portion of the decision reads:
23
WHEREFORE, premises considered, judgment is hereby rendered GRANTING the instant appeal.
The Decision of the Labor Arbiter dated 19 September 2009 is hereby REVERSED and SET ASIDE,
and a new one is issued ordering respondents-appellees to pay complainant-appellant backwages
computed from the date of her illegal dismissal until finality of this Decision.
SO ORDERED. 24
Arlene and Fuji filed separat emotions for reconsideration. Both motions were denied by the
25
National Labor Relations Commission for lack of merit in the resolution dated April 26, 2010. From
26
the decision of the National Labor Relations Commission, both parties filed separate petitions for
certiorari before the Court of Appeals. The Court of Appeals consolidated the petitions and
27
In the assailed decision, the Court of Appeals affirmed the National Labor Relations
Commission with the modification that Fuji immediately reinstate Arlene to her position as
News Producer without loss of seniority rights, and pay her backwages, 13th-month pay,
mid-year and year-end bonuses, sick leave and vacation leave with pay until reinstated,
moral damages, exemplary damages, attorney’sfees, and legal interest of 12% per annum of
the total monetary awards. The Court of Appeals ruled that:
29
WHEREFORE, for lack of merit, the petition of Fuji Television Network, Inc. and Yoshiki Aoki is
DENIED and the petition of Arlene S. Espiritu is GRANTED. Accordingly, the Decision dated March
5, 2010 of the National Labor Relations Commission, 6th Division in NLRC NCR Case No. 05-
06811-09 and its subsequent Resolution dated April 26, 2010 are hereby AFFIRMED with
MODIFICATIONS, as follows:
Fuji Television, Inc. is hereby ORDERED to immediately REINSTATE Arlene S. Espiritu to her
position as News Producer without loss of seniority rights and privileges and to pay her the following:
1. Backwages at the rate of $1,900.00 per month computed from May 5, 2009 (the date of
dismissal), until reinstated;
2. 13th Month Pay at the rate of $1,900.00 per annum from the date of dismissal, until
reinstated;
3. One and a half (1 1/2) months pay or $2,850.00 as midyear bonus per year from the date
of dismissal, until reinstated;
4. One and a half (1 1/2) months pay or $2,850.00 as year-end bonus per year from the date
of dismissal, until reinstated;
5. Sick leave of 30 days with pay or $1,900.00 per year from the date of dismissal, until
reinstated; and
6. Vacation leave with pay equivalent to 14 days or $1,425.00 per annum from date of
dismissal, until reinstated.
9. Attorney’s fees equivalent to 10% of the total monetary awards herein stated; and
10. Legal interest of twelve percent (12%) per annum of the total monetary awards computed
from May 5, 2009, until their full satisfaction.
The Labor Arbiter is hereby DIRECTED to make another recomputation of the above monetary
awards consistent with the above directives.
SO ORDERED. 30
In arriving at the decision, the Court of Appeals held that Arlene was a regular employee because
she was engaged to perform work that was necessary or desirable in the business of Fuji, and the
31
According to the Court of Appeals, Sonza does not apply in order to establish that Arlene was an
independent contractor because she was not contracted on account of any peculiar ability, special
talent, or skill. The fact that everything used by Arlene in her work was owned by Fuji negated the
33
The Court of Appeals also held that Arlene was illegally dismissed because Fuji failed to comply with
the requirements of substantive and procedural due process necessary for her dismissal since she
was a regular employee. 35
The Court of Appeals found that Arlene did not sign the non-renewal contract voluntarily and that the
contract was a mere subterfuge by Fuji to secure its position that it was her choice not to renew her
contract. She was left with no choice since Fuji was decided on severing her employment. 36
Fuji filed a motion for reconsideration that was denied in the resolution dated December 7, 2012 for
37
Fuji points out that Arlene was hired as a stringer, and it informed her that she would remain
one. She was hired as an independent contractor as defined in Sonza. Fuji had no control over her
40 41
work. The employment contracts were executed and renewed annually upon Arlene’s insistence to
42
which Fuji relented because she had skills that distinguished her from ordinary employees. Arlene 43
and Fuji dealt on equal terms when they negotiated and entered into the employment
contracts. There was no illegal dismissal because she freely agreed not to renew her fixed-term
44
contract as evidenced by her e-mail correspondences with Yoshiki Aoki. In fact, the signing of the
45
non-renewal contract was not necessary to terminate her employment since "such employment
terminated upon expiration of her contract." Finally, Fuji had dealt with Arlene in good faith, thus,
46
Fuji alleges that it did not need a permanent reporter since the news reported by Arlene could easily
be secured from other entities or from the internet. Fuji "never controlled the manner by which she
48
performed her functions." It was Arlene who insisted that Fuji execute yearly fixed-term contracts so
49
Fuji points out that Arlene reported for work for only five (5) days in February 2009, three (3) days in
March 2009, and one (1) day in April 2009. Despite the provision in her employment contract that
51
sick leaves in excess of 30 days shall not be paid, Fuji paid Arlene her entire salary for the months of
March, April, and May; four(4) months of separation pay; and a bonus for two and a half months for
a total of US$18,050.00. Despite having received the amount of US$18,050.00, Arlene still filed a
52
Fuji further argues that the circumstances would show that Arlene was not illegally dismissed. The
decision to not renew her contract was mutually agreed upon by the parties as indicated in Arlene’s
e-mail dated March 11, 2009 where she consented to the non-renewal of her contract but refused
54
to sign anything. Aoki informed Arlene in an e-mail dated March 12, 2009 that she did not need to
55 56
sign a resignation letter and that Fuji would pay Arlene’s salary and bonus until May 2009 as well as
separation pay. 57
Arlene sent an e-mail dated March 18, 2009 with her version of the non-renewal agreement that she
agreed to sign this time. This attached version contained a provision that Fuji shall re-hire her if she
58
was still interested to work for Fuji. For Fuji, Arlene’s e-mail showed that she had the power to
59
bargain. 60
Fuji then posits that the Court of Appeals erred when it held that the elements of an employer-
employee relationship are present, particularly that of control; that Arlene’s separation from
61
employment upon the expiration of her contract constitutes illegal dismissal; that Arlene is entitled
62
to reinstatement; and that Fuji is liable to Arlene for damages and attorney’s fees.
63 64
This petition for review on certiorari under Rule 45 was filed on February 8, 2013. On February 27, 65
2013, Arlene filed a manifestation stating that this court may not take jurisdiction over the case
66
since Fuji failed to authorize Corazon E. Acerden to sign the verification. Fuji filed a comment on
67
Based on the arguments of the parties, there are procedural and substantive issues for resolution:
I. Whether the petition for review should be dismissed as Corazon E. Acerden, the signatory
of the verification and certification of non forum shopping of the petition, had no authority to
sign the verification and certification on behalf of Fuji;
II. Whether the Court of Appeals correctly determined that no grave abuse of discretion was
committed by the National Labor Relations Commission when it ruled that Arlene was a
regular employee, not an independent contractor, and that she was illegally dismissed; and
III. Whether the Court of Appeals properly modified the National Labor Relations
Commission’s decision by awarding reinstatement, damages, and attorney’s fees.
In its comment on Arlene’s manifestation, Fuji alleges that Corazon was authorized to sign the
verification and certification of non-forum shopping because Mr. Shuji Yano was empowered under
the secretary’s certificate to delegate his authority to sign the necessary pleadings, including the
verification and certification against forum shopping. 69
On the other hand, Arlene points out that the authority given to Mr. Shuji Yano and Mr. Jin Eto in the
secretary’s certificate is only for the petition for certiorari before the Court of Appeals. Fuji did not
70
attach any board resolution authorizing Corazon or any other person to file a petition for review on
certiorari with this court. Shuji Yano and Jin Eto could not re-delegate the power that was delegated
71
to them. In addition, the special power of attorney executed by Shuji Yano in favor of Corazon
72
indicated that she was empowered to sign on behalf of Shuji Yano, and not on behalf of Fuji. 73
Rule 7, Section 4 of the 1997 Rules of Civil Procedure provides the requirement of verification, while
Section 5 of the same rule provides the requirement of certification against forum shopping. These
sections state:
SEC. 4. Ver if ica tio n. — Except when otherwise specifically required by law or rule, pleadings need
not be under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations
therein are true and correct of his knowledge and belief.
SEC. 5. Certification against forum shopping.— The plaintiff or principal party shall certify under oath
in the complaint orother initiatory pleading asserting a claim for relief or in a sworn certification
annexed thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any
action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and,
to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such
other pending action or claim, a complete statement of the present status thereof; and (c) if he
should thereafter learn that the same or similar action or claim has been filed or is pending, he shall
report that fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory
pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere amendment of the
complaint or other initiatory pleading but shall be cause for the dismissal of the case without
prejudice, unless otherwise provided, upon motion and after hearing. The submission of a false
certification or non-compliance with any of the undertakings therein shall constitute indirect contempt
of court, without prejudice to the corresponding administrative and criminal actions. If the acts of the
party or his counsel clearly constitute willful and deliberate forum shopping, the same shall be
ground for summary dismissal with prejudice and shall constitute direct contempt, as well as a cause
for administrative sanctions.
Section 4(e) of Rule 45 requires that petitions for review should "contain a sworn certification
74
against forum shopping as provided in the last paragraph of section 2, Rule 42." Section 5 of the
same rule provides that failure to comply with any requirement in Section 4 is sufficient ground to
dismiss the petition.
Effects of non-compliance
Uy v. Landbank discussed the effect of non-compliance with regard to verification and stated that:
75
[t]he requirement regarding verification of a pleading is formal, not jurisdictional. Such requirement is
simply a condition affecting the form of pleading, the non-compliance of which does not necessarily
render the pleading fatally defective. Verification is simply intended to secure an assurance that the
allegations in the pleading are true and correct and not the product of the imagination or a matter of
speculation, and that the pleading is filed in good faith. The court may order the correction of the
pleading if the verification is lacking or act on the pleading although it is not verified, if the attending
circumstances are such that strict compliance with the rules may be dispensed with in order that the
ends of justice may thereby be served. (Citations omitted)
76
Shipside Incorporated v. Court of Appeals cited the discussion in Uy and differentiated its effect
77
On the other hand, the lack of certification against forum shopping is generally not curable by the
submission thereof after the filing of the petition. Section 5, Rule 45 of the 1997 Rules of Civil
Procedure provides that the failure of the petitioner to submit the required documents that should
accompany the petition, including the certification against forum shopping, shall be sufficient ground
for the dismissal thereof. The same rule applies to certifications against forum shopping signed by a
person on behalf of a corporation which are unaccompanied by proof that said signatory is
authorized to file a petition on behalf of the corporation. (Emphasis supplied) Effects of substantial
78
compliance with the requirement of verification and certification against forum shopping
Although the general rule is that failure to attach a verification and certification against forum
shopping is a ground for dismissal, there are cases where this court allowed substantial compliance.
In Loyola v. Court of Appeals, petitioner Alan Loyola submitted the required certification one day
79
after filing his electoral protest. This court considered the subsequent filing as substantial
80
compliance since the purpose of filing the certification is to curtail forum shopping. 81
In LDP Marketing, Inc. v. Monter, Ma. Lourdes Dela Peña signed the verification and certification
82
against forum shopping but failed to attach the board resolution indicating her authority to sign. In a
83
motion for reconsideration, LDP Marketing attached the secretary’s certificate quoting the board
resolution that authorized Dela Peña. Citing Shipside, this court deemed the belated submission as
84
substantial compliance since LDP Marketing complied with the requirement; what it failed to do was
to attach proof of Dela Peña’s authority to sign. Havtor Management Phils., Inc. v. National Labor
85
Commission involved petitions that were dismissed for failure to attach any document showing that
87
the signatory on the verification and certification against forum-shopping was authorized. In both
88
cases, the secretary’s certificate was attached to the motion for reconsideration. This court
89
For the guidance of the bench and bar, the Court restates in capsule form the jurisprudential
pronouncements . . . respecting non-compliance with the requirement on, or submission of defective,
verification and certification against forum shopping:
3) 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.
5) The certification against forum shopping must be signed by all the plaintiffs or petitioners
in a case; otherwise, those who did not sign will be dropped as parties to the case. Under
reasonable or justifiable circumstances, however, as when all the plaintiffs or petitioners
share a common interest and invoke a common cause of action or defense, the signature of
only one of them inthe certification against forum shopping substantially complies with the
Rule.
6) Finally, the certification against forum shopping must be executed by the party-pleader,
not by his counsel. If, however, for reasonable or justifiable reasons, the party-pleader is
unable to sign, he must execute a Special Power of Attorney designating his counsel of
record to sign on his behalf. 92
In its petition for review on certiorari, Fuji attached Hideaki Ota’s secretary’s certificate, authorizing
94
Shuji Yano and Jin Eto to represent and sign for and on behalf of Fuji. The secretary’s certificate
95
was duly authenticated by Sulpicio Confiado, Consul-General of the Philippines in Japan. Likewise
96
attached to the petition is the special power of attorney executed by Shuji Yano, authorizing Corazon
to sign on his behalf. The verification and certification against forum shopping was signed by
97
Corazon. 98
Arlene filed the manifestation dated February 27, 2013, arguing that the petition for review should be
dismissed because Corazon was not duly authorized to sign the verification and certification against
forum shopping.
Fuji filed a comment on Arlene’s manifestation, stating that Corazon was properly authorized to sign.
On the basis of the secretary’s certificate, Shuji Yano was empowered to delegate his authority.
Quoting the board resolution dated May 13, 2010, the secretary's certificate states:
(a) The Corporation shall file a Petition for Certiorari with the Court of Appeals, against
Philippines’ National Labor Relations Commission ("NLRC") and Arlene S. Espiritu,
pertaining to NLRC-NCR Case No. LAC 00-002697-09, RAB No. 05-06811-00 and entitled
"Arlene S. Espiritu v. Fuji Television Network, Inc./Yoshiki Aoki", and participate in any other
subsequent proceeding that may necessarily arise therefrom, including but not limited to the
filing of appeals in the appropriate venue;
(b) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby authorized, to verify and
execute the certification against nonforum shopping which may be necessary or required to
be attached to any pleading to [sic] submitted to the Court of Appeals; and the authority to so
verify and certify for the Corporation in favor of the said persons shall subsist and remain
effective until the termination of the said case;
....
(d) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby authorized, to represent
and appear on behalf the [sic] Corporation in all stages of the [sic] this case and in any other
proceeding that may necessarily arise thereform [sic], and to act in the Corporation’s name,
place and stead to determine, propose, agree, decide, do, and perform any and all of the
following:
Shuji Yano executed a special power of attorney appointing Ms. Ma. Corazon E. Acerden and Mr.
Moises A. Rollera as his attorneys-in-fact. The special power of attorney states:
100
That I, SHUJI YANO, of legal age, Japanese national, with office address at 2-4-8 Daiba, Minato-Ku,
Tokyo, 137-8088 Japan, and being the representative of Fuji TV, INc., [sic] (evidenced by the
attached Secretary’s Certificate) one of the respondents in NLRC-NCR Case No. 05-06811-00
entitled "Arlene S. Espiritu v. Fuji Television Network, Inc./Yoshiki Aoki", and subsequently docketed
before the Court of Appeals asC.A. G.R. S.P. No. 114867 (Consolidated with SP No. 114889) do
hereby make, constitute and appoint Ms. Ma. Corazon E. Acerden and Mr. Moises A. Rolleraas my
true and lawful attorneys-in fact for me and my name, place and stead to act and represent me in the
above-mentioned case, with special power to make admission/s and stipulations and/or to make and
submit as well as to accept and approve compromise proposals upon such terms and conditions and
under such covenants as my attorney-in-fact may deem fit, and to engage the services of Villa Judan
and Cruz Law Offices as the legal counsel to represent the Company in the Supreme Court;
The said Attorneys-in-Fact are hereby further authorized to make, sign, execute and deliver such
papers or documents as may be necessary in furtherance of the power thus granted, particularly to
sign and execute the verification and certification of non-forum shopping needed to be
filed. (Emphasis in the original)
101
In its comment on Arlene’s manifestation, Fuji argues that Shuji Yano could further delegate his
102
authority because the board resolution empowered him to "act in the Corporation’s name, place and
stead to determine, propose, agree, decided [sic], do and perform any and all of the following: . . .
such other matters as may aid in the prompt disposition of the action." To clarify, Fuji attached a
103
verification and certification against forum shopping, but Arlene questions Corazon’s authority to
sign. Arlene argues that the secretary’s certificate empowered Shuji Yano to file a petition for
certiorari before the Court of Appeals, and not a petition for review before this court, and that since
Shuji Yano’s authority was delegated to him, he could not further delegate such power. Moreover,
Corazon was representing Shuji Yano in his personal capacity, and not in his capacity as
representative of Fuji.
A review of the board resolution quoted in the secretary’s certificate shows that Fuji shall "file a
Petition for Certiorari with the Court of Appeals" and "participate in any other subsequent
104
proceeding that may necessarily arise therefrom, including but not limited to the filing of appeals in
the appropriate venue," and that Shuji Yano and Jin Eto are authorized to represent Fuji "in any
105
other proceeding that may necessarily arise thereform [sic]." As pointed out by Fuji, Shuji Yano and
106
Jin Eto were also authorized to "act in the Corporation’s name, place and stead to determine,
propose, agree, decide, do, and perform anyand all of the following: . . . 5. Such other matters as
may aid in the prompt disposition of the action." 107
Considering that the subsequent proceeding that may arise from the petition for certiorari with the
Court of Appeals is the filing of a petition for review with this court, Fuji substantially complied with
the procedural requirement.
On the issue of whether Shuji Yano validly delegated his authority to Corazon, Article 1892 of the
Civil Code of the Philippines states:
ART. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so;
but he shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without designating the person, and the person
appointed was notoriously incompetent or insolvent. All acts of the substitute appointed
against the prohibition of the principal shall be void.
The secretary’s certificate does not state that Shuji Yano is prohibited from appointing a substitute.
In fact, heis empowered to do acts that will aid in the resolution of this case.
This court has recognized that there are instances when officials or employees of a corporation can
sign the verification and certification against forum shopping without a board resolution. In Cagayan
Valley Drug Corporation v. CIR, it was held that:
108
In sum, we have held that the following officials or employees of the company can sign the
verification and certification without need of a board resolution: (1) the Chairperson of the Board of
Directors, (2) the President of a corporation, (3) the General Manager or Acting General Manager,
(4) Personnel Officer, and (5) an Employment Specialist in a labor case.
While the above cases do not provide a complete listing of authorized signatories to the verification
109
and certification required by the rules, the determination of the sufficiency of the authority was done
on a case to case basis. The rationale applied in the foregoing cases is to justify the authority of
corporate officers or representatives of the corporation to sign the verification or certificate against
forum shopping, being ‘in a position to verify the truthfulness and correctness of the allegations in
the petition.’ 110
Corazon’s affidavit states that she is the "office manager and resident interpreter of the Manila
111
Bureau of Fuji Television Network, Inc." and that she has "held the position for the last twenty-three
112
years." 113
As the office manager for 23 years,Corazon can be considered as having knowledge of all matters in
Fuji’s Manila Bureau Office and is in a position to verify "the truthfulness and the correctness of the
allegations in the Petition." 114
Thus, Fuji substantially complied with the requirements of verification and certification against forum
shopping.
Before resolving the substantive issues in this case, this court will discuss the procedural parameters
of a Rule 45 petition for review in labor cases.
II
Article 223 of the Labor Code does not provide any mode of appeal for decisions of the National
115
Labor Relations Commission. It merely states that "[t]he decision of the Commission shall be final
and executory after ten (10) calendar days from receipt thereof by the parties." Being final, it is no
longer appealable. However, the finality of the National Labor Relations Commission’s decisions
does not mean that there is no more recourse for the parties.
In St. Martin Funeral Home v. National Labor Relations Commission, this court cited several
116
cases and rejected the notion that this court had no jurisdiction to review decisions of the National
117
Labor Relations Commission. It stated that this court had the power to review the acts of the
National Labor Relations Commission to see if it kept within its jurisdiction in deciding cases and
alsoas a form of check and balance. This court then clarified that judicial review of National Labor
118
Relations Commission decisions shall be by way of a petition for certiorari under Rule 65. Citing the
doctrine of hierarchy of courts, it further ruled that such petitions shall be filed before the Court of
Appeals. From the Court of Appeals, an aggrieved party may file a petition for review on certiorari
under Rule 45.
A petition for certiorari under Rule 65 is an original action where the issue is limited to grave
abuse of discretion. As an original action, it cannot be considered as a continuation of the
proceedings of the labor tribunals.
On the other hand, a petition for review on certiorari under Rule 45 is a mode of appeal where the
issue is limited to questions of law. In labor cases, a Rule 45 petition is limited toreviewing whether
the Court of Appeals correctly determined the presence or absence of grave abuse of discretion and
deciding other jurisdictional errors of the National Labor Relations Commission. 119
In Odango v. National Labor Relations Commission, this court explained that a petition for
120
commission of grave abuse of discretion amounting to lack or excess of jurisdiction." A petition for
122
certiorari does not include a review of findings of fact since the findings of the National Labor
Relations Commission are accorded finality. In cases where the aggrieved party assails the
123
National Labor Relations Commission’s findings, he or she must be able to show that the
Commission "acted capriciously and whimsically or in total disregard of evidence material to the
controversy." 124
When a decision of the Court of Appeals under a Rule 65 petition is brought to this court by way of a
petition for review under Rule 45, only questions of law may be decided upon. As held in Meralco
Industrial v. National Labor Relations Commission: 125
This Court is not a trier of facts. Well-settled is the rule that the jurisdiction of this Court ina petition
for review on certiorari under Rule 45 of the Revised Rules of Court is limited to reviewing only
errors of law, not of fact, unless the factual findings complained of are completely devoid of
support from the evidence on record, or the assailed judgment is based on a gross
misapprehension of facts. Besides, factual findings of quasi-judicial agencies like the NLRC, when
affirmed by the Court of Appeals, are conclusive upon the parties and binding on this Court. 126
Career Philippines v. Serna, citing Montoya v. Transmed, is instructive on the parameters of
127 128
As a rule, only questions of law may be raised in a Rule 45 petition. In one case, we discussed
the particular parameters of a Rule 45 appeal from the CA’s Rule 65 decision on a labor case, as
follows:
In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast with the
review for jurisdictional error that we undertake under Rule 65. Furthermore, Rule 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. (Emphasis in the original)
129
Justice Brion’s dissenting opinion in Abott Laboratories, PhiIippines v. Aicaraz discussed that in
130
petitions for review under Rule 45, "the Court simply determines whether the legal correctness of the
CA’s finding that the NLRC ruling . . . had basis in fact and in Iaw." In this kind of petition, the
131
proper question to be raised is, "Did the CA correctly determine whether the NLRC committed grave
abuse of discretion in ruling on the case?"132
Justice Brion’s dissenting opinion also laid down the following guidelines:
If the NLRC ruling has basis in the evidence and the applicable law and jurisprudence, then no grave
abuse of discretion exists and the CA should so declare and, accordingly, dismiss the petition. If
grave abuse of discretion exists, then the CA must grant the petition and nullify the NLRC ruling,
entering at the same time the ruling that is justified under the evidence and the governing law, rules
and jurisprudence. In our Rule 45 review, this Court must denythe petition if it finds that the CA
correctly acted. (Emphasis in the original)
133
These parameters shall be used in resolving the substantive issues in this petition.
III
In this case, there is no question that Arlene rendered services to Fuji. However, Fuji alleges that
Arlene was an independent contractor, while Arlene alleges that she was a regular employee. To
resolve this issue, we ascertain whether an employer-employee relationship existed between Fuji
and Arlene.
This court has often used the four-fold test to determine the existence of an employer-employee
relationship. Under the four-fold test, the "control test" is the most important. As to how the
134
elements in the four-fold test are proven, this court has discussed that:
[t]here is no hard and fast rule designed to establish the aforesaid elements. Any competent and
relevant evidence to prove the relationship may be admitted. Identification cards, cash vouchers,
social security registration, appointment letters or employment contracts, payrolls, organization
charts, and personnel lists, serve as evidence of employee status. 135
If the facts of this case vis-à-vis the four-fold test show that an employer-employee relationship
existed, we then determine the status of Arlene’s employment, i.e., whether she was a regular
employee. Relative to this, we shall analyze Arlene’s fixed-term contract and determine whether it
supports her argument that she was a regular employee, or the argument of Fuji that she was an
independent contractor. We shall scrutinize whether the nature of Arlene’s work was necessary and
desirable to Fuji’s business or whether Fuji only needed the output of her work. If the circumstances
show that Arlene’s work was necessary and desirable to Fuji, then she is presumed to be a regular
employee. The burden of proving that she was an independent contractor lies with Fuji.
evidence" has been defined as "such amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion." 137
If Arlene was a regular employee, we then determine whether she was illegally dismissed. In
complaints for illegal dismissal, the burden of proof is on the employee to prove the fact of
dismissal. Once the employee establishes the fact of dismissal, supported by substantial
138
evidence, the burden of proof shifts to the employer to show that there was a just or
authorized cause for the dismissal and that due process was observed. 139
IV
Fuji alleges that Arlene was an independent contractor, citing Sonza v. ABS-CBN and relying on the
following facts: (1) she was hired because of her skills; (2) her salary was US$1,900.00, which is
higher than the normal rate; (3) she had the power to bargain with her employer; and (4) her contract
was for a fixed term. According to Fuji, the Court of Appeals erred when it ruled that Arlene was
forcedto sign the non-renewal agreement, considering that she sent an email with another version of
the non-renewal agreement. Further, she is not entitled to moral damages and attorney’s fees
140
because she acted in bad faith when she filed a labor complaint against Fuji after receiving
US$18,050.00 representing her salary and other benefits. Arlene argues that she was a regular
141
employee because Fuji had control and supervision over her work. The news events that she
covered were all based on the instructions of Fuji. She maintains that the successive renewal of
142
her employment contracts for four (4) years indicates that her work was necessary and
desirable. In addition, Fuji’s payment of separation pay equivalent to one (1) month’s pay per year
143
of service indicates that she was a regular employee. To further support her argument that she was
144
not an independent contractor, she states that Fuji owns the laptop computer and mini-camera that
she used for work. Arlene also argues that Sonza is not applicable because she was a plain
145
reporter for Fuji, unlike Jay Sonza who was a news anchor, talk show host, and who enjoyed a
celebrity status. On her illness, Arlene points outthat it was not a ground for her dismissal because
146
her attending physician certified that she was fit to work. 147
Arlene admits that she signed the non-renewal agreement with quitclaim, not because she agreed to
itsterms, but because she was not in a position to reject the non-renewal agreement. Further, she
badly needed the salary withheld for her sustenance and medication. She posits that her
148
acceptance of separation pay does not bar filing of a complaint for illegal dismissal. 149
Art. 280. Regular and casual employment. The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be
deemed to be 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, except where the employment
has been fixed for a specific project or undertaking the completion or termination of which has been
determined at the time of the 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.
This provision classifies employees into regular, project, seasonal, and casual. It further classifies
regular employees into two kinds: (1) those "engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer"; and (2) casual
employees who have "rendered at least one year of service, whether such service is
continuous or broken."
Another classification of employees, i.e., employees with fixed-term contracts, was recognized in
Brent School, Inc. v. Zamora where this court discussed that:
150
Logically, the decisive determinant in the term employment should not be the activities that the
employee is called upon to perform, but the day certain agreed upon by the parties for the
commencement and termination of their employment relationship, a day certain being understood to
be "that which must necessarily come, although it may not be known when." (Emphasis in the
151
original)
This court further discussed that there are employment contracts where "a fixed term is an
essential and natural appurtenance" such as overseas employment contracts and officers in
152
educational institutions.
153
GMA Network, Inc. v. Pabriga expounded the doctrine on fixed term contracts laid down in Brentin
154
Cognizant of the possibility of abuse in the utilization of fixed term employment contracts, we
emphasized in Brentthat where from the circumstances it is apparent that the periods have been
imposed to preclude acquisition of tenurial security by the employee, they should be struck down as
contrary to public policy or morals. We thus laid down indications or criteria under which "term
employment" cannot be said to be in circumvention of the law on security of tenure, namely:
1) The fixed period of employment was knowingly and voluntarily agreed upon by the parties without
any force, duress, or improper pressure being brought to bear upon the employee and absent any
other circumstances vitiating his consent; or
2) It satisfactorily appears that the employer and the employee dealt with each other on more or less
equal terms with no moral dominance exercised by the former or the latter.
These indications, which must be read together, make the Brent doctrine applicable only in a few
special cases wherein the employer and employee are on more or less in equal footing in entering
into the contract. The reason for this is evident: when a prospective employee, on account of special
skills or market forces, is in a position to make demands upon the prospective employer, such
prospective employee needs less protection than the ordinary worker. Lesser limitations on the
parties’ freedom of contract are thus required for the protection of the employee. (Citations omitted)
155
For as long as the guidelines laid down in Brentare satisfied, this court will recognize the validity of
the fixed-term contract.
In Labayog v. M.Y. San Biscuits, Inc., this court upheld the fixedterm employment of petitioners
156
because from the time they were hired, they were informed that their engagement was for a specific
period. This court stated that:
[s]imply put, petitioners were not regular employees. While their employment as mixers, packers and
machine operators was necessary and desirable in the usual business of respondent company, they
were employed temporarily only, during periods when there was heightened demand for production.
Consequently, there could have been no illegal dismissal when their services were terminated on
expiration of their contracts. There was even no need for notice of termination because they knew
exactly when their contracts would end. Contracts of employment for a fixed period terminate on
their own at the end of such period.
Contracts of employment for a fixed period are not unlawful. What is objectionable is the practice of
some scrupulous employers who try to circumvent the law protecting workers from the capricious
termination of employment. (Citation omitted)
157
Caparoso v. Court of Appeals upheld the validity of the fixed-term contract of employment.
158
Caparoso and Quindipan were hired as delivery men for three (3) months. At the end of the third
month, they were hired on a monthly basis. In total, they were hired for five (5) months. They filed a
complaint for illegal dismissal. This court ruled that there was no evidence indicating that they were
159
pressured into signing the fixed-term contracts. There was likewise no proof that their employer was
engaged in hiring workers for five (5) months onlyto prevent regularization. In the absence of these
facts, the fixed-term contracts were upheld as valid. On the other hand, an independent contractor
160
is defined as:
. . . one who carries on a distinct and independent business and undertakes to perform the job, work,
or service on its own account and under one’s own responsibility according to one’s 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. 161
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another
person for the performance of the former’s work, the employees of the contractor and of the latter’s
subcontractor, if any, shall be paid in accordance with the provisions of this Code.
....
The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the
contracting-out of labor to protect the rights of workers established under this Code. In so prohibiting
or restricting, he may make appropriate distinctions between labor-only contracting and job
contracting as well as differentiations within these types of contracting and determine who among
the parties involved shall be considered the employer for purposes of this Code, to prevent any
violation or circumvention of any provision of this Code.
There is "labor-only" contracting 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. In such cases, 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 latterwere directly employed by him.
In Department Order No. 18-A, Seriesof 2011, of the Department of Labor and Employment, a
contractor is defined as having:
Section 3. . . .
....
(c) . . . an arrangement whereby a principal agrees to put out or farm out with a contractor 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
oroutside the premises of the principal.
This department order also states that there is a trilateral relationship in legitimate job contracting
and subcontracting arrangements among the principal, contractor, and employees of the contractor.
There is no employer-employee relationship between the contractor and principal who engages the
contractor’s services, but there is an employer-employee relationship between the contractor and
workers hired to accomplish the work for the principal. 162
Jurisprudence has recognized another kind of independent contractor: individuals with unique skills
and talents that set them apart from ordinary employees. There is no trilateral relationship in this
case because the independent contractor himself or herself performs the work for the principal. In
other words, the relationship is bilateral.
In Orozco v. Court of Appeals, Wilhelmina Orozco was a columnist for the Philippine Daily Inquirer.
163
This court ruled that she was an independent contractor because of her "talent, skill, experience, and
her unique viewpoint as a feminist advocate." In addition, the Philippine Daily Inquirer did not have
164
the power of control over Orozco, and she worked at her own pleasure. 165
Semblante v. Court of Appeals involved a masiador and a sentenciador. This court ruled that
166 167 168
"petitioners performed their functions as masiadorand sentenciador free from the direction and
control of respondents" and that the masiador and sentenciador "relied mainly on their ‘expertise
169
existed.
Bernarte v. Philippine Basketball Association involved a basketball referee. This court ruled that "a
171
referee is an independent contractor, whose special skills and independent judgment are required
specifically for such position and cannot possibly be controlled by the hiring party." 172
In these cases, the workers were found to be independent contractors because of their unique skills
and talents and the lack of control over the means and methods in the performance of their work.
In other words, there are different kinds of independent contractors: those engaged in legitimate job
contracting and those who have unique skills and talents that set them apart from ordinary
employees.
A contract is defined as "a meeting of minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some service." Parties are free to stipulate on
174
terms and conditions in contracts as long as these "are not contrary to law, morals, good customs,
public order, or public policy." This presupposes that the parties to a contract are on equal footing.
175
Theycan bargain on terms and conditions until they are able to reach an agreement.
On the other hand, contracts of employment are different and have a higher level of regulation
because they are impressed with public interest. Article XIII, Section 3 of the 1987 Constitution
provides full protection to labor:
....
LABOR
Section 3. The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law. They shall be
entitled to security of tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights and benefits as may be
provided by law.
The State shall promote the principle of shared responsibility between workers and employers and
the preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce
their mutual compliance therewith to foster industrial peace.
The State shall regulate the relations between workers and employers, recognizing the right of labor
to its just share in the fruits of production and the right of enterprises to reasonable returns on
investments, and to expansion and growth.
Apart from the constitutional guarantee of protection to labor, Article 1700 of the Civil Code states:
ART. 1700. The relations between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good. Therefore, such
contracts are subject to the special laws on labor unions, collective bargaining, strikes and lockouts,
closed shop, wages, working conditions, hours of labor and similar subjects.
In contracts of employment, the employer and the employee are not on equal footing. Thus, it is
subject to regulatory review by the labor tribunals and courts of law. The law serves to equalize the
unequal. The labor force is a special class that is constitutionally protected because of the inequality
between capital and labor. This presupposes that the labor force is weak. However, the level of
176
protection to labor should vary from case to case; otherwise, the state might appear to be too
paternalistic in affording protection to labor. As stated in GMA Network, Inc. v. Pabriga, the ruling
in Brent applies in cases where it appears that the employer and employee are on equal
footing. This recognizes the fact that not all workers are weak. To reiterate the discussion in GMA
177
Network v. Pabriga:
The reason for this is evident: when a prospective employee, on account of special skills or market
forces, is in a position to make demands upon the prospective employer, such prospective employee
needs less protection than the ordinary worker. Lesser limitations on the parties’ freedom of contract
are thus required for the protection of the employee. 178
The level of protection to labor must be determined on the basis of the nature of the work,
qualifications of the employee, and other relevant circumstances.
For example, a prospective employee with a bachelor’s degree cannot be said to be on equal footing
witha grocery bagger with a high school diploma. Employees who qualify for jobs requiring special
qualifications such as "[having] a Master’s degree" or "[having] passed the licensure exam" are
different from employees who qualify for jobs that require "[being a] high school graduate;
withpleasing personality." In these situations, it is clear that those with special qualifications can
bargain with the employer on equal footing. Thus, the level of protection afforded to these
employees should be different.
Fuji’s argument that Arlene was an independent contractor under a fixed-term contract is
contradictory. Employees under fixed-term contracts cannot be independent contractors because in
fixed-term contracts, an employer-employee relationship exists. The test in this kind of contract is not
the necessity and desirability of the employee’s activities, "but the day certain agreed upon by the
parties for the commencement and termination of the employment relationship." For regular 179
employees, the necessity and desirability of their work in the usual course of the employer’s
business are the determining factors. On the other hand, independent contractors do not have
employer-employee relationships with their principals. Hence, before the status of employment can
be determined, the existence of an employer-employee relationship must be established.
The four-fold test can be used in determining whether an employeremployee relationship exists.
180
(4) the power of control, which is the most important element. 181
The "power of control" was explained by this court in Corporal, Sr. v. National Labor Relations
Commission: 182
The power to control refers to the existence of the power and not necessarily to the actual exercise
thereof, nor is it essential for the employer to actually supervise the performance of duties of the
employee. It is enough that the employer has the right to wield that power. (Citation omitted)
183
Orozco v. Court of Appeals further elucidated the meaning of "power of control" and stated the
following:
Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be employed
in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the
use of such means. The first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means used to achieve it. . . .
(Citation omitted)
184
In Locsin, et al. v. Philippine Long Distance Telephone Company, the "power of control" was
185
defined as "[the] right to control not only the end to be achieved but also the means to be used in
reaching such end." 186
Here, the Court of Appeals applied Sonza v. ABS-CBN and Dumpit Murillo v. Court of Appeals in 187
In deciding Sonza and Dumpit-Murillo, this court used the four-fold test. Both cases involved
newscasters and anchors. However, Sonza was held to be an independent contractor, while Dumpit-
Murillo was held to be a regular employee.
Sonza was engaged by ABS-CBN in view of his "unique skills, talent and celebrity status not
possessed by ordinary employees." His work was for radio and television programs. On the other
188 189
hand, Dumpit-Murillo was hired by ABC as a newscaster and co-anchor. Sonza’s talent fee
190
amounted to ₱317,000.00 per month, which this court found to be a substantial amount that
indicatedhe was an independent contractor rather than a regular employee. Meanwhile, Dumpit-
191
Murillo’s monthly salary was ₱28,000.00, a very low amount compared to what Sonza received. 192
Sonza was unable to prove that ABS-CBN could terminate his services apart from breach of
contract. There was no indication that he could be terminated based on just or authorized causes
under the Labor Code. In addition, ABS-CBN continued to pay his talent fee under their agreement,
even though his programs were no longer broadcasted. Dumpit-Murillo was found to have
193
beenillegally dismissed by her employer when they did not renew her contract on her fourth year
with ABC. 194
In Sonza, this court ruled that ABS-CBN did not control how Sonza delivered his lines, how he
appeared on television, or how he sounded on radio. All that Sonza needed was his
195
talent. Further, "ABS-CBN could not terminate or discipline SONZA even if the means and methods
196
of performance of his work . . . did not meet ABS-CBN’s approval." In Dumpit-Murillo, the duties
197
and responsibilities enumerated in her contract was a clear indication that ABC had control over her
work.198
The Court of Appeals did not err when it relied on the ruling in Dumpit-Murillo and affirmed the ruling
of the National Labor Relations Commission finding that Arlene was a regular employee. Arlene was
hired by Fuji as a news producer, but there was no showing that she was hired because of unique
skills that would distinguish her from ordinary employees. Neither was there any showing that she
had a celebrity status. Her monthly salary amounting to US$1,900.00 appears tobe a substantial
sum, especially if compared to her salary whenshe was still connected with GMA. Indeed, wages
199
may indicate whether one is an independent contractor. Wages may also indicate that an employee
is able to bargain with the employer for better pay. However, wages should not be the conclusive
factor in determining whether one is an employee or an independent contractor.
Fuji had the power to dismiss Arlene, as provided for in paragraph 5 of her professional employment
contract. Her contract also indicated that Fuji had control over her work because she was required
200
to work for eight (8) hours from Monday to Friday, although on flexible time. Sonza was not
201
required to work for eight (8) hours, while Dumpit-Murillo had to be in ABC to do both on-air and off-
air tasks.
On the power to control, Arlene alleged that Fuji gave her instructions on what to report. Even the
202
mode of transportation in carrying out her functions was controlled by Fuji. Paragraph 6 of her
contract states:
6. During the travel to carry out work, if there is change of place or change of place of work, the train,
bus, or public transport shall be used for the trip. If the Employee uses the private car during the
work and there is an accident the Employer shall not be responsible for the damage, which may be
caused to the Employee. 203
Thus, the Court of Appeals did not err when it upheld the findings of the National Labor Relations
Commission that Arlene was not an independent contractor.
Having established that an employer-employee relationship existed between Fuji and Arlene, the
next questions for resolution are the following: Did the Court of Appeals correctly affirm the National
Labor Relations Commission that Arlene had become a regular employee? Was the nature of
Arlene’s work necessary and desirable for Fuji’s usual course of business?
The test for determining regular employment is whether there is a reasonable connection between
the employee’s activities and the usual business of the employer. Article 280 provides that the
nature of work must be "necessary or desirable in the usual business or trade of the employer" as
the test for determining regular employment. As stated in ABS-CBN Broadcasting Corporation v.
Nazareno: 204
However, there may be a situation where an employee’s work is necessary but is not always
desirable inthe usual course of business of the employer. In this situation, there is no regular
employment.
In San Miguel Corporation v. National Labor Relations Commission, Francisco de Guzman was
206
hired to repair furnaces at San Miguel Corporation’s Manila glass plant. He had a separate contract
for every furnace that he repaired. He filed a complaint for illegal dismissal three (3) years after the
end of his last contract. In ruling that de Guzman did not attain the status of a regular employee,
207
Note that the plant where private respondent was employed for only seven months is engaged in the
manufacture of glass, an integral component of the packaging and manufacturing business of
petitioner. The process of manufacturing glass requires a furnace, which has a limited operating life.
Petitioner resorted to hiring project or fixed term employees in having said furnaces repaired since
said activity is not regularly performed. Said furnaces are to be repaired or overhauled only in case
of need and after being used continuously for a varying period of five (5) to ten (10) years. In 1990,
one of the furnaces of petitioner required repair and upgrading. This was an undertaking distinct and
separate from petitioner's business of manufacturing glass. For this purpose, petitioner must hire
workers to undertake the said repair and upgrading. . . .
....
Clearly, private respondent was hired for a specific project that was not within the regular business
of the corporation. For petitioner is not engaged in the business of repairing furnaces. Although the
activity was necessary to enable petitioner to continue manufacturing glass, the necessity therefor
arose only when a particular furnace reached the end of its life or operating cycle. Or, as in the
second undertaking, when a particular furnace required an emergency repair. In other words, the
undertakings where private respondent was hired primarily as helper/bricklayer have specified goals
and purposes which are fulfilled once the designated work was completed. Moreover, such
undertakings were also identifiably separate and distinct from the usual, ordinary or regular business
operations of petitioner, which is glass manufacturing. These undertakings, the duration and scope
of which had been determined and made known to private respondent at the time of his
employment, clearly indicated the nature of his employment as a project employee. 208
Fuji is engaged in the business of broadcasting, including news programming. It is based in
209 210
Based on the record, Fuji’s Manila Bureau Office is a small unit and has a few employees. As
213 214
such, Arlene had to do all activities related to news gathering. Although Fuji insists that Arlene was a
stringer, it alleges that her designation was "News Talent/Reporter/Producer." 215
A news producer "plans and supervises newscast . . . [and] work[s] with reporters in the field
planning and gathering information. . . ." Arlene’s tasks included "[m]onitoring and [g]etting [n]ews
216
[s]tories, [r]eporting interviewing subjects in front of a video camera," "the timely submission of
217
news and current events reports pertaining to the Philippines[,] and traveling [sic] to [Fuji’s] regional
office in Thailand." She also had to report for work in Fuji’s office in Manila from Mondays to
218
Fridays, eight (8) hours per day. She had no equipment and had to use the facilities of Fuji to
219
The Court of Appeals affirmed the finding of the National Labor Relations Commission that the
successive renewals of Arlene’s contract indicated the necessity and desirability of her work in the
usual course of Fuji’s business. Because of this, Arlene had become a regular employee with the
right to security of tenure. The Court of Appeals ruled that:
220
Here, Espiritu was engaged by Fuji as a stinger [sic] or news producer for its Manila Bureau. She
was hired for the primary purpose of news gathering and reporting to the television network’s
headquarters. Espiritu was not contracted on account of any peculiar ability or special talent and skill
that she may possess which the network desires to make use of. Parenthetically, ifit were true that
Espiritu is an independent contractor, as claimed by Fuji, the factthat everything that she uses to
perform her job is owned by the company including the laptop computer and mini camera discounts
the idea of job contracting. 221
Moreover, the Court of Appeals explained that Fuji’s argument that no employer-employee
relationship existed in view of the fixed-term contract does not persuade because fixed-term
contracts of employment are strictly construed. Further, the pieces of equipment Arlene used were
222
all owned by Fuji, showing that she was a regular employee and not an independent contractor. 223
The Court of Appeals likewise cited Dumpit-Murillo, which involved fixed-term contracts that were
successively renewed for four (4) years. This court held that "[t]his repeated engagement under
224
contract of hire is indicative of the necessity and desirability of the petitioner’s work in private
respondent ABC’s business." 225
With regard to Fuji’s argument that Arlene’s contract was for a fixed term, the Court of Appeals cited
Philips Semiconductors, Inc. v. Fadriquela and held that where an employee’s contract "had been
226
continuously extended or renewed to the same position, with the same duties and remained in the
employ without any interruption," then such employee is a regular employee. The continuous
227
renewal is a scheme to prevent regularization. On this basis, the Court of Appeals ruled in favor of
Arlene.
The employment status of a person is defined and prescribed by law and not by what the parties say
it should be. Equally important to consider is that a contract of employment is impressed with public
interest such that labor contracts must yield to the common good. Thus, provisions of applicable
statutes are deemed written into the contract, and the parties are not at liberty to insulate themselves
and their relationships from the impact of labor laws and regulations by simply contracting with each
other. (Citations omitted)
229
Arlene’s contract indicating a fixed term did not automatically mean that she could never be a regular
employee. This is precisely what Article 280 seeks to avoid. The ruling in Brent remains as the
exception rather than the general rule.
Further, an employee can be a regular employee with a fixed-term contract. The law does not
preclude the possibility that a regular employee may opt to have a fixed-term contract for valid
reasons. This was recognized in Brent: For as long as it was the employee who requested, or
bargained, that the contract have a "definite date of termination," or that the fixed-term contract be
freely entered into by the employer and the employee, then the validity of the fixed-term contract will
be upheld. 230
Fuji argues that the Court of Appeals erred when it held that Arlene was illegally dismissed, in view
of the non-renewal contract voluntarily executed by the parties. Fuji also argues that Arlene’s
contract merely expired; hence, she was not illegally dismissed. 231
Arlene alleges that she had no choice but to sign the non-renewal contract because Fuji withheldher
salary and benefits.
We cannot subscribe to Fuji’s assertion that Espiritu’s contract merely expired and that she
voluntarily agreed not to renew the same. Even a cursory perusal of the subject Non-Renewal
Contract readily shows that the same was signed by Espiritu under protest. What is apparent is that
the Non-Renewal Contract was crafted merely as a subterfuge to secure Fuji’s position that it was
Espiritu’s choice not to renew her contract. 232
As a regular employee, Arlene was entitled to security of tenure and could be dismissed only for just
or authorized causes and after the observance of due process.
The right to security of tenureis guaranteed under Article XIII, Section 3 of the 1987 Constitution:
ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS
....
LABOR
....
It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law. They shall be
entitled to security of tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights and benefits as may be
provided by law.
Article 279 of the Labor Code also provides for the right to security of tenure and states the
following:
Art. 279. Security of tenure.In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause of when authorized by this Title. An employee who
is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld from him up to the time
of his actual reinstatement.
Thus, on the right to security of tenure, no employee shall be dismissed, unless there are just
orauthorized causes and only after compliance with procedural and substantive due process is
conducted.
Even probationary employees are entitled to the right to security of tenure. This was explained in
Philippine Daily Inquirer, Inc. v. Magtibay, Jr.:233
Within the limited legal six-month probationary period, probationary employees are still entitled to
security of tenure. It is expressly provided in the afore-quoted Article 281 that a probationary
employee may be terminated only on two grounds: (a) for just cause, or (b) when he fails to qualify
as a regular employee in accordance with reasonable standards made known by the employer to the
employee at the time of his engagement. (Citation omitted)
234
The expiration of Arlene’s contract does not negate the finding of illegal dismissal by Fuji. The
manner by which Fuji informed Arlene that her contract would no longer be renewed is tantamount to
constructive dismissal. To make matters worse, Arlene was asked to sign a letter of resignation
prepared by Fuji. The existence of a fixed-term contract should not mean that there can be no
235
illegal dismissal. Due process must still be observed in the pre-termination of fixed-term contracts of
employment.
In addition, the Court of Appeals and the National Labor Relations Commission found that Arlene
was dismissed because of her health condition. In the non-renewal agreement executed by Fuji and
Arlene, it is stated that:
WHEREAS, the SECOND PARTY is undergoing chemotherapy which prevents her from continuing
to effectively perform her functions under the said Contract such as the timely submission of news
and current events reports pertaining to the Philippines and travelling [sic] to the FIRST PARTY’s
regional office in Thailand. (Emphasis supplied)
236
Disease as a ground for termination is recognized under Article 284 of the Labor Code:
Art. 284. Disease as ground for termination. An employer may terminate the services of an
employee who has been found to be suffering from any disease and whose continued employment
is prohibited by law or is prejudicial to his health as well as to the health of his co-employees:
Provided, That he is paid separation pay equivalent to at least one (1) month salary or to one-half
(1/2) month salary for every year of service, whichever is greater, a fraction of at least six (6) months
being considered as one (1) whole year.
Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the Labor Code provides:
Sec. 8. Disease as a ground for dismissal.– Where the employee suffers from a disease and his
continued employment is prohibited by law or prejudicial to his healthor to the health of his
coemployees, the employer shall not terminate his employment unless there is a certification by a
competent public health authority that the disease is of such nature or at such a stage that it cannot
be cured within a period of six (6) months even with proper medical treatment. If the disease or
ailment can be cured within the period, the employer shall not terminate the employee but shall ask
the employee to take a leave. The employer shall reinstate such employee to his former position
immediately upon the restoration of his normal health.
For dismissal under Article 284 to be valid, two requirements must be complied with: (1) the
employee’s disease cannot be cured within six (6) months and his "continued employment is
prohibited by law or prejudicial to his health as well as to the health of his co-employees"; and (2)
certification issued by a competent public health authority that even with proper medical treatment,
the disease cannot be cured within six (6) months. The burden of proving compliance with these
237
requisites is on the employer. Noncompliance leads to the conclusion that the dismissal was
238
illegal.
239
There is no evidence showing that Arlene was accorded due process. After informing her employer
of her lung cancer, she was not given the chance to present medical certificates. Fuji immediately
concluded that Arlene could no longer perform her duties because of chemotherapy. It did not ask
her how her condition would affect her work. Neither did it suggest for her to take a leave, even
though she was entitled to sick leaves. Worse, it did not present any certificate from a competent
public health authority. What Fuji did was to inform her thather contract would no longer be renewed,
and when she did not agree, her salary was withheld. Thus, the Court of Appeals correctly upheld
the finding of the National Labor Relations Commission that for failure of Fuji to comply with due
process, Arlene was illegally dismissed. 240
VI
The National Labor Relations Commission awarded separation pay in lieu of reinstatement, on the
ground that the filing of the complaint for illegal dismissal may have seriously strained relations
between the parties. Backwages were also awarded, to be computed from date of dismissal until the
finality of the National Labor Relations Commission’s decision. However, only backwages were
included in the dispositive portion because the National Labor Relations Commission recognized
that Arlene had received separation pay in the amount of US$7,600.00. The Court of Appeals
affirmed the National Labor Relations Commission’s decision but modified it by awarding moral and
exemplary damages and attorney’s fees, and all other benefits Arlene was entitled to under her
contract with Fuji. The Court of Appeals also ordered reinstatement, reasoning that the grounds
when separation pay was awarded in lieu of reinstatement were not proven. 241
Art. 279. Security of tenure. In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title. An employee who
is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld from him up to the time
of his actual reinstatement. (Emphasis supplied)
The Court of Appeals’ modification of the National Labor Relations Commission’s decision was
proper because the law itself provides that illegally dismissed employees are entitled to
reinstatement, backwages including allowances, and all other benefits.
On reinstatement, the National Labor Relations Commission ordered payment of separation pay in
lieu of reinstatement, reasoning "that the filing of the instant suit may have seriously abraded the
relationship of the parties so as to render reinstatement impractical." The Court of Appeals
242
reversed this and ordered reinstatement on the ground that separation pay in lieu of reinstatement is
allowed only in several instances such as (1) when the employer has ceased operations; (2) when
the employee’s position is no longer available; (3) strained relations; and (4) a substantial period has
lapsed from date of filing to date of finality.
243
To protect labor’s security of tenure, we emphasize that the doctrine of "strained relations" should be
strictly applied so as not to deprive an illegally dismissed employee of his right to reinstatement.
Every labor dispute almost always results in "strained relations" and the phrase cannot be given an
overarching interpretation, otherwise, an unjustly dismissed employee can never be
reinstated. (Citations omitted)
245
The Court of Appeals reasoned that strained relations are a question of fact that must be supported
by evidence. No evidence was presented by Fuji to prove that reinstatement was no longer
246
feasible. Fuji did not allege that it ceased operations or that Arlene’s position was no longer
available. Nothing in the records shows that Arlene’s reinstatement would cause an atmosphere of
antagonism in the workplace. Arlene filed her complaint in 2009. Five (5) years are not yet a
substantial period to bar reinstatement.
247
On the award of damages, Fuji argues that Arlene is not entitled to the award of damages and
attorney’s fees because the non-renewal agreement contained a quitclaim, which Arlene signed.
Quitclaims in labor cases do not bar illegally dismissed employees from filing labor complaints and
money claim. As explained by Arlene, she signed the non-renewal agreement out of necessity. In
Land and Housing Development Corporation v. Esquillo, this court explained: We have heretofore
248
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 holdof 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. 249
With regard to the Court of Appeals’ award of moral and exemplary damages and attorney’s fees,
this court has recognized in several cases that moral damages are awarded "when the dismissal 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." On the other hand, exemplary damages
250
may be awarded when the dismissal was effected "in a wanton, oppressive or malevolent manner." 251
The Court of Appeals and National Labor Relations Commission found that after Arlene had
informed Fuji of her cancer, she was informed that there would be problems in renewing her contract
on account of her condition. This information caused Arlene mental anguish, serious anxiety, and
wounded feelings that can be gleaned from the tenor of her email dated March 11, 2009. A portion of
her email reads:
I WAS SO SURPRISED . . . that at a time when I am at my lowest, being sick and very weak, you
suddenly came to deliver to me the NEWS that you will no longer renew my contract. I knew this will
1awp++i1
come but I never thought that you will be so ‘heartless’ and insensitive to deliver that news just a
month after I informed you that I am sick. I was asking for patience and understanding and your
response was not to RENEW my contract. 252
Apart from Arlene’s illegal dismissal, the manner of her dismissal was effected in an oppressive
approach withher salary and other benefits being withheld until May 5, 2009, when she had no other
choice but to sign the non-renewal contract. Thus, there was legal basis for the Court of Appeals to
modify the National Labor Relations Commission’s decision.
However, Arlene received her salary for May 2009. Considering that the date of her illegal
253
dismissal was May 5, 2009, this amount may be subtracted from the total monetary award. With
254
regard to the award of attorney’s fees, Article 111 of the Labor Code states that "[i]n 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." Likewise, this court has recognized 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." Due to her
255
In the dispositive portion of its decision, the Court of Appeals awarded legal interest at the rate of
12% per annum. In view of this court’s ruling in Nacar v. Gallery Frames, the legal interest shall
256 257
be reducd to a rate of 6% per annum from July 1, 2013 until full satisfaction.
WHEREFORE, the petition is DENIED. The assailed Court of Appeals decision dated June 25, 2012
is AFFIRMED with the modification that backwages shall be computed from June 2009. Legal
interest shall be computed at the rate of 6% per annum of the total monetary award from date of
finality of this decision until full satisfaction.
SO ORDERED.
MARVIC M.V.F LEONEN
Associate Justice
WE CONCUR:
G.R. No. 176419 November 27, 2013
GMA NETWORK, INC., Petitioner,
vs.
CARLOS P. PABRIGA, GEOFFREY F. ARIAS, KIRBY N. CAMPO,
ARNOLD L. LAGAHIT, and ARMANDO A. CATUBIG, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
This is a Petition for Review on Certiorari filed by petitioner GMA Network Inc. assailing the
Decision of the Court of Appeals dated September 8, 2006 and the subsequent Resolution dated
1 2
On July 19 1999 due to the miserable working conditions private respondents were forced to file a
complaint against petitioner before the National Labor Relations Commission Regional Arbitration
Branch No. VII Cebu City assailing their respective employment circumstances as follows:
Private respondents were engaged by petitioner to perform the following activities, to wit:
4) Acting as Cameramen
On 4 August 1999, petitioner received a notice of hearing of the complaint. The following day,
petitioner’s Engineering Manager, Roy Villacastin, confronted the private respondents about the said
complaint.
On 9 August 1999, private respondents were summoned to the office of petitioner’s Area Manager,
Mrs. Susan Aliño, and they were made to explain why they filed the complaint. The next day, private
respondents were barred from entering and reporting for work without any notice stating the reasons
therefor.
On 13 August 1999, private respondents, through their counsel, wrote a letter to Mrs. Susan Aliño
requesting that they be recalled back to work.
On 23 August 1999, a reply letter from Mr. Bienvenido Bustria, petitioner’s head of Personnel and
Labor Relations Division, admitted the non-payment of benefits but did not mention the request of
private respondents to be allowed to return to work.
On 15 September 1999, private respondents sent another letter to Mr. Bustria reiterating their
request to work but the same was totally ignored. On 8 October 1999, private respondents filed an
amended complaint raising the following additional issues: 1) Unfair Labor Practice; 2) Illegal
dismissal; and 3) Damages and Attorney’s fees.
On 23 September 1999, a mandatory conference was set to amicably settle the dispute between the
parties, however, the same proved to be futile. As a result, both of them were directed to file their
respective position papers.
On 10 November 1999, private respondents filed their position paper and on 2 March 2000, they
received a copy of petitioner’s position paper. The following day, the Labor Arbiter issued an order
considering the case submitted for decision. 3
In his Decision dated August 24, 2000, the Labor Arbiter dismissed the complaint of respondents for
illegal dismissal and unfair labor practice, but held petitioner liable for 13th month pay. The
dispositive portion of the Labor Arbiter’s Decision reads:
WHEREFORE, the foregoing premises considered, judgment is hereby rendered dismissing the
complaints for illegal dismissal and unfair labor practice.
Respondents are, however, directed to pay the following complainants their proportionate 13th
month pay, to wit:
₱28,826.14
All other claims are, hereby, dismissed for failure to substantiate the same. 4
Respondents appealed to the National Labor Relations Commission (NLRC). The NLRC reversed
the Decision of the Labor Arbiter, and held thus:
a) All complainants are regular employees with respect to the particular activity to which they were
assigned, until it ceased to exist. As such, they are entitled to payment of separation pay computed
at one (1) month salary for every year of service;
b) They are not entitled to overtime pay and holiday pay; and
c) They are entitled to 13th month pay, night shift differential and service incentive leave pay.
For purposes of accurate computation, the entire records are REMANDED to the Regional
Arbitration Branch of origin which is hereby directed to require from respondent the production of
additional documents where necessary.
Respondent is also assessed the attorney’s fees of ten percent (10%) of all the above awards. 5
Petitioner elevated the case to the Court of Appeals via a Petition for Certiorari. On September 8,
2006, the appellate court rendered its Decision denying the petition for lack of merit.
Petitioner filed the present Petition for Review on Certiorari, based on the following grounds:
I.
THE COURT OF APPEALS GRAVELY ERRED FINDING RESPONDENTS ARE REGULAR
EMPLOYEES OF THE PETITIONER AND ARE NOT PROJECT EMPLOYEES.
II.
III.
IV.
The parties having extensively elaborated on their positions in their respective memoranda, we
proceed to dispose of the issues raised.
At the outset, we should note that the nature of the employment is determined by law, regardless of
any contract expressing otherwise. The supremacy of the law over the nomenclature of the contract
and the stipulations contained therein is to bring to life the policy enshrined in the Constitution to
afford full protection to labor. Labor contracts, being imbued with public interest, are placed on a
higher plane than ordinary contracts and are subject to the police power of the State.7
Respondents claim that they are regular employees of petitioner GMA Network, Inc. The latter, on
the other hand, interchangeably characterize respondents’ employment as project and fixed
period/fixed term employment. There is thus the need to clarify the foregoing terms.
The terms regular employment and project employment are taken from Article 280 of the Labor
Code, which also speaks of casual and seasonal employment:
ARTICLE 280. Regular and casual employment. – The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall
be deemed to be 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, except where the
employment has been fixed for a specific project or undertaking the completion or termination of
which has been determined at the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and employment is for the duration of the season.
that employment will last only for a definite period, is not per se illegal or against public policy.
Pursuant to the above-quoted Article 280 of the Labor Code, employees performing activities which
are usually necessary or desirable in the employer’s usual business or trade can either be regular,
project or seasonal employees, while, as a general rule, those performing activities not usually
necessary or desirable in the employer’s usual business or trade are casual employees. The reason
for this distinction may not be readily comprehensible to those who have not carefully studied these
provisions: only employers who constantly need the specified tasks to be performed can be
justifiably charged to uphold the constitutionally protected security of tenure of the corresponding
workers. The consequence of the distinction is found in Article 279 of the Labor Code, which
provides:
ARTICLE 279. Security of tenure. – In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by this Title.
An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss
of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement.
On the other hand, the activities of project employees may or may not be usually necessary or
desirable in the usual business or trade of the employer, as we have discussed in ALU-TUCP v.
National Labor Relations Commission, and recently reiterated in Leyte Geothermal Power
9
It is evidently important to become clear about the meaning and scope of the term "project" in the
present context. The "project" for the carrying out of which "project employees" are hired would
ordinarily have some relationship to the usual business of the employer. Exceptionally, the "project"
undertaking might not have an ordinary or normal relationship to the usual business of the employer.
In this latter case, the determination of the scope and parameters of the "project" becomes fairly
easy. It is unusual (but still conceivable) for a company to undertake a project which has absolutely
no relationship to the usual business of the company; thus, for instance, it would be an unusual
steel-making company which would undertake the breeding and production of fish or the cultivation
of vegetables. From the viewpoint, however, of the legal characterization problem here presented to
the Court, there should be no difficulty in designating the employees who are retained or hired for
the purpose of undertaking fish culture or the production of vegetables as "project employees," as
distinguished from ordinary or "regular employees," so long as the duration and scope of the project
were determined or specified at the time of engagement of the "project employees." For, as is
evident from the provisions of Article 280 of the Labor Code, quoted earlier, the principal test for
determining whether particular employees are properly characterized as "project employees" as
distinguished from "regular employees," is whether or not the "project employees" were assigned to
carry out a "specific project or undertaking," the duration (and scope) of which were specified at the
time the employees were engaged for that project.
In the realm of business and industry, we note that "project" could refer to one or the other of at least
two (2) distinguishable types of activities. Firstly, a project could refer to a particular job or
undertaking that is within the regular or usual business of the employer company, but which is
distinct and separate, and identifiable as such, from the other undertakings of the company. Such
job or undertaking begins and ends at determined or determinable times. The typical example of this
first type of project is a particular construction job or project of a construction company. A
construction company ordinarily carries out two or more [distinct] identifiable construction projects:
e.g., a twenty-five-storey hotel in Makati; a residential condominium building in Baguio City; and a
domestic air terminal in Iloilo City. Employees who are hired for the carrying out of one of these
separate projects, the scope and duration of which has been determined and made known to the
employees at the time of employment, are properly treated as "project employees," and their
services may be lawfully terminated at completion of the project.
The term "project" could also refer to, secondly, a particular job or undertaking that is not within the
regular business of the corporation. Such a job or undertaking must also be identifiably separate and
distinct from the ordinary or regular business operations of the employer. The job or undertaking also
begins and ends at determined or determinable times. x x x. (Emphases supplied, citation omitted.)
11
Thus, in order to safeguard the rights of workers against the arbitrary use of the word "project" to
prevent employees from attaining the status of regular employees, employers claiming that their
workers are project employees should not only prove that the duration and scope of the employment
was specified at the time they were engaged, but also that there was indeed a project. As discussed
above, the project could either be (1) a particular job or undertaking that is within the regular or usual
business of the employer company, but which is distinct and separate, and identifiable as such, from
the other undertakings of the company; or (2) a particular job or undertaking that is not within the
regular business of the corporation. As it was with regard to the distinction between a regular and
casual employee, the purpose of this requirement is to delineate whether or not the employer is in
constant need of the services of the specified employee. If the particular job or undertaking is within
the regular or usual business of the employer company and it is not identifiably distinct or separate
from the other undertakings of the company, there is clearly a constant necessity for the
performance of the task in question, and therefore said job or undertaking should not be considered
a project.
Brief examples of what may or may not be considered identifiably distinct from the business of the
employer are in order. In Philippine Long Distance Telephone Company v. Ylagan, this Court held
12
that accounting duties were not shown as distinct, separate and identifiable from the usual
undertakings of therein petitioner PLDT. Although essentially a telephone company, PLDT maintains
its own accounting department to which respondent was assigned. This was one of the reasons why
the Court held that respondent in said case was not a project employee. On the other hand, in San
Miguel Corporation v. National Labor Relations Commission, respondent was hired to repair
13
furnaces, which are needed by San Miguel Corporation to manufacture glass, an integral component
of its packaging and manufacturing business. The Court, finding that respondent is a project
employee, explained that San Miguel Corporation is not engaged in the business of repairing
furnaces. Although the activity was necessary to enable petitioner to continue manufacturing glass,
the necessity for such repairs arose only when a particular furnace reached the end of its life or
operating cycle. Respondent therein was therefore considered a project employee.
In the case at bar, as discussed in the statement of facts, respondents were assigned to the
following tasks:
4) Acting as Cameramen 14
These jobs and undertakings are clearly within the regular or usual business of the employer
company and are not identifiably distinct or separate from the other undertakings of the company.
There is no denying that the manning of the operations center to air commercials, acting as
transmitter/VTR men, maintaining the equipment, and acting as cameramen are not undertakings
separate or distinct from the business of a broadcasting company.
Petitioner’s allegation that respondents were merely substitutes or what they call pinch-hitters (which
means that they were employed to take the place of regular employees of petitioner who were
absent or on leave) does not change the fact that their jobs cannot be considered projects within the
purview of the law. Every industry, even public offices, has to deal with securing substitutes for
employees who are absent or on leave. Such tasks, whether performed by the usual employee or by
a substitute, cannot be considered separate and distinct from the other undertakings of the
company. While it is management’s prerogative to device a method to deal with this issue, such
prerogative is not absolute and is limited to systems wherein employees are not ingeniously and
methodically deprived of their constitutionally protected right to security of tenure. We are not
convinced that a big corporation such as petitioner cannot device a system wherein a sufficient
number of technicians can be hired with a regular status who can take over when their colleagues
are absent or on leave, especially when it appears from the records that petitioner hires so-called
pinch-hitters regularly every month.
In affirming the Decision of the NLRC, the Court of Appeals furthermore noted that if respondents
were indeed project employees, petitioner should have reported the completion of its projects and
the dismissal of respondents in its finished projects:
There is another reason why we should rule in favor of private respondents. Nowhere in the records
is there any showing that petitioner reported the completion of its projects and the dismissal of
private respondents in its finished projects to the nearest Public Employment Office as per Policy
Instruction No. 20 of the Department of Labor and Employment [DOLE]. Jurisprudence abounds
15
with the consistent rule that the failure of an employer to report to the nearest Public Employment
Office the termination of its workers’ services everytime a project or a phase thereof is completed
indicates that said workers are not project employees.
In the extant case, petitioner should have filed as many reports of termination as there were projects
actually finished if private respondents were indeed project employees, considering that the latter
were hired and again rehired from 1996 up to 1999. Its failure to submit reports of termination cannot
but sufficiently convince us further that private respondents are truly regular employees. Important to
note is the fact that private respondents had rendered more than one (1) year of service at the time
of their dismissal which overturns petitioner’s allegations that private respondents were hired for a
specific or fixed undertaking for a limited period of time. (Citations omitted.)
16
We are not unaware of the decisions of the Court in Philippine Long Distance Telephone Company
v. Ylagan and ABS-CBN Broadcasting Corporation v. Nazareno which held that the employer’s
17 18
failure to report the termination of employees upon project completion to the DOLE Regional Office
having jurisdiction over the workplace within the period prescribed militates against the employer’s
claim of project employment, even outside the construction industry. We have also previously stated
in another case that the Court should not allow circumvention of labor laws in industries not falling
within the ambit of Policy Instruction No. 20/Department Order No. 19, thereby allowing the
prevention of acquisition of tenurial security by project employees who have already gained the
status of regular employees by the employer’s conduct. 19
While it may not be proper to revisit such past pronouncements in this case, we nonetheless find
that petitioner’s theory of project employment fails the principal test of demonstrating that the alleged
project employee was assigned to carry out a specific project or undertaking, the duration and scope
of which were specified at the time the employee is engaged for the project. 20
The Court of Appeals also ruled that even if it is assumed that respondents are project employees,
they would nevertheless have attained regular employment status because of their continuous
rehiring:
Be that as it may, a project employee may also attain the status of a regular employee if there is a
continuous rehiring of project employees after the stoppage of a project; and the activities performed
are usual [and] customary to the business or trade of the employer. The Supreme Court ruled that a
project employee or a member of a work pool may acquire the status of a regular employee when
the following concur:
1) There is a continuous rehiring of project employees even after cessation of a project; and
2) The tasks performed by the alleged project employee are vital, necessary and
indispensable to the usual business or trade of the employer.
The circumstances set forth by law and the jurisprudence is present in this case. In fine, even if
private respondents are to be considered as project employees, they attained regular employment
status, just the same. (Citation omitted.)
21
Anent this issue of attainment of regular status due to continuous rehiring, petitioner advert to the
fixed period allegedly designated in employment contracts and reflected in vouchers. Petitioner cites
our pronouncements in Brent, St. Theresa’s School of Novaliches Foundation v. National Labor
Relations Commission, and Fabela v. San Miguel Corporation, and argues that respondents were
22 23
fully aware and freely entered into agreements to undertake a particular activity for a specific length
of time. Petitioner apparently confuses project employment from fixed term employment. The
24
discussions cited by petitioner in Brent, St. Theresa’s and Fabela all refer to fixed term employment,
which is subject to a different set of requirements.
As stated above, petitioner interchangeably characterizes respondents’ service as project and fixed
term employment. These types of employment, however, are not the same. While the former
requires a project as restrictively defined above, the duration of a fixed-term employment agreed
upon by the parties may be any day certain, which is understood to be "that which must necessarily
come although it may not be known when." The decisive determinant in fixed-term employment is
25
not the activity that the employee is called upon to perform but the day certain agreed upon by the
parties for the commencement and termination of the employment relationship. 26
1) The fixed period of employment was knowingly and voluntarily agreed upon by the parties
without any force, duress, or improper pressure being brought to bear upon the employee
and absent any other circumstances vitiating his consent; or
2) It satisfactorily appears that the employer and the employee dealt with each other on more
or less equal terms with no moral dominance exercised by the former or the latter. (Citation
28
omitted.)
These indications, which must be read together, make the Brent doctrine applicable only in a few
special cases wherein the employer and employee are on more or less in equal footing in entering
into the contract. The reason for this is evident: when a prospective employee, on account of special
skills or market forces, is in a position to make demands upon the prospective employer, such
prospective employee needs less protection than the ordinary worker. Lesser limitations on the
parties’ freedom of contract are thus required for the protection of the employee. These indications
were applied in Pure Foods Corporation v. National Labor Relations Commission, where we
29
discussed the patent inequality between the employer and employees therein:
[I]t could not be supposed that private respondents and all other so-called "casual" workers of [the
petitioner] KNOWINGLY and VOLUNTARILY agreed to the 5-month employment contract. Cannery
workers are never on equal terms with their employers. Almost always, they agree to any terms of
an employment contract just to get employed considering that it is difficult to find work given their
ordinary qualifications. Their freedom to contract is empty and hollow because theirs is the freedom
to starve if they refuse to work as casual or contractual workers. Indeed, to the unemployed, security
of tenure has no value. It could not then be said that petitioner and private respondents "dealt with
each other on more or less equal terms with no moral dominance whatever being exercised by the
former over the latter.
To recall, it is doctrinally entrenched that in illegal dismissal cases, the employer has the
burden of proving with clear, accurate, consistent, and convincing evidence that the
dismissal was valid. It is therefore the employer which must satisfactorily show that it was
30
not in a dominant position of advantage in dealing with its prospective employee. Thus, in
Philips Semiconductors (Phils.), Inc. v. Fadriquela, this Court rejected the employer’s insistence on
31
the application of the Brent doctrine when the sole justification of the fixed terms is to respond to
temporary albeit frequent need of such workers:
We reject the petitioner’s submission that it resorted to hiring employees for fixed terms to augment
or supplement its regular employment "for the duration of peak loads" during short-term surges to
respond to cyclical demands; hence, it may hire and retire workers on fixed terms, ad infinitum,
depending upon the needs of its customers, domestic and international. Under the petitioner's
submission, any worker hired by it for fixed terms of months or years can never attain regular
employment status. x x x.
Similarly, in the case at bar, we find it unjustifiable to allow petitioner to hire and rehire workers on
fixed terms, ad infinitum, depending upon its needs, never attaining regular employment status. To
recall, respondents were repeatedly rehired in several fixed term contracts from 1996 to 1999. To
prove the alleged contracts, petitioner presented cash disbursement vouchers signed by
respondents, stating that they were merely hired as pinch-hitters. It is apparent that respondents
were in no position to refuse to sign these vouchers, as such refusal would entail not getting paid for
their services. Plainly, respondents as "pinch-hitters" cannot be considered to be in equal footing as
petitioner corporation in the negotiation of their employment contract.
In sum, we affirm the findings of the NLRC and the Court of Appeals that respondents are regular
employees of petitioner. As regular employees, they are entitled to security of tenure and therefore
1âwphi1
their services may be terminated only for just or authorized causes. Since petitioner failed to prove
any just or authorized cause for their termination, we are constrained to affirm the findings of the
NLRC and the Court of Appeals that they were illegally dismissed.
Petitioner admits that respondents were not given separation pay and night shift differential.
Petitioner, however, claims that respondents were not illegally dismissed and were therefore not
entitled to separation pay. As regards night shift differential, petitioner claims that its admission in its
August 23, 1999 letter as to the nonpayment thereof is qualified by its allegation that respondents
are not entitled thereto. Petitioner points out that respondents failed to specify the period when such
benefits are due, and did not present additional evidence before the NLRC and the Court of
Appeals. 32
In light, however, of our ruling that respondents were illegally dismissed, we affirm the findings of the
NLRC and the Court of Appeals that respondents are entitled to separation pay in lieu of
reinstatement. We quote with approval the discussion of the Court of Appeals:
However, since petitioner refused to accept private respondents back to work, reinstatement is no
longer practicable. Allowing private respondents to return to their work might only subject them to
further embarrassment, humiliation, or even harassment.
Thus, in lieu of reinstatement, the grant of separation pay equivalent to one (1) month pay for every
year of service is proper which public respondent actually did. Where the relationship between
private respondents and petitioner has been severely strained by reason of their respective
imputations of accusations against each other, to order reinstatement would no longer serve any
purpose. In such situation, payment of separation pay instead of reinstatement is in
order. (Citations omitted.)
33
As regards night shift differential, the Labor Code provides that every employee shall be paid not
less than ten percent (10%) of his regular wage for each hour of work performed between ten o’clock
in the evening and six o’clock in the morning. As employees of petitioner, respondents are entitled
34
to the payment of this benefit in accordance with the number of hours they worked from 10:00 p.m.
to 6:00 a.m., if any. In the Decision of the NLRC affirmed by the Court of Appeals, the records were
remanded to the Regional Arbitration Branch of origin for the computation of the night shift
differential and the separation pay. The Regional Arbitration Branch of origin was likewise directed to
require herein petitioner to produce additional documents where necessary. Therefore, while we are
affirming that respondents are entitled to night shift differential in accordance with the number of
hours they worked from 10:00 p.m. to 6:00 a.m., it is the Regional Arbitration Branch of origin which
should determine the computation thereof for each of the respondents, and award no night shift
differential to those of them who never worked from 10:00 p.m. to 6:00 a.m.
It is also worthwhile to note that in the NLRC Decision, it was herein petitioner GMA Network,
Inc. (respondent therein) which was tasked to produce additional documents necessary for
the computation of the night shift differential. This is in accordance with our ruling in Dansart
Security Force & Allied Services Company v. Bagoy, where we held that it is entirely within the
35
employer's power to present such employment records that should necessarily be in their
possession, and that failure to present such evidence must be taken against them.
Petitioner, however, is correct that the award of attorney's fees is contrary to jurisprudence. In De las
Santos v. Jebsen Maritime Inc., we held:
36
Likewise legally correct is the deletion of the award of attorney's fees, the NLRC having failed to
explain petitioner's entitlement thereto. As a matter of sound policy, an award of attorney's fees
remains the exception rather than the rule. It must be stressed, as aptly observed by the appellate
court, that it is necessary for the trial court, the NLRC in this case, to make express findings of facts
and law that would bring the case within the exception. In fine, the factual, legal or equitable
justification for the award must be set forth in the text of the decision. The matter of attorney's fees
cannot be touched once and only in the fallo of the decision, else, the award should be thrown out
for being speculative and conjectural. In the absence of a stipulation, attorney's fees are ordinarily
not recoverable; otherwise a premium shall be placed on the right to litigate. They are not awarded
every time a party wins a suit. (Citations omitted.)
In the case at bar, the factual basis for the award of attorney's fees was not discussed in the text of
NLRC Decision. We are therefore constrained to delete the same.
WHEREFORE the Decision of the Court of Appeals dated September 8, 2006 and the subsequent
Resolution denying reconsideration dated January 22, 2007 in CA-G.R. SP No. 73652, are hereby
AFFIRMED with the MODIFICATION that the award of attorney's fees in the affirmed Decision of the
National Labor Relations Commission is hereby DELETED.
SO ORDERED.
This resolves a Petition for Review on Certiorari 2 under Rule 45 of the 1997 Rules of
Civil Procedure praying that the assailed Court of Appeals July 4, 2013 Decision 3 and
February 12, 2014 Resolution4 in CA-G.R. SP No. 04622 be reversed and set aside.
The assailed Court of Appeals July 4, 2013 Decision found grave abuse of discretion on
the part of the National Labor Relations Commission in issuing its May 27, 2011
Decision5 and August 31, 2011 Decision6 holding that respondent Heidi Pelayo (Pelayo)
was not constructively dismissed. The assailed Court of Appeals February 12, 2014
Resolution denied the Motion for Reconsideration 7 of petitioner Philippine Span Asia
Carriers Corporation, then Sulpicio Lines, Inc. (Sulpicio Lines).
Pelayo was employed by Sulpicio Lines as an accounting clerk at its Davao City branch
office. As accounting clerk, her main duties were "to receive statements and billings for
processing of payments, prepare vouchers and checks for the approval and signature of
the branch manager, and release checks for payment." 8
Sulpicio Lines uncovered several anomalous transactions in its Davao City branch office.
Most notably, a check issued to a certain "J. Josol"9 had been altered from its original
amount of P20,804.58 to P820,804.58. The signatories to the check were branch
manager Tirso Tan (Tan) and cashier Fely Sobiaco (Sobiaco). 10
There were also apparent double disbursements. In the first double disbursement, two
(2) checks amounting to P5,312.15 each were issued for a single P5,312.15 transaction
with Davao United Educational Supplies. This transaction was covered by official receipt
no. 16527, in the amount of P5,312.15 and dated January 12, 2008. The first check,
Philippine Trust Company (PhilTrust Bank) check no. 2043921, was issued on December
15, 2007. This was covered by voucher no. 227275. The second check, PhilTrust Bank
check no. 2044116, was issued on January 19, 2008 and was covered by voucher no.
227909.11
There was another double disbursement for a single transaction. Two (2) checks for
P20,804.58 each in favor of Everstrong Enterprises were covered by official receipt no.
5129, dated January 25, 2008. The first check, PhilTrust Bank check no. 2044156, was
dated January 26, 2008 and covered by voucher no. 228034. The second check,
PhilTrust Bank check no. 2044244, was dated February 9, 2008 and covered by voucher
no. 228296.12
Another apparent anomaly was a discrepancy in the amounts reflected in what should
have been a voucher and a check corresponding to each other and covering the same
transaction with ARR Vulcanizing. Voucher no. 232550 dated October 30, 2008
indicated only P17,052.00, but the amount disbursed through check no. 2051313
amounted to P29,306.00.13
Sulpicio Lines' Cebu-based management team went to Davao to investigate from March
3 to 5, 2010. Pelayo was interviewed by members of the management team as "she
was the one who personally prepared the cash vouchers and checks for approval by Tan
and Sobiaco."14
The management team was unable to complete its investigation by March 5, 2010.
Thus, a follow-up investigation had to be conducted. On March 8, 2010, Pelayo was
asked to come to Sulpicio Lines' Cebu main office for another interview. 15 Sulpicio Lines
shouldered all the expenses arising from Pelayo's trip. 16
In the midst of a panel interview, Pelayo walked out. 17 She later claimed that she was
being coerced to admit complicity with Tan and Sobiaco. 18 Pelayo then returned to
Davao City,19 where she was admitted to a hospital "because of depression and a
nervous breakdown."20 She eventually filed for leave of absence and ultimately stopped
reporting for work.21
Following an initial phone call asking her to return to Cebu, Sulpicio Lines served on
Pelayo a memorandum dated March 15, 2010,22 requiring her to submit a written
explanation concerning "double disbursements, payments of ghost purchases and
issuances of checks with amounts bigger than what [were] stated in the
vouchers."23 Sulpicio Lines also placed Pelayo on preventive suspension for 30 days. 24 It
stated:
Among your duties is to receive statements and billings for processing of payments,
prepare vouchers and checks for the signature of the approving authority. In the
preparation of the vouchers and the checks, you also are required to check and to make
sure that the supporting documents are in order. Thus, the double payments and other
payments could not have been perpetra[t]ed without your cooperation and/or neglect
of duty/gross negligence.
You are hereby required to submit within three (3) days from receipt of this letter a
written explanation why no disciplinary action [should] be imposed against you for
dishonesty and/or neglect of duty or gross negligence.25
Sulpicio Lines also sought the assistance of the National Bureau of Investigation, which
asked Pelayo to appear before it on March 19, 2010. 26
Sulpicio Lines denied liability asserting that Pelayo was merely asked to come to Cebu
"to shed light on the discovered anomalies"28 and was "only asked to cooperate in
prosecuting Tan and Sobiaco."29 It also decried Pelayo's seeming attempt at
"distanc[ing] herself from the ongoing investigation of financial anomalies discovered." 30
In her September 17, 2010 Decision,31 Labor Arbiter Merceditas C. Larida (Labor Arbiter
Larida) held that Sulpicio Lines constructively dismissed Pelayo. She faulted Sulpicio
Lines for harassing Pelayo when her participation in the uncovered anomalies was "far-
fetched."32 Labor Arbiter Larida relied mainly on the affidavit of Alex Te (Te), 33 an
employee of Sulpicio Lines assigned at the Accounting Department of its Cebu City main
office. Te's affidavit was attached to the Secretary's Certificate, 34 attesting to Sulpicio
Lines' Board Resolution authorizing Te to act in its behalf in prosecuting Tan and
Sobiaco. This affidavit detailed the duties of Tan and Sobiaco, as branch manager and
cashier, respectively, and laid out the bases for their prosecution.35 Labor Arbiter Larida
noted that the affidavit's silence on how Pelayo could have been involved demonstrated
that it was unjust to suspect her of wrongdoing. 36
In its May 27, 2011 Decision,37 the National Labor Relations Commission reversed Labor
Arbiter Larida's Decision. It explained that the matter of disciplining employees
was a management prerogative and that complainant's involvement in the
investigation did not necessarily amount to harassment.38 The dispositive portion
of this Decision read:
WHEREFORE, foregoing premises considered, the appeal is GRANTED and the appealed
decision is SET ASIDE and VACATED. In lieu thereof, a new judgment is rendered
DISMISSING the above-entitled case for lack of merit.
SO ORDERED.39
In its assailed July 4, 2013 Decision, the Court of Appeals found grave abuse of
discretion on the part of the National Labor Relations Commission in reversing Labor
Arbiter Larida's Decision.40
Following the denial of its Motion for Reconsideration, 41 Sulpicio Lines filed the present
Petition.
For resolution is the issue of whether or not the Court of Appeals erred in finding grave
abuse of discretion on the part of the National Labor Relations Commission in ruling
that respondent Heidi Pelayo's involvement in the investigation conducted by petitioner
did not amount to constructive dismissal.
While adopted with a view "to give maximum aid and protection to
labor,"42 labor laws are not to be applied in a manner that undermines valid
exercise of management prerogative.
Indeed, basic is the recognition that even as our laws on labor and social
justice impel a "preferential view in favor of labor,"
The rationale for this was explained in Rural Bank of Cantilan, Inc. v. Julve:46
While the law imposes many obligations upon the employer, nonetheless, it
also protects the employer's right to expect from its employees not only good
performance, adequate work, and diligence, but also good conduct and loyalty.
In fact, the Labor Code does not excuse employees from complying with valid company
policies and reasonable regulations for their governance and guidance. 47
II
While due process, both substantive and procedural, is imperative in the discipline of
employees, our laws do not go so far as to mandate the minutiae of how employers
must actually investigate employees' wrongdoings. Employers are free to adopt
different mechanisms such as interviews, written statements, or probes by
specially designated panels of officers.
In the case of termination of employment for offenses and misdeeds by employees, i.e.,
for just causes under Article 282 of the Labor Code, 51 employers are required to adhere
to the so-called "two-notice rule."52King of Kings Transport v. Mamac53 outlined what
"should be considered in terminating the services of employees" 54 :
(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. 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.55 (Citation omitted)
The two-notice rule applies at that stage when an employer has previously
determined that there are probable grounds for dismissing a specific
employee. The first notice implies that the employer already has a cause for
termination. The employee then responds to the cause against him or her. The two-
notice rule does not apply to anterior, preparatory investigations precipitated by the
initial discovery of wrongdoing. At this stage, an employer has yet to identify a specific
employee as a suspect. These preparatory investigations logically lead to disciplinary
proceedings against the specific employee suspected of wrongdoing, but are not yet
part of the actual disciplinary proceedings against that erring employee. While the
Labor Code specifically prescribes the two-notice rule as the manner by which an
employer must proceed against an employee specifically charged with wrongdoing, it
leaves to the employer's discretion the manner by which it shall proceed in initially
investigating offenses that have been uncovered, and whose probable perpetrators
have yet to be pinpointed.
Thus, subject to the limits of ethical and lawful conduct, an employer is free to adopt
any means for conducting these investigations. They can, for example, obtain
information from the entire roster of employees involved in a given workflow. They can
also enlist the aid of public and private investigators and law enforcers, especially when
the uncovered iniquity amounts to a criminal offense just as much as it violates
company policies.
When employee wrongdoing has been uncovered, employers are equally free to adopt
contingency measures; lest they, their clients, and other employees suffer from
exigencies otherwise left unaddressed. These measures may be enforced as soon as an
employee's wrongdoing is uncovered, may extend until such time that disciplinary
proceedings are commenced and terminated, and in certain instances, even made
permanent. Employers can rework processes, reshuffle assignments, enforce stopgap
measures, and put in place safety checks like additional approvals from superiors.
In Mandapat v. Add Force Personnel Services, Inc.,56 this Court upheld the temporary
withholding of facilities and privileges as an incident to an ongoing investigation. Thus,
this Court found no fault in the disconnection of an employee's computer and the
suspension of her internet access privilege. 57 Employers can also place employees under
preventive suspension, not as a penalty in itself, but as an intervening means to enable
unhampered investigation and to foreclose "a serious and imminent threat to the life or
property of the employer or of the employee's co-workers." 58 As Artificio v. National
Labor Relations Commission59 illustrated:
In this case, Artificio's preventive suspension was justified since he was employed as a
security guard tasked precisely to safeguard respondents' client. His continued
presence in respondents' or its client's premises poses a serious threat to respondents,
its employees and client in light of the serious allegation of conduct unbecoming a
security guard such as abandonment of post during night shift duty, light threats and
irregularities in the observance of proper relieving time.
Besides, as the employer, respondent has the right to regulate, according to its
discretion and best judgment, all aspects of employment, including work assignment,
working methods, processes to be followed, working regulations, transfer of employees,
work supervision, lay-off of workers and the discipline, dismissal and recall of workers.
Management has the prerogative to discipline its employees and to impose appropriate
penalties on erring workers pursuant to company rules and regulations.
This Court has upheld a company's management prerogatives so long as they are
exercised in good faith for the advancement of the employer's interest and not for the
purpose of defeating or circumventing the rights of the employees under special laws or
under valid agreements.60
III
This Court has, however, been careful to qualify that "[n]ot every inconvenience,
disruption, difficulty, or disadvantage that an employee must endure sustains a finding
of constructive dismissal."62 In a case where the employee decried her employers' harsh
words as supposedly making for a work environment so inhospitable that she was
compelled to resign, this Court explained:
The unreasonably harsh conditions that compel resignation on the part of an employee
must be way beyond the occasional discomforts brought about by the
misunderstandings between the employer and employee. Strong words may sometimes
be exchanged as the employer describes her expectations or as the employee narrates
the conditions of her work environment and the obstacles she encounters as she
accomplishes her assigned tasks. As in every human relationship, there are bound to be
disagreements.
However, when these strong words from the employer happen without palpable reason
or are expressed only for the purpose of degrading the dignity of the employee, then a
hostile work environment will be created. In a sense, the doctrine of constructive
dismissal has been a consistent vehicle by this Court to assert the dignity of labor. 63
Resolving allegations of constructive dismissal is not a one-sided affair impelled by
romanticized sentiment for a preconceived underdog. Rather, it is a question of justice
that "hinges on whether, given the circumstances, the employer acted fairly in
exercising a prerogative."64 It involves the weighing of evidence and a consideration of
the "totality of circumstances."65
IV
This Court fails to see how the petitioner's investigation amounted to respondent's
constructive dismissal.
The assailed Court of Appeals July 4, 2013 Decision devoted all of three (3)
paragraphs66 in explaining why respondent was constructively dismissed. It anchored its
conclusion on how "petitioner was made to admit the commission of the crime," 67 and
on how "[respondent] was compelled to give up her employment due to [petitioner's]
unfounded, unreasonable and improper accusations, which made her employment
unbearable."68
The most basic flaw in the Court of Appeals' reasoning is its naive credulity. It
did not segregate verified facts from impressions and bare allegations. It was quick to
lend credence to respondent's version of events and her bare claim that she "was made
to admit the commission of the crime."69
third, the investigation involved respondent considering that, as accounting clerk, her
main duties were "to receive statements and billings for processing of payments,
prepare vouchers and checks for the approval and signature of the Branch Manager,
and release the checks for cash payment"; 70
fourth, the investigation in Davao could not be completed for lack of time; fifth,
respondent was made to come to petitioner's Cebu main office - all expense paid - for
the continuation of the investigation;
sixth, in Cebu, respondent was again interviewed; seventh, respondent walked out in
the midst of this interview.
Human nature dictates that involvement in investigations for wrongdoing, even if one is
not the identified suspect, will entail discomfort and difficulty. Indeed, stress is merely
the "response to physical or psychological demands on a person." 72 Even positive
stimuli can become stressors.73 Stress, challenge, and adversity are the natural state of
things when a problematic incident is revealed and begs to be addressed. They do not
mean that an employer is bent on inflicting suffering on an employee.
Different individuals react to stress differently "and some people react to stress by
getting sick."74 Stress is as much a matter of psychological perception as it is of
physiological reaction. Respondent's confinement at a hospital proves that, indeed, she
was stressed at such a degree that it manifested physically. It may also be correlated
with the stressors that respondent previously encountered. Among these stressors was
her interview. One can then reasonably say that respondent's interview may have been
difficult for her. However, any analysis of causation and correlation can only go as far
as this. The evidence does not lead to an inescapable conclusion that respondent's
confinement was solely and exclusively because of how respondent claims her
interviewers incriminated her.
The discomfort of having to come to the investigation's venue, the strain of recalling
and testifying on matters that transpired months prior, the frustration that she was
being dragged into the wrongdoing of other employees—if indeed she was completely
innocent—or the trepidation that a reckoning was forthcoming—if indeed she was guilty
—and many other worries doubtlessly weighed on respondent. Yet, these are normal
burdens cast upon her plainly on account of having to cooperate in the investigation.
They themselves do not translate to petitioner's malice. Respondent's physical response
may have been acute, but this, by itself, can only speak of her temperament and
physiology. It would be fallacious to view this physical response as proof of what her
interviewers actually told her or did to her.
Indeed, it was possible that respondent was harassed. But possibility is not proof.
Judicial and quasi-judicial proceedings demand proof. Respondent's narrative is rich
with melodramatic undertones of how she suffered a nervous breakdown, but is short of
prudent, verifiable proof. In the absence of proof, it would be a miscarriage of justice to
sustain a party-litigant's allegation.
What is certain is that there were several anomalies in petitioner's Davao branch. It
made sense for petitioner to investigate these anomalies. It also made sense for
respondent to be involved in the investigation.
Labor Arbiter Larida's reliance on Te's affidavit is misplaced. That affidavit was prepared
to facilitate the criminal prosecution of Tan, the branch manager, and Sobiaco, the
cashier.77 It naturally emphasized Tan's and Sobiaco's functions, and related these to
the uncovered anomalies. It would have been absurd to make respondent a focal point
as she was extraneous to the criminal suit against Tan and Sobiaco. The affidavit was
reticent about respondent because it did not have to discuss her.
If at all, Te's affidavit even militates against respondent's claim that petitioner was out
to get her. For if petitioner was indeed bent on pinning her down, it was foolhardy for it
to concentrate its attempts at criminal prosecution on Tan and Sobiaco.
In any case, for the very reason of her main functions as accounting clerk, it made
sense to view respondent with a degree of suspicion. It was only logical for petitioner to
inquire into how multiple vouchers and checks could have passed the scrutiny of the
officer tasked to prepare them. It was not capricious for petitioner to ponder if its
accounting clerk acted negligently or had allowed herself to be used, if not acted with
deliberate intent to defraud.
Even if petitioner were to completely distance itself from judicious misgivings against
respondent, elect to not treat her as a suspect, and restrict itself to Tan's and Sobiaco's
complicity, it was still reasonable for it to involve respondent in its investigation. Given
her direct interactions with Tan and Sobiaco and her role in the workflow for payments
and disbursements, it was wise, if not imperative, to invoke respondent as a witness.
Unfortunately, however, before the investigation could proceed to the second step of
the termination process into a hearing or conference, Mandapat chose to resign from
her job. Mandapat's bare allegation that she was coerced into resigning can hardly be
given credence in the absence of clear evidence proving the same. No doubt, Mandapat
read the writing on the wall, knew that she would be fired for her transgressions, and
beat the company to it by resigning. Indeed, by the disrespectful tenor of her
memorandum, Mandapat practically indicated that she was no longer interested in
continuing cordial relations, much less gainful employment with Add Force. 82 (Citation
omitted)
This Court will not be so intrepid in this case as to surmise that respondent
was truly complicit in the uncovered anomalies and that termination of
employment for just cause was a foregone conclusion which she was merely
trying to evade by ceasing to report to work. Still, fairness dictates that this
Court decline to condone her acts in preempting and refusing to cooperate in a
legitimate investigation, only to cry constructive dismissal.
WHEREFORE, the Petition for Review on Certiorari is GRANTED. The assailed July 4,
2013 Decision and February 12, 2014 Resolution of the Court of Appeals in CA-G.R. SP
No. 04622 are REVERSED and SET ASIDE. The National Labor Relations Commission
May 27, 2011 and August 31, 2011 Decisions in NLRC No. MAC-01-011835-2011 (RAB-
XI-03-00352-2010) are REINSTATED.
SO ORDERED.
Velasco, Jr., J., (Chairperson), Bersamin, Martires, and Gesmundo, JJ., concur.
G.R. No. 152991 July 21, 2008
ALBERTO P. OXALES, Petitioner,
vs.
UNITED LABORATORIES, INC., Respondent.
DECISION
REYES, R.T., J.:
HOW should a private company retirement plan for employees be implemented vis-à-vis The
Retirement Pay Law (Republic Act No. 7641)?
Papaano ipapatupad ang isang plano ng pribadong kompanya para sa pagreretiro ng mga
empleyado sa harap ng Batas ng Pagbabayad sa Pagreretiro (Batas Republika Blg. 7641)?
We address the concern in this appeal by certiorari of the Decision1 of the Court of Appeals (CA)
affirming the Resolution2 and Decision3 of the Labor Arbiter and the National Labor Relations
Commission (NLRC), respectively, dismissing petitioner Alberto P. Oxales’ complaint for additional
retirement benefits, recovery of the cash equivalent of his unused sick leaves, damages, and
attorney’s fees, against respondent United Laboratories, Inc. (UNILAB).
The Facts
Sometime in 1959, UNILAB established the United Retirement Plan (URP). 4 The plan is a
comprehensive retirement program aimed at providing for retirement, resignation, disability, and
death benefits of its members. An employee of UNILAB becomes a member of the URP upon his
regularization in the company. The URP mandates the compulsory retirement of any member-
employee who reaches the age of 60.
Both UNILAB and the employee contribute to the URP. On one hand, UNILAB provides for the
account of the employee an actuarially-determined amount to Trust Fund A. On the other hand, the
employee chips in 2½% of his monthly salary to Trust Fund B. Upon retirement, the employee gets
both amounts standing in his name in Trust Fund A and Trust Fund B.
As retirement benefits, the employee receives (1) from Trust Fund A a lump sum of 1½ month’s pay
per year of service "based on the member’s last or terminal basic monthly salary," 5 and (2) whatever
the employee has contributed to Trust Fund B, together with the income minus any losses incurred.
The URP excludes commissions, overtime, bonuses, or extra compensations in the computation of
the basic salary for purposes of retirement.
Oxales joined UNILAB on September 1, 1968. He was compulsorily retired by UNILAB when he
reached his 60th birthday on September 7, 1994, after having rendered service of twenty-five (25)
years, eleven (11) months, and six (6) days. He was then Director of Manufacturing Services Group.
In computing the retirement benefits of Oxales based on the 1½ months for every year of service
under the URP, UNILAB took into account only his basic monthly salary. It did not include as part of
the salary base the permanent and regular bonuses, reasonable value of food allowances, 1/12 of
the 13th month pay, and the cash equivalent of service incentive leave.
Thus, Oxales received from Trust Fund A ₱1,599,179.00, instead of ₱4,260,255.70. He also
received ₱176,313.06, instead of ₱456,039.20 as cash equivalent of his unused sick leaves. Lastly,
he received ₱397,738.33 from his contributions to Trust Fund B. In sum, Oxales received the total
amount of ₱2,173,230.39 as his retirement benefits.
On August 21, 1997, Oxales wrote UNILAB, claiming that he should have been paid ₱1,775,907.23
more in retirement pay and unused leave credits. He insisted that his bonuses, allowances and 13th
month pay should have been factored in the computation of his retirement benefits. 6
On September 9, 1997, UNILAB wrote7 back and reminded Oxales about the provision of the URP
excluding any commissions, overtime, bonuses or extra compensations in the computation of the
basic salary of the retiring employee.
Disgruntled, Oxales filed a complaint with the Labor Arbiter for (1) the correct computation of his
retirement benefits, (2) recovery of the cash equivalent of his unused sick leaves, (3) damages, and
(4) attorney’s fees. He argued that in the computation of his retirement benefits, UNILAB should
have included in his basic pay the following, to wit: (a) cash equivalent of not more than five (5) days
service incentive leave; (b) 1/12th of 13th month pay; and (c) all other benefits he has been
receiving.
Efforts were exerted for a possible amicable settlement. As this proved futile, the parties were
required to submit their respective pleadings and position papers.
On June 30, 1998, Labor Arbiter Romulus A. Protasio rendered a decision dismissing the
complaint, thus:
SO ORDERED.8
The Labor Arbiter held that the URP clearly excludes commission, overtime, bonuses, or other extra
compensation. Hence, the benefits asked by Oxales to be included in the computation of his
retirement benefits should be excluded. 9
The Arbiter also held that the inclusion of the fringe benefits claimed by Oxales would put UNILAB in
violation of the terms and conditions set forth by the Bureau of Internal Revenue (BIR) when it
approved the URP as a tax-qualified plan. More, any overpayment of benefits would adversely affect
the actuarial soundness of the plan. It would also expose the trustees of the URP to liabilities and
prejudice the other employees. Worse, the BIR might even withdraw the tax exemption granted to
the URP.10 Lastly, the Labor Arbiter opined that the URP precludes the application of the provisions
of R.A. No. 7641.11
Oxales appealed to the NLRC. On February 8, 1999, the NLRC affirmed the decision of the Labor
Arbiter, disposing as follows:
WHEREFORE, in view thereof, the instant appeal is hereby dismissed for lack of merit and the
appealed decision is ordered affirmed.
SO ORDERED.12
The NLRC ruled that the interpretation by Oxales of R.A. No. 7641 is selective. He only culled the
provisions that are beneficial to him, putting in grave doubt the sincerity of his motives. For instance,
he claims that the value of the food benefits and other allowances should be included in his monthly
salary as multiplicand to the number of his years of service with UNILAB. At the same time,
however, he does not intend to reduce the 1½ month salary as multiplier under the URP to ½ under
R.A. No. 7641.13
The NLRC agreed with the Labor Arbiter that the provisions of R.A. No. 7641 do not apply in view of
the URP. The NLRC also took into account the fact that the benefits granted to Oxales by virtue of
the URP was even higher than what R.A. No. 7641 requires. 14
His motion for reconsideration having been denied, Oxales filed with the CA a petition
for certiorari under Rule 65.
In a decision promulgated on April 12, 2002, the CA dismissed the petition. The CA ruled that the
petition of Oxales calls for a review of the factual findings of the Labor Arbiter as affirmed by the
NLRC. It is not the normal function of the CA in a special civil action for certiorari to inquire into the
correctness of the evaluation of the evidence by the Labor Arbiter. Its authority is confined only to
issues of jurisdiction or grave abuse of discretion. 15
Just like the Labor Arbiter and the NLRC, the CA also held that R.A. No. 7641 is applicable only in
the absence of a retirement plan or agreement providing for the retirement benefits of employees in
an establishment.16
Finally, the CA denied the claim of Oxales to moral and exemplary damages. According to the
appellate court, he failed to prove the presence of bad faith or fraud on the part of UNILAB. His mere
allegations of having suffered sleepless nights, serious anxiety, and mental anguish are not enough.
No premium should be placed on the right to litigate. 17
Left with no other option, Oxales filed the present recourse under Rule 45 of the 1997 Rules of Civil
Procedure.18
Issues
In his Memorandum,19 Oxales raises the following issues for Our disposition, to wit:
5. WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE
NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN INCORRECTLY INTERPRETING
THE URP TO EXCLUDE ONE TWELFTH (1/12th) OF THE STATUTORY THIRTEENTH
MONTH PAY FROM THE SALARY BASE FOR COMPUTING RETIREMENT BENEFITS;
8. WHETHER OR NOT THE LABOR ARBITER, THE NLRC, AND COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION IN IGNORING AND NOT RESOLVING
THE ISSUES REGARDING PETITIONER’S UNPAID CASH EQUIVALENT OF THE
UNUSED SICK LEAVE CREDITS;
10. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED IN NOT RULING
THAT THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN NOT REINSTATING
THE MEDICAL RETIREMENT BENEFITS OF PETITIONER;
11. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY
ABUSED ITS DISCRETION IN TOTALLY AND ARBITRARILY IGNORING THE ISSUE AND
IN NOT FINDING THAT THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN
RENDERING A DECISION IN VIOLATION OF THE CONSTITUTIONAL REQUIREMENTS
WHICH IN EFFECT DENIED PETITIONER’S RIGHT TO DUE PROCESS;
12. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY
ABUSED ITS DISCRETION IN LIKEWISE RENDERING A DECISION IN VIOLATION OF
THE CONSTITUTIONAL REQUIREMENT THAT DECISIONS SHOULD EXPRESS
CLEARLY AND DISTINCTLY THE FACTS OF THE CASE AND THE LAW ON WHICH IT IS
BASED;
The issues posed by Oxales may be compressed as follows: first, whether in the computation of his
retirement and sick leave benefits, UNILAB should have factored such benefits like bonuses, cash
and meal allowances, rice rations, service incentive leaves, and 1/12 of the 13th month pay; second,
whether R.A. No. 7641 is applicable for purposes of computing his retirement benefits; and third,
whether UNILAB is liable for moral damages, exemplary damages, and attorney’s fees.
Our Ruling
A retirement plan in a company partakes the nature of a contract, with the employer and the
employee as the contracting parties. It creates a contractual obligation in which the promise to pay
retirement benefits is made in consideration of the continued faithful service of the employee for the
requisite period.21
The employer and the employee may establish such stipulations, clauses, terms, and conditions as
they may deem convenient.22 In Allgeyer v. Louisiana,23 New York Life Ins. Co. v. Dodge, 24 Coppage
v. Kansas,25 Adair v. United States,26 Lochner v. New York,27 and Muller v. Oregon,28 the United
States Supreme Court held that the right to contract about one’s affair is part and parcel of the liberty
of the individual which is protected by the "due process of law" clause of the Constitution.
The obligations arising from the agreement between the employer and the employee have the force
of law between them and should be complied with in good faith. 29
However, though the employer and the employee are given the widest latitude possible in the
crafting of their contract, such right is not absolute. There is no such thing as absolute freedom of
contract. A limitation is provided for by the law itself. Their stipulations, clauses, terms, and
conditions should not be contrary to law, morals, good customs, public order, or public policy. 30
Indeed, the law respects the freedom to contract but, at the same time, is very zealous in protecting
the contracting parties and the public in general. So much so that the contracting parties need not
incorporate the existing laws in their contract, as the law is deemed written in every
contract. Quando abest, proviso parties, adest proviso legis . When the provision of the party
is lacking, the provision of the law supplies it. Kung may kulang na kondisyon sa isang
kasunduan, ang batas ang magdaragdag dito.
Viewed from the foregoing, We rule that Oxales is not entitled to the additional retirement benefits he
is asking. The URP is very clear: "basic monthly salary" for purposes of computing the retirement
pay is "the basic monthly salary, or if daily[,] means the basic rate of pay converted to basic monthly
salary of the employee excluding any commissions, overtime, bonuses, or extra
compensations."31 Inclusio unius est exclusio alterius. The inclusion of one is the exclusion of others.
Ang pagsama ng isa, pagpwera naman sa iba.
The URP is not contrary to law, morals, good customs, public order, or public policy to merit its
nullification. We, thus, sustain it. At first blush, the URP seems to be disadvantageous to the retiring
employee because of the exclusion of commissions, overtime, bonuses, or extra compensations in
the computation of the basic monthly salary. However, a close reading of its provisions would reveal
otherwise. We quote with approval the explanation of the NLRC in this regard, viz.:
x x x the United Retirement Plan of the respondent [Unilab] has a one and one-half months salary for
every year of service as the basis of entitlement. Under the new law, only one-half month of the
retiree’s salary inclusive however, of not more than five (5) days of service incentive leave and one-
twelfth (1/12) of the 13th month pay are used as the bases in the retirement benefits computation.
Both law33 and jurisprudence34 mandate that if the terms of a contract are clear and leave no doubt
upon the intention of the contracting parties, the literal meaning of its stipulations shall control. Thus,
if the terms of a writing are plain and unambiguous, there is no room for construction, since the only
purpose of judicial construction is to remove doubt and uncertainty. 35 Only where the language of a
contract is ambiguous and uncertain that a court may, under well-established rules of construction,
interfere to reach a proper construction and make certain that which in itself is uncertain. 36 Where the
language of a contract is plain and unambiguous, its meaning should be determined without
reference to extrinsic facts or aids.37
R.A. No. 7641 does not apply in view of the URP which gives to the retiring employee more
than what the law requires; the supporting cases cited by Oxales are off-tangent.
R.A. No. 7641, otherwise known as "The Retirement Pay Law," only applies in a situation where (1)
there is no collective bargaining agreement or other applicable employment contract providing for
retirement benefits for an employee; or (2) there is a collective bargaining agreement or other
applicable employment contract providing for retirement benefits for an employee, but it is below the
requirements set for by law. The reason for the first situation is to prevent the absurd situation where
an employee, who is otherwise deserving, is denied retirement benefits by the nefarious scheme of
employers in not providing for retirement benefits for their employees. The reason for the second
situation is expressed in the latin maxim pacta privata juri publico derogare non possunt. Private
contracts cannot derogate from the public law. Ang kasunduang pribado ay hindi makasisira sa
batas publiko. Five (5) reasons support this conclusion.
First, a plain reading of the Retirement Pay Law. R.A. No. 7641 originated from the House of
Representatives as House Bill 317 which was later consolidated with Senate Bill 132. It was
approved on December 9, 1992 and took effect on January 7, 1993. 38 Amending Article 287 of the
Labor Code, it provides as follows:
Art. 287. Retirement. – Any employee may be retired upon reaching the retirement age established
in the collective bargaining agreement or other applicable employment contract.
In case of retirement, the employee shall be entitled to receive such retirement benefits as he may
have earned under existing laws and any collective bargaining agreement and other agreements:
Provided, however, that an employee’s retirement benefits under any collective bargaining and other
agreements shall not be less than those provided herein.
In the absence of a retirement plan or agreement providing for retirement benefits of employees in
the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond
sixty-five (65) years which is hereby declared the compulsory retirement age, who has served at
least five (5) years in the said establishment, may retire and shall be entitled to retirement pay
equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six
(6) months being considered as one whole year.
Unless the parties provide for broader inclusions, the term ‘one-half (1/2) month salary shall mean
fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more
than five (5) days of service incentive leaves. (Underscoring supplied)
Second, the legislative history of the Retirement Pay Law. It may be recalled that R.A. No. 7641
traces back its history in the case of Llora Motors, Inc. v. Drilon.39 In this case, the Court held that the
then Article 287 of the Labor Code40 and its Implementing Rules41 may not be the source of an
employee’s entitlement to retirement pay absent the presence of a collective bargaining agreement
or voluntary company policy that provides for retirement benefits for the employee. 42
Third, the legislative intent of the Retirement Pay Law. A reading of the explanatory note of
Representative Alberto S. Veloso would show why Congress sought to pass the Retirement Pay
Law: many employers refuse or neglect to adopt a retirement plan for their employees because of
the absence of any legal compulsion for them to do so, thus:
When the Labor Code came into effect in 1974, retirement pay had, as a matter of course, been
granted to employees in the private sector when they reach the age of sixty (60) years. This had
practically been the rule observed by employers in the country pursuant to the rules and regulations
issued by the then Minister of Labor and Employment to implement the provisions of the Labor
Code, more particularly, where there is no provision for the same in the collective bargaining
agreement or retirement plan of the establishment. 1avvphil
At present, however, such benefit of retirement pay is no longer available where there is no
collective agreement thereon or any retirement plan at all. This is so because, in a decision of the
Supreme Court (Llora Motors vs. Drilon and NLRC, et al., G.R. No. 82895, November 7, 1989), it
was held that the grant of such benefit under the rules implementing the Labor Code is not
supported by any express provision of the Labor Code itself. In short, there is no specific statutory
basis for the grant of retirement benefits for employees in the private sector reaching the age of 60
years.
Since the time of such nullification by the Supreme Court of said implementing rules on retirement
pay for private sector employees, many employers simply refuse or neglect to adopt any retirement
plan for their workers, obviously emboldened by the thought that, after said ruling, there is no longer
any legal compulsion to grant such retirement benefits. In our continuous quest to promote social
justice, unfair situations like this, productive of grievance or irritants in the labor-management
relations, must immediately be corrected or remedied by legislation. (Underscoring supplied)
Fourth, the title of the Retirement Pay Law. The complete title of R.A. No. 7641 is "An Act Amending
Article 287 of Presidential Decree No. 442, As Amended, Otherwise Known as the Labor Code of
the Philippines, By Providing for Retirement Pay to Qualified Private Sector in the Absence of Any
Retirement Plan in the Establishment." Res ipsa loquitur. The thing speaks for itself. Isang bagay na
nangungusap na sa kanyang sarili.
Fifth, jurisprudence. In Oro Enterprises, Inc. v. National Labor Relations Commission,43 the Court
held that R.A. No. 7641 "is undoubtedly a social legislation. The law has been enacted as a labor
protection measure and as a curative statute that – absent a retirement plan devised by, an
agreement with, or a voluntary grant from, an employer – can respond, in part at least, to the
financial well-being of workers during their twilight years soon following their life of labor." 44
In Pantranco North Express, Inc. v. National Labor Relations Commission,45 the Court held that
Article 287 of the Labor Code "makes clear the intention and spirit of the law to give employers and
employees a free hand to determine and agree upon the terms and conditions of retirement," 46 and
that the law "presumes that employees know what they want and what is good for them absent any
showing that fraud or intimidation was employed to secure their consent thereto." 47
Lastly, in Brion v. South Philippine Union Mission of the Seventh Day Adventist Church,48 the Court
ruled that a reading of Article 287 of the Labor Code would reveal that the "employer and employee
are free to stipulate on retirement benefits, as long as these do not fall below floor limits provided by
law."49
We are aware of the several cases cited by Oxales to support his claim that the computation of his
retirement benefits should not have been limited to the basic monthly salary as defined by the URP.
However, these cases negate, rather than support, his claim.
The distinction between Villena with the instant case is readily apparent. The Court used the regular
compensation of Villena in computing his retirement benefits because the provision of the CBA for
rank-and-file employees is inapplicable to him, being a managerial employee. The Villena case was
also decided before the passage of R.A. No. 7641.
In Planters Products, Inc. v. National Labor Relations Commission,52 the petitioning employees were
given termination benefits based on their basic salary. However, Planters Products, Inc. had
integrated the allowances of its remaining employees into their basic salary. Thus, it was the basic
salary that increased. Also, it was the basic salary as increased (not the basic salary and
allowances) which still formed the basis for the computation of the termination benefits of the
remaining employees of the company. The Court held that fairness demanded that the terminated
employees receive the same treatment.53 Clearly, such situation is absent here.
In Manuel L. Quezon University v. National Labor Relations Commission,54 the issue raised was
whether respondents are entitled to the retirement benefits provided for under R.A. No. 7641, even if
petitioner has an existing valid retirement plan. The Court held that the coverage of the law "applies
to establishments with existing collective bargaining or other agreements or voluntary retirement
plans whose benefits are less than those prescribed under the proviso in question." 55
Admittedly, this Court held in the case of Songco v. National Labor Relations Commission56 that not
only the basic salary but also the "allowances" (like transportation and emergency living allowances)
and "earned sales commissions" should be taken into consideration in computing the backwages
and separation pay of the employee. However, a closer examination of the case would show that the
CBA57 between Zuellig and F.E. Zuellig Employees Association, in which Songco was a member, did
not contain an explicit definition of what salary is. Neither was there any inclusions or exclusions in
the determination of the salary of the employee. Here, the URP has an explicit provision excluding
any commissions, overtime, bonuses, or extra compensations for purposes of computing the basic
salary of a retiring employee. Too, the Songco case was decided before the passage of R.A. No.
7641.
Clearly then, R.A. No. 7641 does not apply because the URP grants to the retiring employee more
than what the law gives. Under the URP, the employee receives a lump sum of 1½ pay per year of
service, compared to the minimum ½ month salary for every year of service set forth by R.A. No.
7641.
Oxales is trying to have the best of both worlds. He wants to have his cake and eat it too: the 1½
months formula under the URP, and the inclusion of the value of food benefits and other allowances
he was entitled to as employee of UNILAB with his monthly salary as the multiplicand of his number
of years in the service. This he should not be permitted to do, lest a grave injustice is caused to
UNILAB, and its past and future retirees.
As an illustration, Complainant claims that his monthly salary as the multiplicand of his number of
years in the service should include the value of the food benefits and other allowances he was
entitled while in the employ of respondent. However, he did not even, by implication, intend to
reduce the 1½ month salary as multiplier under the URP to ½ under the law he invoked. This is a
sign of covetousness, unfair both to the employer and those employees who have earlier retired
under said plan.58
Oxales is not entitled to the reinstatement of his medical benefits, which are not part of the
URP. Corollarily, he is not also entitled to moral damages, exemplary damages, and
attorney’s fees.
Oxales claims that UNILAB unilaterally revoked his medical benefits, causing him humiliation and
anxiety. This, he argues, entitles him to moral damages, exemplary damages, plus attorney’s fees.
We cannot agree. The records bear out that after Oxales retired from UNILAB, he chose to join a
rival company, Lloyds Laboratories, Inc. As UNILAB correctly puts it, "[i]f any employer can legally
and validly do the supreme act of dismissing a disloyal employee for having joined or sympathized
with a rival company, with more reason may it do the lesser act of merely discontinuing a benefit
unilaterally given to an already-retired employee." 59 As a retired employee, Oxales may not claim a
vested right on these medical benefits. A careful examination of the URP would show that medical
benefits are not included in the URP.
Indeed, while there is nothing wrong in the act of Oxales in joining a rival company after his
retirement, justice and fair play would dictate that by doing so, he cannot now legally demand the
continuance of his medical benefits from UNILAB. To rule otherwise would result in an absurd
situation where Oxales would continue to receive medical benefits from UNILAB while working in a
rival company. We note that these medical benefits are merely unilaterally given by UNILAB to its
retired employees.
We are not unaware of this Court’s pronouncement in Brion v. South Philippine Union Mission of the
Seventh Day Adventist Church.60 However, Oxales’ plight differs from Brion because the URP does
not expressly cover medical benefits to retirees. In contrast, the retired employee in Brion had
acquired a vested right to the withheld benefits.
The claim of Oxales to moral damages, exemplary damages, and attorney’s fees must also be
denied for want of basis in law or jurisprudence. On this score, We echo the pronouncement of the
Court in Audion v. Electric Co., Inc. v. National Labor Relations Commission,61 to wit:
Moral and exemplary damages are recoverable only where the dismissal of an 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. The person claiming moral damages must prove
the existence of bad faith by clear and convincing evidence for the law always presumes good faith.
It is not enough that one merely suffered sleepless nights, mental anguish, serious anxiety as the
result of the actuations of the other party. Invariably, such action must be shown to have been
willfully done in bad faith or with ill motive, and bad faith or ill motive under the law cannot be
presumed but must be established with clear and convincing evidence. Private respondent
predicated his claim for such damages on his own allegations of sleepless
nights and mental anguish, without establishing bad faith, fraud or ill motive as legal basis therefor.
Private respondent not being entitled to award of moral damages, an award of exemplary damages
is likewise baseless. Where the award of moral and exemplary damages is eliminated, so must the
award for attorney’s fees be deleted. Private respondent has not shown that he is entitled thereto
pursuant to Art. 2208 of the Civil Code.62 (Citations omitted)
Here, there was no dismissal, as Oxales was retired by UNILAB by virtue of the URP. He was also
paid his complete retirement benefits.
Epilogue
It is not disputed that Oxales has worked tirelessly for UNILAB. For one thing, he has spent a
considerable amount of years with the company. For another, he has contributed much to its growth
and expansion. However, even as We empathize with him in his time of great need, it behooves Us
to interpret the law according to what it mandates.
We reiterate the time-honored principle that the law, in protecting the rights of the laborer, authorizes
neither oppression nor self-destruction of the employer. While the Constitution is committed to the
policy of social justice and the protection of the working class, management also has its own rights,
which are entitled to respect and enforcement in the interest of fair play. Out of its concern for those
with less privilege in life, this Court has inclined more often than not toward the employee and
upheld his cause with his conflicts with the employer. Such favorable treatment, however, has not
blinded the Court to rule that justice is in every case for the deserving. Justice should be dispensed
in the light of the established facts and applicable law and doctrine. 63
SO ORDERED.
RUBEN T. REYES
Associate Justice
WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
ADOLFO S. AZCUNA**
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.
REYNATO S. PUNO
Chief Justice
CENTRO PROJECT MANPOWER SERVICES
CORPORATION, Petitioner,
vs.
AGUINALDO NALUIS and THE COURT OF
APPEALS, Respondents.
G.R. No. 160123 June 17, 2015
DECISION
BERSAMIN, J.:
In the interpretation of their provisions, labor contracts require the resolution of doubts in favor
of the laborer because of their being imbued with social justice considerations . This rule of
interpretation is demanded by the Labor Code and the Civil Code.
1 2
Both the Labor Arbiter and the National Labor Relations Commission (NLRC) resolved the doubt in
3 4
favor of the employer when it held that respondent Aguinaldo Naluis (Naluis) had been properly
repatriated, and, consequently, not illegally dismissed. However, on April 23, 2003, the Court of
Appeals (CA) set aside their resolutions, and ruled to the contrary. Hence, this appeal by the
5
employer.
Antecedents
Petitioner Centro Project Manpower Services Corporation (Centro Project), a local recruitment
agency, engaged Naluis to work abroad as a piufu6er· under Pacific Micronesia Corporation (Pacific
Micronesia) in Garapan, Saipan, in the Commonwealth of the Northern Mariana Islands (Northern
Marianas). The work was covered by the primary Employment Contract dated March 11,
1997, whereby his employment would last for 12 months, and would commence upon his arrival in
6
Northern Marianas. On June 3, 1997, the Department of Labor and Immigration of Northern Mariana
Islands issued an Authorization for Entry (AE) in his favor. On September 3, 1997, Centro Project
7
and Naluis executed an addendum to the primary Employment Contract to make the start of his
8
employment effective from his departure at the point of origin instead of his arrival in
Northern Marianas.
Naluis left for Northern Mariana on September 13, 1997, the date of his actual deployment, and his
9
employment continued until his repatriation to the Philippines on June 3, 1998 allegedly due to the
expiration of the employment contract. Not having completed 12 months of work, he filed a complaint
for illegal dismissal against Centro Project.
The Labor Arbiter found that Centro Project had been justified m repatriating Naluis, and accordingly
dismissed the complaint, to wit:
This Office finds the repatriation of complainant to the Philippines NOT A DISMISSAL BUT AS A
RESULT OF THE LAWS AND REGULATIONS OF THE COMMONWEALTH OF NORTHERN
MARIANA ISLANDS AS PROVIDED FOR IN THE AUTHORIZATION FOR ENTRY.
xxxx
Although complainant has not served the twelve (12) months period stated in the Contract of
Employment, the Employer has no other alternative but to repatriate complainant otherwise, the
employer could be liable for violation of the Commonwealth's Immigration Rules x x x.
xxxx
WHEREFORE, in view of the foregoing, the instant complaint is hereby DISMISSED lack of merit. 10
Naluis appealed to the NLRC, which found that Centro Project had no choice but to terminate the
employment contract because the AE issued by the Department of Labor and Immigration of
Northern Mariana Islands had limited his stay in Northern Marianas, and that his employment had
expired on May 13, 1998 as explicitly provided in the employment contract executed between him
and Centro Project. The NLRC thus disposed:
WHEREFORE, in view of the foregoing, this Commission resolves to affirm the Decision of the Labor
Arbiter and dismiss the instant appeal for lack of merit.
11
On April 23, 2003, the CA promulgated its judgment setting aside the decision of the NLRC, holding
that the AE did not have any effect on Naluis' employment status; that the AE did not limit his stay in
Northern Marianas; and that, consequently, Centro Project had breached the contract by
ordering his repatriation. The CA decreed as follows:
WHEREFORE, the petition is GRANTED. The assailed decision is REVERSED and SET ASIDE,
and a new one entered DIRECTING the private respondent to pay the petitioner the following:
a) Four (4) months salary corresponding to the unpaid portion of his contract at $520.00
(Five Hundred Twenty U.S. Dollars) per month;
b) Guaranteed overtime pay at an average of thirty (30) to forty (40) hours per month in
excess of straight eight (8) hours regular work schedule corresponding to the unexpired
portion of four ( 4) months in the contract;
SO ORDERED. 12
Issues
Hence, this appeal, whereby Centro Project submits that the AE categorically fixed the period of stay
of Naluis; and that even the primary Employment Contract clearly set the date for its expiration.
Naluis counters that the handwritten date of May 3, 1998 was inserted in the primary Employment
Contract only after he had signed it, as distinguished from all other stipulations that had been
typewritten. Did the expiration date contained in the AE issued by the Department of Labor and
Immigration of Northern Mariana Islands validly cut short Naluis' stay and thus justified the pre-
termination of his work?
There is no dispute that Naluis did not complete the 12-month period stipulated in the primary
Employment Contract. However, the NLRC concluded that Centro Project had been justified in
repatriating him because the AE had stipulated a limit of stay for him. The NLRC thereby relied on a
loose interpretation of the AE and the primary Employment Contract.
In finding that the NLRC committed grave abuse of discretion amounting to lack or excess of
jurisdiction in so concluding, the CA observed that:
x x x the document upon which the employer predicated its action to terminate and repatriate the
petitioner i.e., the Authorization of Entry issued by the immigration authorities of CNMI does not
appear to limit the employee's stay in the said country. The authorization upon its face simply shows
that the person to whom it is issued should enter CNMI not later than May 13, 1998 as a general
rule or, if he is an employee, not later than three months from its issuance. We submit that an
authorization of entry is different from a limitation of stay in the country visited, which is not indicated
in any of the documents submitted by the respondent. 13
We concur with the CA. The burden of proof to show that the employment contract had been validly
terminated pertained to the employer. To discharge its burden, the employer must rely on the
14
strength of its own evidence. However, Centro Project's reliance on the AE limiting
Naluis' stay was unwarranted, and, worse, it did not discharge its burden of proof as the employer to
show that Naluis' repatriation had been justified.
This letter allows authorized entry into the Commonwealth of the Northern Mariana Islands for
Aguinaldo S. Naluis.
AGUINALDO S NALUIS
Occupation: PLUMBER
1. Present this Authorization for Entry letter to an Immigration Officer immediately upon
arrival at your designated port of entry into the Commonwealth of the Northern Mariana
Islands.
xxxx
3. The Entry Permit, if issued for the purpose of employment, expires automatically upon
termination of such employment and must be surrendered to your employer.
xxxx
5. You must enter the CNMI within 90 days of issuance of this "Authorization for Entry" letter
if you are entering for the purpose of employment. (emphasis supplied)
1âwphi1
The AE thereby clearly indicated that the date of May 13, 1998 appearing thereon referred only to
the expiration of the document itself. Centro Project stretched its interpretation to bolster its
contention that May 13, 1998 was the limit of stay for Naluis in Northern Marianas. The interpretation
is unacceptable, for item number 3 of the AE even recognized any employment period if the AE was
issued for the purpose of employment. This meant that contrary to the position of Centro Project
there was no clear and categorical entry in the AE to the effect that the AE limited his stay in
Northern Marianas.
or vagueness in the provisions of the contract of employment should have been interpreted
and resolved in favor of employee (Naluis) . 17
Although Centro Project alleges that it feared that Naluis would eventually be declared an illegal
alien had he not been repatriated, the records do not support the allegation. For one, Centro Project
did not demonstrate that its fear was justified at all. On the contrary, its fear was, at best, imaginary
because it did not submit evidence showing that the Northern Marianas authorities had ever moved
to declare him an illegal alien. Moreover, had Centro Project been aware of any likelihood of him
being soon declared an illegal alien, it could have easily advised him thereof, and explained the
situation to him in due course. Yet, he was not at all informed of the likelihood.
Denying its participation in the fixing of the expiration date, Centro Project argues that it was the
Philippine representative in Northern Marianas who had inserted by hand the date of expiration in
the Employment Contract.
And, secondly, even assuming that Centro Project did not have any participation in fixing the
expiration date, it did not amend the employment contract despite being fully aware that the term of
12 months was clearly indicated as the period of Naluis' work. The primary Employment Contract
was sent for approval to the principal employer abroad, as well as to the immigration authorities of
the Philippines and Northern Marianas. In such circumstances, Centro Project could not but know
that the period had been fixed by the immigration authorities of Northern Marianas prior to his actual
deployment. Thus, Centro Project was in bad faith in not taking any action when the Philippine
immigration authorities supposedly inserted the handwritten date of expiration of the contract. In fact,
the addendum to the employment contract, approved by the POEA on September 3, 1997, which
categorically stated that "the term of this contract shall be for a period of Twelve Months," was
19
executed even before he left for Northern Marianas on September 13, 1997, and after the AE had
already been issued by Northern Marianas on June 3, 1997. Centro Project could have easily
apprised him of the change. Also, the necessary amendments to the primary contract or an
addendum thereto could have been easily made prior to his deployment.
Undoubtedly, the term of the contract was 12 months. The AE could not be used as a valid cause for
pre-terminating the employment of Naluis. His repatriation was clearly a breach of the contract of
employment, for which the CA awarded to him the following money claims, to wit:
a) Four (4) months salary corresponding to the unpaid portion of his contract at $520.00
(Five Hundred Twenty U.S. Dollars) per month;
b) Guaranteed overtime pay at an average of thirty (30) to forty (40) hours per month in
excess of straight eight (8) hours regular work schedule corresponding to the unexpired
portion of four ( 4) months in the contract;
We affirm the awards except those for the guaranteed overtime pay and legal holiday pay.
Under Section 10 of Republic Act No. 8042, the unjustly terminated employee is entitled to
20
the full reimbursement of his placement fee with interest at 12% per annum, plus his salaries
for the unexpired portion of his employment contract. We further allow the payment of
vacation leave pay and sick leave pay because the employment contract2' stipulated 12
days vacation leave with pay and seven days sick leave with pay that could be taken after
one year. With his premature repatriation being unjustified, Naluis should receive his
vacation and sick leave pays, but not the guaranteed overtime pay and legal holiday pay
because the employment contract did not extend such benefits.
WHEREFORE, the Court AFFIRMS the decision promulgated on April 23, 2003, subject to the
DELETION of the awards for guaranteed overtime pay and legal holiday; and ORDERS the
petitioner to pay the costs of suit.
G.R. No. 158539 January 15, 2009 INDUSTRIAL & TRANSPORT EQUIPMENT,INC. Vs. TOMAS TUGADE And
CRESENCIO
DECISION
AZCUNA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to annul and
set aside the Decision of the Court of Appeals dated March 14, 2003 which affirmed the decision
of the National Labor Relations Commission (NLRC) finding petitioners liable for illegal
dismissal and ordering the payment of backwages and separation pay to respondents, and
the Resolution dated May 29, 2003 denying petitioners’ motion for reconsideration.
Petitioner is a corporation engaged in the business of motor vehicle repair. Private respondents,
Tomas Tugade and his brother Cresencio Tugade, were hired on November 14, 1978 and on May
11, 1984, respectively, by petitioner corporation. Tomas was employed as a diesel mechanic, while
Cresencio was the officer-in-charge at petitioner’s shop on Visayas Avenue.
Private respondents’ dismissal stemmed from an incident which took place on March 22, 1998, when
Mr. Faustino Cabel, one of the regular customers of petitioner, arrived at the shop to have his
vehicle repaired. On March 27, 1998, respondent Cresencio Tugade, after making the necessary
verifications regarding the payment of the service made by Mr. Cabel, released the latter’s vehicle.
On March 28, 1998, Felix P. Broqueza, petitioner’s Personnel and Administration Manager issued a
memorandum against Engr. Fernando Fabros and respondents Tomas and Cresencio Tugade,
suspending them for ten (10) working days from March 30, 1998 to April 11, 1998 for disobedience,
incompetence and gross negligence. The memorandum stated, among others, that the three
employees released the vehicle to Mr. Cabel, despite the instructions made by the Company
president not to release the same, unless and until he made full settlement of his obligation which
remained unpaid since 1996.
After the lapse of ten (10) days suspension or on April 12, 1998, the Tugades allegedly did not report
for work and were considered absent without leave. On April 13, 1998, another memorandum was
issued by Felix Broqueza directing him to make the necessary explanation why he failed to report for
work.
On April 16, 1996, however, the Tugades filed a complaint for illegal dismissal with prayer for
payment of separation pay in lieu of reinstatement, backwages and damages against petitioner. 1
On September 28, 1998, Labor Arbiter Potenciano S. Cañezares rendered his Decision, dismissing
the complaint for lack of merit but awarding separation pay of P56,680, the dispositive portion of
which reads:
WHEREFORE, the above-captioned case is hereby DISMISSED for lack of merit.
However, We find it in conformity with labor justice, considering the long services of the
complainants, to award them separation pay equivalent to one-half month pay for every year of
service, which as computed by Patricia B. Pangilinan of the Commission’s NLRC NCR Branch are
the following:
11/14/78-09/30/98
SO ORDERED.
Both parties appealed the decision of the Labor Arbiter to the NLRC which rendered a decision on
July 30, 1999 that reversed the Labor Arbiter by ruling that respondents were illegally dismissed and
ordering payment of backwages and separation pay. The motion for reconsideration filed by
petitioners was also denied by the NLRC in a Resolution dated September 20, 1999.
On July 8, 2003, petitioners filed the present petition for review on certiorari with prayer for the
issuance of a temporary restraining order and/or writ of preliminary injunction assailing the Decision
and Resolution of the Court of Appeals.
In a Resolution dated March 10, 2004, this Court issued a temporary restraining order enjoining
respondents from enforcing the assailed Decision and Resolution of the Court of Appeals.
II
Dismissal connotes a permanent severance or complete separation of the worker from the service
on the initiative of the employer regardless of the reasons therefor. 2 Based on the foregoing, it can
hardly be said that respondents were dismissed from employment rather than merely temporarily
suspended. Nowhere in the proceedings or pleadings filed before the Labor Arbiter or the NLRC did
respondents dispute that they were merely suspended from March 30, 1998 to April 11, 1998. As
shown by the contents of the memorandum issued to respondents, they were not dismissed but
merely suspended from employment:
xxx However, despite our President’s direct and clear instruction you released the vehicle to Mr.
Faustino Cabel without the necessary payment. This is a clear disobedience, incompetence and
gross negligence of your duty as Supervisor.
In view thereof, we regret to inform you that you are being suspended for ten (10) working days
without pay effective March 30 to April 11, 1998.
Repetition of the same offense will be dealt with accordingly in accordance with the labor law.
(Annex "2" to Annex "F" to Annex "C" hereof)
This piece of evidence clearly disproves the finding of the Court of Appeals that respondents were
terminated from employment supposedly based on a memorandum prohibiting their entry into the
company premises. A settled exception to the rule generally sustaining the factual determination of
the Court of Appeals is when it disregards a vital evidence in reaching its finding. This obtains here.
There is also no dispute that petitioners instructed the respondents not to release the vehicle of Mr.
Faustino Cabel unless and until the latter has completely settled his obligations with the company.
However, despite the fact that Mr. Cabel failed to settle his obligations and in clear defiance of the
petitioners’ order, respondents released the car to Mr. Cabel. Petitioners were clearly acting within
their rights in suspending respondents.
In numerous cases, this Court has sustained the right of employers to exercise their management
prerogatives to discipline erring employees, thus:
However, petitioner loses sight off the fact that the right of an employer to regulate all aspects of
employment is well settled. This right, aptly called management prerogative, gives employers the
freedom to regulate, according to their discretion and best judgment, all aspects of employment,
including work assignment, working methods, processes to be followed, working regulations, transfer
of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of
workers. In general, management has the prerogative to discipline its employees and to impose
appropriate penalties on erring workers pursuant to company rules and regulations. 3
Therefore, the complaint for illegal dismissal filed by respondents was premature, since even after
the expiration of their suspension period, they refused, despite due notice, to report to work. In fact,
in their Memorandum of Appeal, respondents admitted having received petitioners’ return-to-work
memorandum which, however, became futile because they hastily filed the complaint for illegal
dismissal.
Since there was no dismissal to speak of, there is no basis to award any backwages to respondents.
Under Article 279 of the Labor Code, an employee is entitled to reinstatement and backwages only if
he was illegally dismissed.
The decision of the Labor Arbiter is, therefore, sustained, finding that respondents abandoned their
positions by failing to return to work despite management directives to do so, and awarding
separation pay of P56,680 each to respondents.
Nevertheless, this Court agrees with the Court of Appeals that petitioners failed to follow the
requirements of notices after respondents abandoned their positions. Respondents are therefore
entitled to an additional award of P30,000 each in accordance with the doctrine in the
Agabon 4 case.
WHEREFORE, the Decision dated March 14, 2003 and the Resolution dated May 29, 2003 of the
Court of Appeals are hereby MODIFIED. The decision of the National Labor Relations Commission
dated July 30, 1999 is REVERSED and the Decision of the Labor Arbiter dated September 28, 1998
is REINSTATED with MODIFICATION, awarding separation pay to respondents in the amount of
P56,680 each plus P30,000 each in accordance with the Agabon doctrine.
No costs.
SO ORDERED.
MARSMAN & COMPANY, INC.,, Petitioner vs RODIL C. STA.
RITA, Respondent
G.R. No. 194765
DECISION
LEONARDO-DE CASTRO, J.:
Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by
Marsman & Company, Inc. (Marsman), now Metro Alliance Holdings & Equities Corporation, seeking
the annulment and reversal of the Decision dated June 25, 2010 and the Resolution dated
1 2
December 9, 2010 of the Court of Appeals in CA-G.R. SP No. 106516. The appellate court's
issuances reversed the Decision dated July 31, 2008 of the National Labor Relations Commission
3
(NLRC) in NLRC NCR Case No. 30- 01-00362-00 (NLRC CA No. 032892-02) dismissing respondent
Rodil C. Sta. Rita's (Sta. Rita's) complaint and the Resolution denying his motion for
4
reconsideration. The Court of Appeals instead found Marsman guilty of illegal dismissal and ordered
the company to pay for backwages, separation pay, moral damages, exemplary damages and
attorney's fees.
Marsman, a domestic corporation, was formerly engaged in the business of distribution and
sale of pharmaceutical and consumer products for different manufacturers within the
country. Marsman purchased Metro Drug Distribution, Inc. (Metro Drug), now Consumer Products
5
Distribution Services, Inc. (CPDSI), which later became its business successor-in-interest. The
business transition from Marsman to CPDSI generated confusion as to the actual employer of Sta.
Rita at the time of his dismissal.
Marsman temporarily hired Sta. Rita on November 16, 1993 as a warehouse helper with a contract
that was set to expire on April 16, 1994, and paid him a monthly wage of ₱2,577.00. After the
contract expired, Marsman rehired Sta. Rita as a warehouseman and placed him on probationary
status on April 18, 1994 with a monthly salary of ₱3,166.00. Marsman then confirmed Sta. Rita's
6
status as a regular employee on September 18, 1994 and adjusted his monthly wage to ₱3,796.00.
Later, Sta. Rita joined Marsman Employees Union (MEU), the recognized sole and exclusive
bargaining representative of Marsman's employees. 7
Marsman administered Sta. Rita's warehouse assignments. Initially, Marsman assigned Sta. Rita to
work in its GMA warehouse. Marsman then transferred Sta:. Rita to Warehouses C and E of Kraft
General Foods, Inc. on September 5, 1995. Thereafter, Marsman reassigned Sta. Rita to Marsman
Consumer Product Division Warehouse Din ACSIE, Parañaque. 8
Sometime in July 1995, Marsman purchased Metro Drug, a company that was also engaged in the
distribution and sale of pharmaceutical and consumer products, from Metro Pacific, Inc. The
similarity in Marsman's and Metro Drug's business led to the integration of their employees which
was formalized in a Memorandum of Agreement, dated June 1996, which provides:
9
MARSMAN AND CO., INC. hereinafter referred to as the MANAGEMENT, represented by MR.
JOVEN D. REYES, Group President and Chief Executive Officer and the MARSMAN EMPLOYEES
UNION-PSMM/DFA as the Union, represented hereinafter by MR. BONIFACIO M. PANALIGAN,
PSMM President,
WITNESSETH, THAT:
WHEREAS, Marsman & Co. Inc. bought Metro Drug Distribution, Inc. from Metro Pacific Inc. last
July, 1995;
WHEREAS, the Management of Marsman & Co., Inc. decided to limit Marsman & Co. Inc.'s,
functions to those of a holding company and run Metro Drug Distribution, Inc. as the main
operating company;
WHEREAS, in view of this, Management decided to integrate the employees of Marsman &
Co. Inc. and Metro Drug Distribution, Inc. effective July 1, 1996 under the Metro Drug legal
entity;
4. That, the tenure or service years of all employees transferred shall be recognized and
carried over and will be included in the computation/consideration of their retirement and
other benefits.
5. That, the provisions of the existing Collective Bargaining Agreement signed last June
1995 and the Memorandum of Agreement signed also last June 1995 will be respected,
honored and continue to be implemented until expiry or until superseded as per item 8
below.
6. That, there will be no diminution of present salaries and benefits being enjoyed even after
the transfer.
7. That, upon transfer of MCI employees to Metro Drug Distribution, Inc. all employees
covered by the CBA or otherwise shall enjoy the same terms and conditions of employment
prior to transfer and shall continue to enjoy the same including company practice until a new
CBA is concluded.
8. That, all of the above rights and obligations of the parties pertaining to the recognition of
the union as exclusive bargaining representative, the effectivity, coverage and validity of the
CBA and all other issues relative to the representation of the former Marsman employees are
subject to and be superseded by the result of a Certification Election between Marsman
Employees Union-PSMM/DFA and Metro Drug Corp. Employees Association-FFW in 1996
or at a date to be agreed upon by MEU and MDCEA as coordinated by the DOLE, and by
any agreement that may be entered into by management and the winner in said certification
election.
10. That, also upon transfer, the Management agrees to continue negotiation of Truckers
and Forwarders issue as stipulated in the MOA signed last June, 1995.
11. That, Management and Union may continue to negotiate/discuss other concerns/issues
with regard to the transfer and integration.
IN WITNESS WHEREOF, the parties have caused this document to be executed by their authorized
representatives this ____ day of June, 1996 at Makati City. [Emphases supplied.]
(signed)
JOVEN D. REYES
President & Chief Exec. Officer
(signed)
BONIFACIO M. PANALIGAN
President
Witnessed by:
(signed) (signed)
LUISITO N. REYES JOSE MILO M. GILLESANIA
Vice-President 1st Vice-President
Finance & Administration MEU-PSMM/DFA
Attested by:
(signed)
ABNER M. PADILLA
Conciliator-Mediator
NCMB,DOLE
Concomitant to the integration of employees is the transfer of all office, sales and warehouse
personnel of Marsman to Metro Drug and the latter's assumption of obligation with regard to the
affected employees' labor contracts and Collective Bargaining Agreement. The integration and
transfer of employees ensued out of the transitions of Marsman and CPDSI into, respectively, a
holding company and an operating company. Thereafter, on November 7, 1997, Metro Drug
amended its Articles of Incorporation by changing its name to "Consumer Products Distribution
Services, Inc." (CPDSI) which was approved by the Securities and Exchange Commission. 10
In the meantime, on an unspecified date, CPDSI contracted its logistic services to EAC Distributors
(EAC). CPDSI and EAC agreed that CPDSI would provide warehousemen to EAC's tobacco
business which operated in EAC-Libis Warehouse. A letter issued by Marsman confirmed Sta. Rita's
appointment as one of the warehousemen for EAC-Libis Warehouse, effective October 13, 1997,
which also stated that the assignment was a "transfer that is part of our cross-training program."11
Parenthetically, EAC's use of the EAC-Libis Warehouse was dependent upon the lease contract
between EAC and Valiant Distribution (Valiant), owner of the EAC-Libis Warehouse. Hence, EAC's
operations were affected when Valiant decided to terminate their contract of lease on January 31,
2000. In response to the cessation of the contract of lease, EAC transferred their stocks into their
own warehouse and decided to operate the business by themselves, thereby ending their logistic
service agreement with CPDSI. 12
This sequence of events left CPDSI with no other option but to terminate the employment of those
assigned to EAC-Libis Warehouse, including Sta. Rita. A letter dated January 14, 2000, issued by
13
Michael Leo T. Luna, CPDSI's Vice-President and General Manager, notified Sta. Rita that his
services would be terminated on February 28, 2000 due to redundancy. CPDSI rationalised that they
could no longer accommodate Sta. Rita to another work or position. CPDSI however guaranteed
Sta. Rita's separation pay and other employment benefits. The letter is reproduced in full as follows:
a MARSMAN company
__________________________________________________
CONSUMER PRODUCTS DISTRIBUTION SERVICES, INC.
January 14, 2000
Dear Rodil,
As we have earlier informed you, EAC Distributors, Inc. has advised us that their Lessor, Valiant
Distribution has terminated their lease contract effective January 31, 2000.
Accordingly, we were informed by EAC Distributors, Inc., that they will no longer need our services
effective on the same date. As a result thereof, your position as warehouseman will become
redundant thereafter.
We have exerted efforts to find other work for you to do or other positions where you could be
accommodated. Unfortunately, our efforts proved futile.
In view thereof, we regret to inform you that your services will be terminated effective upon the close
of business hours on the 28th of February, 2000.
You will be paid separation pay and other employment benefits in accordance with the company
policies and the law, the details of which shall be discussed with you by your immediate superior.
In order to cushion the impact of your separation from the service and to give you ample time to look
for other employment elsewhere, you need not report for work from the 18th of January up the end
of February, 2000, although you will remain in the payroll of the company and will be paid the salary
corresponding to this period.
We thank you for your contribution to this organization and we wish you well in your future
endeavors.
Sincerely,
(signed)
MICHAEL LEO T. LUNA
Vice President & General Manager 14
CPDSI thereafter reported the matter of redundancy to the Department of Labor and Employment in
a letter dated January 17, 2000, conveying therein Sta. Rita's impending termination. The letter
15
stated:
Dear Sir:
In compliance with the provisions of Article 283 of the Labor Code, as amended, Consumer Products
Distribution Services, Inc. (CPDSI) "Company" hereby gives notice that our company is
implementing a comprehensive streamlining program affecting levels of employment with the
objective of further reducing operating expenses and to cope with the current economic difficulties.
The employment of the employees occupying such positions and whose names are enumerated in
the attachment list of (Annex "A") will be terminated.
In accordance with law, the above enumerated employees will be paid their separation pay in due
course. Individual notices of the termination of employment of said employees have already been
served upon them.
BY:
(signed)
MICHAEL LEO T. LUNA
Vice President and General Manager
xxxx
JR. x
Aggrieved, Sta. Rita filed a complaint in the NLRC, National Capital Region-Quezon City against
Marsman on January 25, 2000 for illegal dismissal with damages in the form of moral, exemplary,
and actual damages and attorney's fees. Sta. Rita alleged that his dismissal was without just or
authorized cause and without compliance with procedural due process. His affidavit-complaint reads:
RODIL C. STA RITA, of legal age, single, Filipino citizen, with residence and postal address at 1128
R. Papa Street, Bo. Obrero, Tondo, Manila being under oath hereby deposes and says:
1. He was employed with Marsman on November 16, 1993, with offices and address at Manalac
Avenue, Taguig, Metro Manila, as warehouseman with a basic salary ₱3,790.00 more (sic);
2. As a regular employee, his salary was increased by ₱1,600.00 in 1995; in 1996 was increased by
₱1,300.00; in 1997 was increased by ₱1,050.00, making a total of ₱7,740.00 up to his separation
from employment on January 18, 2000 x xx;
3. He cannot fathom to know why he was terminated from employment, save the better (sic) of Mr.
Michael Leo T. Luna, Vice President and General Manager of Marsman Company (Consumer
Products Distribution Services, Inc.) on January 14, 2000;
4. His termination from employment is in diametric opposition to Art VI. Sec. 3(d) of the CBA and to
Art. 282 of the Labor Code, as amended, i.e., he was no[t] given the 30-day period prior to his
termination, making his dismissal as illegal per se;
5. In the absence of any derogatory record of Mr. Rodil Sta. Rita for six (6) years, he is entitled to
moral and exemplary damages, in addition to back wages and separation pay, short of reinstatement
and without loss of seniority rights.
17
Marsman filed a Motion to Dismiss on March 16, 2000 on the premise that the Labor Arbiter had no
18
jurisdiction over the complaint for illegal dismissal because Marsman is not Sta. Rita's employer.
Marsman averred that the Memorandum of Agreement effectively transferred Sta. Rita's employment
from Marsman and Company, Inc. to CPDSI. Said transfer was further verified by Sta. Rita's: 1)
continued work in CPDSI's premises; 2) adherence to CPDSI's rules and regulations; and 3) receipt
of salaries from CPDSI. Moreover, Marsman asserted that CPDSI terminated Sta. Rita.
Labor Arbiter Gaudencio P. Demaisip, Jr. (Demaisip) rendered his Decision on April 10, 2002
19
"Employer means any person, natural or juridical, employing the services of the employee."
Likewise, Article 212 of the Labor Code defines employer in this wise:
"Employer includes any person acting in the interest of an employer directly or indirectly."
Consumer did not perform any act, thru its responsible officer, to show that it had employed the
complainant. Nevertheless, Marsman acted in the interest of Consumer because "sometime in 1996,
for purposes of efficiency and economy Marsman integrated its distribution business with the
business operations of Consumer Products Distribution Services, Inc. xxx" and "in line with the
integration of the distribution businesses of Marsman and CPDSI, the employment of all Marsman
office, sales, and warehouse personnel was transferred to CPDSI. x x x"
Thusly, Marsman qualifies as the employer of the complainant under the aforequoted provisions of
the Labor Code.
The MOA was concluded between Marsman and. Co. Inc. and Marsman Employees Union-
PSMM/DFA. A perusal of its contents show that matters, concerning terms and conditions of
employment, were contracted and concluded.
On the contrary, the MOA is a piece of evidence that Marsman is the employer of complainant
because it is solely the employer who can negotiate and conclude the terms and conditions of
employment of the workers.
Ironically, the MOA does not establish the contention that Consumer is the employer of the
complainant.
Rule XVI of Department Order No. 9, Series of 1997, which took effect on June 21, 1997, requires
among others, the ratification by the majority of all workers in the Collective Bargaining Unit of the
Agreement. The non-compliance of the requirement, under said Department Order, renders the
MOA ineffective.
Further, it may be concluded that the Consumer is an agent of respondent Marsman, because the
former does "[t]he employment of all Marsman office sales, and warehouse personnel x x x."
In illegal dismissal, the burden, to establish the just cause of termination, rest on the employer. The
records of this case [are] devoid of the existence of such cause. Indeed, the respondent Marsman
and Company, Inc. failed to show the cause of complainant's dismissal, warranting the twin
remedies of reinstatement and backwages. However, insofar as reinstatement is concerned, this
remedy appears to be impractical because, as gleaned from the position paper of [Sta. Rita], there is
uncertainty in the availability of assignment for the complainant. Instead, the payment of separation
pay equivalent to one half month for every year or a fraction of at least six (6) months be considered
as one year, would be equitable.
WHEREFORE, premises considered, the complainant is herein declared to have been illegally
dismissed. Marsman and Company, Inc. is directed to pay the complainant backwages and
separation pay on the total amount of ₱152,757.55. 20
Mars man appealed the fore going Decision arguing that the Labor Arbiter had no jurisdiction over
the complaint because an employer-employee relationship did not exist between the party-litigants at
the time of Sta. Rita's termination. Furthermore, Marsman stated that the ratification requirement
under Rule XVI of Department Order No. 9, Series of 1997 applied only to Collective Bargaining
21
Agreements, and the Memorandum of Agreement was certainly not a replacement for the Collective
Bargaining Agreement which Marsman and MEU entered into in the immediately succeeding year
prior to the ratification of the Memorandum of Agreement. Marsman also maintained that it had a
personality that was separate and distinct from CPDSI thus it may not be made liable to answer for
acts or liabilities of CPDSI and vice-versa. Finally, Marsman claimed that Sta. Rita was validly
declared redundant when CPDSI's logistics agreement with EAC was not renewed. 22
Sta. Rita filed his own appeal, contesting the failure of the Labor Arbiter to award him moral and
exemplary damages, and attorney's fees.
The NLRC in its Decision dated July 31, 2008, reversed Labor Arbiter Demaisip's Decision and
found that there was no employer-employee relationship between Marsman and Sta. Rita. The
NLRC held:
Applying the four-fold test in determining the existence of employer-employee relationship fails to
convince Us that complainant is respondent Marsman's employee.
On selection and engagement, by complainant's transfer to CPDSI, he had become the employee of
CPDSI. It should be emphasized that respondent Marsman and CPDSI are corporate entities which
are separate and distinct from one another.
On payment of wages, it was CPDSI which paid complainant's salaries and benefits. Complainant
never claimed that it was still respondent Marsman which paid his salaries.
On the power of dismissal, after EAC's lease contract expired deciding to transfer its stock to its own
warehouse and handle its warehousing operations, complainant was left without any work. CPDSI
decided to terminate his services by issuing him a termination notice on January 14, 2000.
On the employer's power to control the employee with respect to the means and methods by which
his work is to be accomplished, complainant was under the control and supervision of CPDSI
concomitant to the logistic services which respondent Marsman had integrated to that of CPDSI.
CPDSI saw to it that its obligation to provide logistic services to its client EAC is carried out with
complainant working as warehouseman in the warehouse rented by EAC. The power of control is
the most decisive factor in determining the existence of an employer-employee relationship. x x x.
Having determined that employer-employee relationship does not exist between complainant and
respondent Marsman, complainant has no cause of action for illegal dismissal against the latter.
There is no necessity to resolve the [other] issues.
WHEREFORE, premises considered, the Decision of the Labor Arbiter is VACATED and SET
ASIDE. A NEW decision is entered dismissing the complaint for lack of employer-employee
relationship.
23
In a Resolution dated November 11, 2008, the NLRC denied Sta. Rita's motion for reconsideration
because his motion "raised no new matters of substance which would warrant reconsideration of the
Decision of [the] Commission." 24
Sta. Rita filed before the Court of Appeals a Petition for Certiorari imputing grave abuse of
25
discretion on the part of the NLRC for 1) finding a lack of employer-employee relationship between
the party-litigants; and 2) not awarding backwages, separation pay, damages and attorney's fees.
The Court of Appeals promulgated its Decision on June 25, 2010, reversing the NLRC Decision. The
Court of Appeals held that Marsman was Sta. Rita's employer because Sta. Rita was allegedly not
part of the integration of employees between Marsman and CPDSI. The Court gave credence to Sta.
Rita's contention that he purposely refused to sign the Memorandum of Agreement because such
indicated his willingness to be transferred to CPDSI. In addition, the appellate court considered Sta.
Rita's assignment to the EAC-Libis Warehouse as part of Marsman's cross-training program,
concluding that only Sta. Rita's work assignment was transferred and not his employment.
The appellate court also found no merit in the NLRC's contention that CPDSI paid Sta. Rita's
salaries and that it exercised control over the means and methods by which Sta. Rita performed his
tasks. On the contrary, the Court of Appeals observed that Sta. Rita filed his applications for leave of
absence with Marsman. Finally, the Court of Appeals adjudged that CPDSI, on the assumption that it
had the authority to dismiss Sta. Rita, did not comply with the requirements for the valid
implementation of the redundancy program.
5. the amount equivalent to 10% of his total monetary award, as and for attorney's fees.
Let this case be REMANDED to the Labor Arbiter for the purpose of computing, with reasonable
dispatch, petitioner's monetary awards as above discussed. 26
Hence, Marsman lodged the petition before us raising the lone issue:
WITH ALL DUE RESPECT, THE HONORABLE ·COURT OF APPEALS SERIOUSLY ERRED IN
DECIDING A QUESTION OF SUBSTANCE IN A MANNER NOT IN ACCORD WITH THE LAW,
APPLICABLE DECISIONS OF THIS HONORABLE COURT AND EVIDENCE ON RECORD WHEN
IT ANNULLED AND SET ASIDE THE NLRC'S DECISION AND RESOLUTION EFFECTIVELY
RULING THAT [STA. RITA] WAS ILLEGALLY DISMISSED FROM SERVICE WHEN THE LATTER
COULD NOT HAVE BEEN DISMISSED AT ALL ON ACCOUNT OF THE ABSENCE OF
EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN SAID [STA. RITA] AND THE COMPANY 27
Simply stated, the issue to be resolved is whether or not an employer-employee relationship existed
between Marsman and Sta. Rita at the time of Sta. Rita's dismissal.
The issue of whether or not an employer-employee relationship exists in a given case is essentially a
question of fact. As a rule, this Court is not a trier of facts and this applies with greater force in labor
1âwphi1
cases. This petition however falls under the exception because of variance in the factual findings of
28
the Labor Arbiter, the NLRC and the Court of Appeals. Indeed, on occasion, the Court is constrained
to wade into factual matters when there is insufficient or insubstantial evidence on record to support
those factual findings; or when too much is concluded, inferred or deduced from the bare or
incomplete facts appearing on record. The Court in the case of South Cotabato Communications
29
The findings of fact should, however, be supported by substantial evidence from which the said
tribunals can make their own independent evaluation of the facts. In labor cases, as in other
administrative and quasi-judicial proceedings, the quantum of proof necessary is substantial
evidence, or such amount of relevant evidence which a reasonable mind might accept as adequate
to justify a conclusion. Although no particular form of evidence is required to prove the existence of
an employer-employee relationship, and any competent and relevant evidence to prove the
relationship may be admitted, a finding that the relationship exists must nonetheless rest on
substantial evidence. (Citations omitted)
Settled is the tenet that allegations in the complaint must be duly proven by competent evidence and
the burden of proof is on the party making the allegation. In an illegal dismissal case, the onus
31
probandi rests on the employer to prove that its dismissal of an employee was for a valid cause.
However, before a case for illegal dismissal can prosper, an employer-employee relationship must
first be established. In this instance, it was incumbent upon Sta. Rita as the complainant to prove
32
the employer-employee relationship by substantial evidence. Unfortunately, Sta. Rita failed to
discharge the burden to prove his allegations.
To reiterate the facts, undisputed and relevant to the disposition of this case, Marsman hired Sta.
Rita as a warehouseman when it was still engaged in the business of distribution and sale of
pharmaceutical and consumer products. Marsman paid Sta. Rita's wages and controlled his
warehouse assignments, acts which can only be attributed to a bona fide employer. Marsman
thereafter purchased Metro Drug, now CPDSI, which at that time, was engaged in a similar
business. Marsman then entered into a Memorandum of Agreement with MEU, its bargaining
representative, integrating its employees with CPDSI and transferring its employees, their respective
employment contracts and the attendant employment obligation to CPDSI. The planned integration
was then carried out sometime in 1996, as admitted by Sta. Rita in his pleading. 33
It is imperative to point out that the integration and transfer was a necessary consequence of the
business transition or corporate reorganization that Marsman and CPDSI had undertaken, which had
the characteristics of a corporate spin-off. To recall, a proviso in the Memorandum of Agreement
limited Marsman's function into that of a holding company and transformed CPDSI as its main
operating company. In business parlance, a corporate spin-off occurs when a department, division or
portions of the corporate business enterprise is sold-off or assigned to a new corporation that will
arise by the process which may constitute it into a subsidiary of the original corporation.34
The spin-off and the attendant transfer of employees are legitimate business interests of Marsman.
The transfer of employees through the Memorandum of Agreement was proper and did not violate
any existing law or jurisprudence.
Jurisprudence has long recognized what are termed as "management prerogatives." In SCA
Hygiene Products Corporation Employees Association-FFW v. SCA Hygiene Products
Corporation, we held that:
35
The hiring, firing, transfer, demotion, and promotion of employees have been traditionally identified
as a management prerogative subject to limitations found in the law, a collective bargaining
agreement, or in general principles of fair play and justice. This is a function associated with the
employer's inherent right to control and manage effectively its enterprise. Even as the law is
solicitous of the welfare of employees, it must also protect the right of an employer to exercise what
are clearly management prerogatives. The free will of management to conduct its own business
affairs to achieve its purpose cannot be denied. x x x.
Tinio v: Court of Appeals also acknowledged management's prerogative to transfer its employees
36
This Court has consistently recognized and upheld the prerogative of management to transfer an
employee from one office to another within the business establishment, provided there is no
demotion in rank or a diminution of salary, benefits and other privileges. As a rule, the Court will not
interfere with an employer's prerogative to regulate all aspects of employment which include among
others, work assignment, working methods and place and manner of work. Labor laws discourage
interference with an employer's judgment in the conduct of his business.
xxxx
But, like other rights, there are limits thereto. The managerial prerogative to transfer personnel must
be exercised without grave abuse of discretion, bearing in mind the basic elements of justice and fair
play. Having the right should not be confused with the manner in which the right is exercised. Thus,
it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. The
employer must be able to show that the transfer is not unreasonable, inconvenient, or prejudicial to
the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges, and
other benefits. x x x. (Citations omitted.)
Analogously, the Court has upheld the transfer/absorption of employees from one company to
another, as successor employer, as long as the transferor was not in bad faith and the employees
37
absorbed by a successor-employer enjoy the continuity of their employment status and their rights
and privileges with their former employer. 38
Sta. Rita's contention that the absence of his signature on the Memorandum of Agreement meant
that his employment remained with Marsman is merely an allegation that is neither proof nor
evidence. It cannot prevail over Marsman's evident intention to transfer its employees.
To assert that Marsman remained as Sta. Rita's employer even after the corporate spin-off
disregards the separate personality of Marsman and CPDSI. It is a fundamental principle of law that
a corporation has a personality that is separate and distinct from that composing it as well as from
that of any other legal entity to which it may be related. Other than Sta. Rita's bare allegation that
39
Michael Leo T. Luna was Marsman's and CPDSI's Vice-President and General Manager, Sta. Rita
failed to support his claim that both companies were managed and operated by the same persons,
or that Marsman still had complete control ·over CPDSI's operations. Moreover, the existence of
interlocking directors, corporate officers and shareholders without more, is not enough justification to
pierce the veil of corporate fiction in the absence of fraud or other public policy considerations.
40
Verily, the doctrine of piercing the corporate veil also finds no application in this case because bad
faith cannot be imputed to Marsman. On the contrary, the Memorandum of Agreement guaranteed
41
the tenure of the employees, the honoring of the Collective Bargaining Agreement signed in June
1995, the preservation of salaries and benefits, and the enjoyment of the same terms and conditions
of employment by the affected employees.
Sta. Rita also failed to satisfy the four-fold test which determines the existence of an employer-
employee relationship. The elements of the fourfold test are: 1) the selection and engagement of the
employees; 2) the payment of wages; 3) the power of dismissal; and 4) the power to control the
employee's conduct. There is no hard and fast rule designed to establish the aforesaid elements.
42
Any competent and relevant evidence to prove the relationship may be admitted. Identification cards,
cash vouchers, social security registration, appointment letters or employment contracts, payrolls,
organization charts, and personnel lists, serve as evidence of employee status. 43
Art. 1700. The relations between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good. Therefore, such
contracts are subject to the special laws on labor unions, collective bargaining, strikes and lockouts,
closed shop, wages, working conditions, hours of labor and similar subjects.
A labor contract merely creates an action in personam and does not create any real right which
should be respected by third parties. This conclusion draws its force from the right of an employer
44
to select his/her employees and equally, the right of the employee to refuse or voluntarily terminate
his/her employment with his/her new employer by resigning or retiring. That CPDSI took Sta. Rita
into its employ and assigned him to one of its clients signified the former's acquiescence to the
transfer.
Marsman's letter to Sta. Rita dated September 29, 1997 neither assumed nor disturbed CPDSI's
45
This is to confirm in writing your appointment as warehouseman for EACLibis Warehouse and
Mercury Drug effective 13 October 1997. This transfer is part of our cross-training program.
Prior to the effectivity of your appointment, you may be instructed to proceed to EAC-Libis
Warehouse for work familiarization and other operational matters related to the job.
Good luck.
(signed)
Irene C. Nagrampa
cc: EDB/QRI
LRP/Noynoy Paisaje
HRG-201 file
file
It would be amiss to read this letter independent of the Memorandum of Agreement because the
Memorandum of Agreement clearly reflected Marsman's intention to transfer all employees to
CPDSI. When read in isolation, the use of "cross-training program" may be subject to a different
interpretation but reading it together with the MOA indicates that the "cross-training program" was in
relation to the transition phase that Marsman and CPDSI were then undergoing. It is clear under the
terms of the Memorandum of Agreement that Marsman may continue to negotiate and address
issues with the Union even after the signing and execution of said agreement in the course of fully
implementing the transfer to, and the integration of operations with, CPDSI.
To prove the element on the payment of wages, Sta. Rita submitted forms for leave application, with
either Marsman's logo or CPDSI's logo. Significantly, the earlier leave forms bore Marsman's logo
but the latest leave application of Sta. Rita already had CPDSI's logo. In any event, the forms for
leave application did not sufficiently establish that Marsman paid Sta. Rita's wages. Sta. Rita could
have presented pay slips, salary vouchers, payrolls, certificates of withholding tax on compensation
income or testimonies of his witnesses. The submission of his Social Security System (SSS)
46
identification card (ID) only proved his membership in the social insurance program. Sta. Rita should
have instead presented his SSS records which could have reflected his contributions, and the name
and address of his employer. Thus, Sta. Rita fell short in his claim that Marsman still had him in its
47
Finally, Sta. Rita failed to prove that Marsman had the power of control over his employment at the
time of his dismissal. The power of an employer to control the work of the employee is considered
the most significant determinant of the existence of an employer-employee relationship. Control in
48
such relationships addresses the details of day to day work like assigning the particular task that has
to be done, monitoring the way tasks· are done and their results, and determining the time during
which the employee must report for work or accomplish his/her assigned task. The Court likewise
49
takes notice of the company IDs attached in Sta. Rita's pleading. The "old" ID bore Marsman's logo
while the "new" ID carried Metro Drug's logo. The Court has held that in a business establishment,
an identification card is usually provided not only as a security measure but mainly to identify the
holder thereof as a bona fide employee of the firm that issues it. Thus the "new" ID confirmed that
50
Sta. Rita was an employee of Metro Drug, which, to reiterate, later changed its name to CPDSI.
Having established that an employer-employee relationship did not exist between Marsman and Sta.
Rita at the time of his dismissal, Sta. Rita's original complaint must be dismissed for want of
jurisdiction on the part of the Labor Arbiter to take cognizance of the case. For this reason, there is
no need for the Court to pass upon the other issues raised.
SO ORDERED.
DECISION
REYES, J.:
Assailed in this petition for review under Rule 45 of the Rules of Court is the Decision dated July 19,
1 2
2010 and Resolution dated January 13, 2011 of the Court of Appeals (CA) in CA-G.R. SP No.
3
107749 declaring respondent Delfin A. Mina (Mina) to have been constructively dismissed by
petitioner Divine Word College of Laoag (DWCL) and awarding him backwages, damages and
attorney's fees.
Antecedent Facts
DWCL is a non-stock educational institution offering catholic education to the public. It is run by the
Society of Divine Word (SVD), a congregation of Catholic priests that maintains several other
member educational institutions throughout the country. 4
On July 1, 1969, the Society of Divine Word Educational Association (DWEA) established a
Retirement Plan to provide retirement benefits for qualified employees of DWEA’s member
institutions, offices and congregations. The DWEA Retirement Plan contains a clause about the
5 6
When a member who resigns or is separated from employment from one Participating Employer and
who is employed by another Participating Employer, the member will carry the credit he earned
under his former Participating Employer to his new Employer and the length of service in both will be
taken into consideration in determining his total years of continuous service on the following
conditions:
a. The transfer is approved by both the Participating Employer whose service he is leaving
and the new Participating Employer;
c. The member is employed by another Participating Employer on the next working day after
his resignation. 7
Mina was first employed in 1971 as a high school teacher, and later on a high school principal, at the
Academy of St. Joseph (ASJ), a school run by the SVD. On June 1, 1979, he transferred to DWCL
and was accorded a permanent status after a year of probationary status. He was subsequently
8
transferred in 2002 to DWCL’s college department as an Associate Professor III. Thereafter, on June
1, 2003, Mina was assigned as the College Laboratory Custodian of the School of Nursing and was
divested of his teaching load, effective June 1, 2003 until May 31, 2004, subject to automatic
termination and without need for any further notification. He was the only one among several
9
teachers transferred to the college department who was divested of teaching load. 10
In early June 2004, Mina was offered early retirement by Professor Noreen dela Rosa, Officer-in-
Charge of DWCL’s School of Nursing. He initially declined the offer because of his family’s
dependence on him for support. He later received a Memorandum dated July 27, 2004 from the
11
Office of the Dean enumerating specific acts of gross or habitual negligence, insubordination, and
reporting for work under the influence of alcohol. He answered the allegations against him; sensing,
12
pointless to continue employment with DWCL, he requested that his retirement date be adjusted to
September 2004 to enable him to avail of the 25-year benefits. He also requested for the inclusion of
his eight years of service in ASJ, to make his total years of service to 33 years pursuant to the
portability clause of the retirement plan, which was denied by DWCL. Instead, he was paid
₱275,513.10 as retirement pay. It was made to appear that his services were terminated by reason
13
of redundancy to avoid any tax implications. Mina was also made to sign a deed of waiver and
quitclaim stating that he no longer has any claim against DWCL with respect to any matter arising
14
On September 21, 2004, he filed a case for illegal dismissal and recovery of separation pay and
other monetary claims. Pending resolution of his case, Mina passed away on June 18, 2005.
16 17
On August 26, 2005, the Labor Arbiter (LA) rendered its Decision, ruling that the actuation of DWCL
18
is not constitutive of constructive dismissal. The LA ratiocinated, however, that the computation of
Mina’s retirement pay based on redundancy is illegal; hence, it was modified, and the number of
years he worked for ASJ was added to the years he worked for DWCL thus making his creditable
number of years of service to 33 years. According to the LA, his length of service in both institutions
will be taken into consideration in determining his total years of continuous service since the DWEA
Retirement Plan has a provision on portability, which allows a member to carry the earned credit for
his number of years of service from his former participating employer to his new employer.
Moreover, the LA held that there is no showing that Mina ceased to be a member of the plan when
he left the ASJ as there was not a day that he was separated from any school that is the member of
the plan. The LA’s computation of Mina’s retirement benefits is as follows:
Deficiency = P 87,887.19 19
1. Finding that [Mina] was underpaid in his retirement benefits pursuant to the DWEA
Retirement Plan. Consequently, [DWCL] must pay the deficiency in his retirement benefits in
the amount of P87,887.19.
2. Finding that the respondents were harsh on him. Consequently, the DWCL must be
adjudged to pay him P50,000 as moral damages and P50,000 as exemplary damages.
3. That his claims for additional separation pay for his future services are denied.
4. [DWCL] must pay [Mina] 10% of the total award as attorney’s fees for his having been
forced to litigate to protect his rights as an employee.
SO ORDERED. 20
Both DWCL and Mina appealed to the National Labor Relations Commission (NLRC), with DWCL
mainly questioning the LA’s decision making Mina’s creditable years of service 33 years, and
awarding moral and exemplary damages. 21
The NLRC ruled that Mina was constructively dismissed when he was appointed as College
Laboratory Custodian and divested of his teaching load without any justification. It also ruled that
22
Mina was not deemed to have waived all his claims against DWCL as quitclaims cannot bar
employees from demanding benefits to which they are legally entitled. The NLRC, however,
23
disregarded Mina’s eight years of service in ASJ in the computation of his retirement pay because of
his failure to show compliance with the portability provision. The dispositive portion of the NLRC
24
WHEREFORE, We grant in partly [sic] the appeals of both [Mina] and [DWCL]. The decision dated
August 26, 200[5] is hereby modified to delete the order adding the length of service rendered by
[Mina] to the [ASJ] in the computation of the latter’s retirement pay from the former. Accordingly,
[DWCL] is held liable to pay [Mina] full backwages and separation pay, in lieu of
reinstatement and to his full compulsory retirement pay, less the amount already received by
him representing his optional retirement.
DWCL thus filed a petition for certiorari before the CA, seeking to reverse and set aside the NLRC
decision and resolution. DWCL primarily asserted that the NLRC committed grave abuse of
27
discretion in holding that Mina was constructively dismissed from work, in holding DWCL liable for
moral and exemplary damages, and in ordering the payment of separation pay as well as retirement
pay computed up to the age of 60. 28
Ruling of the CA
On July 19, 2010, the CA rendered the assailed Decision, denying the petition but modifying the
award. It sustained the NLRC’s ruling that Mina was indeed constructively dismissed from work. The
CA also held that Mina is entitled to receive backwages, to be computed from the time of hiring on
June 1, 1979 until the time of his death on June 18, 2005, as he was constructively dismissed from
work, as follows:
WHEREFORE, the petition is DENIED, granting to [Mina] substituted by his heirs in addition to the
full retirement benefits at Php275,513.10, the following:
SO ORDERED. 30
DWCL’s motion for reconsideration was denied by the CA in its Resolution dated January 13, 2011.
31
I.
The Honorable [CA] erred in upholding [NLRC’s] findings that [Mina] was constructively dismissed.
II.
The Honorable [CA] erred in holding [DWCL] liable for moral and exemplary damages and attorney’s
fees.
III.
Even assuming, without admitting that [Mina] was constructively dismissed, the Honorable [CA]
erred in ordering the payment of his backwages "computed from the time of hiring, 1 June 1979 until
the time of his death 18 June 2005."
IV.
Even assuming, without admitting, that [Mina] was constructively dismissed, the Honorable [CA] has
no legal basis in awarding him full retirement benefits since it invalidated Mina’s retirement for which
the retirement benefits were given to him. 32
In a petition for review on certiorari under Rule 45, only questions of law may be raised. The raison
d’être is that the Court is not a trier of facts. The rule, however, admits of certain exceptions, such
33
as when the factual findings of the LA differ from those of the NLRC, as in the instant case, which
opens the door to a review by this Court. 34
The Constitution and the Labor Code mandate that employees be accorded security of tenure. The
35 36
right of employees to security of tenure, however, does not give the employees vested rights to their
positions to the extent of depriving management of its prerogative to change their assignments or to
transfer them. In cases of transfer of an employee, the employer is charged with the burden of
37
proving that its conduct and action are for valid and legitimate grounds such as genuine business
necessity and that the transfer is not unreasonable, inconvenient or prejudicial to the employee. If
38
the employer cannot overcome this burden of proof, the employee’s transfer shall be tantamount to
unlawful constructive dismissal. 39
such, an act must be a display of utter discrimination or insensibility on the part of the employer so
intense that it becomes unbearable for the employee to continue with his employment. The law
42
recognizes and resolves this situation in favor of employees in order to protect their rights and
interests from the coercive acts of the employer. 43
In this case, Mina’s transfer clearly amounted to a constructive dismissal. For almost 22 years, he
was a high school teacher enjoying a permanent status in DWCL’s high school department. In 2002,
he was appointed as an associate professor at the college department but shortly thereafter, or on
June 1, 2003, he was appointed as a college laboratory custodian, which is a clear relegation from
his previous position. Not only that. He was also divested of his teaching load. His appointment even
became contractual in nature and was subject to automatic termination after one year "without any
further notification." Aside from this, Mina was the only one among the high school teachers
44
transferred to the college department who was divested of teaching load. More importantly, DWCL
failed to show any reason for Mina’s transfer and that it was not unreasonable, inconvenient, or
prejudicial to him. 45
Also, the CA correctly ruled that Mina’s appointment as laboratory custodian was a demotion. There
is demotion when an employee occupying a highly technical position requiring the use of one’s
mental faculty is transferred to another position, where the employee performed mere mechanical
work – virtually a transfer from a position of dignity to a servile or menial job. The assessment
whether Mina’s transfer amounted to a demotion must be done in relation to his previous position,
that is, from an associate college professor, he was made a keeper and inventory-taker of laboratory
materials. Clearly, Mina’s new duties as laboratory custodian were merely perfunctory and a far cry
from his previous teaching job, which involved the use of his mental faculties. And while there was
no proof adduced showing that his salaries and benefits were diminished, there was clearly a
demotion in rank. As was stated in Blue Dairy Corporation v. NLRC, "[i]t was virtually a transfer
46
Given the finding of constructive dismissal, Mina, therefore, is entitled to reinstatement without loss
of seniority rights, and payment of backwages computed from the time compensation was withheld
up to the date of actual reinstatement. The Court notes that aside from full compulsory retirement
48
pay, the NLRC awarded full backwages and separation pay, in lieu of reinstatement. The CA,
49
however, computed the amount to be awarded as backwages from the time of Mina’s hiring on June
1, 1979 until the time of his death on June 18, 2005, apparently interchanging backwages and
separation pay. Aside from this, the CA omitted to include a separate award of separation pay.
50
The Court has repeatedly stressed that the basis for the payment of backwages is different from that
of the award of separation pay. "The basis for computing separation pay is usually the length of the
employee’s past service, while that for backwages is the actual period when the employee was
unlawfully prevented from working." Thus, the Court explained in Bani Rural Bank, Inc. v. De
51
Guzman that:
52
[U]nder Article 279 of the Labor Code and as held in a catena of cases, an employee who is
dismissed without just cause and without due process is entitled to backwages and
reinstatement or payment of separation pay in lieu thereof:
xxxx
The normal consequences of respondents’ illegal dismissal, then, are reinstatement without loss of
seniority rights, and payment of backwages computed from the time compensation was withheld up
to the date of actual reinstatement. Where reinstatement is no longer viable as an option, separation
pay equivalent to one (1) month salary for every year of service should be awarded as an
alternative. The payment of separation pay is in addition to payment of backwages. (Emphasis and
53
Thus, the computation of Mina’s backwages should be from the time he was constructively
dismissed on June 1, 2003.
Aside from the foregoing, the CA should have also awarded separation pay since reinstatement is
no longer viable due to Mina’s death in 2005. As stated before, the award of separation pay is
distinct from the award of backwages. The award of separation pay is also distinct from the grant of
retirement benefits. These benefits are not mutually exclusive as "[r]etirement benefits are a form of
reward for an employee’s loyalty and service to an employer and are earned under existing laws,
[Collective Bargaining Agreements], employment contracts and company policies." Separation pay,
54
on the other hand, is that amount which an employee receives at the time of his severance from
employment, designed to provide the employee with the wherewithal during the period that he is
looking for another employment. In the computation of separation pay, the Court stresses that it
55
should not go beyond the date an employee was deemed to have been actually separated
from employment, or beyond the date when reinstatement was rendered impossible. The 56
period for the computation of separation pay Mina is entitled to shall therefore begin to run from June
1, 1979, when he was transferred to DWCL from ASJ, until his death on June 18, 2005, or for a
period of 26 years.
The award of damages was also justified given the CA and NLRC’s finding that DWCL acted in a
manner wherein Mina was not treated with utmost good faith. The intention of the school to erase
him out of employment is too apparent. The Court upholds the CA’s finding that when DWCL’s act
57
of unceremoniously demoting and giving Mina contractual employment for one year and citing him
for numerous violations of school regulations when he rejected the school’s offer to voluntarily retire
is constitutive of bad faith.
58
Lastly, the Court affirms the NLRC’s findings that the eight years of service rendered by Mina in ASJ
shall not be included in the computation of his retirement benefits. No adequate proof is shown that
1âwphi1
he has complied with the portability clause of the DWEA Retirement Plan. The employee has the
burden of proof to show compliance with the requirements set forth in retirement plans, being in the
nature of privileges granted to employees. Failure to overcome the burden of proof would
necessarily result in the employee’s disqualification to receive the benefits.
WHEREFORE, the Decision dated July 19, 2010 and Resolution dated January 13, 2011 of the
Court of Appeals in CA-G.R. SP No. 107749 are MODIFIED in that, in addition to the award of
attorney’s fees, and moral and exemplary damages, petitioner Divine Word College of Laoag
is ORDERED to pay Shirley B. Mina, as heir-substitute of the late Delfin Mina, the following:
(1) backwages, to be computed from June 1, 2003 until June 18, 2005, or ₱13,006.23 x 24
(months) = ₱312,149.52; and
(2) separation pay, to be computed from June 1, 1979 until June 18, 2005, or ₱13,006.23 x
26 (years) = ₱338,161.98.
The monetary awards granted shall earn legal interest at the rate of six percent (6%) per
annum from the date of the finality of this Decision until fully paid.
SO ORDERED.
BIENVENIDO L. REYES
Associate Justice
1st DIVISION G.R. No. 169750 February 27, 2007 RURAL BANK OF CANTILAN, INC., Vs. ARJAY RONNEL H.
JULVE, SANDOVAL-GUTIERREZ, J.: Petition For Review On Certiorari
DECISION
SANDOVAL-GUTIERREZ, J.:
For our resolution is the instant Petition for Review on Certiorari assailing the Decision 1 of the Court
of Appeals (Twenty Second Division, Cagayan de Oro City) dated September 23, 2004 in CA-G.R.
SP No. 77206 and its Resolution of September 6, 2005.
On August 1, 1997, the Rural Bank of Cantilan, Inc., petitioner, hired respondent as a management
trainee. Later, he was appointed as planning and marketing officer.
On June 18, 2001, William Hotchkiss III (also a petitioner), president of petitioner bank, issued a
memorandum addressed to all its branch managers informing them of the abolition of the positions
of planning and marketing officer and remedial officer; that this was undertaken in accordance with
the bank’s Personnel Streamlining Program; and that the operations officer shall absorb the
functions of the abolished offices.
On July 18, 2001, Hotchkiss sent respondent a memorandum stating that he has been appointed
bookkeeper I at the bank’s branch in Madrid, Surigao del Sur effective immediately with the same
salary corresponding to his old position. Initially, respondent agreed to accept the appointment, but
eventually, he changed his mind and made the following notation on Hotchkiss’ memorandum, thus:
I am withdrawing my signature on this appointment because I feel that this is a demotion (on the
position itself and allowances) and not a lateral transfer as what the President told me yesterday. I
believe I do not deserve a demotion.
Thank you.
On August 9, 2001, Hotchkiss appointed respondent as bookkeeper I and assistant branch head of
the Madrid branch. However, he did not report for work.
On September 11, 2001, Hotchkiss directed respondent to explain why he should not be sanctioned
for his failure to assume his new post at the Madrid branch. 1awphi1.net
The following day, respondent submitted his written explanation, which partly reads:
I regret to say that I am not accepting the position of Asst. Branch Head of RBCI-Madrid Branch for
the very reason that the papers were not left with me by the Admin. Officer after she let me read
them. Considering that Asst. Branch Head is a newly-created position, I requested her for a copy of
the said papers first so I can thoroughly study them before making my decision. But she immediately
took them back from me after I told her about this.
On September 14, 2001, respondent filed with the Regional Arbitration Branch No. XIII, National
Labor Relations Commission (NLRC), Butuan City, a complaint for constructive dismissal against
petitioners, docketed as NLRC Case No. RAB-13-09-00276-2001.
On January 14, 2002, the Labor Arbiter rendered a Decision, the dispositive portion of which is partly
reproduced below:
and
4. Ordering respondents to pay complainant moral and exemplary damages in the total amount of
₱100,000.00 plus ₱15,718.53, as attorney’s fees which is equivalent to 10% of the total monetary
award.
SO ORDERED.
On appeal by petitioners, the NLRC, in its Resolution dated November 19, 2002, set aside the
Labor Arbiter’s judgment, thus:
WHEREFORE, foregoing premises considered, the appealed decision is Vacated and Set
Aside. In lieu thereof, a new judgment is rendered dismissing the above-entitled case for lack
of merit.
SO ORDERED.
The NLRC held that respondent’s reassignment is not a demotion. There was neither
diminution in functions and pay. Thus, he was not constructively dismissed from
employment. Moreover, respondent himself admitted that he decided not to report for work at
his new station. Yet, he continued receiving his salaries and allowances.
Respondent filed a motion for reconsideration but it was denied by the NLRC.
Respondent then filed with the Court of Appeals a petition for certiorari, docketed as CA-G.R.
SP No. 77206.
On September 23, 2004, the Court of Appeals rendered its Decision granting the petition,
thus:
WHEREFORE, the instant Petition is hereby GRANTED. The NLRC Resolutions dated 19
November 2002 and 26 February 2003 are hereby ANNULLED and SET ASIDE. The Labor
Arbiter’s Decision dated 14 January 2002 is hereby REINSTATED.
SO ORDERED.
Petitioners filed a motion for reconsideration. However, it was denied by the appellate court
in its Resolution dated September 6, 2005.
The only issue before us is whether the Court of Appeals erred in holding that respondent
was constructively dismissed from employment.
Under the doctrine of management prerogative, every employer has the inherent right to
regulate, according to his own discretion and judgment, all aspects of employment, including
hiring, work assignments, working methods, the time, place and manner of work, work
supervision, transfer of employees, lay-off of workers, and discipline, dismissal, and recall of
employees.2 The only limitations to the exercise of this prerogative are those imposed by
labor laws and the principles of equity and substantial justice.
While the law imposes many obligations upon the employer, nonetheless, it also protects the
employer’s right to expect from its employees not only good performance, adequate work,
and diligence, but also good conduct and loyalty.3 In fact, the Labor Code does not excuse
employees from complying with valid company policies and reasonable regulations for their
governance and guidance.
Concerning the transfer of employees, these are the following jurisprudential guidelines: (a) a
transfer is a movement from one position to another of equivalent rank, level or salary
without break in the service or a lateral movement from one position to another of equivalent
rank or salary;4 (b) the employer has the inherent right to transfer or reassign an employee
for legitimate business purposes;5 (c) a transfer becomes unlawful where it is motivated by
discrimination or bad faith or is effected as a form of punishment or is a demotion without
sufficient cause;6 (d) the employer must be able to show that the transfer is not
unreasonable, inconvenient, or prejudicial to the employee.7
Respondent contends that the abolition of his position as planning and marketing officer and
his appointment as bookkeeper I and assistant branch head of the Madrid Branch is a
demotion. However, a look at the functions of his new position shows the contrary. The
bookkeeper and assistant branch head is not only charged with preparing financial reports
and monthly bank reconciliations, he is also the head of the Accounting Department of a
branch. Under any standard, these are supervisory and administrative tasks which entail
great responsibility. Moreover, respondent’s transfer did not decrease his pay.
Nor was respondent’s transfer motivated by ill-will or prejudice on the part of petitioners. His
position was not the only one abolished pursuant to the bank’s Personnel Streamlining
Program. We recall that the position of remedial officer was likewise abolished. Petitioners’
reason was to acquire savings from the salaries it would pay to full-time personnel in these
positions.
Finally, we note that despite respondent’s refusal to accept the new appointment, petitioners
did not dismiss him. Rather, it was he who opted to terminate his employment when he
purposely failed to report for work.
In fine, we hold that the Court of Appeals erred when it concluded that respondent was
constructively dismissed from employment.
SO ORDERED.
DANILO LEONARDO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and REYNALDO'S MARKETING
CORPORATION, ET. AL., respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
DE LEON, JR., J.:
Before us is a consolidation of G.R. Nos. 125303 and 126937, both petitions for certiorari under Rule
65 of the 1997 Rules of Civil Procedure, seeking the annulment of a Decision and Resolution dated
1 2
March 28, 1996 and May 29, 1996, respectively, of the public respondent in NLRC NCR 00-02-
01024-92.
FUERTE alleges that on January 3, 1992, he was instructed to report at private respondent's main
office where he was informed by the company's personnel manager that he would be transferred to
its Sucat plant due to his failure to meet his sales quota, and for that reason, his supervisor's
allowance would be withdrawn. For a short time, FUERTE reported for work at the Sucat plant;
however, he protested his transfer, subsequently filing a complaint for illegal termination.
On his part, LEONARDO alleges that on April 22, 1991, private respondent was approached by the
same personnel manager who informed him that his services were no longer needed. He, too, filed a
complaint for illegal termination.
The case was heard by Labor Arbiter Jesus N. Rodriguez, Jr. On December 15, 1994, Labor Arbiter
Emerson C. Tumanon, to whom the case was subsequently assigned, rendered judgment in favor of
petitioners. The dispositive portion of the arbiter's decision states:
3
1. To reinstate complainant Aurelio Fuerte, to the position he was holding before the
demotion, and to reinstate likewise complainant Danilo Leogardo to his former position or in
lieu thereof, they be reinstated through payroll reinstatement without any of them losing their
seniority rights and other privileges, inclusive of allowance and to their other benefits;
2. To pay AURELIO FUERTE, the sum of TWO HUNDRED EIGHTY THOUSAND EIGHT
HUNDRED NINETY-SIX PESOS and 72/100 (280,896.72);
3. To pay DANILO LEOGARDO, the sum of TWO HUNDRED FORTY ONE THOUSAND
NINE HUNDRED EIGHT PESOS and 67/100 (P241,908.67).
SO ORDERED.
WHEREFORE, premises considered, the Decision of December 15, 1994 is hereby modified
as follows:
1. Ordering the reinstatement of complainant Aurelio Fuerte to his former position without
loss of his seniority rights but without backwages;
2. Dismissing the complaint of Danilo leonardo [sic] for lack of merit; and
3. Deleting the rests [sic] of the monetary award as well as the award of moral damages and
attorney's fees in favor of the complainants also for lack of merit.
SO ORDERED.
Petitioners filed a motion for reconsideration on April 30, 1996, which the Commission denied in its
4
On July 1, 1996, LEONARDO, represented by the Public Attorney's Office, filed G.R. No. 125303, a
special civil action for certiorari assailing the Commission's decision and resolution. However, on
November 15, 1996, FUERTE, again joined by LEONARDO, filed G.R. No. 126937, a similar action
praying for the annulment of the same decision and resolution.
On October 7, 1997, private respondent filed its Comment to the petition in G.R. No. 125303. On
5
April 2, 1997, it filed its Comments to the petition in G.R. No. 126937 with a motion to drop
6
petitioner LEONARDO and consolidate G.R. No. 126937 with G.R. No. 125303. We granted private
respondent's motion in our Resolution dated June 16, 1997. 7
Private respondent contends that it never terminated petitioners' services. In FUERTE's case,
private respondent claims that the latter was demoted pursuant to a company policy intended to
foster competition among its employees. Under this scheme, private respondent's employees are
required to comply with a monthly sales quota. Should a supervisor such as FUERTE fail to meet his
quota for a certain number of consecutive months, he will be demoted, whereupon his supervisor's
allowance will be withdrawn and be given to the individual who takes his place. When the employee
concerned succeeds in meeting the quota again, he is re-appointed supervisor and his allowance is
restored.9
With regard to LEONARDO, private respondent likewise insists that it never severed the former's
employment. On the contrary, the company claims that it was LEONARDO who abandoned his post
following an investigation wherein he was asked to explain an incident of alleged "sideline" work
which occurred on April 22, 1991. It would appear that late in the evening of the day in question, the
driver of a red Corolla arrived at the shop looking for LEONARDO. The driver said that, as
prearranged, he was to pick up LEONARDO who would perform a private service on the vehicle.
When reports of the "sideline" work reached management, it confronted LEONARDO and asked for
an explanation. According to private respondent, LEONARDO gave contradictory excuses,
eventually claiming that the unauthorized service was for an aunt. When pressed to present his aunt,
it was then that LEONARDO stopped reporting for work, filing his complaint for illegal dismissal
some ten months after his alleged termination.
Insofar as the action taken against FUERTE is concerned, private respondent's justification is well-
illustrated in the record. He was unable to meet his quota for five months in 1991, from July to
November of that year. Yet he insists that it could not possibly be so. He argues that he must have
10
met his quota considering that he received his supervisor's allowance for the period aforesaid. The
Commission, however, negated this view, finding the alleged inconsistency to be adequately
explained in the record. We quite agree. As found by the Commission, placing special emphasis on
the reasoning of the labor arbiter —
We find otherwise. Complainant Fuerte's failure to meet his sales quota which caused his
demotion and the subsequent withdrawal of his allowance is fully supported by Exhibit "4" of
respondents' position paper showing that his performance for the months of July 1991 to
November 1991 is below par. While it is the policy of the respondent company that an
employer who fails to meet his sales quota for three (3) consecutive months, he is stripped of
his supervisor's designation and allowance. In the case of Fuerte, the respondents went
beyond the three (3) months period before withdrawing his allowance. On this basis, the
Labor Arbiter sweepingly concluded that the withdrawal of Fuerte's allowance is illegal since
the respondents should have withdrawn the same after Fuerte failed to meet his sales quota
for three consecutive months. However, the apparent flaw had been sufficiently reconciled
by the respondents when they state that a supervisor like Fuerte, continues to receive his
allowance until he is officially stripped of his supervisor's designation and assigned to
another job as ordinary employee. This is precisely the reason why complainant Fuerte
continued to receive his allowance even beyond the three (3) consecutive months period to
meet his sales quota considering that it was only on the fifth consecutive months when the
respondent company decided to strip him of his designation as supervisor. This is
corroborated by the "Sinumpaang Salaysay" (Exh. "A" — respondents' position paper) of
some employees of the respondent company who had been previously demoted for failure to
meet their sales quota when they unformably stated:
5. Na alam naming kapagka hindi namin maabot and quotang nabanggit na may
ilang buwan, kami'y maaring mademote at kapagka nagkaganoon ang supervisor
allowance sampu ng, may mataas na parte sa profit sharing at winnings ay maalis sa
amin at maibibigay sa hahalili sa amin.
Surprisingly, the Labor Arbiter failed to take into consideration this material allegations of the
respondents in his assailed decision except his sweeping statement that the "Sinumpaang
Salaysay" was purposely done with malice to justify respondents' withdrawal of Fuerte's
supervisor's allowance. [emphasis supplied]
FUERTE nonetheless decries his transfer as being violative of his security of tenure, the clear
implication being that he was constructively dismissed. We have held that an employer acts well
within its rights in transferring an employee as it sees fit provided that there is no demotion in rank or
diminution in pay. The two circumstances are deemed badges of bad faith, and thus constitutive of
11
constructive dismissal. In this regard, constructive dismissal is defined in the following manner:
Yet here, the transfer was undertaken beyond the parameters as aforesaid. The instinctive
conclusion would be that his transfer is actually a constructive dismissal, but oddly, private
respondent never denies that it was really demoting FUERTE for cause. It should be borne in mind,
however, that the right to demote an employee also falls within the category of management
prerogatives. 13
[t]he practice of a company in laying off workers because they failed to make the work quota
has been recognized in this jurisdiction. (Philippine American Embroideries vs. Embroidery
and Garment Workers, 26 SCRA 634, 639). In the case at bar, the petitioners' failure to meet
the sales quota assigned to each of them constitute a just cause of their dismissal,
regardless of the permanent or probationary status of their employment. Failure to observe
prescribed standards of work, or to fulfill reasonable work assignments due to inefficiency
may constitute just cause for dismissal. Such inefficiency is understood to mean failure to
attain work goals or work quotas, either by failing to complete the same within the allotted
reasonable period, or by producing unsatisfactory results. This management prerogative of
requiring standards may be availed of so long as they are exercised in good faith for the
advancement of the employer's interest. 14
Neither can we say that FUERTE's actions are indicative of abandonment. To constitute such a
ground for dismissal, there must be (1) failure to report for work or absence without valid or
justifiable reason; and (2) a clear intention, as manifested by some overt acts, to sever the employer-
employee relationship. We have accordingly held that the filing of a complaint for illegal dismissal,
15
There remains a question regarding the manner of demotion. In Jarcia Machine Shop and Auto
Supply, Inc. v. National Labor Relations Commission, we ruled that:
17
Besides, even assuming arguendo that there was some basis for the demotion, as alleged
by petitioner, the case records are bereft of any showing that private respondent was notified
in advance of his impending transfer and demotion. Nor was he given an opportunity to
refute the employer's grounds or reasons for said transfer and demotion. In Gaco v. National
Labor Relations Commission, it was noted that:
While due process required by law is applied on dismissals, the same is also
applicable to demotions as demotions likewise affect the employment of a worker
whose right to continued employment, under the same terms and conditions, is also
protected by law. Moreover, considering that demotion is, like dismissal, also a
punitive action, the employee being demoted should as in cases of dismissals, be
given a chance to contest the same.
After reviewing the record, we are sufficiently persuaded that private respondent had offered
substantial proof of compliance with this procedural requisite.
18
Accordingly, given that FUERTE may not be deemed to have abandoned his job, and neither was he
constructively dismissed by private respondent, the Commission did not err in ordering his
reinstatement but without backwages. In a case where the employee's failure to work was
occasioned neither by his abandonment nor by a termination, the burden of economic loss is not
rightfully shifted to the employer; each party must bear his own loss.
19
Neither do we discern any grave abuse of discretion in the Commission's ruling dismissing
LEONARDO's complaint. On this score, the public respondent found that:
Coming now to the case of complainant Danilo Leonardo, the evidence on record indubitably
shows that he abandoned his work with the respondents. As sufficiently established by
respondents, complainant Leonardo, after being pressed by the respondent company to
present the customer regarding his unauthorized solicitation of sideline work from the latter
and whom he claims to be his aunt, he never reported back to work anymore. This finding is
bolstered by the fact that after he left the respondent company, he got employed with Dennis
Motors Corporation as Air-Con Mechanic from October 12, 1992 to April 3, 1995
(Certification attached to respondents' Manifestation filed June 5, 1996)
It must be stressed that while Leonardo alleges that he was illegally dismissed from his
employment by the respondents, surprisingly, he never stated any reason why the
respondents would want to ease him out from his job. Moreover, why did it take him ten (10)
long months to file his case if indeed he was aggrieved by respondents. All the above facts
clearly point that the filing of his case is a mere afterthought on the part of complainant
Leonardo. In the case of Flexo Mfg. Corp. vs. NLRC, et. al., 135 SCRA 145, the Supreme
Court held, thus:
LEONARDO protests that he was never accorded due process. This begs the question, for he was
1awphi1
never terminated; he only became the subject of an investigation in which he was apparently loath
20
analogous instance, we held that an employee's refusal to sign the minutes of an investigation
cannot negate the fact that he was accorded due process. So should it be here. We find no reason
23
to disturb the Commission's ruling that LEONARDO had abandoned his position, the instant case
being a petition for certiorari where questions of fact are not entertained. Whether a worker has
24
abandoned his employment is essentially a question of fact. We reiterate that it is not for us "to re-
25
examine conflicting evidence, re-evaluate the credibility of witnesses, nor substitute the findings of
fact of an administrative tribunal which has gained expertise in its special field." 26
In concluding, we feel that it will not be amiss to point out that a petition for certiorari under Rule 65
is intended to rectify errors of jurisdiction or grave abuse of discretion. As we held in Philippine
Advertising Counselors, Inc. v. National Labor Relations Commission, 27
The well-settled rule confines the original and exclusive jurisdiction of the Supreme Court in
the review of decisions of the NLRC under Rule 65 of the Revised Rules of Court only to the
issue of jurisdiction or grave abuse of discretion amounting to lack of jurisdiction. Grave
abuse of discretion is committed when the judgment is rendered in a capricious, whimsical,
arbitrary or despotic manner. An abuse of discretion does not necessarily follow just because
there is a reversal by the NLRC of the decision of the Labor Arbiter. Neither does the mere
variance in the evidentiary assessment of the NLRC and that of the Labor Arbiter would, as a
matter of course, so warrant another full review of the facts. The NLRC's decision, so long as
it is not bereft of support from the records, deserves respect from the Court.
WHEREFORE, the petitions for certiorari in G.R. Nos. 125303 and 126937 are hereby DISMISSED
for lack of merit.
The Decision dated March 28, 1998 and the Resolution dated May 29, 1996 of public respondents is
AFFIRMED in toto. No pronouncement as to costs.
SO ORDERED.
DECISION
SANDOVAL-GUTIERREZ, J.:
For our resolution is the instant Petition for Review on Certiorari assailing the Decision 1 of the Court
of Appeals (Twenty Second Division, Cagayan de Oro City) dated September 23, 2004 in CA-G.R.
SP No. 77206 and its Resolution of September 6, 2005.
On August 1, 1997, the Rural Bank of Cantilan, Inc., petitioner, hired respondent as a management
trainee. Later, he was appointed as planning and marketing officer.
On June 18, 2001, William Hotchkiss III (also a petitioner), president of petitioner bank, issued a
memorandum addressed to all its branch managers informing them of the abolition of the positions
of planning and marketing officer and remedial officer; that this was undertaken in accordance with
the bank’s Personnel Streamlining Program; and that the operations officer shall absorb the
functions of the abolished offices.
On July 18, 2001, Hotchkiss sent respondent a memorandum stating that he has been appointed
bookkeeper I at the bank’s branch in Madrid, Surigao del Sur effective immediately with the same
salary corresponding to his old position. Initially, respondent agreed to accept the appointment, but
eventually, he changed his mind and made the following notation on Hotchkiss’ memorandum, thus:
I am withdrawing my signature on this appointment because I feel that this is a demotion (on the
position itself and allowances) and not a lateral transfer as what the President told me yesterday. I
believe I do not deserve a demotion.
Thank you.
On August 9, 2001, Hotchkiss appointed respondent as bookkeeper I and assistant branch head of
the Madrid branch. However, he did not report for work.
On September 11, 2001, Hotchkiss directed respondent to explain why he should not be sanctioned
for his failure to assume his new post at the Madrid branch. 1awphi1.net
The following day, respondent submitted his written explanation, which partly reads:
I regret to say that I am not accepting the position of Asst. Branch Head of RBCI-Madrid Branch for
the very reason that the papers were not left with me by the Admin. Officer after she let me read
them. Considering that Asst. Branch Head is a newly-created position, I requested her for a copy of
the said papers first so I can thoroughly study them before making my decision. But she immediately
took them back from me after I told her about this.
On September 14, 2001, respondent filed with the Regional Arbitration Branch No. XIII, National
Labor Relations Commission (NLRC), Butuan City, a complaint for constructive dismissal against
petitioners, docketed as NLRC Case No. RAB-13-09-00276-2001.
On January 14, 2002, the Labor Arbiter rendered a Decision, the dispositive portion of which is partly
reproduced below:
and
4. Ordering respondents to pay complainant moral and exemplary damages in the total amount of
₱100,000.00 plus ₱15,718.53, as attorney’s fees which is equivalent to 10% of the total monetary
award.
SO ORDERED.
On appeal by petitioners, the NLRC, in its Resolution dated November 19, 2002, set aside the
Labor Arbiter’s judgment, thus:
WHEREFORE, foregoing premises considered, the appealed decision is Vacated and Set
Aside. In lieu thereof, a new judgment is rendered dismissing the above-entitled case for lack
of merit.
SO ORDERED.
The NLRC held that respondent’s reassignment is not a demotion. There was neither
diminution in functions and pay. Thus, he was not constructively dismissed from
employment. Moreover, respondent himself admitted that he decided not to report for work at
his new station. Yet, he continued receiving his salaries and allowances.
Respondent filed a motion for reconsideration but it was denied by the NLRC.
Respondent then filed with the Court of Appeals a petition for certiorari, docketed as CA-G.R.
SP No. 77206.
On September 23, 2004, the Court of Appeals rendered its Decision granting the petition,
thus:
WHEREFORE, the instant Petition is hereby GRANTED. The NLRC Resolutions dated 19
November 2002 and 26 February 2003 are hereby ANNULLED and SET ASIDE. The Labor
Arbiter’s Decision dated 14 January 2002 is hereby REINSTATED.
SO ORDERED.
Petitioners filed a motion for reconsideration. However, it was denied by the appellate court
in its Resolution dated September 6, 2005.
The only issue before us is whether the Court of Appeals erred in holding that respondent
was constructively dismissed from employment.
Under the doctrine of management prerogative, every employer has the inherent right to
regulate, according to his own discretion and judgment, all aspects of employment, including
hiring, work assignments, working methods, the time, place and manner of work, work
supervision, transfer of employees, lay-off of workers, and discipline, dismissal, and recall of
employees.2 The only limitations to the exercise of this prerogative are those imposed by
labor laws and the principles of equity and substantial justice.
While the law imposes many obligations upon the employer, nonetheless, it also protects the
employer’s right to expect from its employees not only good performance, adequate work,
and diligence, but also good conduct and loyalty.3 In fact, the Labor Code does not excuse
employees from complying with valid company policies and reasonable regulations for their
governance and guidance.
Concerning the transfer of employees, these are the following jurisprudential guidelines: (a) a
transfer is a movement from one position to another of equivalent rank, level or salary
without break in the service or a lateral movement from one position to another of equivalent
rank or salary;4 (b) the employer has the inherent right to transfer or reassign an employee
for legitimate business purposes;5 (c) a transfer becomes unlawful where it is motivated by
discrimination or bad faith or is effected as a form of punishment or is a demotion without
sufficient cause;6 (d) the employer must be able to show that the transfer is not
unreasonable, inconvenient, or prejudicial to the employee.7
Respondent contends that the abolition of his position as planning and marketing officer and
his appointment as bookkeeper I and assistant branch head of the Madrid Branch is a
demotion. However, a look at the functions of his new position shows the contrary. The
bookkeeper and assistant branch head is not only charged with preparing financial reports
and monthly bank reconciliations, he is also the head of the Accounting Department of a
branch. Under any standard, these are supervisory and administrative tasks which entail
great responsibility. Moreover, respondent’s transfer did not decrease his pay.
Nor was respondent’s transfer motivated by ill-will or prejudice on the part of petitioners. His
position was not the only one abolished pursuant to the bank’s Personnel Streamlining
Program. We recall that the position of remedial officer was likewise abolished. Petitioners’
reason was to acquire savings from the salaries it would pay to full-time personnel in these
positions.
Finally, we note that despite respondent’s refusal to accept the new appointment, petitioners
did not dismiss him. Rather, it was he who opted to terminate his employment when he
purposely failed to report for work.
In fine, we hold that the Court of Appeals erred when it concluded that respondent was
constructively dismissed from employment.
SO ORDERED.
DECISION
BERSAMIN, J.:
In labor cases, the rules on the degree of proof are enforced not as stringently as in other cases in
order to better serve the higher ends of justice. This lenity is intended to afford to the employee
every opportunity to level the playing field.
The Case
Being now assailed is the amended decision promulgated on November 19, 2003, whereby the
1
Court of Appeals (CA) reconsidered its original disposition, and granted the petition for certiorari filed
by respondent Margaret A. Defensor (respondent) by annulling and setting aside the adverse
resolutions dated July 31, 2002 and March 31, 2003 issued by the National Labor Relations
Commission (NLRC).
Antecedents
Petitioner Mega Magazine Publications, Inc. (MMPI) first employed the respondent as an Associate
Publisher in 1996, and later promoted her as a Group Publisher with a monthly salary of
₱60,000.00. 2
In a memorandum dated February 25, 1999, the respondent proposed to MMPI’s Executive Vice-
President Sarita V. Yap (Yap) year-end commissions for herself and a special incentive plan for the
Sales Department. 3
while the proposed schedule of the special incentive plan would be the following:
5. MMPI Total revenue at ₱41M up ₱10,000 each by year-end Plus incentive trip abroad
Yap made marginal notes of her counter-proposals on her copy of the respondent’s memorandum
dated February 25, 1999 itself, crossing out proposed items 1 and 2 from the schedule of the
4
respondent’s commissions, and proposing instead that outright commissions be at 0.1% of ₱35-₱38
million in accordance with proposed item 3; and crossing out proposed items 1 and 2 from the
schedule of the special incentive plan, and writing "start here" and "stet" in reference to item 3. Yap
also wrote on the memorandum: "Marge, if everything is ok w/ you, draft something for me to sign
…"; "You can also announce that at 5 M net for MMPI [acc to my computation, achievable if they
only meet their month min. quota] we can declare 14th month pay for entire company." 5
The respondent sent another memorandum on April 5, 1999 setting out the 1999 advertisement
sales, target and commissions, and proposing that the schedule of her outright commissions should
start at .05% of ₱34.5 million total revenue, or ₱175,000.00; and further proposing that the special
6
On August 31, 1999, the respondent sent Yap a report on sales and sales targets. 7
On October 1999, the respondent tendered her letter of resignation effective at the end of December
1999. Yap accepted the resignation. Before leaving MMPI, the respondent sent Yap another report
1âwphi1
8
on the sales and advertising targets for 1999. On December 8, 1999, Yap responded with a
9
"formalization" of her approval of the 1999 special incentive scheme proposed by the respondent
through her memorandum dated February 25, 1999, revising anew the schedule by starting
10
commissions at.05% of ₱35-₱38 million gross advertising revenue (including barter), and the
proposed special incentives at ₱35-₱38 million with ₱8,500.00 bonus. 11
The respondent replied to Yap, pointing out that her memorandum dated April 5, 1999 had been the
result of Yap’s own comments on the special incentive scheme she had proposed, and that she had
assumed that Yap had been amenable to the proposal when she did not receive any further reaction
from the latter. 12
On May 2000, after the respondent had left the company, she filed a complaint for payment of bonus
and incentive compensation with damages, specifically demanding the payment of₱271,264.68 as
13
sales commissions, ₱60,000.00 as 14th month pay, and ₱8,500.00 as her share in the incentive
scheme for the advertising and sales staff. 14
In a decision dated February 5, 2001, the Labor Arbiter (LA) dismissed the respondent’s complaint,
15
ruling that the respondent had not presented any evidence showing that MMPI had agreed or
committed to the terms proposed in her memorandum of April 5, 1999; that even assuming that the
petitioners had agreed to her terms, the table she had submitted justifying a gross revenue of
₱36,216,624.07 was not an official account by MMPI; and that the petitioners had presented a 1999
16
statement of income and deficit prepared by the auditing firm of Punongbayan & Araullo showing
MMPI’s gross revenue for 1999 being only ₱31,947,677.00. 17
Decision of the NLRC
The respondent appealed, but the NLRC denied the appeal for its lack of merit, with the NLRC
18
concurring with the LA’s ruling that there had been no agreement between the petitioners and the
respondent on the terms and conditions of the incentives reached.
The respondent filed a motion for reconsideration and a supplement to the motion for
reconsideration. In the supplement, she included a motion to admit additional evidence (i.e., the
1âwphi1
affidavit of Lie Tabingo who had worked as a traffic clerk in the Advertising Department of MMPI and
had been in charge of keeping track of the advertisements placed with MMPI) on the ground that
such evidence had been "unavailable during the hearing as newly discovered evidence in a motion
for new trial".
19
Judgment of the CA
The respondent brought a special civil action for certiorari in the CA.
In its decision promulgated on August 28, 2003, the CA dismissed the respondent’s petition for
21
On motion for reconsideration by the respondent, however, the CA promulgated on November 19,
2003 its assailed amended decision granting the motion for reconsideration and giving due course to
the respondent’s petition for certiorari; annulling the challenged resolutions of the NLRC; and
remanding the case to the NLRC for the reception of additional evidence. The CA opined that the
NLRC had committed a grave abuse of discretion in finding that there had been no special incentive
scheme approved and implemented for 1999, and in disallowing the respondent from presenting
22
additional evidence that was crucial in establishing her claim about MMPI’s gross revenue. The
23
WHEREFORE, premises considered, the motion for reconsideration is hereby GRANTED. Our
Decision of August 28, 2003 is hereby RECONSIDERED AND SET ASIDE. A new judgment is
hereby entered GIVING DUE COURSE to the petition and GRANTING the writ prayed for.
Accordingly, the challenged Resolutions of the NLRC in NLRC NCR 00-03-61361-00 (CA No.
028358-01) dated July 31, 2002 and March 31, 2003 are hereby ANNULLED and SET ASIDE. The
case is hereby remanded to the NLRC for reception of additional evidence on appeal as prayed for
by petitioner and for proper proceedings in accordance with Our disquisitions herein.
The denial of the claim for 14th month pay is sustained for lack of evidentiary basis.
No pronouncement as to costs.
SO ORDERED. 24
The petitioners and the respondent sought reconsideration of the CA’s amended decision, but the
CA denied their motions through the resolution promulgated on February 4, 2004. 25
Issues
Hence, this appeal by petition for review on certiorari, with the petitioners urging that the CA erred in
ruling that –
The petitioners argue that the circumstances of the case did not warrant the relaxation of the rules of
procedure in order to allow the submission of the memorandum and the affidavit of Tabingo to the
LA and the NLRC. They contend that the respondent had sought to introduce in the proceedings
before the LA Tabingo’s memorandum dated December 10, 1999 addressed to the Accounting
Department stating that the "gross revenue from all publications was ₱36,022,624.07, while net
revenue was ₱32,551,890.58"; that Tabingo’s affidavit was meant to validate her memorandum;
27
that such pieces of evidence sought to prove that MMPI’s target gross sales had been met, and
would then entitle the respondent to her claims of commissions and special incentives; that the LA
actually considered but did not give any weight or value to Tabingo’s memorandum in resolving the
respondent’s claims; that any affidavit from Tabingo that the respondent intended to introduce would
be merely corroborative of the evidence already presented, like the table purportedly showing
MMPI’s gross revenue for 1999; and that such evidence was already considered by the NLRC in
resolving the appeal. 28
The important issue is whether or not the respondent was entitled to the commissions and the
incentive bonus being claimed.
Ruling
The grant of a bonus or special incentive, being a management prerogative, is not a demandable
and enforceable obligation, except when the bonus or special incentive is made part of the wage,
salary or compensation of the employee, or is promised by the employer and expressly agreed
29
upon by the parties. By its very definition, bonus is a gratuity or act of liberality of the giver, and
30 31
cannot be considered part of an employee’s wages if it is paid only when profits are realized or a
certain amount of productivity is achieved. If the desired goal of production or actual work is not
accomplished, the bonus does not accrue.
Due to the nature of the bonus or special incentive being a gratuity or act of liberality on the part of
the giver, the respondent could not validly insist on the schedule proposed in her memorandum of
April 5, 1999 considering that the grant of the bonus or special incentive remained a management
prerogative. However, the Court agrees with the CA’s ruling that the petitioners had already
exercised the management prerogative to grant the bonus or special incentive. At no instance did
Yap flatly refuse or reject the respondent’s request for commissions and the bonus or incentive. This
is plain from the fact that Yap even "bargained" with the respondent on the schedule of the rates and
the revenues on which the bonus or incentive would be pegged. What remained contested was only
the schedule of the rates and the revenues. In her initial memorandum of February 25, 1999, the
respondent had suggested the following schedule, namely: (a) 0.05% outright commission on total
revenue of ₱28-₱29 million; (b) 0.075% on ₱30-₱34 million; (c) 0.1% on ₱35-₱38 million; (d) 0.1%
on ₱39-₱41 million pesos; and (f) 0.1% on ₱41 million or higher, but Yap had countered by revising
the schedule to start at 0.1% as outright commissions on a total revenue of ₱35-₱38 million, and the
special incentive bonus to start at revenues of ₱35-₱38 million. Moreover, on December 8, 1999,
Yap sent to the respondent a memorandum entitled Re: Formalization of my handwritten approval of
1999 Incentive scheme dated 25 February 1999. Such actuations and actions by Yap indicated that,
firstly, the petitioners had already acceded to the grant of the special incentive bonus; and, secondly,
the only issue still to be threshed out was at which point and at what rate the respondent’s outright
commissions and the special incentive bonus for the sales staff should be given.
For sure, Yap’s memorandum dated December 8, 1999, aside from being the petitioners’ categorical
admission of the grant of the commissions and the bonus or incentives, laid down the petitioners’
own schedule of the commissions and the bonus or incentives, to wit:
32
Re: Formalization of my handwritten approval of 1999 incentive scheme dated 25 February 1999
cash and bartered goods revenue for the year. This amount will be paid by January 30, 2000 if the
documents (contracts, P.O.s) to support the gross revenue claim are in order and submitted to
Finance.
Concerning the remand of the case to the NLRC for reception of additional evidence at the instance
of the respondent, we hold that the CA committed a reversible error. Although, as a rule, the
submission to the NLRC of additional evidence like documents and affidavits is not prohibited, so
that the NLRC may properly consider such evidence for the first time on appeal, the circumstances
33
of the case did not justify the application of the rule herein.
The additional evidence the respondent has sought to be admitted (i.e., Tabingo’s affidavit executed
on October 14, 2002) was already attached to the pleadings filed in the NLRC, and was part of the
records thereat. Its introduction was apparently aimed to rebut the petitioners’ claim that its gross
revenue was only ₱31,947,677.00 and did not reach the minimum ₱35 million necessary for the
grant of the respondent’s outright commissions and the special incentive bonus for the sales staff
(inclusive of the respondent). Tabingo’s affidavit corroborated her memorandum to the Accounting
Department dated December 10, 1999 stating that MMPI’s revenue for 1999 was ₱36,216,624.07. 34
1âwphi1
Confronted with the conflicting claims on MMPI’s gross revenue realized in 1999, the question is
which evidence must be given more weight?
The resolution of the question requires the re-examination and calibration of evidence. Such re-
35
examination and calibration, being of a factual nature, ordinarily lies beyond the purview of the
Court’s authority in this appeal. Yet, because the documents are already before the Court, we
hereby treat the situation as an exception in order to resolve the question promptly and finally
instead of still remanding the case to the CA for the reevaluation and calibration.
We start by observing that the degree of proof required in labor cases is not as stringent as in other
types of cases. This liberal approach affords to the employee every opportunity to level the playing
36
field in which her employer is pitted against her. Here, on the one hand, were Tabingo’s
memorandum and affidavit indicating that MMPI’s revenues in 1999 totaled ₱36,216,624.07, and, on
the other, the audit report showing MMPI’s gross revenues amounting to only ₱31,947,677.00 in the
same year. That the audit report was rendered by the auditing firm of Punongbayan & Araullo did not
make it weightier than Tabingo’s memorandum and affidavit, for only substantial evidence – that
amount of relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion was required in labor adjudication. Moreover, whenever the evidence presented by the
37
employer and that by the employee are in equipoise, the scales of justice must tilt in favor of the
latter. For purposes of determining whether or not the petitioners’ gross revenue reached the
38
minimum target of ₱35 million, therefore, Tabingo’s memorandum and affidavit sufficed to positively
establish that it did, particularly considering that Tabingo’s memorandum was made in the course of
the performance of her official tasks as a traffic clerk of MMPI. In her affidavit, too, Tabingo asserted
that her issuance of the memorandum was pursuant to MMPI’s year-end procedures, an assertion
that the petitioners did not refute. In any event, Tabingo’s categorical declaration in her affidavit that
"[because] of that achievement, as part of the Sales and Traffic Team of MMPI, in addition to my
other bonuses that year, I received ₱8,500.00 in gift certificates as my share in the Group Incentive
for the Sales and Traffic Team for gross advertising revenue of ₱35 to ₱38 million xxx," aside from
39
the petitioners not refuting it, was corroborated by the 1999 Advertising Target sent by the
respondent to Yap on December 2, 1999, in which the respondent reported a gross revenue of
₱36,216,624.07 as of December 1, 1999. 40
Accordingly, the Court concludes that the respondent was entitled to her 0.05% outright
commissions and to the special incentive bonus of ₱8,500.00 based on MMPI having reached the
minimum target of ₱35 million in gross revenues paid in "bartered goods and cash in direct
proportion to percentage of cash and bartered goods revenue for the year," as provided in Yap’s
memorandum of December 8, 1999. 41
WHEREFORE, the Court REVERSES AND SETS ASIDE the amended decision promulgated on
November 19, 2003; ENTERS a new decision granting respondent Margaret A. Defensor’s claim for
outright commissions in the amount of P 181,083 .12 and special incentive bonus of ₱8,500.00, or a
total of 1!189,583.12; and DIRECTS petitioner Mega Magazine Publications, Inc. to pay the costs of
suit.
SO ORDERED.
LUCAS P. BERSAMIN
Associate Justice
2nd DIVISION G.R. No. 180866 March 2, 2010 LEPANTO CERAMICS, INC., Vs. LEPANTO CERAMICS
EMPLOYEES ASSOCIATION PEREZ, J.:
DECISION
PEREZ, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 1 of the 1997 Rules of Civil
Procedure filed by petitioner Lepanto Ceramics, Inc. (petitioner), assailing the: (1) Decision 2 of the
Court of Appeals, dated 5 April 2006, in CA-G.R. SP No. 78334 which affirmed in toto the decision of
the Voluntary Arbitrator3 granting the members of the respondent association a Christmas Bonus in
the amount of Three Thousand Pesos (₱3,000.00), or the balance of Two Thousand Four Hundred
Pesos (₱2,400.00) for the year 2002, and the (2) Resolution 4 of the same court dated 13 December
2007 denying Petitioner’s Motion for Reconsideration.
Petitioner Lepanto Ceramics, Incorporated is a duly organized corporation existing and operating by
virtue of Philippine Laws. Its business is primarily to manufacture, make, buy and sell, on wholesale
basis, among others, tiles, marbles, mosaics and other similar products. 5
In December 1998, petitioner gave a ₱3,000.00 bonus to its employees, members of the respondent
Association.7
Subsequently, in September 1999, petitioner and respondent Association entered into a Collective
Bargaining Agreement (CBA) which provides for, among others, the grant of a Christmas gift
package/bonus to the members of the respondent Association. 8 The Christmas bonus was one of
the enumerated "existing benefit, practice of traditional rights" which "shall remain in full force and
effect."
Section 8. – All other existing benefits, practice of traditional rights consisting of Christmas
Gift package/bonus, reimbursement of transportation expenses in case of breakdown of
service vehicle and medical services and safety devices by virtue of company policies by the
UNION and employees shall remain in full force and effect.
Section 1. EFFECTIVITY
This agreement shall become effective on September 1, 1999 and shall remain in full force
and effect without change for a period of four (4) years or up to August 31, 2004 except as to
the representation aspect which shall be effective for a period of five (5) years. It shall bind
each and every employee in the bargaining unit including the present and future officers of
the Union.
In the succeeding years, 1999, 2000 and 2001, the bonus was not in cash. Instead, petitioner gave
each of the members of respondent Association Tile Redemption Certificates equivalent to
₱3,000.00.9 The bonus for the year 2002 is the root of the present dispute. Petitioner gave a year-
end cash benefit of Six Hundred Pesos (₱600.00) and offered a cash advance to interested
employees equivalent to one (1) month salary payable in one year.10 The respondent Association
objected to the ₱600.00 cash benefit and argued that this was in violation of the CBA it executed
with the petitioner.
The parties failed to amicably settle the dispute. The respondent Association filed a Notice of Strike
with the National Conciliation Mediation Board, Regional Branch No. IV, alleging the violation of the
CBA. The case was placed under preventive mediation. The efforts to conciliate failed. The case
was then referred to the Voluntary Arbitrator for resolution where the Complaint was docketed as
Case No. LAG-PM-12-095-02.
In support of its claim, respondent Association insisted that it has been the traditional practice of the
company to grant its members Christmas bonuses during the end of the calendar year, each in the
amount of ₱3,000.00 as an expression of gratitude to the employees for their participation in the
company’s continued existence in the market. The bonus was either in cash or in the form of
company tiles. In 2002, in a speech during the Christmas celebration, one of the company’s top
executives assured the employees of said bonus. However, the Human Resources Development
Manager informed them that the traditional bonus would not be given as the company’s earnings
were intended for the payment of its bank loans. Respondent Association argued that this was in
violation of their CBA.
The petitioner averred that the complaint for nonpayment of the 2002 Christmas bonus had no basis
as the same was not a demandable and enforceable obligation. It argued that the giving of extra
compensation was based on the company’s available resources for a given year and the workers
are not entitled to a bonus if the company does not make profits. Petitioner adverted to the fact that it
was debt-ridden having incurred net losses for the years 2001 and 2002 totaling to ₱1.5 billion; and
since 1999, when the CBA was signed, the company’s accumulated losses amounted to over ₱2.7
billion. Petitioner further argued that the grant of a one (1) month salary cash advance was not
meant to take the place of a bonus but was meant to show the company’s sincere desire to help its
employees despite its precarious financial condition. Petitioner also averred that the CBA provision
on a "Christmas gift/bonus" refers to alternative benefits. Finally, petitioner emphasized that even if
the CBA contained an unconditional obligation to grant the bonus to the respondent Association, the
present difficult economic times had already legally released it therefrom pursuant to Article 1267 of
the Civil Code.11
The Voluntary Arbitrator rendered a Decision dated 2 June 2003, declaring that petitioner is bound to
grant each of its workers a Christmas bonus of ₱3,000.00 for the reason that the bonus was given
prior to the effectivity of the CBA between the parties and that the financial losses of the company is
not a sufficient reason to exempt it from granting the same. It stressed that the CBA is a binding
contract and constitutes the law between the parties. The Voluntary Arbitrator further expounded that
since the employees had already been given ₱600.00 cash bonus, the same should be deducted
from the claimed amount of ₱3,000.00, thus leaving a balance of ₱2,400.00. The dispositive portion
of the decision states, viz:
Wherefore, in view of the foregoing respondent LCI is hereby ordered to pay the members of the
complainant union LCEA their respective Christmas bonus in the amount of three thousand
(₱3,000.00) pesos for the year 2002 less the ₱600.00 already given or a balance of ₱2,400.00. 12
Petitioner sought reconsideration but the same was denied by the Voluntary Arbitrator in an Order
dated 27 June 2003, in this wise:
The Motion for Reconsideration filed by the respondent in the above-entitled case which was
received by the Undersigned on June 26, 2003 is hereby denied pursuant to Section 7 Rule XIX on
Grievance Machinery and Voluntary Arbitration; Amending The Implementing Rules of Book V of the
Labor Code of the Philippines; to wit:
Section 7. Finality of Award/Decision − The decision, order, resolution or award of the voluntary
arbitrator or panel of voluntary arbitrators shall be final and executory after ten (10) calendar days
from receipt of the copy of the award or decision by the parties and it shall not be subject of a motion
for reconsideration.13
Petitioner elevated the case to the Court of Appeals via a Petition for Certiorari under Rule 65 of the
Rules of Court docketed as CA-G.R. SP No. 78334. 14 As adverted to earlier, the Court of Appeals
affirmed in toto the decision of the Voluntary Arbitrator. The appellate court also denied petitioner’s
motion for reconsideration.
In affirming respondent Association’s right to the Christmas bonus, the Court of Appeals held:
In the case at bar, it is indubitable that petitioner offered private respondent a Christmas bonus/gift in
1998 or before the execution of the 1999 CBA which incorporated the said benefit as a traditional
right of the employees. Hence, the grant of said bonus to private respondent can be deemed a
practice as the same has not been given only in the 1999 CBA. Apparently, this is the reason why
petitioner specifically recognized the grant of a Christmas bonus/gift as a practice or tradition as
stated in the CBA. x x x.
xxxx
Evidently, the argument of petitioner that the giving of a Christmas bonus is a management
prerogative holds no water. There were no conditions specified in the CBA for the grant of said
benefit contrary to the claim of petitioner that the same is justified only when there are profits earned
by the company. As can be gleaned from the CBA, the payment of Christmas bonus was not
contingent upon the realization of profits. It does not state that if the company derives no profits,
there are no bonuses to be given to the employees. In fine, the payment thereof was not related to
the profitability of business operations.
Moreover, it is undisputed that petitioner, aside from giving the mandated 13th month pay, has
further been giving its employees an additional Christmas bonus at the end of the year since 1998 or
before the effectivity of the CBA in September 1999. Clearly, the grant of Christmas bonus from
1998 up to 2001, which brought about the filing of the complaint for alleged non-payment of the 2002
Christmas bonus does not involve the exercise of management prerogative as the same was given
continuously on or about Christmas time pursuant to the CBA. Consequently, the giving of said
bonus can no longer be withdrawn by the petitioner as this would amount to a diminution of the
employee’s existing benefits.15
Not to be dissuaded, petitioner is now before this Court. The only issue before us is whether or not
the Court of Appeals erred in affirming the ruling of the voluntary arbitrator that the petitioner is
obliged to give the members of the respondent Association a Christmas bonus in the amount of
₱3,000.00 in 2002.16
We uphold the rulings of the voluntary arbitrator and of the Court of Appeals. Findings of labor
officials, who are deemed to have acquired expertise in matters within their respective jurisdictions,
are generally accorded not only respect but even finality, and bind us when supported by substantial
evidence. This is the rule particularly where the findings of both the arbitrator and the Court of
Appeals coincide.17
As a general proposition, an arbitrator is confined to the interpretation and application of the CBA.
He does not sit to dispense his own brand of industrial justice: his award is legitimate only in so far
as it draws its essence from the CBA.18 That was done in this case.
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. 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.19
A bonus is also granted by an enlightened employer to spur the employee to greater efforts for the
success of the business and realization of bigger profits. 20
Generally, a bonus is not a demandable and enforceable obligation. For a bonus to be enforceable,
it must have been promised by the employer and expressly agreed upon by the parties. 21 Given that
the bonus in this case is integrated in the CBA, the same partakes the nature of a demandable
obligation. Verily, by virtue of its incorporation in the CBA, the Christmas bonus due to respondent
Association has become more than just an act of generosity on the part of the petitioner but a
contractual obligation it has undertaken. 22
A CBA refers to a 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 other contracts, the parties to 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.23
It is a 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.24 This principle stands strong and true in the case at
bar.1avvphi1
A reading of the provision of the CBA reveals that the same provides for the giving of a "Christmas
gift package/bonus" without qualification. Terse and clear, the said provision did not state that the
Christmas package shall be made to depend on the petitioner’s financial standing. The records are
also bereft of any showing that the petitioner made it clear during CBA negotiations that the bonus
was dependent on any condition. Indeed, if the petitioner and respondent Association intended that
the ₱3,000.00 bonus would be dependent on the company earnings, such intention should have
been expressed in the CBA.
It is noteworthy that in petitioner’s 1998 and 1999 Financial Statements, it took note that "the 1997
financial crisis in the Asian region adversely affected the Philippine economy." 25
From the foregoing, petitioner cannot insist on business losses as a basis for disregarding its
undertaking. It is manifestly clear that petitioner was very much aware of the imminence and
possibility of business losses owing to the 1997 financial crisis. In 1998, petitioner suffered a net loss
of ₱14,347,548.00.26 Yet it gave a ₱3,000.00 bonus to the members of the respondent Association.
In 1999, when petitioner’s very own financial statement reflected that "the positive developments in
the economy have yet to favorably affect the operations of the company," 27 and reported a loss of
₱346,025,733.00,28 it entered into the CBA with the respondent Association whereby it contracted to
grant a Christmas gift package/bonus to the latter. Petitioner supposedly continued to incur losses in
the years 200029 and 2001. Still and all, this did not deter it from honoring the CBA provision on
Christmas bonus as it continued to give ₱3,000.00 each to the members of the respondent
Association in the years 1999, 2000 and 2001.
All given, business losses are a feeble ground for petitioner to repudiate its obligation under the
CBA. The rule is settled that any benefit and supplement being enjoyed by the employees cannot be
reduced, diminished, discontinued or eliminated by the employer. The principle of non-diminution of
benefits is founded on the constitutional mandate to protect the rights of workers and to promote
their welfare and to afford labor full protection.30
Hence, absent any proof that petitioner’s consent was vitiated by fraud, mistake or duress, it is
presumed that it entered into the CBA voluntarily and had full knowledge of the contents thereof and
was aware of its commitments under the contract.
The Court is fully aware that implementation to the letter of the subject CBA provision may further
deplete petitioner’s resources. Petitioner’s remedy though lies not in the Court’s invalidation of the
provision but in the parties’ clarification of the same in subsequent CBA negotiations. Article 253 of
the Labor Code is relevant:
Art. 253. Duty to bargain collectively when there exists a collective bargaining agreement. - When
there is a collective bargaining agreement, the duty to bargain collectively shall also mean that
neither party shall terminate nor modify such agreement during its lifetime. However, either party can
serve a written notice to terminate or modify the agreement at least sixty (60) days prior to its
expiration date. It shall be the duty of both parties to keep the status quo and to continue in full force
and effect the terms and conditions of the existing agreement during the sixty (60)-day period and/or
until a new agreement is reached by the parties.
WHEREFORE, Premises considered, the petition is DENIED for lack of merit. The Decision of the
Court of Appeals dated 5 April 2006 and the Resolution of the same court dated 13 December 2007
in CA-G.R. SP No. 78334 are AFFIRMED.
SO ORDERED.
SECOND DIVISION
[ G.R. No. 195297, December 05, 2018 ]
COCA-COLA BOTTLERS PHILIPPINES, INC., PETITIONER, VS. ILOILO COCA-
COLA PLANT EMPLOYEES LABOR UNION (ICCPELU), AS REPRESENTED BY
WILFREDO L. AGUIRRE, RESPONDENT.
DECISION
A. REYES, JR., J.:
Challenged before this Court via this Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court is the
Decision[2] dated June 23, 2010 of the Court of Appeals (CA), and its Resolution[3] dated October 19, 2010 which
reversed the Decision[4] dated September 7, 2006 of the National Conciliation and Mediation Board (NCMB), Regional
Branch No.6, Iloilo City, in Case No. PAC-613-RB6-02-01-06-2006.
Petitioner Coca-Cola Bottlers Philippines, Inc. (CCBPI) is a domestic corporation engaged in the business of
manufacturing and selling of leading non-alcoholic products and other beverages.[5] It operates a manufacturing plant
in Ungka, Pavia, Iloilo City, where the aggrieved former employees herein, as represented by respondent Iloilo Coca-
Cola Plant Employees Labor Union (respondent), worked as regular route drivers and helpers.[6]
The conflict arose due to the CCBPI's policy involving Saturday work. In the said policy, several of CCBPI's
employees were required to report for work on certain Saturdays to perform a host of activities, usually involving
maintenance of the facilities. This prerogative was supposedly consistent with the pertinent provisions[7] in the
Collective Bargaining Agreement (CBA) between CCBPI and its employees, which stated that management had the
sole option to schedule, work on Saturdays on the basis of operational necessity.[8]
CCBPI later on informed the respondent that, starting July 2, 2005, Saturday work would no longer be scheduled,
with CCBPI citing operational necessity as the reason for the decision.[9] Specifically, the discontinuance was done
with the purpose of saving on operating expenses and compensating for the anticipated decreased revenues. As
Saturday work involved maintenance-related activities, CCBPI would then only schedule the day's work as the need
arose for these particular undertakings, particularly on some Saturdays from September to December 2005.[10]
On July 1, 2005, the parties met, with CCBPI's Manufacturing Manager setting forth the official proposal to stop the
work schedule during Saturdays.[11] This proposal was opposed and rejected by the officers and members of the
respondent who were present at the meeting. Despite this opposition, CCBPI pushed through with the non-
scheduling of work on the following Saturday, July 2, 2005.
As a result of the foregoing, the respondent submitted to CCBPI its written grievance, stating therein that CCBPI's act
of disallowing its employees to report during Saturday is a violation of the CBA provisions, specifically Section 1,
Article 10 thereof.[12] Along with the submission of the written grievance, the respondent also requested a meeting
with CCBPI to discuss the issue. CCBPI response to the request, however, was to merely send a letter reiterating to
the respondent that under the set of facts, management has the option to schedule work on Saturday on the basis of
operational necessity.[13] Further letters on the part of the respondent were responded to in the same way by CCBPI.
Respondent thus brought its grievances to the office of the NCMB, and on June 9, 2006, the parties pursuant to the
provisions of their CBA submitted the case for voluntary arbitration.[14] The panel comprised of three (3) voluntary
arbitrators (the Panel of Arbitrators), was charged with resolving two issues: First, whether or not members of the
respondent were entitled to receive their basic pay during Saturdays under the CBA even if they would not report for
work, and second, whether or not CCBPI could be compelled by the respondent to provide work to its members
during Saturdays under the CBA.[15]
After the presentation of evidence and the subsequent deliberations, the Panel of Arbitrators ruled in favor of CCBPI,
the dispositive part of the decision reading:
IN VIEW OF THE FOREGOING, the Panel of Arbitrators, rules on the first issue, that the Complainant's Union
members are nary entitled to receive their Basic Pay during Saturdays under the CBA if they are not reporting for
work, under Section I Article 10, and Sections 1(c) and 3(c) Article II of the CBA.
On the second issue, the PANEL, rules that [CCBPI] cannot be compelled by the Complainant Union to provide
works to its members during Saturdays under the CBA, for lack of legal and factual basis.
SO ORDERED.[16]
Respondent's Motion for Reconsideration to the Panel of Arbitrators' ruling was denied for lack of merit on October
24, 2006.[17]
Unwilling to accept the findings of the Panel of Arbitrators, the respondent elevated its case to the CA via a Petition
for Review under Rule 43 of the Rules of Court. After a review of the same, the CA subsequently rendered a
Decision[18] dated June 23, 2010 granting the respondent's Petition for Review and reversing the decision of the Panel
of Arbitrators. The dispositive portion of the CA decision reads, to wit:
WHEREFORE, premises considered, the petition is GRANTED. The assailed Decision, dated 07 September 2006,
and, Order, dated 24 October 2006, respectively, by the panel of voluntary arbitrators, namely: Atty. Mateo A.
Valenzuela, Atty. Inocencio Fener, Jr., and Gloria Aniola, of the NCMB. Regional Branch No. 6, Iloilo City, are
REVERSED and SET ASIDE. A NEW judgment is rendered ORDERING CCBPI to:
1. COMPLY with the CBA provisions respecting its normal work week, that is, from Monday to Friday for eight (8)
hours a day and on Saturdays for four (4) hours;
2. ALLOW the concerned union members to render work for four (4) hours on Saturdays; and
3. PAY the corresponding wage for the Saturdays work which were not performed pursuant to its order to do so
commencing on 02 July 2005, the date when it actually refused the concerned union members to report tor work, until
the finality of this decision. The rate for work rendered on a Saturday is composed of the whole daily rate (not the
amount equivalent to one-half day rate) plus the corresponding premium.
No Costs.
SO ORDERED.[19]
CCBPI's Motion for Reconsideration was denied by the CA in a Resolution[20] dated October 19, 2010 received on
January 28, 2011. On appeal to this Court, on February 11, 2011, CCBPI filed Motion for Extension and requested for
an additional period of 30 days from February 12, 2011, or until March 14, 2014, within which to file its Petition
for Certiorari, which was granted by this Court in a Resolution[21] dated February 21, 2011.
Hence, this Petition, to which the respondent filed a Comment[22] to on June 11, 2011, the latter pleading responded
to by CCBPI via Reply[23] on September 6, 2011.
A perusal of the parties' pleadings will show the following issues and points of contention:
First, whether or not the CA erred in ruling that under the CBA between the parties, scheduling Saturday work for
CCBPI's employees is mandatory on the part of the Company.
Second, whether scheduling Saturday work has ripened into a company practice, the removal of which constituted a
diminution of benefits, to which CCBPI is likewise liable to the affected employees for, including the corresponding
wage for the Saturday work which was not performed pursuant to the policy of the Company to remove Saturday
work based on operational necessity.
It is the contention of CCBPI that the CA erred in reversing the decision of the Panel of Arbitrators and finding that the
CBA gave the employees the right to compel CCBPI to give work on Saturdays, that the scheduling of work on a
Saturday had ripened into a company practice, and that the subsequent withdrawal of Saturday work constituted a
prohibited diminution of wages. CCBPI states that this ruling is contrary to fact and law and unduly prejudiced CCBPI
as the company was ordered to allow the affected employees to render work for four hours on Saturdays. CCBPI was
also ordered to pay the corresponding wage for the Saturday work which were not performed pursuant to its order to
do so, the said amount corresponding to the date when the company actually refused the affected employees to
report for work, until the finality of this decision.[24]
CCBPI argues that based on the provisions of its CBA, specifically Article 10, Section 1, in relation with, Article 11,
Section 1 (c) and Section 2(c), it is clear that work on a Saturday is optional on the part of management,[25] and
constitutes a legitimate management prerogative that is entitled to respect and enforcement in the interest of simple
fair play.[26] CCBPI likewise posits that the option to schedule work necessarily includes the prerogative not to
schedule it. And, as the provisions in the CBA are unmistakable and unambiguous, the terms therein are to be
understood literary just as they appear on the face of the contract.[27]
For CCBPI, permitting the workers to suffer work on a Saturday would render the phrase "required to work'' in Article
10, Section 1 and Article II, Section 2(c) meaningless and superfluous, as while the scheduling of Saturday work
would be optional on the pat1of management, the workers would still be required to render service even if no
Saturday work was scheduled.[28]
Aside front the clear and unambiguous provisions of the CBA, CCBPI states that the evidence on record negates the
finding that Saturday work is mandatory.[29] The evidence shows that only some, and not all the same daily-paid
employees reported for work on a Saturday, and the number of the daily-paid employees who reported for work on a
Saturday always depended on the CCBPI's operational necessity.[30] The optional nature of the work on the Saturday
is also highlighted by the fact that, subject to the fulfillment of certain conditions, the employees who were permitted
to suffer work on such day are compensated with a premium pay.[31] This means that work on a Saturday is part of the
normal work week, as there would be no reason why employees who reported for work on such date should be given
additional compensation or premium pay.
CCBPI also disagrees with the CA that the scheduling of work on a Saturday had ripened into a company practice
and that the withdrawal of Saturday work constitutes a prohibited diminution of wages.[32] CCBPI maintains that work
on a Saturday does not amount to a benefit as a result of a long-established practice. CCBPI states that in several
analogous cases involving overtime work, Manila Jockey Club Employees Labor-Union-PTGWO v. Manila Jockey
Club, Inc.[33] and San Miguel Corporation v. Layoc, Jr.,[34] the Court has already ruled that the work given in excess of
the regular work hours is not a "benefit" and the previous grant thereof cannot amount to a "company practice."
CCBPI particularly cites the Layoc case which held that there is no violation of the rule on non-diminution of benefits
as.the nature of overtime work of the supervisory employees would show that these are not freely given by the
employer, and that on the contrary, the payment of overtime pay is made as a means of compensation for services
rendered in addition to the regular hours of work.[35]
CCBPI likewise cites several cases involving overtime work, there the Court ruled that the work given in excess of the
regular work hours is not a "benefit" and the previous grant thereof cannot amount to a "company practice."[36] As a
premium day, that Saturday would have the effect of being a holiday wherein the employees are entitled to receive
their pay whether they reported for work or not.[37]
For CCBPI, the previous grant of Saturday work cannot amount to a benefit that cannot be withdrawn by the
Company. Contrary to the nature of "benefits" under the law, CCBPI did not freely give payment for Saturday work,
instead paying the employees the corresponding wage and premium pay as compensation for services rendered in
addition to the regular work of eight (8) hours per day from Mondays to Fridays.[38]
On the other hand, the respondents argue that CCBPI failed to regard the express provision of the CBA which
delineates CCBPI's normal work-week which consists of five (5) consecutive days (Monday to Friday) or eight (8)
hours each and one (1) day (Saturday) of four (4) hours.[39] The highlighted provision reads as follows:
ARTICLE 10
HOURS OF WORK
SECTION 1. Work Week. For daily paid workers the nom1al work week shall consist of five (5) consecutive days
(Monday to Friday) of eight (8) hours each find one (1) day (Saturday) of four (4) hours. Provided, however, that any
worker required to work on Saturday must complete the scheduled shift tor the day and shall be entitled to the
premium pay provided in Article IX hereof.
As such, the respondent advocates that the various stipulations of a contract shall be interpreted together, and that
assuming there is any ambiruity in the CBA, this ambiguity should not prejudice respondents under the principle that
any doubt in all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for
the laborer.[40] According to the respondent, Article 11, Section 1(c) merely grants to CCBPI the option to schedule
work on Saturdays on the basis of operational necessity, and by contrast nothing in the CBA allegedly allows or
grants CCBPI the right or prerogative to unilaterally amend the duly established work week by eliminating Saturday
work.[41]
Respondent also alleges that CCBPI was obliged to provide work on Saturday, not only due to the apparent .mandate
in the CBA, but also as the same ripened into an established company practice, as CCBPI's practice of providing
Saturday work had been observed for several years.[42] Respondent thus contends that the unilateral abrogation of
the same would squarely tantamount to diminution of benefits, especially as the CBA itself expressly provides that
Saturday is part of CCBPI's normal work week, hence the same cannot be unilaterally eliminated by CCBPI,[43] and
that the option granted by the CBA to CCBPI is merely to schedule Saturday work, not eliminate it entirely. Thus, to
eliminate the Saturday work allegedly would amount to diminution of benefits because the affected employees are
ultimately deprived of their supposed salaries or income for that day.[44]
In its Reply[45] to the counter-arguments posited by the respondent in its Comment, CCBPI alleges that if indeed
Saturday work is mandatory under the CBA and all the workers are obliged to render work on a Saturday, then the
phrase "required to work" under Article 10, Section 1 and Article 11, Section 2(c) would be meaningless and
superfluous.[46] Also, CCBPI takes stock in the fact that the compensation for work on Saturday is not freely given.
Under the scheme followed by the parties under the CBA, i.e., if the daily-paid employees were permitted to suffer
work on a Saturday, they are given additional compensation or premium pay amounting to 50% of their hourly rate for
the first eight (8) hours, and 75% of their hourly rate for the work rendered in excess thereof under Article 11, Section
2(c) of the CBA.[47]
As to whether or not the CBA between the parties mandates that CCBII schedule Saturday work for its employees.
A CBA is 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.[48] It incorporates the agreement
reached after negotiations between the employer and the bargaining agent with respect to terms and conditions of
employment.[49]
It is axiomatic that the CBA comprises the law between the contracting parties, and compliance therewith is
mandated by the express policy of the law.[50] The literal meaning of the stipulations of the CBA, as with every other
contract, control if they are clear and leave no doubt upon the intention of the contracting parties. 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.[51] Moreover, it is a familiar rule in interpretation of contracts that the various stipulations
of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of
them taken jointly.[52]
Consequently, in this case, recourse to the CBA between CCBPI and the respondent as regards the hours of work is
essential. In Article 10 of the CBA, the company work week is elaborated while also defining how a Saturday is
treated and in fact delineating the same from the other days of the work week:
ARTICLE 10
Hours of Work
SECTION 1. Work Week. For daily paid workers, the normal work week shall consist of five (5) consecutive days
(Monday to Friday) of eight (8) hours and each and one (1) day (Saturday) of four (4) hours, provided, however, that
any worker required to work on Saturday must complete the scheduled shift for the day and shall be entitled to the
premium pay provided in Article IX hereof.
xxxx
(c) Saturdays. Saturday is a premium day but shall not be considered as a rest day or equivalent to a Sunday. It is
further agreed that management has the option to schedule work on Saturdays on the basis of operational necessity.
Section 5 of Article 9 of the CBA, explicitly referred to in Article 10 states:
SECTION 5. Special Bonus. When a regular employee goes out on his route on a Saturday, Sunday, or Legal
Holiday, either because he is so required by District Sale Supervisor or because, after securing approval from the
District Sales Supervisor. he voluntarily chooses to do so. he shall be entitled to a special bonus of P280.00.
In making its decision, the CA reasoned that had it really been the intention that Saturday work, by itself, is optional
on CCBPI's part, then there would have been no need to state under the CBA that Saturday is part of the, normal
work week together with the Monday to Friday schedule, and that if Saturday work is indeed optional, then it would
have expressly stipulated the same.[53] According to the CA's interpretation, the provision wherein CCBPI had the
option to schedule work on Saturdays on the basis of operational necessity, simply meant that CCBPI could schedule
the mandated four (4) hours work any time within the 24-hour period on that day, but not remove the hours entirely.[54]
For the CA, to interpret the phrase "option to schedule'' as limited merely to scheduling the time of work on Saturdays
and not the option to allow or disallow or to grant or not to grant the Saturday work itself, is more consistent with the
idea candidly stated in the CBA regarding the work week which is comprised of five (5) consecutive days (Monday to
Friday) of eight (8) hours each and one (1) day (Saturday) of four (4) hours. The foregoing interpretation, as held by
the CA, is in harmony with the context and the established practice in which the CBA is negotiated,[55] and that, based
on the foregoing, CCBPI should comply with the provisions respecting its normal work week, that is, from Monday to
Friday of eight (8) hours a day and on Saturdays for four (4) hours. CCBPI thus should allow the concerned union
members to render work for four (4) hours on Saturday.[56]
The Court disagrees with the interpretation of the CA. In the perusal of the same, the Court finds that a more logical
and harmonious interpretation of the CBA provisions wherein Saturday work is optional and not mandatory keeps
more with the agreement between the parties.
To note, the CBA under Article 11, Section 1(c), clearly provides that CCBPI has the option to schedule work on
Saturdays based on operational necessity. There is no ambiguity to the provision, and no other interpretation of the
word "work" other than the work itself and not the working hours. If the parties had truly intended that the option
would be to change only the working hours, then it would have so specified that whole term "working hours" be used,
as was done in other provisions of the CBA. By comparison, there is a provision in Article 10 that states:
SECTION 2. Changes in Work Schedule. The present regular working hours shall be maintained for the duration of
this Agreement. However, it is hereby agreed that the COMPANY may change the prevailing working hours, if in its
judgment, it shall find such change or changes advisable or necessary either as a permanent or temporary measure,
provided at least twelve (12) hours notice in advance is given of such change or changes, and provided, further, that
they are in accordance with law.
Here, hours are specified as that which can be changed regarding the work schedule. The Court compares this to
Article 11, where it is expressly stated' that management has the option to schedule work on Saturdays on the basis
of operational necessity. To emphasize, if it is only the hours that management may amend, then it would have been
so stated, with that specific term used instead of just merely "work," a more general term.
Also, as correctly pointed out by CCBPI, if Saturday work is indeed mandatory under the CBA, the phrase "required
to work on a Saturday" in Article 10, Section 1 would be superfluous. The same phrase is also found in Article 11,
Section 2(c) which provides that "a worker paid on daily basis required to work on a Saturday shall be paid his basic
hourly rate plus fifty (50%) percent thereof."
For the Court, the phrase "schedule work on Saturdays based on operational necessity," by itself, is union recognition
that there are times when exigencies of the business will arise requiring a manning complement to suffer work for four
additional hours per week. Necessarily, when no such exigencies exist, the additional hours of work need not be
rendered.
As such, the provisions' tenor and plain meaning give company management the right to compel its employees to
suffer work on Saturdays. This necessarily includes the prerogative not to schedule work. Whether or not work will be
scheduled on a given Saturday is made to depend on operational necessity. The CBA therefore gives CCBPI the
management prerogative to provide its employees with Saturday work depending on the exigencies of the business.
This reading of the CBA is made even more apparent by the fact that workers who are required to work on Saturdays
are paid a premium for such work. Notably, in the section on Premium Pay, it is stated:
(c) Saturdays. Even though Saturday is not his rest day - A worker paid on daily basis required to work on a Saturday
shall be paid his basic hourly rate plus fifty (50%) percent thereof for each hour worked not in excess of eight hours; if
he is required to work more than eight (8) hours, he shall be paid his basic hourly rate plus seventy-five (75%) thereof
for each hour worked in excess of eight (8) hours.
If Saturday was part of the regular work week and not dependent on management's decision to schedule work, there
would be no need to give additional compensation to employees who report to work on that day. The CA erred in
taking into account that employees required to work on that day but who would fai1 to report, would be marked down
as having gone on leave.[57] The Court agrees with CCBPI that such conclusion is non sequitur and that the markings
merely indicated the fact that they did not report for work (even if required) and the reasons for their absence,
whether legitimate or not.[58] This understanding is bolstered by the fact that not all daily-paid workers were required
to report for work, which and if indeed Saturday was to be considered a regular work day, all the3e employees should
have been required to report for work.[59]
In sum, by not taking these provisions into account, the CA ignored the well-settled rule that the various stipulations
of a contract must be interpreted together. The Court finds that relying on the interpretation of the CA would result in
the patent absurdity that the company would have to look for work for the employees to do even if there is none, on
the Saturday as stated. Even if one were to downplay the lack of logic with this assertion, as mentioned the CBA
provisions are clear and unambiguous, leaving no need for a separate interpretation of the same.
As to whether scheduling Saturday work has ripened into a company practice, the removal of which constituted a
diminution of benefits.
In the decision of the CA, it was held that the fact that CCBPI had been providing work to its employees every
Saturday for several years, a circumstance that proved Saturday was part of the regular work week, made the grant
of Saturday work ripen into company practice.
In asking the Court to reverse the ruling of the CA, CCBPI argues that work on a Saturday is akin to overtime work
because employees who are required to perform such work are given additional compensation or premium in the
CBA.[60] Citing Layoc,[61] CCBPI stresses that since overtime work does not fall within the definition of benefits, the
same is not protected by Article 100 of the Labor Code which proscribes the diminution of benefits. To wit:
First. respondents assert that Article 100 of the Labor Code prohibits the elimination or diminution of benefits.
However, contrary to the nature of benefits, petitioners did not freely give the payment for overtime work to
respondents. Petitioners paid respondents overtime pay as compensation for services rendered in addition to the
regular work hours. Respondents rendered overtime work only when their services were needed after their regular
working hours and only upon the instructions of their superiors. Respondents even differ as to the amount of overtime
pay received on account of the difference in the additional hours of services rendered.
xxxx
Aside from their allegations, respondents were not able to present anything to prove that petitioners were obliged to
permit respondents to render overtime work and give them the corresponding overtime pay. Even if petitioners did not
institute a "no time card policy," respondents could not demand overtime pay from petitioners if respondents did not
render overtime work. The requirement of rendering additional service differentiates overtime pay from benefits such
as thirteenth month pay or yearly merit increase. These benefits do not require any additional service from their
beneficiaries. Thus, overtime pay does not fall within the definition of benefits under Article 100 of the Labor Code.[62]
The Court does not agree with the argument of CCBPI. CCBPI overlooks the fact that the term overtime work has an
established and technical meaning under our labor laws, to wit:
Article 87. Overtime work. Work may be performed beyond eight (8) hours a day provided that the employee is paid
for the overtime work, an additional compensation equivalent to his regular wage plus at least twenty-five percent
(25%) thereof. Work performed beyond eight hours on a holiday or rest day shall be paid an additional compensation
equivalent to the rate of the first eight hours on a holiday or rest day plus at least thirty percent (30%) thereof.
It can be deduced from the foregoing provision that overtime work is work exceeding eight hours within the worker's
24-hour workday.[63] What is involved in this case is work undertaken within the normal hours of work on Saturdays
and not work performed beyond eight hours in one day. Under Article 83 of the Labor Code:
Article. 83. Normal hours of work. The normal hours of work of any employee shall not exceed eight (8) hours a day.
Despite the mistaken notion of CCBPI that Saturday work is synonymous to overtime work, the Court still disagrees
with the CA ruling that the previous practice of instituting Saturday work by CCBPI had ripened into a company
practice covered by Article 100 of the Labor Code.
To note, it is not Saturday work per se which constitutes a benefit to the company's employees. Rather, the benefit
involved in this case is the premium which the company pays its employees above and beyond the minimum
requirements set by law. The CBA between CCBPI and the respondent guarantees the employees that they will be
paid their regular wage plus an additional 50% thereof for the first eight (8) hours of work performed on Saturdays.
Therefore, the benefit, if ever there is one, is the premium pay given by reason of Saturday work, and not the grant of
Saturday work itself.
In Royal Plant Workers Union v. Coca-Cola Bottlers Philippines, Inc.-Cebu Plant,[64] the Court had the occasion to rule
that the term "benefits" mentioned in the non-diminution rule refers to monetary benefits or privileges given to the
employee with monetary equivalents. Stated otherwise, the employee benefits contemplated by Article 100 are those
which are capable of being measured in terms of money. Thus, it can be readily concluded from past jurisprudential
pronouncements that these privileges constituted money in themselves or were convertible into monetary
equivalents.[65]
In order for there to be proscribed diminution of benefits that prejudiced the affected employees, CCBPI should have
unilaterally withdrawn the 50% premium pay without abolishing Saturday work. These are not the facts of the case at
bar. CCBPI withdrew the Saturday work itself, pursuant, as already held, to its management prerogative. In fact, this
management prerogative highlights the fact that the scheduling of the Saturday work was actually made subject to a
condition, i.e., the prerogative to provide the company's employees with Saturday work based on the existence of
operational necessity.
In Eastern Telecommunications Philippines, Inc. v. Eastern Telecoms Employees Union,[66] the company therein
allegedly postponed the payment of the 14th, 15th, and 16th month bonuses contained in the CBA, and unilaterally
made the payment subject to availability of funds. Because of its severe financial condition, the company refused to
pay the subject bonuses. The Court, in holding that such act violated the proscription against diminution of benefits,
observed that the CBA provided for the subject bonuses without qualification-their grant was not made to depend on
the existence o,f profits. Since no conditions were specified in the CBA for the grant of the subject benefits, the
company could not use its dire financial straits to justify the omission.
As compared to the factual milieu in the Eastern Telecommunications case, the CBA between CCBPI and the
respondent has no analogous provision which grants that the 50% premium pay would have to be paid regardless of
the occurrence of Saturday work. Thus, the non-payment of the same would not constitute a violation of the
diminution of benefits rule.
Also, even assuming arguendo that the Saturday work involved in this case falls within the definition of a "benefit"
protected by law, the fact that it was made subject to a condition (i.e., the existence of operational necessity) negates
the application of Article 100 pursuant to the established doctrine that when the grant of a benefit is made subject to a
condition and such condition prevails, the rule on non-diminution finds no application. Otherwise stated, if Saturday
work and its corresponding premium pay were granted to CCBPI's employees without qualification, then the
company's policy of permitting its employees to suffer work on Saturdays could have perhaps ripened into company
practice protected by the non-diminution rule.
Lastly, the Court agrees with the assertion of CCBPI that since the affected employees are daily-paid employees,
they should be given their wages and corresponding premiums for Saturday work only if they are permitted to suffer
work. Invoking the time-honored rule of "a fair day's work for a fair day's pay," the CCBPI argues that the CA's ruling
that such unworked Saturdays should be compensated is contrary to law and the evidence on record.
The CA, for its part, ruled that the principle of "a fair day's work for a fair day's pay" was irrelevant to the instant case.
According to the appellate court, since CCBPI's employees are daily-paid workers, they should be paid their whole
daily rate plus the corresponding premium pay in the absence of a specific CBA provision that directed wages to be
paid on a different rate on Saturdays. This was notwithstanding the fact that the duration of Saturday work lasted only
for four hours or half the time spent on other workdays.
The CA erred in this pronouncement. The age-old rule governing the relation between labor and capital, or
management and employee, of a "fair day's,wage for a fair day's labor" remains the basic factor in determining
employees' wages.[67] If there is no work performed by the employee, there can be no wage.[68] In cases where the
employee's failure to work was occasioned neither by his abandonment nor by termination, the burden of economic
loss is not rightfully shifted to the employer; each party must bear his own loss.[69] In other words, where the employee
is willing and able to work and is not illegally prevented from doing so, no wage is due to him. To hold otherwise
would be to grant to the employee that which he did not earn at the prejudice of the employer.
In the case at bar, CCBPI's employees were not illegally prevented from working on Saturdays. The company was
simply exercising its option not to schedule work pursuant to the CBA provision which gave it the prerogative to do
so. It therefore follows that the principle of "no work, no pay" finds application in the instant case.
Having disposed of the issue on wages for unworked Saturdays in consonance with the well-settled rule of "no work,
no pay," this Court deems it unnecessary to belabor on the CA ruling that the concerned employees should be paid
their whole daily rate, and not the amount equivalent to one-half day's wage, plus corresponding premium.
On a final note, the Court cannot emphasize enough that its primary role as the vanguard of constitutional guaranties
charges it with the solemn duty of affording full protection to labor.[70] It is, in fact, well-entrenched in the deluge of our
jurisprudence on labor law and social legislation that the scales of justice usually tilt in favor of the workingman.
[71]
Such favoritism, however, has not blinded the Court to the rule that justice is, in every case for the deserving, to be
dispensed in the light of the established facts and applicable law and doctrine.[72] The law does not authorize the
oppression or self-destruction of the employer.[73] Management also has its own rights, which, as such, are entitled to
respect and enforcement in the interest of simple fair play.[74] After all, social justice is, in the eloquent words of
Associate Justice Jose P. Laurel, "the humanization of laws and the equalization of social and economic forces by
the State so that justice in its rational and objectively secular conception may at least be approximated."[75]
WHEREFORE, the Decision of the Court of Appeals dated June 23, 2010, and the Resolution dated October 19,
2010 are REVERSED and SET ASIDE. The Decision of the National Conciliation and Mediation Board, Regional
Branch No. 6, Iloilo City dated September 7, 2006, in Case No. PAC-613-RB6-02-01-06-2006 is AFFIRMED.
SO ORDERED.
1st G.R. No. 119205 April 15, 1998 SIME DARBY PILIPINAS, INC. Vs. NATIONAL LABOR RELATIONS
COMMISSION (2ND DIVISION) And SIME DARBY SALARIED EMPLOYEES ASSOCIATION (ALU-TUCP
BELLOSILLO, J.
BELLOSILLO, J.:
Is the act of management in revising the work schedule of its employees and discarding their paid
lunch break constitutive of unfair labor practice?
Sime Darby Pilipinas, Inc., petitioner, is engaged in the manufacture of automotive tires, tubes and
other rubber products. Sime Darby Salaried Employees Association (ALU-TUCP), private
respondent, is an association of monthly salaried employees of petitioner at its Marikina factory.
Prior to the present controversy, all company factory workers in Marikina including members of
private respondent union worked from 7:45 a.m. to 3:45 p.m. with a 30-minute paid "on call" lunch
break.
On 14 August 1992 petitioner issued a memorandum to all factory-based employees advising all its
monthly salaried employees in its Marikina Tire Plant, except those in the Warehouse and Quality
Assurance Department working on shifts, a change in work schedule effective 14 September 1992
thus —
Effective Monday, September 14, 1992, the new work schedule of the factory office will be as
follows:
Excluded from the above schedule are the Warehouse and QA employees who are on
shifting. Their work and break time schedules will be maintained as it is now. 1
Since private respondent felt affected adversely by the change in the work schedule and
discontinuance of the 30-minute paid "on call" lunch break, it filed on behalf of its members a
complaint with the Labor Arbiter for unfair labor practice, discrimination and evasion of liability
pursuant to the resolution of this Court in Sime Darby International Tire Co., Inc. v. NLRC. However,
2
the Labor Arbiter dismissed the complaint on the ground that the change in the work schedule and
the elimination of the 30-minute paid lunch break of the factory workers constituted a valid exercise
of management prerogative and that the new work schedule, break time and one-hour lunch break
did not have the effect of diminishing the benefits granted to factory workers as the working time did
not exceed eight (8) hours.
The Labor Arbiter further held that the factory workers would be unjustly enriched if they continued to
be paid during their lunch break even if they were no longer "on call" or required to work during the
break. He also ruled that the decision in the earlier Sime Darby case was not applicable to the
3
instant case because the former involved discrimination of certain employees who were not paid for
their 30-minute lunch break while the rest of the factory workers were paid; hence, this Court
ordered that the discriminated employees be similarly paid the additional compensation for their
lunch break.
Private respondent appealed to respondent National Labor Relations Commission (NLRC) which
sustained the Labor Arbiter and dismissed the appeal. However, upon motion for reconsideration by
4
private respondent, the NLRC, this time with two (2) new commissioners replacing those who earlier
retired, reversed its earlier decision of 20 April 1994 as well as the decision of the Labor Arbiter. The
5
NLRC considered the decision of this Court in the Sime Darby case of 1990 as the law of the case
wherein petitioner was ordered to pay "the money value of these covered employees deprived of
lunch and/or working time breaks." The public respondent declared that the new work schedule
deprived the employees of the benefits of a time-honored company practice of providing its
employees a 30-minute paid lunch break resulting in an unjust diminution of company privileges
prohibited by Art. 100 of the Labor Code, as amended. Hence, this petition alleging that public
respondent committed grave abuse of discretion amounting to lack or excess of jurisdiction: (a) in
ruling that petitioner committed unfair labor practice in the implementation of the change in the work
schedule of its employees from 7:45 a.m. — 3:45 p.m. to 7:45 a.m. — 4:45 p.m. with one-hour lunch
break from 12:00 nn to 1:00 p.m.; (b) in holding that there was diminution of benefits when the 30-
minute paid lunch break was eliminated; (c) in failing to consider that in the earlier Sime Darby case
affirming the decision of the NLRC, petitioner was authorized to discontinue the practice of having a
30-minute paid lunch break should it decide to do so; and, (d) in ignoring petitioner's inherent
management prerogative of determining and fixing the work schedule of its employees which is
expressly recognized in the collective bargaining agreement between petitioner and private
respondent.
The Office of the Solicitor General filed in a lieu of comment a manifestation and motion
recommending that the petitioner be granted, alleging that the 14 August 1992 memorandum which
contained the new work schedule was not discriminatory of the union members nor did it constitute
unfair labor practice on the part of petitioner.
We agree, hence, we sustain petitioner. The right to fix the work schedules of the employees rests
principally on their employer. In the instant case petitioner, as the employer, cites as reason for the
adjustment the efficient conduct of its business operations and its improved production. It6
rationalizes that while the old work schedule included a 30-minute paid lunch break, the employees
could be called upon to do jobs during that period as they were "on call." Even if denominated as
lunch break, this period could very well be considered as working time because the factory
employees were required to work if necessary and were paid accordingly for working. With the new
work schedule, the employees are now given a one-hour lunch break without any interruption from
their employer. For a full one-hour undisturbed lunch break, the employees can freely and effectively
use this hour not only for eating but also for their rest and comfort which are conducive to more
efficiency and better performance in their work. Since the employees are no longer required to work
during this one-hour lunch break, there is no more need for them to be compensated for this period.
We agree with the Labor Arbiter that the new work schedule fully complies with the daily work period
of eight (8) hours without violating the Labor Code. Besides, the new schedule applies to all
7
employees in the factory similarly situated whether they are union members or not. 8
Consequently, it was grave abuse of discretion for public respondent to equate the earlier Sime
Darby case with the facts obtaining in this case. That ruling in the former case is not applicable
9
here. The issue in that case involved the matter of granting lunch breaks to certain employees while
depriving the other employees of such breaks. This Court affirmed in that case the NLRC's finding
that such act of management was discriminatory and constituted unfair labor practice.
The case before us does not pertain to any controversy involving discrimination of employees but
only the issue of whether the change of work schedule, which management deems necessary to
increase production, constitutes unfair labor practice. As shown by the records, the change effected
by management with regard to working time is made to apply to all factory employees engaged in
the same line of work whether or not they are members of private respondent union. Hence, it
cannot be said that the new scheme adopted by management prejudices the right of private
respondent to self-organization.
Every business enterprise endeavors to increase its profits. In the process, it may devise means to
attain that goal. Even as the law is solicitous of the welfare of the employees, it must also protect the
right of an employer to exercise what are clearly management prerogatives. Thus, management is
10
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. Further, management retains the
11
prerogative, whenever exigencies of the service so require, to change the working hours of its
employees. So long as such prerogative 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 under valid agreements, this Court will uphold such exercise. 12
While the Constitution is committed to the policy of social justice and the protection of the working
class, it should not be supposed that every dispute will be automatically decided in favor of labor.
Management also has rights which, as such, are entitled to respect and enforcement in the interest
of simple fair play. Although this Court has inclined more often than not toward the worker and has
upheld his cause in his conflicts with the employer, such favoritism has not blinded the Court to the
rule that justice is in every case for the deserving, to be dispensed in the light of the established
facts and the applicable law and doctrine. 13
WHEREFORE, the Petition is GRANTED. The Resolution of the National Labor Relations
Commission dated 29 November 1994 is SET ASIDE and the decision of the Labor Arbiter dated 26
November 1993 dismissing the complaint against petitioner for unfair labor practice is AFFIRMED.
SO ORDERED.
2nd G.R. No. 164774 April 12, 2006 STAR PAPER CORPORATION, Et.Al. Vs. RONALDO D. SIMBOL, Et.Al. PUNO,
J.:
DECISION
PUNO, J.:
We are called to decide an issue of first impression: whether the policy of the employer banning
spouses from working in the same company violates the rights of the employee under the
Constitution and the Labor Code or is a valid exercise of management prerogative.
At bar is a Petition for Review on Certiorari of the Decision of the Court of Appeals dated August 3,
2004 in CA-G.R. SP No. 73477 reversing the decision of the National Labor Relations Commission
(NLRC) which affirmed the ruling of the Labor Arbiter.
Petitioner Star Paper Corporation (the company) is a corporation engaged in trading – principally of
paper products. Josephine Ongsitco is its Manager of the Personnel and Administration Department
while Sebastian Chua is its Managing Director.
The evidence for the petitioners show that respondents Ronaldo D. Simbol (Simbol), Wilfreda N.
Comia (Comia) and Lorna E. Estrella (Estrella) were all regular employees of the company. 1
Simbol was employed by the company on October 27, 1993. He met Alma Dayrit, also an employee
of the company, whom he married on June 27, 1998. Prior to the marriage, Ongsitco advised the
couple that should they decide to get married, one of them should resign pursuant to a company
policy promulgated in 1995,2 viz.:
1. New applicants will not be allowed to be hired if in case he/she has [a] relative, up to [the]
3rd degree of relationship, already employed by the company.
2. In case of two of our employees (both singles [sic], one male and another female)
developed a friendly relationship during the course of their employment and then decided to
get married, one of them should resign to preserve the policy stated above. 3
Comia was hired by the company on February 5, 1997. She met Howard Comia, a co-employee,
whom she married on June 1, 2000. Ongsitco likewise reminded them that pursuant to company
policy, one must resign should they decide to get married. Comia resigned on June 30, 2000. 5
Estrella was hired on July 29, 1994. She met Luisito Zuñiga (Zuñiga), also a co-worker. Petitioners
stated that Zuñiga, a married man, got Estrella pregnant. The company allegedly could have
terminated her services due to immorality but she opted to resign on December 21, 1999. 6
The respondents each signed a Release and Confirmation Agreement. They stated therein that they
have no money and property accountabilities in the company and that they release the latter of any
claim or demand of whatever nature. 7
Respondents offer a different version of their dismissal. Simbol and Comia allege that they did not
resign voluntarily; they were compelled to resign in view of an illegal company policy. As to
respondent Estrella, she alleges that she had a relationship with co-worker Zuñiga who
misrepresented himself as a married but separated man. After he got her pregnant, she discovered
that he was not separated. Thus, she severed her relationship with him to avoid dismissal due to the
company policy. On November 30, 1999, she met an accident and was advised by the doctor at the
Orthopedic Hospital to recuperate for twenty-one (21) days. She returned to work on December 21,
1999 but she found out that her name was on-hold at the gate. She was denied entry. She was
directed to proceed to the personnel office where one of the staff handed her a memorandum. The
memorandum stated that she was being dismissed for immoral conduct. She refused to sign the
memorandum because she was on leave for twenty-one (21) days and has not been given a chance
to explain. The management asked her to write an explanation. However, after submission of the
explanation, she was nonetheless dismissed by the company. Due to her urgent need for money,
she later submitted a letter of resignation in exchange for her thirteenth month pay. 8
Respondents later filed a complaint for unfair labor practice, constructive dismissal, separation pay
and attorney’s fees. They averred that the aforementioned company policy is illegal and contravenes
Article 136 of the Labor Code. They also contended that they were dismissed due to their union
membership.
On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the complaint for lack of
merit, viz.:
[T]his company policy was decreed pursuant to what the respondent corporation perceived as
management prerogative. This management prerogative is quite broad and encompassing for it
covers hiring, work assignment, working method, time, place and manner of work, tools to be used,
processes to be followed, supervision of workers, working regulations, transfer of employees, work
supervision, lay-off of workers and the discipline, dismissal and recall of workers. Except as provided
for or limited by special law, an employer is free to regulate, according to his own discretion and
judgment all the aspects of employment.9 (Citations omitted.)
On appeal to the NLRC, the Commission affirmed the decision of the Labor Arbiter on January 11,
2002. 10
Respondents filed a Motion for Reconsideration but was denied by the NLRC in a Resolution 11 dated
August 8, 2002. They appealed to respondent court via Petition for Certiorari.
In its assailed Decision dated August 3, 2004, the Court of Appeals reversed the NLRC
decision, viz.:
WHEREFORE, premises considered, the May 31, 2002 (sic)12 Decision of the National Labor
Relations Commission is hereby REVERSED and SET ASIDE and a new one is entered as follows:
(1) Declaring illegal, the petitioners’ dismissal from employment and ordering private
respondents to reinstate petitioners to their former positions without loss of seniority rights
with full backwages from the time of their dismissal until actual reinstatement; and
(2) Ordering private respondents to pay petitioners attorney’s fees amounting to 10% of the
award and the cost of this suit.13
On appeal to this Court, petitioners contend that the Court of Appeals erred in holding that:
We affirm.
The 1987 Constitution15 states our policy towards the protection of labor under the following
provisions, viz.:
Article II, Section 18. The State affirms labor as a primary social economic force. It shall protect the
rights of workers and promote their welfare.
xxx
Article XIII, Sec. 3. The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law. They shall be
entitled to security of tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights and benefits as may be
provided by law.
The State shall promote the principle of shared responsibility between workers and employers,
recognizing the right of labor to its just share in the fruits of production and the right of enterprises to
reasonable returns on investments, and to expansion and growth.
The Civil Code likewise protects labor with the following provisions:
Art. 1700. The relation between capital and labor are not merely contractual. They are so impressed
with public interest that labor contracts must yield to the common good. Therefore, such contracts
are subject to the special laws on labor unions, collective bargaining, strikes and lockouts, closed
shop, wages, working conditions, hours of labor and similar subjects.
Art. 1702. In case of doubt, all labor legislation and all labor contracts shall be construed in favor of
the safety and decent living for the laborer.
The Labor Code is the most comprehensive piece of legislation protecting labor. The case at bar
involves Article 136 of the Labor Code which provides:
Art. 136. It shall be unlawful for an employer to require as a condition of employment or continuation
of employment that a woman employee shall not get married, or to stipulate expressly or tacitly that
upon getting married a woman employee shall be deemed resigned or separated, or to actually
dismiss, discharge, discriminate or otherwise prejudice a woman employee merely by reason of her
marriage.
Respondents submit that their dismissal violates the above provision. Petitioners allege that its
policy "may appear to be contrary to Article 136 of the Labor Code" but it assumes a new meaning if
read together with the first paragraph of the rule. The rule does not require the woman employee to
resign. The employee spouses have the right to choose who between them should resign. Further,
they are free to marry persons other than co-employees. Hence, it is not the marital status of the
employee, per se, that is being discriminated. It is only intended to carry out its no-employment-for-
relatives-within-the-third-degree-policy which is within the ambit of the prerogatives of
management.16
It is true that the policy of petitioners prohibiting close relatives from working in the same company
takes the nature of an anti-nepotism employment policy. Companies adopt these policies to prevent
the hiring of unqualified persons based on their status as a relative, rather than upon their
ability.17 These policies focus upon the potential employment problems arising from the perception of
favoritism exhibited towards relatives.
With more women entering the workforce, employers are also enacting employment policies
specifically prohibiting spouses from working for the same company. We note that two types of
employment policies involve spouses: policies banning only spouses from working in the same
company (no-spouse employment policies), and those banning all immediate family members,
including spouses, from working in the same company (anti-nepotism employment policies).18
Unlike in our jurisdiction where there is no express prohibition on marital discrimination, 19 there are
twenty state statutes20 in the United States prohibiting marital discrimination. Some state
courts21 have been confronted with the issue of whether no-spouse policies violate their laws
prohibiting both marital status and sex discrimination.
In challenging the anti-nepotism employment policies in the United States, complainants utilize two
theories of employment discrimination: the disparate treatment and the disparate impact. Under
the disparate treatment analysis, the plaintiff must prove that an employment policy is
discriminatory on its face. No-spouse employment policies requiring an employee of a particular
sex to either quit, transfer, or be fired are facially discriminatory. For example, an employment policy
prohibiting the employer from hiring wives of male employees, but not husbands of female
employees, is discriminatory on its face.22
On the other hand, to establish disparate impact, the complainants must prove that a facially
neutral policy has a disproportionate effect on a particular class. For example, although most
employment policies do not expressly indicate which spouse will be required to transfer or leave the
company, the policy often disproportionately affects one sex.23
The state courts’ rulings on the issue depend on their interpretation of the scope of marital status
discrimination within the meaning of their respective civil rights acts. Though they agree that the term
"marital status" encompasses discrimination based on a person's status as either married, single,
divorced, or widowed, they are divided on whether the term has a broader meaning. Thus, their
decisions vary.24
The courts narrowly25 interpreting marital status to refer only to a person's status as married, single,
divorced, or widowed reason that if the legislature intended a broader definition it would have either
chosen different language or specified its intent. They hold that the relevant inquiry is if one is
married rather than to whom one is married. They construe marital status discrimination to include
only whether a person is single, married, divorced, or widowed and not the "identity, occupation, and
place of employment of one's spouse." These courts have upheld the questioned policies and ruled
that they did not violate the marital status discrimination provision of their respective state statutes.
The courts that have broadly26 construed the term "marital status" rule that it encompassed the
identity, occupation and employment of one's spouse. They strike down the no-spouse employment
policies based on the broad legislative intent of the state statute. They reason that the no-spouse
employment policy violate the marital status provision because it arbitrarily discriminates against all
spouses of present employees without regard to the actual effect on the individual's qualifications or
work performance.27 These courts also find the no-spouse employment policy invalid for failure of the
employer to present any evidence of business necessity other than the general perception that
spouses in the same workplace might adversely affect the business. 28 They hold that the absence of
such a bona fide occupational qualification29 invalidates a rule denying employment to one
spouse due to the current employment of the other spouse in the same office. 30 Thus, they rule that
unless the employer can prove that the reasonable demands of the business require a distinction
based on marital status and there is no better available or acceptable policy which would better
accomplish the business purpose, an employer may not discriminate against an employee based on
the identity of the employee’s spouse. 31 This is known as the bona fide occupational qualification
exception.
We note that since the finding of a bona fide occupational qualification justifies an employer’s no-
spouse rule, the exception is interpreted strictly and narrowly by these state courts. There must be a
compelling business necessity for which no alternative exists other than the discriminatory
practice.32 To justify a bona fide occupational qualification, the employer must prove two
factors: (1) that the employment qualification is reasonably related to the essential operation
of the job involved; and, (2) that there is a factual basis for believing that all or substantially
all persons meeting the qualification would be unable to properly perform the duties of the
job.33
The concept of a bona fide occupational qualification is not foreign in our jurisdiction. We employ the
standard of reasonableness of the company policy which is parallel to the bona fide occupational
qualification requirement. In the recent case of Duncan Association of Detailman-PTGWO and
Pedro Tecson v. Glaxo Wellcome Philippines, Inc.,34 we passed on the validity of the policy of a
pharmaceutical company prohibiting its employees from marrying employees of any competitor company. We
held that Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other
confidential programs and information from competitors. We considered the prohibition against personal or
marital relationships with employees of competitor companies upon Glaxo’s employees reasonable under the
circumstances because relationships of that nature might compromise the interests of Glaxo. In laying down
the assailed company policy, we recognized that Glaxo only aims to protect its interests against the possibility
that a competitor company will gain access to its secrets and procedures. 35
The requirement that a company policy must be reasonable under the circumstances to qualify as a
valid exercise of management prerogative was also at issue in the 1997 case of Philippine
Telegraph and Telephone Company v. NLRC.36 In said case, the employee was dismissed in
violation of petitioner’s policy of disqualifying from work any woman worker who contracts marriage.
We held that the company policy violates the right against discrimination afforded all women workers
under Article 136 of the Labor Code, but established a permissible exception, viz.:
[A] requirement that a woman employee must remain unmarried could be justified as a "bona fide
occupational qualification," or BFOQ, where the particular requirements of the job would justify the
same, but not on the ground of a general principle, such as the desirability of spreading work in the
workplace. A requirement of that nature would be valid provided it reflects an inherent
quality reasonably necessary for satisfactory job performance.37 (Emphases supplied.)
Petitioners’ sole contention that "the company did not just want to have two (2) or more of its
employees related between the third degree by affinity and/or consanguinity" 38 is lame. That the
second paragraph was meant to give teeth to the first paragraph of the questioned rule 39 is evidently
not the valid reasonable business necessity required by the law.
It is significant to note that in the case at bar, respondents were hired after they were found fit for the
job, but were asked to resign when they married a co-employee. Petitioners failed to show how the
marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then an employee of the
Repacking Section, could be detrimental to its business operations. Neither did petitioners explain
how this detriment will happen in the case of Wilfreda Comia, then a Production Helper in the
Selecting Department, who married Howard Comia, then a helper in the cutter-machine. The policy
is premised on the mere fear that employees married to each other will be less efficient. If we uphold
the questioned rule without valid justification, the employer can create policies based on an
unproven presumption of a perceived danger at the expense of an employee’s right to security of
tenure.
Petitioners contend that their policy will apply only when one employee marries a co-employee, but
they are free to marry persons other than co-employees. The questioned policy may not facially
violate Article 136 of the Labor Code but it creates a disproportionate effect and under the disparate
impact theory, the only way it could pass judicial scrutiny is a showing that it is reasonable despite
the discriminatory, albeit disproportionate, effect. The failure of petitioners to prove a legitimate
business concern in imposing the questioned policy cannot prejudice the employee’s right to be free
from arbitrary discrimination based upon stereotypes of married persons working together in one
company.40
Lastly, the absence of a statute expressly prohibiting marital discrimination in our jurisdiction cannot
benefit the petitioners. The protection given to labor in our jurisdiction is vast and extensive that we
cannot prudently draw inferences from the legislature’s silence 41 that married persons are not
protected under our Constitution and declare valid a policy based on a prejudice or stereotype. Thus,
for failure of petitioners to present undisputed proof of a reasonable business necessity, we rule that
the questioned policy is an invalid exercise of management prerogative. Corollarily, the issue as to
whether respondents Simbol and Comia resigned voluntarily has become moot and academic.
As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling on the singular fact that
her resignation letter was written in her own handwriting. Both ruled that her resignation was
voluntary and thus valid. The respondent court failed to categorically rule whether Estrella voluntarily
resigned but ordered that she be reinstated along with Simbol and Comia.
Estrella claims that she was pressured to submit a resignation letter because she was in dire need of
money. We examined the records of the case and find Estrella’s contention to be more in accord
with the evidence. While findings of fact by administrative tribunals like the NLRC are generally given
not only respect but, at times, finality, this rule admits of exceptions, 42 as in the case at bar.
Estrella avers that she went back to work on December 21, 1999 but was dismissed due to her
alleged immoral conduct. At first, she did not want to sign the termination papers but she was forced
to tender her resignation letter in exchange for her thirteenth month pay.
The contention of petitioners that Estrella was pressured to resign because she got impregnated by
a married man and she could not stand being looked upon or talked about as immoral 43 is
incredulous. If she really wanted to avoid embarrassment and humiliation, she would not have gone
back to work at all. Nor would she have filed a suit for illegal dismissal and pleaded for
reinstatement. We have held that in voluntary resignation, the employee is compelled by personal
reason(s) to dissociate himself from employment. It is done with the intention of relinquishing an
office, accompanied by the act of abandonment. 44 Thus, it is illogical for Estrella to resign and then
file a complaint for illegal dismissal. Given the lack of sufficient evidence on the part of petitioners
that the resignation was voluntary, Estrella’s dismissal is declared illegal.
IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. SP No. 73477 dated August
3, 2004 is AFFIRMED. 1avvphil.net
SO ORDERED.
2nd G.R. No. 162994 September 17, 2004 DUNCAN ASSOCIATION OF DETAILMAN-PTGWO And PEDRO A.
TECSON, Vs. GLAXO WELLCOME PHILIPPINES, INC., TINGA, J.:
RESOLUTION
TINGA, J.:
Confronting the Court in this petition is a novel question, with constitutional overtones, involving the
validity of the policy of a pharmaceutical company prohibiting its employees from marrying
employees of any competitor company.
This is a Petition for Review on Certiorari assailing the Decision1 dated May 19, 2003 and
the Resolution dated March 26, 2004 of the Court of Appeals in CA-G.R. SP No. 62434. 2
Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome Philippines, Inc.
(Glaxo) as medical representative on October 24, 1995, after Tecson had undergone training and
orientation.
Thereafter, Tecson signed a contract of employment which stipulates, among others, that he agrees
to study and abide by existing company rules; to disclose to management any existing or future
relationship by consanguinity or affinity with co-employees or employees of competing drug
companies and should management find that such relationship poses a possible conflict of interest,
to resign from the company.
The Employee Code of Conduct of Glaxo similarly provides that an employee is expected to inform
management of any existing or future relationship by consanguinity or affinity with co-employees or
employees of competing drug companies. If management perceives a conflict of interest or a
potential conflict between such relationship and the employee’s employment with the company, the
management and the employee will explore the possibility of a "transfer to another department in a
non-counterchecking position" or preparation for employment outside the company after six months.
Tecson was initially assigned to market Glaxo’s products in the Camarines Sur-Camarines Norte
sales area.
Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of Astra
Pharmaceuticals3 (Astra), a competitor of Glaxo. Bettsy was Astra’s Branch Coordinator in Albay.
She supervised the district managers and medical representatives of her company and prepared
marketing strategies for Astra in that area.
Even before they got married, Tecson received several reminders from his District Manager
regarding the conflict of interest which his relationship with Bettsy might engender. Still, love
prevailed, and Tecson married Bettsy in September 1998.
In January 1999, Tecson’s superiors informed him that his marriage to Bettsy gave rise to a conflict
of interest. Tecson’s superiors reminded him that he and Bettsy should decide which one of them
would resign from their jobs, although they told him that they wanted to retain him as much as
possible because he was performing his job well.
Tecson requested for time to comply with the company policy against entering into a relationship
with an employee of a competitor company. He explained that Astra, Bettsy’s employer, was
planning to merge with Zeneca, another drug company; and Bettsy was planning to avail of the
redundancy package to be offered by Astra. With Bettsy’s separation from her company, the
potential conflict of interest would be eliminated. At the same time, they would be able to avail of the
attractive redundancy package from Astra.
In August 1999, Tecson again requested for more time resolve the problem. In September 1999,
Tecson applied for a transfer in Glaxo’s milk division, thinking that since Astra did not have a milk
division, the potential conflict of interest would be eliminated. His application was denied in view of
Glaxo’s "least-movement-possible" policy.
In November 1999, Glaxo transferred Tecson to the Butuan City-Surigao City-Agusan del Sur sales
area. Tecson asked Glaxo to reconsider its decision, but his request was denied.
Tecson sought Glaxo’s reconsideration regarding his transfer and brought the matter to Glaxo’s
Grievance Committee. Glaxo, however, remained firm in its decision and gave Tescon until February
7, 2000 to comply with the transfer order. Tecson defied the transfer order and continued acting as
medical representative in the Camarines Sur-Camarines Norte sales area.
During the pendency of the grievance proceedings, Tecson was paid his salary, but was not issued
samples of products which were competing with similar products manufactured by Astra. He was
also not included in product conferences regarding such products.
Because the parties failed to resolve the issue at the grievance machinery level, they submitted the
matter for voluntary arbitration. Glaxo offered Tecson a separation pay of one-half (½) month pay for
every year of service, or a total of ₱50,000.00 but he declined the offer. On November 15, 2000, the
National Conciliation and Mediation Board (NCMB) rendered its Decision declaring as valid Glaxo’s
policy on relationships between its employees and persons employed with competitor companies,
and affirming Glaxo’s right to transfer Tecson to another sales territory.
Aggrieved, Tecson filed a Petition for Review with the Court of Appeals assailing the
NCMB Decision.
On May 19, 2003, the Court of Appeals promulgated its Decision denying the Petition for Review on
the ground that the NCMB did not err in rendering its Decision. The appellate court held that Glaxo’s
policy prohibiting its employees from having personal relationships with employees of competitor
companies is a valid exercise of its management prerogatives. 4
Tecson filed a Motion for Reconsideration of the appellate court’s Decision, but the motion was
denied by the appellate court in its Resolution dated March 26, 2004.5
Petitioners filed the instant petition, arguing therein that (i) the Court of Appeals erred in affirming the
NCMB’s finding that the Glaxo’s policy prohibiting its employees from marrying an employee of a
competitor company is valid; and (ii) the Court of Appeals also erred in not finding that Tecson was
constructively dismissed when he was transferred to a new sales territory, and deprived of the
opportunity to attend products seminars and training sessions. 6
Petitioners contend that Glaxo’s policy against employees marrying employees of competitor
companies violates the equal protection clause of the Constitution because it creates invalid
distinctions among employees on account only of marriage. They claim that the policy restricts the
employees’ right to marry.7
They also argue that Tecson was constructively dismissed as shown by the following circumstances:
(1) he was transferred from the Camarines Sur-Camarines Norte sales area to the Butuan-Surigao-
Agusan sales area, (2) he suffered a diminution in pay, (3) he was excluded from attending seminars
and training sessions for medical representatives, and (4) he was prohibited from promoting
respondent’s products which were competing with Astra’s products. 8
In its Comment on the petition, Glaxo argues that the company policy prohibiting its employees from
having a relationship with and/or marrying an employee of a competitor company is a valid exercise
of its management prerogatives and does not violate the equal protection clause; and that Tecson’s
reassignment from the Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao City
and Agusan del Sur sales area does not amount to constructive dismissal. 9
Glaxo insists that as a company engaged in the promotion and sale of pharmaceutical products, it
has a genuine interest in ensuring that its employees avoid any activity, relationship or interest that
may conflict with their responsibilities to the company. Thus, it expects its employees to avoid having
personal or family interests in any competitor company which may influence their actions and
decisions and consequently deprive Glaxo of legitimate profits. The policy is also aimed at
preventing a competitor company from gaining access to its secrets, procedures and policies. 10
It likewise asserts that the policy does not prohibit marriage per se but only proscribes existing or
future relationships with employees of competitor companies, and is therefore not violative of the
equal protection clause. It maintains that considering the nature of its business, the prohibition is
based on valid grounds.11
According to Glaxo, Tecson’s marriage to Bettsy, an employee of Astra, posed a real and potential
conflict of interest. Astra’s products were in direct competition with 67% of the products sold by
Glaxo. Hence, Glaxo’s enforcement of the foregoing policy in Tecson’s case was a valid exercise of
its management prerogatives.12 In any case, Tecson was given several months to remedy the
situation, and was even encouraged not to resign but to ask his wife to resign form Astra instead. 13
Glaxo also points out that Tecson can no longer question the assailed company policy because
when he signed his contract of employment, he was aware that such policy was stipulated therein. In
said contract, he also agreed to resign from respondent if the management finds that his relationship
with an employee of a competitor company would be detrimental to the interests of Glaxo. 14
Glaxo likewise insists that Tecson’s reassignment to another sales area and his exclusion from
seminars regarding respondent’s new products did not amount to constructive dismissal.
It claims that in view of Tecson’s refusal to resign, he was relocated from the Camarines Sur-
Camarines Norte sales area to the Butuan City-Surigao City and Agusan del Sur sales area. Glaxo
asserts that in effecting the reassignment, it also considered the welfare of Tecson’s family. Since
Tecson’s hometown was in Agusan del Sur and his wife traces her roots to Butuan City, Glaxo
assumed that his transfer from the Bicol region to the Butuan City sales area would be favorable to
him and his family as he would be relocating to a familiar territory and minimizing his travel
expenses.15
In addition, Glaxo avers that Tecson’s exclusion from the seminar concerning the new anti-asthma
drug was due to the fact that said product was in direct competition with a drug which was soon to
be sold by Astra, and hence, would pose a potential conflict of interest for him. Lastly, the delay in
Tecson’s receipt of his sales paraphernalia was due to the mix-up created by his refusal to transfer
to the Butuan City sales area (his paraphernalia was delivered to his new sales area instead of Naga
City because the supplier thought he already transferred to Butuan). 16
The Court is tasked to resolve the following issues: (1) Whether the Court of Appeals erred in ruling
that Glaxo’s policy against its employees marrying employees from competitor companies is valid,
and in not holding that said policy violates the equal protection clause of the Constitution; (2)
Whether Tecson was constructively dismissed.
The stipulation in Tecson’s contract of employment with Glaxo being questioned by petitioners
provides:
10. You agree to disclose to management any existing or future relationship you may have,
either by consanguinity or affinity with co-employees or employees of competing drug
companies. Should it pose a possible conflict of interest in management discretion, you
agree to resign voluntarily from the Company as a matter of Company policy.
…17
The same contract also stipulates that Tescon agrees to abide by the existing company rules of
Glaxo, and to study and become acquainted with such policies. 18 In this regard, the Employee
Handbook of Glaxo expressly informs its employees of its rules regarding conflict of interest:
1. Conflict of Interest
Employees should avoid any activity, investment relationship, or interest that may run
counter to the responsibilities which they owe Glaxo Wellcome.
c. To avoid outside employment or other interests for income which would impair
their effective job performance.
d. To consult with Management on such activities or relationships that may lead to
conflict of interest.
Employees with existing or future relationships either by consanguinity or affinity with co-
employees of competing drug companies are expected to disclose such relationship to the
Management. If management perceives a conflict or potential conflict of interest, every effort
shall be made, together by management and the employee, to arrive at a solution within six
(6) months, either by transfer to another department in a non-counter checking position, or
by career preparation toward outside employment after Glaxo Wellcome. Employees must
be prepared for possible resignation within six (6) months, if no other solution is feasible. 19
No reversible error can be ascribed to the Court of Appeals when it ruled that Glaxo’s policy
prohibiting an employee from having a relationship with an employee of a competitor company is a
valid exercise of management prerogative.
Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other
confidential programs and information from competitors, especially so that it and Astra are rival
companies in the highly competitive pharmaceutical industry.
The prohibition against personal or marital relationships with employees of competitor companies
upon Glaxo’s employees is reasonable under the circumstances because relationships of that nature
might compromise the interests of the company. In laying down the assailed company policy, Glaxo
only aims to protect its interests against the possibility that a competitor company will gain access to
its secrets and procedures.
That Glaxo possesses the right to protect its economic interests cannot be denied. No less than the
Constitution recognizes the right of enterprises to adopt and enforce such a policy to protect its right
to reasonable returns on investments and to expansion and growth. 20 Indeed, while our laws
endeavor to give life to the constitutional policy on social justice and the protection of labor, it does
not mean that every labor dispute will be decided in favor of the workers. The law also recognizes
that management has rights which are also entitled to respect and enforcement in the interest of fair
play.21
The challenged company policy does not violate the equal protection clause of the Constitution as
petitioners erroneously suggest. It is a settled principle that the commands of the equal protection
clause are addressed only to the state or those acting under color of its authority. 24 Corollarily, it has
been held in a long array of U.S. Supreme Court decisions that the equal protection clause erects no
shield against merely private conduct, however, discriminatory or wrongful. 25 The only exception
occurs when the state29 in any of its manifestations or actions has been found to have become
entwined or involved in the wrongful private conduct. 27 Obviously, however, the exception is not
present in this case. Significantly, the company actually enforced the policy after repeated requests
to the employee to comply with the policy. Indeed, the application of the policy was made in an
impartial and even-handed manner, with due regard for the lot of the employee.
In any event, from the wordings of the contractual provision and the policy in its employee handbook,
it is clear that Glaxo does not impose an absolute prohibition against relationships between its
employees and those of competitor companies. Its employees are free to cultivate relationships with
and marry persons of their own choosing. What the company merely seeks to avoid is a conflict of
interest between the employee and the company that may arise out of such relationships. As
succinctly explained by the appellate court, thus:
The policy being questioned is not a policy against marriage. An employee of the company
remains free to marry anyone of his or her choosing. The policy is not aimed at restricting a
personal prerogative that belongs only to the individual. However, an employee’s personal
decision does not detract the employer from exercising management prerogatives to ensure
maximum profit and business success. . .28
The Court of Appeals also correctly noted that the assailed company policy which forms part of
respondent’s Employee Code of Conduct and of its contracts with its employees, such as that signed
by Tescon, was made known to him prior to his employment. Tecson, therefore, was aware of that
restriction when he signed his employment contract and when he entered into a relationship with
Bettsy. Since Tecson knowingly and voluntarily entered into a contract of employment with Glaxo,
the stipulations therein have the force of law between them and, thus, should be complied with in
good faith."29 He is therefore estopped from questioning said policy.
The Court finds no merit in petitioners’ contention that Tescon was constructively dismissed when he
was transferred from the Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao
City-Agusan del Sur sales area, and when he was excluded from attending the company’s seminar
on new products which were directly competing with similar products manufactured by Astra.
Constructive dismissal is defined as a quitting, an involuntary resignation resorted to when continued
employment becomes impossible, unreasonable, or unlikely; when there is a demotion in rank or
diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes
unbearable to the employee.30 None of these conditions are present in the instant case. The record
does not show that Tescon was demoted or unduly discriminated upon by reason of such transfer.
As found by the appellate court, Glaxo properly exercised its management prerogative in reassigning
Tecson to the Butuan City sales area:
. . . In this case, petitioner’s transfer to another place of assignment was merely in keeping
with the policy of the company in avoidance of conflict of interest, and thus valid…Note that
[Tecson’s] wife holds a sensitive supervisory position as Branch Coordinator in her
employer-company which requires her to work in close coordination with District Managers
and Medical Representatives. Her duties include monitoring sales of Astra products,
conducting sales drives, establishing and furthering relationship with customers, collection,
monitoring and managing Astra’s inventory…she therefore takes an active participation in
the market war characterized as it is by stiff competition among pharmaceutical companies.
Moreover, and this is significant, petitioner’s sales territory covers Camarines Sur and
Camarines Norte while his wife is supervising a branch of her employer in Albay. The
proximity of their areas of responsibility, all in the same Bicol Region, renders the conflict of
interest not only possible, but actual, as learning by one spouse of the other’s market
strategies in the region would be inevitable. [Management’s] appreciation of a conflict of
interest is therefore not merely illusory and wanting in factual basis…31
In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission, 32 which involved a
complaint filed by a medical representative against his employer drug company for illegal dismissal
for allegedly terminating his employment when he refused to accept his reassignment to a new area,
the Court upheld the right of the drug company to transfer or reassign its employee in accordance
with its operational demands and requirements. The ruling of the Court therein, quoted hereunder,
also finds application in the instant case:
As noted earlier, the challenged policy has been implemented by Glaxo impartially and
disinterestedly for a long period of time. In the case at bar, the record shows that Glaxo gave Tecson
several chances to eliminate the conflict of interest brought about by his relationship with Bettsy.
When their relationship was still in its initial stage, Tecson’s supervisors at Glaxo constantly
reminded him about its effects on his employment with the company and on the company’s interests.
After Tecson married Bettsy, Glaxo gave him time to resolve the conflict by either resigning from the
company or asking his wife to resign from Astra. Glaxo even expressed its desire to retain Tecson in
its employ because of his satisfactory performance and suggested that he ask Bettsy to resign from
her company instead. Glaxo likewise acceded to his repeated requests for more time to resolve the
conflict of interest. When the problem could not be resolved after several years of waiting, Glaxo was
constrained to reassign Tecson to a sales area different from that handled by his wife for Astra.
Notably, the Court did not terminate Tecson from employment but only reassigned him to another
area where his home province, Agusan del Sur, was included. In effecting Tecson’s transfer, Glaxo
even considered the welfare of Tecson’s family. Clearly, the foregoing dispels any suspicion of
unfairness and bad faith on the part of Glaxo.34
SO ORDERED.
FIRST DIVISION July 5, 2016 G.R. No. 220978 CENTURY PROPERTIES, INC., Vs EDWIN J. BABIANO And
EMMA B. CONCEPCION, PERLAS-BERNABE, J.:
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari are the Decision dated April 8, 2015 and the
1 2
Resolution dated October 12, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 132953, which
3
affirmed with modification the Decision dated June 25, 2013 and the Resolution dated October 16,
4 5
2013 of the National Labor Relations Commission (NLRC) in NLRC LAC No. 05-001615-12, and
ordered petitioner Century Properties, Inc. (CPI) to pay respondents Edwin J. Babiano (Babiano)
and Emma B. Concepcion (Concepcion; collectively, respondents) unpaid commissions in the
amounts of P889,932.42 and P591,953.05, respectively.
The Facts
On October 2, 2002, Babiano was hired by CPI as Director of Sales, and was eventually appointed
6
as Vice President for Sales effective September 1, 2007. As CPI' s Vice President for Sales,
Babiano was remunerated with, inter alia, the following benefits: (a) monthly salary of
P70,000.00; (b) allowance of P50,000.00; and (c) 0.5% override commission for completed sales.
His employment contract also contained a "Confidentiality of Documents and Non:-Compete
7
Clause" which, among others, barred him from disclosing confidential information, and from working
8
in any business enterprise that is in direct competition with CPI "while [he is] employed and for a
period of one year from date of resignation or termination from [CPI]." Should Babiano breach any of
the terms thereof, his "forms of compensation, including commissions and incentives will be
forfeited." 9
During the same period, Concepcion was initially hired as Sales Agent by CPI and was
eventually promoted as Project Director on September 1, 2007. As such, she signed an
10 11
employment agreement, denominated as "Contract of Agency for Project Director" which provided,
12
among others, that she would directly report to Babiano, and receive a monthly subsidy of
P60,000.00, 0.5% commission, and cash incentives. On March 31, 2008, Concepcion executed a
13
similar contract anew with CPI in which she would receive a monthly subsidy of P50,000.00, 0.5%
14
commission, and cash incentives as per company policy. Notably, it was stipulated in both contracts
that no employer-employee relationship exists between Concepcion and CPI. 15
After receiving reports that Babiano provided a competitor with information regarding CPI's
marketing strategies, spread false information regarding CPI and its projects, recruited CPI's
personnel to join the competitor, and for being absent without official leave (AWOL) for five (5) days,
CPI, through its Executive Vice President for Marketing and Development, Jose Marco R. Antonio
(Antonio), sent Babiano a Notice to Explain on February 23, 2009 directing him to explain why he
16
should not be charged with disloyalty, conflict of interest, and breach of trust and confidence for his
actuations. 17
On February 25, 2009, Babiano tendered his resignation and revealed that he had been accepted
18
as Vice President of First Global BYO Development Corporation (First Global), a competitor of
CPI. On March 3, 2009, Babiano was served a Notice of Termination for: (a) incurring
19 20
On the other hand, Concepcion resigned as CPI's Project Director through a letter dated February
22
On August 8, 2011, respondents filed a complaint for non-payment of commissions and damages
23
against CPI and Antonio before the NLRC, docketed as NLRC Case No. NCR-08-12029-11,
claiming that their repeated demands for the payment and release of their commissions remained
unheeded. 24
For its part, CPI maintained that Babiano is merely its agent tasked with selling its projects.
25
Nonetheless, he was afforded due process in the termination of his employment which was based
on just causes. It also claimed to have validly withheld Babiano' s commissions, considering that
26
they were deemed forfeited for violating the "Confidentiality of Documents and Non-Compete
Clause." On Concepcion's money claims, CPI asserted that the NLRC had no jurisdiction to hear
27
the same because there was no employer-employee relations between them, and thus, she should
have litigated the same in an ordinary civil action. 28
The LA Ruling
In a Decision dated March 19, 2012, the Labor Arbiter (LA) ruled in CPI's favor and, accordingly,
29
dismissed the complaint for lack of merit. The LA found that: (a) Babiano's acts of providing
30
information on CPI’s marketing strategies to the competitor and spreading false information about
CPI and its projects are blatant violations of the "Confidentiality of Documents and Non-Compete
Clause" of his employment contract, thus, resulting in the forfeiture of his unpaid commissions in
accordance with the same clause; and (b) it had no jurisdiction over Concepcion's money claim as
31
she was not an employee but a mere agent of CPI, as clearly stipulated in her engagement contract
with the latter. 32
In a Decision dated June 25, 2013, the NLRC reversed and set aside the LA ruling, and entered a
34
new one ordering CPI to pay Babiano and Concepcion the amounts of P685,211.76 and
P470,754.62, respectively, representing their commissions from August 9, 2008 to August 8, 2011,
as well as 10% attorney's fees of the total monetary awards. 35
While the NLRC initially concurred with the LA that Babiano's acts constituted just cause which
would warrant the termination of his employment from CPI, it, however, ruled that the forfeiture of all
earned commissions ofBabiano under the "Confidentiality of Documents and Non-Compete Clause"
is confiscatory and unreasonable and hence, contrary to law and public policy. In this light, the
36
NLRC held that CPI could not invoke such clause to avoid the payment of Babiano's commissions
since he had already earned those monetary benefits and, thus, should have been released to him.
However, the NLRC limited the grant of the money claims in light of Article 291 (now Article 306) of
37
the Labor Code which provides for a prescriptive period of three (3) years. Consequently,· the NLRC
awarded unpaid commissions only from August 9, 2008 to August 8, 2011 - i.e., which was the date
when the complaint was filed. Meanwhile, contrary to the LA's finding, the NLRC ruled that
38
Concepcion was CPI's employee, considering that CPI: (a) repeatedly hired and promoted her since
2002; (b) paid her wages despite referring to it as "subsidy"; and (c) exercised the power of
dismissal and control over her. Lastly, the NLRC granted respondents' claim for attorney's fees
39
since they were forced to litigate and incurred expenses for the protection of their rights and
interests.
40
Respondents did not assail the NLRC findings. In contrast, only CPI moved for
reconsideration, which the NLRC denied in a Resolution dated October 16, 2013. Aggrieved, CPI
41 42
The CA Ruling
In a Decision dated April 8, 2015, the CA affirmed the NLRC ruling with modification increasing the
44
award of unpaid commissions to Babiano and Concepcion in the amounts of P889,932.42 and
P591,953.05, respectively, and imposing interest of six percent (6%) per annum on all monetary
awards from the finality of its decision until fully paid. 45
The CA held that Babiano properly instituted his claim for unpaid commissions before the labor
tribunals as it is a money claim arising from an employer-employee relationship with CPI. In this
relation, the CA opined that CPI cannot withhold such unpaid commissions on the ground of
Babiano's alleged breach of the "Confidentiality of Documents and Non-Compete Clause" integrated
in the latter's employment contract, considering that such clause referred to acts done after the
cessation of the employer-employee relationship or to the "post-employment" relations of the parties.
Thus, any such supposed breach thereof is a civil law dispute that is best resolved by the regular
courts and not by labor tribunals. 46
Similarly, the CA echoed the NLRC's finding that there exists an employer-employee relationship
between Concepcion and CPI, because the latter exercised control over the performance of her
duties as Project Director which is indicative of an employer-employee relationship. Necessarily
therefore, CPI also exercised control over Concepcion's duties in recruiting, training, and developing
directors of sales because she was supervised by Babiano in the performance of her functions. The
CA likewise observed the presence of critical factors which were indicative of an employer-employee
relationship with CPI, such as: (a) Concepcion's receipt of a monthly salary from CPI; and (b) that
she performed tasks besides selling CPI properties. To add, the title of her contract which was
referred to as "Contract of Agency for Project Director" was not binding and conclusive, considering
that the characterization of the juridical relationship is essentially a matter of law that is for the courts
to determine, and not the parties thereof. Moreover, the totality of evidence sustains a finding of
employer-employee relationship between CPI and Concepcion. 47
Further, the CA held that despite the NLRC's proper application of the three (3)-year prescriptive
period under Article 291 of the Labor Code, it nonetheless failed to include all of respondents'
earned commissions during that time - i.e., August 9, 2008 to August 8, 2011 - thus, necessitating
the increase in award of unpaid commissions in respondents' favor. 48
Undaunted, CPI sought for reconsideration, which was, however, denied in a Resolution dated
49 50
The core issue for the Court's resolution is whether or not the CA erred in denying CPI's petition
for certiorari, thereby holding it liable for the unpaid commissions of respondents.
The Court's Ruling
I.
Article 1370 of the Civil Code provides that "[i]f the terms of a contract are clear and leave no doubt
upon the intention of the contracting parties, the literal meaning of its stipulations shall
control." In Norton Resources and Development Corporation v. All Asia Bank Corporation, the
51 52
Court had the opportunity to thoroughly discuss the said rule as follows:
The rule is that where the language of a contract is plain and unambiguous, its meaning
should be determined without reference to extrinsic facts or aids. The intention of the parties
must be gathered from that language, and from that language alone. Stated differently, where the
language of a written contract is clear and unambiguous, the contract must be taken to mean
that which, on its face, it purports to mean, unless some good reason can be assigned to
show that the words should be understood in a different sense. Courts cannot make for the
parties better or more equitable agreements than they themselves have been satisfied to make, or
rewrite contracts because they operate harshly or inequitably as to one of the parties, or alter them
for the benefit of one party and to the detriment of the other, or by construction, relieve one of the
parties from the terms which he voluntarily consented to, or impose on him those which he did
not. (Emphases and underscoring supplied)
53
Thus, in the interpretation of contracts, the Court must first determine whether a provision or
stipulation therein is ambiguous. Absent any ambiguity, the provision on its face will be read as it is
written and treated as the binding law of the parties to the contract.54
In the case at bar, CPI primarily invoked the "Confidentiality of Documents and Non-Compete
Clause" found in Babiano's employment contract to justify the forfeiture of his commissions, viz.:
55
All records and documents of the company and all information pertaining to its business or affairs or
that of its affiliated companies are confidential and no unauthorized disclosure or reproduction or the
same will be made by you any time during or after your employment.
And in order to ensure strict compliance herewith, you shall not work for whatsoever
capacity, either as an employee, agent or consultant with any person whose business is in
direct competition with the company while you are employed and for a period of one year
from date of resignation or termination from the company.
In the event the undersigned breaches any term of this contract, the undersigned agrees and
acknowledges that damages may not be an adequate remedy and that in addition to any other
remedies available to the Company at law or in equity, the Company is entitled to enforce its rights
hereunder by way of injunction, restraining order or other relief to enjoin any breach or default of this
contract.
The undersigned agrees to pay all costs, expenses and attorney's fees incurred by the Company in
connection with the enforcement of the obligations of the undersigned. The undersigned also agrees
to .pay the Company all profits, revenues and income or benefits derived by or accruing to the
undersigned resulting from the undersigned's breach of the obligations hereunder. This Agreement
shall be binding upon the undersigned, all employees, agents, officers, directors, shareholders,
partners and representatives of the undersigned and all heirs, successors and assigns of the
foregoing.
Finally, if undersigned breaches any terms of this contract, forms of compensation including
commissions and incentives will be forfeited. (Emphases and underscoring supplied)
56
Verily, the foregoing clause is not only clear and unambiguous in stating that Babiano is barred to
"work for whatsoever capacity x x x with any person whose business is in direct competition with
[CPI] while [he is] employed and for a period of one year from date of [his] resignation or termination
from the company," it also expressly provided in no uncertain terms that should Babiano "[breach]
any term of [the employment contract], forms of compensation including commissions and incentives
will be forfeited." Here, the contracting parties - namely Babiano on one side, and CPI as
represented by its COO-Vertical, John Victor R. Antonio, and Director for Planning and Controls,
Jose Carlo R. Antonio, on the other - indisputably wanted the said clause to be effective even during
the existence of the employer-employee relationship between Babiano and CPI, thereby indicating
their intention to be bound by such clause by affixing their respective signatures to the employment
contract. More significantly, as CPI's Vice President for Sales, Babiano held a highly sensitive and
confidential managerial position as he "was tasked, among others, to guarantee the achievement of
agreed sales targets for a project and to ensure that his team has a qualified and competent
manpower resources by conducting recruitment activities, training sessions, sales rallies,
motivational activities, and evaluation programs." Hence, to allow Babiano to freely move to direct
57
competitors during and soon after his employment with CPI would make the latter's trade secrets
vulnerable to exposure, especially in a highly competitive marketing environment. As such, it is only
reasonable that CPI and Babiano agree on such stipulation in the latter's employment contract in
order to afford a fair and reasonable protection to CPI. Indubitably, obligations arising from
58
contracts, including employment contracts, have the force of law between the contracting parties and
should be complied with in good faith. Corollary thereto, parties are bound by the stipulations,
59
clauses, terms, and conditions they have agreed to, provided that these stipulations, clauses, terms,
and conditions are not contrary to law, morals, public order or public policy, as in this case.
60
Therefore, the CA erred in limiting the "Confidentiality of Documents and Non-Compete Clause" only
to acts done after the cessation of the employer-employee relationship or to the "post-employment"
relations of the parties. As clearly stipulated, the parties wanted to apply said clause during the
pendency of Babiano' s employment, and CPI correctly invoked the same before the labor tribunals
to resist the farmer's claim for unpaid commissions on account of his breach of the said clause while
the employer-employee relationship between them still subsisted. Hence, there is now a need to
determine whether or not Babiano breached said clause while employed by CPI, which would then
resolve the issue of his entitlement to his unpaid commissions.
A judicious review of the records reveals that in his resignation letter dated February 25, 2009,
61
Babiano categorically admitted to CPI Chairman Jose Antonio that on February 12, 2009, he sought
employment from First Global, and five (5) days later, was admitted thereto as vice president. From
the foregoing, it is evidently clear that when he sought and eventually accepted the said position with
First Global, he was still employed by CPI as he has not formally resigned at that time. Irrefragably,
this is a glaring violation of the "Confidentiality of Documents and Non-Compete Clause" in his
employment contract with CPI, thus, justifying the forfeiture of his unpaid commissions.
II.
Anent the nature of Concepcion' s engagement, based on case law, the presence of the following
elements evince the existence of an employer-employee relationship: (a) the power to hire, i.e., the
selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal;
and (d) the employer's power to control the employee's conduct, or the so called "control test." The
control test is commonly regarded as the most important indicator of the presence or absence of an
employer-employee relationship. Under this test, an employer-employee relationship exists where
62
the person for whom the services are performed reserves the right to control not only the end
achieved, but also the manner and means to be used in reaching that end. 63
Guided by these parameters, the Court finds that Concepcion was an employee of CPI considering
that: (a) CPI continuously hired and promoted Concepcion from October 2002 until her resignation
on February 23, 2009, thus, showing that CPI exercised the power of selection and engagement
64
over her person and that she performed functions that were necessary and desirable to the business
of CPI; (b) the monthly "subsidy" and cash incentives that Concepcion was receiving from CPI are
actually remuneration in the concept of wages as it was regularly given to her on a monthly basis
without any qualification, save for the "complete submission of documents on what is a sale
policy"; (c) CPI had the power to discipline or even dismiss Concepcion as her engagement
65
contract with CPI expressly conferred upon the latter "the right to discontinue [her] service anytime
during the Eeriod of engagement should [she] fail to meet the performance standards," among
66
others, and that CPI actually exercised such power to dismiss when it accepted and approved
Concepcion' s resignation letter; and most importantly, (d) as aptly pointed out by the CA, CPI
possessed the power of control over Concepcion because in the performance of her duties as
Project Director - particularly in the conduct of recruitment activities, training sessions, and skills
development of Sales Directors - she did not exercise independent discretion thereon, but was still
subject to the direct supervision of CPI, acting through BabiaNo. 67
Therefore, the CA correctly ruled that since there exists an employer-employee relationship between
Concepcion and CPI, the labor tribunals correctly assumed jurisdiction over her money claims.
III.
Finally, CPI contends that Concepcion's failure to assail the NLRC ruling awarding her the amount of
P470,754.62 representing unpaid commissions rendered the same final and binding upon her. As
Such, the CA erred in increasing her monetary award to P591,953.05. 70
As a general rule, a party who has not appealed cannot obtain any affirmative relief other than the
one granted in the appealed decision. However, jurisprudence admits an exception to the said rule,
1avvphi1
such as when strict adherence thereto shall result in the impairment of the substantive rights of the
parties concerned. In Global Resource for Outsourced Workers, Inc. v. Velasco: 71
Indeed, a party who has failed to appeal from a judgment is deemed to have acquiesced to it and
can no longer obtain from the appellate court any affirmative relief other than what was already
granted under said judgment. However, when strict adherence to such technical rule will impair
a substantive right, such as that of an illegally dismissed employee to monetary
compensation as provided by law, then equity dictates that the Court set aside the rule to
pave the way for a full and just adjudication of the case. (Emphasis and underscoring supplied)
72
In the present case, the CA aptly pointed out that the NLRC failed to account for all the unpaid
commissions due to Concepcion for the period of August 9, 2008 to August 8, 201l. Indeed,
73
Concepcion's right to her earned commissions is a substantive right which cannot be impaired by an
erroneous computation of what she really is entitled to. Hence, following the dictates of equity and in
order to arrive at a complete and just resolution of the case, and avoid a piecemeal dispensation of
justice over the same, the CA correctly recomputed Concepcion' s unpaid commissions,
notwithstanding her failure to seek a review of the NLRC's computation of the same.
In sum, the Court thus holds that the commissions of Babiano were properly forfeited for violating the
"Confidentiality of Documents and Non-Compete Clause." On the other hand, CPI remains liable for
the unpaid commissions of Concepcion in the sum of P591,953.05.
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated April 8, 2015 and the
Resolution dated October 12, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 132953 are
hereby MODIFIED in that the commissions of respondent Edwin J. Babiano are
deemed FORFEITED. The rest of the CA Decision stands.
SO ORDERED.
ESTELA M. PERLAS-BERNABE
Associate Justice
SECOND DIVISION G.R. No. 163512 February 28, 2007 DAISY B. TIU, Vs.PLATINUM PLANS PHIL., INC.,
QUISUMBING, J.:
DAISY B. TIU, Petitioner
vs.
PLATINUM PLANS PHIL., INC., Respondent.
DECISION
QUISUMBING, J.:
For review on certiorari are the Decision1 dated January 20, 2004 of the Court of Appeals in CA-G.R.
CV No. 74972, and its Resolution2 dated May 4, 2004 denying reconsideration. The Court of Appeals
had affirmed the decision3 dated February 28, 2002 of the Regional Trial Court (RTC) of Pasig City,
Branch 261, in an action for damages, ordering petitioner to pay respondent ₱100,000 as liquidated
damages.
Respondent Platinum Plans Philippines, Inc. is a domestic corporation engaged in the pre-need
industry. From 1987 to 1989, petitioner Daisy B. Tiu was its Division Marketing Director.
On January 1, 1993, respondent re-hired petitioner as Senior Assistant Vice-President and Territorial
Operations Head in charge of its Hongkong and Asean operations. The parties executed a contract
of employment valid for five years.4
On September 16, 1995, petitioner stopped reporting for work. In November 1995, she became the
Vice-President for Sales of Professional Pension Plans, Inc., a corporation engaged also in the pre-
need industry.
Consequently, respondent sued petitioner for damages before the RTC of Pasig City, Branch 261.
Respondent alleged, among others, that petitioner’s employment with Professional Pension Plans,
Inc. violated the non-involvement clause in her contract of employment, to wit:
8. NON INVOLVEMENT PROVISION – The EMPLOYEE further undertakes that during his/her
engagement with EMPLOYER and in case of separation from the Company, whether voluntary or for
cause, he/she shall not, for the next TWO (2) years thereafter, engage in or be involved with any
corporation, association or entity, whether directly or indirectly, engaged in the same business or
belonging to the same pre-need industry as the EMPLOYER. Any breach of the foregoing provision
shall render the EMPLOYEE liable to the EMPLOYER in the amount of One Hundred Thousand
Pesos (P100,000.00) for and as liquidated damages. 5
Respondent thus prayed for ₱100,000 as compensatory damages; ₱200,000 as moral damages;
₱100,000 as exemplary damages; and 25% of the total amount due plus ₱1,000 per counsel’s court
appearance, as attorney’s fees.
Petitioner countered that the non-involvement clause was unenforceable for being against public
order or public policy: First, the restraint imposed was much greater than what was necessary to
afford respondent a fair and reasonable protection. Petitioner contended that the transfer to a rival
company was an accepted practice in the pre-need industry. Since the products sold by the
companies were more or less the same, there was nothing peculiar or unique to protect. Second,
respondent did not invest in petitioner’s training or improvement. At the time petitioner was recruited,
she already possessed the knowledge and expertise required in the pre-need industry and
respondent benefited tremendously from it. Third, a strict application of the non-involvement clause
would amount to a deprivation of petitioner’s right to engage in the only work she knew.
In upholding the validity of the non-involvement clause, the trial court ruled that a contract in restraint
of trade is valid provided that there is a limitation upon either time or place. In the case of the pre-
need industry, the trial court found the two-year restriction to be valid and reasonable. The
dispositive portion of the decision reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant,
ordering the latter to pay the following:
1. the amount of One Hundred Thousand Pesos (P100,000.00) for and as damages, for the
breach of the non-involvement provision (Item No. 8) of the contract of employment;
2. costs of suit.
There being no sufficient evidence presented to sustain the grant of attorney’s fees, the Court
deems it proper not to award any.
SO ORDERED.6
On appeal, the Court of Appeals affirmed the trial court’s ruling. It reasoned that petitioner entered
into the contract on her own will and volition. Thus, she bound herself to fulfill not only what was
expressly stipulated in the contract, but also all its consequences that were not against good faith,
usage, and law. The appellate court also ruled that the stipulation prohibiting non-employment for
two years was valid and enforceable considering the nature of respondent’s business.
Petitioner moved for reconsideration but was denied. Hence, this appeal by certiorari where
petitioner alleges that the Court of Appeals erred when:
A.
B.
Plainly stated, the core issue is whether the non-involvement clause is valid.
Petitioner avers that the non-involvement clause is offensive to public policy since the restraint
imposed is much greater than what is necessary to afford respondent a fair and reasonable
protection. She adds that since the products sold in the pre-need industry are more or less the
same, the transfer to a rival company is acceptable. Petitioner also points out that respondent did
not invest in her training or improvement. At the time she joined respondent, she already had the
knowledge and expertise required in the pre-need industry. Finally, petitioner argues that a strict
application of the non-involvement clause would deprive her of the right to engage in the only work
she knows.
Respondent counters that the validity of a non-involvement clause has been sustained by the
Supreme Court in a long line of cases. It contends that the inclusion of the two-year non-involvement
clause in petitioner’s contract of employment was reasonable and needed since her job gave her
access to the company’s confidential marketing strategies. Respondent adds that the non-
involvement clause merely enjoined her from engaging in pre-need business akin to respondent’s
within two years from petitioner’s separation from respondent. She had not been prohibited from
marketing other service plans.
As early as 1916, we already had the occasion to discuss the validity of a non-involvement clause. In
Ferrazzini v. Gsell,8 we said that such clause was unreasonable restraint of trade and therefore
against public policy. In Ferrazzini, the employee was prohibited from engaging in any business or
occupation in the Philippines for a period of five years after the termination of his employment
contract and must first get the written permission of his employer if he were to do so. The Court ruled
that while the stipulation was indeed limited as to time and space, it was not limited as to trade. Such
prohibition, in effect, forces an employee to leave the Philippines to work should his employer refuse
to give a written permission.
In G. Martini, Ltd. v. Glaiserman, 9 we also declared a similar stipulation as void for being an
unreasonable restraint of trade. There, the employee was prohibited from engaging in any business
similar to that of his employer for a period of one year. Since the employee was employed only in
connection with the purchase and export of abaca, among the many businesses of the employer, the
Court considered the restraint too broad since it effectively prevented the employee from working in
any other business similar to his employer even if his employment was limited only to one of its
multifarious business activities.
However, in Del Castillo v. Richmond,10 we upheld a similar stipulation as legal, reasonable, and not
contrary to public policy. In the said case, the employee was restricted from opening, owning or
having any connection with any other drugstore within a radius of four miles from the employer’s
place of business during the time the employer was operating his drugstore. We said that a contract
in restraint of trade is valid provided there is a limitation upon either time or place and the restraint
upon one party is not greater than the protection the other party requires.
More significantly, since petitioner was the Senior Assistant Vice-President and Territorial
Operations Head in charge of respondent’s Hongkong and Asean operations, she had been privy to
confidential and highly sensitive marketing strategies of respondent’s business. To allow her to
engage in a rival business soon after she leaves would make respondent’s trade secrets vulnerable
especially in a highly competitive marketing environment. In sum, we find the non-involvement
clause not contrary to public welfare and not greater than is necessary to afford a fair and
reasonable protection to respondent.13
In any event, Article 1306 of the Civil Code provides that parties to a contract 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.
Article 115914 of the same Code also provides that obligations arising from contracts have the force
of law between the contracting parties and should be complied with in good faith. Courts cannot
stipulate for the parties nor amend their agreement where the same does not contravene law,
morals, good customs, public order or public policy, for to do so would be to alter the real intent of
the parties, and would run contrary to the function of the courts to give force and effect thereto. 15 Not
being contrary to public policy, the non-involvement clause, which petitioner and respondent freely
agreed upon, has the force of law between them, and thus, should be complied with in good faith. 16
Thus, as held by the trial court and the Court of Appeals, petitioner is bound to pay respondent
₱100,000 as liquidated damages. While we have equitably reduced liquidated damages in certain
cases,17 we cannot do so in this case, since it appears that even from the start, petitioner had not
shown the least intention to fulfill the non-involvement clause in good faith.
WHEREFORE, the petition is DENIED for lack of merit. The Decision dated January 20, 2004, and
the Resolution dated May 4, 2004, of the Court of Appeals in CA-G.R. CV No. 74972, are
AFFIRMED. Costs against petitioner.
SO ORDERED.
LEONARDO A. QUISUMBING
Associate Justice
1st DIVISION G.R. No. 163269 April 19, 2006 ROLANDO C. RIVERA, Vs. SOLIDBANK CORPORATION, CALLEJO,
SR., J.:
ROLANDO C. RIVERA, Petitioner,
vs.
SOLIDBANK CORPORATION, Respondent.
DECISION
CALLEJO, SR., J.:
Assailed in this Petition for Review on Certiorari is the Decision 1 of the Court of Appeals (CA) in CA-
G.R. CV No. 52235 as well as its Resolution 2 denying the Motion for Partial Reconsideration of
petitioner Rolando C. Rivera.
Petitioner had been working for Solidbank Corporation since July 1, 1977. 3 He was initially employed
as an Audit Clerk, then as Credit Investigator, Senior Clerk, Assistant Accountant, and Assistant
Manager. Prior to his retirement, he became the Manager of the Credit Investigation and Appraisal
Division of the Consumer’s Banking Group. In the meantime, Rivera and his brother-in-law put up a
poultry business in Cavite.
In December 1994, Solidbank offered two retirement programs to its employees: (a) the Ordinary
Retirement Program (ORP), under which an employee would receive 85% of his monthly basic
salary multiplied by the number of years in service; and (b) the Special Retirement Program (SRP),
under which a retiring employee would receive 250% of the gross monthly salary multiplied by the
number of years in service.4 Since Rivera was only 45 years old, he was not qualified for retirement
under the ORP. Under the SRP, he was entitled to receive P1,045,258.95 by way of benefits.5
Deciding to devote his time and attention to his poultry business in Cavite, Rivera applied for
retirement under the SRP. Solidbank approved the application and Rivera was entitled to receive the
net amount of P963,619.28. This amount included his performance incentive award (PIA), and his
unearned medical, dental and optical allowances in the amount of P1,666.67, minus his total
accountabilities to Solidbank amounting to P106,973.00.6 Rivera received the amount and confirmed
his separation from Solidbank on February 25, 1995. 7
Subsequently, Solidbank required Rivera to sign an undated Release, Waiver and Quitclaim, which
was notarized on March 1, 1995.8 Rivera acknowledged receipt of the net proceeds of his separation
and retirement benefits and promised that "[he] would not, at any time, in any manner whatsoever,
directly or indirectly engage in any unlawful activity prejudicial to the interest of Solidbank, its parent,
affiliate or subsidiary companies, their stockholders, officers, directors, agents or employees, and
their successors-in-interest and will not disclose any information concerning the business of
Solidbank, its manner or operation, its plans, processes, or data of any kind." 9
Aside from acknowledging that he had no cause of action against Solidbank or its affiliate
companies, Rivera agreed that the bank may bring any action to seek an award for damages
resulting from his breach of the Release, Waiver and Quitclaim, and that such award would include
the return of whatever sums paid to him by virtue of his retirement under the SRP. 10 Rivera was
likewise required to sign an undated Undertaking as a supplement to the Release, Waiver and
Quitclaim in favor of Solidbank in which he declared that he received in full his entitlement under the
law (salaries, benefits, bonuses and other emoluments), including his separation pay in accordance
with the SRP. In this Undertaking, he promised that "[he] will not seek employment with a competitor
bank or financial institution within one (1) year from February 28, 1995, and that any breach of the
Undertaking or the provisions of the Release, Waiver and Quitclaim would entitle Solidbank to a
cause of action against him before the appropriate courts of law. 11 Unlike the Release, Waiver and
Quitclaim, the Undertaking was not notarized.
On May 1, 1995, the Equitable Banking Corporation (Equitable) employed Rivera as Manager of its
Credit Investigation and Appraisal Division of its Consumers’ Banking Group. 12 Upon discovering
this, Solidbank First Vice-President for Human Resources Division (HRD) Celia J.L. Villarosa wrote a
letter dated May 18, 1995, informing Rivera that he had violated the Undertaking. She likewise
demanded the return of all the monetary benefits he received in consideration of the SRP within five
(5) days from receipt; otherwise, appropriate legal action would be taken against him. 13
When Rivera refused to return the amount demanded within the given period, Solidbank filed a
complaint for Sum of Money with Prayer for Writ of Preliminary Attachment 14 before the Regional
Trial Court (RTC) of Manila on June 26, 1995. Solidbank, as plaintiff, alleged therein that in
accepting employment with a competitor bank for the same position he held in Solidbank before his
retirement, Rivera violated his Undertaking under the SRP. Considering that Rivera accepted
employment with Equitable barely three months after executing the Undertaking, it was clear that he
had no intention of honoring his commitment under said deed.
Solidbank prayed that Rivera be ordered to return the net amount of P963,619.28 plus interests
therein, and attorney’s fees, thus:
1. At the commencement of this action and upon the filing of a bond in such amount as this
Honorable Court may fix, a writ of preliminary attachment be forthwith issued against the
properties of the defendant as satisfaction of any judgment that plaintiff may secure;
2. After trial, judgment be rendered ordering defendant to pay plaintiff the following sums:
NINE HUNDRED SIXTY-THREE THOUSAND SIX HUNDRED NINETEEN AND 28/100
ONLY (P963,619.28) PESOS, Philippine Currency, as of 23 May 1995, plus legal interest of
12% per annum until fully paid;
3. Such sum equivalent to 10% of plaintiff’s claims plus P2,000.00 for every appearance by
way of attorney’s fees; and
4. Costs of suit.
PLAINTIFF prays for other reliefs just and equitable under the premises. 15
Solidbank appended the Affidavit of HRD First Vice-President Celia Villarosa and a copy of the
Release, Waiver and Quitclaim and Undertaking which Rivera executed. 16
In an Order dated July 6, 1995, the trial court issued a Writ of Preliminary Attachment 17 ordering
Deputy Sheriff Eduardo Centeno to attach all of Rivera’s properties not exempt from execution.
Thus, the Sheriff levied on a parcel of land owned by Rivera.
In his Answer with Affirmative Defenses and Counterclaim, Rivera admitted that he received the net
amount of P963,619.28 as separation pay. However, the employment ban provision in the
Undertaking was never conveyed to him until he was made to sign it on February 28, 1995. He
emphasized that, prior to said date, Solidbank never disclosed any condition to the retirement
scheme, nor did it impose such employment ban on the bank officers and employees who had
previously availed of the SRP. He alleged that the undertaking not to "seek employment with any
competitor bank or financial institution within one (1) year from February 28, 1995" was void for
being contrary to the Constitution, the law and public policy, that it was unreasonable, arbitrary,
oppressive, discriminatory, cruel, unjust, inhuman, and violative of his human rights. He further
claimed that the Undertaking was a contract of adhesion because it was prepared solely by
Solidbank without his participation; considering his moral and economic disadvantage, it must be
liberally construed in his favor and strictly against the bank.
On August 15, 1995, Solidbank filed a Verified Motion for Summary Judgment, alleging therein that
Rivera raised no genuine issue as to any material fact in his Answer except as to the amount of
damages. It prayed that the RTC render summary judgment against Rivera. Solidbank alleged that
whether or not the employment ban provision contained in the Undertaking is unreasonable,
arbitrary, or oppressive is a question of law. It insisted that Rivera signed the Undertaking voluntarily
and for valuable consideration; and under the Release, Waiver and Quitclaim, he was obliged to
return the P963,619.28 upon accepting employment from a competitor bank within the one-year
proscribed period. Solidbank appended to its motion the Affidavit of Villarosa, where she declared
that Rivera was employed by Equitable on May 1, 1995 for the same position he held before his
retirement from Solidbank.
Rivera opposed the motion contending that, as gleaned from the pleadings of the parties as well as
Villarosa’s Affidavit, there are genuine issues as to material facts which call for the presentation of
evidence. He averred that there was a need for the parties to adduce evidence to prove that he did
not sign the Undertaking voluntarily. He claimed that he would not have been allowed to avail of the
SRP if he had not signed it, and consequently, his retirement benefits would not have been paid.
This was what Ed Nallas, Solidbank Assistant Vice-President for HRD and Personnel, told him when
he received his check on February 28, 1995. Senior Vice-President Henry Valdez, his superior in the
Consumers’ Banking Group, also did not mention that he would have to sign such Undertaking
which contained the assailed provision. Thus, he had no choice but to sign it. He insisted that the
question of whether he violated the Undertaking is a genuine issue of fact which called for the
presentation of evidence during the hearing on the merits of the case. He also asserted that he could
not cause injury or prejudice to Solidbank’s interest since he never acquired any sensitive or delicate
information which could prejudice the bank’s interest if disclosed.
Rivera averred that he had the right to adduce evidence to prove that he had been faithful to the
provisions of the Release, Waiver and Quitclaim, and the Undertaking, and had not committed any
act or done or said anything to cause injury to Solidbank. 18
Rivera appended to his Opposition his Counter-Affidavit in which he reiterated that he had to sign
the Undertaking containing the employment ban provision, otherwise his availment of the SRP would
not push through. There was no truth to the bank’s allegation that, "in exchange for receiving the
larger amount of P1,045,258.95 under the SRP, instead of the very much smaller amount
of P224,875.81 under the ORP, he agreed that he will not seek employment in a competitor bank or
financial institution within one year from February 28, 1995." It was the bank which conceived the
SRP to streamline its organization and all he did was accept it. He stressed that the decision
whether to allow him to avail of the SRP belonged solely to Solidbank. He also pointed out that the
employment ban provision in the Undertaking was not a consideration for his availment of the SRP,
and that if he did not avail of the retirement program, he would have continued working for Solidbank
for at least 15 more years, earning more than what he received under the SRP. He alleged that he
intended to go full time into the poultry business, but after about two months, found out that, contrary
to his expectations, the business did not provide income sufficient to support his family. Being the
breadwinner, he was then forced to look for a job, and considering his training and experience as a
former bank employee, the job with Equitable was all he could find. He insisted that he had remained
faithful to Solidbank and would continue to do so despite the case against him, the attachment of his
family home, and the resulting mental anguish, torture and expense it has caused them. 19
In his Supplemental Opposition, Rivera stressed that, being a former bank employee, it was the only
kind of work he knew. The ban was, in fact, practically absolute since it applied to all financial
institutions for one year from February 28, 1995. He pointed out that he could not work in any other
company because he did not have the qualifications, especially considering his age. Moreover, after
one year from February 28, 1995, he would no longer have any marketable skill, because by then, it
would have been rendered obsolete by non-use and rapid technological advances. He insisted that
the ban was not necessary to protect the interest of Solidbank, as, in the first place, he had no
access to any "secret" information which, if revealed would be prejudicial to Solidbank’s interest. In
any case, he was not one to reveal whatever knowledge or information he may have acquired during
his employment with said bank.20
In its Reply, Solidbank averred that the wisdom of requiring the Undertaking from the 1995 SRP is
purely a management prerogative. It was not for Rivera to question and decry the bank’s policy to
protect itself from unfair competition and disclosure of its trade secrets. The substantial monetary
windfall given the retiring officers was meant to tide them over the one-year period of hiatus, and did
not prevent them from engaging in any kind of business or bar them from being employed except
with competitor banks/financial institutions.21
On December 18, 1995, the trial court issued an Order of Summary Judgment. 22 The fallo of the
decision reads:
FURTHER, NEVERTHELESS, both parties are hereby encouraged as they are directed to meet
again and sit down to find out how they can finally end this rift and litigation, all in the name of equity,
for after all, defendant had worked for the bank for some 18 years.23
The trial court declared that there was no genuine issue as to a matter of fact in the case since
Rivera voluntarily executed the Release, Waiver and Quitclaim, and the Undertaking. He had a
choice not to retire, but opted to do so under the SRP, and, in fact, received the benefits under it.
According to the RTC, the prohibition incorporated in the Undertaking was not unreasonable. To
allow Rivera to be excused from his undertakings in said deed and, at the same time, benefit
therefrom would be to allow him to enrich himself at the expense of Solidbank. The RTC ruled that
Rivera had to return the P963,619.28 he received from Solidbank, plus interest of 12% per annum
from May 23, 1998 until fully paid.
Aggrieved, Rivera appealed the ruling to the CA which rendered judgment on June 14, 2002 partially
granting the appeal. The fallo of the decision reads:
WHEREFORE, the appeal is PARTIALLY GRANTED. The decision appealed from is AFFIRMED
with the modification that the attachment and levy upon the family home covered by TCT No. 51621
of the Register of Deeds, Las Piñas, Metro Manila, is hereby SET ASIDE and DISCHARGED.
SO ORDERED.24
The CA declared that there was no genuine issue regarding any material fact except as to the
amount of damages. It ratiocinated that the agreement between Rivera and Solidbank was the law
between them, and that the interpretation of the stipulations therein could not be left upon the whims
of Rivera. According to the CA, Rivera never denied signing the Release, Waiver, and Quitclaim,
including the Undertaking regarding the employment prohibition. He even admitted joining Equitable
as an employee within the proscribed one-year period. The alleged defenses of Rivera, the CA
declared, could not prevail over the admissions in his pleadings. Moreover, Rivera’s justification for
1avvphil.net
taking the job with Equitable, "dire necessity," was not an acceptable ground for annulling the
Undertaking since there were no earmarks of coercion, undue influence, or fraud in its execution.
Having executed the said deed and thereafter receiving the benefits under the SRP, he is deemed to
have waived the right
to assail the same, hence, is estopped from insisting or retaining the said amount of P963,619.28.
However, the CA ruled that the attachment made upon Rivera’s family home was void, and,
pursuant to the mandate of Article 155, in relation to Article 153 of the Family Code, must be
discharged.
I.
II.
THE COURT OF APPEALS ERRED IN NOT DECLARING THE ONE-YEAR EMPLOYMENT BAN
IMPOSED BY RESPONDENT SOLIDBANK UPON HEREIN PETITIONER NULL AND VOID FOR
BEING UNREASONABLE AND OPPRESSIVE AND FOR CONSTITUTING RESTRAINT OF TRADE
WHICH VIOLATES PUBLIC POLICY AS ENUNCIATED IN OUR CONSTITUTION AND LAWS.
III.
THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT’S DECISION ORDERING
HEREIN RESPONDENT TO PAY SOLIDBANK THE AMOUNT OF P963,619.28 AS OF MAY 23,
1995, PLUS LEGAL INTEREST OF 12% PER ANNUM UNTIL FULLY PAID.
IV.
MORE SPECIFICALLY, THE COURT OF APPEALS ERRED IN AFFIRMING THE PORTION OF
THE SUMMARY JUDGMENT ORDERING PETITIONER TO PAY SOLIDBANK LEGAL INTEREST
OF 12% PER ANNUM UNTIL FULLY PAID ON THE AFOREMENTIONED SUM [OF] P963,619.28.25
The issues for resolution are: (1) whether the parties raised a genuine issue in their pleadings,
affidavits, and documents, that is, whether the employment ban incorporated in the Undertaking
which petitioner executed upon his retirement is unreasonable, oppressive, hence, contrary to public
policy; and (2) whether petitioner is liable to respondent for the restitution of P963,619.28
representing his retirement benefits, and interest thereon at 12% per annum as of May 23, 1995 until
payment of the full amount.
On the first issue, petitioner claims that, based on the pleadings of the parties, and the documents
and affidavits appended thereto, genuine issues as to matters of fact were raised therein. He insists
that the resolution of the issue of whether the employment ban is unreasonable requires the
presentation of evidence on the circumstances which led to respondent bank’s offer of the SRP and
ORP, and petitioner’s eventual acceptance and signing of the Undertaking on March 1, 1995. There
is likewise a need to adduce evidence on whether the employment ban is necessary to protect
respondent’s interest, and whether it is an undue restraint on petitioner’s constitutional right to earn a
living to support his family. He further insists that respondent is burdened to prove that it sustained
damage or injury by reason of his alleged breach of the employment ban since neither the Release,
Waiver and Quitclaim, and Undertaking he executed contain any provision that respondent is
automatically entitled to the restitution of the P963,619.28. Petitioner points out that all the deeds
provide is that, in case of breach thereof, respondent is entitled to protection before the appropriate
courts of law.
On the second issue, petitioner avers that the prohibition incorporated in the Release, Waiver and
Quitclaim barring him as retiree from engaging directly or indirectly in any unlawful activity and
disclosing any information concerning the business of respondent bank, as well as the employment
ban contained in the Undertaking he executed, are oppressive, unreasonable, cruel and inhuman
because of its overbreath. He reiterates that it is against public policy, an unreasonable restraint of
trade, because it prohibits him to work for one year in the Philippines, ultimately preventing him from
supporting his family. He points out that a breadwinner in a family of four minor daughters who are
all studying, with a wife who does not work, one would have a very difficult time meeting the financial
obligations even with a steady, regular-paying job. He insists that the Undertaking deprives him of
the means to support his family, and ultimately, his children’s chance for a good education and
future. He reiterates that the returns in his poultry business fell short of his expectations, and
unfortunately, the business was totally destroyed by typhoon "Rosing" in November 1995.
Petitioner further maintains that respondent’s management prerogative does not give it a license to
entice its employees to retire at a very young age and prohibit them from seeking employment in a
so-called competitor bank or financial institution, thus prevent them from working and supporting
their families (considering that banking is the only kind of work they know). Petitioner avers that
"management’s prerogative must be without abuse of discretion. A line must be drawn between
management prerogative regarding business operations per se and those which affect the rights of
the employees. In treating its employees, management should see to it that its employees are at
least properly informed of its decision or modes of action."
On the last issue, petitioner alleges that the P1,045,258.95 he received was his retirement benefit
which he earned after serving the bank for 18 years. It was not a mere gift or gratuity given by
respondent bank, without the latter giving up something of value in return. On the contrary,
respondent bank received "valuable consideration," that is, petitioner quit his job at the relatively
young age of 45, thus enabling respondent to effect its reorganization plan and forego the salary,
benefits, bonuses, and promotions he would have received had he not retired early.
Petitioner avers that, under the Undertaking, respondent would be entitled to a cause of action
against him before the appropriate courts of law if he had violated the employment ban. He avers
that respondent must prove its entitlement to the P963,619.28. The Undertaking contains no
provision that he would have to return the amount he received under the SRP; much less does it
provide that he would have to pay 12% interest per annum on said amount. On the other hand, the
Release, Waiver and Quitclaim does not contain the provision prohibiting him from being employed
with any competitor bank or financial institution within one year from February 28, 1995. Petitioner
insists that he acted in good faith when he received his retirement benefits; hence, he cannot be
punished by being ordered to return the sum of P963,619.28 which was given to him for and in
consideration of his early retirement.
Neither can petitioner be subjected to the penalty of paying 12% interest per annum on his
retirement pay of P963,619.28 from May 23, 1995, as it is improper and oppressive to him and his
family. As of July 3, 2002, the interest alone would amount to P822,609.67, thus doubling the
amount to be returned to respondent bank under the decision of the RTC and the CA. The
imposition of interest has no basis because the Release, Waiver and Quitclaim, and the Undertaking
do not provide for payment of interest. The deeds only state that breach thereof would entitle
respondent to bring an action to seek damages, to include the return of the amount that may have
been paid to petitioner by virtue thereof. On the other hand, any breach of the Undertaking or the
Release, Waiver and Quitclaim would only entitle respondent to a cause of action before the
appropriate courts of law. Besides, the amount received by petitioner was not a loan and, therefore,
should not earn interest pursuant to Article 1956 of the Civil Code.
Finally, petitioner insists that he acted in good faith in seeking employment with another bank within
one year from February 28, 1995 because he needed to earn a living to support his family and
finance his children’s education. Hence, the imposition of interest, which is a penalty, is
unwarranted.
By way of Comment on the petition, respondent avers that the Undertaking is the law between it and
petitioner. As such, the latter could not assail the deed after receiving the retirement benefit under
the SRP. As gleaned from the averments in his petition, petitioner admitted that he executed the
Undertaking after having been informed of the nature and consequences of his refusal to sign the
same, i.e., he would not be able to receive the retirement benefit under the SRP.
Respondent maintains that courts have no power to relieve parties of obligations voluntarily entered
into simply because their contracts turned out to be disastrous deeds. Citing the ruling of this Court
in Eastern Shipping Lines, Inc. v. Court of Appeals, 26 respondent avers that petitioner is obliged to
pay 12% per annum interest of the P963,619.28 from judicial or extrajudicial demand.
In reply, petitioner asserts that respondent failed to prove that it sustained damages, including the
amount thereof, and that neither the Release, Waiver and Quitclaim nor the Undertaking obliged him
to pay interest to respondent.
Section 1. Summary judgment for claimant. – A party seeking to recover upon a claim, counterclaim,
or cross-claim or to obtain a declaratory relief may, at any time after the pleading in answer thereto
has been served, move with supporting affidavits, depositions or admissions for a summary
judgment in his favor upon all or any part thereof.
xxxx
Sec. 3. Motion and proceedings thereon. – The motion shall be served at least ten (10) days before
the time specified for the hearing. The adverse party may serve opposing affidavits, depositions, or
admissions at least three (3) days before the hearing. After the hearing, the judgment sought shall
be rendered forthwith if the pleadings, supporting affidavits, depositions, and admissions on file,
show that, except as to the amount of damages, there is no genuine issue as to any material fact
and that the moving party is entitled to a judgment as a matter of law.
For a summary judgment to be proper, the movant must establish two requisites: (a) there must be
no genuine issue as to any material fact, except for the amount of damages; and (b) the party
presenting the motion for summary judgment must be entitled to a judgment as a matter of
law.27 Where, on the basis of the pleadings of a moving party, including documents appended
thereto, no genuine issue as to a material fact exists, the burden to produce a genuine issue shifts to
the opposing party. If the opposing party fails, the moving party is entitled to a summary judgment. 28
A genuine issue is an issue of fact which requires the presentation of evidence as distinguished from
an issue which is a sham, fictitious, contrived or a false claim. The trial court can determine a
genuine issue on the basis of the pleadings, admissions, documents, affidavits or counteraffidavits
submitted by the parties. When the facts as pleaded appear uncontested or undisputed, then there is
no real or genuine issue or question as to any fact and summary judgment called for. On the other
hand, where the facts pleaded by the parties are disputed or contested, proceedings for a summary
judgment cannot take the place of a trial. 29 The evidence on record must be viewed in light most
favorable to the party opposing the motion who must be given the benefit of all favorable inferences
as can reasonably be drawn from the evidence. 30
Courts must be critical of the papers presented by the moving party and not of the
papers/documents in opposition thereto. 31 Conclusory assertions are insufficient to raise an issue of
material fact.32 A party cannot create a genuine dispute of material fact through mere speculations or
compilation of differences.33 He may not create an issue of fact through bald assertions, unsupported
contentions and conclusory statements.34 He must do more than rely upon allegations but must
come forward with specific facts in support of a claim. Where the factual context makes his claim
implausible, he must come forward with more persuasive evidence demonstrating a genuine issue
for trial.35
Where there are no disputed material facts, the determination of whether a party breached a
contract is a question of law and is appropriate for summary judgment. 36 When interpreting an
ambiguous contract with extrinsic evidence, summary judgment is proper so long as the extrinsic
evidence presented to the court supports only one of the conflicting interpretations. 37 Where
reasonable men could differ as to the contentions shown from the evidence, summary judgment
might be denied.
In United Rentals (North America), Inc. v. Keizer,38 the U.S. Circuit Court of Appeals resolved the
issue of whether a summary judgment is proper in a breach of contract action involving the
interpretation of such contract, and ruled that:
[A] contract can be interpreted by the court on summary judgment if (a) the contract’s terms are
clear, or (b) the evidence supports only one construction of the controverted provision,
notwithstanding some ambiguity. x x x If the court finds no ambiguity, it should proceed to interpret
the contract – and it may do so at the summary judgment stage. If, however, the court discerns an
ambiguity, the next step – involving an examination of extrinsic evidence – becomes essential. x x x
Summary judgment may be appropriate even if ambiguity lurks as long as the extrinsic evidence
presented to the court supports only one of the conflicting interpretations. 39
In this case, there is no dispute between the parties that, in consideration for his availment of the
SRP, petitioner executed the Release, Waiver and Quitclaim, and the Undertaking as supplement
thereto, and that he received retirement pay amounting to P963,619.28 from respondent. On May 1,
1995, within the one-year ban and without prior knowledge of respondent, petitioner was employed
by Equitable as Manager of its Credit Investigation and Appraisal Division, Consumers’ Banking
Group. Despite demands, petitioner failed to return the P963,619.28 to respondent on the latter’s
allegation that he had breached the one-year ban by accepting employment from Equitable, which
according to respondent was a competitor bank.
We agree with petitioner’s contention that the issue as to whether the post-retirement competitive
employment ban incorporated in the Undertaking is against public policy is a genuine issue of fact,
requiring the parties to present evidence to support their respective claims.
As gleaned from the records, petitioner made two undertakings. The first is incorporated in the
Release, Waiver and Quitclaim that he signed, to wit:
4. I will not, at any time, in any manner whatsoever, directly or indirectly engage in any unlawful
activity prejudicial to the interest of the BANK, its parent, affiliate or subsidiary companies, their
stockholders, officers, directors, agents or employees, and their successors-in-interest and will not
disclose any information concerning the business of the BANK, its manner or operation, its plans,
processes or data of any kind.40
The second undertaking is incorporated in the Undertaking following petitioner’s execution of the
Release, Waiver and Quitclaim which reads:
In the Release, Waiver and Quitclaim, petitioner declared that respondent may bring "an action for
damages which may include, but not limited to the return of whatever sums he may have received
from respondent under said deed if he breaks his undertaking therein." 42 On the other hand,
petitioner declared in the Undertaking that "any breach on his part of said Undertaking or the terms
and conditions of the Release, Waiver and Quitclaim will entitle respondent to a cause of action
against [petitioner] for protection before the appropriate courts of law." 43
Article 1306 of the New Civil Code provides that 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. The freedom of contract is both
a constitutional and statutory right. 44 A contract is the law between the parties and courts have no
choice but to enforce such contract as long as it is not contrary to law, morals, good customs and
against public policy.
The well-entrenched doctrine is that the law does not relieve a party from the effects of an unwise,
foolish or disastrous contract, entered into with full awareness of what he was doing and entered into
and carried out in good faith. Such a contract will not be discarded even if there was a mistake of law
or fact. Courts have no jurisdiction to look into the wisdom of the contract entered into by and
between the parties or to render a decision different therefrom. They have no power to relieve
parties from obligation voluntarily assailed, simply because their contracts turned out to be
disastrous deals.45
On the other hand, retirement plans, in light of the constitutional mandate of affording full protection
to labor, must be liberally construed in favor of the employee, it being the general rule that pension
or retirement plans formulated by the employer are to be construed against it. 46 Retirement benefits,
after all, are intended to help the employee enjoy the remaining years of his life, releasing him from
the burden of worrying for his financial support, and are a form of reward for being loyal to the
employer.47
In Ferrazzini v. Gsell,48 the Court defined public policy in civil law countries and in the United States
and the Philippines:
By "public policy," as defined by the courts in the United States and England, is intended that
principle of the law which holds that no subject or citizen can lawfully do that which has a tendency
to be injurious to the public or against the public good, which may be termed the "policy of the law,"
or "public policy in relation to the administration of the law." (Words & Phrases Judicially Defined,
vol. 6, p. 5813, and cases cited.) Public policy is the principle under which freedom of contract or
private dealing is restricted by law for the good of the public. (Id., Id.) In determining whether a
contract is contrary to public policy the nature of the subject matter determines the source from
which such question is to be solved. (Hartford Fire Ins. Co. v. Chicago, M. & St. P. Ry. Co., 62 Fed.
904, 906.)
The foregoing is sufficient to show that there is no difference in principle between the public policy
(orden publico) in the two jurisdictions (the United States and the Philippine Islands) as determined
by the Constitution, laws, and judicial decisions. 49
x x x In the broader sense, it is any occupation or business carried on for subsistence or profit.
Anderson’s Dictionary of Law gives the following definition: "Generally equivalent to occupation,
employment, or business, whether manual or mercantile; any occupation, employment or business
carried on for profit, gain, or livelihood, not in the liberal arts or in the learned professions." In
Abbott’s Law Dictionary, the word is defined as "an occupation, employment or business carried on
for gain or profit." Among the definitions given in the Encyclopaedic Dictionary is the following: "The
business which a person has learnt, and which he carries on for subsistence or profit; occupation;
particularly employment, whether manual or mercantile, as distinguished from the liberal arts or the
learned professions and agriculture." Bouvier limits the meaning to commerce and traffic, and the
handicraft of mechanics. (In re Pinkney, 47 Kan., 89.) We are inclined to adopt and apply the
broader meaning given by the lexicographers.50
In the present case, the trial court ruled that the prohibition against petitioner accepting employment
with a competitor bank or financial institution within one year from February 28, 1995 is not
unreasonable. The appellate court held that petitioner was estopped from assailing the post-
retirement competitive employment ban because of his admission that he signed the Undertaking
and had already received benefits under the SRP.
The rulings of the trial court and the appellate court are incorrect.
There is no factual basis for the trial court’s ruling, for the simple reason that it rendered summary
judgment and thereby foreclosed the presentation of evidence by the parties to prove whether the
restrictive covenant is reasonable or not. Moreover, on the face of the Undertaking, the post-
retirement competitive employment ban is unreasonable because it has no geographical limits;
respondent is barred from accepting any kind of employment in any competitive bank within the
proscribed period. Although the period of one year may appear reasonable, the matter of whether
the restriction is reasonable or unreasonable cannot be ascertained with finality solely from the
terms and conditions of the Undertaking, or even in tandem with the Release, Waiver and Quitclaim.
Undeniably, petitioner retired under the SRP and received P963,619.28 from respondent. However,
petitioner is not proscribed, by waiver or estoppel, from assailing the post-retirement competitive
employment ban since under Article 1409 of the New Civil Code, those contracts whose cause,
object or purpose is contrary to law, morals, good customs, public order or public policy are
inexistent or void from the beginning. Estoppel cannot give validity to an act that is prohibited by law
or one that is against public policy.51
x x x There are two principal grounds on which the doctrine is founded that a contract in restraint of
trade is void as against public policy. One is, the injury to the public by being deprived of the
restricted party’s industry; and the other is, the injury to the party himself by being precluded from
pursuing his occupation, and thus being prevented from supporting himself and his family.
And in Gibbs vs. Consolidated Gas Co. of Baltimore, supra, the court stated the rule thus:
Public welfare is first considered, and if it be not involved, and the restraint upon one party is not
greater than protection to the other party requires, the contract may be sustained. The question is,
whether, under the particular circumstances of the case and the nature of the particular contract
involved in it, the contract is, or is not, unreasonable. 53
In cases where an employee assails a contract containing a provision prohibiting him or her from
accepting competitive employment as against public policy, the employer has to adduce evidence to
prove that the restriction is reasonable and not greater than necessary to protect the employer’s
legitimate business interests.54 The restraint may not be unduly harsh or oppressive in curtailing the
employee’s legitimate efforts to earn a livelihood and must be reasonable in light of sound public
policy.55
Courts should carefully scrutinize all contracts limiting a man’s natural right to follow any trade or
profession anywhere he pleases and in any lawful manner. But it is just as important to protect the
enjoyment of an establishment in trade or profession, which its employer has built up by his own
honest application to every day duty and the faithful performance of the tasks which every day
imposes upon the ordinary man. What one creates by his own labor is his. Public policy does not
intend that another than the producer shall reap the fruits of labor; rather, it gives to him who labors
the right by every legitimate means to protect the fruits of his labor and secure the enjoyment of
them to himself.56 Freedom to contract must not be unreasonably abridged. Neither must the right to
protect by reasonable restrictions that which a man by industry, skill and good judgment has built up,
be denied.57
The Court reiterates that the determination of reasonableness is made on the particular facts and
circumstances of each case.58 In Esmerson Electric Co. v. Rogers,59 it was held that the question of
reasonableness of a restraint requires a thorough consideration of surrounding circumstances,
including the subject matter of the contract, the purpose to be served, the determination of the
parties, the extent of the restraint and the specialization of the business of the employer. The court
has to consider whether its enforcement will be injurious to the public or cause undue hardships to
the employee, and whether the restraint imposed is greater than necessary to protect the employer.
Thus, the court must have before it evidence relating to the legitimate interests of the employer
which might be protected in terms of time, space and the types of activity proscribed. 60
Consideration must be given to the employee’s right to earn a living and to his ability to determine
with certainty the area within which his employment ban is restituted. A provision on territorial
limitation is necessary to guide an employee of what constitutes as violation of a restrictive covenant
and whether the geographic scope is co-extensive with that in which the employer is doing business.
In considering a territorial restriction, the facts and circumstances surrounding the case must be
considered.61
Thus, in determining whether the contract is reasonable or not, the trial court should consider the
following factors: (a) whether the covenant protects a legitimate business interest of the employer;
(b) whether the covenant creates an undue burden on the employee; (c) whether the covenant is
injurious to the public welfare; (d) whether the time and territorial limitations contained in the
covenant are reasonable; and (e) whether the restraint is reasonable from the standpoint of public
policy.62
Not to be ignored is the fact that the banking business is so impressed with public interest where the
trust and interest of the public in general is of paramount importance such that the appropriate
standard of diligence must be very high, if not the highest degree of diligence. 63
We are not impervious of the distinction between restrictive covenants barring an employee to
accept a post-employment competitive employment or restraint on trade in employment contracts
and restraints on post-retirement competitive employment in pension and retirement plans either
incorporated in employment contracts or in collective bargaining agreements between the employer
and the union of employees, or separate from said contracts or collective bargaining agreements
which provide that an employee who accepts post retirement competitive employment will forfeit
retirement and other benefits or will be obliged to restitute the same to the employer. The strong
weight of authority is that forfeitures for engaging in subsequent competitive employment included in
pension and retirement plans are valid even though unrestricted in time or geography. The raison
d’etre is explained by the United States Circuit Court of Appeals in Rochester Corporation v. W.L.
Rochester, Jr.:64
x x x The authorities, though, generally draw a clear and obvious distinction between restraints on
competitive employment in employment contracts and in pension plans. The strong weight of
authority holds that forfeitures for engaging in subsequent competitive employment, included in
pension retirement plans, are valid, even though unrestricted in time or geography. The reasoning
behind this conclusion is that the forfeiture, unlike the restraint included in the employment contract,
is not a prohibition on the employee’s engaging in competitive work but is merely a denial of the right
to participate in the retirement plan if he does so engage. A leading case on this point is Van Pelt v.
Berefco, Inc., supra, 208 N.E.2d at p. 865, where, in passing on a forfeiture provision similar to that
here, the Court said:
"A restriction in the contract which does not preclude the employee from engaging in competitive
activity, but simply provides for the loss of rights or privileges if he does so is not in restraint of
trade." (emphasis added)65
A post-retirement competitive employment restriction is designed to protect the employer against
competition by former employees who may retire and obtain retirement or pension benefits and, at
the same time, engage in competitive employment.66
We have reviewed the Undertaking which respondent impelled petitioner to sign, and find that in
case of failure to comply with the promise not to accept competitive employment within one year
from February 28, 1995, respondent will have a cause of action against petitioner for "protection in
the courts of law." The words "cause of action for protection in the courts of law" are so broad and
comprehensive, that they may also include a cause of action for prohibitory and mandatory
injunction against petitioner, specific performance plus damages, or a damage suit (for actual, moral
and/or exemplary damages), all inclusive of the restitution of the P963,619.28 which petitioner
received from respondent. The Undertaking and the Release, Waiver and Quitclaim do not provide
for the automatic forfeiture of the benefits petitioner received under the SRP upon his breach of said
deeds. Thus, the post-retirement competitive employment ban incorporated in the Undertaking of
respondent does not, on its face, appear to be of the same class or genre as that contemplated in
Rochester.
It is settled that actual damages or compensatory damages may be awarded for breach of contracts.
Actual damages are primarily intended to simply make good or replace the loss covered by said
breach.67 They cannot be presumed. Even if petitioner had admitted to having breached the
Undertaking, respondent must still prove that it suffered damages and the amount thereof. 68 In
determining the amount of actual damages, the Court cannot rely on mere assertions, speculations,
conjectures or guesswork but must depend on competent proof and on the best evidence obtainable
regarding the actual amount of losses.69 The benefit to be derived from a contract which one of the
parties has absolutely failed to perform is of necessity to some extent a matter of speculation of the
injured party.
On the assumption that the competitive employment ban in the Undertaking is valid, petitioner is not
automatically entitled to return the P963,619.28 he received from respondent. To reiterate, the terms
of the Undertaking clearly state that any breach by petitioner of his promise would entitle respondent
to a cause of action for protection in the courts of law; as such, restitution of the P963,619.28 will not
follow as a matter of course. Respondent is still burdened to prove its entitlement to the aforesaid
amount by producing the best evidence of which its case is susceptible. 70
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of
Appeals in CA-G.R. CV No. 52235 is SET ASIDE. Let this case be REMANDED to the Regional
Trial Court of Manila for further proceedings conformably with this decision of the Court.
SO ORDERED.
SECOND DIVISION
DECISION
LAZARO-JAVIER, J.:
Prefatory
We have always recognized and respected certain rights and privileges of employers
and would not, when law and judgment dictate, interfere with its business decisions.
Management rights and prerogatives, however, are not absolute. On numerous
occasions, We have come forward to temper the unbridled exercise of these rights and
prerogatives.
The Case
This petition for review on certiorari1 assails the following dispositions, of the Court of
Appeals in CA-G.R. SP No. 134712 entitled Isabela-I Electric Coop., Inc. represented by
its General Manager, Engr. Virgilio L. Montano v. National Labor Relations Commission
and Vicente B. Del Rosario, Jr.:
1. Decision dated December 21, 2015,2 affirming the finding of the National Labor
Relation Commission (NLRC) that respondent Vicente B. Del Rosario, Jr. was
constructively dismissed; and
On January 29, 1996, petitioner Isabela-I Electric Cooperative, Inc. hired respondent
Vicente B. Del Rosario, Jr. as Financial Assistant. The latter quickly rose from the ranks.
After just three (3) months, on April 26, 1996, he got promoted as Acting Management
Internal Auditor and on October 26, 1996, as Management Internal Auditor at
petitioner's main office.5
As Management Internal Auditor, respondent was receiving a basic monthly salary of
P30,979.00 exclusive of representation allowance and other emoluments and
benefits.6 Petitioner never raised any issue regarding his performance and capacity to
lead his department.7
In January 2011, petitioner approved a reorganization plan declaring all positions in the
company vacant. Respondent, along with other employees signed a Manifesto to oppose
the reorganization. Despite this opposition, petitioner proceeded to implement the
reorganization in June 2011.8 Additionally, petitioner informed its employees in writing,
that they were on a "hold-over capacity." 9
Together with other employees, respondent was made to fill out a prescribed
application form. There, respondent listed "Internal Auditor Manager A," his current
position, as his first preference, and "Finance Services Department Manager A" as his
second.10
While on vacation leave in October 2012, respondent received two (2) letters from
petitioner. The first referred to his appointment as probationary Area Operations
Manager. The second contained four (4) office memoranda which (a) indicated his area
of assignment; (b) ordered him to cease acting as petitioner's management internal
auditor; (c) directed him to turn over his current post and pertinent documents to his
successor; and (d) appointed his subordinate Arlene B. Boy as officer-in-charge of the
Auditing Department.11 Although respondent had issues about this new appointment,
including the fact that his successor was not even a Certified Public Accountant (CPA)
as he was the only CPA among petitioner's employees, he begrudgingly accepted his
appointment.12
Three (3) months later, in January 2013, respondent sent a letter to petitioner's
general manager Virgilio L. Montano, voicing out his concern that the new position
given him was a demotion. In the same letter he requested to be reinstated to his
former position, especially since he was the only CPA among petitioner's employees.
Petitioner, however, did not act on his letter.13
The Complaint
On January 30, 2013, respondent filed the complaint below for illegal dismissal and
damages. He claimed he was unlawfully demoted and was therefore constructively
dismissed. He essentially averred:
(a) His former position as Management Internal Auditor had Salary Rank 20
(Php33,038.05), while his new position as Area Operations Management Department
Manager came with Salary Rank 19 (Php30,963.95).14
(b) The job description contained in his undated appointment entailed lesser
responsibilities than those pertaining to his former position. What he held before
covered the entire province of Isabela while his new position was limited to Isabela
South Sector.15
(c) Although his former position was not abolished, an incumbent of lesser qualifications
than him was appointed thereto. Among all petitioner's employees, he is the only full-
fledged CPA with a Master's Degree in Business Administration. He is the most qualified
candidate for his former position.16
(b) Petitioner appointed him to a position with a salary rank lower than that attached to
his former position. The guidelines specifically stated that employees who had been
assigned lower ranks would not suffer diminution in salary. 18
In its position paper,19 petitioner explained that under Republic Act No. 9136 (RA 9136)
or the Electric Power Industry Reform Act of 2001, (EPIRA) distribution utilities like
itself were required to reengineer their existing organization to suit the demands of
time. National Electrification Administration (NEA) Memorandum No. 2004-024 provided
for the model organizational structure to be adopted by all electric cooperatives. Thus,
it structured a reorganizational plan which the NEA approved. 20
Pursuant to the reorganization plan, it declared all positions vacant and subjected all
employees to evaluation. The reorganization went smoothly although there was
hesitation from some of its employees. Its accredited union did not consider any aspect
of the reorganization as a violation of the Collective Bargaining Agreement (CBA). 21
It was true respondent requested to be reappointed to his former position. But it was
also equally true that respondent was given a fresh appointment since all positions in
the company were declared vacant as a result of the reorganization. 23
Respondent's new appointment was based on a valid reorganization. The position given
him was the result of the company's assessment of his qualifications, aptitude, and
competence. He was appointed Area Operations Management Department Manager
because the company had ascertained that his assignment would produce maximum
benefit to the operations of the company. 24
An employee did not have a vested right in his or her position, otherwise, the employer
would be deprived of its prerogative to move an employee to another assignment
where he would be most useful.25 If the purpose of reorganization were to be achieved,
changes in the positions and rankings of the employees should be expected. To insist
on one's old position and ranking after the reorganization would render such endeavor
ineffectual.26
By Decision dated August 29, 2013,28 Labor Arbiter Ma. Lourdes R. Baricaua dismissed
the complaint. She found no concrete evidence on record showing that petitioner
undertook the process of reorganization for purposes other than its declared objective:
to save cost and maximize productivity and in compliance with the NEA policy as
mandated by RA 9136.29
On appeal, the NLRC reversed through its Decision dated November 20, 2013. 30 It held
that petitioner did not present any justifiable reason for not reappointing respondent to
his former position, nor did it deny that respondent was the only licensed CPA among
its employees. Too, the NLRC noted that respondent's new position carried a lower
salary grade than that attached to his former position. The NLRC thus ruled:
1. Salary differential at the rate of Two Thousand Seventy Four Pesos and Ten
Centavos [Php2,074.10] per month starting on October 2012, which to date amounted
to Twenty Six Thousand Nine Hundred Sixty Three and Thirty Centavos
[Php26,963.30];
2. Moral and exemplary damages of Twenty Five Thousand Pesos [Php25,000.00] each
or a total amount of Fifty Thousand Pesos [Php50,000.00];
3. Attorney's fees often percent [10%] of the total award. Other claims are dismissed
for lack of merit.
SO ORDERED.31
Under Resolution dated January 21, 2014,32 the NLRC denied petitioner's motion for
reconsideration.
The Court of Appeals' Ruling
Petitioner brought the case to the Court of Appeals which, by Decision dated December
21, 2015, affirmed but deleted the award of salary differential, viz:
SO ORDERED.33
The Court of Appeals further denied petitioner's motion for reconsideration 34 under its
Resolution dated July 7, 2016.35
Petitioner now seeks this Court's discretionary appellate jurisdiction to review and
reverse the assailed dispositions of the Court of Appeals. In support hereof, petitioner
basically repeats the arguments presented and passed upon by the three (3) tribunals
below.
In his Comment dated December 11, 2016, respondent similarly repleads his
submissions below against petitioner's plea for affirmative relief.
Issue
Was respondent constructively dismissed when he got appointed to the new position of
Area Operations Management Department Manager in lieu of his former position as
Management Internal Auditor?
Ruling
The Court has been faced with charges of constructive dismissal. In several occasions,
We have recognized management prerogative to effect the transfer of its employees. At
other times, though, We have succored the worker's rights against arbitrary transfers
which amount to constructive dismissal.
Here, the NLRC and Court of Appeals correctly ruled that respondent was demoted
without sufficient cause.
Petitioner, nonetheless, argues that respondent was not demoted, but was appointed to
a new position as a result of the company's reorganization. There was allegedly no
diminution in respondent's rank because: (a) he is still a manager; (b) his functions
were not diminished; (c) as the Court of Appeals held, there was no diminution in his
salary; (d) there was no change in his place of work; and (e) there was no change in
the benefits and privileges given to him.
We do not agree.
Diminution in rank
x x x x x x x x x
x x x x x x x x x
So, what is in a name? Although respondent retained the appellation "manager," his
new rank was in fact a demotion from his former position.
More, petitioner has consistently admitted that respondent is the only-licensed CPA
among its employees. In addition, respondent holds a Master's Degree in Business
Administration. Petitioner also concedes that respondent has been working for the
company as auditor continuously for fifteen (15) years before the reorganization.
Respondent has all the qualifications to continue holding the position of Management
Internal Auditor, which after the reorganization, was not abolished. For no apparent
reason, petitioner opted to appoint, even in an acting capacity, a non-CPA as
Management Internal Auditor. In fine, petitioner arbitrarily, sans any rhyme or reason
peremptorily removed respondent from his post as Management Internal Auditor in the
guise of a supposed reorganization and exercise of management prerogative.
Petitioner next claims that the "totality of circumstances rule" as enunciated in Tinio v.
Court of Appeals42 shows that respondent did not actually suffer diminution.
Petitioner's argument fails. In Tinio, the Court sustained the management's decision to
transfer Tinio to another position and area of assignment because the transfer could
actually be considered a promotion. For Tinio's transfer from the Cebu office to the
Makati office entailed greater responsibilities because it would involve corporate
accounts of top establishments in Makati which are significantly greater in value than
the individual accounts in Visayas and Mindanao. The Court held that the transfer was
even beneficial and advantageous since Tinio was being assigned the corporate
accounts of the choice clients of SMART. More, the position was of the same level as
Senior Manager since the skills and competencies required involved handling the
accounts of top corporate clients being among the largest corporations in the country. 43
The situation in Tinio is not the case here. As thoroughly discussed by the NLRC and the
Court of Appeals, respondent's new position entailed less responsibilities and less
qualifications than those pertaining to his former position. In essence, the totality of the
circumstances actually obtaining here leads to no other conclusion than that respondent
was in fact demoted.
Diminution in salary
We disagree with the Court of Appeals' finding that respondent did not suffer diminution
in salary.
Records show that Management Internal Auditor carries Salary Rank 20, while the
position of Area Operations Head, Salary Rank 19.
On this score, petitioner asserts that respondent is basically receiving the same amount
of salary at P30,963.95, and therefore, there is no diminution in salary to speak of.
The evidence, however, would suggest that after the reorganization, there was
restructuring of the salary ranks. Salary Rank 20 is paid P33,038.53, 44 while the
compensation for Salary Rank 19 is fixed at P30,963.95. Hence, had petitioner been
retained as Management Internal Auditor, he would already have received P33,038.53,
and not just P30,963.95.
In any case, even if there was no diminution in salary, there has still been a demotion
in terms of respondent's rank, responsibilities, and status. There is demotion when an
employee is appointed to a position resulting to a diminution in duties, responsibilities,
status or rank which may or may not involve a reduction in salary.45
All told, the Court of Appeals did not err when it affirmed the NLRC's finding that
respondent was demoted, hence, was considered to have been constructively
dismissed. But for the reasons heretofore stated, We restore the award of salary
differential to respondent.
ACCORDINGLY, the petition is DENIED. The Decision dated December 21, 2015 and
Resolution dated July 7, 2016 of the Court of Appeals in CA-G.R. SP No. 134712
are AFFIRMED with MODIFICATION.
Vicente B. Del Rosario, Jr. is declared to have been illegally transferred and/or
demoted. Isabela-1 Electric Coop., Inc. is ordered to immediately reinstate and/or
restore the Vicente B. Del Rosario, Jr. to his former position as Management Internal
Auditor and to pay the him the following amounts:
1. Salary differential at the rate of Two Thousand Seventy-Four Pesos and Ten
Centavos [Php2,074.10] per month starting on October 2012 until actual reinstatement
to his former position:
5. Legal Interest of twelve per cent (12%) per annum of the total monetary awards,
computed from October 2012 up to June 30, 2013, and thereafter, six percent (6%) per
annum from July 1, 2013 until fully paid. 46
SO ORDERED.
Social Justice FIRST DIVISION [ G.R. No. 220998, August 08, 2016 ] HOLCIM PHILIPPINES, INC., VS. RENANTE
J. OBRA, PERLAS-BERNABE, J.:
PERLAS-BERNABE, J.:
Before the Court is a petition for review on certiorari,[1] filed by petitioner
Holcim Philippines, Inc. (petitioner), assailing the Decision [2] dated
February 13, 2015 and the Resolution[3] dated September 7, 2015 of the
Court of Appeals (CA) in CA-G.R. SP No. 136413, which affirmed the
Decision[4] dated March 31, 2014 and the Resolution[5] dated April 30, 2014
of the National Labor Relations Commission (NLRC) in NLRC LAC No. 03-
000696-14(8) / NLRC CN. RAB-I-09-1102-13(LU-l), holding that
respondent Renante J. Obra (respondent) was illegally dismissed and,
thereby, ordering petitioner to pay him separation pay amounting to
P569,772.00 in lieu of reinstatement.
The Facts
In a Decision[44] dated March 31, 2014, the NLRC reversed the LA's ruling
and held that the penalty of dismissal from service imposed upon
respondent was unduly harsh since his misconduct was not so gross to
deserve such penalty.[45] It found merit in respondent's defense that he took
the scrap wire on the belief that it was already for disposal, noting that
petitioner never denied the same.[46] The NLRC also emphasized that
petitioner did not suffer any damage since respondent was not able to take
the wire outside the company premises.[47] Moreover, he did not hold a
position of trust and confidence and was remorseful of his mistake, as
evidenced by his repeated pleas for another chance.[48] These, coupled with
the fact that he had been in petitioner's employ for nineteen (19) years,
made respondent's dismissal from service excessive and harsh.
[49]
Considering, however, the strained relations between the parties, the
NLRC awarded separation pay in favor of respondent in lieu of
reinstatement.[50]
The CA Ruling
The sole issue for the Court's resolution is whether or not the CA erred in
affirming the ruling of the NLRC.
The Court's Ruling
There is no question that the employer has the inherent right to discipline,
including that of dismissing its employees for just causes. [59] This right is,
however, subject to reasonable regulation by the State in the exercise of its
police power.[60] Accordingly, the finding that an employee violated
company rules and regulations is subject to scrutiny by the Court to
determine if the dismissal is justified and, if so, whether the penalty
imposed is commensurate to the gravity of his offense.[61]
In this case, the Court agrees with the CA and the NLRC that respondent's
misconduct is not so gross as to deserve the penalty of dismissal from
service. As correctly observed by the NLRC, while there is no dispute that
respondent took a piece of wire from petitioner's La Union Plant and tried
to bring it outside the company premises, he did so in the belief that the
same was already for disposal. Notably, petitioner never denied that the
piece of wire was already for disposal and, hence, practically of no value. At
any rate, petitioner did not suffer any damage from the incident, given that
after being asked to submit himself and his bag for inspection, respondent
had a change of heart and decided to just return the wire to the Packhouse
Office. Respondent has also shown remorse for his mistake, pleading
repeatedly with petitioner to reconsider the penalty imposed upon him. [62]
Time and again, the Court has held that infractions committed by an
employee should merit only the corresponding penalty demanded by the
circumstance.[63] The penalty must be commensurate with the act, conduct
or omission imputed to the employee.[64]
The Court is not unaware of its ruling in Reno Foods, Inc. v. Nagkakaisang
Lakas ng Manggagawa (NLM) – KATIPUNAN,[74] which was cited in the
petition,[75] where an employee was dismissed after being caught hiding six
(6) Reno canned goods wrapped in nylon leggings inside her bag. However,
in that case, the main issue was the payment of separation pay and/or
financial assistance and not the validity of the employee's dismissal.
Furthermore, unlike the present case where respondent tried to take a piece
of scrap wire, the employee in Reno Foods tried to steal items
manufactured and sold by the company. Her wrongful intent is also evident
as she tried to hide the canned goods by wrapping them in nylon leggings.
Here, as earlier adverted to, respondent volunteered the information that
he had a piece of scrap wire in his bag.
In this case, the Court cannot sustain the award of separation pay in lieu of
respondent's reinstatement on the bare allegation of the existence of
"strained relations" between him and the petitioner. It is settled that the
doctrine on "strained relations" cannot be applied indiscriminately since
every labor dispute almost invariably results in "strained relations;"
otherwise, reinstatement can never be possible simply because some
hostility is engendered between the parties as a result of their
disagreement.[80] It is imperative, therefore, that strained relations be
demonstrated as a fact and adequately supported by substantial evidence
showing that the relationship between the employer and the employee is
indeed strained as a necessary consequence of the judicial controversy. [81]
Unfortunately, the Court failed to find the factual basis for the award of
separation pay to herein respondent. The NLRC Decision did not state the
facts which demonstrate that reinstatement is no longer a feasible option
that could have justified the alternative relief of granting separation pay.
[82]
Hence, reinstatement cannot be barred, especially, as in this case, when
the employee has not indicated an aversion to returning to work, or does
not occupy a position of trust and confidence in, or has no say in the
operation of the employer's business.[83] As priorly stated, respondent had
expressed remorse over the incident and had asked to be given the chance
to correct his mistake. He had also prayed for a lower penalty than
dismissal, especially considering his lack of intent to steal, and his
unblemished record of 19 years of employment with petitioner. All these
clearly indicate his willingness to continue in the employ of petitioner and
to redeem himself. Considering further that respondent did not occupy a
position of trust and confidence and that his taking of the scrap wire did not
relate to the performance of his work as packhouse operator, his
reinstatement remains a viable remedy. The award of separation pay,
therefore, being a mere exception to the rule, finds no application herein.
Accordingly, he should be reinstated to his former position.
SO ORDERED.
2nd DIVISION G.R. No. 148340 : January 26, 2004 J.A.T. GENERAL SERVICES And JESUSA ADLAWAN TOROBU,
V. NATIONAL LABOR RELATIONS COMMISSION And JOSE F. MASCARINAS, QUISUMBING, J.:
DECISION
QUISUMBING, J.:
For review are the Decision dated February 27, 2001 of the Court of Appeals in CA-G.R. SP No.
1
60337, and its Resolution dated May 28, 2001, denying the motion for reconsideration. The Court of
2
Appeals dismissed the petition for certiorari filed by petitioners and affirmed the Resolution of the
3
National Labor Relations Commission (NLRC), Third Division, which affirmed the Decision of Labor
4
Arbiter Jose G. De Vera in NLRC-NCR Case No. 00-03-02279-98, which found petitioners liable for
illegal dismissal and ordered petitioners to pay private respondent Jose Mascarinas separation pay,
backwages, legal holiday pay, service incentive leave pay and 13th month pay in the aggregate sum
of ₱85,871.00.
Petitioner Jesusa Adlawan Trading & General Services (JAT) is a single proprietorship engaged in
the business of selling second-hand heavy equipment. JAT is owned by its namesake, co-petitioner
Jesusa Adlawan Torobu. Sometime in April 1997, JAT hired private respondent Jose F. Mascarinas
as helper tasked to coordinate with the cleaning and delivery of the heavy equipment sold to
customers. Initially, private respondent was hired as a probationary employee and was paid ₱165
per day that was increased to ₱180 in July 1997 and ₱185 in January 1998.
In October 1997, the sales of heavy equipment declined because of the Asian currency crisis.
Consequently, JAT temporarily suspended its operations. It advised its employees, including private
respondent, not to report for work starting on the first week of March 1998. JAT indefinitely closed
shop effective May 1998.
A few days after, private respondent filed a case for illegal dismissal and underpayment of wages
against petitioners before the NLRC.
In his Complaint, private respondent alleged that he started as helper mechanic of JAT on January
6, 1997 with an initial salary rate of ₱165.00 per day, which was increased to ₱180.00 per day after
six (6) months in employment. He related that he was one of those retrenched from employment by
JAT and was allegedly required to sign a piece of paper which he refused, causing his termination
from employment.
On December 14, 1998, JAT filed an Establishment Termination Report with the Department of
Labor and Employment (DOLE), notifying the latter of its decision to close its business operations
due to business losses and financial reverses.
After due proceedings, the Labor Arbiter rendered a decision on March 25, 1999, finding the
dismissal of herein private respondent unjustified and ordering JAT to pay private respondent
separation pay and backwages, among others. The decretal portion of the decision reads as follows:
WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered ordering
the respondents [herein petitioners] to pay complainant the aggregate sum of ₱85,871.00.
SO ORDERED. 5
The Labor Arbiter ruled that (1) private respondent Jose F. Mascarinas’ dismissal was unjustified
because of petitioners’ failure to serve upon the private respondent and the DOLE the required
written notice of termination at least one month prior to the effectivity thereof and to submit proof
showing that petitioners suffered a business slowdown in operations and sales effective January
1998; (2) private respondent may recover backwages from March 1, 1998 up to March 1, 1999 or
₱66,924.00 and separation pay, in lieu of reinstatement, at the rate of one (1) month pay for every
6
year of service, or ₱10,296.00; (3) the payrolls submitted by JAT showed that effective May 1, 1997,
7
private respondent’s wages did not conform to the prevailing minimum wage, hence, private
respondent is entitled to salary differentials from May 1, 1997 to January 6, 1998, in the amount of
₱1,066.00; (4) that private respondent be awarded legal holiday pay in the amount of
8
₱1,850.00, service incentive leave pay in the amount of ₱925.00 and 13th month pay for 1997 in
9 10
On appeal, the NLRC affirmed the decision of the labor arbiter. The NLRC found that the financial
12
statements submitted on appeal were questionable, unreliable and inconsistent with petitioners’
allegations in the pleadings, particularly as to the date of the alleged closure of operation; hence,
they cannot be used to support private respondent’s dismissal. The NLRC also affirmed the
monetary awards because petitioners failed to prove the payment of benefits claimed by private
respondent.
Dissatisfied, petitioners filed a Petition for Certiorari under Rule 65 before the Court of Appeals,
which the latter dismissed. The decretal portion of the decision reads as follows:
WHEREFORE, foregoing premises considered, the instant petition, having no merit in fact and in
law, is hereby DENIED DUE COURSE, and ordered DISMISSED, and the assailed decision of the
National Labor Relations Commission AFFIRMED, with costs to petitioners.
SO ORDERED. 13
The Court of Appeals affirmed the findings of the NLRC, particularly on the illegal dismissal of the
private respondent. The appellate court held that the petitioners failed to prove by clear and
convincing evidence their compliance with the requirements for valid retrenchment. It cited the
findings of the NLRC on the belated submission of the financial statements during appeal that could
not be given sufficient weight, and that the petitioners’ late submission of notice of closure is
indicative of their bad faith.
Petitioners filed a Motion of Reconsideration, which was denied by the Court of Appeals.
C. THE LOWER COURT (sic) ERRED IN RULING THAT THE EMPLOYER HAS THE
BURDEN OF PROVING THE EXISTENCE OF AN EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN THE PARTIES;
The relevant issues for our resolution are: (a) whether or not private respondent was illegally
dismissed from employment due to closure of petitioners’ business, and (b) whether or not private
respondent is entitled to separation pay, backwages and other monetary awards.
On the first issue, the petitioners claim that the Court of Appeals erroneously concluded that they are
liable for illegal dismissal because of non-compliance of the procedural and substantive
requirements of terminating employment due to retrenchment and cessation of business. They
argued that there was no closure but only suspension of operation in good faith in March 1998, when
private respondent claimed to have been illegally dismissed, due to the decline in sales and heavy
losses incurred in its business arising from the 1997 Asian financial crisis. Petitioners assert that
under Article 286 of the Labor Code, a bona fide suspension of the operation of a business for a
period not exceeding six (6) months shall not terminate employment and no notice to an employee is
required. However, petitioners relate that JAT was compelled to permanently close its operation
eight (8) months later or on November 1998, when the hope of recovery became nil but only after
sending notices to all its workers and DOLE. Thus, petitioners argue that it cannot be held liable for
illegal dismissal in March 1998 since there was no termination of employment during suspension of
operations and a notice to employee is not required, unlike in the case of permanent closure of
business operation.
We need not belabor the issue of notice requirement for a suspension of operation of business
under Article 286 of the Labor Code. This matter is not pertinent to, much less determinative of, the
15
disposition of this case. Suffice it to state that there is no termination of employment during the
period of suspension, thus the procedural requirement for terminating an employee does not come
into play yet. Rather, the issue demanding a sharpened focus here concerns the validity of dismissal
resulting from the closure of JAT.
A brief discussion on the difference between retrenchment and closure of business as grounds for
terminating an employee is necessary. While the Court of Appeals defined the issue to be the
validity of dismissal due to alleged closure of business, it cited jurisprudence relating
to retrenchment to support its resolution and conclusion. While the two are often used
interchangeably and are interrelated, they are actually two separate and independent authorized
causes for termination of employment. Termination of an employment may be predicated on one
without need of resorting to the other.
Closure of business, on one hand, is the reversal of fortune of the employer whereby there is a
complete cessation of business operations and/or an actual locking-up of the doors of establishment,
usually due to financial losses. Closure of business as an authorized cause for termination of
employment aims to prevent further financial drain upon an employer who cannot pay anymore his
employees since business has already stopped. On the other hand, retrenchment is reduction of
personnel usually due to poor financial returns so as to cut down on costs of operations in terms of
salaries and wages to prevent bankruptcy of the company. It is sometimes also referred to as down-
sizing. Retrenchment is an authorized cause for termination of employment which the law accords
an employer who is not making good in its operations in order to cut back on expenses for salaries
and wages by laying off some employees. The purpose of retrenchment is to save a financially ailing
business establishment from eventually collapsing. 16
In the present case, we find the issues and contentions more centered on closure of business
operation rather than retrenchment. Closure or cessation of operation of the establishment is
an authorized cause for terminating an employee under Article 283 of the Labor Code, to wit:
ART. 283. Closure of establishment and reduction of personnel. – The employer may also terminate
the employment of any employee due to the installation of labor-saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by
serving a written notice on the workers and the Department of Labor and Employment at least one
(1) month before the intended date thereof. … In case of 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
to 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 one (1) whole year.
However, the burden of proving that such closure is bona fide falls upon the employer. In the
17
present case, JAT justifies its closure of business due to heavy losses caused by declining sales. It
belatedly submitted its 1997 Income Statement and Comparative Statement of Income and Capital
18
for 1997 and 1998 to the NLRC to prove that JAT suffered losses starting 1997. However, as noted
19
earlier, these were not given much evidentiary weight by the NLRC as well as the Court of Appeals,
to wit:
The financial statements submitted by the respondents on appeal are questionable for the following
reasons: (1) the figures in Annexes "D-2" and "E" of the appeal memorandum (which both refer to
1997) do not tally; (2) they (the respondents) allegedly closed on March 1, 1998. Yet, their 1998
financial statement (Annex "E") indicates operations up to and ending December 31, 1998. In view of
the foregoing, the above-mentioned financial statements do not justify the complainant’s dismissal.
… 20
The foregoing findings of the Court of Appeals is conclusive on us. We see no cogent reason to set it
aside. While business reverses or losses are recognized by law as an authorized cause for
terminating employment, it is an essential requirement that alleged losses in business operations
must be proven convincingly. Otherwise, said ground for termination would be susceptible to abuse
by scheming employers, who might be merely feigning business losses or reverses in their business
ventures in order to ease out employees. In this case, the financial statements were not only
21
belatedly submitted but were also bereft of necessary details on the extent of the alleged losses
incurred, if any. The income statements only indicated a decline in sales in 1998 as compared to
1997. These fell short of the stringent requirement of the law that the employer prove sufficiently and
convincingly its allegation of substantial losses. While the comparative income statement shows a
net loss of ₱207,091 in 1998, the income statement of 1997 still shows JAT posting a net income of
₱19,361. Both statements need interpretation as to their impact on the company’s termination of
certain personnel as well as business closure.
Having concluded that private respondent was not validly dismissed resulting from closure of
business operations due to substantial losses, we now proceed to determine whether or not private
respondent was validly dismissed on the ground of closure or cessation of operations for reasons
other than substantial business losses.
A careful examination of Article 283 of the Labor Code shows that closure or cessation of business
operation as a valid and authorized ground of terminating employment is not limited to those
resulting from business losses or reverses. Said provision in fact provides for the payment of
separation pay to employees terminated because of closure of business not due to losses, thus
implying that termination of employees other than closure of business due to losses may be valid.
…Art. 283 governs the grant of separation benefits "in case of closures or cessation of operation" of
business establishments "NOT due to serious business losses or financial reverses x x x." Where,
however, the closure was due to business losses–as in the instant case, in which the aggregate
losses amounted to over ₱20 billion–the Labor Code does not impose any obligation upon the
employer to pay separation benefits, for obvious reasons. There is no need to belabor this point.
Even the public respondents, in their Comment filed by the Solicitor General, impliedly concede this
point.
In any case, Article 283 of the Labor Code is clear that an employer may close or cease his business
operations or undertaking even if he is not suffering from serious business losses or financial
reverses, as long as he pays his employees their termination pay in the amount corresponding to
their length of service. It would, indeed, be stretching the intent and spirit of the law if we were to
unjustly interfere in management’s prerogative to close or cease its business operations just
because said business operation or undertaking is not suffering from any loss.
In the present case, while petitioners did not sufficiently establish substantial losses to justify closure
of the business, its income statement shows declining sales in 1998, prompting the petitioners to
suspend its business operations sometime in March 1998, eventually leading to its permanent
closure in December 1998. Apparently, the petitioners saw the declining sales figures and the
unsustainable business environment with no hope of recovery during the period of suspension as
indicative of bleak business prospects, justifying a permanent closure of operation to save its
business from further collapse. On this score, we agree that undue interference with an employer’s
judgment in the conduct of his business is uncalled for. Even as the law is solicitous of the welfare of
employees, it must also protect the right of an employer to exercise what is clearly a management
prerogatives. As long as the company’s exercise of the same is in good faith to advance its interest
and not for the purpose of defeating or circumventing the rights of employees under the law or a
valid agreement such exercise will be upheld. 24
In the event, under Article 283 of the Labor Code, three requirements are necessary for a valid
cessation of business operations, namely: (a) service of a written notice to the employees and to the
DOLE at least one (1) month before the intended date thereof; (b) the cessation of business must be
bona fide in character; and (c) payment to the employees of termination pay amounting to at least
one-half (1/2) month pay for every year of service, or one (1) month pay, whichever is higher. 25
The closure of business operation by petitioners, in our view, is not tainted with bad faith or other
circumstance that arouses undue suspicion of malicious intent. The decision to permanently close
business operations was arrived at after a suspension of operation for several months precipitated
by a slowdown in sales without any prospects of improving. There were no indications that an
impending strike or any labor-related union activities precipitated the sudden closure of business.
Further, contrary to the findings of the Labor Arbiter, petitioners had notified private respondent and
26
all other workers through written letters dated November 25, 1998 of its decision to permanently
close its business and had submitted a termination report to the DOLE. Generally, review of labor
27
cases elevated to this Court on a petition for review on certiorari is confined merely to questions of
law. But in certain cases, we are constrained to analyze or weigh the evidence again if the findings
of fact of the labor tribunals and the appellate court are in conflict, or not supported by evidence on
record or the judgment is based on a misapprehension of facts. 28
In this case, we are persuaded that the closure of JAT’s business is not unjustified. Further we hold
1âwphi1
that private respondent was validly terminated, because the closure of business operations is
justified.
Nevertheless in this case, we must stress that the closure of business operation is allowed under the
Labor Code, provided separation pay be paid to the terminated employee. It is settled that in case of
closure or cessation of operation of a business establishment not due to serious business losses or
financial reverses, the employees are always given separation benefits. The amount of separation
29
pay must be computed from the time private respondent commenced employment with petitioners
until the time the latter ceased operations.
30
1âwphi1
Considering that private respondent was not illegally dismissed, however, no backwages need to be
awarded. Backwages in general are granted on grounds of equity for earnings which a worker or
employee has lost due to illegal dismissal. It is well settled that backwages may be granted only
31
The other monetary awards to private respondent are undisputed by petitioners and unrefuted by
any contrary evidence. These awards, namely legal holiday pay, service incentive leave pay and
13th month pay, should be maintained.
WHEREFORE, the petition is given due course. The assailed Resolutions of the Court of Appeals in
CA-G.R. SP No. 60337 are AFFIRMED with the MODIFICATION that the award of ₱66,924.00 as
backwages is deleted. The award of separation pay amounting to ₱10,296.00 and the other
monetary awards, namely salary differentials in the amount of ₱1,066.00, legal holiday pay in the
amount of ₱1,850.00, service incentive leave pay in the amount of ₱925.00 and 13th month pay in
the amount of ₱4,910, or a total of ₱29,047.00 are maintained. No pronouncement as to costs.
SO ORDERED.
R.A. 10911: “ANTI-AGE DISCRIMINATION IN EMPLOYMENT ACT”.
Sixteenth Congress
Begun and held in Metro Manila, on Monday, the twenty-seventh day of July, two thousand fifteen.
Be it enacted by the Senate and House of Representatives of the Philippine Congress Assembled:
Section 1. Short Title. - This Act shall be known as the "Anti-Age Discrimination in Employment Act".
Section 2. Declaration of Policies. - The State shall promote equal opportunities in employment for
everyone. To this end, it shall be the policy of the State to:
(a) Promote employment of individuals on the basis of their abilities, knowledge, skills and
qualifications rather than their age.
(c) Promote the right of all employees and workers, regardless of age, to be treated equally
in terms of compensation, benefits, promotion, training and other employment opportunities.
(b) Employer refers to any person, natural or juridical, employing the services of an
employee or worker and shall include the government and all its branches, subdivisions and
instrumentalities, all government-owned and -controlled corporations, and government
financial institutions, as well as nonprofit private institutions or organizations;
(d) Labor contractor refers to any person or an agent of that person who regularly
undertakes, with or without compensation, the procurement of employees or workers for an
employer, or the procurement for employees’ or workers’ opportunities to work for an
employer;
(e) Labor organization refers to any union or association of employees or workers which
exists in whole or in part for the purpose of collective bargaining or for dealing with
employers concerning terms and conditions of employment;
(f) Publisher refers to any person or juridical entity engaged in the printing of information on
paper and its distribution, buying or securing of airtime or space on television, radio or the
internet, and other similar media; and
(g) Worker refers to a person who performs manual labor involving skilled or unskilled work,
and is paid wages by the employer as compensation for services rendered.
Section 4. Coverage. - The provisions of this Act shall apply to all employers, labor contractors or
subcontractors, if any, and labor organizations.
(2) Require the declaration of age or birth date during the application process;
(5) Deny any employee’s or worker’s promotion or opportunity for training because of
age;
(7) Impose early retirement on the basis of such employee’s or worker’s age.
(b) It shall be unlawful for a labor contractor or subcontractor, if any, to refuse to refer for
employment or otherwise discriminate against any individual because of such person’s age.
(2) Exclude from its membership any individual because of such individual’s age; or
(d) It shall be unlawful for a publisher to print or publish any notice of advertisement relating
to employment suggesting preferences, limitations, specifications, and discrimination based
on age.
Section 6. Exceptions. - It shall not be unlawful for an employer to set age limitations in employment
if:
(a) Age is a bona fide occupational qualification reasonably necessary in the normal
operation of a particular business or where the differentiation is based on reasonable factors
other than age;
(b) The intent is to observe the terms of a bona fide seniority system that is not intended to
evade the purpose of this Act;
(c) The intent is to observe the terms of a bona fide employee retirement or a voluntary early
retirement plan consistent with the purpose of this Act: Provided, That such retirement or
voluntary retirement plan is in accordance with the Labor Code, as amended, and other
related laws; or
(d) The action is duly certified by the Secretary of Labor and Employment in accordance with
the purpose of this Act. 1awp++i1
Section 7. Penalty. - Any violation of this Act shall be punished with a fine of not less than fifty
thousand pesos (₱50,000.00) but not more than five hundred thousand pesos (₱500,000.00), or
imprisonment of not less than three (3) months but not more than two (2) years, or both, at the
discretion of the court. If the offense is committed by a corporation, trust, firm, partnership or
association or other entity, the penalty shall be imposed upon the guilty officer or officers of such
corporation, trust, firm, partnership or association or entity.
Section 8. Education and Research Programs. - The Department of Labor and Employment (DOLE)
shall:
(a) Conduct studies and researches on minimizing impediments to the employment of older
persons, and furnish such information to employers, labor groups, and the general public;
and
(b) Promote programs, in coordination with public and private agencies, that will further
enhance the knowledge and skills of every individual regardless of age. 1âwphi1
Section 9. Implementing Rules and Regulations. - The DOLE shall have the authority to investigate
and require the keeping of records necessary for the administration of this Act. Within ninety (90)
days from the effectivity of this Act, the Secretary of Labor and Employment shall formulate the
necessary rules and regulations to implement the provisions of this Act.
Section 10. Separability Clause. - Should any provision of this Act be declared unconstitutional, the
remainder thereof not otherwise affected shall remain in full force and effect.
Section 11. Repealing Clause. - All existing laws, presidential decrees, executive orders,
proclamations or administrative regulations that are inconsistent with the provisions of this Act are
hereby repealed, amended or modified accordingly.
Section 12. Effectivity. - This Act shall take effect fifteen (15) days after its publication in the Official
Gazette or in a newspaper of general circulation.
Approved,
FRANKLIN M. DRILON
President of the Senate
FELICIANO BELMONTE, JR.
Speaker of the House of Representatives
This Act was passed by the House of Representatives as House Bill No. 6418 on May 23, 2016 and
adopted by the Senate as an amendment to Senate Bill No. 29 on May 30, 2016
OSCAR G. YABES
Secretary of the Senate
MARILYN B. BARUA-YAP
Secretary General
House of Representatives
ARMANDO G. YRASUEGUI, petitioners,
vs.
PHILIPPINE AIRLINES, INC., respondents.
DECISION
REYES, R.T., J.:
THIS case portrays the peculiar story of an international flight steward who was dismissed because
of his failure to adhere to the weight standards of the airline company.
He is now before this Court via a petition for review on certiorari claiming that he was illegally
dismissed. To buttress his stance, he argues that (1) his dismissal does not fall under 282(e) of the
Labor Code; (2) continuing adherence to the weight standards of the company is not a bona fide
occupational qualification; and (3) he was discriminated against because other overweight
employees were promoted instead of being disciplined.
The Facts
Petitioner Armando G. Yrasuegui was a former international flight steward of Philippine Airlines, Inc.
(PAL). He stands five feet and eight inches (5’8") with a large body frame. The proper weight for a
man of his height and body structure is from 147 to 166 pounds, the ideal weight being 166 pounds,
as mandated by the Cabin and Crew Administration Manual 1 of PAL.
The weight problem of petitioner dates back to 1984. Back then, PAL advised him to go on an
extended vacation leave from December 29, 1984 to March 4, 1985 to address his weight concerns.
Apparently, petitioner failed to meet the company’s weight standards, prompting another leave
without pay from March 5, 1985 to November 1985.
After meeting the required weight, petitioner was allowed to return to work. But petitioner’s weight
problem recurred. He again went on leave without pay from October 17, 1988 to February 1989.
On April 26, 1989, petitioner weighed 209 pounds, 43 pounds over his ideal weight. In line with
company policy, he was removed from flight duty effective May 6, 1989 to July 3, 1989. He was
formally requested to trim down to his ideal weight and report for weight checks on several dates. He
was also told that he may avail of the services of the company physician should he wish to do so. He
was advised that his case will be evaluated on July 3, 1989. 2
On February 25, 1989, petitioner underwent weight check. It was discovered that he gained, instead
of losing, weight. He was overweight at 215 pounds, which is 49 pounds beyond the limit.
Consequently, his off-duty status was retained.
On October 17, 1989, PAL Line Administrator Gloria Dizon personally visited petitioner at his
residence to check on the progress of his effort to lose weight. Petitioner weighed 217 pounds,
gaining 2 pounds from his previous weight. After the visit, petitioner made a commitment 3 to reduce
weight in a letter addressed to Cabin Crew Group Manager Augusto Barrios. The letter, in full, reads:
Dear Sir:
I would like to guaranty my commitment towards a weight loss from 217 pounds to 200 pounds from
today until 31 Dec. 1989.
From thereon, I promise to continue reducing at a reasonable percentage until such time that my
ideal weight is achieved.
Likewise, I promise to personally report to your office at the designated time schedule you will set for
my weight check.
Respectfully Yours,
Despite the lapse of a ninety-day period given him to reach his ideal weight, petitioner remained
overweight. On January 3, 1990, he was informed of the PAL decision for him to remain grounded
until such time that he satisfactorily complies with the weight standards. Again, he was directed to
report every two weeks for weight checks.
Petitioner failed to report for weight checks. Despite that, he was given one more month to comply
with the weight requirement. As usual, he was asked to report for weight check on different dates.
He was reminded that his grounding would continue pending satisfactory compliance with the weight
standards.5
Again, petitioner failed to report for weight checks, although he was seen submitting his passport for
processing at the PAL Staff Service Division.
On April 17, 1990, petitioner was formally warned that a repeated refusal to report for weight check
would be dealt with accordingly. He was given another set of weight check dates. 6 Again, petitioner
ignored the directive and did not report for weight checks. On June 26, 1990, petitioner was required
to explain his refusal to undergo weight checks.7
When petitioner tipped the scale on July 30, 1990, he weighed at 212 pounds. Clearly, he was still
way over his ideal weight of 166 pounds.
From then on, nothing was heard from petitioner until he followed up his case requesting for leniency
on the latter part of 1992. He weighed at 219 pounds on August 20, 1992 and 205 pounds on
November 5, 1992.
On November 13, 1992, PAL finally served petitioner a Notice of Administrative Charge for violation
of company standards on weight requirements. He was given ten (10) days from receipt of the
charge within which to file his answer and submit controverting evidence. 8
On December 7, 1992, petitioner submitted his Answer.9 Notably, he did not deny being overweight.
What he claimed, instead, is that his violation, if any, had already been condoned by PAL since "no
action has been taken by the company" regarding his case "since 1988." He also claimed that PAL
discriminated against him because "the company has not been fair in treating the cabin crew
members who are similarly situated."
On December 8, 1992, a clarificatory hearing was held where petitioner manifested that he was
undergoing a weight reduction program to lose at least two (2) pounds per week so as to attain his
ideal weight.10
On June 15, 1993, petitioner was formally informed by PAL that due to his inability to attain his ideal
weight, "and considering the utmost leniency" extended to him "which spanned a period covering a
total of almost five (5) years," his services were considered terminated "effective immediately." 11
His motion for reconsideration having been denied, 12 petitioner filed a complaint for illegal dismissal
against PAL.
On November 18, 1998, Labor Arbiter Valentin C. Reyes ruled 13 that petitioner was illegally
dismissed. The dispositive part of the Arbiter ruling runs as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered, declaring the complainant’s
dismissal illegal, and ordering the respondent to reinstate him to his former position or substantially
equivalent one, and to pay him:
a. Backwages of Php10,500.00 per month from his dismissal on June 15, 1993 until reinstated,
which for purposes of appeal is hereby set from June 15, 1993 up to August 15, 1998 at
₱651,000.00;
SO ORDERED.14
The Labor Arbiter held that the weight standards of PAL are reasonable in view of the nature of the
job of petitioner.15 However, the weight standards need not be complied with under pain of dismissal
since his weight did not hamper the performance of his duties. 16 Assuming that it did, petitioner could
be transferred to other positions where his weight would not be a negative factor. 17 Notably, other
overweight employees, i.e., Mr. Palacios, Mr. Cui, and Mr. Barrios, were promoted instead of being
disciplined.18
On October 8, 1999, the Labor Arbiter issued a writ of execution directing the reinstatement of
petitioner without loss of seniority rights and other benefits. 20
On February 1, 2000, the Labor Arbiter denied 21 the Motion to Quash Writ of Execution22 of PAL.
On March 6, 2000, PAL appealed the denial of its motion to quash to the NLRC. 23
On June 23, 2000, the NLRC rendered judgment 24 in the following tenor:
WHEREFORE, premises considered[,] the Decision of the Arbiter dated 18 November 1998 as
modified by our findings herein, is hereby AFFIRMED and that part of the dispositive portion of said
decision concerning complainant’s entitlement to backwages shall be deemed to refer to
complainant’s entitlement to his full backwages, inclusive of allowances and to his other benefits or
their monetary equivalent instead of simply backwages, from date of dismissal until his actual
reinstatement or finality hereof. Respondent is enjoined to manifests (sic) its choice of the form of
the reinstatement of complainant, whether physical or through payroll within ten (10) days from
notice failing which, the same shall be deemed as complainant’s reinstatement through payroll and
execution in case of non-payment shall accordingly be issued by the Arbiter. Both appeals of
respondent thus, are DISMISSED for utter lack of merit.25
According to the NLRC, "obesity, or the tendency to gain weight uncontrollably regardless of the
amount of food intake, is a disease in itself." 26 As a consequence, there can be no intentional
defiance or serious misconduct by petitioner to the lawful order of PAL for him to lose weight. 27
Like the Labor Arbiter, the NLRC found the weight standards of PAL to be reasonable. However, it
found as unnecessary the Labor Arbiter holding that petitioner was not remiss in the performance of
his duties as flight steward despite being overweight. According to the NLRC, the Labor Arbiter
should have limited himself to the issue of whether the failure of petitioner to attain his ideal weight
constituted willful defiance of the weight standards of PAL. 28
PAL moved for reconsideration to no avail.29 Thus, PAL elevated the matter to the Court of Appeals
(CA) via a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure. 30
WHEREFORE, premises considered, we hereby GRANT the petition. The assailed NLRC decision
is declared NULL and VOID and is hereby SET ASIDE. The private respondent’s complaint is
hereby DISMISSED. No costs.
SO ORDERED.32
The CA opined that there was grave abuse of discretion on the part of the NLRC because it "looked
at wrong and irrelevant considerations"33 in evaluating the evidence of the parties. Contrary to the
NLRC ruling, the weight standards of PAL are meant to be a continuing qualification for an
employee’s position.34 The failure to adhere to the weight standards is an analogous cause for the
dismissal of an employee under Article 282(e) of the Labor Code in relation to Article 282(a). It is not
willful disobedience as the NLRC seemed to suggest. 35 Said the CA, "the element of willfulness that
the NLRC decision cites is an irrelevant consideration in arriving at a conclusion on whether the
dismissal is legally proper."36 In other words, "the relevant question to ask is not one of willfulness but
one of reasonableness of the standard and whether or not the employee qualifies or continues to
qualify under this standard."37
Just like the Labor Arbiter and the NLRC, the CA held that the weight standards of PAL are
reasonable.38 Thus, petitioner was legally dismissed because he repeatedly failed to meet the
prescribed weight standards.39 It is obvious that the issue of discrimination was only invoked by
petitioner for purposes of escaping the result of his dismissal for being overweight. 40
On May 10, 2005, the CA denied petitioner’s motion for reconsideration. 41 Elaborating on its earlier
ruling, the CA held that the weight standards of PAL are a bona fide occupational qualification which,
in case of violation, "justifies an employee’s separation from the service." 42
Issues
In this Rule 45 petition for review, the following issues are posed for resolution:
I.
II.
III.
IV.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT BRUSHED ASIDE
PETITIONER’S CLAIMS FOR REINSTATEMENT [AND] WAGES ALLEGEDLY FOR BEING MOOT
AND ACADEMIC.43 (Underscoring supplied)
Our Ruling
I. The obesity of petitioner is a ground for dismissal under Article 282(e) 44 of the Labor Code.
A reading of the weight standards of PAL would lead to no other conclusion than that they constitute
a continuing qualification of an employee in order to keep the job. Tersely put, an employee may be
dismissed the moment he is unable to comply with his ideal weight as prescribed by the weight
standards. The dismissal of the employee would thus fall under Article 282(e) of the Labor Code. As
explained by the CA:
x x x [T]he standards violated in this case were not mere "orders" of the employer; they were the
"prescribed weights" that a cabin crew must maintain in order to qualify for and keep his or her
position in the company. In other words, they were standards that establish continuing
qualifications for an employee’s position. In this sense, the failure to maintain these standards does
not fall under Article 282(a) whose express terms require the element of willfulness in order to be a
ground for dismissal. The failure to meet the employer’s qualifying standards is in fact a ground
that does not squarely fall under grounds (a) to (d) and is therefore one that falls under Article 282(e)
– the "other causes analogous to the foregoing."
By its nature, these "qualifying standards" are norms that apply prior to and after an employee is
hired. They apply prior to employment because these are the standards a job applicant must
initially meet in order to be hired. They apply after hiring because an employee must continue to
meet these standards while on the job in order to keep his job. Under this perspective, a violation is
not one of the faults for which an employee can be dismissed pursuant to pars. (a) to (d) of Article
282; the employee can be dismissed simply because he no longer "qualifies" for his job irrespective
of whether or not the failure to qualify was willful or intentional. x x x 45
Petitioner, though, advances a very interesting argument. He claims that obesity is a "physical
abnormality and/or illness."46 Relying on Nadura v. Benguet Consolidated, Inc.,47 he says his
dismissal is illegal:
Conscious of the fact that Nadura’s case cannot be made to fall squarely within the specific causes
enumerated in subparagraphs 1(a) to (e), Benguet invokes the provisions of subparagraph 1(f) and
says that Nadura’s illness – occasional attacks of asthma – is a cause analogous to them.
Even a cursory reading of the legal provision under consideration is sufficient to convince anyone
that, as the trial court said, "illness cannot be included as an analogous cause by any stretch of
imagination."
It is clear that, except the just cause mentioned in sub-paragraph 1(a), all the others expressly
enumerated in the law are due to the voluntary and/or willful act of the employee. How Nadura’s
illness could be considered as "analogous" to any of them is beyond our understanding, there being
no claim or pretense that the same was contracted through his own voluntary act. 48
The reliance on Nadura is off-tangent. The factual milieu in Nadura is substantially different from the
case at bar. First, Nadura was not decided under the Labor Code. The law applied in that case was
Republic Act (RA) No. 1787. Second, the issue of flight safety is absent in Nadura, thus, the
rationale there cannot apply here. Third, in Nadura, the employee who was a miner, was laid off from
work because of illness, i.e., asthma. Here, petitioner was dismissed for his failure to meet the
weight standards of PAL. He was not dismissed due to illness. Fourth, the issue in Nadura is
whether or not the dismissed employee is entitled to separation pay and damages. Here, the issue
centers on the propriety of the dismissal of petitioner for his failure to meet the weight standards of
PAL. Fifth, in Nadura, the employee was not accorded due process. Here, petitioner was accorded
utmost leniency. He was given more than four (4) years to comply with the weight standards of PAL.
In the case at bar, the evidence on record militates against petitioner’s claims that obesity is a
disease. That he was able to reduce his weight from 1984 to 1992 clearly shows that it is possible
for him to lose weight given the proper attitude, determination, and self-discipline. Indeed, during the
clarificatory hearing on December 8, 1992, petitioner himself claimed that "[t]he issue is could I bring
my weight down to ideal weight which is 172, then the answer is yes. I can do it now." 49
True, petitioner claims that reducing weight is costing him "a lot of expenses." 50 However, petitioner
has only himself to blame. He could have easily availed the assistance of the company physician,
per the advice of PAL.51 He chose to ignore the suggestion. In fact, he repeatedly failed to report
when required to undergo weight checks, without offering a valid explanation. Thus, his fluctuating
weight indicates absence of willpower rather than an illness.
Petitioner cites Bonnie Cook v. State of Rhode Island, Department of Mental Health, Retardation
and Hospitals,52 decided by the United States Court of Appeals (First Circuit). In that case, Cook
worked from 1978 to 1980 and from 1981 to 1986 as an institutional attendant for the mentally
retarded at the Ladd Center that was being operated by respondent. She twice resigned voluntarily
with an unblemished record. Even respondent admitted that her performance met the Center’s
legitimate expectations. In 1988, Cook re-applied for a similar position. At that time, "she stood 5’2"
tall and weighed over 320 pounds." Respondent claimed that the morbid obesity of plaintiff
compromised her ability to evacuate patients in case of emergency and it also put her at greater risk
of serious diseases.
Cook contended that the action of respondent amounted to discrimination on the basis of a
handicap. This was in direct violation of Section 504(a) of the Rehabilitation Act of 1973, 53 which
incorporates the remedies contained in Title VI of the Civil Rights Act of 1964. Respondent claimed,
however, that morbid obesity could never constitute a handicap within the purview of the
Rehabilitation Act. Among others, obesity is a mutable condition, thus plaintiff could simply lose
weight and rid herself of concomitant disability.
The appellate Court disagreed and held that morbid obesity is a disability under the Rehabilitation
Act and that respondent discriminated against Cook based on "perceived" disability. The evidence
included expert testimony that morbid obesity is a physiological disorder. It involves a dysfunction of
both the metabolic system and the neurological appetite – suppressing signal system, which is
capable of causing adverse effects within the musculoskeletal, respiratory, and cardiovascular
systems. Notably, the Court stated that "mutability is relevant only in determining the substantiality of
the limitation flowing from a given impairment," thus "mutability only precludes those conditions that
an individual can easily and quickly reverse by behavioral alteration."
Unlike Cook, however, petitioner is not morbidly obese. In the words of the District Court for the
District of Rhode Island, Cook was sometime before 1978 "at least one hundred pounds more than
what is considered appropriate of her height." According to the Circuit Judge, Cook weighed "over
320 pounds" in 1988. Clearly, that is not the case here. At his heaviest, petitioner was only less than
50 pounds over his ideal weight.
In fine, We hold that the obesity of petitioner, when placed in the context of his work as flight
attendant, becomes an analogous cause under Article 282(e) of the Labor Code that justifies his
dismissal from the service. His obesity may not be unintended, but is nonetheless voluntary. As the
CA correctly puts it, "[v]oluntariness basically means that the just cause is solely attributable to the
employee without any external force influencing or controlling his actions. This element runs through
all just causes under Article 282, whether they be in the nature of a wrongful action or omission.
Gross and habitual neglect, a recognized just cause, is considered voluntary although it lacks the
element of intent found in Article 282(a), (c), and (d)." 54
II. The dismissal of petitioner can be predicated on the bona fide occupational qualification defense.
Employment in particular jobs may not be limited to persons of a particular sex, religion, or national
origin unless the employer can show that sex, religion, or national origin is an actual qualification for
performing the job. The qualification is called a bona fide occupational qualification (BFOQ). 55 In the
United States, there are a few federal and many state job discrimination laws that contain an
exception allowing an employer to engage in an otherwise unlawful form of prohibited discrimination
when the action is based on a BFOQ necessary to the normal operation of a business or
enterprise.56
Petitioner contends that BFOQ is a statutory defense. It does not exist if there is no statute providing
for it.57 Further, there is no existing BFOQ statute that could justify his dismissal. 58
First, the Constitution,59 the Labor Code,60 and RA No. 727761 or the Magna Carta for Disabled
Persons62 contain provisions similar to BFOQ.
Second, in British Columbia Public Service Employee Commission (BSPSERC) v. The British
Columbia Government and Service Employee’s Union (BCGSEU),63 the Supreme Court of Canada
adopted the so-called "Meiorin Test" in determining whether an employment policy is justified. Under
this test, (1) the employer must show that it adopted the standard for a purpose rationally connected
to the performance of the job;64 (2) the employer must establish that the standard is reasonably
necessary65 to the accomplishment of that work-related purpose; and (3) the employer must
establish that the standard is reasonably necessary in order to accomplish the legitimate work-
related purpose. Similarly, in Star Paper Corporation v. Simbol,66 this Court held that in order to
justify a BFOQ, the employer must prove that (1) the employment qualification is reasonably related
to the essential operation of the job involved; and (2) that there is factual basis for believing that all
or substantially all persons meeting the qualification would be unable to properly perform the duties
of the job.67
In short, the test of reasonableness of the company policy is used because it is parallel to
BFOQ.68 BFOQ is valid "provided it reflects an inherent quality reasonably necessary for satisfactory
job performance."69
In Duncan Association of Detailman-PTGWTO v. Glaxo Wellcome Philippines, Inc., 70 the Court did
not hesitate to pass upon the validity of a company policy which prohibits its employees from
marrying employees of a rival company. It was held that the company policy is reasonable
considering that its purpose is the protection of the interests of the company against possible
competitor infiltration on its trade secrets and procedures.
Verily, there is no merit to the argument that BFOQ cannot be applied if it has no supporting statute.
Too, the Labor Arbiter,71 NLRC,72 and CA73 are one in holding that the weight standards of PAL are
reasonable. A common carrier, from the nature of its business and for reasons of public policy, is
bound to observe extraordinary diligence for the safety of the passengers it transports. 74 It is bound
to carry its passengers safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for all the circumstances. 75
The law leaves no room for mistake or oversight on the part of a common carrier. Thus, it is only
logical to hold that the weight standards of PAL show its effort to comply with the exacting
obligations imposed upon it by law by virtue of being a common carrier.
The business of PAL is air transportation. As such, it has committed itself to safely transport its
passengers. In order to achieve this, it must necessarily rely on its employees, most particularly the
cabin flight deck crew who are on board the aircraft. The weight standards of PAL should be viewed
as imposing strict norms of discipline upon its employees.
In other words, the primary objective of PAL in the imposition of the weight standards for cabin crew
is flight safety. It cannot be gainsaid that cabin attendants must maintain agility at all times in order
to inspire passenger confidence on their ability to care for the passengers when something goes
wrong. It is not farfetched to say that airline companies, just like all common carriers, thrive due to
public confidence on their safety records. People, especially the riding public, expect no less than
that airline companies transport their passengers to their respective destinations safely and soundly.
A lesser performance is unacceptable.
The task of a cabin crew or flight attendant is not limited to serving meals or attending to the whims
and caprices of the passengers. The most important activity of the cabin crew is to care for the
safety of passengers and the evacuation of the aircraft when an emergency occurs. Passenger
safety goes to the core of the job of a cabin attendant. Truly, airlines need cabin attendants who
have the necessary strength to open emergency doors, the agility to attend to passengers in
cramped working conditions, and the stamina to withstand grueling flight schedules.
On board an aircraft, the body weight and size of a cabin attendant are important factors to consider
in case of emergency. Aircrafts have constricted cabin space, and narrow aisles and exit doors.
Thus, the arguments of respondent that "[w]hether the airline’s flight attendants are overweight or
not has no direct relation to its mission of transporting passengers to their destination"; and that the
weight standards "has nothing to do with airworthiness of respondent’s airlines," must fail.
The rationale in Western Air Lines v. Criswell76 relied upon by petitioner cannot apply to his case.
What was involved there were two (2) airline pilots who were denied reassignment as flight
engineers upon reaching the age of 60, and a flight engineer who was forced to retire at age 60.
They sued the airline company, alleging that the age-60 retirement for flight engineers violated the
Age Discrimination in Employment Act of 1967. Age-based BFOQ and being overweight are not the
same. The case of overweight cabin attendants is another matter. Given the cramped cabin space
and narrow aisles and emergency exit doors of the airplane, any overweight cabin attendant would
certainly have difficulty navigating the cramped cabin area.
In short, there is no need to individually evaluate their ability to perform their task. That an obese
cabin attendant occupies more space than a slim one is an unquestionable fact which courts can
judicially recognize without introduction of evidence. 77 It would also be absurd to require airline
companies to reconfigure the aircraft in order to widen the aisles and exit doors just to accommodate
overweight cabin attendants like petitioner.
The biggest problem with an overweight cabin attendant is the possibility of impeding passengers
from evacuating the aircraft, should the occasion call for it. The job of a cabin attendant during
emergencies is to speedily get the passengers out of the aircraft safely. Being overweight
necessarily impedes mobility. Indeed, in an emergency situation, seconds are what cabin attendants
are dealing with, not minutes. Three lost seconds can translate into three lost lives. Evacuation might
slow down just because a wide-bodied cabin attendant is blocking the narrow aisles. These
possibilities are not remote.
Petitioner is also in estoppel. He does not dispute that the weight standards of PAL were made
known to him prior to his employment. He is presumed to know the weight limit that he must
maintain at all times.78 In fact, never did he question the authority of PAL when he was repeatedly
asked to trim down his weight. Bona fides exigit ut quod convenit fiat. Good faith demands that what
is agreed upon shall be done. Kung ang tao ay tapat kanyang tutuparin ang napagkasunduan.
Too, the weight standards of PAL provide for separate weight limitations based on height and body
frame for both male and female cabin attendants. A progressive discipline is imposed to allow non-
compliant cabin attendants sufficient opportunity to meet the weight standards. Thus, the clear-cut
rules obviate any possibility for the commission of abuse or arbitrary action on the part of PAL.
III. Petitioner failed to substantiate his claim that he was discriminated against by PAL.
Petitioner next claims that PAL is using passenger safety as a convenient excuse to discriminate
against him.79 We are constrained, however, to hold otherwise. We agree with the CA that "[t]he
element of discrimination came into play in this case as a secondary position for the private
respondent in order to escape the consequence of dismissal that being overweight entailed. It is a
confession-and-avoidance position that impliedly admitted the cause of dismissal, including the
reasonableness of the applicable standard and the private respondent’s failure to comply." 80 It is a
basic rule in evidence that each party must prove his affirmative allegation. 81
Since the burden of evidence lies with the party who asserts an affirmative allegation, petitioner has
to prove his allegation with particularity. There is nothing on the records which could support the
finding of discriminatory treatment. Petitioner cannot establish discrimination by simply naming the
supposed cabin attendants who are allegedly similarly situated with him. Substantial proof must be
shown as to how and why they are similarly situated and the differential treatment petitioner got from
PAL despite the similarity of his situation with other employees.
Indeed, except for pointing out the names of the supposed overweight cabin attendants, petitioner
miserably failed to indicate their respective ideal weights; weights over their ideal weights; the
periods they were allowed to fly despite their being overweight; the particular flights assigned to
them; the discriminating treatment they got from PAL; and other relevant data that could have
adequately established a case of discriminatory treatment by PAL. In the words of the CA, "PAL
really had no substantial case of discrimination to meet." 82
We are not unmindful that findings of facts of administrative agencies, like the Labor Arbiter and the
NLRC, are accorded respect, even finality.83 The reason is simple: administrative agencies are
experts in matters within their specific and specialized jurisdiction. 84 But the principle is not a hard
and fast rule. It only applies if the findings of facts are duly supported by substantial evidence. If it
can be shown that administrative bodies grossly misappreciated evidence of such nature so as to
compel a conclusion to the contrary, their findings of facts must necessarily be reversed. Factual
findings of administrative agencies do not have infallibility and must be set aside when they fail the
test of arbitrariness.85
Here, the Labor Arbiter and the NLRC inexplicably misappreciated evidence. We thus annul their
findings.
To make his claim more believable, petitioner invokes the equal protection clause guaranty 86 of the
Constitution. However, in the absence of governmental interference, the liberties guaranteed by the
Constitution cannot be invoked.87 Put differently, the Bill of Rights is not meant to be invoked against
acts of private individuals.88 Indeed, the United States Supreme Court, in interpreting the Fourteenth
Amendment,89 which is the source of our equal protection guarantee, is consistent in saying that the
equal protection erects no shield against private conduct, however discriminatory or
wrongful.90 Private actions, no matter how egregious, cannot violate the equal protection guarantee. 91
IV. The claims of petitioner for reinstatement and wages are moot.
As his last contention, petitioner avers that his claims for reinstatement and wages have not been
mooted. He is entitled to reinstatement and his full backwages, "from the time he was illegally
dismissed" up to the time that the NLRC was reversed by the CA.92
In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee,
insofar as the reinstatement aspect is concerned, shall immediately be executory, even pending
appeal. The employee shall either be admitted back to work under the same terms and conditions
prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in
the payroll. The posting of a bond by the employer shall not stay the execution for reinstatement
provided herein.
The law is very clear. Although an award or order of reinstatement is self-executory and does not
require a writ of execution,93 the option to exercise actual reinstatement or payroll reinstatement
belongs to the employer. It does not belong to the employee, to the labor tribunals, or even to the
courts.
Contrary to the allegation of petitioner that PAL "did everything under the sun" to frustrate his
"immediate return to his previous position," 94 there is evidence that PAL opted to physically reinstate
him to a substantially equivalent position in accordance with the order of the Labor Arbiter. 95 In fact,
petitioner duly received the return to work notice on February 23, 2001, as shown by his signature. 96
Petitioner cannot take refuge in the pronouncements of the Court in a case97 that "[t]he unjustified
refusal of the employer to reinstate the dismissed employee entitles him to payment of his salaries
effective from the time the employer failed to reinstate him despite the issuance of a writ of
execution"98 and ""even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is
obligatory on the part of the employer to reinstate and pay the wages of the employee during the
period of appeal until reversal by the higher court." 99 He failed to prove that he complied with the
return to work order of PAL. Neither does it appear on record that he actually rendered services for
PAL from the moment he was dismissed, in order to insist on the payment of his full backwages.
Normally, a legally dismissed employee is not entitled to separation pay. This may be deduced from
the language of Article 279 of the Labor Code that "[a]n employee who is unjustly dismissed from
work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his
full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to the time of his actual
reinstatement." Luckily for petitioner, this is not an ironclad rule.
Here, We grant petitioner separation pay equivalent to one-half (1/2) month’s pay for every year of
service.104 It should include regular allowances which he might have been receiving. 105 We are not
blind to the fact that he was not dismissed for any serious misconduct or to any act which would
reflect on his moral character. We also recognize that his employment with PAL lasted for more or
less a decade.
SO ORDERED.
RUBEN T. REYES
Associate Justice