APPLICABILITY

OF LABOR CODE
PNOC vs. NLRC, 201 SCRA 487

FULL TEXT:

G.R. No. 79182 September 11, 1991

PNOC-ENERGY DEVELOPMENT CORPORATION, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (Third Division) and DANILO
MERCADO, respondents.

Bacorro & Associates for petitioner.

Alberto L. Dalmacion for private respondent.

PARAS, J.:

This is a petition for certiorari to set aside the Resolution   dated July 3, 1987 of respondent National
*

Labor Relations Commission (NLRC for brevity) which affirmed the decision dated April 30, 1986 of
Labor Arbiter Vito J. Minoria of the NLRC, Regional Arbitration Branch No. VII at Cebu City in Case
No. RAB-VII-0556-85 entitled "Danilo Mercado, Complainant, vs. Philippine National Oil Company-
Energy Development Corporation, Respondent", ordering the reinstatement of complainant Danilo
Mercado and the award of various monetary claims.

The factual background of this case is as follows:

Private respondent Danilo Mercado was first employed by herein petitioner Philippine National Oil
Company-Energy Development Corporation (PNOC-EDC for brevity) on August 13, 1979. He held
various positions ranging from clerk, general clerk to shipping clerk during his employment at its
Cebu office until his transfer to its establishment at Palimpinon, Dumaguete, Oriental Negros on
September 5, 1984. On June 30, 1985, private respondent Mercado was dismissed. His last salary
was P1,585.00 a month basic pay plus P800.00 living allowance (Labor Arbiter's Decision, Annex
"E" of Petition, Rollo, p. 52).

The grounds for the dismissal of Mercado are allegedly serious acts of dishonesty committed as
follows:

1. On ApriI 12, 1985, Danilo Mercado was ordered to purchase 1,400 pieces of nipa shingles
from Mrs. Leonardo Nodado of Banilad, Dumaguete City, for the total purchase price of
Pl,680.00. Against company policy, regulations and specific orders, Danilo Mercado
withdrew the nipa shingles from the supplier but paid the amount of P1,000.00 only. Danilo
Mercado appropriated the balance of P680.00 for his personal use;

2. In the same transaction stated above, the supplier agreed to give the company a discount
of P70.00 which Danilo Mercado did not report to the company;

3. On March 28, 1985, Danilo Mercado was instructed to contract the services of Fred R.
Melon of Dumaguete City, for the fabrication of rubber stamps, for the total amount of
 P28.66. Danilo Mercado paid the amount of P20.00 to Fred R. Melon and appropriated for
his personal use the balance of P8.66.

In addition, private respondent, Danilo Mercado violated company rules and regulations in
the following instances:

1. On June 5, 1985, Danilo Mercado was absent from work without leave, without proper
turn-over of his work, causing disruption and delay of company work activities;

2. On June 15, 1985, Danilo Mercado went on vacation leave without prior leave, against
company policy, rules and regulations. (Petitioner's Memorandum, Rollo, p. 195).

On September 23, 1985, private respondent Mercado filed a complaint for illegal dismissal,
retirement benefits, separation pay, unpaid wages, etc. against petitioner PNOC-EDC before the
NLRC Regional Arbitration Branch No. VII docketed as Case No. RAB-VII-0556-85.

After private respondent Mercado filed his position paper on December 16, 1985 (Annex "B" of the
Petition, Rollo, pp. 28-40), petitioner PNOC-EDC filed its Position Paper/Motion to Dismiss on
January 15, 1986, praying for the dismissal of the case on the ground that the Labor Arbiter and/or
the NLRC had no jurisdiction over the case (Annex "C" of the Petition, Rollo, pp. 41-45), which was
assailed by private respondent Mercado in his Opposition to the Position Paper/Motion to Dismiss
dated March 12, 1986 (Annex "D" of the Petition, Rollo, pp. 46-50).

The Labor Arbiter ruled in favor of private respondent Mercado. The dispositive onion of said
decision reads as follows:

WHEREFORE, in view of the foregoing, respondents are hereby ordered:

1) To reinstate complainant to his former position with full back wages from the date of his
dismissal up to the time of his actual reinstatement without loss of seniority rights and other
privileges;

2) To pay complainant the amount of P10,000.00 representing his personal share of his
savings account with the respondents;

3) To pay complainants the amount of P30,000.00 moral damages; P20,000.00 exemplary

damages and P5,000.00 attorney's fees;

4) To pay complainant the amount of P792.50 as his proportionate 13th month pay for 1985.

Respondents are hereby further ordered to deposit the aforementioned amounts with this
Office within ten days from receipt of a copy of this decision for further disposition.

SO ORDERED.
(Labor Arbiter's Decision, Rollo, p. 56)

The appeal to the NLRC was dismissed for lack of merit on July 3, 1987 and the assailed decision
was affirmed.

Hence, this petition.

The issues raised by petitioner in this instant petition are:

1. Whether or not matters of employment affecting the PNOC-EDC, a government-owned

and controlled corporation, are within the jurisdiction of the Labor Arbiter and the NLRC.

2. Assuming the affirmative, whether or not the Labor Arbiter and the NLRC are justified in
ordering the reinstatement of private respondent, payment of his savings, and proportionate
13th month pay and payment of damages as well as attorney's fee.

Petitioner PNOC-EDC alleges that it is a corporation wholly owned and controlled by the
government; that the Energy Development Corporation is a subsidiary of the Philippine National Oil
Company which is a government entity created under Presidential Decree No. 334, as amended;
that being a government-owned and controlled corporation, it is governed by the Civil Service Law
as provided for in Section 1, Article XII-B of the 1973 Constitution, Section 56 of Presidential Decree
No. 807 (Civil Service Decree) and Article 277 of Presidential Decree No. 442, as amended (Labor
Code).

The 1973 Constitution provides:

The Civil Service embraces every branch, agency, subdivision and instrumentality of the
government including government-owned or controlled corporations.

Petitioner PNOC-EDC argued that since Labor Arbiter Minoria rendered the decision at the time
when the 1973 Constitution was in force, said decision is null and void because under the 1973
Constitution, government-owned and controlled corporations were governed by the Civil Service
Law. Even assuming that PNOC-EDC has no original or special charter and Section 2(i), Article IX-B
of the 1987 Constitution provides that:

The Civil Service embraces all branches, subdivision, instrumentalities and agencies of the
Government, including government-owned or controlled corporations with original charters.

such circumstances cannot give validity to the decision of the Labor Arbiter (Ibid., pp. 192-193).

This issue has already been laid to rest in the case of PNOC-EDC vs. Leogardo, 175 SCRA 26 (July
5, 1989), involving the same petitioner and the same issue, where this Court ruled that the doctrine
that employees of government-owned and/or con controlled corporations, whether created by
special law or formed as subsidiaries under the General Corporation law are governed by the Civil
Service Law and not by the Labor Code, has been supplanted by the present Constitution. "Thus,
under the present state of the law, the test in determining whether a government-owned or controlled
corporation is subject to the Civil Service Law are the manner of its creation, such that government
corporations created by special charter are subject to its provisions while those incorporated under
the General Corporation Law are not within its coverage."

Specifically, the PNOC-EDC having been incorporated under the General Corporation Law was held
to be a government owned or controlled corporation whose employees are subject to the provisions
of the Labor Code (Ibid.).

The fact that the case arose at the time when the 1973 Constitution was still in effect, does not
deprive the NLRC of jurisdiction on the premise that it is the 1987 Constitution that governs because
it is the Constitution in place at the time of the decision (NASECO v. NLRC, G.R. No. 69870, 168
SCRA 122 [1988]).
In the case at bar, the decision of the NLRC was promulgated on July 3, 1987. Accordingly, this
case falls squarely under the rulings of the aforementioned cases.

As regards the second issue, the record shows that PNOC-EDC's accusations of dishonesty and
violations of company rules are not supported by evidence. Nonetheless, while acknowledging the
rule that administrative bodies are not governed by the strict rules of evidence, petitioner PNOC-
EDC alleges that the labor arbiter's propensity to decide the case through the position papers
submitted by the parties is violative of due process thereby rendering the decision null and void
(Ibid., p. 196).

On the other hand, private respondent contends that as can be seen from petitioner's Motion for
Reconsideration and/or Appeal dated July 28, 1986 (Annex "F" of the Petition, Rollo, pp. 57- 64), the
latter never questioned the findings of facts of the Labor Arbiter but simply limited its objection to the
lack of legal basis in view of its stand that the NLRC had no jurisdiction over the case (Private
Respondent's Memorandum, Rollo, p. 104).

Petitioner PNOC-EDC filed its Position Paper/Motion to Dismiss dated January 15, 1986 (Annex "C"
of the Petition Rollo, pp. 41-45) before the Regional Arbitration Branch No. VII of Cebu City and its
Motion for Reconsideration and/or Appeal dated July 28, 1986 (Annex "F" of the Petition, Rollo, pp.
57-64) before the NLRC of Cebu City. Indisputably, the requirements of due process are satisfied
when the parties are given an opportunity to submit position papers. What the fundamental law
abhors is not the absence of previous notice but rather the absolute lack of opportunity to ventilate a
party's side. There is no denial of due process where the party submitted its position paper and flied
its motion for reconsideration (Odin Security Agency vs. De la Serna, 182 SCRA 472 [February 21,
1990]). Petitioner's subsequent Motion for Reconsideration and/or Appeal has the effect of curing
whatever irregularity might have been committed in the proceedings below (T.H. Valderama and
Sons, Inc. vs. Drilon, 181 SCRA 308 [January 22, 1990]).

Furthermore, it has been consistently held that findings of administrative agencies which have
acquired expertise because their jurisdiction is confined to specific matters are accorded not only
respect but even finality (Asian Construction and Development Corporation vs. NLRC, 187 SCRA
784 [July 27, 1990]; Lopez Sugar Corporation vs. Federation of Free Workers, 189 SCRA 179
[August 30, 1990]). Judicial review by this Court does not go so far as to evaluate the sufficiency of
the evidence but is limited to issues of jurisdiction or grave abuse of discretion (Filipinas
Manufacturers Bank vs. NLRC, 182 SCRA 848 [February 28, 1990]). A careful study of the records
shows no substantive reason to depart from these established principles.

While it is true that loss of trust or breach of confidence is a valid ground for dismissing an
employee, such loss or breach of trust must have some basis (Gubac v. NLRC, 187 SCRA 412 [July
13, 1990]). As found by the Labor Arbiter, the accusations of petitioner PNOC-EDC against private
respondent Mercado have no basis. Mrs. Leonardo Nodado, from whom the nipa shingles were
purchased, sufficiently explained in her affidavit (Rollo, p. 36) that the total purchase price of
P1,680.00 was paid by respondent Mercado as agreed upon. The alleged discount given by Mrs.
Nodado is not supported by evidence as well as the alleged appropriation of P8.66 from the cost of
fabrication of rubber stamps. The Labor Arbiter, likewise, found no evidence to support the alleged
violation of company rules. On the contrary, he found respondent Mercado's explanation in his
affidavit (Rollo, pp. 38-40) as to the alleged violations to be satisfactory. Moreover, these findings
were never contradicted by petitioner petitioner PNOC-EDC.

PREMISES CONSIDERED, the petition is DENIED and the resolution of respondent NLRC dated
July 3, 1987 is AFFIRMED with the modification that the moral damages are reduced to Ten
Thousand (P10,000.00) Pesos, and the exemplary damages reduced to Five Thousand (P5,000.00)
Pesos.

SO ORDERED.

Melencio-Herrera (Chairperson), Padilla and Regalado, JJ., concur.

Sarmiento, J., is on leave.

CASE DIGEST LINK:

https://www.scribd.com/document/385265999/PNOC-vs-NLRC-G-R-No-79182-September-11-1991-
docx
Phil. Fisheries vs. NLRC, 213 SCRA 621
FULL TEXT:

[G.R. No. 94825. September 4, 1992.]

PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY, Petitioner, v. NATIONAL

LABOR RELATIONS COMMISSION, and ODIN SECURITY AGENCY, as
representative of its Security Guards, Respondents.

Franklin J. Andrada for Petitioner.

Ramon Encarnacion and Reynato V. Siozon for Private Respondents.

SYLLABUS

1. LABOR AND SOCIAL LEGISLATIONS; PRINCIPAL AND CONTRACTOR; JOINTLY

AND SEVERALLY LIABLE FOR PAYMENT OF UNPAID WAGES; TERM ‘EMPLOYER’
CONSTRUED. — Notwithstanding that the petitioner is a government agency, its liabilities,
which are joint and solidary with that of the contractor, are provided in Articles 106, 107 and 109
of the Labor Code. This places the petitioner’s liabilities under the scope of the NLRC.
Moreover, Book Three, Title II on Wages specifically provides that the term "employer" includes
any person acting directly or indirectly in the interest of an employer in relation to an employee
and shall include the Government and all its branches, subdivisions and instrumentalities, all
government-owned or controlled corporation and institutions as well as non-profit private
institutions, or organizations (Art. 97 [b], Labor Code; Eagle Security Agency, Inc. v. NLRC,
173 SCRA 479 [1989]; Rabago v. NLRC, 200 SCRA 158 [1991]). Settled is the rule that in job
contracting, the petitioner as principal is jointly and severally liable with the contractor for the
payment of unpaid wages. The statutory basis for the joint and several liability is set forth in
Articles 107, and 109 in relation to Article 106 of the Labor Code.

2. ID.; ID.; ID.; WAGE ORDERS, MANDATORY AND CANNOT BE WAIVED. — In the
case at bar, the action instituted by the private respondent was for the payment of unpaid wage
differentials under Wage Order No. 6. The liabilities of the parties were very well explained in
the case of Eagle Security v. NLRC, supra where the court held: . . . "The solidary liability of
PTSI and EAGLE, however, does not preclude the right of reimbursement from his co-debtor by
the one who paid [See Article 1217, Civil Code]. It is with respect to this right of reimbursement
that petitioners can find support in the aforecited contractual stipulation and Wage Order
provision. "That Wage Orders are explicit that payment of the increases are `to be borne’ by the
principal or client.’To be borne’, however, does not mean that the principal, PTSI in this case,
would directly pay the security guards the wage and allowance increases because there is no
privity of contract between them. The security guards’ contractual relationship is with their
immediate employer, EAGLE. As an employer, EAGLE is tasked, among others, with the
payment of their wages [See Article VII Sec. 3 of the Contract for Security Services, supra and
Bautista v. Inciong, G.R. No. 52824, March 16, 1988, 158 SCRA 556]. . . . The Wage Orders are
statutory and mandatory and can not be waived. The petitioner can not escape liability since the
law provides the joint and solidary liability of the principal and the contractor for the protection
of the laborers.

3. ID.; ID.; ID.; DUE PROCESS OBSERVED IN CASE AT BAR. — The contention that it was
deprived due process because no hearing was conducted does not deserve merit. A decision on
the merits is proper where the issues raised by the parties did not involve intricate questions of
law. (See Blue Bar Coconut Phils. Inc. v. Minister of Labor, 174 SCRA 25 [1989]) There can be
no question that the security guards are entitled to wage adjustments. The computation of the
amount due to each individual guard can be made during the execution of the decision where
hearings can be held. (See Section 3, Rule VIII of the New Rules of Procedure of the NLRC).

4. ID.; INDIRECT EMPLOYER; ESTOPPED FROM ASSAILING CONTRACT. — Petitioner

assail the contract for security services for being void ab initio on the ground that it did not
comply with the bidding requirements set by law. Undeniably, services were rendered already
and the petitioner benefitted from said contract for two (2) years now. The petitioner is therefore
estopped from assailing the contract.

5. ID.; PHIL. ASSOCIATION OF DETECTIVE AND PROTECTIVE AGENCY OPERATORS

(PADPAO); PURPOSE FOR ITS CREATION. — In the complaint filed, the private respondent
alleged that it requested the Regional Director, NCR Region of the Department of Labor and
Employment for their intercession in connection with the illegal bidding and award made by the
petitioner in favor of Triad Security Agency which was below the minimum wage law.
Undeniably, the private respondent is equally guilty when it entered into the contract with the
petitioner without considering Wage Order No. 6. The private respondent tries to explain that the
Philippine Association of Detective and Protective Agency Operators (PADPAO) which fixes
the contract rate of the security agencies was unable to fix the new contract rate until May 12,
1986. We, however, agree with the posture that the setting of wages under PADPAO is of no
moment. The PADPAO memorandum was not necessary to make Wage Order No. 6 effective.
The PADPAO memo was merely an internal agreement among the operators to set the ceiling of
the contract rates. It was aimed to curb the practice of security agencies which were in cutthroat
competition to request for wage adjustments after proposals were accepted in good faith to the
prejudice of the parties.

6. ID.; SECURITY AGENCY; CANNOT ESCAPE LIABILITY FOR PAYMENT OF UNPAID

WAGES; PAYMENT OF WAGES TO EMPLOYEES GUARANTEED UNDER THE
CONSTITUTION. — it bears emphasis that it was the private respondent which first deprived
the security personnel of their rightful wage under Wage Order No. 6. The private respondent is
the employer of the security guards and as the employer, it is charged with knowledge of labor
laws and the adequacy of the compensation that it demands for contractual services is its
principal concern and not any other’s (Del Rosario & Sons Logging Enterprises, Inc. v. NLRC,
136 SCRA 669 [1985]). Given this peculiar circumstance, the private respondent should also be
faulted for the unpaid wage differentials of the security guards. By filing the complaint in its own
behalf and in behalf of the security guards, the private respondent wishes to exculpate itself from
liability on the strength of the ruling in the Eagle case that the ultimate liability rests with the
principal. Nonetheless, the inescapable fact is that the employees must be guaranteed payment of
the wages due them for the performance of any work, task, job or project. They must be given
ample protection as mandated by the Constitution (See Article II, Section 18 and Article XIII,
Section 3). Thus, to assure compliance with the provisions of the Labor Code including the
statutory minimum wage, the joint and several liability of the contractor and the principal is
mandated.

7. ID.; SOLIDARY LIABILITY OF PRINCIPAL AND CONTRACTOR; WITHOUT

PREJUDICE TO THE RIGHT OF REIMBURSEMENT TO EITHER PRINCIPAL OR
DIRECT EMPLOYER AS WARRANTED. — We hold the petitioner and the private respondent
jointly and severally liable to the security guards for the unpaid wage differentials under Wage
Order No. 6. As held in the Eagle case, the security guards’ immediate recourse is with their
direct employer, private respondent Odin Security Agency. The solidary liability is, however,
without prejudice to a claim for reimbursement by the private respondent against the petitioner
for only one-half of the amount due considering that the private respondent is also at fault for
entering into the contract without taking into consideration the minimum wage rates under Wage
Order No. 6.

DECISION

GUTIERREZ, JR., J.:

The petitioner questions the resolution of the National Labor Relations Commission
(NLRC) dated January 17, 1983 setting aside the order of dismissal issued by the Labor
Arbiter and the resolution dated June 25, 1990 denying petitioner’s motion for
reconsideration.

The facts are as follows: chanrob1es virtual 1aw library

The petitioner is a government-owned or controlled corporation created by P.D. No.

977.

On November 11, 1985, it entered into a contract with the Odin Security Agency for
security services of its Iloilo Fishing Port Complex in Iloilo City. The pertinent provision
of the contract provides: chanrobles.com : virtual law library

OBLIGATION OF THE FISHING PORT COMPLEX: chanrob1es virtual 1aw library

1. For and in consideration of the services to be rendered by the AGENCY to the

FISHING PORT COMPLEX, the latter shall pay to the former per month for eight (8)
hours work daily as follows: chanrob1es virtual 1aw library

OUTSIDE METRO MANILA

Security Guard P1,990.00

Security Supervisor 2,090.00

Det. Commander 2,190.00.

The Security Group of the AGENCY will be headed by a detachment commander whose
main function shall consist of the administration and supervision control of the
AGENCY’s personnel in the FISHING PORT COMPLEX. There shall be one supervisor per
shift who shall supervise the guards on duty during a particular shift.

The above schedule of compensation includes among others, the following: chanrob1es virtual 1aw library

(a) Minimum wage (Wage Order No. 5)

(b) Rest Day Pay

(c) Night Differential Pay

(d) Incentive Leave Pay

(e) 13th Month Pay

(f) Emergency Cost of Living Allowance (up to Wage Order No. 5)

(g) 4% Contractor’s Tax

(h) Operational Expenses

(i) Overhead (Rollo, pp. 197-198)

The contract for security services also provided for a one year renewable period unless
terminated by either of the parties. It reads: chanrob1es virtual 1aw library

9. This agreement shall take effect upon approval for a period of one (1) year unless
sooner terminated upon notice of one party to the other provided, that should there be
no notice of renewal within thirty (30) days before the expiry date, the same shall be
deemed renewed, and provided further, that the party desiring to terminate the
contract before the expiry date shall give thirty (30) days written advance notice to the
other party. (Rollo, p. 198)

On October 24, 1987, and during the effectivity of the said Security Agreement, the
private respondent requested the petitioner to adjust the contract rate in view of the
implementation of Wage Order No. 6 which took effect on November 1, 1984. chanroblesvirtualawlibrary

The private respondent’s request for adjustment was anchored on the provision of
Wage Order No. 6 which states: chanrob1es virtual 1aw library

SECTION 9. In the case of contracts for construction projects and for security, janitorial
and similar services, the increases in the minimum wage and allowance rates of the
workers shall be borne by the principal or client of the construction/service contractor
and the contracts shall be deemed amended accordingly, subject to the provisions of
Section 3(c) of this Order. (Rollo, p. 49)
Section 7, par. c of the Security Services Contract which calls for an automatic
escalation of the rate per guard in case of wage increase also reads:chanrob1es virtual 1aw library

The terms and conditions herein set forth shall be modified by the applicable provisions
of subsequent laws or decrees, especially as they pertain to increases in the minimum
wage and occupational benefits to workers. (Rollo, p. 46)

Requests for adjustment of the contract price were reiterated on January 14, 1988 and
February 19, 1988 but were ignored by the petitioner.

Thus on June 7, 1988, the private respondent filed with the Office of the Sub-Regional
Arbitrator in Region VI, Iloilo City a complaint for unpaid amount of re-adjustment rate
under Wage Order No. 6 together with wage salary differentials arising from the
integration of the cost of living allowance under Wage Order No. 1, 2, 3 and 5 pursuant
to Executive Order No. 178 plus the amount of P25,000.00 as attorney’s fees and cost
of litigation.

On July 29, 1988, the petitioner filed a Motion to Dismiss on the following grounds: chanrob1es virtual 1aw library

(1) The Commission has no jurisdiction to hear and try the case;

(2) Assuming it has jurisdiction, the security guards of Odin Security Agency have no
legal personality to sue or be sued; and

(3) Assuming the individual guards have legal personality the action involves
interpretation of contract over which it has no authority. (Rollo, p. 75)

On August 19, 1988, the Labor Arbiter issued an Order dismissing the complaint stating
that the petitioner’s being a government-owned or controlled corporation would place it
under the scope and jurisdiction of the Civil Service Commission and not within the
ambit of the NLRC.

This Order of dismissal was raised on Appeal to the NLRC and on January 17, 1989 the
NLRC issued the questioned resolution setting aside the order and entered a decision
granting reliefs to the private Respondent.

A motion for reconsideration was subsequently filed raising among others that the
resolution is:
chanroblesvirtualawlibrary

(1) In violation of the right of the respondent to due process under the Constitution;

(2) Granting arguendo that the due process clause was observed, the resolution
granting relief is without any legal basis; and

(3) Granting arguendo that there is legal basis for the award, the stipulation under the
contract allowing an increase of wage rate is void ab initio. (Rollo, p. 86)

On June 25, 1990, the motion for reconsideration was denied.

The petitioner now comes to this Court reiterating substantially the same grounds it
raised in its motion for reconsideration, to wit:chanrob1es virtual 1aw library

(1) The National Labor Relations Commission failed to observe due process.

(2) Granting the award of the National Labor Relations Commission is valid, reliefs
granted are not legal.

(3) Assuming the award complies with the requirements of due process, the National
Labor Relations Commission erred when it failed to declare the contract for security
services void. (Rollo, pp. 201-202)

The petitioner is a government-owned or controlled corporation with a special charter.

This places it under the scope of the civil service (Art. XI [B] [1] and [2], 1987
Constitution); Boy Scouts of the Philippines v. NLRC, 196 SCRA 176 [1991]; PNOC-
Energy Development Corp. v. NLRC, 201 SCRA 487 [1991]). However, the guards are
not employees of the petitioner. The contract of services explicitly states that the
security guards are not considered employees of the petitioner (Rollo, p. 45). There
being no employer-employee relationship between the petitioner and the security
guards, the jurisdiction of the Civil Service Commission may not be invoked in this
case.

The contract entered into by the petitioner which is merely job contracting makes the
petitioner an indirect employer. The issue, therefore, is whether or not an indirect
employer is bound by the rulings of the NLRC.

Notwithstanding that the petitioner is a government agency, its liabilities, which are
joint and solidary with that of the contractor, are provided in Articles 106, 107 and 109
of the Labor Code. This places the petitioner’s liabilities under the scope of the NLRC.
Moreover, Book Three, Title II on Wages specifically provides that the term "employer"
includes any person acting directly or indirectly in the interest of an employer in
relation to an employee and shall include the Government and all its branches,
subdivisions and instrumentalities, all government-owned or controlled corporation and
institutions as well as non-profit private institutions, or organizations (Art. 97 [b], Labor
Code; Eagle Security Agency, Inc. v. NLRC, 173 SCRA 479 [1989]; Rabago v. NLRC,
200 SCRA 158 [1991]). The NLRC, therefore, did not commit grave abuse of discretion
in assuming jurisdiction to set aside the Order of dismissal by the Labor Arbiter. chanrobles virtual lawlibrary

The underlying issue in this case is who should carry the burden of the wage increases.

Settled is the rule that in job contracting, the petitioner as principal is jointly and
severally liable with the contractor for the payment of unpaid wages. The statutory
basis for the joint and several liability is set forth in Articles 107, and 109 in relation to
Article 106 of the Labor Code. (Del Rosario and Sons Logging Enterprises, Inc. v. NLRC,
136 SCRA 669 [1985]; Baguio v. NLRC, 202 SCRA 465 [1991]; Ecal v. NLRC, 195 SCRA
224 [1991]). In the case at bar, the action instituted by the private respondent was for
the payment of unpaid wage differentials under Wage Order No. 6. The liabilities of the
parties were very well explained in the case of Eagle Security v. NLRC, supra where the
court held:chanrob1es virtual 1aw library
 x          x           x

"The solidary liability of PTSI and EAGLE, however, does not preclude the right of
reimbursement from his co-debtor by the one who paid [See Article 1217, Civil Code].
It is with respect to this right of reimbursement that petitioners can find support in the
aforecited contractual stipulation and Wage Order provision.

"The Wage Orders are explicit that payment of the increases are `to be borne’ by the
principal or client.’To be borne’, however, does not mean that the principal, PTSI in this
case, would directly pay the security guards the wage and allowance increases because
there is no privity of contract between them. The security guards’ contractual
relationship is with their immediate employer, EAGLE. As an employer, EAGLE is tasked,
among others, with the payment of their wages [See Article VII Sec. 3 of the Contract
for Security Services, supra and Bautista v. Inciong, G.R. No. 52824, March 16, 1988,
158 SCRA 556].

"Premises considered, the security guards’ immediate recourse for the payment of the
increases is with their direct employer, EAGLE. However, in order for the security
agency to comply with the new wage and allowance rates it has to pay the security
guards, the Wage Order made specific provision to amend existing contracts for
security services by allowing the adjustment of the consideration paid by the principal
to the security agency concerned. What the Wage Orders require, therefore, is the
amendment of the contract as to the consideration to cover the service contractor’s
payment of the increases mandated. In the end, therefore, ultimate liability for the
payment of the increases rests with the principal." cralaw virtua1aw library

The Wage Orders are statutory and mandatory and can not be waived. The petitioner
can not escape liability since the law provides the joint and solidary liability of the
principal and the contractor for the protection of the laborers. The contention that it
was deprived due process because no hearing was conducted does not deserve merit. A
decision on the merits is proper where the issues raised by the parties did not involve
intricate questions of law. (See Blue Bar Coconut Phils. Inc. v. Minister of Labor, 174
SCRA 25 [1989]) There can be no question that the security guards are entitled to
wage adjustments. The computation of the amount due to each individual guard can be
made during the execution of the decision where hearings can be held. (See Section 3,
Rule VIII of the New Rules of Procedure of the NLRC) Neither can the petitioner assail
the contract for security services for being void ab initio on the ground that it did not
comply with the bidding requirements set by law. Undeniably, services were rendered
already and the petitioner benefitted from said contract for two (2) years now. The
petitioner is therefore estopped from assailing the contract. chanrobles law library : red

Quite noteworthy is the fact that the private respondent entered into the contract when
Wage Order No. 6 had already been in force. The contract was entered into in
November 11, 1985 one year after the effectivity of Wage Order No. 6 which was on
November 1, 1984. The rates of the security guards as stipulated in the contract did not
consider the increases in the minimum wage mandated by Wage Order No. 6. Two
years after, the private respondent is now asking for an adjustment in the contract
price pursuant to the wage order provision.

Such action of the private respondent is rather disturbing and must not remain
unchecked. In the complaint filed, the private respondent alleged that it requested the
Regional Director, NCR Region of the Department of Labor and Employment for their
intercession in connection with the illegal bidding and award made by the petitioner in
favor of Triad Security Agency which was below the minimum wage law. Undeniably,
the private respondent is equally guilty when it entered into the contract with the
petitioner without considering Wage Order No. 6.

The private respondent tries to explain that the Philippine Association of Detective and
Protective Agency Operators (PADPAO) which fixes the contract rate of the security
agencies was unable to fix the new contract rate until May 12, 1986.

We, however, agree with the posture that the setting of wages under PADPAO is of no
moment. The PADPAO memorandum was not necessary to make Wage Order No. 6
effective. The PADPAO memo was merely an internal agreement among the operators
to set the ceiling of the contract rates. It was aimed to curb the practice of security
agencies which were in cutthroat competition to request for wage adjustments after
proposals were accepted in good faith to the prejudice of the parties. chanrobles.com.ph : virtual law library

While it is true that security personnel should not be deprived of what is lawfully due
them, it bears emphasis that it was the private respondent which first deprived the
security personnel of their rightful wage under Wage Order No. 6. The private
respondent is the employer of the security guards and as the employer, it is charged
with knowledge of labor laws and the adequacy of the compensation that it demands
for contractual services is its principal concern and not any other’s (Del Rosario & Sons
Logging Enterprises, Inc. v. NLRC, 136 SCRA 669 [1985]).

Given this peculiar circumstance, the private respondent should also be faulted for the
unpaid wage differentials of the security guards. By filing the complaint in its own
behalf and in behalf of the security guards, the private respondent wishes to exculpate
itself from liability on the strength of the ruling in the Eagle case that the ultimate
liability rests with the principal. Nonetheless, the inescapable fact is that the employees
must be guaranteed payment of the wages due them for the performance of any work,
task, job or project. They must be given ample protection as mandated by the
Constitution (See Article II, Section 18 and Article XIII, Section 3). Thus, to assure
compliance with the provisions of the Labor Code including the statutory minimum
wage, the joint and several liability of the contractor and the principal is mandated.

We, therefore, hold the petitioner and the private respondent jointly and severally liable
to the security guards for the unpaid wage differentials under Wage Order No. 6. As
held in the Eagle case, the security guards’ immediate recourse is with their direct
employer, private respondent Odin Security Agency. The solidary liability is, however,
without prejudice to a claim for reimbursement by the private respondent against the
petitioner for only one-half of the amount due considering that the private respondent
is also at fault for entering into the contract without taking into consideration the
minimum wage rates under Wage Order No. 6. chanrobles lawlibrary : rednad

WHEREFORE, the questioned resolutions of the National Labor Relations Commission

are hereby AFFIRMED with the modification that both the petitioner and the private
respondent are ORDERED to pay jointly and severally the unpaid wage differentials
under Wage Order No. 6 without prejudice to the right of reimbursement for one-half of
the amount which either the petitioner or the private respondent may have to pay to
the security guards. Costs against the petitioner.

SO ORDERED.

Bidin, Davide, Jr. and Romero, JJ., concur.

Felciano, J., is on leave.

CASE DIGEST LINK:

https://www.scribd.com/document/328783918/Philippine-Fisheries-Development-Authority-V
EMPLOYER-
EMPLOYEE
RELATIONSHIP
Sonza vs. ABS CBN, G.R. No. 138051, June 10, 2004

FULL TEXT:

G.R. No. 138051             June 10, 2004

JOSE Y. SONZA, petitioner,
vs.
ABS-CBN BROADCASTING CORPORATION, respondent.

DECISION

CARPIO, J.:

The Case

Before this Court is a petition for review on certiorari1 assailing the 26 March 1999 Decision2 of the
Court of Appeals in CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza
("SONZA"). The Court of Appeals affirmed the findings of the National Labor Relations Commission
("NLRC"), which affirmed the Labor Arbiter’s dismissal of the case for lack of jurisdiction.

The Facts

In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an Agreement

("Agreement") with the Mel and Jay Management and Development Corporation ("MJMDC"). ABS-
CBN was represented by its corporate officers while MJMDC was represented by SONZA, as
President and General Manager, and Carmela Tiangco ("TIANGCO"), as EVP and Treasurer.
Referred to in the Agreement as "AGENT," MJMDC agreed to provide SONZA’s services exclusively
to ABS-CBN as talent for radio and television. The Agreement listed the services SONZA would
render to ABS-CBN, as follows:

a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;

b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.3

ABS-CBN agreed to pay for SONZA’s services a monthly talent fee of ₱310,000 for the first year and
₱317,000 for the second and third year of the Agreement. ABS-CBN would pay the talent fees on
the 10th and 25th days of the month.

On 1 April 1996, SONZA wrote a letter to ABS-CBN’s President, Eugenio Lopez III, which reads:

Dear Mr. Lopez,

We would like to call your attention to the Agreement dated May 1994 entered into by your
goodself on behalf of ABS-CBN with our company relative to our talent JOSE Y. SONZA.

As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning
his programs and career. We consider these acts of the station violative of the Agreement
and the station as in breach thereof. In this connection, we hereby serve notice of rescission
of said Agreement at our instance effective as of date.
 Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount
stipulated in paragraph 7 of the Agreement but reserves the right to seek recovery of the
other benefits under said Agreement.

Thank you for your attention.

Very truly yours,

(Sgd.)
JOSE Y. SONZA
President and Gen. Manager4

On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and
Employment, National Capital Region in Quezon City. SONZA complained that ABS-CBN did not
pay his salaries, separation pay, service incentive leave pay, 13th month pay, signing bonus, travel
allowance and amounts due under the Employees Stock Option Plan ("ESOP").

On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee
relationship existed between the parties. SONZA filed an Opposition to the motion on 19 July 1996.

Meanwhile, ABS-CBN continued to remit SONZA’s monthly talent fees through his account at
PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account with
the same bank where ABS-CBN deposited SONZA’s talent fees and other payments due him under
the Agreement.

In his Order dated 2 December 1996, the Labor Arbiter5 denied the motion to dismiss and directed
the parties to file their respective position papers. The Labor Arbiter ruled:

In this instant case, complainant for having invoked a claim that he was an employee of
respondent company until April 15, 1996 and that he was not paid certain claims, it is
sufficient enough as to confer jurisdiction over the instant case in this Office. And as to
whether or not such claim would entitle complainant to recover upon the causes of action
asserted is a matter to be resolved only after and as a result of a hearing. Thus, the
respondent’s plea of lack of employer-employee relationship may be pleaded only as a
matter of defense. It behooves upon it the duty to prove that there really is no employer-
employee relationship between it and the complainant.

The Labor Arbiter then considered the case submitted for resolution. The parties submitted their
position papers on 24 February 1997.

On 11 March 1997, SONZA filed a Reply to Respondent’s Position Paper with Motion to Expunge
Respondent’s Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBN’s
witnesses Soccoro Vidanes and Rolando V. Cruz. These witnesses stated in their affidavits that the
prevailing practice in the television and broadcast industry is to treat talents like SONZA as
independent contractors.

The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of
jurisdiction.6 The pertinent parts of the decision read as follows:

xxx
 While Philippine jurisprudence has not yet, with certainty, touched on the "true nature of the
contract of a talent," it stands to reason that a "talent" as above-described cannot be
considered as an employee by reason of the peculiar circumstances surrounding the
engagement of his services.

It must be noted that complainant was engaged by respondent by reason of his peculiar

skills and talent as a TV host and a radio broadcaster. Unlike an ordinary employee,
he was free to perform the services he undertook to render in accordance with his
own style. The benefits conferred to complainant under the May 1994 Agreement are
certainly very much higher than those generally given to employees. For one, complainant
Sonza’s monthly talent fees amount to a staggering ₱317,000. Moreover, his engagement as
a talent was covered by a specific contract. Likewise, he was not bound to render eight (8)
hours of work per day as he worked only for such number of hours as may be necessary.

The fact that per the May 1994 Agreement complainant was accorded some benefits
normally given to an employee is inconsequential. Whatever benefits complainant
enjoyed arose from specific agreement by the parties and not by reason of employer-
employee relationship. As correctly put by the respondent, "All these benefits are merely
talent fees and other contractual benefits and should not be deemed as ‘salaries, wages
and/or other remuneration’ accorded to an employee, notwithstanding the nomenclature
appended to these benefits. Apropos to this is the rule that the term or nomenclature given to
a stipulated benefit is not controlling, but the intent of the parties to the Agreement conferring
such benefit."

The fact that complainant was made subject to respondent’s Rules and Regulations,
likewise, does not detract from the absence of employer-employee relationship. As
held by the Supreme Court, "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 to achieve it." (Insular Life Assurance Co., Ltd.
vs. NLRC, et al., G.R. No. 84484, November 15, 1989).

x x x (Emphasis supplied)7

SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the
Labor Arbiter’s decision. SONZA filed a motion for reconsideration, which the NLRC denied in its
Resolution dated 3 July 1998.

On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals
assailing the decision and resolution of the NLRC. On 26 March 1999, the Court of Appeals
rendered a Decision dismissing the case.8

Hence, this petition.

The Rulings of the NLRC and Court of Appeals

The Court of Appeals affirmed the NLRC’s finding that no employer-employee relationship existed
between SONZA and ABS-CBN. Adopting the NLRC’s decision, the appellate court quoted the
following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract
merely as an agent of complainant Sonza, the principal. By all indication and as the law puts
it, the act of the agent is the act of the principal itself. This fact is made particularly true in this
case, as admittedly MJMDC ‘is a management company devoted exclusively to managing
the careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C. Tiangco.’ (Opposition
to Motion to Dismiss)

Clearly, the relations of principal and agent only accrues between complainant Sonza and
MJMDC, and not between ABS-CBN and MJMDC. This is clear from the provisions of the
May 1994 Agreement which specifically referred to MJMDC as the ‘AGENT’. As a matter of
fact, when complainant herein unilaterally rescinded said May 1994 Agreement, it was
MJMDC which issued the notice of rescission in behalf of Mr. Sonza, who himself signed the
same in his capacity as President.

Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that
historically, the parties to the said agreements are ABS-CBN and Mr. Sonza. And it is only in
the May 1994 Agreement, which is the latest Agreement executed between ABS-CBN and
Mr. Sonza, that MJMDC figured in the said Agreement as the agent of Mr. Sonza.

We find it erroneous to assert that MJMDC is a mere ‘labor-only’ contractor of ABS-CBN

such that there exist[s] employer-employee relationship between the latter and Mr. Sonza.
On the contrary, We find it indubitable, that MJMDC is an agent, not of ABS-CBN, but of the
talent/contractor Mr. Sonza, as expressly admitted by the latter and MJMDC in the May 1994
Agreement.

It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to
the regular courts, the same being in the nature of an action for alleged breach of contractual
obligation on the part of respondent-appellee. As squarely apparent from complainant-
appellant’s Position Paper, his claims for compensation for services, ‘13th month pay’,
signing bonus and travel allowance against respondent-appellee are not based on the Labor
Code but rather on the provisions of the May 1994 Agreement, while his claims for proceeds
under Stock Purchase Agreement are based on the latter. A portion of the Position Paper of
complainant-appellant bears perusal:

‘Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually
bound itself to pay complainant a signing bonus consisting of shares of stocks…with
FIVE HUNDRED THOUSAND PESOS (₱500,000.00).

Similarly, complainant is also entitled to be paid 13th month pay based on an amount
not lower than the amount he was receiving prior to effectivity of (the) Agreement’.

Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a

commutable travel benefit amounting to at least One Hundred Fifty Thousand Pesos
(₱150,000.00) per year.’

Thus, it is precisely because of complainant-appellant’s own recognition of the fact that his
contractual relations with ABS-CBN are founded on the New Civil Code, rather than the
Labor Code, that instead of merely resigning from ABS-CBN, complainant-appellant served
upon the latter a ‘notice of rescission’ of Agreement with the station, per his letter dated April
1, 1996, which asserted that instead of referring to unpaid employee benefits, ‘he is waiving
and renouncing recovery of the remaining amount stipulated in paragraph 7 of the
 Agreement but reserves the right to such recovery of the other benefits under said
Agreement.’ (Annex 3 of the respondent ABS-CBN’s Motion to Dismiss dated July 10, 1996).

Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or
the Stock Purchase Agreement by respondent-appellee that complainant-appellant filed his
complaint. Complainant-appellant’s claims being anchored on the alleged breach of contract
on the part of respondent-appellee, the same can be resolved by reference to civil law and
not to labor law. Consequently, they are within the realm of civil law and, thus, lie with the
regular courts. As held in the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238
SCRA 267, 21 November 1994, an action for breach of contractual obligation is
intrinsically a civil dispute.9 (Emphasis supplied)

The Court of Appeals ruled that the existence of an employer-employee relationship between
SONZA and ABS-CBN is a factual question that is within the jurisdiction of the NLRC to resolve.10 A
special civil action for certiorari extends only to issues of want or excess of jurisdiction of the
NLRC.11 Such action cannot cover an inquiry into the correctness of the evaluation of the evidence
which served as basis of the NLRC’s conclusion.12 The Court of Appeals added that it could not re-
examine the parties’ evidence and substitute the factual findings of the NLRC with its own.13

The Issue

In assailing the decision of the Court of Appeals, SONZA contends that:

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRC’S DECISION

AND REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED
BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT OF CONTROLLING LAW,
JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A FINDING.14

The Court’s Ruling

We affirm the assailed decision.

No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming
the NLRC ruling which upheld the Labor Arbiter’s dismissal of the case for lack of jurisdiction.

The present controversy is one of first impression. Although Philippine labor laws and jurisprudence
define clearly the elements of an employer-employee relationship, this is the first time that the Court
will resolve the nature of the relationship between a television and radio station and one of its
"talents." There is no case law stating that a radio and television program host is an employee of the
broadcast station.

The instant case involves big names in the broadcast industry, namely Jose "Jay" Sonza, a known
television and radio personality, and ABS-CBN, one of the biggest television and radio networks in
the country.

SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee
of ABS-CBN. On the other hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction because
SONZA was an independent contractor.

Employee or Independent Contractor?

The existence of an employer-employee relationship is a question of fact. Appellate courts accord
the factual findings of the Labor Arbiter and the NLRC not only respect but also finality when
supported by substantial evidence.15 Substantial evidence means such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion.16 A party cannot prove the
absence of substantial evidence by simply pointing out that there is contrary evidence on record,
direct or circumstantial. The Court does not substitute its own judgment for that of the tribunal in
determining where the weight of evidence lies or what evidence is credible.17

SONZA maintains that all essential elements of an employer-employee relationship are present in
this case. Case law has consistently held that the elements of an employer-employee relationship
are: (a) 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 on the means and methods by
which the work is accomplished.18 The last element, the so-called "control test", is the most
important element.19

A. Selection and Engagement of Employee

ABS-CBN engaged SONZA’s services to co-host its television and radio programs because of
SONZA’s peculiar skills, talent and celebrity status. SONZA contends that the "discretion used by
respondent in specifically selecting and hiring complainant over other broadcasters of possibly
similar experience and qualification as complainant belies respondent’s claim of independent
contractorship."

Independent contractors often present themselves to possess unique skills, expertise or talent to
distinguish them from ordinary employees. The specific selection and hiring of SONZA, because of
his unique skills, talent and celebrity status not possessed by ordinary employees, is a
circumstance indicative, but not conclusive, of an independent contractual relationship. If SONZA did
not possess such unique skills, talent and celebrity status, ABS-CBN would not have entered into
the Agreement with SONZA but would have hired him through its personnel department just like any
other employee.

In any event, the method of selecting and engaging SONZA does not conclusively determine his
status. We must consider all the circumstances of the relationship, with the control test being the
most important element.

B. Payment of Wages

ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC.
SONZA asserts that this mode of fee payment shows that he was an employee of ABS-CBN.
SONZA also points out that ABS-CBN granted him benefits and privileges "which he would not have
enjoyed if he were truly the subject of a valid job contract."

All the talent fees and benefits paid to SONZA were the result of negotiations that led to the
Agreement. If SONZA were ABS-CBN’s employee, there would be no need for the parties to
stipulate on benefits such as "SSS, Medicare, x x x and 13th month pay"20 which the law
automatically incorporates into every employer-employee contract.21 Whatever benefits SONZA
enjoyed arose from contract and not because of an employer-employee relationship.22

SONZA’s talent fees, amounting to ₱317,000 monthly in the second and third year, are so huge and
out of the ordinary that they indicate more an independent contractual relationship rather than an
employer-employee relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely
because of SONZA’s unique skills, talent and celebrity status not possessed by ordinary employees.
Obviously, SONZA acting alone possessed enough bargaining power to demand and receive such
huge talent fees for his services. The power to bargain talent fees way above the salary scales of
ordinary employees is a circumstance indicative, but not conclusive, of an independent contractual
relationship.

The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of
SONZA as an independent contractor. The parties expressly agreed on such mode of payment.
Under the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have to turn over
any talent fee accruing under the Agreement.

C. Power of Dismissal

For violation of any provision of the Agreement, either party may terminate their relationship. SONZA
failed to show that ABS-CBN could terminate his services on grounds other than breach of contract,
such as retrenchment to prevent losses as provided under labor laws.23

During the life of the Agreement, ABS-CBN agreed to pay SONZA’s talent fees as long as "AGENT
and Jay Sonza shall faithfully and completely perform each condition of this Agreement."24 Even if it
suffered severe business losses, ABS-CBN could not retrench SONZA because ABS-CBN remained
obligated to pay SONZA’s talent fees during the life of the Agreement. This circumstance indicates
an independent contractual relationship between SONZA and ABS-CBN.

SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him
his talent fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement to continue paying
SONZA’s talent fees during the remaining life of the Agreement even if ABS-CBN cancelled
SONZA’s programs through no fault of SONZA.25

SONZA assails the Labor Arbiter’s interpretation of his rescission of the Agreement as an admission
that he is not an employee of ABS-CBN. The Labor Arbiter stated that "if it were true that
complainant was really an employee, he would merely resign, instead." SONZA did actually resign
from ABS-CBN but he also, as president of MJMDC, rescinded the Agreement. SONZA’s letter
clearly bears this out.26 However, the manner by which SONZA terminated his relationship with ABS-
CBN is immaterial. Whether SONZA rescinded the Agreement or resigned from work does not
determine his status as employee or independent contractor.

D. Power of Control

Since there is no local precedent on whether a radio and television program host is an employee or
an independent contractor, we refer to foreign case law in analyzing the present case. The United
States Court of Appeals, First Circuit, recently held in Alberty-Vélez v. Corporación De Puerto
Rico Para La Difusión Pública ("WIPR")27 that a television program host is an independent
contractor. We quote the following findings of the U.S. court:

Several factors favor classifying Alberty as an independent contractor. First, a television

actress is a skilled position requiring talent and training not available on-the-job. x x x
In this regard, Alberty possesses a master’s degree in public communications and
journalism; is trained in dance, singing, and modeling; taught with the drama department at
the University of Puerto Rico; and acted in several theater and television productions prior to
her affiliation with "Desde Mi Pueblo." Second, Alberty provided the "tools and
instrumentalities" necessary for her to perform. Specifically, she provided, or obtained
sponsors to provide, the costumes, jewelry, and other image-related supplies and services
necessary for her appearance. Alberty disputes that this factor favors independent contractor
 status because WIPR provided the "equipment necessary to tape the show." Alberty’s
argument is misplaced. The equipment necessary for Alberty to conduct her job as host of
"Desde Mi Pueblo" related to her appearance on the show. Others provided equipment for
filming and producing the show, but these were not the primary tools that Alberty used to
perform her particular function. If we accepted this argument, independent contractors could
never work on collaborative projects because other individuals often provide the equipment
required for different aspects of the collaboration. x x x

Third, WIPR could not assign Alberty work in addition to filming "Desde Mi
Pueblo." Alberty’s contracts with WIPR specifically provided that WIPR hired her
"professional services as Hostess for the Program Desde Mi Pueblo." There is no evidence
that WIPR assigned Alberty tasks in addition to work related to these tapings. x x
x28 (Emphasis supplied)

Applying the control test to the present case, we find that SONZA is not an employee but an
independent contractor. The control test is the most important test our courts apply in
distinguishing an employee from an independent contractor.29 This test is based on the extent of
control the hirer exercises over a worker. The greater the supervision and control the hirer exercises,
the more likely the worker is deemed an employee. The converse holds true as well – the less
control the hirer exercises, the more likely the worker is considered an independent contractor.30

First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.

SONZA’s argument is misplaced. ABS-CBN engaged SONZA’s services specifically to co-host the
"Mel & Jay" programs. ABS-CBN did not assign any other work to SONZA. To perform his work,
SONZA only needed his skills and talent. How SONZA delivered his lines, appeared on television,
and sounded on radio were outside ABS-CBN’s control. SONZA did not have to render eight hours
of work per day. The Agreement required SONZA to attend only rehearsals and tapings of the
shows, as well as pre- and post-production staff meetings.31 ABS-CBN could not dictate the contents
of SONZA’s script. However, the Agreement prohibited SONZA from criticizing in his shows ABS-
CBN or its interests.32 The clear implication is that SONZA had a free hand on what to say or discuss
in his shows provided he did not attack ABS-CBN or its interests.

We find that ABS-CBN was not involved in the actual performance that produced the finished
product of SONZA’s work.33 ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN
merely reserved the right to modify the program format and airtime schedule "for more effective
programming."34 ABS-CBN’s sole concern was the quality of the shows and their standing in the
ratings. Clearly, ABS-CBN did not exercise control over the means and methods of performance of
SONZA’s work.

SONZA claims that ABS-CBN’s power not to broadcast his shows proves ABS-CBN’s power over
the means and methods of the performance of his work. Although ABS-CBN did have the option not
to broadcast SONZA’s show, ABS-CBN was still obligated to pay SONZA’s talent fees... Thus, even
if ABS-CBN was completely dissatisfied with the means and methods of SONZA’s performance of
his work, or even with the quality or product of his work, ABS-CBN could not dismiss or even
discipline SONZA. All that ABS-CBN could do is not to broadcast SONZA’s show but ABS-CBN
must still pay his talent fees in full.35

Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it was by the obligation to
continue paying in full SONZA’s talent fees, did not amount to control over the means and methods
of the performance of SONZA’s work. ABS-CBN could not terminate or discipline SONZA even if the
means and methods of performance of his work - how he delivered his lines and appeared on
television - did not meet ABS-CBN’s approval. This proves that ABS-CBN’s control was limited only
to the result of SONZA’s work, whether to broadcast the final product or not. In either case, ABS-
CBN must still pay SONZA’s talent fees in full until the expiry of the Agreement.

In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court of Appeals ruled that
vaudeville performers were independent contractors although the management reserved the right to
delete objectionable features in their shows. Since the management did not have control over the
manner of performance of the skills of the artists, it could only control the result of the work by
deleting objectionable features.37

SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment
and crew. No doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the
"Mel & Jay" programs. However, the equipment, crew and airtime are not the "tools and
instrumentalities" SONZA needed to perform his job. What SONZA principally needed were his
talent or skills and the costumes necessary for his appearance.38 Even though ABS-CBN provided
SONZA with the place of work and the necessary equipment, SONZA was still an independent
contractor since ABS-CBN did not supervise and control his work. ABS-CBN’s sole concern was for
SONZA to display his talent during the airing of the programs.39

A radio broadcast specialist who works under minimal supervision is an independent

contractor.40 SONZA’s work as television and radio program host required special skills and talent,
which SONZA admittedly possesses. The records do not show that ABS-CBN exercised any
supervision and control over how SONZA utilized his skills and talent in his shows.

Second, SONZA urges us to rule that he was ABS-CBN’s employee because ABS-CBN subjected
him to its rules and standards of performance. SONZA claims that this indicates ABS-CBN’s control
"not only [over] his manner of work but also the quality of his work."

The Agreement stipulates that SONZA shall abide with the rules and standards of performance
"covering talents"41 of ABS-CBN. The Agreement does not require SONZA to comply with the rules
and standards of performance prescribed for employees of ABS-CBN. The code of conduct imposed
on SONZA under the Agreement refers to the "Television and Radio Code of the Kapisanan ng mga
Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN) as its Code
of Ethics."42 The KBP code applies to broadcasters, not to employees of radio and television stations.
Broadcasters are not necessarily employees of radio and television stations. Clearly, the rules and
standards of performance referred to in the Agreement are those applicable to talents and not to
employees of ABS-CBN.

In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an
employee of the former.43 In this case, SONZA failed to show that these rules controlled his
performance. We find that these general rules are merely guidelines towards the achievement of
the mutually desired result, which are top-rating television and radio programs that comply with
standards of the industry. We have ruled that:

Further, not every form of control that a party reserves to himself over the conduct of the other party
in relation to the services being rendered may be accorded the effect of establishing an employer-
employee relationship. The facts of this case fall squarely with the case of Insular Life Assurance
Co., Ltd. vs. NLRC. In said case, we held that:

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.44

The Vaughan case also held that one could still be an independent contractor although the hirer
reserved certain supervision to insure the attainment of the desired result. The hirer, however, must
not deprive the one hired from performing his services according to his own initiative.45

Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme form of
control which ABS-CBN exercised over him.

This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an
employee of ABS-CBN. Even an independent contractor can validly provide his services exclusively
to the hiring party. In the broadcast industry, exclusivity is not necessarily the same as control.

The hiring of exclusive talents is a widespread and accepted practice in the entertainment
industry.46 This practice is not designed to control the means and methods of work of the talent, but
simply to protect the investment of the broadcast station. The broadcast station normally spends
substantial amounts of money, time and effort "in building up its talents as well as the programs they
appear in and thus expects that said talents remain exclusive with the station for a commensurate
period of time."47 Normally, a much higher fee is paid to talents who agree to work exclusively for a
particular radio or television station. In short, the huge talent fees partially compensates for
exclusivity, as in the present case.

MJMDC as Agent of SONZA

SONZA protests the Labor Arbiter’s finding that he is a talent of MJMDC, which contracted out his
services to ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an
employee of ABS-CBN. SONZA insists that MJMDC is a "labor-only" contractor and ABS-CBN is his
employer.

In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the
employee who is ostensibly under the employ of the "labor-only" contractor; and (3) the principal
who is deemed the real employer. Under this scheme, the "labor-only" contractor is the agent of
the principal. The law makes the principal responsible to the employees of the "labor-only
contractor" as if the principal itself directly hired or employed the employees.48 These circumstances
are not present in this case.

There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-
CBN. MJMDC merely acted as SONZA’s agent. The Agreement expressly states that MJMDC acted
as the "AGENT" of SONZA. The records do not show that MJMDC acted as ABS-CBN’s agent.
MJMDC, which stands for Mel and Jay Management and Development Corporation, is a corporation
organized and owned by SONZA and TIANGCO. The President and General Manager of MJMDC is
SONZA himself. It is absurd to hold that MJMDC, which is owned, controlled, headed and managed
by SONZA, acted as agent of ABS-CBN in entering into the Agreement with SONZA, who himself is
represented by MJMDC. That would make MJMDC the agent of both ABS-CBN and SONZA.

As SONZA admits, MJMDC is a management company devoted exclusively to managing the

careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not engaged in any other
business, not even job contracting. MJMDC does not have any other function apart from acting as
agent of SONZA or TIANGCO to promote their careers in the broadcast and television industry.49
Policy Instruction No. 40

SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8
January 1979 finally settled the status of workers in the broadcast industry. Under this policy, the
types of employees in the broadcast industry are the station and program employees.

Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of
law. There is no legal presumption that Policy Instruction No. 40 determines SONZA’s status. A
mere executive issuance cannot exclude independent contractors from the class of service providers
to the broadcast industry. The classification of workers in the broadcast industry into only two groups
under Policy Instruction No. 40 is not binding on this Court, especially when the classification has no
basis either in law or in fact.

Affidavits of ABS-CBN’s Witnesses

SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando
Cruz without giving his counsel the

opportunity to cross-examine these witnesses. SONZA brands these witnesses as incompetent to

attest on the prevailing practice in the radio and television industry. SONZA views the affidavits of
these witnesses as misleading and irrelevant.

While SONZA failed to cross-examine ABS-CBN’s witnesses, he was never prevented from denying
or refuting the allegations in the affidavits. The Labor Arbiter has the discretion whether to conduct a
formal (trial-type) hearing after the submission of the position papers of the parties, thus:

Section 3. Submission of Position Papers/Memorandum

xxx

These verified position papers shall cover only those claims and causes of action raised in
the complaint excluding those that may have been amicably settled, and shall be
accompanied by all supporting documents including the affidavits of their respective
witnesses which shall take the place of the latter’s direct testimony. x x x

Section 4. Determination of Necessity of Hearing. – Immediately after the submission of the

parties of their position papers/memorandum, the Labor Arbiter shall motu propio determine
whether there is need for a formal trial or hearing. At this stage, he may, at his discretion and
for the purpose of making such determination, ask clarificatory questions to further elicit facts
or information, including but not limited to the subpoena of relevant documentary evidence, if
any from any party or witness.50

The Labor Arbiter can decide a case based solely on the position papers and the supporting
documents without a formal trial.51 The holding of a formal hearing or trial is something that the
parties cannot demand as a matter of right.52 If the Labor Arbiter is confident that he can rely on the
documents before him, he cannot be faulted for not conducting a formal trial, unless under the
particular circumstances of the case, the documents alone are insufficient. The proceedings before a
Labor Arbiter are non-litigious in nature. Subject to the requirements of due process, the
technicalities of law and the rules obtaining in the courts of law do not strictly apply in proceedings
before a Labor Arbiter.
Talents as Independent Contractors

ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries
to treat talents like SONZA as independent contractors. SONZA argues that if such practice exists, it
is void for violating the right of labor to security of tenure.

The right of labor to security of tenure as guaranteed in the Constitution53 arises only if there is an
employer-employee relationship under labor laws. Not every performance of services for a fee
creates an employer-employee relationship. To hold that every person who renders services to
another for a fee is an employee - to give meaning to the security of tenure clause - will lead to
absurd results.

Individuals with special skills, expertise or talent enjoy the freedom to offer their services as
independent contractors. The right to life and livelihood guarantees this freedom to contract as
independent contractors. The right of labor to security of tenure cannot operate to deprive an
individual, possessed with special skills, expertise and talent, of his right to contract as an
independent contractor. An individual like an artist or talent has a right to render his services without
any one controlling the means and methods by which he performs his art or craft. This Court will not
interpret the right of labor to security of tenure to compel artists and talents to render their services
only as employees. If radio and television program hosts can render their services only as
employees, the station owners and managers can dictate to the radio and television hosts what they
say in their shows. This is not conducive to freedom of the press.

Different Tax Treatment of Talents and Broadcasters

The National Internal Revenue Code ("NIRC")54 in relation to Republic Act No. 7716,55 as amended
by Republic Act No. 8241,56 treats talents, television and radio broadcasters differently. Under the
NIRC, these professionals are subject to the 10% value-added tax ("VAT") on services they render.
Exempted from the VAT are those under an employer-employee relationship.57 This different tax
treatment accorded to talents and broadcasters bolters our conclusion that they are independent
contractors, provided all the basic elements of a contractual relationship are present as in this case.

Nature of SONZA’s Claims

SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service
incentive leave, signing bonus, travel allowance, and amounts due under the Employee Stock
Option Plan. We agree with the findings of the Labor Arbiter and the Court of Appeals that SONZA’s
claims are all based on the May 1994 Agreement and stock option plan, and not on the Labor
Code. Clearly, the present case does not call for an application of the Labor Code provisions but an
interpretation and implementation of the May 1994 Agreement. In effect, SONZA’s cause of action is
for breach of contract which is intrinsically a civil dispute cognizable by the regular courts.58

WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26

March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner.

SO ORDERED.

CASE DIGEST :

JOSE Y. SONZA v. ABS-CBN BROADCASTING CORPORATION, GR No. 138051, 2004-

06-10
Facts:
respondent ABS-CBN Broadcasting Corporation... signed an Agreement... with the Mel and
Jay Management and Development Corporation
MJMDC agreed to provide SONZA's services exclusively to ABS-CBN as talent for radio
and television.
00 to 10:00 a.m., M
SONZA wrote a letter to ABS-CBN's President, Eugenio Lopez III
Mr. Sonza irrevocably resigned in view of recent events concerning his programs and
career.
we hereby serve notice of rescission of... said Agreement
SONZA filed a complaint against ABS-CBN
SONZA complained that ABS-CBN did not pay his salaries, separation pay, service
incentive leave pay, 13th month pay, signing bonus,... travel allowance and amounts due
under the Employees Stock Option Plan
ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship
existed between the parties.
The Labor Arbiter rendered his Decision... dismissing the complaint for lack of jurisdiction.
SONZA appealed to the NLRC.
the NLRC rendered a Decision affirming the Labor Arbiter's decision.
the Court of Appeals rendered a Decision dismissing the case.
Issues:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRC'S DECISION
AND REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED
BETWEEN SONZA AND ABS-CBN
Ruling:
We affirm the assailed decision.
Although Philippine labor laws and jurisprudence define clearly the elements of an
employer-employee relationship, this is the first time that the Court will resolve the nature of
the relationship between a television and radio... station and one of its "talents." There is no
case law stating that a radio and television program host is an employee of the broadcast
station.
Applying the control test to the present case, we find that SONZA is not an employee but an
independent contractor. The control test is the most important test our courts apply in
distinguishing an employee from an independent contractor.
This test is based on the extent of control the hirer exercises over a worker. The greater the
supervision and control the hirer exercises, the more likely the worker is deemed an
employee. The converse holds true as well the less control the hirer exercises, the more
likely the... worker is considered an independent contractor.
ABS-CBN engaged SONZA's services specifically to co-host the "Mel & Jay" programs.
ABS-CBN did not assign any other work to SONZA. To perform his work, SONZA only
needed his skills and talent. How SONZA delivered his lines, appeared on... television, and
sounded on radio were outside ABS-CBN's control.
A radio broadcast specialist who works under minimal supervision is an independent
contractor.
SONZA's work as television and radio program host required special skills and talent, which
SONZA admittedly possesses. The records do not show that ABS-CBN... exercised any
supervision and control over how SONZA utilized his skills and talent in his shows.
In any event, not all rules imposed by the hiring party on the hired party indicate that the
latter is an employee of the former.
In this case, SONZA failed to show that these rules controlled his performance. We find that
these general rules are merely... guidelines towards the achievement of the mutually
desired result, which are top-rating television and radio programs that comply with
standards of the industry.
Being an exclusive talent does not by itself mean that SONZA is an employee of ABS-CBN.
Even an independent contractor can validly provide his services exclusively to the hiring
party. In the broadcast industry, exclusivity is not necessarily the same as... control.
In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2)
the employee who is ostensibly under the employ of the "labor-only" contractor; and (3) the
principal who is deemed the real employer. Under this scheme, the "labor-only"... contractor
is the agent of the principal. The law makes the principal responsible to the employees of
the "labor-only contractor" as if the principal itself directly hired or employed the employees.
These circumstances are not present in this... case.
Individuals with special skills, expertise or talent enjoy the freedom to offer their services as
independent contractors.
An individual like an artist or talent has a right to render his services without any one
controlling the means and methods by which he performs his... art or craft.
If radio and television program hosts can render their services only as employees, the
station owners and managers can... dictate to the radio and television hosts what they say
in their shows. This is not conducive to freedom of the press.
we DENY the petition
Dumpit-Murillo vs. CA, G.R. No. 164652, June 8, 2007
FULL TEXT:

[G.R. NO. 164652   : June 8, 2007]

THELMA DUMPIT-MURILLO, Petitioner, v. COURT OF APPEALS, ASSOCIATED

BROADCASTING COMPANY, JOSE JAVIER AND EDWARD TAN, Respondents.

DECISION

QUISUMBING, J.:

This petition seeks to reverse and set aside both the Decision 1 dated January 30, 2004
of the Court of Appeals in CA-G.R. SP No. 63125 and its Resolution 2 dated June 23,
2004 denying the motion for reconsideration. The Court of Appeals had overturned the
Resolution3 dated August 30, 2000 of the National Labor Relations Commission (NLRC)
ruling that petitioner was illegally dismissed.

The facts of the case are as follows:

On October 2, 1995, under Talent Contract No. NT95-1805, 4 private respondent

Associated Broasting Company (ABC) hired petitioner Thelma Dumpit-Murillo as a
newscaster and co-anchor for Balitang-Balita, an early evening news program. The
contract was for a period of three months. It was renewed under Talent Contracts Nos.
NT95-1915, NT96-3002, NT98-4984 and NT99-5649.5 In addition, petitioner's services
were engaged for the program "Live on Five." On September 30, 1999, after four years
of repeated renewals, petitioner's talent contract expired. Two weeks after the
expiration of the last contract, petitioner sent a letter to Mr. Jose Javier, Vice President
for News and Public Affairs of ABC, informing the latter that she was still interested in
renewing her contract subject to a salary increase. Thereafter, petitioner stopped
reporting for work. On November 5, 1999, she wrote Mr. Javier another letter, 6 which
we quote verbatim:

xxx

Dear Mr. Javier:

On October 20, 1999, I wrote you a letter in answer to your query by way of a marginal
note "what terms and conditions" in response to my first letter dated October 13, 1999.
To date, or for more than fifteen (15) days since then, I have not received any formal
written reply. xxx

In view hereof, should I not receive any formal response from you until Monday,
November 8, 1999, I will deem it as a constructive dismissal of my services.

xxx
A month later, petitioner sent a demand letter7 to ABC, demanding: (a) reinstatement
to her former position; (b) payment of unpaid wages for services rendered from
September 1 to October 20, 1999 and full backwages; (c) payment of 13th month pay,
vacation/sick/service incentive leaves and other monetary benefits due to a regular
employee starting March 31, 1996. ABC replied that a check covering petitioner's talent
fees for September 16 to October 20, 1999 had been processed and prepared, but that
the other claims of petitioner had no basis in fact or in law.

On December 20, 1999, petitioner filed a complaint 8 against ABC, Mr. Javier and Mr.
Edward Tan, for illegal constructive dismissal, nonpayment of salaries, overtime pay,
premium pay, separation pay, holiday pay, service incentive leave pay, vacation/sick
leaves and 13th month pay in NLRC-NCR Case No. 30-12-00985-99. She likewise
demanded payment for moral, exemplary and actual damages, as well as for attorney's
fees.

The parties agreed to submit the case for resolution after settlement failed during the
mandatory conference/conciliation. On March 29, 2000, the Labor Arbiter dismissed the
complaint.9

On appeal, the NLRC reversed the Labor Arbiter in a Resolution dated August 30, 2000.
The NLRC held that an employer-employee relationship existed between petitioner and
ABC; that the subject talent contract was void; that the petitioner was a regular
employee illegally dismissed; and that she was entitled to reinstatement and
backwages or separation pay, aside from 13th month pay and service incentive leave
pay, moral and exemplary damages and attorney's fees. It held as follows:

WHEREFORE, the Decision of the Arbiter dated 29 March 2000 is

hereby REVERSED/SET ASIDE and a NEW ONE promulgated:

1) declaring respondents to have illegally dismissed complainant from her regular work
therein and thus, ordering them to reinstate her in her former position without loss of
seniority right[s] and other privileges and to pay her full backwages, inclusive of
allowances and other benefits, including 13th month pay based on her said latest rate
of P28,000.00/mo. from the date of her illegal dismissal on 21 October 1999 up to
finality hereof, or at complainant's option, to pay her separation pay of one (1) month
pay per year of service based on said latest monthly rate, reckoned from date of hire
on 30 September 1995 until finality hereof;

2) to pay complainant's accrued SILP [Service Incentive Leave Pay] of 5 days pay per
year and 13th month pay for the years 1999, 1998 and 1997 of P19,236.00
and P84,000.00, respectively and her accrued salary from 16 September 1999 to 20
October 1999 of P32,760.00 plus legal interest at 12% from date of judicial demand on
20 December 1999 until finality hereof;

3) to pay complainant moral damages of P500,000.00, exemplary damages

of P350,000.00 and 10% of the total of the adjudged monetary awards as attorney's
fees.

Other monetary claims of complainant are dismissed for lack of merit.

SO ORDERED.10

After its motion for reconsideration was denied, ABC elevated the case to the Court of
Appeals in a petition for certiorari under Rule 65. The petition was first dismissed for
failure to attach particular documents,11 but was reinstated on grounds of the higher
interest of justice.12

Thereafter, the appellate court ruled that the NLRC committed grave abuse of
discretion, and reversed the decision of the NLRC. 13 The appellate court reasoned that
petitioner should not be allowed to renege from the stipulations she had voluntarily and
knowingly executed by invoking the security of tenure under the Labor Code. According
to the appellate court, petitioner was a fixed-term employee and not a regular
employee within the ambit of Article 280 14 of the Labor Code because her job, as
anticipated and agreed upon, was only for a specified time. 15

Aggrieved, petitioner now comes to this Court on a Petition for Review, raising issues as
follows:

I.

THIS HONORABLE COURT CAN REVIEW THE FINDINGS OF THE HONORABLE COURT OF
APPEALS, THE DECISION OF WHICH IS NOT IN ACCORD WITH LAW OR WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT[;]

II.

THE PRO-FORMA TALENT CONTRACTS, AS CORRECTLY FOUND BY THE NLRC - FIRST

DIVISION, ARE "ANTI-REGULARIZATION DEVICES" WHICH MUST BE STRUCK DOWN
FOR REASONS OF PUBLIC POLICY[;]

III.

BY REASON OF THE CONTINUOUS AND SUCCESSIVE RENEWALS OF THE THREE-

MONTH TALENT CONTRACTS, AN EMPLOYER-EMPLOYEE RELATIONSHIP WAS CREATED
AS PROVIDED FOR UNDER ARTICLE 280 OF THE LABOR CODE[;]

IV.

BY THE CONSTRUCTIVE DISMISSAL OF HEREIN PETITIONER, AS A REGULAR

EMPLOYEE, THERE WAS A DENIAL OF PETITIONER'S RIGHT TO DUE PROCESS THUS
ENTITLING HER TO THE MONEY CLAIMS AS STATED IN THE COMPLAINT[.] 16

The issues for our disposition are: (1) whether or not this Court can review the findings
of the Court of Appeals; and (2) whether or not under Rule 45 of the Rules of Court the
Court of Appeals committed a reversible error in its Decision.

On the first issue, private respondents contend that the issues raised in the instant
petition are mainly factual and that there is no showing that the said issues have been
resolved arbitrarily and without basis. They add that the findings of the Court of
Appeals are supported by overwhelming wealth of evidence on record as well as
prevailing jurisprudence on the matter.17

Petitioner however contends that this Court can review the findings of the Court of
Appeals, since the appellate court erred in deciding a question of substance in a way
which is not in accord with law or with applicable decisions of this Court. 18

We agree with petitioner. Decisions, final orders or resolutions of the Court of Appeals
in any case - regardless of the nature of the action or proceeding involved - may be
appealed to this Court through a Petition for Review . This remedy is a continuation of
the appellate process over the original case,19 and considering there is no congruence in
the findings of the NLRC and the Court of Appeals regarding the status of employment
of petitioner, an exception to the general rule that this Court is bound by the findings of
facts of the appellate court,20 we can review such findings.

On the second issue, private respondents contend that the Court of Appeals did not err
when it upheld the validity of the talent contracts voluntarily entered into by petitioner.
It further stated that prevailing jurisprudence has recognized and sustained the
absence of employer-employee relationship between a talent and the media entity
which engaged the talent's services on a per talent contract basis, citing the case
of Sonza v. ABS-CBN Broasting Corporation.21

Petitioner avers however that an employer-employee relationship was created when the
private respondents started to merely renew the contracts repeatedly fifteen times or
for four consecutive years.22

Again, we agree with petitioner. The Court of Appeals committed reversible error when
it held that petitioner was a fixed-term employee. Petitioner was a regular employee
under contemplation of law. The practice of having fixed-term contracts in the industry
does not automatically make all talent contracts valid and compliant with labor law. The
assertion that a talent contract exists does not necessarily prevent a regular
employment status.23

Further, the Sonza  case is not applicable. In Sonza, the television station did not
instruct Sonza how to perform his job. How Sonza delivered his lines, appeared on
television, and sounded on radio were outside the television station's control. Sonza
had a free hand on what to say or discuss in his shows provided he did not attack the
television station or its interests. Clearly, the television station did not exercise control
over the means and methods of the performance of Sonza's work. 24 In the case at bar,
ABC had control over the performance of petitioner's work. Noteworthy too, is the
comparatively low P28,000 monthly pay of petitioner25 vis the P300,000 a month salary
of Sonza,26 that all the more bolsters the conclusion that petitioner was not in the same
situation as Sonza.

The contract of employment of petitioner with ABC had the following stipulations:

xxx
1. SCOPE OF SERVICES - TALENT agrees to devote his/her talent, time, attention and
best efforts in the performance of his/her duties and responsibilities as Anchor/Program
Host/Newscaster of the Program, in accordance with the direction of ABC and/or its
authorized representatives.

1.1. DUTIES AND RESPONSIBILITIES - TALENT shall:

A. Render his/her services as a newscaster on the Program;

b. Be involved in news-gathering operations by conducting interviews on - and off-the-

air;

c. Participate in live remote coverages when called upon;

d. Be available for any other news assignment, such as writing, research or camera
work;

e. Attend production meetings;

f. On assigned days, be at the studios at least one (1) hour before the live telecasts;

g. Be present promptly at the studios and/or other place of assignment at the time
designated by ABC;

h. Keep abreast of the news;

i. Give his/her full cooperation to ABC and its duly authorized representatives in the
production and promotion of the Program; and cralawlibrary

j. Perform such other functions as may be assigned to him/her from time to time.

xxx

1.3 COMPLIANCE WITH STANDARDS, INSTRUCTIONS AND OTHER RULES AND

REGULATIONS - TALENT agrees that he/she will promptly and faithfully comply with the
requests and instructions, as well as the program standards, policies, rules and
regulations of ABC, the KBP and the government or any of its agencies and
instrumentalities.27

xxx

In Manila Water Company, Inc. v. Pena,28 we said that the elements to determine the
existence of an employment relationship are: (a) 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 most important element is the employer's control of
the employee's conduct, not only as to the result of the work to be done, but also as to
the means and methods to accomplish it.29
The duties of petitioner as enumerated in her employment contract indicate that ABC
had control over the work of petitioner. Aside from control, ABC also dictated the work
assignments and payment of petitioner's wages. ABC also had power to dismiss her. All
these being present, clearly, there existed an employment relationship between
petitioner and ABC.

Concerning regular employment, the law provides for two kinds of employees, namely:
(1) those who are engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer; and (2) those who have
rendered at least one year of service, whether continuous or broken, with respect to the
activity in which they are employed. 30 In other words, regular status arises from either
the nature of work of the employee or the duration of his employment. 31 In Benares v.
Pancho,32 we very succinctly said:

'[T]he primary standard for determining regular employment is the reasonable

connection between the particular activity performed by the employee vis - à -vis the
usual trade or business of the employer. This connection can be determined by
considering the nature of the work performed and its relation to the scheme of the
particular business or trade in its entirety. If the employee has been performing the job
for at least a year, even if the performance is not continuous and merely intermittent,
the law deems repeated and continuing need for its performance as sufficient evidence
of the necessity if not indispensability of that activity to the business. Hence, the
employment is considered regular, but only with respect to such activity and while such
activity exists.33

In our view, the requisites for regularity of employment have been met in the instant
case. Gleaned from the description of the scope of services aforementioned, petitioner's
work was necessary or desirable in the usual business or trade of the employer which
includes, as a pre-condition for its enfranchisement, its participation in the
government's news and public information dissemination. In addition, her work was
continuous for a period of four years. This repeated engagement under contract of hire
is indicative of the necessity and desirability of the petitioner's work in private
respondent ABC's business.34

The contention of the appellate court that the contract was characterized by a valid
fixed-period employment is untenable. For such contract to be valid, it should be shown
that the fixed period was knowingly and voluntarily agreed upon by the parties. There
should have been no force, duress or improper pressure brought to bear upon the
employee; neither should there be any other circumstance that vitiates the employee's
consent.35 It should satisfactorily appear that the employer and the employee dealt with
each other on more or less equal terms with no moral dominance being exercised by
the employer over the employee.36 Moreover, fixed-term employment will not be
considered valid where, from the circumstances, it is apparent that periods have been
imposed to preclude acquisition of tenurial security by the employee. 37

In the case at bar, it does not appear that the employer and employee dealt with each
other on equal terms. Understandably, the petitioner could not object to the terms of
her employment contract because she did not want to lose the job that she loved and
the workplace that she had grown accustomed to,38 which is exactly what happened
when she finally manifested her intention to negotiate. Being one of the numerous
newscasters/broasters of ABC and desiring to keep her job as a broasting practitioner,
petitioner was left with no choice but to affix her signature of conformity on each
renewal of her contract as already prepared by private respondents; otherwise, private
respondents would have simply refused to renew her contract. Patently, the petitioner
occupied a position of weakness vis - à-vis the employer. Moreover, private
respondents' practice of repeatedly extending petitioner's 3-month contract for four
years is a circumvention of the acquisition of regular status. Hence, there was no valid
fixed-term employment between petitioner and private respondents.

While this Court has recognized the validity of fixed-term employment contracts in a
number of cases, it has consistently emphasized that when the circumstances of a case
show that the periods were imposed to block the acquisition of security of tenure, they
should be struck down for being contrary to law, morals, good customs, public order or
public policy.39

As a regular employee, petitioner is entitled to security of tenure and can be dismissed

only for just cause and after due compliance with procedural due process. Since private
respondents did not observe due process in constructively dismissing the petitioner, we
hold that there was an illegal dismissal.

WHEREFORE, the challenged Decision dated January 30, 2004 and Resolution dated
June 23, 2004 of the Court of Appeals in CA-G.R. SP No. 63125, which held that the
petitioner was a fixed-term employee, are REVERSED and SET ASIDE. The NLRC
decision is AFFIRMED.

Costs against private respondents.

SO ORDERED.

Endnotes:

*
 Acting Chief Justice.

1
 Rollo, pp. 207-220. Penned by Associate Justice Edgardo F. Sundiam, with Associate
Justices Eubulo G. Verzola and Remedios Salazar-Fernando concurring.

2
 Id. at 246. Penned by Associate Justice Edgardo F. Sundiam, with Associate Justices
Remedios Salazar-Fernando and Mariano C. Del Castillo concurring.

3
 Id. at 90-125.

4
 CA rollo, pp. 105-107.

5
 Id. at 108-112.
6
 Id. at 121.

7
 Id. at 123.

8
 Id. at 213-214.

9
 Id. at 155-169.

10
 Id. at 124-125.

11
 Rollo, p. 180.

12
 Id. at 195.

13
 Id. at 220.

14
 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.

An employment shall be deemed to be casual if it is not covered by the preceding

paragraph: Provided, That, any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his employment shall
continue while such activity exists.

15
 Rollo, p. 217.

16
 Id. at 382.

17
 Id. at 335.

18
 Id. at 387.

19
 Pagoda Philippines, Inc. v. Universal Canning, Inc., G.R. No. 160966, October 11,
2005, 472 SCRA 355, 359.

20
 Cirelos v. Hernandez, G.R. No. 146523, June 15, 2006, 490 SCRA 625, 635.

21
 G.R. No. 138051, June 10, 2004, 431 SCRA 583.

22
 Rollo, pp. 420-421.
23
 See ABS-CBN Broasting Corporation v. Marquez, G.R. No. 167638, June 22, 2005,
pp. 5-6 (Unsigned Resolution), where the Court held what petitioner ABS-CBN called
"talents" as regular employees. The Court declared: "It may be so that respondents
were assigned to a particular tele-series. However, petitioner can and did immediately
reassign them to a new production upon completion of a previous one. Hence, they
were continuously employed, the tele-series being a regular feature in petitioner's
network programs. Petitioner's continuous engagement of respondents from one
production after another, for more than five years, made the latter part of petitioner's
workpool who cannot be separated from the service without cause as they are
considered regular. A project employee or a member of a workpool may acquire the
status of a regular employee when the following concur: there is continuous rehiring of
project employees even after the cessation of the project and the tasks performed by
the alleged "project employee" are vital, necessary, and indispensable to the usual
business or trade of his employer. It cannot be denied that the services of respondents
as members of a crew in the production of a tele-series are undoubtedly connected with
the business of the petitioner. This Court has held that the primary standard in
determining regular employment is the reasonable connection between the particular
activity performed by the employee in relation to the business or trade of his employer.
Here, the activity performed by respondents is, without doubt, vital to petitioner's trade
or business."

24
 See Sonza v. ABS-CBN Broasting Corporation, supra note 21, at 599, which also held
that in the United States, aside from the right of control test, there are the "economic
reality" test and the "multi-factor test." The tests are drawn from statutes, regulations,
rules, policies, rulings, case law and the like. The "right of control" test applies under
the Federal Internal Revenue Code ("IRC"). The "economic reality" test applies to the
Federal Fair Labor Standards Act ("FLSA"). The California Division of Labor Standards
Enforcement ("DLSE") uses a hybrid of these two tests often referred to as the "multi-
factor test" in determining who an employee is.

CASE DIGEST:

THELMA DUMPIT-MURILLO v. CA, GR No. 164652, 2007-06-08

Facts:
On October 2, 1995, under Talent Contract No. NT95-1805,[4] private respondent
Associated Broadcasting Company (ABC) hired petitioner Thelma Dumpit-Murillo as a
newscaster and co-anchor for Balitang-Balita, an early evening news program.
Two weeks after the expiration of the last contract, petitioner sent a letter to Mr. Jose Javier,
Vice President for News and Public Affairs of ABC, informing the latter that she was still
interested in... renewing her contract subject to a salary increase. Thereafter, petitioner
stopped reporting for work.
In addition, petitioner's services were engaged for the program "Live on Five."
On December 20, 1999, petitioner filed a complaint[8] against ABC, Mr. Javier and Mr.
Edward Tan, for illegal constructive dismissal, nonpayment of salaries, overtime pay,
premium pay, separation pay, holiday pay, service incentive leave pay, vacation/sick...
leaves and 13th month pay
On March 29, 2000, the Labor Arbiter dismissed the complaint.[
On appeal, the NLRC reversed the Labor Arbiter in a Resolution dated August 30, 2000.
Thereafter, the appellate court ruled that the NLRC committed grave abuse of discretion,
and reversed the decision of the NLRC
According to the appellate court, petitioner was a fixed-term employee and not a regular
employee within the ambit of Article 280[14] of the Labor Code because her job, as...
anticipated and agreed upon, was only for a specified time.[
Issues:
The issues for our disposition are: (1) whether or not this Court can review the findings of
the Court of Appeals; and (2) whether or not under Rule 45 of the Rules of Court the Court
of Appeals committed a reversible error in its Decision.
Ruling:
WHEREFORE, the challenged Decision dated January 30, 2004 and Resolution dated June
23, 2004 of the Court of Appeals in CA-G.R. SP No. 63125, which held that the petitioner
was a fixed-term employee, are REVERSED and SET ASIDE. The NLRC... decision is
AFFIRMED.
Principles:
The Court of Appeals committed reversible error when it held that petitioner was a fixed-
term employee. Petitioner was a regular employee under contemplation of law
The duties of petitioner as enumerated in her employment contract indicate that ABC had
control over the work of petitioner. Aside from control, ABC also dictated the work
assignments and payment of petitioner's wages. ABC also had power to dismiss her. All
these being present,... clearly, there existed an employment relationship between petitioner
and ABC.
Concerning regular employment, the law provides for two kinds of employees, namely: (1)
those who are engaged to perform activities which are usually necessary or desirable in the
usual business or trade of the employer; and (2) those who have rendered at least one year
of... service, whether continuous or broken, with respect to the activity in which they are
employed.[30] In other words, regular status arises from either the nature of work of the
employee or the duration of his employment.
Sunripe Coconut vs. CIR, CIR, 83 SCRA 518

FULL TEXT:

G.R. No. L-2009             April 30, 1949

SUNRIPE COCONUT PRODUCTS CO., INC petitioner,

vs.
THE COURT OF INDUSTRIAL RELATIONS and SUNSHINE COCONUT WORKERS' UNION
(CLO), respondents.

Paredes Diaz & Poblador for petitioner.

Juan R. Maralit for respondents.

PARAS, J.:

This is an appeal from a decision of the Court of Industrial Relation holding that the parers and
"shellers" of the petitioner Sunshine Coconut Products Co., Inc., are its laborers entitled to twelve
days sick leave (one day for each month of service), notwithstanding the fact that they are piece-
workers under the pakiao system. The contention of the petitioner is that said "parer" and "shellers"
are independent contractors and do not fall within the category of employees or laborers.

The Court of Industrial Relation has relied upon the rule laid down in the case of Philadelphia Record
Company, 69 N.L.R.B., 1232 (1946), to the effect that when a worker possesses some attributes of
an employee and others off an independent contractor which make him fall within an intermediate
area he may be classified under the category off an employee when the economic factsof the
relation make it more nearly one of employment than one of independent business enterprise with to
the ends sought to be accomplished. Counsel for the petitioner does not dispute the correctness or
applicability of the rule but it is vigorously contended that in the case at bar the economic facts
characteristic of the independent contractor far outweigh the economic facts indicative of an
employee. We are not called upon to rule on the accuracyof petitioner's contention since the
conclusion of the Court of Industrial relation on the matter is binding this Court. In other word the
ruling that the "parers" and "shellers" have the status of employee or laborers carries the factual
verdict that economic facts showing such status outweigh those indicative of an independent
contractor. Some facts expressly invoked by the Court of Industrial Relations are: That the "parers"
and "shellers" work under some degree of control or supervision of the company if not under its
absolute direction; that said " parers" and "shellers" form stable groups composed of matured men
and women who regularly work at shelling and paring nuts that for the most part they depend on
their work in the Sunripe Coconut Products Co., Inc. For their livelihood; that they are admittedly
working in the factory of said company alongside person who are indisputably employed by said
company. As already stated whether these specific facts are outweighed as contended by the
petitioner by facts demonstrative of the status of an independent contractor is a question decided
adversely to the petitioner when the Court of Industrial Relations held that the "parers" and "shellers"
are laborers or employees.

It is also pretended for the petitioner for the petitioner that the Court of Industrial Relations departed
from the definition of the word "employee" or "laborer" found in the Workmen's Compensation Law
namely: " 'Laborer' is used as a synonym off employee,' and it means every person who has entered
the employment of or works under a service or apprenticeship contract for an employer. . . ."
(Section 39 [b], Workmen's Compensation Law as amended.) The Court of Industrial relation of
course adverted to the following definition; "An employee is any person in the service of another
under a contract for hire express or implied oral or written. " (Section 7, Labor Union by Dangle and
Scriber, p. 7, citing McDermott's Case, 283 Mass. 74; Werner vs. Industrial Comm., 212 Wis., 76) In
essence however the ruling of the Court of Industrial Relation does not run counter to the definition
given in the Workmen's Compensation Law.

Counsel for the petitioner have stressed the argument that the principal test in determining whether
a worker is an employee or an independent contractor is the employer's right of control over the work
and not merely the right to control the result it being intimated that the "parers" and shellers" are
controlled by the petitioner only to the extent "that the nut are pared whole or that there is not much
meat wasted." Even under the criterion adopted by the petitioner it would not be amiss to state
thatthe requirement imposed on the "parers" and "shellers" to the effect that the nuts are pared
whole or that there is not much meat wasted," in effect limits or that there is not much meat wasted,"
in effect limits or controls the means or details by which said workers are to accomplish their
services.It is inconceivable that the "parers " and "shellers" in order to meet the requirement of the
petitioners would not follow a uniform standard in the performance of their work.

Petitioner also insists that the "parers" and "shellers" are piece-workers under the "pakiao" system.
In answer, suffice it to observe that Commonwealth Act No. 103, as amended expressly provides
that "A minimum wage or share shall be determined and fixed for laborers working by the hour day
or month or by piece-work and for tenants sharing in the crop or paid by measurement unit. . . ."
(Section 5.) The organic law of the Court of Industrial Relation therefore even orders that laborers
may be paid by piece-work; and the facts that the "parers" and shellers" are paid a fixed amount for
a fixed number of nuts pared or shelled does not certainly take them out of the purview of
Commonwealth Act No. 103.

It is unnecessary to discuss at length the other facts pointed out by the petitioner in support of the
proposition that said "parers" and shellers" are independent contractors, because a ruling on the
matter would necessarily involve a factual inquiry which we are not authorized to makeEven so we
would undertake to advance the general remark that inn cases of this kind wherein laborers are
usually compelled to work under condition and term dictated by the employer a reasonably wide
latitude of action and judgment should be given to the Court of Industrial Relations with a view to
settling industrial disputes conformably to the intents and purposes of its organic law. Without in the
least intimating that the relation between the "parers" and "shellers" on the one hand and the
petitioner on the other as planned out by the latter was conceived knowingly to deprive said
workersof the benefits accruing to workers who are admittedly employees or laborersunder
Commonwealth Act No. 103 or the Workmen's Compensation law it is not difficult to surmise that a
contrary decision is likely to set a precedent that may tend to encourage the adoption of a similar
scheme by many other or even all employers.

The appealed decision of the Court of Industrial Relations is therefore affirmed with costs against the
petitioner. So ordered.

Moran, C.J., Pablo, Bengzon, and Reyes, JJ., concur.

Tuason, J., concur in the result.

Separate Opinions
PERFECTO, J., concurring:

We concur in the decision as penned by Mr. Justice Paras.

We believe that judicial notice can be taken of the fact that the so-called "pakyaw" system mentioned
in this case as generally practiced in our country is in fact a labor contract between employers and
employees between capitalists and laborers. Under this system the workers continue in the
economic category of contract laborers. They do not acquire the character of owners or managers of
an independent enterprise. The system is practiced only in labor contracts.

The "parers" and "shellers" in this case according to the record are subjectto same degree of control
or supervision by the company for which they are working and that very fact characterized them as
employees or laborers, entering into the service of the company under a contract of hire or lease of
services.

BRIONES, M., conforme:

Esroy conforme con la ponencia. Aunque los obreros intersados en este asunto trabajan bajo la
forma de contrato llamada "pakyaw," esto es se les paga la compensasion de trabajo no mediantee
jornal sino a razon de la cuantia de la labor realizada esto sin embargo es merament los demass
efectos y fines loss obreros de que se trata forman parte de la organizacion de trabajadores afectos
a la industria de la compania recurrente. Si se tratase de obreros contratados bajo "pakyaw" de
cuaando en cuando, casualmente segun lo requieran la emergencia y las necesidades incidentales
de la compania probablemente se podria sostener que no son obreros enel seentido legal de la
palabra y por tando sin derecho a reclamar los titulos y privilegios anejos a la condicion de obrero.
Pero el presente caso es diferente. Aqui los obreros tienen una colocacion mas o menos
permanente y forman parte como digo de la orrganizacion de la compania al igual que los
asalariados.

FERIA, J., dissenting:

I dissent.

Under section 14 of Commonwealth Act No. 103 and Rule 44 of the Rule of Courtby appeal by
certiorari from the decrees order or decision of the Court of Industrial Relation to the Supreme Court
lies only in cases in which question of law are involved in the appeal and consequently this Court
can not review said decrees, orders or decisions on question of facts.

In all judicial cases the justiciable question is always either one of factand law or of law only if the
facts on which it is predicated are admittedor not issue. It can never be a question of fact only
because the administration of justice consists in the application of law to facts of each case
submitted to the Court for decision. The facts are the minor premise of the syllogism the law
applicable to the major premise and the conclusion drawn from the syllogism is the conclusion or
finding of law necessary of the decision of cases or lawsuit by the courts.
If the facts are admitted and only the law applicable to the case and the conclusion of law to be
drawn from such application is in issue in an appeal the question involved is purely of law and he
Supreme Court has jurisdiction to review and pass upon the conclusion of law or finding of the Court
of Industrial Relation. However, if not only the law applicable and consequently, the inference or
conclusion to be drawn from the application thereof but the facts of the case as shown by the
evidence are in issue the question involved in an appeal is not of law but of fact, because no
question may arise before the facts to which the law may bee applied have been finally determined
or found.

In the present appeal there is no question of law involved because the question whether the "parers"
or "shellers" have the status of employees or laborers in view of the facts of the case or the work
they were bound to do or the control the principal may or may not have over their work is a question
of fact, or which "would necessarily involve a factual inquiry which we are not authorized to do,"
according to the very decision of the majority.

This Supreme Court has, therefore no jurisdiction to review the decision of the Court of Industrial
Relation because the appeal does not involve a question of law but of facts and this Court has no
power to review the findings of facts in the decision of the said Court of Industrial Relation. A
decision of the said Court on question of fact is final and not appealable.

We should have dismissed the petition for certiorari by way of appeal filed in this case from the start
and the fact that we have given it due course in order to determine whether or not appeal lies after
hearing the adverse party, does not necessarily empower us to pass upon the merits of the appeal
and affirm or reverse the decision appealed from. To affirm or reverse a judgment of the Court of
Industrial Relation presupposes a review by us of the finding of fact on which it is based which we
have power to do in the present case.

Petition for certiorari by way of appeal is therefore dismissed. We can not review and affirm or
reverse the decision of the court of Industrial Relation in this case. So ordered.

CASE DIGEST LINK: https://www.scribd.com/document/425327563/Sunripe-Coconut-Product-Case-

Digest
CONSTITUTIONAL
PROVISIONS
APPLICATION
CONSTITUTIONAL
DUE
PROCESS
Serrano vs. NLRC, G.R. No. 117040, January 27, 2000

FULL TEXT:

[G.R. No. 117040. January 27, 2000.]

RUBEN SERRANO, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION and

ISETANN DEPARTMENT STORE, Respondents.

DECISION

MENDOZA, J.:

This is a petition seeking review of the resolutions, dated March 30, 1994 and August 26, 1994,
of the National Labor Relations Commission (NLRC) which reversed the decision of the Labor
Arbiter and dismissed petitioner Ruben Serrano’s complaint for illegal dismissal and denied his
motion for reconsideration. The facts are as follows:
chanrobles virtua| |aw |ibrary

Petitioner was hired by private respondent Isetann Department Store as a security checker to
apprehend shoplifters and prevent pilferage of merchandise. 1 Initially hired on October 4, 1984
on contractual basis, petitioner eventually became a regular employee on April 4, 1985. In 1988,
he became head of the Security Checkers Section of private Respondent. 2

Sometime in 1991, as a cost-cutting measure, private respondent decided to phase out its entire
security section and engage the services of an independent security agency. For this reason, it
wrote petitioner the following memorandum: 3

October 11, 1991

MR. RUBEN SERRANO

PRESENT

Dear Mr. Serrano,

In view of the retrenchment program of the company, we hereby reiterate our verbal notice to
you of your termination as Security Section Head effective October 11, 1991.

Please secure your clearance from this office.

Very truly yours,

[Sgd.] TERESITA A. VILLANUEVA

Human Resources Division Manager

The loss of his employment prompted petitioner to file a complaint on December 3, 1991 for
illegal dismissal, illegal layoff, unfair labor practice, underpayment of wages, and nonpayment of
salary and overtime pay. 4

The parties were required to submit their position papers, on the basis of which the Labor Arbiter
defined the issues as follows: 5

Whether or not there is a valid ground for the dismissal of the complainant.

Whether or not complainant is entitled to his monetary claims for underpayment of wages,
nonpayment of salaries, 13th month pay for 1991 and overtime pay.

Whether or not Respondent is guilty of unfair labor practice.

Thereafter, the case was heard. On April 30, 1993, the Labor Arbiter rendered a decision finding
petitioner to have been illegally dismissed. He ruled that private respondent failed to establish
that it had retrenched its security section to prevent or minimize losses to its business; that
private respondent failed to accord due process to petitioner; that private respondent failed to use
reasonable standards in selecting employees whose employment would be terminated; that
private respondent had not shown that petitioner and other employees in the security section
were so inefficient so as to justify their replacement by a security agency, or that "cost-saving
devices [such as] secret video cameras (to monitor and prevent shoplifting) and secret code tags
on the merchandise” could not have been employed; instead, the day after petitioner’s dismissal,
private respondent employed a safety and security supervisor with duties and functions similar to
those of petitioner.
chanrobles.com : virtualaw library

Accordingly, the Labor Arbiter ordered: 6

WHEREFORE, above premises considered, judgment is hereby decreed: chanrob1es virtual 1aw library

(a) Finding the dismissal of the complainant to be illegal and concomitantly, Respondent is
ordered to pay complainant full backwages without qualification or deduction in the amount of
P74,740.00 from the time of his dismissal until reinstatement (computed till promulgation only)
based on his monthly salary of P4,040.00/month at the time of his termination but limited to (3)
three years;

(b) Ordering the Respondent to immediately reinstate the complainant to his former position as
security section head or to a reasonably equivalent supervisorial position in charges of security
without loss of seniority rights, privileges and benefits. This order is immediately executory even
pending appeal;

(c) Ordering the Respondent to pay complainant unpaid wages in the amount of P2,020.73 and
proportionate 13th month pay in the amount of P3,198.30;

(d) Ordering the Respondent to pay complainant the amount of P7,995.91, representing 10%
attorney’s fees based on the total judgment award of P79,959.12.

All other claims of the complainant whether monetary or otherwise is hereby dismissed for lack
of merit.

SO ORDERED. chanroblesvirtual|awlibrary

Private respondent appealed to the NLRC which, in its resolution of March 30, 1994, reversed
the decision of the Labor Arbiter and ordered petitioner to be given separation pay equivalent to
one month pay for every year of service, unpaid salary, and proportionate 13th month pay.
Petitioner filed a motion for reconsideration, but his motion was denied.

The NLRC held that the phase-out of private respondent’s security section and the hiring of an
independent security agency constituted an exercise by private respondent of" [a] legitimate
business decision whose wisdom we do not intend to inquire into and for which we cannot
substitute our judgment" ; that the distinction made by the Labor Arbiter between "retrenchment"
and the employment of "cost-saving devices” under Art. 283 of the Labor Code was insignificant
because the company official who wrote the dismissal letter apparently used the term
"retrenchment” in its "plain and ordinary sense: to layoff or remove from one’s job, regardless of
the reason therefor”; that the rule of "reasonable criteria” in the selection of the employees to be
retrenched did not apply because all positions in the security section had been abolished; and that
the appointment of a safety and security supervisor referred to by petitioner to prove bad faith on
private respondent’s part was of no moment because the position had long been in existence and
was separate from petitioner’s position as head of the Security Checkers Section.

Hence this petition. Petitioner raises the following issue: chanrobles virtual lawlibrary

IS THE HIRING OF AN INDEPENDENT SECURITY AGENCY BY THE PRIVATE

RESPONDENT TO REPLACE ITS CURRENT SECURITY SECTION A VALID GROUND
FOR THE DISMISSAL OF THE EMPLOYEES CLASSED UNDER THE LATTER? 7

Petitioner contends that abolition of private respondent’s Security Checkers Section and the
employment of an independent security agency do not fall under any of the authorized causes for
dismissal under Art. 283 of the Labor Code.

Petitioner Laid Off for Cause

Petitioner’s contention has no merit. Art. 283 provides: chanrob1es virtual 1aw library

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 operations of the establishment or
undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by
serving a written notice on the workers and the Department of Labor and Employment at least
one (1) month before the intended date thereof. In case of termination due to the installation of
labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation
pay equivalent to at least one (1) month pay or to at least one (1) month pay for every year of
service, whichever is higher. In case of retrenchment to prevent losses and in cases of closure or
cessation of operations of establishment or undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent to at least one (1) month pay or at least
one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six
(6) months shall be considered as one (1) whole year. chanroblesvirtual|awlibrary

In De Ocampo v. National Labor Relations Commission, 8 this Court upheld the termination of
employment of three mechanics in a transportation company and their replacement by a
company rendering maintenance and repair services. It held: chanrob1es virtual 1aw library

In contracting the services of Gemac Machineries, as part of the company’s cost-saving program,
the services rendered by the mechanics became redundant and superfluous, and therefore
properly terminable. The company merely exercised its business judgment or management
prerogative. And in the absence of any proof that the management abused its discretion or acted
in a malicious or arbitrary manner, the court will not interfere with the exercise of such
prerogative. 9

In Asian Alcohol Corporation v. National Labor Relations Commission, 10 the Court likewise
upheld the termination of employment of water pump tenders and their replacement by
independent contractors. It ruled that an employer’s good faith in implementing a redundancy
program is not necessarily put in doubt by the availment of the services of an independent
contractor to replace the services of the terminated employees to promote economy and
efficiency.

Indeed, as we pointed out in another case, the" [management of a company] cannot be denied the
faculty of promoting efficiency and attaining economy by a study of what units are essential for
its operation. To it belongs the ultimate determination of whether services should be performed
by its personnel or contracted to outside agencies . . . [While there] should be mutual
consultation, eventually deference is to be paid to what management decides." 11 Consequently,
absent proof that management acted in a malicious or arbitrary manner, the Court will not
interfere with the exercise of judgment by an employer. 12

In the case at bar, we have only the bare assertion of petitioner that, in abolishing the security
section, private respondent’s real purpose was to avoid payment to the security checkers of the
wage increases provided in the collective bargaining agreement approved in 1990. 13 Such an
assertion is not a sufficient basis for concluding that the termination of petitioner’s employment
was not a bona fide decision of management to obtain reasonable return from its investment,
which is a right guaranteed to employers under the Constitution. 14 Indeed, that the phase-out of
the security section constituted a "legitimate business decision” is a factual finding of an
administrative agency which must be accorded respect and even finality by this Court since
nothing can be found in the record which fairly detracts from such finding. 15

Accordingly, we hold that the termination of petitioner’s services was for an authorized cause,
i.e., redundancy. Hence, pursuant to Art. 283 of the Labor Code, petitioner should be given
separation pay at the rate of one month pay for every year of service.
Sanctions for Violations of

the Notice Requirement chanrobles.com.ph:red

Art. 283 also provides that to terminate the employment of an employee for any of the authorized
causes the employer must serve "a written notice on the workers and the Department of Labor
and Employment at least one (1) month before the intended date thereof.” In the case at bar,
petitioner was given a notice of termination on October 11, 1991. On the same day, his services
were terminated. He was thus denied his right to be given written notice before the termination
of his employment, and the question is the appropriate sanction for the violation of petitioner’s
right.

To be sure, this is not the first time this question has arisen. In Sebuguero v. NLRC, 16 workers
in a garment factory were temporarily laid off due to the cancellation of orders and a garment
embargo. The Labor Arbiter found that the workers had been illegally dismissed and ordered the
company to pay separation pay and backwages. The NLRC, on the other hand, found that this
was a case of retrenchment due to business losses and ordered the payment of separation pay
without backwages. This Court sustained the NLRC’s finding. However, as the company did not
comply with the 30-day written notice in Art. 283 of the Labor Code, the Court ordered the
employer to pay the workers P2,000.00 each as indemnity.

The decision followed the ruling in several cases involving dismissals which, although based on
any of the just causes under Art. 282, 17 were effected without notice and hearing to the
employee as required by the implementing rules. 18 As this Court said: "It is now settled that
where the dismissal of one employee is in fact for a just and valid cause and is so proven to be
but he is not accorded his right to due process, i.e., he was not furnished the twin requirements of
notice and opportunity to be heard, the dismissal shall be upheld but the employer must be
sanctioned for non-compliance with the requirements of, or for failure to observe, due process."
19

The rule reversed a long standing policy theretofore followed that even though the dismissal is
based on a just cause or the termination of employment is for an authorized cause, the dismissal
or termination is illegal if effected without notice to the employee. The shift in doctrine took
place in 1989 in Wenphil Corp. v. NLRC. 20 In announcing the change, this Court said: 21

The Court holds that the policy of ordering the reinstatement to the service of an employee
without loss of seniority and the payment of his wages during the period of his separation until
his actual reinstatement but not exceeding three (3) years without qualification or deduction,
when it appears he was not afforded due process, although his dismissal was found to be for just
and authorized cause in an appropriate proceeding in the Ministry of Labor and Employment,
should be re-examined. It will be highly prejudicial to the interests of the employer to impose on
him the services of an employee who has been shown to be guilty of the charges that warranted
his dismissal from employment. Indeed, it will demoralize the rank and file if the undeserving, if
not undesirable, remains in the service.

x        x       x
However, the petitioner must nevertheless be held to account for failure to extend to private
respondent his right to an investigation before causing his dismissal. The rule is explicit as above
discussed. The dismissal of an employee must be for just or authorized cause and after due
process. Petitioner committed an infraction of the second requirement. Thus; it must be imposed
a sanction for its failure to give a formal notice and conduct an investigation as required by law
before dismissing petitioner from employment. Considering the circumstances of this case
petitioner must indemnify the private respondent the amount of P1,000.00. The measure of this
award depends on the facts of each case and the gravity of the omission committed by the
employer. chanrobles virtuallawlibrary:red

The fines imposed for violations of the notice requirement have varied from P1,000.00 22 to
P2,000.00 23 to P5,000.00 24 to P10,000.00.25 cralaw:red

Need for Reexamining the Wenphil Doctrine

Today, we once again consider the question of appropriate sanctions for violations of the notice
requirement in light of our experience during the last decade or so with the Wenphil doctrine.
The number of cases involving dismissals without the requisite notice to the employee, although
effected for just or authorized causes, suggests that the imposition of fine for violation of the
notice requirement has not been effective in deterring violations of the notice requirement.
Justice Panganiban finds the monetary sanctions "too insignificant, too niggardly, and sometimes
even too late.” On the other hand, Justice Puno says there has in effect been fostered a policy of
"dismiss now, pay later” which moneyed employers find more convenient to comply with than
the requirement to serve a 30-day written notice (in the case of termination of employment for an
authorized cause under Arts. 283-284) or to give notice and hearing (in the case of dismissals for
just causes under Art. 282).

For this reason, they regard any dismissal or layoff without the requisite notice to be null and
void even though there are just or authorized causes for such dismissal or layoff. Consequently,
in their view, the employee concerned should be reinstated and paid backwages.

Validity of Petitioner’s Layoff Not

Affected by Lack of Notice

We agree with our esteemed colleagues, Justices Puno and Panganiban, that we should rethink
the sanction of fine for an employer’s disregard of the notice requirement. We do not agree,
however, that disregard of this requirement by an employer renders the dismissal or termination
of employment null and void. Such a stance is actually a reversion to the discredited pre-Wenphil
rule of ordering an employee to be reinstated and paid backwages when it is shown that he has
not been given notice and hearing although his dismissal or layoff is later found to be for a just
or authorized cause. Such rule was abandoned in Wenphil because it is really unjust to require an
employer to keep in his service one who is guilty, for example, of an attempt on the life of the
employer or the latter’s family, or when the employer is precisely retrenching in order to prevent
losses.

The need is for a rule which, while recognizing the employee’s right to notice before he is
dismissed or laid off, at the same time acknowledges the right of the employer to dismiss for any
of the just causes enumerated in Art. 282 or to terminate employment for any of the authorized
causes mentioned in Arts. 283-284. If the Wenphil rule imposing a fine on an employer who is
found to have dismissed an employee for cause without prior notice is deemed ineffective in
deterring employer violations of the notice requirement, the remedy is not to declare the
dismissal void if there are just or valid grounds for such dismissal or if the termination is for an
authorized cause. That would be to uphold the right of the employee but deny the right of the
employer to dismiss for cause. Rather, the remedy is to order the payment to the employee of full
backwages from the time of his dismissal until the court finds that the dismissal was for a just
cause. But, otherwise, his dismissal must be upheld and he should not be reinstated. This is
because his dismissal is ineffectual.

For the same reason, if an employee is laid off for any of the causes in Arts. 283-284, i.e.,
installation of a labor-saving device, but the employer did not give him and the DOLE a 30-day
written notice of termination in advance, then the termination of his employment should be
considered ineffectual and he should be paid backwages. However, the termination of his
employment should not be considered void but he should simply be paid separation pay as
provided in Art. 283 in addition to backwages.

Justice Puno argues that an employer’s failure to comply with the notice requirement constitutes
a denial of the employee’s right to due process. Prescinding from this premise, he quotes the
statement of Chief Justice Concepcion in Vda. de Cuaycong v. Vda. de Sengbengco 26 that "acts
of Congress, as well as of the Executive, can deny due process only under the pain of nullity, and
judicial proceedings suffering from the same flaw are subject to the same sanction, any statutory
provision to the contrary notwithstanding.” Justice Puno concludes that the dismissal of an
employee without notice and hearing, even if for a just cause, as provided in Art. 282, or for an
authorized cause, as provided in Arts. 283-284, is a nullity. Hence, even if just or authorized
causes exist, the employee should be reinstated with full back pay. On the other hand, Justice
Panganiban quotes from the statement in People v. Bocar 27 that" [w]here the denial of the
fundamental right of due process is apparent, a decision rendered in disregard of that right is void
for lack of jurisdiction."
cralaw virtua1aw library

Violation of Notice Requirement

Not a Denial of Due Process

The cases cited by both Justices Puno and Panganiban refer, however, to the denial of due
process by the State, which is not the case here. There are three reasons why, on the other hand,
violation by the employer of the notice requirement cannot be considered a denial of due process
resulting in the nullity of the employee’s dismissal or layoff.

The first is that the Due Process Clause of the Constitution is a limitation on governmental
powers. It does not apply to the exercise of private power, such as the termination of
employment under the Labor Code. This is plain from the text of Art. III, §1 of the Constitution,
viz.: "No person shall be deprived of life, liberty, or property without due process of law. . . .”
The reason is simple: Only the State has authority to take the life, liberty, or property of the
individual. The purpose of the Due Process Clause is to ensure that the exercise of this power is
consistent with what are considered civilized methods.

The second reason is that notice and hearing are required under the Due Process Clause before
the power of organized society are brought to bear upon the individual. This is obviously not the
case of termination of employment under Art. 283. Here the employee is not faced with an aspect
of the adversary system. The purpose for requiring a 30-day written notice before an employee is
laid off is not to afford him an opportunity to be heard on any charge against him, for there is
none.The purpose rather is to give him time to prepare for the eventual loss of his job and the
DOLE an opportunity to determine whether economic causes do exist justifying the termination
of his employment. chanrobles virtuallawlibrary

Even in cases of dismissal under Art. 282, the purpose for the requirement of notice and hearing
is not to comply with Due Process Clause of the Constitution. The time for notice and hearing is
at the trial stage. Then that is the time we speak of notice and hearing as the essence of
procedural due process. Thus, compliance by the employer with the notice requirement before he
dismisses an employee does not foreclose the right of the latter to question the legality of his
dismissal. As Art. 277 (b) provides, "Any decision taken by the employer shall be without
prejudice to the right of the worker to contest the validity or legality of his dismissal by filing a
complaint with the regional branch of the National Labor Relations Commission." cralaw virtua1aw library

Indeed, to contend that the notice requirement in the Labor Code is an aspect of due process is to
overlook the fact that Art. 283 had its origin in Art. 302 of the Spanish Code of Commerce of
1882 which gave either party to the employer-employee relationship the right to terminate their
relationship by giving notice to the other one month in advance. In lieu of notice, an employee
could be laid off by paying him a mesada equivalent to his salary for one month. 28 This
provision was repealed by Art. 2270 of the Civil Code, which took effect on August 30, 1950.
But on June 12, 1954, R.A. No. 1052, otherwise known as the Termination Pay Law, was
enacted reviving the mesada. On June 21, 1957, the law was amended by R.A. No. 1787
providing for the giving of advance notice or the payment of compensation at the rate of one-half
month for every year of service. 29

The Termination Pay Law was held not to be a substantive law but a regulatory measure, the
purpose of which was to give the employer the opportunity to find a replacement or substitute,
and the employee the equal opportunity to look for another job or source of employment. Where
the termination of employment was for a just cause, no notice was required to be given to the
employee. 30 It was only on September 4, 1981 that notice was required to be given even where
the dismissal or termination of an employee was for cause. This was made in the rules issued by
the then Minister of Labor and Employment to implement B.P. Blg. 130 which amended the
Labor Code. And it was still much later when the notice requirement was embodied in the law
with the amendment of Art. 277(b) by R.A. No. 6715 on March 2, 1989. It cannot be that the
former regime denied due process to the employee. Otherwise, there should now likewise be a
rule that, in case an employee leaves his job without cause and without prior notice to his
employer, his act should be void instead of simply making him liable for damages.

The third reason why the notice requirement under Art. 283 can not be considered a requirement
of the Due Process Clause is that the employer cannot really be expected to be entirely an
impartial judge of his own cause. This is also the case in termination of employment for a just
cause under Art. 282 (i.e., serious misconduct or willful disobedience by the employee of the
lawful orders of the employer, gross and habitual neglect of duties, fraud or willful breach of
trust of the employer, commission of crime against the employer or the latter’s immediate family
or duly authorized representatives, or other analogous cases).

Justice Puno disputes this. He says that "statistics in the DOLE will prove that many cases have
been won by employees before the grievance committees manned by impartial judges of the
company.” The grievance machinery is, however, different because it is established by
agreement of the employer and the employees and composed of representatives from both sides.
That is why, in Batangas Laguna Tayabas Bus Co. v. Court of Appeals, 31 which Justice Puno
cites, it was held that "Since the right of [an employee] to his labor is in itself a property and that
the labor agreement between him and [his employer] is the law between the parties, his summary
and arbitrary dismissal amounted to deprivation of his property without due process of law.” But
here we are dealing with dismissals and layoffs by employers alone, without the intervention of
any grievance machinery. Accordingly in Montemayor v. Araneta University Foundation, 32
although a professor was dismissed without a hearing by his university, his dismissal for having
made homosexual advances on a student was sustained, it appearing that in the NLRC, the
employee was fully heard in his defense.

Lack of Notice Only Makes

Termination Ineffectual

Not all notice requirements are requirements of due process. Some are simply part of a procedure
to be followed before a right granted to a party can be exercised. Others are simply an
application of the Justinian precept, embodied in the Civil Code, 33 to act with justice, give
everyone his due, and observe honesty and good faith toward one’s fellowmen. Such is the
notice requirement in Arts. 282-283. The consequence of the failure either of the employer or the
employee to live up to this precept is to make him liable in damages, not to render his act
(dismissal or resignation, as the case may be) void. The measure of damages is the amount of
wages the employee should have received were it not for the termination of his employment
without prior notice. If warranted, nominal and moral damages may also be awarded. ELC

We hold, therefore, that, with respect to Art. 283 of the Labor Code, the employer’s failure to
comply with the notice requirement does not constitute a denial of due process but a mere failure
to observe a procedure for the termination of employment which makes the termination of
employment merely ineffectual. It is similar to the failure to observe the provisions of Art. 1592,
in relation to Art. 1191, of the Civil Code 34 in rescinding a contract for the sale of immovable
property. Under these provisions, while the power of a party to rescind a contract is implied in
reciprocal obligations, nonetheless, in cases involving the sale of immovable property, the
vendor cannot exercise this power even though the vendee defaults in the payment of the price,
except by bringing an action in court or giving notice of rescission by means of a notarial
demand. 35 Consequently, a notice of rescission given in the letter of an attorney has no legal
effect, and the vendee can make payment even after the due date since no valid notice of
rescission has been given. 36

Indeed, under the Labor Code, only the absence of a just cause for the termination of
employment can make the dismissal of an employee illegal. This is clear from Art. 279 which
provides:chanrob1es virtual 1aw library

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. 37

Thus, only if the termination of employment is not for any of the causes provided by law is it
illegal and, therefore, the employee should be reinstated and paid backwages. To contend, as
Justices Puno and Panganiban do, that even if the termination is for a just or authorized cause the
employee concerned should be reinstated and paid backwages would be to amend Art. 279 by
adding another ground for considering a dismissal illegal. What is more, it would ignore the fact
that under Art. 285, if it is the employee who fails to give a written notice to the employer that he
is leaving the service of the latter, at least one month in advance, his failure to comply with the
legal requirement does not result in making his resignation void but only in making him liable
for damages. 38 This disparity in legal treatment, which would result from the adoption of the
theory of the minority cannot simply be explained by invoking President Ramon Magsaysay’s
motto that "he who has less in life should have more in law." That would be a misapplication of
this noble phrase originally from Professor Thomas Reed Powell of the Harvard Law School.

Justice Panganiban cites Pepsi Cola Bottling Co. v. NLRC, 39 in support of his view that an
illegal dismissal results not only from want of legal cause but also from the failure to observe
"due process." The Pepsi-Cola case actually involved a dismissal for an alleged loss of trust and
confidence which, as found by the Court, was not proven. The dismissal was, therefore, illegal,
not because there was a denial of due process, but because the dismissal was without cause. The
statement that the failure of management to comply with the notice requirement "taints the
dismissal with illegality” was merely a dictum thrown in as additional grounds for holding the
dismissal to be illegal. chanrobles virtual lawlibrary

Given the nature of the violation, therefore, the appropriate sanction for the failure to give notice
is the payment of backwages for the period when the employee is considered not to have been
effectively dismissed or his employment terminated. The sanction is not the payment alone of
nominal damages as Justice Vitug contends.

Unjust Results of Considering Dismissals/

Layoffs Without Prior Notice As Illegal

The refusal to look beyond the validity of the initial action taken by the employer to terminate
employment either for an authorized or just cause can result in an injustice to the employer. For
not giving notice and hearing before dismissing an employee, who is otherwise guilty of, say,
theft, or even of an attempt against the life of the employer, an employer will be forced to keep
in his employ such guilty employee. This is unjust.

It is true the Constitution regards labor as "a primary social economic force." 40 But so does it
declare that it "recognizes the indispensable role of the private sector, encourages private
enterprise, and provides incentives to needed investment." 41 The Constitution bids the State to
"afford full protection to labor." 42 But it is equally true that "the law, in protecting the rights of
the laborer, authorizes neither oppression nor self-destruction of the employer." 43 And it is
oppression to compel the employer to continue in employment one who is guilty or to force the
employer to remain in operation when it is not economically in his interest to do so.

In sum, we hold that if in proceedings for reinstatement under Art. 283, it is shown that the
termination of employment was due to an authorized cause, then the employee concerned should
not be ordered reinstated even though there is failure to comply with the 30-day notice
requirement. Instead, he must be granted separation pay in accordance with Art. 283, to wit: chanrob1es virtual 1aw library

In case of termination due to the installation of labor-saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay
or to at least one month for every year of service, whichever is higher. In case of retrenchment to
prevent losses and in cases of closures or cessation of operations of establishment or undertaking
not due to serious business losses or financial reverses, the separation pay shall be equivalent to
one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is
higher. A fraction of at least six months shall be considered one (1) whole year.

If the employee’s separation is without cause, instead of being given separation pay, he should
be reinstated. In either case, whether he is reinstated or only granted separation pay, he should be
paid full backwages if he has been laid off without written notice at least 30 days in advance.

On the other hand, with respect to dismissals for cause under Art. 282, if it is shown that the
employee was dismissed for any of the just causes mentioned in said Art 282, then, in
accordance with that article, he should not be reinstated. However, he must be paid backwages
from the time his employment was terminated until it is determined that the termination of
employment is for a just cause because the failure to hear him before he is dismissed renders the
termination of his employment without legal effect.

WHEREFORE, the petition is GRANTED and the resolution of the National Labor Relations
Commission is MODIFIED by ordering private respondent Isetann Department Store, Inc. to pay
petitioner separation pay equivalent to one (1) month pay for every year of service, his unpaid
salary, and his proportionate 13th month pay and, in addition, full backwages from the time his
employment was terminated on October 11, 1991 up to the time the decision herein becomes
final. For this purpose, this case is REMANDED to the Labor Arbiter for computation of the
separation pay, backwages, and other monetary awards to petitioner. chanroblesvirtual|awlibrary
SO ORDERED.

Davide, Jr., C.J., Melo, Kapunan, Quisumbing, Purisima, Pardo, Buena, Gonzaga-Reyes and De
Leon, Jr., JJ., concur.

Separate Opinions

BELLOSILLO, J.:

We point out at the outset that this Petition for Review, which was filed before the promulgation
of St. Martin Funeral Home v. National Labor Relations Commission, 1 is not the proper means
by which NLRC decisions are appealed to this Court. Before St. Martin Funeral Home, it was
only through a Petition for Certiorari under Rule 65 that NLRC decisions could be reviewed and
nullified by us on the ground of lack of jurisdiction or grave abuse of discretion amounting to
lack or excess of jurisdiction. After St. Martin Funeral Home, petitions like the one at bar are
initially filed in the Court of Appeals for proper adjudication. LGM

In the interest of justice, however, and in order to write finis to the instant case which has already
dragged on for so long, we shall treat the petition pro hac vice as one for certiorari under Rule
65 although it is captioned Petition for Review on Certiorari; after all, it was filed within the
reglementary period for the filing of a petition for certiorari under Rule 65.

Briefly, on 4 April 1985 private respondent Isetann Department Store, Inc. (ISETANN),
employed petitioner Ruben Serrano as Security Checker until his appointment as Security
Section Head. On 11 October 1991 ISETANN through its Human Resource Division Manager
Teresita A. Villanueva sent Serrano a memorandum terminating his employment effective
immediately "in view of the retrenchment program of the company," and directing him to secure
clearance from their office. 2

Petitioner Serrano filed with the NLRC Adjudication Office a complaint for illegal dismissal and
underpayment of wages against ISETANN. Efforts at amicable settlement proved futile. Ms.
Cristina Ramos, Personnel Administration Manager of ISETANN, testified that the security
checkers and their section head were retrenched due to the installation of a labor saving device,
i.e., the hiring of an independent security agency.

Finding the dismissal to be illegal, the Labor Arbiter ordered the immediate reinstatement of
Serrano to his former or to an equivalent position plus payment of back wages, unpaid
wages,13th month pay and attorney’s fees.

On appeal the NLRC reversed the Labor Arbiter and ruled that ISETANN acted within its
prerogative when it phased out its Security Section and retained the services of an independent
security agency in order to cut costs and economize. Upon denial of his motion for
reconsideration 3 Serrano filed the instant petition imputing grave abuse of discretion on the part
of the NLRC.
Article 282 of the Labor Code enumerates the just causes for the termination of employment by
the employer: (a) serious misconduct or willful disobedience by the employee of the lawful
orders of his employer or the latter’s representative in connection with the employee’s work; (b)
gross and habitual neglect by the employee of his duties; (c) fraud or willful breach by the
employee of the trust reposed in him by his employer or his duly authorized representative; (d)
commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representative; and, (e) other causes
analogous to the foregoing. CDta

On the other hand, Arts. 283 and 284 of the same Code enumerate the so-called authorized
causes: (a) installation of labor saving devices; (b) redundancy; (c) retrenchment to prevent
losses; (d) closure or cessation of the establishment or undertaking unless the closure or cessation
is for the purpose of circumventing the provisions of the law; and, (e) disease.

The just causes enumerated under Art. 282 of the Labor Code are provided by the employee who
causes the infraction. The authorized causes are provided by the employer either because of
outside factors such as the general decline in the economy or merely part of its long range plan
for business profitability. Corollarily, in termination for a just cause, the employee is not entitled
to separation pay unlike in termination for an authorized cause. In addition, the basis in
computing the amount of separation pay varies depending on whether the termination is due to
the installation of a labor saving device, or redundancy, in which case, the employee is entitled to
receive separation pay equivalent to at least one (1) month pay or to at least one (1) month pay
for every year of service. In case the termination is due to retrenchment in order to prevent losses
or in case of closure or cessation of operation of the establishment or undertaking not due to
serious business losses or financial reverses, the separation pay is lower, i.e., equivalent to one
(1) month pay or at least one-half month pay for every year of service, whichever is higher. As
may be gleaned from the foregoing, where the cause of termination is for the financial advantage
or benefit of the employer, the basis in computing for separation pay is higher compared to
termination dictated by necessity with no appreciable financial advantage to the employer.

In the instant case, we agree with the NLRC that the dismissal of petitioner Serrano was for an
authorized cause, i.e., redundancy, which exists where the services of an employee are in excess
of what are reasonably demanded by the actual requirements of the enterprise. A position is
redundant where it is superfluous, and the superfluity may be the outcome of other factors such
as overhiring of workers, decreased volume of business, or dropping of a particular product line
or service activity previously manufactured or undertaken by the enterprise. 4

The hiring of an independent security agency is a business decision properly within the exercise
of management prerogative. As such, this Court is denied the authority to delve into its wisdom
although it is equipped with the power to determine whether the exercise of such prerogative is
in accordance with law. Consequently, the wisdom or soundness of the management decision is
not subject to the discretionary review of the Labor Arbiter nor of the NLRC unless there is a
violation of law or arbitrariness in the exercise thereof, in which case, this Court will step in. 5
Specifically, we held in International Harvester Macleod, Inc. v. Intermediate Appellate Court 6
that the determination of whether to maintain or phase out an entire department or section or to
reduce personnel lies with management. The determination of the need for the phasing out of a
department as a labor and cost saving device because it is no longer economical to retain its
services is a management prerogative. chanrobles.com : virtuallawlibrary

After having established that the termination of petitioner Ruben Serrano was for an authorized
cause, we now address the issue of whether proper procedures were observed in this dismissal.

Since the State affords protection to labor under the Constitution, 7 workers enjoy security of
tenure and may only be removed or terminated upon valid reason and through strict observance
of proper procedure. 8 Article 279 of the Labor Code specifically 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.

Security of tenure however does not guarantee perpetual employment. If there exists a just or an
authorized cause, the employer may terminate the services of an employee but subject always to
procedural requirements. The employer cannot be legally compelled to have in its employ a
person whose continued employment is patently inimical to its interest. The law, while affording
protection to the employee, does not authorize the oppression or destruction of his employer. 9

Subject then to the constitutional right of workers to security of tenure and to be protected
against dismissal except for a just or authorized cause, and without prejudice to the requirement
of notice under Art. 283 of the Labor Code, the employer shall furnish the worker whose
employment is sought to be terminated a written notice containing a statement of the cause of
termination and shall afford the latter ample opportunity to be heard and to defend himself with
the assistance of his representative, if he so desires, in accordance with company rules and
regulations promulgated pursuant to guidelines set by the DOLE. 10

As specifically provided in Art. 283 of the Labor Code, the employer may terminate the
employment of any employee due to redundancy by serving a written notice on the worker and
the DOLE at least one (1) month before the intended date thereof. In the instant case, ISETANN
clearly violated the provisions of Art. 283 on notice. 11 It did not send a written notice to DOLE
which is essential because the right to terminate an employee is not an absolute prerogative. The
lack of written notice denied DOLE the opportunity to determine the validity of the termination.

The written notice ISETANN sent to Serrano was dated 11 October 1991 or on the same day the
intended termination was to take effect. This obviously did not comply with the 30-day
mandatory requirement. Although the cause for discharge may be just or authorized, it is still
necessary and obligatory to afford the employee concerned his basic and more important right to
notice. Serrano was not given the chance to make the needed adjustments brought about by his
termination. Significantly, the notice is intended to enable the employee not only to prepare
himself for the legal battle to protect his tenure of employment, which can be long, arduous,
expensive and complicated by his own standards, but also to find other means of employment
and ease the impact of the loss of his job and, necessarily, his income.

We are of the view that failure to send notice of termination to Serrano is not tantamount to
violation of his constitutional right to due process but merely constitutes non-compliance with
the provision on notice under Art. 283 of the Labor Code.

The legitimacy of a government is established and its functions delineated in the Constitution.
From the Constitution flows all the powers of government in the same manner that it sets the
limits for their proper exercise. In particular, the Bill of Rights functions primarily as a deterrent
to any display of arbitrariness on the part of the government or any of its instrumentalities. It
serves as the general safeguard, as is apparent in its first section which states, "No person shall
be deprived of life, liberty or property without due process of law, nor shall any person be denied
the equal protection of the laws." 12 Specifically, due process is a requirement for the validity of
any governmental action amounting to deprivation of liberty or property. 13 It is a restraint on
state action not only in terms of what it amounts to but how it is accomplished. Its range thus
covers both the ends sought to be achieved by officialdom as well as the means for their
realization. 14

Substantive due process is a weapon that may be utilized to challenge acts of the legislative
body, whether national or local, and presumably executive orders of the President and
administrative orders and regulations of a rule-making character. Procedural due process, on the
other hand, is available for the purpose of assailing arbitrariness or unreasonableness in the
administration of the law by the executive department or the judicial branch. Procedural due
process likewise may aid those appearing before Congressional committees if the proceedings
are arbitrary or otherwise unfair. 15

Procedural due process demands that governmental acts, more specifically so in the case of the
judiciary, be not infected with arbitrariness. 16 The same disinterestedness required of men on
the bench must characterize the actuations of public officials, not excluding the President, to
satisfy the requirements of procedural due process. 17

In his dissent Mr. Justice Puno states that "the new majority opinion limiting violations of due
process to government action alone is a throwback to a regime of law long discarded by more
progressive countries." He opines that "today, private due process is a settled norm in
administrative law," citing Schwartz, an authority in administrative law.

We beg to disagree. A careful reading of Schwartz would reveal that requirements of procedural
due process extended from governmental to private action only in instances where there is
"sufficient governmental involvement" or "the private action was so saturated with governmental
incidents."cralaw virtua1aw library

The cardinal primary requirements of due process in administrative proceedings were

highlighted in Ang Tibay v. Court of Industrial Relations: 18 (a) the right to a hearing, which
includes the right to present one’s case and submit evidence in support thereof; (b) the tribunal
must consider the evidence presented; (c) the decision must have something to support itself; (d)
the evidence must be substantial; (e) the decision must be based on the evidence presented at the
hearing, or at least contained in the record and disclosed to the parties affected; (f) the tribunal or
body or any of its judges must act on its own independent consideration of the law and facts of
the controversy, and not simply accept the views of a subordinate; (g) the board or body should,
in all controversial questions, render its decision in such manner that the parties to the
proceeding may know the various issues involved, and the reason for the decision rendered.

Also in Lumiqued v. Exevea 19 it was held —

In administrative proceedings, the essence of due process is simply the opportunity to explain
one’s side. One may be heard, not solely by verbal presentation but also, and perhaps even more
creditably as it is more practicable than oral arguments, through pleadings. An actual hearing is
not always an indispensable aspect of due process. As long as a party was given the opportunity
to defend his interests in due course, he cannot be said to have been denied due process of law,
for this opportunity to be heard is the very essence of due process. Llibris

From the foregoing, it is clear that the observance of due process is demanded in governmental
acts. Particularly in administrative proceedings, due process starts with the tribunal or hearing
officer and not with the employer. In the instant case, what is mandated of the employer to
observe is the 30-day notice requirement. Hence, non-observance of the notice requirement is not
denial of due process but merely a failure to comply with a legal obligation for which, we
strongly recommend, we impose a disturbance compensation as discussed hereunder.

In the instant case, we categorically declare that Serrano was not denied his right to due process.
Instead, his employer did not comply with the 30-day notice requirement. However, while
Serrano was not given the required 30-day notice, he was nevertheless given and, in fact, took
advantage of every opportunity to be heard, first, by the Labor Arbiter, second, by the NLRC,
and third, by no less than this Court. Before the Labor Arbiter and the NLRC, petitioner had the
opportunity to present his side not only orally but likewise through proper pleadings and position
papers. It is not correct therefore to say that petitioner was deprived of his right to due process.

We have consistently upheld in the past as valid although irregular the dismissal of an employee
for a just or authorized cause but without notice and have imposed a sanction on the erring
employers in the form of damages for their failure to comply with the notice requirement. We
discussed the rationale behind this ruling in Wenphil Corporation v. NLRC 20 thus —

The Court holds that the policy of ordering reinstatement to the service of an employee without
loss of seniority and the payment of his wages during the period of his separation until his actual
reinstatement but not exceeding three years without qualification or deduction, when it appears
he was not afforded due process, although his dismissal was found to be for just and authorized
cause in an appropriate proceeding in the Ministry of Labor and Employment should be re-
examined. It will be highly prejudicial to the interests of the employer to impose on him the
services of an employee who has been shown to be guilty of the charges that warranted his
dismissal from employment. Indeed, it will demoralize the rank and file if the undeserving, if not
undesirable, remains in the service . . . . However, the petitioner must nevertheless be held to
account for failure to extend to private respondent his right to an investigation before causing his
dismissal. The rule is explicit as above discussed. The dismissal of an employee must be for just
or authorized cause and after due process. Petitioner committed an infraction of the second
requirement. Thus, it must be imposed a sanction for its failure to give a formal notice and
conduct an investigation as required by law before dismissing petitioner from employment.
Considering the circumstances of this case petitioner must indemnify private respondent the
amount of P1,000.00. The measure of this award depends on the facts of each case and the
gravity of the omission committed by the employer (Emphasis supplied).

In Sebuguero v. National Labor Relations Commission 21 Mr. Justice Davide Jr., now Chief
Justice, made this clear pronouncement —

It is now settled that where the dismissal of an employee is in fact for a just and valid cause and
is so proven to be but he is not accorded his right to due process, i.e., he was not furnished the
twin requirements of notice and the opportunity to be heard, the dismissal shall be upheld but the
employer must be sanctioned for non-compliance with the requirements of or for failure to
observe due process. The sanction, in the nature of indemnification or penalty, depends on the
facts of each case and the gravity of the omission committed by the employer.

This ruling was later ably amplified by Mr. Justice Puno in Nath v. National Labor Relations
Commission 22 where he wrote —

The rules require the employer to furnish the worker sought to be dismissed with two written
notices before termination of employment can be legally effected: (1) notice which apprises the
employee of the particular acts or omissions for which his dismissal is sought; and (2) the
subsequent notice which informs the employee of the employer’s decision to dismiss him. In the
instant case, private respondents have failed to furnish petitioner with the first of the required
two (2) notices and to state plainly the reasons for the dismissal in the termination letter. Failure
to comply with the requirements taints the dismissal with illegality.

Be that as it may, private respondent can dismiss petitioner for just cause . . . . We affirm the
finding of the public respondent that there was just cause to dismiss petitioner, a probationary
employee (Emphasis supplied). chanrobles.com.ph : red

Also, in Camua v. National Labor Relations Commission 23 this Court through Mr. Justice
Mendoza decreed —

In the case at bar, both the Labor Arbiter and the NLRC found that no written notice of the
charges had been given to petitioner by the respondent company. Accordingly, in accordance
with the well-settled rule, private respondents should pay petitioner P1,000.00 as indemnity for
violation of his right to due process. Although an employee validly dismissed for cause he may
nevertheless be given separation pay as a measure of social justice provided the cause is not
serious misconduct reflecting on his moral character (Emphasis supplied).

Non-observance of this procedural requirement before would cause the employer to be penalized
by way of paying damages to the employee the amounts of which fluctuated through the years.
Thus, for just cause the indemnity ranged from P1,000.00 to P10,000.00. 24 For authorized
cause, as distinguished from just cause, the award ranged from P2,000.00 to P5,000.00.25 cralaw:red

This Court has also sanctioned the ruling that a dismissal for a just or authorized cause but
without observance of the mandatory 30-day notice requirement was valid although considered
irregular. The Court ratiocinated that employers should not be compelled to keep in their employ
undesirable and undeserving laborers. For the irregularity, i.e., the failure to observe the 30-day
notice of termination, the employer was made to pay a measly sum ranging from P1,000.00 to
P10,000.00. RHLY

With regard to the indemnity or penalty, which we prefer seriously to be referred to as

"disturbance compensation," the Court has awarded varying amounts depending on the
circumstances of each case and the gravity of the commission. We now propose that the amount
of the award be uniform and rational and not arbitrary. The reason for the proposal or
modification is that in their non-compliance with the 30-day notice requirement the erring
employers, regardless of the peculiar circumstances of each case, commit the infraction only by
the single act of not giving any notice to their workers. It cannot be gainfully said that the
infraction in one case is heavier than in the other as the non-observance constitutes one single
act. Thus, if the dismissal is illegal, i.e., there is no just or authorized cause, a disturbance
compensation in the amount of P10,000.00 may be considered reasonable. If the dismissal is for
a just cause but without notice, a disturbance compensation in the amount P5,000.00 may be
given. In termination for an authorized cause and the notice requirement was not complied with,
we distinguish further: If it is to save the employer from imminent bankruptcy or business losses,
the disturbance compensation to be given is P5,000.00. If the authorized cause was intended for
the employer to earn more profits, the amount of disturbance compensation is P10,000.00. This
disturbance compensation, again we strongly recommend, should be given to the dismissed
employee at the first instance, the moment it is shown that his employer has committed the
infraction — of not complying with the 30-day written notice requirement — to tide him over
during his economic dislocation.

The right of the laborers to be informed of their impending termination cannot be taken lightly,
and the award of any amount below P5,000.00 may be too anemic to satisfy the fundamental
protection especially accorded to labor and the workingman. In fact, it is hardly enough to
sustain a family of three; more so if the employee has five or more children, which seems to be
the average size of a Filipino family.

Henceforth, if the dismissal is for a just cause but without observance of the 30-day notice
requirement, the dismissal is deemed improper and irregular. If later the dismissal is ascertained
to be without just cause, the dismissed employee is entitled to reinstatement, if this be feasible,
otherwise to separation pay and back wages plus disturbance compensation of P10,000.00 and
moral damages, if warranted. On the other hand, if the dismissal is ascertained to be with just
cause, the dismissed employee is entitled nevertheless to a disturbance compensation of
P5,000.00 if the legal requirement of the 30-day notice to both employee and DOLE has not been
complied with.

In instances where there is obviously a ground for dismissal, as when the employee has become
violent and his presence would cause more harm to his co-workers and the security and serenity
of the workplace, the employee may be suspended in the meantime until he is heard with proper
observance of the 30-day notice requirement. Likewise, if the dismissal is for an authorized
cause but without the required notice, the dismissal is improper and irregular and the employee
should be paid separation pay, backwages and disturbance compensation of P5,000.00 or
P10,000.00 depending on the cause. As already intimated, if the authorized cause is for the
purpose of saving the employer from imminent bankruptcy or business losses, the disturbance
compensation should be P5,000.00; otherwise, if the authorized cause is for the employer, in the
exercise of management prerogative, to save and earn more profits, the disturbance
compensation should be P10,000.00.

In the instant case, Serrano was given his walking papers only on the very same day his
termination was to take effect. DOLE was not served any written notice. In other words, there
was non-observance of the 30-day notice requirement to both Serrano and the DOLE. Serrano
was thus terminated for an authorized cause but was not accorded his right to 30-day notice.
Thus, his dismissal being improper and irregular, he is entitled to separation pay and back wages
the amounts of which to be determined by the Labor Arbiter, plus P10,000.00 as disturbance
compensation which, from its very nature, must be paid immediately to cushion the impact of his
economic dislocation.

One last note. This Separate Opinion is definitely not advocating a new concept in imposing the
so-called "disturbance compensation." Since Wenphil Corporation v. NLRC 26 this Court has
already recognized the necessity of imposing a sanction in the form of indemnity or even
damages, when proper, not specifically provided by any law, upon employers who failed to
comply with the twin-notice requirement. At the very least, what is being proposed to be adopted
here is merely a change in the terminology used, i.e., from "sanction," "indemnity," "damages" or
"penalty," to "disturbance compensation" as it is believed to be the more appropriate term to
accurately describe the lamentable situation of our displaced employees.

Indeed, from the time the employee is dismissed from the service without notice — in this case
since 11 October 1991 — to the termination of his case, assuming it results in his reinstatement,
or his being paid his back wages and separation pay, as the case may be, how long must he be
made to suffer emotionally and bear his financial burden? Will reinstating him and/or paying his
backwages adequately make up for the entire period that he was in distress for want of any
means of livelihood? Petitioner Serrano has been deprived of his only source of income — his
employment — for the past eight (8) years or so. Will his reinstatement and/or the payment of
his back wages and separation pay enable him to pay off his debts incurred in abject usury — to
which he must have succumbed — during his long period of financial distress? Will it be
adequate? Will it be just? Will it be fair? Thus, do we really and truly render justice to the
workingman by simply awarding him full back wages and separation pay without regard for the
long period during which he was wallowing in financial difficulty?

FOR ALL THE FOREGOING, the Decision of respondent National Labor Relations
Commission should be MODIFIED. The termination of petitioner RUBEN SERRANO being
based on an authorized cause should be SUSTAINED AS VALID although DECLARED
IRREGULAR for having been effected without the mandatory 30-day notice.
ISETANN DEPARTMENT STORE INC. should PAY petitioner petitioner SERRANO back
wages and separation pay the amounts of which to be determined by the Labor Arbiter, plus
P10,000.00 as disturbance compensation which must be paid immediately. Consequently, except
as regards the disturbance compensation, the case should be REMANDED to the Labor Arbiter
for the immediate computation and payment of the back wages and separation pay due petitioner.

EXCEPT as herein stated, I concur with the majority. CDta

PUNO, J., dissenting: chanrob1es virtual 1aw library

The rule of audi alteram partem — hear the other side, is the essence of procedural due process.
That a "party is not to suffer in person or in purse without an opportunity of being heard" is the
oldest established principle in administrative law. 1 Today, the majority is ruling that the all
important right of an employee to be notified before he is dismissed for a just or authorized cause
is not a requirement of due process. This is a blow on the breadbasket of our lowly employees
considerable erosion of their constitutional right to security of tenure, hence this humble
dissenting opinion. chanroblesvirtuallawlibrary

A review of our law on dismissal is in order.

I. DISMISSAL DUE TO JUST CAUSE

The law allowing dismissal of an employee due to a just cause is provided in Article 282 of the
Labor Code: jgc:chanrobles.com.ph

"ARTICLE 282. Termination by employer. — An employer may terminate an employment for

any of the following causes: chanrob1es virtual 1aw library

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

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

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

(d) Commission of the crime or offense by the employee against the person of his employer or
any immediate member of his family or his duly authorized representative; and chanrobles virtual lawlibrary

(e) Other causes analogous to the foregoing." cralaw virtua1aw library

The long established jurisprudence 2 is that to justify dismissal of an employee for a just cause,
he must be given two kinds of notice by his employer, viz.: (1) notice to apprise the employee of
the particular acts or omissions for which the dismissal is sought, and (2) subsequent notice to
inform him of the employer’s decision to dismiss him. Similarly, deeply ingrained is our ruling
that these pre and post notice requirements are not mere technicalities but are requirements of
due process. 3

Then came the case of Wenphil Corporation v. NLRC and Mallare in 1989. 4 It is the majority
view that Wenphil reversed the long standing policy of this Court on dismissal. This is too broad
a reading of Wenphil. A careful statement of the facts of Wenphil and the ruling of this Court is
thus proper.chanrobles.com : chanrobles.com.ph

First, the facts. The private respondent Roberto Mallare is the assistant head of the backroom
department of petitioner Wenphil Corporation. At about 2:30 pm on May 20, 1985, Mallare had
an altercation with his co-employee, Job Barrameda, about tending the Salad Bar. He slapped
Barrameda’s cap, stepped on his foot, picked up an ice scooper and brandished it against the
latter. He refused to be pacified by another employee who reported the incident to Delilah
Hermosura, assistant manager. Hermosura summoned Mallare but the latter refused to see the
former. It took a security guard to bring Mallare to Hermosura. Instead of making an
explanation, Mallare shouted profane words against Hermosura. He declared that their
altercation should only be settled by him and Barrameda.

The following morning, Mallare was suspended. In the afternoon, he was dismissed from the
service. He received an official notice of his dismissal four (4) days later.

Mallare filed with the Labor Arbiter a complaint for illegal suspension, illegal dismissal and
unfair labor practice. No hearing was conducted in view of the repeated absence of the counsel
of Mallare. The parties submitted their respective position papers. On December 3, 1986, the
Arbiter denied the complaint as he found Mallare guilty of grave misconduct and
insubordination, which are just causes for dismissal. The Arbiter also ruled that Mallare was not
denied due process. On appeal, the NLRC reversed. It held that Mallare was denied due process
before he was dismissed. It ordered Mallare’s reinstatement and the payment of his one (1) year
backwages.

On certiorari to this Court, we reversed the NLRC and reinstated the decision of the Arbiter with
the modification that petitioner should pay to Mallare an indemnity of P1,000.00 for dismissing
Mallare without any notice and hearing. We held: jgc:chanrobles.com.ph

"Petitioner insists that private respondent was afforded due process but he refused to avail of his
right to the same; that when the matter was brought to the labor arbiter he was able to submit his
position paper although the hearing cannot proceed due to the non-appearance of his counsel;
and that the private respondent is guilty of serious misconduct in threatening or coercing a co-
employee which is a ground for dismissal under Article 283 of the Labor Code. chanroblesvirtuallawlibrary

The failure of petitioner to give private respondent the benefit of a hearing before he was
dismissed constitutes an infringement of his constitutional right to due process of law and equal
protection of the laws. The standards of due process in judicial as well as administrative
proceedings have long been established. In its bare minimum due process of law simply means
giving notice and opportunity to be heard before judgment is rendered.

The claim of petitioner that a formal investigation was not necessary because the incident, which
gave rise to the termination of private respondent, was witnessed by his co-employees and
supervisors, is without merit. The basic requirement of due process is that which hears before it
condemns, which proceeds upon inquiry and renders judgment only after trial.

However, it is a matter of fact that when the private respondent filed a complaint against
petitioner, he was afforded the right to an investigation by the labor arbiter. He presented his
position paper as did the petitioner. If no hearing was had, it was the fault of private respondent
as his counsel failed to appear at the scheduled hearings. The labor arbiter concluded that the
dismissal of private respondent was for just cause. He was found guilty of grave misconduct and
insubordination. This is borne by the sworn statements of witnesses. The Court is bound by this
finding of the labor arbiter. chanrobles virtuallawlibrary:red

By the same token, the conclusion of the public respondent NLRC on appeal that private
respondent was not afforded due process before he was dismissed is binding on this Court.
Indeed, it is well taken and supported by the records. However, it can not justify a ruling that
private respondent should be reinstated with back wages as the public respondent NLRC so
decreed. Although belatedly, private respondent was afforded due process before the labor
arbiter wherein the just cause of his dismissal had been established. With such finding, it would
be arbitrary and unfair to order his reinstatement with back wages." cralaw virtua1aw library

Three members of the Court filed concurring and dissenting opinions. Madam Justice Herrera
opined that: (a) Mallare was dismissed for cause, hence, he is not entitled to reinstatement and
backwages; (b) he was not denied due process; and (c) he has no right to any indemnity but to
separation pay to cushion the impact of his loss of employment Mr. Justice Padilla took the view
that: (1) Mallare was not entitled to reinstatement and backwages as he was guilty of grave
misconduct and insubordination; (2) he was denied administrative due process; and (3) for
making such denial, Wenphil should pay "separation pay (instead of indemnity) in the sum of
P1,000.00." Madam Justice Cortes held that: (1) Mallare was not illegally dismissed; (2) he was
not denied due process; (3) he was not entitled to indemnity; and (4) if P1,000.00 was to be
imposed on Wenphil as an administrative sanction, it should form part of the public fund of the
government.

I shall discuss later that Wenphil did not change our ruling that violation of the pre-dismissal
notice requirement is an infringement of due process.

II. DISMISSAL DUE TO AUTHORIZED CAUSE

The applicable law on dismissal due to authorized cause is Article 283 of the Labor Code which
provides:jgc:chanrobles.com.ph

"ARTICLE 283. Closure of establishment and reduction of personnel. — The employer may also
terminate the employment of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the [Department] of Labor
and Employment at least one (1) month before the intended date thereof. In case of termination
due to the installation of labor-saving devices or redundancy, the worker affected thereby shall
be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1)
month pay for every year of service, whichever is higher. In case of retrenchment to prevent
losses and in cases of closures or cessation of operations of establishment or undertaking not due
to serious business losses or financial reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1) whole year."
cralaw virtua1aw library

In Sebuguero v. NLRC, 5 we held thru our esteemed Chief Justice Davide that "the requirement
of notice to both the employees concerned and the Department of Labor and Employment
(DOLE) is mandatory and must be written and given at least one month before the intended date
of retrenchment." We explained that the "notice to the DOLE is essential because the right to
retrench is not an absolute prerogative of an employer but is subject to the requirement of law
that retrenchment be proved to prevent losses. The DOLE is the agency that will determine
whether the planned retrenchment is justified and adequately supported by fact." 6 Nonetheless,
we ruled:jgc:chanrobles.com.ph

"The lack of written notice to the petitioners and to the DOLE does not, however, make the
petitioners’ retrenchment illegal such that they are entitled to the payment of back wages and
separation pay in lieu of reinstatement as they contend. Their retrenchment, for not having been
effected with the required notices, is merely defective. In those cases where we found the
retrenchment to be illegal and ordered the employees’ reinstatement and the payment of
backwages, the validity of the cause for retrenchment, that is the existence of imminent or actual
serious or substantial losses, was not proven. But here, such a cause is present as found by both
the Labor Arbiter and the NLRC. There is only a violation by GTI of the procedure prescribed in
Article 283 of the Labor Code in effecting the retrenchment of the petitioners. chanrobles.com : virtualaw library

It is now settled that where the dismissal of an employee is in fact for a just and valid cause and
is so proven to be but he is not accorded his right to due process, i.e., he was not furnished the
twin requirements of notice and the opportunity to be heard, the dismissal shall be upheld but the
employer must be sanctioned for non-compliance with the requirements of or for failure to
observe due process. The sanction, in the nature of indemnification or penalty, depends on the
facts of each case and the gravity of the omission committed by the employer and has ranged
from P1,000.00 as in the cases of Wenphil v. National Labor Relations Commission, Seahorse
Maritime Corp. v. National Labor Relations Commission, Shoemart, Inc. v. National Labor
Relations Commission, Rubberworld (Phils.) Inc. v. National Labor Relations Commission,
Pacific Mills, Inc. v. Alonzo, and Aurelio v. National Labor Relations Commission to
P10,000.00 in Reta v. National Labor Relations Commission and Alhambra Industries, Inc. v.
National Labor Relations Commission. More recently, in Worldwide Papermills, Inc. v. National
Labor Relations Commission, the sum of P5,000.00 was awarded to the employee as
indemnification for the employer’s failure to comply with the requirements of procedural due
process.

Accordingly, we affirm the deletion by the NLRC of the award of back wages. But because the
required notices of the petitioners’ retrenchment were not served upon the petitioners and the
DOLE, GTI must be sanctioned for such failure and thereby required to indemnify each of the
petitioners the sum of P20,000.00 which we find to be just and reasonable under the
circumstances of this case." cralaw virtua1aw library

III. RE-EXAMINATION OF THE WENPHIL DOCTRINE: FROM BAD TO WORSE

The minority of the Court has asked for a re-examination of Wenphil because as the majority
correctly observed, "the number of cases involving dismissals without the requisite notice to the
employee although effected for just or authorized causes suggests that the imposition of fine for
violation of the notice requirement has not been effective in deterring violations of the notice
requirement."cralaw virtua1aw library

We must immediately set Wenphil in its proper perspective as it is a very exceptional case. Its
doctrine must be limited to its distinct facts. Its facts therefore ought to be carefully examined
again. In Wenphil, it was clearly established that the employee had a violent temper, caused
trouble during office hours and even defied his superiors as they tried to pacify him. The
employee was working for a fast food chain that served the public and where violence has no
place. These facts were established only in the proceedings before the Labor Arbiter after the
employee filed a complaint for illegal dismissal. There were no formal investigation proceedings
before the employer as the employee was dismissed without any notice by the employer. Given
these facts, we ruled that the pre-dismissal notice requirement was part of due process;
nonetheless, we held that the employee was given due process as he was heard by the Labor
Arbiter; we found that the proceedings before the Labor Arbiter proved that the employee was
guilty of grave misconduct and insubordination; we concluded with the rule that it would be
highly prejudicial to the interest of the employer to reinstate the employee, but the employer
must indemnify the employee the amount of P1,000.00 for dismissing him without notice. We
further held that "the measure of this award depends on the facts of each case and the gravity of
the omission committed by the employer." 7

At the outset, I wish to emphasize that Wenphil itself held, and repeatedly held that "the failure
of petitioner to give private respondent the benefit of a hearing before he was dismissed,
constitutes an infringement of his constitutional right to due process of law and equal protection
of the laws. The standards of due process of law in judicial as well as administrative proceedings
have long been established. In its bare minimum due process of law simply means giving notice
and opportunity to be heard before judgment is rendered." 8 The Court then satisfied itself with
this bare minimum when it held that the post dismissal hearing before the Labor Arbiter was
enough compliance with the demands of due process and refused to reinstate an eminently
undesirable employee. Heretofore, the Court was far from satisfied with this bare minimum as it
strictly imposed on an employer compliance with the requirement of pre-dismissal notice,
violation of which resulted in orders of reinstatement of the dismissed employee. This is the only
wrinkle wrought by Wenphil in our jurisprudence on dismissal. Nonetheless, it should be
stressed that the Court still punished Wenphil’s violation of the pre-dismissal notice requirement
as it was ordered to pay an indemnity of P1,000.00 to the employee. The indemnity was based on
the iterated and reiterated rule that "the dismissal of an employee must be for just or authorized
cause and after due process." 9

Our ten (10) years experience with Wenphil is not a happy one. Unscrupulous employers have
abused the Wenphil ruling. They have dismissed without notice employees including those who
are not as eminently undesirable as the Wenphil employee. They dismissed employees without
notice as a general rule when it should be the exception. The purpose of the pre-dismissal notice
requirement was entirely defeated by employers who were just too willing to pay an indemnity
for its violation. The result, as the majority concedes, is that the indemnity we imposed has not
been effective to prevent unjust dismissals of employees. To be sure, this is even a supreme
understatement. The ugly truth is that Wenphil is the mother of many unjust and unauthorized
dismissals of employees who are too weak to challenge their powerful employees. chanrobles.com : virtual law library

As the Wenphil indemnity doctrine has proved to be highly inimical to the interest of our
employees, I humbly submit a return to the pre-Wenphil rule where a reasonless violation of the
pre-dismissal notice requirement makes the dismissal of an employee illegal and results in his
reinstatement. In fine, we should strike down as illegal the dismissal of an employee even if it is
for a justified end if it is done thru unjustified means for we cannot be disciples of the
Machiavellian doctrine of the end justifies the means. With due respect, the majority decision
comes too near this mischievous doctrine by giving emphasis on the end and not the means of
dismissal of employees. What grates is that the majority today espouses a doctrine more
pernicious than Wenphil for now it announces that a violation of the pre-dismissal notice
requirement does not even concern due process. The reasons relied upon by the majority for this
new ruling against the job security of employees cannot inspire assent. chanrobles.com : chanrobles.com.ph

FIRST. I would like to emphasize that one undesirable effect of Wenphil is to compel employees
to seek relief against illegal dismissals with the DOLE whereas before, a remedy can be sought
before the employer. In shifting this burden, an employee’s uneven fight against his employer
has become more uneven. Now, an illegally dismissed employee often goes to the DOLE without
an exact knowledge of the cause of his dismissal. As a matter of strategy, some employers today
dismiss employees without notice. They know that it is more advantageous for them to litigate
with an employee who has no knowledge of the cause of dismissal. The probability is that said
employee will fail to prove the illegality of his dismissal. All that he can prove is that he was
dismissed without notice and the penalty for the omission is a mere fine, a pittance.

The case at bar demonstrates how disastrous Wenphil has been to our helpless employees. In
holding that the petitioner failed to prove his cause of action, the majority held." . . we have only
the bare assertion of petitioner that, in abolishing the security section, private respondent’s real
purpose was to avoid payment to the security checkers of the wage increases provided in the
collective bargaining agreement approved in 1990." The bare assertion of the petitioner is
understandable. The notice given to him spoke of a general ground retrenchment. No details
were given about the employer’s sudden retrenchment program. Indeed, the employee was
dismissed on the day he received the notice in violation of the 30-day requirement. He was given
no time, no opportunity to ascertain and verify the real cause of his dismissal. Thus, he filed with
the DOLE a complaint for illegal dismissal with a hazy knowledge of its real cause. Heretofore,
it is the employer whom we blame and penalize if he does not notify his employee of the cause
of his dismissal. Today, the majority puts the blame on the employee for not knowing why he
was dismissed when he was not given any notice of dismissal. In truth, the suspicion of the
petitioner in the case at bar that he was dismissed to avoid payment of their wage increases is not
without basis. The DOLE itself found that petitioner has unpaid wages which were ordered to be
paid by the employer. The majority itself affirmed this finding.

What hurts is that while the majority was strict with the petitioner-employee, it was not so with
the employer ISETANN. Immediately, it validated the finding of the NLRC that petitioner was
dismissed due to the redundancy of his position. This is inconsistent with the finding of the
Labor Arbiter that the employer failed to prove retrenchment, the ground it used to dismiss the
petitioner. A perusal of the records will show that Ms. Cristina Ramos, Personnel Administration
Manager of the employer ISETANN testified on the cause of dismissal of the petitioner. She
declared that petitioner was retrenched due to the installation of a labor saving device. Allegedly,
the labor saving device was the hiring of an independent security agency, thus: 10

"x       x       x

Atty. Perdigon: chanrob1es virtual 1aw library

You said that your company decided to phase out the position of security checkers . . .

Ms. Ramos: chanrob1es virtual 1aw library

Yes Sir.

Q: And instead hired the services of a security agency?

A: Yes, sir.

x        x       x

Q: Did you not retrench the position of security checkers?

A: We installed a labor saving device. chanrobles virtual lawlibrary

Q: So you did not retrench?

A: No, sir.

Q: How about the position of Section Head of Security Department?

A: It was abolished in 1991.

x        x       x

Q: Are you aware of the retrenchment program of the company as stated in this letter?

A: Actually it’s not a retrenchment program. It’s an installation of a labor saving device.
Q: So you are telling this Court now that there was no retrenchment program?

A: It was actually an installation of a labor saving device (Emphasis supplied).

x        x       x

Q: . . . What (is) this labor saving device that you are referring to?

A: The labor saving device is that the services of a security agency were contracted to handle the
services of the security checkers of our company. chanrobles.com : virtualaw library

Q: Are you sure of what labor saving means, Madam witness?

A: Yes, sir.

Q: You said you installed a labor saving device, and you installed a security agency as a labor
saving device?

A: We hired the services of a security agency.

Q: So according to you a security agency is a labor saving device?

Atty. Salonga: chanrob1es virtual 1aw library

Already answered, your Honor." cralaw virtua1aw library

Obviously, Ms. Ramos could not even distinguish between retrenchment and redundancy. The
Labor Arbiter thus ruled that petitioner’s dismissal was illegal. The NLRC, however, reversed.
The majority affirmed the NLRC ruling that ISETANN’s phase out of its security employees is a
legitimate business decision, one that is necessary to obtain reasonable return from its
investment. To use the phrase of the majority, this is a "bare assertion." Nothing in the majority
decision shows how the return of ISETANN’s investment has been threatened to justify its so-
called business decision as legitimate.

SECOND. The majority holds that "the need is for a rule which, while recognizing the
employee’s right to notice before he is dismissed or laid off, at the same time acknowledges the
right of the employer to dismiss for any of the just causes enumerated in Art. 282 or to terminate
employment for any of the authorized causes mentioned in Arts. 283-284. If the Wenphil rule
imposing a fine on an employer who is found to have dismissed an employee for cause without
prior notice is deemed ineffective in deterring employer violations of the notice requirement, the
remedy is not to declare the dismissal void if there are just or valid grounds for such dismissal or
if the termination is for an authorized cause. That would be to uphold the right of the employee
but deny the right of the employer to dismiss for cause. Rather, the remedy is to consider the
dismissal or termination to be simply ineffectual for failure of the employer to comply with the
procedure for dismissal or termination." cralaw virtua1aw library
With due respect, I find it most difficult to follow the logic of the majority. Before Wenphil, we
protected employees with the ruling that dismissals without prior notice are illegal and the
illegally dismissed employee must be reinstated with backwages. Wenphil diluted that rule when
it held that due process is satisfied if the employee is given the opportunity to be heard by the
Labor Arbiter. It further held that an employee cannot be reinstated if it is established in the
hearing that his dismissal is for a just cause. The failure of the employer to give a pre-dismissal
notice is only to be penalized by payment of an indemnity. The dilution of the rule has been
abused by unscrupulous employers who then followed the "dismiss now, pay later" strategy. This
evil practice of employers was what I expected the majority to address in re-examining the
Wenphil doctrine. At the very least, I thought that the majority would restore the balance of
rights between an employee and an employer by giving back the employee’s mandatory right to
notice before dismissal. It is disquieting, however, that the majority re-arranged this balance of
right by tilting it more in favor of the employer’s right to dismiss. Thus, instead of weakening a
bit the right to dismiss of employers, the majority further strengthens it by insisting that a
dismissal without prior notice is merely "ineffectual" and not illegal.chanrobles.com.ph:red

The stubborn refusal of the majority to appreciate the importance of pre-dismissal notice is
difficult to understand. It is the linchpin of an employee’s right against an illegal dismissal. The
notice tells him the cause of his dismissal. It gives him a better chance to contest his dismissal in
an appropriate proceeding as laid down in the parties’ collective bargaining agreement or the
rules of employment established by the employer, as the case may be. In addition, it gives to both
the employee and employer more cooling time to settle their differences amicably. In fine, the
prior notice requirement and the hearing before the employer give an employee a distinct,
different and effective first level of remedy to protect his job. In the event the employee is
dismissed, he can still file a complaint with the DOLE with better knowledge of the cause of his
dismissal, with longer time to prepare his case, and with greater opportunity to take care of the
financial needs of his family pendente lite. The majority has taken away from employees this
effective remedy. This is not to say that the pre-dismissal notice requirement equalizes the fight
between an employee and an employer for the fight will remain unequal. This notice requirement
merely gives an employee a fighting chance but that fighting chance is now gone.

It is equally puzzling why the majority believes that restoring the employee’s right to pre-
dismissal notice will negate the right of an employer to dismiss for cause. The pre-Wenphil rule
simply requires that before the right of the employer to dismiss can be exercised, he must give
prior notice to the employee of its cause. There is nothing strange nor difficult about this
requirement. It is no burden to an employer. He is bereft of reason not to give the simple notice.
If he fails to give notice, he can only curse himself, He forfeits his right to dismiss by failing to
follow the procedure for the exercise of his right. Employees in the public sector cannot be
dismissed without prior notice. Equal protection of law demands similar treatment of employees
in the private sector.

THIRD. The case at bar specifically involves Article 283 of the Labor Code which lays down
four (4) authorized causes for termination of employment. 11 These authorized causes are: (1)
installation of labor-saving devices; (2) redundancy; (3) retrenchment to prevent losses; and (4)
closing or cessation of operation of the establishment or undertaking unless the closing is for the
purpose of circumventing the law. It also provides that prior to the dismissal of an employee for
an authorized cause, the employer must send two written notices at least one month before the
intended dismissal — one notice to the employee and another notice to the Department of Labor
and Employment (DOLE). We have ruled that the right to dismiss on authorized causes is not an
absolute prerogative of an employer. 12 We explained that the notice to the DOLE is necessary
to enable it to ascertain the truth of the cause of termination. 13 The DOLE is equipped with men
and machines to determine whether the planned closure or cessation of business or retrenchment
or redundancy or installation of labor saving device is justified by economic facts. 14 For this
reason too, we have held that notice to the employee is required to enable him to contest the
factual bases of the management decision or good faith of the retrenchment or redundancy before
the DOLE. 15 In addition, this notice requirement gives an employee a little time to adjust to his
joblessness. 16

The majority insists that if an employee is laid off for an authorized cause under Article 283 in
violation of the prior notice requirement, his dismissal should not be considered void but only
ineffectual. He shall not be reinstated but paid separation pay and some backwages. I respectfully
submit that an employee under Article 283 has a stronger claim to the right to a pre-dismissal
notice and hearing. To begin with, he is an innocent party for he has not violated any term or
condition of his employment. Moreover, an employee in an Article 283 situation may lose his
job simply because of his employer’s desire for more profit. Thus, the installation of a labor
saving device is an authorized cause to terminate employment even if its non-installation need
not necessarily result in an over-all loss to an employer possessed by his possessions. In an
Article 283 situation, it is easy to see that there is a greater need to scrutinize the allegations of
the employer that he is dismissing an employee for an authorized cause. The acts involved here
are unilateral acts of the employer. Their nature requires that they should be proved by the
employer himself. The need for a labor saving device, the reason for redundancy, the cause for
retrenchment, the necessity for closing or cessation of business are all within the knowledge of
the employer and the employer alone. They involve a constellation of economic facts and factors
usually beyond the ken of knowledge of an ordinary employee. Thus, the burden should be on
the employer to establish and justify these authorized causes. Due to their complexity, the law
correctly directs that notice should be given to the DOLE for it is the DOLE more than the lowly
employee that has the expertise to validate the alleged cause in an appropriate hearing. In fine,
the DOLE provides the equalizer to the powers of the employer in an Article 283 situation.
Without the equalizing influence of DOLE, the employee can be abused by his employer. ris chanrobles.com : virtual law library

Further, I venture the view that the employee’s right to security of tenure guaranteed in our
Constitution calls for a pre-dismissal notice and hearing rather than a post facto dismissal
hearing. The need for an employee to be heard before he can be dismissed cannot be
overemphasized. As aforestated, in the case at bar, petitioner was a regular employee of
ISETANN. He had the right to continue with his employment. The burden to establish that this
right has ceased is with ISETANN, as petitioner’s employer. In fine, ISETANN must be the one
to first show that the alleged authorized cause for dismissing petitioner is real. And on this
factual issue, petitioner must be heard. Before the validity of the alleged authorized cause is
established by ISETANN, the petitioner cannot be separated from employment. This is the
simple meaning of security of tenure. With due respect, the majority opinion will reduce this
right of our employees to a mere illusion. It will allow the employer to dismiss an employee for a
cause that is yet to be established. It tells the employee that if he wants to be heard, he can file a
case with the labor arbiter, then the NLRC, and then this Court. Thus, it unreasonably shifts the
burden to the employee to prove that his dismissal is for an unauthorized cause.

The pernicious effects of the majority stance are self-evident in the case at bar. For one,
petitioner found himself immediately jobless and without means to support his family. For
another, petitioner was denied the right to rely on the power of DOLE to inquire whether his
dismissal was for a genuine authorized cause. This is a valuable right for all too often, a lowly
employee can only rely on DOLE’s vast powers to check employer abuses on illegal dismissals.
Without DOLE, poor employees are preys to the claws of powerful employers. Last but not the
least, it was the petitioner who was forced to file a complaint for illegal dismissal. To a jobless
employee, filing a complaint is an unbearable burden due to its economic cost. He has to hire a
lawyer and defray the other expenses of litigation while already in a state of penury. At this
point, the hapless employee is in a no win position to fight for his right. To use a local adage,
"aanhin pa ang damo kung patay na ang kabayo." cralaw virtua1aw library

In the case at bar, the job of the petitioner could have been saved if DOLE was given notice of
his dismissal. The records show that petitioner worked in ISETANN as security checker for six
(6) years. He served ISETANN faithfully and well. Nonetheless, in a desire for more profits, and
not because of losses, ISETANN contracted out the security work of the company. There was no
effort whatsoever on the part of ISETANN to accommodate petitioner in an equivalent position.
Yet, there was the position of Safety and Security Supervisor where petitioner fitted like a
perfect T. Despite petitioner’s long and loyal service, he was treated like an outsider, made to
apply for the job, and given a stringent examination which he failed. Petitioner was booted out
and given no chance to contest his dismissal. Neither was the DOLE given the chance to check
whether the dismissal of petitioner was really for an authorized cause. All these because
ISETANN did not follow the notice and hearing requirement of due process. ELC

FOURTH. The majority has inflicted a most serious cut on the job security of employees. The
majority did nothing to restore the pre-Wenphil right of employees but even expanded the right
to dismiss of employer by holding that the pre-dismissal notice requirement is not, even a
function of due process. This seismic shift in our jurisprudence ought not to pass.

The key to the new majority ruling is that the "due process clause of the Constitution is a
limitation on governmental powers. It does not apply to the exercise of private power such as the
termination of employment under the Labor Code." The main reason alleged is that "only the
State has authority to take the life, liberty, or property of the individual. The purpose of the Due
Process Clause is to ensure that the exercise of this power is consistent with settled usage of
civilized society."
cralaw virtua1aw library

There can be no room for disagreement on the proposition that the due process clause found in
the Bill of Rights of the Constitution is a limitation on governmental powers. Nor can there be
any debate that acts of government violative of due process are null and void. Thus, former Chief
Justice Roberto Concepcion emphasized in Cuaycong v. Senbengco 17 that." . . acts of Congress
as well as those of the Executive, can deny due process only under pain of nullity, and judicial
proceedings suffering from the same flaw are subject to the same sanction, any statutory
provision to the contrary notwithstanding." With due respect to the majority, however, I part
ways with the majority in its new ruling that the due process requirement does not apply to the
exercise of private power. This overly restrictive majority opinion will sap the due process right
of employees of its remaining utility, Indeed, the new majority opinion limiting violations of due
process to government action alone is a throwback to a regime of law long discarded by more
progressive countries. Today, private due process is a settled norm in administrative law. Per
Schwartz, a known authority in the field, viz: 18

"Private Due Process

As already stressed, procedural due process has proved of an increasingly encroaching nature.
Since Goldberg v. Kelly, the right to be heard has been extended to an ever-widening area,
covering virtually all aspects of agency action, including those previously excluded under the
privilege concept. The expansion of due process has not been limited to the traditional areas of
administrative law. We saw how procedural rights have expanded into the newer field of social
welfare, as well as that of education. But due process expansion has not been limited to these
fields. The courts have extended procedural protections to cases involving prisoners and
parolees, as well as the use of established adjudicatory procedures. Important Supreme Court
decisions go further and invalidate prejudgment wage garnishments and seizures of property
under replevin statutes where no provision is made for notice and hearing. But the Court has not
gone so far as to lay down an inflexible rule that due process requires an adversary hearing when
an individual may be deprived of any possessory interest, however brief the dispossession and
however slight the monetary interest in the property. Due process is not violated where state law
requires, as a precondition to invoking the state’s aid to sequester property of a defaulting debtor,
that the creditor furnish adequate security and make a specific showing of probable cause before
a judge.

In addition, there has been an extension of procedural due process requirements from
governmental to private action. In Section 5.16 we saw that Goldberg v. Kelly has been extended
to the eviction of a tenant from a public housing project. The courts have not limited the right to
be heard to tenants who have governmental agencies as landlords. Due process requirements also
govern acts by "private" landlords where there is sufficient governmental involvement in the
rented premises. Such an involvement exists in the case of housing aided by Federal Housing
Administration financing and tax advantages. A tenant may not be summarily evicted from a
building operated by a "private" corporation where the corporation enjoyed substantial tax
exemption and had obtained an FHA-insured mortgage, with governmental subsidies to reduce
interest payments. The "private" corporation was so saturated with governmental incidents as to
be limited in its practices by constitutional due process. Hence, it could not terminate tenancies
without notice and an opportunity to be heard." cralaw virtua1aw library

But we need not rely on foreign jurisprudence to repudiate the new majority ruling that due
process restricts government alone and not private employers like ISETANN. This Court has
always protected employees whenever they are dismissed for an unjust cause by private
employers. We have consistently held that before dismissing an employee for a just cause, he
must be given notice and hearing by his private employer. In Kingsize Manufacturing
Corporation v. NLRC, 19 this Court, thru Mr. Justice Mendoza, categorically ruled: jgc:chanrobles.com.ph
". . . (P)etitioners failure to give notice with warning to the private respondents before their
services were terminated puts in grave doubt petitioners’ claim that dismissal was for a just
cause. Section 2 Rule XIV of the Rules implementing the Labor Code provides: jgc:chanrobles.com.ph

"An employer who seeks to dismiss a worker shall furnish him a written notice stating the
particular acts or omission constituting the ground for dismissal. In case of abandonment of
work, the notice shall be served on the worker’s last known address.

"The notice required, actually consists of two parts to be separately served on the employee, to
wit: (1) notice to apprise the employee of the particular acts or omissions for which the dismissal
is sought; and (2) subsequent notice to inform him of the employer’s decision to dismiss him.
LGM

"This requirement is not a mere, technicality but a requirement of due process to which every
employee is entitled to insure that the employer’s prerogative to dismiss or lay off is not abused
or exercised in an arbitrary manner. This rule is clear and unequivocal. . . ." 20

In other words, we have long adopted in our decisions the doctrine of private due process. This is
as it ought to be. The 1987 Constitution guarantees the rights of workers, especially the right to
security of tenure in a separate article — section 3 of Article XIII entitled Social Justice and
Human Rights. Thus, a 20-20 vision of the Constitution will show that the more specific rights of
labor are not in the Bill of Rights which is historically directed against government acts alone.
Needless to state, the constitutional rights of labor should be safeguarded against assaults from
both government and private parties. The majority should not reverse our settled rulings
outlawing violations of due process by employers in just causes cases.

To prop up its new ruling against our employees, the majority relates the evolution of our law on
dismissal starting from Article 302 of the Spanish Code of Commerce, to the New Civil Code of
1950, to R.A. No, 1052 (Termination Pay Law), then to RA No. 1787. To complete the picture,
let me add that on May 1, 1974, the Labor Code (PD 442) was signed into law by former
President Marcos. It took effect on May 1, 1974 or six months after its promulgation. The right
of the employer to terminate the employment was embodied in Articles 283, 21 284, 22 and 285,
23 Batas Pambansa Blg. 130 which was enacted on August 21, 1981 amended Articles 283 and
284, which today are cited as Arts. 282 and 283 of the Labor Code. 24

On March 2, 1989, Republic Act No. 6715 was approved which amended, among others, Article
277 of the Labor Code. Presently, Article 277 (b) reads: RBR

"ARTICLE 277. Miscellaneous provisions. — (a) . . .

"(b) Subject to the constitutional right of workers to security of tenure and their right to be
protected against dismissal except for a just or authorized cause and without prejudice to the
requirement of notice under Article 283 of this Code, the employer shall furnish the worker
whose employment is sought to be terminated a written notice containing a statement of the
causes for termination and shall afford the latter ample opportunity to be heard and to defend
himself with the assistance of his representative if he so desires in accordance with company
rules and regulations promulgated pursuant to the guidelines set by the Department of Labor and
Employment. Any decision taken by the employer shall be without prejudice to the right of the
worker to contest the validity or legality of his dismissal by filing a complaint with the regional
branch of the National Labor Relations Commission. The burden of proving that the termination
was for a valid or authorized cause shall rest on the employer." cralaw virtua1aw library

Previous to the amendment, Article 277 (b) read: jgc:chanrobles.com.ph

"ARTICLE 277. Miscellaneous provisions. — (a) . . .

"(b) With or without a collective agreement, no employer may shut down his establishment or
dismiss or terminate the employment of employees with at least one year of service during the
last two years, whether such service is continuous or broken, without prior written authority
issued in accordance with the rules and regulations as the Secretary may promulgate." cralaw virtua1aw library

Rule XIV, Book V of the 1997 Omnibus Rules Implementing the Labor Code provides: jgc:chanrobles.com.ph

"Termination of Employment

"SECTION 1. Security of tenure and due process. — No worker shall be dismissed except for a
just or authorized cause provided by law and after due process.

"SECTION 2. Notice of dismissal. — Any employer who seeks to dismiss a worker shall furnish
him a written notice stating the particular acts or omissions constituting the grounds for his
dismissal. . . .

x        x       x

"SECTION 5. Answer and hearing. — The worker may answer the allegations stated against him
in the notice of dismissal within a reasonable period from receipt of such notice. The employer
shall afford the worker ample opportunity to be heard and to defend himself with the assistance
of his representative, if he so desires."
cralaw virtua1aw library

These laws, rules and regulations should be related to our decisions interpreting them. Let me
therefore emphasize our rulings holding that the pre-dismissal notice requirement is part of due
process. In Batangas Laguna Tayabas Bus Co. v. Court of Appeals, 25 which was decided under
the provisions of RA No. 1052 as amended by RA No. 1787, this Court ruled that "the failure of
the employer to give the [employee] the benefit of a hearing before he was dismissed constitute
an infringement on his constitutional right to due process of law and not to be denied the equal
protection of the laws. . . . Since the right of [an employee] to his labor is in itself a property and
that the labor agreement between him and [his employer] is the law between the parties, his
summary and arbitrary dismissal amounted to deprivation of his property without due process,"
Since then, we have consistently held that before dismissing an employee for a just cause, he
must be given notice and hearing by his private employer as a matter of due process.

I respectfully submit that these rulings are more in accord with the need to protect the right of
employees against illegal dismissals. Indeed, our laws and our present Constitution are more
protective of the rights and interests of employees than their American counterpart. For one, to
justify private due process, we need not look for the factors of "sufficient governmental
involvement" as American courts do. Article 1700 of our Civil Code explicitly provides: SDML

"ARTICLE 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." cralaw virtua1aw library

Nor do we have to strain on the distinction made by American courts between property and
privilege and follow their ruling that due process will not apply if what is affected is a mere
privilege. It is our hoary ruling that labor is property within the contemplation of the due process
clause of the Constitution. Thus, in Philippine Movie Pictures Workers Association v. Premiere
Productions, Inc., 26 private respondent-employer filed with the Court of Industrial Relations
(CIR) a petition seeking authority to lay off forty-four of its employees. On the date of the
hearing of the petition, at the request of the counsel of the private respondent, the judge of the
CIR conducted an ocular inspection in the premises of the employer. He interrogated fifteen
laborers. On the basis of the ocular inspection, the judge concluded that the petition for lay off
was justified. We did not agree and we ruled that "the right of a person to his labor is deemed to
be property within the meaning of constitutional guarantees. That is his means of livelihood. He
can not be deprived of his labor or work without due process of law. . . . (T)here are certain
cardinal primary rights which the Court of Industrial Relations must respect in the trial of every
labor case. One of them is the right to a hearing which includes the right of the party interested to
present his own case and to submit evidence in support thereof." cralaw virtua1aw library

I wish also to stress that the 1999 Rules and Regulations implementing the Labor Code
categorically characterize this pre-dismissal notice requirement as a requirement of due process.
Rule XXIII provides: jgc:chanrobles.com.ph

"SECTION 2. Standards of due process: requirements of notice. — In all cases of termination of

employment, the following standards of due process shall be substantially observed: chanrob1es virtual 1aw library

I. For termination of employment based on just causes as defined in Article 282 of the Code: chanrob1es virtual 1aw library

(a) A written notice served on the employee specifying the ground or grounds for termination,
and giving to said employee reasonable opportunity within which to explain his side;

(b) A hearing or conference during which the employee concerned, with the assistance of
counsel if the employee so desires, is given opportunity to respond to the charge, present his
evidence or rebut the evidence presented against him; and

(c) A written notice of termination served on the employee indicating that upon due
consideration of all the circumstance, grounds have been established to justify his termination.

In case of termination, the foregoing notices shall be served on the employee’s last known
address.

II. For termination of employment as based on authorized causes defined in Article 283 of the
Code, the requirements of due process shall be deemed complied with upon service of a written
notice to the employee and the appropriate Regional Office of the Department at least thirty (30)
days before the effectivity of the termination, specifying the ground or grounds for termination."
virtua1aw library
cralaw

The new ruling af the majority is not in consonance with this Rule XXIII. Llibris

If we are really zealous of protecting the rights of labor as called for by the Constitution, we
should guard against every violation of their rights regardless of whether the government or a
private party is the culprit. Section 3 of Article XIII of the Constitution requires the State to give
full protection to labor. We cannot be faithful to this duty if we give no protection to labor when
the violator of its rights happens to be private parties like private employers. A private person
does not have a better right than the government to violate an employee’s right to due process.
To be sure, violation of the particular right of employees to security of tenure comes almost
always from their private employers. To suggest that we take mere geriatric steps when it comes
to protecting the rights of labor from infringement by private parties is farthest from the intent of
the Constitution. We trivialize the right of the employee if we adopt the rule allowing the
employer to dismiss an employee without any prior hearing and say let him be heard later on. To
a dismissed employee that remedy is too little and too late. The new majority ruling is doubly to
be regretted because it comes at a time when deregulation and privatization are buzzwords in the
world being globalized. In such a setting, the new gods will not be governments but non-
governmental corporations. The greater need of the day therefore is protection from illegal
dismissals sans due process by these non-governmental corporations. chanrobles.com : virtuallawlibrary

The majority also holds that the "third reason why the notice requirement under Art. 283 is not a
requirement of due process is that the employer cannot really be expected to be entirely an
impartial judge of his own cause. This is also the case in termination of employment for a just
cause under Art. 282." Again, with due respect, I beg to disagree. In an Article 283 situation,
dismissal due to an authorized cause, the employer is not called upon to act as an impartial judge.
The employer is given the duty to serve a written notice on the worker and the DOLE at least one
month before the intended date of lay-off. It is the DOLE, an impartial agency that will judge
whether or not the employee is being laid off for an authorized cause. 27 It is not the employer
who will adjudge whether the alleged authorized cause for dismissing the employee is fact or
fiction. On the other hand, in an Article 282 situation, dismissal for a just cause, it is also
incorrect to hold that an employer cannot be an impartial judge. Today, the procedure on
discipline and dismissal of employees is usually defined in the parties’ collective bargaining
agreement or in its absence, on the rules and regulations made by the employer himself. This
procedure is carefully designed to be bias free for it is to the interest of both the employee and
the employer that only a guilty employee is disciplined or dismissed. Hence, where the charge
against an employee is serious, it is standard practice to include in the investigating committee an
employee representative to assure the integrity of the process. In addition, it is usual practice to
give the aggrieved employee an appellate body to review an unfavorable decision. Stated
otherwise, the investigators are mandated to act impartially for to do otherwise can bring havoc
less to the employee but more to the employer. For one, if the integrity of the grievance
procedure becomes suspect, the employees may shun it and instead resort to coercive measures
like picketing and strikes that can financially bleed employers, For another, a wrong, especially a
biased judgment can always be challenged in the DOLE and the courts and can result in awards
of huge damages against the company. Indeed, the majority ruling that an employer cannot act as
an impartial judge has no empirical evidence to support itself. Statistics in the DOLE will prove
the many cases won by employees before the grievance committees manned by impartial judges
of the company. chanrobles.com : chanrobles.com.ph

Next, the majority holds that "the requirement to hear an employee before he is dismissed should
be considered simply as an application of the Justinian precept, embodied in the Civil Code, to
act with justice, give everyone his due, and observe honesty and good faith toward one’s
fellowmen." It then rules that violation of this norm will render the employer liable for damages
but will not render his act of dismissal void. Again, I cannot join the majority stance. The
faultline of this ruling lies in the refusal to recognize that employer-employee relationship is
governed by special labor laws and not by the Civil Code. The majority has disregarded the
precept that relations between capital and labor are impressed with public interest. For this
reason, we have the Labor Code that specially regulates the relationship between employer-
employee including dismissals of employees. Thus, Article 279 of the Labor Code specifically
provides that "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." This provision of the Labor Code clearly gives the
remedies that an unjustly dismissed employee deserves. It is not the Civil Code that is the source
of his remedies.chanrobles virtuallawlibrary

The majority also holds that lack of notice in an Article 283 situation merely makes an employee
dismissal "ineffectual" but not illegal. Again, the ruling is sought to be justified by analogy and
our attention is called to Article 1592, in relation to Article 1191 of the Civil Code. It is
contended that "under these provisions, while the power to rescind is implied in reciprocal
obligations, nonetheless, in cases involving the sale of immovable property, the vendor cannot
rescind the contract even though the vendee defaults in the payment of the price, except by
bringing an action in court or giving notice of rescission by means of a notarial demand." The
analogy of the majority cannot be allowed both in law and in logic. The legal relationship of an
employer to his employee is not similar to that of a vendor and a vendee. An employee suffers
from a distinct disadvantage in his relationship with an employer, hence, the Constitution and our
laws give him extra protection. In contrast, a vendor and a vendee in a sale of immovable
property are at economic par with each other. To consider an employer-employee relationship as
similar to a sale of commodity is an archaic abomination. An employer-employee relationship
involves the common good and labor cannot be treated as a mere commodity. As well-stated by
former Governor General Leonard Wood in his inaugural message before the 6th Philippine
Legislature on October 27, 1922, "it is opportune that we strive to impress upon all the people
that labor is neither a chattel nor a commodity, but human and must be dealt with from the
standpoint of human interests." cralaw virtua1aw library
Next, the majority holds that under the Labor Code, only the absence of a just cause for the
termination of employment can make the dismissal of an employee illegal. Quoting Article 279
which provides: jgc:chanrobles.com.ph

"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." cralaw virtua1aw library

it is then rationalized that "to hold that the employer’s failure to give notice before dismissing an
employee . . . results in the nullity of the dismissal would, in effect, be to amend Article 279 by
adding another ground; for considering a dismissal illegal." With due respect, the majority has
misread Article 279. To start with, the article is entitled "Security of Tenure" and therefore
protects an employee against dismissal not only for an unjust cause but also for an unauthorized
cause. Thus, the phrase "unjustly dismissed" refers to employees who are dismissed without just
cause and to employees who are laid off without any authorized cause. As heretofore shown, we
have interpreted dismissals without prior notice as illegal for violating the right to due process of
the employee, These rulings form part of the law of the land and Congress was aware of them
when it enacted the Labor Code and when its implementing rules and regulations were
promulgated especially the rule ordering employers to follow due process when dismissing
employees. Needless to state, it is incorrect for the majority to urge that we are in effect
amending Article 279. chanrobles virtua| |aw |ibrary

In further explication of its ruling, the majority contends "what is more, it would ignore the fact
that under Art. 285, if it is the employee who fails to give a written notice to the employer that he
is leaving the service of the latter, at least one month in advance, his failure to comply with the
legal requirement does not result in making his resignation void but only in making him liable
for damages." Article 285(a) states: "An employee may terminate without just cause the
employee-employer relationship by serving a written notice on the employer at least one (1)
month in advance. The employer upon whom no such notice was served may hold the employee
liable for damages." cralaw virtua1aw library

In effect, the majority view is that its new ruling puts at par both the employer and the employee
— under Article 285, the failure of an employee to pre-notify in writing his employer that he is
terminating their relationship does not make his walk-out void; under its new ruling, the failure
of an employer to pre-notify an employee before his dismissal does not also render the dismissal
void. By this new ruling, the majority in a short stroke has rewritten the law on dismissal and
tampered its pro-employee philosophy. Undoubtedly, Article 285 favors the employee as it does
not consider void his act of terminating his employment relationship before giving the required
notice. But this favor given to an employee just like the other favors in the Labor Code and the
Constitution are precisely designed to level the playing field between the employer and the
employee. It cannot be gainsaid that employees are the special subject of solicitous laws because
they have been and they continue to be exploited by unscrupulous employers. Their exploitation
has resulted in labor warfare that has broken industrial peace and slowed down economic
progress. In the exercise of their wisdom, the founding fathers of our 1935, 1973 and 1987
Constitutions as well as the members of our past and present Congresses, have decided to give
more legal protection and better legal treatment to our employees in their relationship with their
employer. Expressive of this policy is President Magsaysay’s call that "he who has less in life
should have more in law." I respectfully submit that the majority cannot revise our laws nor shun
the social justice thrust of our Constitution in the guise of interpretation especially when its result
is to favor employers and disfavor employees. The majority talks of high nobility but the highest
nobility it to stoop down to reach the poor.

IV. NO UNJUST RESULTS OF CONSIDERING DISMISSALS WITHOUT PRIOR NOTICE

AS ILLEGAL

The majority further justifies its new ruling by holding: jgc:chanrobles.com.ph

"The refusal to look beyond the validity of the initial action taken by the employer to terminate
employment either for an authorized or just cause can result in an injustice to the employer. For
not having been given notice and hearing before dismissing an employee, who is otherwise
guilty of, say, theft, or even of an attempt against the life of the employer, an employer will be
forced to keep in his employ such guilty employee. This is unjust.

It is true the Constitution regards labor as "a primary social economic force." But so does it
declare that it "recognizes the indispensable role of the private sector, encourages private
enterprise, and provides incentives to needed investment" The Constitution bids the State to
"afford full protection to labor." But it is equally true that "the law, in protecting the rights of the
laborer, authorizes neither oppression nor self-destruction of the employer." And it is oppression
to compel the employer to continue in employment one who is guilty or to force the employer to
remain in operation when it is not economically in his interest to do so." cralaw virtua1aw library

With due respect, I cannot understand this total turnaround of the majority on the issue of the
unjustness of lack of pre-dismissal notice to an employee. Heretofore, we have always
considered this lack of notice as unjust to the employee. Even under Article 302 of the Spanish
Code of Commerce of 1882 as related by the majority, an employer who opts to dismiss an
employee without any notice has to pay a mesada equivalent to his salary for one month because
of its unjustness. This policy was modified by our legislators in favor of a more liberal treatment
of labor as our country came under the influence of the United States whose major labor laws
became the matrix of our own laws like R.A. 875, otherwise known as the Industrial Peace Act.
In accord with these laws, and as aforediscussed, we laid down the case law that dismissals
without prior notice offend due process. This is the case law when the Labor Code was enacted
on May 1, 1974 and until now despite its amendments. The 1935 and the 1973 Constitutions did
not change this case law. So with the 1987 Constitution which even strengthened the rights of
employees, especially their right to security of tenure. Mr. Justice Laurel in his usual inimitable
prose expressed this shift in social policy in favor of employees as follows: jgc:chanrobles.com.ph

"It should be observed at the outset that our Constitution was adopted in the midst of surging
unrest and dissatisfaction resulting from economic and social distress which was threatening the
stability of governments the world over. Alive to the social and economic forces at work, the
framers of our Constitution boldly met the problems and difficulties which faced them and
endeavored to crystallize, with more or less fidelity, the political, social and economic
propositions of their age, and this they did, with the consciousness that the political and
philosophical aphorism of their generation will, in the language of a great jurist, ‘be doubted by
the next and perhaps entirely discarded by the third.’ (Chief Justice Winslow in Gorgnis v. Falk
Co., 147 Wis., 327; 133 N. W., 209). Embodying the spirit of the present epoch, general
provisions were inserted in the Constitution which are intended to bring about the needed social
and economic equilibrium between component elements of society through the application of
what may be termed as the justitia communis advocated by Grotius and Leibnitz many years ago
to be secured through the counter-balancing of economic and social forces and employers or
landlords, and employees or tenants, respectively; and by prescribing penalties for the violation
of the orders’ and later, Commonwealth Act No. 213, entitled ‘An Act to define and regulate
legitimate labor organizations" ‘ 28

This ingrained social philosophy favoring employees has now been weakened by the new ruling
of the majority. For while this Court has always considered lack of pre-dismissal notice as unjust
to employees, the new ruling of the majority now declares it is unjust to employers as if
employers are the ones exploited by employees. In truth, there is nothing unjust to employers by
requiring them to give notice to their employees before denying them their jobs. There is nothing
unjust to the duty to give notice for the duty is a reasonable duty. If the duty is reasonable, then it
is also reasonable to demand its compliance before the right to dismiss on the part of an
employer can be exercised. If it is reasonable for an employer to comply with the duty, then it
can never be unjust if non-compliance therewith is penalized by denying said employer his right
to dismiss. In fine, if the employer’s right to dismiss an employee is forfeited for his failure to
comply with this simple, reasonable duty to pre-notify his employee, he has nothing to blame but
himself. If the employer is estopped from litigating the issue of whether or not he is dismissing
his employee for a just or an authorized cause, he brought the consequence on to himself. The
new ruling of the majority, however, inexplicably considers this consequence as unjust to the
employer and it merely winks at his failure to give notice. chanrobles.com : virtual law library

V. A LAST WORD

The new ruling of the majority erodes the sanctity of the most important right of an employee,
his constitutional right to security of tenure. This right will never be respected by the employer if
we merely honor the right with a price tag. The policy of "dismiss now and pay later" favors
monied employers and is a mockery of the right of employees to social justice. There is no way
to justify this pro-employer stance when the 1987 Constitution is undeniably more pro-employee
than our previous fundamental laws. Section 18 of Article II (State Policies) provides that "the
State affirms labor as a primary social economic force. It shall protect the rights of workers and
promote their welfare." Section 1, Article XIII (Social Justice and Human Rights) calls for the
reduction of economic inequalities. Section 3, Article XIII (Labor) directs the State to accord full
protection to labor and to guaranty security of tenure. These are constitutional polestars and not
mere works of cosmetology. Our odes to the poor will be meaningless mouthfuls if we cannot
protect the employee’s right to due process against the power of the peso of employers. chanroblesvirtuallawlibrary

To an employee, a job is everything. Its loss involves terrible repercussions — stoppage of the
schooling of children, ejectment from leased premises, hunger to the family, a life without any
safety net. Indeed, to many employees, dismissal is their lethal injection. Mere payment of
money by way of separation pay and backwages will not secure food on the mouths of
employees who do not even have the right to choose what they will chew.

I vote to grant the petition. chanroblesvirtual|awlibrary

VITUG, J., concurring and dissenting: chanrob1es virtual 1aw library

The lawful severance by an employer of an employer-employee relationship would require a

valid cause. There are, under the Labor Code, two groups of valid causes, and these are the just
causes under Article 282 1 and the authorized causes under Article 283 2 and Article 284. 3

An employee whose employment is terminated for a just cause is not entitled to the payment of
separation benefits. 4 Separation pay would be due, however, when the lay-off is on account of
an authorized cause. The amount of separation pay would depend on the ground for the
termination of employment. A lay-off due to the installation of a labor saving device, redundancy
(Article 283) or disease (Article 284), entitles the worker to a separation pay equivalent to "one
(1) month pay or at least one (1) month pay for every year of service, whichever is higher."
When the termination of employment is due to retrenchment to prevent losses, or to closure or
cessation of operations of an establishment or undertaking not due to serious business losses or
financial reverses, the separation pay is only an equivalent of "one (1) month pay or at least one-
half (1/2) month pay for every year of service, whichever is higher." In the above instances, a
fraction of at least six (6) months is considered as one (1) whole year. chanrobles.com : virtuallawlibrary

Due process of law, in its broad concept, is a principle in our legal system that mandates due
protection to the basic rights, inherent or accorded, of every person against harm or transgression
without an intrinsically just and valid law, as well as an opportunity to be heard before an
impartial tribunal, that can warrant such an impairment. Due process guarantees against
arbitrariness and bears on both substance and procedure. Substantive due process concerns itself
with the law, its essence, and its concomitant efficacy; procedural due process focuses on the
rules that are established in order to ensure meaningful adjudications appurtenant thereto.

In this jurisdiction, the right to due process is constitutional and statutory.

Due process in the context of a termination of employment, particularly, would be two-fold, i.e.,
substantive due process which is complied with when the action of the employer is predicated on
a just cause or an authorized cause, and procedural due process which is satisfied when the
employee has the opportunity to contest the existence of the ground invoked by the employer in
terminating the contract of employment and to be heard thereon. I find it difficult to ascribe
either a want of wisdom or a lack of legal basis to the early pronouncements of this Court that
sanction the termination of employment when a just or an authorized cause to warrant the
termination is clearly extant. Regrettably, the Court in some of those pronouncements has used,
less than guarded in my view, the term "due process" when referring to the notices prescribed in
the Labor Code 5 and its implementing rules 6 that could, thereby, albeit unintendedly and
without meaning to, confuse the latter with the notice requirement in adjudicatory proceedings. It
is not seldom when the law puts up various conditions in the juridical relations of parties; it
would not be accurate to consider, I believe, an infraction thereof to ipso-facto raise a problem of
due process. The mere failure of notice of the dismissal or lay-off does not foreclose the right of
an employee from disputing the validity, in general, of the termination of his employment, or the
veracity, in particular, of the cause that has been invoked in order to justify that termination. In
assailing the dismissal or lay-off, an employee is entitled to be heard and to be given the
corresponding due notice of the proceedings. It would be when this right is withheld without
cogent reasons that, indeed, it can rightly be claimed that the fundamental demands of procedural
due process have been unduly discarded. CDTInc

I do appreciate the fact that the prescribed notices can have consequential benefits to an
employee who is dismissed or laid off, as the case may be; its non-observance by an employer,
therefore, can verily entitle the employee to an award of damages but, to repeat, not to the extent
of rendering outrightly illegal that dismissal or lay-off predicated on valid grounds. I would
consider the indemnification to the employee not a penalty or a fine against the employer, the
levy of either of which would require an appropriate legislative enactment; rather, I take the
grant of indemnity as justifiable as an award of nominal damages in accordance with the
provisions of Articles 2221-2223 of the Civil Code, viz.: jgc:chanrobles.com.ph

"ARTICLE 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which
has been violated or invaded by the defendant, may be vindicated or recognized, and not for the
purpose of indemnifying the plaintiff for any loss suffered by him.

"ARTICLE 2222. The court may award nominal damages in every obligation arising from any
source enumerated in article 1157, or in every case where any property right has been invaded.

"ARTICLE 2223. The adjudication of nominal damages shall preclude further contest upon the
right involved and all accessory questions, as between the parties to the suit, or their respective
heirs and assigns."cralaw virtua1aw library

There is no fixed formula for determining the precise amount of nominal damages. In fixing the
amount of nominal damages to be awarded, the circumstances of each case should thus be taken
into account, such as, to exemplify, the —

(a) length of service or employment of the dismissed employee;

(b) his salary or compensation at the time of the termination of employment vis-a-vis the
capability of the employer to pay; CDta

(c) question of whether the employer has deliberately violated the requirements for termination
of employment or has attempted to comply, at least substantially, therewith; and/or

(d) reasons for the termination of employment.

I might stress the rule that the award of nominal damages is not for the purpose of
indemnification for a loss but for the recognition and vindication of a right. The degree of
recovery therefor can depend, on the one hand, on the constitution of the right, and, upon the
other hand, on the extent and manner by which that right is ignored to the prejudice of the holder
of that right.

In fine 7 —

A. A just cause or an authorized cause and a written notice of dismissal or lay-off, as the case
may be, are required concurrently but not really equipollent in their consequence, in terminating
an employer-employee relationship.

B. Where there is neither just cause nor authorized cause, the reinstatement of the employee and
the payment of back salaries would be proper and should be decreed. If the dismissal or lay-off is
attended by bad faith or if the employer acted in wanton or oppressive manner, moral and
exemplary damages might also be awarded. In this respect, the Civil Code provides: CDta

"ARTICLE 2220. Willful injury to property may be a legal ground for awarding moral damages
if the court should find that, under the circumstances, such damages are justly due. The same rule
applies to breaches of contract where the defendant acted fraudulently or in bad faith."cralaw virtua1aw library

"ARTICLE 2232. In contracts and quasi-contracts, the court may award exemplary damages if
the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner." (Civil
Code)

Separation pay can substitute for reinstatement if such reinstatement is not feasible, such as in
case of a clearly strained employer-employee relationship (limited to managerial positions and
contracts of employment predicated on trust and confidence) or when the work or position
formerly held by the dismissed employee plainly has since ceased to be available.

C. Where there is just cause or an authorized cause for the dismissal or lay-off but the required
written notices therefor have not been properly observed by an employer, it would neither be
right and justifiable nor likely intended by law to order either the reinstatement of the dismissed
or laid-off employee or the payment of back salaries to him simply for the lack of such notices if,
and so long as, the employee is not deprived of an opportunity to contest that dismissal or lay-off
and to accordingly be heard thereon. In the termination of employment for an authorized cause
(this cause being attributable to the employer), the laid-off employee is statutorily entitled to
separation pay, unlike a dismissal for a just cause (a cause attributable to an employee) where no
separation pay is due. In either case, if an employer fails to comply with the requirements of
notice in terminating the services of the employee, the employer must be made to pay, as so
hereinabove expressed, corresponding damages to the employee.

WHEREFORE, I vote to hold (a) that the lay-off in the case at bar is due to redundancy and that,
accordingly, the separation pay to petitioner should be increased to one month, instead of one-
half month, pay for every year of service, and (b) that petitioner is entitled to his unpaid wages,
proportionate 13th-month pay, and an indemnity of P10,000.00 in keeping with the nature and
purpose of, as well as the rationale behind, the grant of nominal damages.
PANGANIBAN, J.:

In the case before us, the Court is unanimous in at least two findings: (1) petitioner’s dismissal
was due to an authorized cause, redundancy; and (2) petitioner was notified of his dismissal only
on the very day his employment was terminated. The contentious issue arising out of these two
findings is as follows: What is the legal effect and the corresponding sanction for the failure of
the employer to give the employee and the Department of Labor and Employment (DOLE) the
30-day notice of termination required under Article 283 of the Labor Code?

During the last ten (10) years, the Court has answered the foregoing question by ruling that the
dismissal should be upheld although the employee should be given "indemnity or damages"
ranging from P1,000 to P10,000 depending on the circumstances. CDTInc

The present ponencia of Mr. Justice Mendoza holds that "the termination of his employment
should be considered ineffectual and the [employee] should be paid back wages" from the time
of his dismissal until the Court finds that the dismissal was for a just cause.

Reexamination of the

"Indemnity Only" Rule

I am grateful that the Court has decided to reexamine our ten-year doctrine on this question and
has at least, in the process, increased the monetary award that should go to the dismissed
employee — from a nominal sum in the concept "indemnity or damages" to "full back wages."
Shortly after my assumption of office on October 10, 1995, I already questioned this practice of
granting "indemnity only" to employees who were dismissed for cause but without due process.
1 I formally registered reservations on this rule in my ponencia in MGG Marine Services v.
NLRC 2 and gave it full discussion in my Dissents in Better Buildings v. NLRC 3 and in Del Val
v. NLRC. 4

Without in any way diminishing my appreciation of this reexamination and of the more
financially-generous treatment the Court has accorded labor, I write to take issue with the legal
basis of my esteemed colleague, Mr. Justice Mendoza, in arriving at his legal conclusion that
"the employer’s failure to comply with the notice requirement does not constitute a denial of due
process but a mere failure to observe a procedure for the termination of employment which
makes the termination of employment merely ineffectual." In short, he believes that (1) the 30-
day notice requirement finds basis only in the Labor Code, and (2) the sanction for its violation is
only "full back wages." cralaw virtua1aw library

With due respect, I submit the following counter-arguments: chanrob1es virtual 1aw library

(1) The notice requirement finds basis not only in the Labor Code but, more important, in the due
process clause of the Constitution.

(2) Consequently, when the employee is dismissed without due process, the legal effect is an
illegal dismissal and the appropriate sanction is full back wages plus reinstatement, not merely
full back wages. It is jurisprudentially settled, as I will show presently, that when procedural due
process is violated, the proceedings — in this case, the dismissal — will be voided, and the
parties will have to be returned to their status quo ante; that is, the employee will have to be
given back his old job and paid all benefits as if he were never dismissed.

(3) In any event, contrary to Mr. Justice Mendoza’s premise, even the Labor Code expressly
grants the dismissed employee not only the right to be notified but also the right to be heard.

In short, when an employee is dismissed without notice and hearing, the effect is an illegal
dismissal and the appropriate reliefs are reinstatement and full back wages. In ruling that the
dismissal should be upheld, the Court majority has virtually rendered nugatory the employee’s
right to due process as mandated by law and the Constitution. It implicitly allows the employer
to simply ignore such right and to just pay the employee. While it increases the payment to "full
back wages," it doctrinally denigrates his right to due process to a mere statutory right to notice.

Let me explain the foregoing by starting with a short background of our jurisprudence on the
right to due process. SDML

Without Due Process, the

Proceedings Are Illegal

In the past, this Court has untiringly reiterated that there are two essential requisites for an
employer’s valid termination of an employee’s services: (1) a just 5 or authorized 6 cause and (2)
due process. 7 During the last ten years, the Court has been quite firm in this doctrinal concept,
but it has been less than consistent in declaring the illegality of a dismissal when due process has
not been observed. This is particularly noticeable in the relief granted. Where there has been no
just or authorized cause, the employee is awarded reinstatement or separation pay, and back
wages. 8 If only the second requisite (due process) has not been fulfilled, the employee, as earlier
stated, is granted indemnity or damages amounting to a measly P1,000 up to P10,000. 9

I respectfully submit that illegal dismissal results not only from the absence of a legal cause
(enumerated in Arts. 282 to 284 of the Labor Code), but likewise from the failure to observe due
process. Indeed, many are the cases, labor or otherwise, in which acts violative of due process
are unequivocally voided or declared illegal by the Supreme Court. In Pepsi-Cola Bottling Co. v.
NLRC, 10 the Court categorically ruled that the failure of management to comply with the
requirements of due process made its judgment of dismissal "void and non-existent." cralaw virtua1aw library

This Court in People v. Bocar 11 emphatically made the following pronouncement, which has
been reiterated in several cases: 12

"The cardinal precept is that where there is a violation of basic constitutional rights, courts are
ousted of their jurisdiction. Thus the violation of the State’s right to due process raises a serious
jurisdictional issue (Gumabon v. Director of the Bureau of Prisons, L-30026, 37 SCRA 420 [Jan.
30, 1971]) which cannot be glossed over or disregarded at will. Where the denial of the
fundamental right of due process is apparent, a decision rendered in disregard of that right is void
for lack of jurisdiction (Aducayen v. Flores, L-30370, [May 25, 1973] 51 SCRA 78; Shell Co. v.
Enage, L-30111-12, 49 SCRA 416 [Feb. 27, 1973]). Any judgment or decision rendered
notwithstanding such violation may be regarded as a ‘lawless thing, which can be treated as an
outlaw and slain at sight, or ignored wherever it exhibits its head’ (Aducayen v. Flores,
supra)." 
chanrobles.com.ph:red

In the earlier case Bacus v. Ople, 13 this Court also nullified the then labor minister’s clearance
to terminate the employment of company workers who had supposedly staged an illegal strike.
The reason for this ruling was the denial of sufficient opportunity for them to present their
evidence and prove their case. The Court explained: 14

"A mere finding of the illegality of a strike should not be automatically followed by a wholesale
dismissal of the strikers from their employment. What is more, the finding of the illegality of the
strike by respondent Minister of Labor and Employment is predicated on the evidence
ascertained through an irregular procedure conducted under the semblance of summary methods
and speedy disposition of labor disputes involving striking employees. SDML

While it is true that administrative agencies exercising quasi-judicial functions are free from the
rigidities of procedure, it is equally well-settled in this jurisdiction that avoidance of such
technicalities of law or procedure in ascertaining objectively the facts in each case should not,
however, cause a denial of due process. The relative freedom of the labor arbiter from the
rigidities of procedure cannot be invoked to evade what was clearly emphasized in the landmark
case of Ang Tibay v. Court of Industrial Relations that all administrative bodies cannot ignore or
disregard the fundamental and essential requirements of due process." cralaw virtua1aw library

In the said case, the respondent company was ordered to reinstate the dismissed workers,
pending a hearing "giving them the opportunity to be heard and present their evidence." cralaw virtua1aw library

In Philippine National Bank v. Apalisok, 15 Primitivo Virtudazo, an employee of PNB, was

served a Memorandum stating the finding against him of a prima facie case for dishonesty and
violation of bank rules and regulations. He submitted his Answer denying the charges and
explaining his defenses.

Later, two personnel examiners of the bank conducted a fact-finding investigation. They stressed
to him that a formal investigation would follow, in which he could confront and examine the
witnesses for the bank, as well as present his own. What followed, however, was a Memorandum
notifying him that he had been found guilty of the charges and that he was being dismissed. After
several futile attempts to secure a copy of the Decision rendered against him, he instituted
against PNB a Complaint for illegal dismissal and prayed for reinstatement and damages. chanrobles.com : virtual law library

The trial court held that Virtudazo had been deprived of his rights to be formally investigated and
to cross-examine the witnesses. This Court sustained the trial court, stating resolutely: "The
proceedings having been conducted without according to Virtudazo the ‘cardinal primary rights
of due process’ guaranteed to every party in an administrative or quasi-judicial proceeding, said
proceedings must be pronounced null and void." 16
Also in Fabella v. Court of Appeals, 17 this Court declared the dismissal of the schoolteachers
illegal, because the administrative body that heard the charges against them had not afforded
them their right to procedural due process. The proceedings were declared void, and the orders
for their dismissal set aside. We unqualifiedly reinstated the schoolteachers, to whom we
awarded all monetary benefits that had accrued to them during the period of their unjustified
suspension or dismissal.

In People v. San Diego, 18 People v. Sola, 19 People v. Dacudao, 20 People v. Calo Jr. 21 and
People v. Burgos, 22 this Court similarly voided the trial court’s grant of bail to the accused
upon a finding that the prosecution had been deprived of procedural due process.

In People v. Sevilleno, 23 the Court noted that the trial judge "hardly satisfied the requisite
searching inquiry" due the accused when he pleaded guilty to the capital offense he had been
charged with. We thus concluded that "the accused was not properly accorded his fundamental
right to be informed of the precise nature of the accusation leveled against him." Because of the
nonobservance of "the fundamental requirements of fairness and due process," the appealed
Decision was annulled and set aside, and the case was remanded for the proper arraignment and
trial of the accused.

Recently, the Court vacated its earlier Decision 24 in People v. Parazo 25 upon realizing that the
accused — "a deaf-mute, a mental retardate, whose mental age [was] only seven (7) years and
nine (9) months, and with low IQ of 60 only" — had not been ably assisted by a sign language
expert during his arraignment and trial. Citing People v. Crisologo, 26 we ruled that the accused
had been deprived of "a full and fair trial and a reasonable opportunity to defend himself." He
had in effect been denied his fundamental right to due process of law. Hence, we set aside the
trial proceedings and granted the accused a rearraignment and a retrial.

Of late, we also set aside a Comelec Resolution disallowing the use by a candidate of a certain
nickname for the purpose of her election candidacy. The Resolution was issued pursuant to a
letter petition which was passed upon by the Comelec without affording the candidate the
opportunity to explain her side and to counter the allegations in said letter-petition. In
invalidating the said Resolution, we again underscored the necessity of the observance of the
twin requirements of notice and hearing before any decision can be validly rendered in a case. 27

Clearly deducible from our extant jurisprudence is that the denial of a person’s fundamental right
to due process amounts to the illegality of the proceedings against him. Consequently, he is
brought back to his status quo ante, not merely awarded nominal damages or indemnity. chanroblesvirtual|awlibrary

Our labor force deserves no less. Indeed, the State recognizes it as its primary social economic
force, 28 to which it is constitutionally mandated to afford full protection. 29 Yet, refusing to
declare the illegality of dismissals without due process, we have continued to impose upon the
erring employer the simplistic penalty of paying indemnity only. Hence, I submit that it is time
for us to denounce these dismissals as null and void and to grant our workers these proper reliefs:
(1) the declaration that the termination or dismissal is illegal and unconstitutional and (2) the
reinstatement of the employee plus full back wages. The present ruling of the Court is manifestly
inconsistent with existing jurisprudence which holds that proceedings held without notice and
hearing are null and void, since they amount to a violation of due process, and therefore bring
back the parties to the status quo ante.

Exception: When Due Process

Is Impractical and Futile

I am fully aware that in a long line of cases starting with Wenphil v. NLRC, 30 the Court has
held: where there is just cause for the dismissal of an employee but the employer fails to follow
the requirements of procedural due process, the former is not entitled to back wages,
reinstatement (or separation pay in case reinstatement is no longer feasible) or other benefits.
Instead, the employee is granted an indemnity (or penalty or damages) ranging from P1,000 31
to as much as P10,000, 32 depending on the circumstances of the case and the gravity of the
employer’s omission. Since then, Wenphil has perfunctorily been applied in most subsequent
cases 33 involving a violation of due process (although just cause has been duly proven), without
regard for the peculiar factual milieu of each case. Indemnity or damages has become an easy
substitute for due process. chanroblesvirtual|awlibrary

Be it remembered, however, that the facts in Wenphil clearly showed the impracticality and the
futility of observing the procedure laid down by law and by the Constitution for terminating
employment. The employee involved therein appeared to have exhibited a violent temper and
caused trouble during office hours. In an altercation with a co-employee, he "slapped [the
latter’s] cap, stepped on his foot and picked up the ice scooper and brandished it against [him]."
When summoned by the assistant manager, the employee "shouted and uttered profane words"
instead of giving an explanation. He was caught virtually in flagrante delicto in the presence of
many people. Under the circumstances obtaining, swift action was necessary to preserve order
and discipline, as well as to safeguard the customers’ confidence in the employer’s business — a
fast food chain catering to the general public where courtesy is a prized virtue. Llibris

However, in most of the succeeding cases, including the present one before us in which the
petitioner was dismissed on the very day he was served notice, there were ample opportunities
for the employers to observe the requisites of due process. There were no exigencies that called
for immediate response. And yet, Wenphil was instantly invoked and due process brushed aside.

I believe that the price that the Court has set for the infringement of the fundamental right to due
process is too insignificant, too niggardly, and sometimes even too late. I believe that imposing a
stiffer sanction is the only way to emphasize to employers the extreme importance of the right to
due process in our democratic system. Such right is too sacred to be taken for granted or glossed
over in a cavalier fashion. To hold otherwise, as by simply imposing an indemnity or even "full
back wages," is to allow the rich and powerful to virtually purchase and to thereby stifle a
constitutional right granted to the poor and marginalized.

It may be asked: If the employee is guilty anyway, what difference would it make if he is fired
without due process? By the same token, it may be asked: If in the end, after due hearing, a
criminal offender is found guilty anyway, what difference would it make if he is simply
penalized immediately without the trouble and the expense of trial? The absurdity of this
argument is too apparent to deserve further discourse. 34

Worker’s Right to Notice Is

Constitutional, Not Merely Statutory

According to the ponencia of Mr. Justice Mendoza, the "violation of the notice requirement
cannot be considered a denial of due process resulting in the nullity of the employee’s dismissal
or lay- off." He argues that the due process clause of the Constitution may be used against the
government only. Since the Labor Code does not accord employees the right to a hearing, ergo,
he concludes, they do not have the right to due process. chanrobles.com : red

I disagree. True, as pointed out by Mr. Justice Mendoza, traditional doctrine holds that
constitutional rights may be invoked only against the State. This is because in the past, only the
State was in a position to violate these rights, including the due process clause. However, with
the advent of liberalization, deregulation and privatization, the State tended to cede some of its
powers to the "market forces." Hence, corporate behemoths and even individuals may now be
sources of abuses and threats to human rights and liberties. I believe, therefore, that such
traditional doctrine should be modified to enable the judiciary to cope with these new paradigms
and to continue protecting the people from new forms of abuses. 34-a

Indeed the employee is entitled to due process not because of the Labor Code, but because of the
Constitution. Elementary is the doctrine that constitutional provisions are deemed written into
every statute, contract or undertaking. Worth noting is that" [o]ne’s employment, profession,
trade or calling is a property right within the protection of the constitutional guaranty of due
process of law." 35

In a long line of cases involving judicial, quasi-judicial and administrative proceedings, some of
which I summarized earlier, the Court has held that the twin requirements of notice and hearing
(or, at the very least, an opportunity to be heard) constitute the essential elements of due process.
In labor proceedings, both are the conditio sine qua non for a dismissal to be validly effected. 36
The perceptive Justice Irene Cortes has aptly stated: "One cannot go without the other, for
otherwise the termination would, in the eyes of the law, be illegal." 37

Even the Labor Code Grants the

Right to a Hearing

Besides, it is really inaccurate to say that the Labor Code grants "notice alone" to employees
being dismissed due to an authorized cause. Article 277 (b) 38 of the said Code explicitly
provides that the termination of employment by the employer is "subject to the constitutional
right of workers to security of tenure[;] . . . without prejudice to the requirement of notice under
Article 283 of this Code, the employer shall furnish the worker whose employment is sought to
be terminated a written notice containing a statement of the causes for termination and shall
afford the latter ample opportunity to be heard . . ." Significantly, the provision requires the
employer "to afford [the employee] ample opportunity to be heard" when the termination is due
to a "just and authorized cause." I submit that this provision on "ample opportunity to be heard"
applies to dismissals under Articles 282, 283 and 284 of the Labor Code. chanroblesvirtuallawlibrary

In addition, to say that the termination is "simply ineffectual" for failure to comply with the 30-
day written notice and, at the same time, to conclude that it has "legal effect" appears to be
contradictory. Ineffectual means "having no legal force." 39 If a dismissal has no legal force or
effect, the consequence should be the reinstatement of the dismissed employee and the grant of
full back wages thereto, as provided by law — not the latter only. Limiting the consequence
merely to the payment of full back wages has no legal or statutory basis. No provision in the
Labor Code or any other law authorizes such limitation of sanction, which Mr. Justice Mendoza
advocates.

The majority contends that it is not fair to reinstate the employee, because the employer should
not be forced to accommodate an unwanted worker. I believe however that it is not the Court that
forces the employer to rehire the worker. By violating the latter’s constitutional right to due
process, the former brings this sanction upon itself. Is it unfair to imprison a criminal? No! By
violating the law, one brings the penal sanction upon oneself. There is nothing unfair or unusual
about this inevitable chain of cause and effect, of crime and punishment, of violation and
sanction.

Due Process Begins

With Each of Us

To repeat, due process begins with the employer, not with the labor tribunals. An objective
reading of the Bill of Rights clearly shows that the due process protection is not limited to
government action alone. The Constitution does not say that the right cannot be claimed against
private individuals and entities. Thus, in PNB v. Apalisok, which I cited earlier, this Court
voided the proceedings conducted by petitioner bank because of its failure to observe Apalisok’s
right to due process.

Truly, justice is dispensed not just by the courts and quasi-judicial bodies like public respondent
here. The administration of justice begins with each of us, in our everyday dealings with one
another and, as in this case, in the employers’ affording their employees the right to be heard. If
we, as a people and as individuals, cannot or will not deign to act with justice and render unto
everyone his or her due in little, everyday things, can we honestly hope and seriously expect to
do so when monumental, life-or-death issues are at stake? Unless each one is committed to a
faithful observance of day-to-day fundamental rights, our ideal of a just society can never be
approximated, not to say attained. chanrobles.com : virtual law library

In the final analysis, what is involved here is not simply the amount of monetary award, whether
insignificant or substantial; whether termed indemnity, penalty or "full back wages." Neither is it
merely a matter of respect for workers’ rights or adequate protection of labor. The bottom line is
really the constitutionally granted right to due process. And due process is the very essence of
justice itself. Where the rule of law is the bedrock of our free society, justice is its very lifeblood.
Denial of due process is thus no less than a denial of justice itself .

In Addition to Reinstatement and

Back Waves, Damages May Be Awarded

One last point. Justice Vitug argues in his Separate Opinion that the nonobservance of the
prescribed notices "can verily entitle the employee to an award of damages but . . . not to the
extent of rendering outrightly illegal that dismissal or lay-off . . ." I, of course, disagree with him
insofar as he denies the illegality of the dismissal, because as I already explained, a termination
without due process is unconstitutional and illegal. But I do agree that, where the employee
proves the presence of facts showing liability for damages (moral, exemplary, etc.) as provided
under the Civil Code, the employee could be entitled to such award in addition to reinstatement
and back wages. For instance, where the illegal dismissal has caused the employee "physical
suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings,
moral shock, social humiliation and similar injury" due to the bad faith of the employer, an
award for moral damages would be proper, in addition to reinstatement and back wages.

Summary

To conclude, I believe that even if there may be a just or an authorized cause for termination but
due process is absent, the dismissal proceedings must be declared null and void. The dismissal
should still be branded as illegal. Consequently, the employee must be reinstated and given full
back wages.

On the other hand, there is an exception. The employer can adequately prove that under the
peculiar circumstances of the case, there was no opportunity to comply with due process
requirements; or doing so would have been impractical or gravely adverse to the employer, as
when the employee is caught in flagrante delicto. Under any of these circumstances, the
dismissal will not be illegal and no award may properly be granted. Nevertheless, as a measure
of compassion, the employee may be given a nominal sum depending on the circumstances,
pursuant to Article 7221 of the Civil Code. chanroblesvirtuallawlibrary

Depending on the facts of each case, damages as provided under applicable articles of the Civil
Code may additionally be awarded.

WHEREFORE, I vote to GRANT the petition. Ruben Serrano should be REINSTATED and
PAID FULL BACK WAGES from date of termination until actual reinstatement, plus all
benefits he would have received as if he were never dismissed.

Endnotes:

1. TSN of testimony of petitioner, pp. 24, 76-78, April 24, 1992.

2. Petitioner’s Position Paper, Annex C; Records, p. 19.

3. Id., Annex B; id., p. 21.

4. Records, p. 2.

5. Decision, dated April 30, 1993, of Labor Arbiter Pablo C. Espiritu. Petition, Annex A;
Rollo, p. 30.

6. Id., pp. 35-36.

7. Petition, p. 10; id., p. 16.

8. 213 SCRA 652 (1992).

9. Id., at 662.

10. G.R. No. 131108, March 25, 1999.

11. Shell Oil Workers Union v. Shell Company of the Philippines, Ltd., 39 SCRA 276,
284-285 (1971).

12. Asian Alcohol Corporation v. National Labor Relations Commission, G.R. No.
131108, March 25, 1999.

13. TSN, p. 61, April 24, 1992.

14. CONST., ART. XIII, §3.

15. E.g., Aurora Land Projects Corporation v. NLRC, 266 SCRA 48 (1997).

16. 248 SCRA 532 (1995).

17. This provision reads: chanrob1es virtual 1aw library

Termination by employer. — An employer may terminate an employment for any of the

following causes: chanrob1es virtual 1aw library

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

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

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

(d) Commission of a crime or offense by the employee against the person of his
employer or any immediate member of his family or his duly authorized representative;
and
(e) Other causes analogous to the foregoing.

18. Bk. VI, Rule 1, of the Omnibus Rules and Regulations to Implement the Labor Code
provides in pertinent parts: chanrob1es virtual 1aw library

Section 2. Security of tenure . . . .

(d) In all cases of termination of employment, the following standards of due process
shall be substantially observed: chanrob1es virtual 1aw library

For termination of employment based on just causes as defined in Article 282 of the
Labor Code: chanrob1es virtual 1aw library

(i) A written notice served on the employee specifying the ground or grounds for
termination, and giving said employee reasonable opportunity within which to explain
his side.

(ii) A hearing or conference during which the employee concerned, with the assistance
of counsel if he so desires, is given opportunity to respond to the charge, present his
evidence, or rebut the evidence presented against him.

(iii) A written notice of termination served on the employee, indicating that upon due
consideration of all the circumstances, grounds have been established to justify his
termination.

For termination of employment as defined in Article 283 of the Labor Code, the
requirement of due process shall be deemed complied with upon service of a written
notice to the employee and the appropriate Regional Office of the Department of Labor
and Employment at least thirty days before effectivity of the termination, specifying the
ground or grounds for termination. . . .

19. Sebuguero v. NLRC, 248 SCRA at 547.

20. 170 SCRA 69 (1989).

21. Id., at 75-76.

22. E.g., Aurelio v. NLRC, 221 SCRA 432 (1993) (dismissal of a managerial employee
for breach of trust); Rubberworld (Phils.), Inc. v. NLRC, 183 SCRA 421 (1990)
(dismissal for absenteeism, leaving the work place without notice, tampering with
machines); Shoemart, Inc. v. NLRC, 176 SCRA 385 (1989) (dismissal for abandonment
of work).

23. Sebuguero v. NLRC, 248 SCRA 536 (1995) (termination of employment due to
retrenchment).

24. E.g., Worldwide Papermills, Inc. v. NLRC, 244 SCRA 125 (1995) (dismissal for gross
and habitual neglect of duties).

25. E.g., Reta v. NLRC, 232 SCRA 613 (1994) (dismissal for negligence and
insubordination).

26. 110 Phil. 113, 118 (1960).

27. 138 SCRA 166, 170 (1985).

28. ART. 302 of the Code of Commerce provided: chanrob1es virtual 1aw library

In cases in which no special time is fixed in the contracts of service, any one of the
parties thereto may dissolve it, advising the other party thereof one month in advance.

The factory or shop clerk shall be entitled, in such case, to the salary due for said
month.

29. R.A. No. 1052, as amended by R.A. No. 1787, provided: chanrob1es virtual 1aw library

SECTION 1. In cases of employment without a definite period, in a commercial,

industrial, or agricultural establishment or enterprise, the employer or the employee
may terminate at any time the employment with just cause; or without just cause in
the case of an employee by serving written notice on the employer at least one month
in advance, or in the case of an employer, by serving such notice to the employee at
least one month in advance or one-half month for every year of service of the
employee, whichever is longer, a fraction of at least six months being considered as
one whole year.

The employer, upon whom no such notice was served in case of termination of
employment without just cause may hold the employee liable for damages.

The employee, upon whom no such notice was served in case of termination of
employment without just cause shall be entitled to compensation from the date of
termination of his employment in an amount equivalent to his salaries or wages
corresponding to the required period of notice.

30. Abe v. Foster Wheeler Corp., 110 Phil. 198 (1960); Malate Taxicab and Garage, Inc.
v. CIR, 99 Phil. 41 (1956).

31. 71 SCRA 470, 480 (1976).

32. 77 SCRA 321 (1977).

33. CIVIL CODE, ART. 19.

34. ART. 1191: "The power to rescind obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what is incumbent upon him . . . ." cralaw virtua1aw library

ART. 1592: "In the sale of immovable property, even though it may have been
stipulated that upon failure to pay the price at the time agreed upon the rescission of
the contract shall of right take place, the vendee may pay, even after the expiration of
the period, as long as no demand for rescission of the contract has been made upon
him either judicially or by a notarial act. After the demand, the court may not grant him
a new term." cralaw virtua1aw library

35. De la Cruz v. Legaspi, 98 Phil. 43(1955); Taguba v. Vda. de Leon, 132 SCRA 722
(1984).

36. See Maximo v. Fabian, G R No. L-8015, December 23, 1955, (unpub.), 98 Phil. 989.

37. Emphasis added.

38. ART. 285 reads: chanrob1es virtual 1aw library

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

(b) An employee may put an end to the relationship without serving any notice on the
employer for any of the following just causes: chanrob1es virtual 1aw library

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

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

3. Commission of a crime or offense by the employer or his representative against the

person of the employee or any of the immediate members of his family; and

4. Other causes analogous to any of the foregoing.

39. 210 SCRA 277 (1992).

40. Art. II, §18.

41. Id., §20.

42. Art. XIII, §3.

43. Manila Trading and Supply Co. v. Zulueta, 69 Phil. 485, 487 (1940) (per Laurel, J.)
Accord, Villanueva v. NLRC, 293 SCRA 259 (1998); DI Security and General Services,
Inc. v. NLRC, 264 SCRA 458 (1996); Flores v. NLRC, 256 SCRA 735 (1996); San Miguel
Corporation v. NLRC, 218 SCRA 293 (1993); Colgate Palmolive Philippines, Inc. v. Ople,
163 SCRA 323 (1988).

BELLOSILLO, J.: chanrob1es virtual 1aw library

1. G.R. No. 130866, 16 September 1998, 295 SCRA 494.

2. Exh. "B," Records, p. 21.

3. Rollo, p. 63.

4. Sebuguero v. National Labor Relations Commission, G.R. No. 115395, 27 September

1995, 248 SCRA 536; Almodiel v. National Labor Relations Commission, G.R. No.
100641, 14 June 1993, 223 SCRA 341.

5. De Ocampo v. National Labor Relations Commission, G.R. No. 101539, 4 September

1992, 213 SCRA 652, 662.

6. G.R. No. 73287, 18 May 1987, 149 SCRA 641.

7. Art. XIII, Sec. 3, 1987 Constitution, reiterated in Art. 3, Labor Code.

8. Art. 3, Labor Code.

9. Alcantara, Samson S., Reviewer in Labor and Social Legislation, 1993 Ed., p. 347.

10. Art. 277, Labor Code.

11. 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 . . . by serving a written notice on the
worker and the Ministry of Labor and Employment at least one (1) month before the
intended date thereof . . . .

12. Sec. 1, Art. III, 1987 Constitution.

13. Fernando, Enrique M., The Bill of Rights, 1972 ed., p. 71.

14. Id., p. 78.

15. Id., pp. 80-81.

16. Id., p. 94.

17. Id., p. 96.

18. 69 Phil. 635 (1940).

19. G.R. No. 117565, 18 November 1997, 282 SCRA 146-147.

20. G.R. No. 80587, 8 February 1989, 170 SCRA 69.

21. G.R. No. 115394, 27 September 1995, 248 SCRA 535.

22. G.R. No. 122666, 19 June 1997, 274 SCRA 379.

23. G.R. No. 116473, 12 September 1997, 279 SCRA 45.

24. Shoemart, Inc. v. NLRC, G.R. No. 74229, 11 August 1989, 176 SCRA 385 — The
employee was found to have abandoned his job but for failure to observe the notice
requirement, the employer was fined P1,000.00; Pacific Mills, Inc. v. Alonzo, G.R. No.
78090, 26 July 1991, 199 SCRA 617 — The employee violated company rules and
regulations but because of procedural lapse the company was fined P1,000.00; Aurelio
v. NLRC, G.R. No. 99034, 12 April 1993, 221 SCRA 432 — The managerial employee
breached the trust and confidence of his employer but for failure to observe the notice
requirement the company was fined P1,000.00; Worldwide Papermills Inc. v. NLRC,
G.R. No. 113081, 12 May 1995, 244 SCRA 125 — The employee was found guilty of
gross and habitual neglect of his duties and of excessive absences. For failure to comply
with the notice requirement the company was fined P5,000.00; Reta v. NLRC, G.R. No.
112100, 27 May 1994, 232 SCRA 613 — The employee was guilty of inefficiency,
negligence and insubordination but the company was fined P10,000.00 for failure to
observe the notice requirement.

25. Sebuguero v. NLRC, G.R. No. 115394, 27 September 1995, 248 SCRA 532 — The
employees were retrenched in order to prevent further losses but the company failed to
observe the notice requirement, hence was fined P2,000.00 for each employee;
Balbalec Et. Al. v. NLRC, G.R. No. 107756, 19 December 1995, 251 SCRA 398 — The
employees were retrenched to prevent business losses but the company was fined
P5,000.00 for each employee for failure to observe the notice requirement.

26. See Note 21.

PUNO, J., dissenting: chanrob1es virtual 1aw library

1. Schwartz, Administrative Law, 1991 ed., p. 224 citing Painter v. Liverpool Gas Co., 3
Ad. & E I. 433, 449, 11 Eng. Rep. 478 (K. B. 1836).

2. Kingsize Manufacturing Corp. v. NLRC, 238 SCRA 349 (1994).

3. Ibid.

4. 170 SCRA 69.

5. 248 SCRA 532, 545 (1995).

6. Ibid., p. 546.

7. Op. cit., p. 76.

8. Op. cit., pp. 74-75.

9. Op. cit., p. 76.

10. TSN, August 4, 1992, pp. 30, 37-38, 42-49.

11. A fifth authorized cause is "disease of the employee" provided in Article 284 of the
Code.
12. Sebuguero, supra.

13. International Hardware, Inc. v. National Labor Relations Commission, 176 SCRA
256, 259 (1989).

14. Sebuguero v. NLRC, supra.

15. Wiltshire File Co. v. NLRC, 193 SCRA 665, 676 (1991).

16. Balbalec v. NLRC, 251 SCRA 398, 406 (1995).

17. 110 Phil. 113 (1960).

18. Schwartz, op. cit., pp. 273-274.

19. Supra.

20. See also JGB and Associates, Inc. v. NLRC, 254 SCRA 457 (1996); Philippine
Savings Bank v. NLRC, 261 SCRA 409 (1996); Pasudeco Inc. v. NLRC, 272 SCRA 737
(1997); P.I. Manpower, Inc. v. NLRC, 267 SCRA 451 (1997); Canura v. NLRC, 279
SCRA 45 (1997); International Pharmaceuticals, Inc. v. NLRC, 287 SCRA 213 (1998);
Mabuhay Development Industries v. NLRC, 288 SCRA 1 (1998), all ponencias of Mr.
Justice Mendoza.

21. Art. 283. Termination by employer. — An employer may terminate an employment

without a definite period for any of the following just causes:
chanrob1es virtual 1aw library

(a) The closing or cessation of operation of the establishment or enterprise, or where

the employer has to reduce his work force by more than one-half (1/2) due to serious
business reverses, unless the closing is for the purpose of circumventing the provisions
of this chapter;

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

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

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

(e) Commission of a crime or offense by the employee against the person of his
employer or any immediate member of his family or representative; and

(f) Other causes analogous to the foregoing.

22. Art. 284. Reduction of personnel. — The termination of employment of any

employee due to the installation of labor saving devices, redundancy, retrenchment to
prevent losses, and other similar causes, shall entitle the employee affected thereby to
separation pay. . . .
23. Art. 285. Disease as a ground for termination. — An employer may terminate the
services of an employee who have 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 . . . .

24. The adjustment of the numbering of the Articles is due to the fact that there are
two (2) Article 238.

25. 71 SCRA 470 (1976).

26. 92 Phil. 843 (1953).

27. International Hardware, Inc. v. NLRC, 176 SCRA 256 (1989); Sebuguero v. NLRC,
supra.

28. Concurring opinion in Ang Tibay Et. Al. v. Court of Industrial Relations, Et Al., 69
Phil. 635 (1940).

VITUG, J., concurring and dissenting: chanrob1es virtual 1aw library

1. ART. 282. Termination by employer. — An employer may terminate an employment

for any of the following causes:chanrob1es virtual 1aw library

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

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

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

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

(e) Other causes analogous to the foregoing.

2. 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 Ministry of Labor and Employment at least one (1) month before the intended
date thereof. In case of termination due to the installation of labor saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay
equivalent to at least his one (1) month pay or to at least one (1) month pay for every
year of service, whichever is higher. In case of retrenchment to prevent losses and in
cases of closures or cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay shall be equivalent to
one (1) month pay or at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered one (1)
whole year.

3. 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.

4. See San Miguel Corporation v. NLRC, 255 SCRA 580. Section 7, Rule 1, Book VI, of
the Omnibus Rules Implementing the Labor Code provides: jgc:chanrobles.com.ph

"Sec. 7. Termination of employment by employer. — The just causes for terminating

the services of an employee shall be those provided in Article 282 of the Code. The
separation from work of an employee for a just cause does not entitle him to the
termination pay provided in Code, without prejudice, however, to whatever rights,
benefits and privileges he may have under the applicable individual or collective
bargaining agreement with the employer or voluntary employer policy or practice." cralaw virtua1aw library

5. See Footnote 2.

6. Section 1, Rule XXIII, of the Rules Implementing the Labor Code clearly states that"
(i)n cases of regular employment, the employer shall not terminate the services of an
employee except for just or authorized causes as provided by law, and subject to the
requirements of due process." cralaw virtua1aw library

Section 2, I, of the same Rule provides that in case of termination of employment

based on just causes under Article 282 of the Labor Code, is it required that there be —

"(a) A written notice served on the employee specifying the ground or grounds for
termination, and giving to said employee reasonable opportunity within which to
explain his side;

(b) A hearing or conference during which the employee concerned, with the assistance
of counsel if the employee so desires, is given opportunity to respond to the charge,
present his evidence or rebut the evidence presented against him; and

(c) A written notice of termination served on the employee indicating that upon due
consideration of all the circumstances, grounds have been established to justify his
termination."cralaw virtua1aw library

In cases of termination based on authorized causes under Article 283 of the Labor
Code, Section 2, II, of the same Rule mandates that there be "a written notice to the
employee and the appropriate Regional Office of the Department (of Labor and
Employment) at least thirty days before the effectivity of the termination," specifying
the ground/s therefor.

7. See MGG Marine Services, Inc. v. NLRC, 259 SCRA 664.

PANGANIBAN, J.: chanrob1es virtual 1aw library

1. See Panganiban, Battles in the Supreme Court, 1998 ed., p. 155 et seq.

2. 259 SCRA 665, July 29, 1996.

3. 283 SCRA 242, December 15, 1997. In that case, I proposed to grant separation pay
in lieu of reinstatement because, by the employee’s acts, he had made reinstatement
improper, a fact not present in the instant case.

4. 296 SCRA 283, September 28, 1998.

5. Art. 282 of the Labor Code provides: jgc:chanrobles.com.ph

"ART. 282. Termination by employer. — An employer may terminate an employment for

any of the following causes: chanrob1es virtual 1aw library

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

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

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

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

(e) Other causes analogous to the foregoing." cralaw virtua1aw library

6. Arts. 283 & 284 provide: jgc:chanrobles.com.ph

"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 or
operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the workers
and the [Department] of Labor and Employment at least one (1) month before the
intended date thereof. In case of termination due to the installation of labor saving
devices or redundancy, the worker affected thereby shall be entitled to a separation pay
equivalent to at least his one (1) month pay or to at least one (1) month pay for every
year of service, whichever is higher. In case of retrenchment to prevent losses and in
cases of closures or cessation of operations of establishments 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.
ART. 284. Disease as a 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." cralaw virtua1aw library

7. Mapalo v. NLRC, 233 SCRA 266, June 17, 1994; Ala Mode Garments, Inc. v. NLRC,
268 SCRA 497, February 17, 1997; Pizza Hut/Progressive Development Corp. v. NLRC,
252 SCRA 531, January 29, 1996; MGG Marine Services, Inc. v. NLRC, 259 SCRA 664,
July 29, 1996; Ranises v. NLRC, 262 SCRA 671, September 24, 1996.

8. Conti v. NLRC, 271 SCRA 114, April 10, 1997; Alhambra Industries, Inc. v. NLRC,
238 SCRA 232, November 18, 1994; JGB and Associates, Inc. v. NLRC, 254 SCRA 457,
March 7, 1996; Samillano v. NLRC, 265 SCRA 788, December 23, 1996.

9. Alhambra Industries, Inc. v. NLRC, ibid.; Segismundo v. NLRC, 239 SCRA 167,
December 13, 1994; Sebuguero v. NLRC, 248 SCRA 532, September 27, 1995; Wenphil
Corp. v. NLRC, 170 SCRA 69, February 8, 1989.

10. 210 SCRA 277, 286, June 23, 1992, per Gutierrez Jr., J.

11. 138 SCRA 166, 170-171, August 16, 1985, per Makasiar, C.J.

12. Among those are Galman v. Sandiganbayan, 144 SCRA 43, 87, September 12,
1986; People v. Albano, 163 SCRA 511, July 26, 1988, Saldana v. Court of Appeals,
190 SCRA 396, 403, October 11, 1990; Paulin v. Gimenez, 217 SCRA 386, 392,
January 21, 1993.

13. 132 SCRA 690, October 23, 1984, per Cuevas, J.

14. Ibid., p. 703.

15. 199 SCRA 92, July 12, 1991, per Narvasa, J. (later C.J.)

16. Ibid., p. 101.

17. 282 SCRA 256, November 28, 1997.

18. 26 SCRA 252, December 24, 1968.

19. 103 SCRA 393, March 17, 1981.

20. 170 SCRA 489, February 21, 1989.

21. 186 SCRA 620, June 18, 1990.

22. 200 SCRA 67, August 2, 1991.

23. G.R. No. 129058, March 29, 1999, per Bellosillo, J.

24. G.R. No. 121179, May 14, 1997.

25. July 8, 1999 Resolution on the Motion for Reconsideration, per Purisima, J.

26. 150 SCRA 653, 656, June 17, 1987, per Padilla, J.

27. Villarosa v. Comelec, G.R. No. 133927, November 29, 1999.

28. § 18, Art. II, 1987 Constitution.

29. § 3, Art. XIII, ibid.

30. 170 SCRA 69, February 8, 1989, per Gancayco, J .

31. In Wenphil Corp. v. NLRC, ibid.; Sampaguita Garments Corp. v. NLRC, 233 SCRA
260, June 17, 1994; Villarama v. NLRC, 236 SCRA 280, September 2, 1994;
Rubberworld (Phils.), Inc. v. NLRC, 183 SCRA 421, March 21, 1990; Kwikway
Engineering Works v. NLRC, 195 SCRA 526, March 22, 1991, and several other cases.

32. In Reta v. NLRC, 232 SCRA 613, May 27, 1994; and Alhambra Industries, Inc. v.
NLRC, 238 SCRA 232, November 18, 1994.

33. Seahorse Maritime Corp. v. NLRC, 173 SCRA 390, May 15, 1989; Rubberworld
(Phils.), Inc. v. NLRC, supra; Cariño v. NLRC, 185 SCRA 177, May 8, 1990; Great
Pacific Life Assurance Corp. v. NLRC, 187 SCRA 694, July 23, 1990; Cathedral School of
Technology v. NLRC, 214 SCRA 551, October 13, 1992; Aurelio v. NLRC, 221 SCRA
432, April 12, 1993; Sampaguita Garments Corp. v. NLRC, 233 SCRA 260, June 17,
1994; Villarama v. NLRC, supra.

34. See Concurring and Dissenting Opinion in Better Buildings, Inc. v. NLRC, 283 SCRA
242, 256, December 15, 1997.

34-a. See Panganiban, Leadership by Example, 1999 ed., pp. 60-61.

35. Wallem Maritime Services, Inc. v. NLRC, 263 SCRA 174, October 15, 1996; per
Romero, J. Bernas, The 1987 Constitution of the Republic of the Philippines: A
Commentary, 1996 ed., p. 101.

36. RCPI v. NLRC, 223 SCRA 656, June 25, 1993; Samillano v. NLRC, 265 SCRA 788,
December 23, 1996.

37. San Miguel Corporation v. NLRC, 173 SCRA 314, May 12, 1989.

38. "Art. 277. . . .

"(b) Subject to the constitutional right of workers to security of tenure and their right to
be protected against dismissal except for a just and authorized cause and without
prejudice to the requirement of notice under Article 283 of this Code the employer shall
furnish the worker whose employment is sought to be terminated a written notice
containing a statement of the causes for termination and shall afford the latter ample
opportunity to be heard and to defend himself with the assistance of his representative
if he so desires in accordance with company rules and regulations promulgated
pursuant to guidelines set by the Department of Labor and Employment. Any decision
taken by the employer shall be without prejudice to the right of the worker to contest
the validity or legality of his dismissal by filing a complaint with the regional branch of
the National Labor Relations Commission. The burden of proving that the termination
was for a valid or authorized cause shall rest on the employer. The Secretary of the
Department of Labor and Employment may suspend the effects of the termination
pending resolution of the dispute in the event of a prima facie finding by the
appropriate official of the Department of Labor and Employment before whom such
dispute is pending that the termination may cause a serious labor dispute or is in
implementation of a mass lay-off." cralaw virtua1aw library

39. The New World Dictionary, Second College Ed. (1974). defines effectual as "having
legal force; valid." Thus, ineffectual, being its opposite, means having no legal force or
not valid.

CASE DIGEST LINK:

https://pdfslide.net/documents/digest-serrano-vs-nlrc-gr-no-117040-january-27-2000.html
Agabon vs. NLRC, G.R. No. 158693, November 17, 2004

FULL TEXT:

G.R. No. 158693             November 17, 2004

JENNY M. AGABON and VIRGILIO C. AGABON, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC), RIVIERA HOME IMPROVEMENTS, INC.
and VICENTE ANGELES, respondents.

DECISION

YNARES-SANTIAGO, J.:

This petition for review seeks to reverse the decision of the Court of Appeals dated January 23,
1 

2003, in CA-G.R. SP No. 63017, modifying the decision of National Labor Relations Commission
(NLRC) in NLRC-NCR Case No. 023442-00.

Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling and
installing ornamental and construction materials. It employed petitioners Virgilio Agabon and Jenny
Agabon as gypsum board and cornice installers on January 2, 1992 until February 23, 1999 when
2 

they were dismissed for abandonment of work.

Petitioners then filed a complaint for illegal dismissal and payment of money claims and on
3 

December 28, 1999, the Labor Arbiter rendered a decision declaring the dismissals illegal and
ordered private respondent to pay the monetary claims. The dispositive portion of the decision
states:

WHEREFORE, premises considered, We find the termination of the complainants illegal.

Accordingly, respondent is hereby ordered to pay them their backwages up to November 29,
1999 in the sum of:

1. Jenny M. Agabon - P56, 231.93

2. Virgilio C. Agabon - 56, 231.93

and, in lieu of reinstatement to pay them their separation pay of one (1) month for every year
of service from date of hiring up to November 29, 1999.

Respondent is further ordered to pay the complainants their holiday pay and service
incentive leave pay for the years 1996, 1997 and 1998 as well as their premium pay for
holidays and rest days and Virgilio Agabon's 13th month pay differential amounting to TWO
THOUSAND ONE HUNDRED FIFTY (P2,150.00) Pesos, or the aggregate amount of ONE
 HUNDRED TWENTY ONE THOUSAND SIX HUNDRED SEVENTY EIGHT & 93/100
(P121,678.93) Pesos for Jenny Agabon, and ONE HUNDRED TWENTY THREE
THOUSAND EIGHT HUNDRED TWENTY EIGHT & 93/100 (P123,828.93) Pesos for Virgilio
Agabon, as per attached computation of Julieta C. Nicolas, OIC, Research and Computation
Unit, NCR.

SO ORDERED. 4

On appeal, the NLRC reversed the Labor Arbiter because it found that the petitioners had
abandoned their work, and were not entitled to backwages and separation pay. The other money
claims awarded by the Labor Arbiter were also denied for lack of evidence. 5

Upon denial of their motion for reconsideration, petitioners filed a petition for certiorari with the Court
of Appeals.

The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal because they
had abandoned their employment but ordered the payment of money claims. The dispositive portion
of the decision reads:

WHEREFORE, the decision of the National Labor Relations Commission is REVERSED only
insofar as it dismissed petitioner's money claims. Private respondents are ordered to pay
petitioners holiday pay for four (4) regular holidays in 1996, 1997, and 1998, as well as their
service incentive leave pay for said years, and to pay the balance of petitioner Virgilio
Agabon's 13th month pay for 1998 in the amount of P2,150.00.

SO ORDERED. 6

Hence, this petition for review on the sole issue of whether petitioners were illegally dismissed. 7

Petitioners assert that they were dismissed because the private respondent refused to give them
assignments unless they agreed to work on a "pakyaw" basis when they reported for duty on
February 23, 1999. They did not agree on this arrangement because it would mean losing benefits
as Social Security System (SSS) members. Petitioners also claim that private respondent did not
comply with the twin requirements of notice and hearing. 8

Private respondent, on the other hand, maintained that petitioners were not dismissed but had
abandoned their work. In fact, private respondent sent two letters to the last known addresses of the
9 

petitioners advising them to report for work. Private respondent's manager even talked to petitioner
Virgilio Agabon by telephone sometime in June 1999 to tell him about the new assignment at Pacific
Plaza Towers involving 40,000 square meters of cornice installation work. However, petitioners did
not report for work because they had subcontracted to perform installation work for another
company. Petitioners also demanded for an increase in their wage to P280.00 per day. When this
was not granted, petitioners stopped reporting for work and filed the illegal dismissal case. 10

It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are accorded not only
respect but even finality if the findings are supported by substantial evidence. This is especially so
when such findings were affirmed by the Court of Appeals. However, if the factual findings of the
11 

NLRC and the Labor Arbiter are conflicting, as in this case, the reviewing court may delve into the
records and examine for itself the questioned findings. 12
Accordingly, the Court of Appeals, after a careful review of the facts, ruled that petitioners' dismissal
was for a just cause. They had abandoned their employment and were already working for another
employer.

To dismiss an employee, the law requires not only the existence of a just and valid cause but also
enjoins the employer to give the employee the opportunity to be heard and to defend himself. Article
13 

282 of the Labor Code enumerates the just causes for termination by the employer: (a) serious
misconduct or willful disobedience by the employee of the lawful orders of his employer or the latter's
representative in connection with the employee's work; (b) gross and habitual neglect by the
employee of his duties; (c) fraud or willful breach by the employee of the trust reposed in him by his
employer or his duly authorized representative; (d) commission of a crime or offense by the
employee against the person of his employer or any immediate member of his family or his duly
authorized representative; and (e) other causes analogous to the foregoing.

Abandonment is the deliberate and unjustified refusal of an employee to resume his employment. It 14 

is a form of neglect of duty, hence, a just cause for termination of employment by the employer. For 15 

a valid finding of abandonment, these two factors should be present: (1) the failure to report for work
or absence without valid or justifiable reason; and (2) a clear intention to sever employer-employee
relationship, with the second as the more determinative factor which is manifested by overt acts from
which it may be deduced that the employees has no more intention to work. The intent to
discontinue the employment must be shown by clear proof that it was deliberate and unjustified. 16

In February 1999, petitioners were frequently absent having subcontracted for an installation work
for another company. Subcontracting for another company clearly showed the intention to sever the
employer-employee relationship with private respondent. This was not the first time they did this. In
January 1996, they did not report for work because they were working for another company. Private
respondent at that time warned petitioners that they would be dismissed if this happened again.
Petitioners disregarded the warning and exhibited a clear intention to sever their employer-employee
relationship. The record of an employee is a relevant consideration in determining the penalty that
should be meted out to him. 17

In Sandoval Shipyard v. Clave, we held that an employee who deliberately absented from work
18 

without leave or permission from his employer, for the purpose of looking for a job elsewhere, is
considered to have abandoned his job. We should apply that rule with more reason here where
petitioners were absent because they were already working in another company.

The law imposes many obligations on the employer such as providing just compensation to workers,
observance of the procedural requirements of notice and hearing in the termination of employment.
On the other hand, the law also recognizes the right of the employer to expect from its workers not
only good performance, adequate work and diligence, but also good conduct and loyalty. The
19 

employer may not be compelled to continue to employ such persons whose continuance in the
service will patently be inimical to his interests.
20

After establishing that the terminations were for a just and valid cause, we now determine if the
procedures for dismissal were observed.

The procedure for terminating an employee is found in Book VI, Rule I, Section 2(d) of the Omnibus
Rules Implementing the Labor Code:

Standards of due process: requirements of notice. – In all cases of termination of

employment, the following standards of due process shall be substantially observed:
 I. For termination of employment based on just causes as defined in Article 282 of the Code:

(a) A written notice served on the employee specifying the ground or grounds for termination,
and giving to said employee reasonable opportunity within which to explain his side;

(b) A hearing or conference during which the employee concerned, with the assistance of
counsel if the employee so desires, is given opportunity to respond to the charge, present his
evidence or rebut the evidence presented against him; and

(c) A written notice of termination served on the employee indicating that upon due
consideration of all the circumstances, grounds have been established to justify his
termination.

In case of termination, the foregoing notices shall be served on the employee's last known
address.

Dismissals based on just causes contemplate acts or omissions attributable to the employee while
dismissals based on authorized causes involve grounds under the Labor Code which allow the
employer to terminate employees. A termination for an authorized cause requires payment of
separation pay. When the termination of employment is declared illegal, reinstatement and full
backwages are mandated under Article 279. If reinstatement is no longer possible where the
dismissal was unjust, separation pay may be granted.

Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give
the employee two written notices and a hearing or opportunity to be heard if requested by the
employee before terminating the employment: a notice specifying the grounds for which dismissal is
sought a hearing or an opportunity to be heard and after hearing or opportunity to be heard, a notice
of the decision to dismiss; and (2) if the dismissal is based on authorized causes under Articles 283
and 284, the employer must give the employee and the Department of Labor and Employment
written notices 30 days prior to the effectivity of his separation.

From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just cause
under Article 282 of the Labor Code, for an authorized cause under Article 283, or for health reasons
under Article 284, and due process was observed; (2) the dismissal is without just or authorized
cause but due process was observed; (3) the dismissal is without just or authorized cause and there
was no due process; and (4) the dismissal is for just or authorized cause but due process was not
observed.

In the first situation, the dismissal is undoubtedly valid and the employer will not suffer any liability.

In the second and third situations where the dismissals are illegal, Article 279 mandates that the
employee is entitled to reinstatement without loss of seniority rights and other privileges and full
backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from
the time the compensation was not paid up to the time of actual reinstatement.

In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot be
cured, it should not invalidate the dismissal. However, the employer should be held liable for non-
compliance with the procedural requirements of due process.

The present case squarely falls under the fourth situation. The dismissal should be upheld because
it was established that the petitioners abandoned their jobs to work for another company. Private
respondent, however, did not follow the notice requirements and instead argued that sending notices
to the last known addresses would have been useless because they did not reside there anymore.
Unfortunately for the private respondent, this is not a valid excuse because the law mandates the
twin notice requirements to the employee's last known address. Thus, it should be held liable for
21 

non-compliance with the procedural requirements of due process.

A review and re-examination of the relevant legal principles is appropriate and timely to clarify the
various rulings on employment termination in the light of Serrano v. National Labor Relations
Commission. 22

Prior to 1989, the rule was that a dismissal or termination is illegal if the employee was not given any
notice. In the 1989 case of Wenphil Corp. v. National Labor Relations Commission, we reversed this
23 

long-standing rule and held that the dismissed employee, although not given any notice and hearing,
was not entitled to reinstatement and backwages because the dismissal was for grave misconduct
and insubordination, a just ground for termination under Article 282. The employee had a violent
temper and caused trouble during office hours, defying superiors who tried to pacify him. We
concluded that reinstating the employee and awarding backwages "may encourage him to do even
worse and will render a mockery of the rules of discipline that employees are required to
observe." We further held that:
24 

Under the circumstances, the dismissal of the private respondent for just cause should be
maintained. He has no right to return to his former employment.

However, the petitioner must nevertheless be held to account for failure to extend to private
respondent his right to an investigation before causing his dismissal. The rule is explicit as
above discussed. The dismissal of an employee must be for just or authorized cause and
after due process. Petitioner committed an infraction of the second requirement. Thus, it
must be imposed a sanction for its failure to give a formal notice and conduct an
investigation as required by law before dismissing petitioner from employment. Considering
the circumstances of this case petitioner must indemnify the private respondent the amount
of P1,000.00. The measure of this award depends on the facts of each case and the gravity
of the omission committed by the employer. 25

The rule thus evolved: where the employer had a valid reason to dismiss an employee but did not
follow the due process requirement, the dismissal may be upheld but the employer will be penalized
to pay an indemnity to the employee. This became known as the Wenphil or Belated Due Process
Rule.

On January 27, 2000, in Serrano, the rule on the extent of the sanction was changed. We held that
the violation by the employer of the notice requirement in termination for just or authorized causes
was not a denial of due process that will nullify the termination. However, the dismissal is ineffectual
and the employer must pay full backwages from the time of termination until it is judicially declared
that the dismissal was for a just or authorized cause.

The rationale for the re-examination of the Wenphil doctrine in Serrano was the significant number of
cases involving dismissals without requisite notices. We concluded that the imposition of penalty by
way of damages for violation of the notice requirement was not serving as a deterrent. Hence, we
now required payment of full backwages from the time of dismissal until the time the Court finds the
dismissal was for a just or authorized cause.

Serrano was confronting the practice of employers to "dismiss now and pay later" by imposing full
backwages.
We believe, however, that the ruling in Serrano did not consider the full meaning of Article 279 of the
Labor Code which states:

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.

This means that the termination is illegal only if it is not for any of the justified or authorized causes
provided by law. Payment of backwages and other benefits, including reinstatement, is justified only
if the employee was unjustly dismissed.

The fact that the Serrano ruling can cause unfairness and injustice which elicited strong dissent has
prompted us to revisit the doctrine.

To be sure, the Due Process Clause in Article III, Section 1 of the Constitution embodies a system of
rights based on moral principles so deeply imbedded in the traditions and feelings of our people as
to be deemed fundamental to a civilized society as conceived by our entire history. Due process is
that which comports with the deepest notions of what is fair and right and just. It is a constitutional
26 

restraint on the legislative as well as on the executive and judicial powers of the government
provided by the Bill of Rights.

Due process under the Labor Code, like Constitutional due process, has two aspects:
substantive, i.e., the valid and authorized causes of employment termination under the Labor Code;
and procedural, i.e., the manner of dismissal. Procedural due process requirements for dismissal are
found in the Implementing Rules of P.D. 442, as amended, otherwise known as the Labor Code of
the Philippines in Book VI, Rule I, Sec. 2, as amended by Department Order Nos. 9 and
10. Breaches of these due process requirements violate the Labor Code. Therefore statutory due
27 

process should be differentiated from failure to comply with constitutional due process.

Constitutional due process protects the individual from the government and assures him of his rights
in criminal, civil or administrative proceedings; while statutory due process found in the Labor Code
and Implementing Rules protects employees from being unjustly terminated without just cause after
notice and hearing.

In Sebuguero v. National Labor Relations Commission, the dismissal was for a just and valid cause
28 

but the employee was not accorded due process. The dismissal was upheld by the Court but the
employer was sanctioned. The sanction should be in the nature of indemnification or penalty, and
depends on the facts of each case and the gravity of the omission committed by the employer.

In Nath v. National Labor Relations Commission, it was ruled that even if the employee was not
29 

given due process, the failure did not operate to eradicate the just causes for dismissal. The
dismissal being for just cause, albeit without due process, did not entitle the employee to
reinstatement, backwages, damages and attorney's fees.

Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v. National Labor
Relations Commission, which opinion he reiterated in Serrano, stated:
30 
 C. Where there is just cause for dismissal but due process has not been properly observed
by an employer, it would not be right to order either the reinstatement of the dismissed
employee or the payment of backwages to him. In failing, however, to comply with the
procedure prescribed by law in terminating the services of the employee, the employer must
be deemed to have opted or, in any case, should be made liable, for the payment of
separation pay. It might be pointed out that the notice to be given and the hearing to be
conducted generally constitute the two-part due process requirement of law to be accorded
to the employee by the employer. Nevertheless, peculiar circumstances might obtain in
certain situations where to undertake the above steps would be no more than a useless
formality and where, accordingly, it would not be imprudent to apply the res ipsa loquitur rule
and award, in lieu of separation pay, nominal damages to the employee. x x x. 31

After carefully analyzing the consequences of the divergent doctrines in the law on employment
termination, we believe that in cases involving dismissals for cause but without observance of the
twin requirements of notice and hearing, the better rule is to abandon the Serrano doctrine and to
follow Wenphil by holding that the dismissal was for just cause but imposing sanctions on the
employer. Such sanctions, however, must be stiffer than that imposed in Wenphil. By doing so, this
Court would be able to achieve a fair result by dispensing justice not just to employees, but to
employers as well.

The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not
complying with statutory due process may have far-reaching consequences.

This would encourage frivolous suits, where even the most notorious violators of company policy are
rewarded by invoking due process. This also creates absurd situations where there is a just or
authorized cause for dismissal but a procedural infirmity invalidates the termination. Let us take for
example a case where the employee is caught stealing or threatens the lives of his co-employees or
has become a criminal, who has fled and cannot be found, or where serious business losses
demand that operations be ceased in less than a month. Invalidating the dismissal would not serve
public interest. It could also discourage investments that can generate employment in the local
economy.

The constitutional policy to provide full protection to labor is not meant to be a sword to oppress
employers. The commitment of this Court to the cause of labor does not prevent us from sustaining
the employer when it is in the right, as in this case. Certainly, an employer should not be compelled
32 

to pay employees for work not actually performed and in fact abandoned.

The employer should not be compelled to continue employing a person who is admittedly guilty of
misfeasance or malfeasance and whose continued employment is patently inimical to the employer.
The law protecting the rights of the laborer authorizes neither oppression nor self-destruction of the
employer. 33

It must be stressed that in the present case, the petitioners committed a grave offense, i.e.,
abandonment, which, if the requirements of due process were complied with, would undoubtedly
result in a valid dismissal.

An employee who is clearly guilty of conduct violative of Article 282 should not be protected by the
Social Justice Clause of the Constitution. Social justice, as the term suggests, should be used only
to correct an injustice. As the eminent Justice Jose P. Laurel observed, social justice must be
founded on the recognition of the necessity of interdependence among diverse units of a society and
of the protection that should be equally and evenly extended to all groups as a combined force in our
social and economic life, consistent with the fundamental and paramount objective of the state of
promoting the health, comfort, and quiet of all persons, and of bringing about "the greatest good to
the greatest number." 34

This is not to say that the Court was wrong when it ruled the way it did in Wenphil, Serrano and
related cases. Social justice is not based on rigid formulas set in stone. It has to allow for changing
times and circumstances.

Justice Isagani Cruz strongly asserts the need to apply a balanced approach to labor-management
relations and dispense justice with an even hand in every case:

We have repeatedly stressed that social justice – or any justice for that matter – is for the
deserving, whether he be a millionaire in his mansion or a pauper in his hovel. It is true that,
in case of reasonable doubt, we are to tilt the balance in favor of the poor to whom the
Constitution fittingly extends its sympathy and compassion. But never is it justified to give
preference to the poor simply because they are poor, or reject the rich simply because they
are rich, for justice must always be served for the poor and the rich alike, according to the
mandate of the law. 35

Justice in every case should only be for the deserving party. It should not be presumed that every
case of illegal dismissal would automatically be decided in favor of labor, as management has rights
that should be fully respected and enforced by this Court. As interdependent and indispensable
partners in nation-building, labor and management need each other to foster productivity and
economic growth; hence, the need to weigh and balance the rights and welfare of both the employee
and employer.

Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process
should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer should
indemnify the employee for the violation of his statutory rights, as ruled in Reta v. National Labor
Relations Commission. The indemnity to be imposed should be stiffer to discourage the abhorrent
36 

practice of "dismiss now, pay later," which we sought to deter in the Serrano ruling. The sanction
should be in the nature of indemnification or penalty and should depend on the facts of each case,
taking into special consideration the gravity of the due process violation of the employer.

Under the Civil Code, nominal damages is adjudicated in order that a right of the plaintiff, which has
been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose
of indemnifying the plaintiff for any loss suffered by him.
37

As enunciated by this Court in Viernes v. National Labor Relations Commissions, an employer is

38 

liable to pay indemnity in the form of nominal damages to an employee who has been dismissed if,
in effecting such dismissal, the employer fails to comply with the requirements of due process. The
Court, after considering the circumstances therein, fixed the indemnity at P2,590.50, which was
equivalent to the employee's one month salary. This indemnity is intended not to penalize the
employer but to vindicate or recognize the employee's right to statutory due process which was
violated by the employer. 39

The violation of the petitioners' right to statutory due process by the private respondent warrants the
payment of indemnity in the form of nominal damages. The amount of such damages is addressed
to the sound discretion of the court, taking into account the relevant circumstances. Considering the
40 

prevailing circumstances in the case at bar, we deem it proper to fix it at P30,000.00. We believe this
form of damages would serve to deter employers from future violations of the statutory due process
rights of employees. At the very least, it provides a vindication or recognition of this fundamental
right granted to the latter under the Labor Code and its Implementing Rules.
Private respondent claims that the Court of Appeals erred in holding that it failed to pay petitioners'
holiday pay, service incentive leave pay and 13th month pay.

We are not persuaded.

We affirm the ruling of the appellate court on petitioners' money claims. Private respondent is liable
for petitioners' holiday pay, service incentive leave pay and 13th month pay without deductions.

As a general rule, one who pleads payment has the burden of proving it. Even where the employee
must allege non-payment, the general rule is that the burden rests on the employer to prove
payment, rather than on the employee to prove non-payment. The reason for the rule is that the
pertinent personnel files, payrolls, records, remittances and other similar documents – which will
show that overtime, differentials, service incentive leave and other claims of workers have been paid
– are not in the possession of the worker but in the custody and absolute control of the employer. 41

In the case at bar, if private respondent indeed paid petitioners' holiday pay and service incentive
leave pay, it could have easily presented documentary proofs of such monetary benefits to disprove
the claims of the petitioners. But it did not, except with respect to the 13th month pay wherein it
presented cash vouchers showing payments of the benefit in the years disputed. Allegations by
42 

private respondent that it does not operate during holidays and that it allows its employees 10 days
leave with pay, other than being self-serving, do not constitute proof of payment. Consequently, it
failed to discharge the onus probandi thereby making it liable for such claims to the petitioners.

Anent the deduction of SSS loan and the value of the shoes from petitioner Virgilio Agabon's 13th
month pay, we find the same to be unauthorized. The evident intention of Presidential Decree No.
851 is to grant an additional income in the form of the 13th month pay to employees not already
receiving the same so as "to further protect the level of real wages from the ravages of world-wide
43 

inflation." Clearly, as additional income, the 13th month pay is included in the definition of wage
44 

under Article 97(f) of the Labor Code, to wit:

(f) "Wage" paid to any employee shall mean the remuneration or earnings, however
designated, capable of being expressed in terms of money whether fixed or ascertained on a
time, task, piece , or commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten contract of employment
for work done or to be done, or for services rendered or to be rendered and includes the fair
and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other
facilities customarily furnished by the employer to the employee…"

from which an employer is prohibited under Article 113 of the same Code from making any
45 

deductions without the employee's knowledge and consent. In the instant case, private respondent
failed to show that the deduction of the SSS loan and the value of the shoes from petitioner Virgilio
Agabon's 13th month pay was authorized by the latter. The lack of authority to deduct is further
bolstered by the fact that petitioner Virgilio Agabon included the same as one of his money claims
against private respondent.

The Court of Appeals properly reinstated the monetary claims awarded by the Labor Arbiter ordering
the private respondent to pay each of the petitioners holiday pay for four regular holidays from 1996
to 1998, in the amount of P6,520.00, service incentive leave pay for the same period in the amount
of P3,255.00 and the balance of Virgilio Agabon's thirteenth month pay for 1998 in the amount of
P2,150.00.
WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of
Appeals dated January 23, 2003, in CA-G.R. SP No. 63017, finding that petitioners' Jenny and
Virgilio Agabon abandoned their work, and ordering private respondent to pay each of the petitioners
holiday pay for four regular holidays from 1996 to 1998, in the amount of P6,520.00, service
incentive leave pay for the same period in the amount of P3,255.00 and the balance of Virgilio
Agabon's thirteenth month pay for 1998 in the amount of P2,150.00 is AFFIRMED with
the MODIFICATION that private respondent Riviera Home Improvements, Inc. is
further ORDERED to pay each of the petitioners the amount of P30,000.00 as nominal damages for
non-compliance with statutory due process.

No costs.

SO ORDERED.

Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Sandoval-Gutierrez, Carpio, Austria-Martinez,

Corona, Carpio-Morales, Callejo, Sr., Azcuna, Tinga, Chico-Nazario, and Garcia, JJ., concur.

SEPARATE OPINION

TINGA, J:

I concur in the result, the final disposition of the petition being correct. There is no denying the
importance of the Court's ruling today, which should be considered as definitive as to the effect of
the failure to render the notice and hearing required under the Labor Code when an employee is
being dismissed for just causes, as defined under the same law. The Court emphatically reaffirms
the rule that dismissals for just cause are not invalidated due to the failure of the employer to
observe the proper notice and hearing requirements under the Labor Code. At the same time,
The Decision likewise establishes that the Civil Code provisions on damages serve as the proper
framework for the appropriate relief to the employee dismissed for just cause if the notice-hearing
requirement is not met. Serrano v. NLRC,1 insofar as it is controlling in dismissals for unauthorized
causes, is no longer the controlling precedent. Any and all previous rulings and statements of the
Court inconsistent with these determinations are now deemed inoperative.

My views on the questions raised in this petition are comprehensive, if I may so in all modesty. I offer
this opinion to discuss the reasoning behind my conclusions, pertaining as they do to questions of
fundamental importance.

Prologue

The factual backdrop of the present Petition for Review is not novel. Petitioners claim that they were
illegally dismissed by the respondents, who allege in turn that petitioners had actually abandoned
their employment. There is little difficulty in upholding the findings of the NRLC and the Court of
Appeals that petitioners are guilty of abandonment, one of the just causes for termination under the
Labor Code. Yet, the records also show that the employer was remiss in not giving the notice
required by the Labor Code; hence, the resultant controversy as to the legal effect of such
failure vis-à-vis the warranted dismissal.
Ostensibly, the matter has been settled by our decision in Serrano2, wherein the Court ruled that the
failure to properly observe the notice requirement did not render the dismissal, whether for just or
authorized causes, null and void, for such violation was not a denial of the constitutional right to due
process, and that the measure of appropriate damages in such cases ought to be the amount of
wages the employee should have received were it not for the termination of his employment without
prior notice.3 Still, the Court has, for good reason, opted to reexamine the so-called Serrano doctrine
through the present petition

Antecedent Facts

Respondent Riviera Home Improvements, Inc (Riviera Home) is engaged in the manufacture and
installation of gypsum board and cornice. In January of 1992, the Agabons were hired in January of
1992 as cornice installers by Riviera Home. According to their personnel file with Riviera Home, the
Agabon given address was 3RDS Tailoring, E. Rodriguez Ave., Moonwalk Subdivision, P-II
Parañaque City, Metro Manila.4

It is not disputed that sometime around February 1999, the Agabons stopped rendering services for
Riviera Home. The Agabons allege that beginning on 23 February 1999, they stopped receiving
assignments from Riviera Home.5 When they demanded an explanation, the manager of Riviera
Homes, Marivic Ventura, informed them that they would be hired again, but on a "pakyaw" (piece-
work) basis. When the Agabons spurned this proposal, Riviera Homes refused to continue their
employment under the original terms and agreement.6 Taking affront, the Agabons filed a complaint
for illegal dismissal with the National Labor Relations Commission ("NLRC").

Riviera Homes adverts to a different version of events leading to the filing of the complaint for illegal
dismissal. It alleged that in the early quarter of 1999, the Agabons stopped reporting for work with
Riviera. Two separate letters dated 10 March 1999, were sent to the Agabons at the address
indicated in their personnel file. In these notices, the Agabons were directed to report for work
immediately.7 However, these notices were returned unserved with the notation "RTS Moved." Then,
in June of 1999, Virgilio Agabon informed Riviera Homes by telephone that he and Jenny Agabon
were ready to return to work for Riviera Homes, on the condition that their wages be first adjusted.
On 18 June 1999, the Agabons went to Riviera Homes, and in a meeting with management,
requested a wage increase of up to Two Hundred Eighty Pesos (P280.00) a day. When no
affirmative response was offered by Riviera Homes, the Agabons initiated the complaint before the
NLRC.8

In their Position Paper, the Agabons likewise alleged that they were required to work even on
holidays and rest days, but were never paid the legal holiday pay or the premium pay for holiday or
rest day. They also asserted that they were denied Service Incentive Leave pay, and that Virgilio
Agabon was not given his thirteenth (13th) month pay for the year 1998.9

After due deliberation, Labor Arbiter Daisy G. Cauton-Barcelona rendered a Decision dated 28

December 1999, finding the termination of the Agabons illegal, and ordering Riviera Homes to pay
backwages in the sum of Fifty Six Thousand Two Hundred Thirty One Pesos and Ninety Three
Centavos (P56,231.93) each. The Labor Arbiter likewise ordered, in lieu of reinstatement, the
payment of separation pay of one (1) month pay for every year of service from date of hiring up to 29
November 1999, as well as the payment of holiday pay, service incentive leave pay, and premium
pay for holiday and restday, plus thirteenth (13th) month differential to Virgilio Agabon.10

In so ruling, the Labor Arbiter declared that Riviera Homes was unable to satisfactorily refute the
Agabons' claim that they were no longer given work to do after 23 February 1999 and that their
rehiring was only on "pakyaw" basis. The Labor Arbiter also held that Riviera Homes failed to comply
with the notice requirement, noting that Riviera Homes well knew of the change of address of the
Agabons, considering that the identification cards it issued stated a different address from that on
the personnel file.11 The Labor Arbiter asserted the principle that in all termination cases, strict
compliance by the employer with the demands of procedural and substantive due process is a
condition sine qua non for the same to be declared valid.12

On appeal, the NLRC Second Division set aside the Labor Arbiter's Decision and ordered the
dismissal of the complaint for lack of merit.13 The NLRC held that the Agabons were not able to
refute the assertion that for the payroll period ending on 15 February 1999, Virgilio and Jenny
Agabon worked for only two and one-half (2½) and three (3) days, respectively. It disputed the
earlier finding that Riviera Homes had known of the change in address, noting that the address
indicated in the

identification cards was not the Agabons, but that of the persons who should be notified in case of
emergency concerning the employee.14 Thus, proper service of the notice was deemed to have been
accomplished. Further, the notices evinced good reason to believe that the Agabons had not been
dismissed, but had instead abandoned their jobs by refusing to report for work.

In support of its conclusion that the Agabons had abandoned their work, the NLRC also observed
that the Agabons did not seek reinstatement, but only separation pay. While the choice of relief was
premised by the Agabons on their purported strained relations with Riviera Homes, the NLRC
pointed out that such claim was amply belied by the fact that the Agabons had actually sought a
conference with Riviera Homes in June of 1999. The NLRC likewise found that the failure of the
Labor Arbiter to justify the award of extraneous money claims, such as holiday and service incentive
leave pay, confirmed that there was no proof to justify such claims.

A Petition for Certiorari was promptly filed with the Court of Appeals by the Agabons, imputing grave
abuse of discretion on the part of the NLRC in dismissing their complaint for illegal dismissal. In
a Decision15 dated 23 January 2003, the Court of Appeals affirmed the finding that the Agabons had
abandoned their employment. It noted that the two elements constituting abandonment had been
established, to wit: the failure to report for work or absence without valid justifiable reason, and; a
clear intention to sever the employer-employee relationship. The intent to sever the employer-
employee relationship was buttressed by the Agabon's choice to seek not reinstatement, but
separation pay. The Court of Appeals likewise found that the service of the notices were valid, as the
Agabons did not notify Riviera Homes of their change of address, and thus the failure to return to
work despite notice amounted to abandonment of work.

However, the Court of Appeals reversed the NLRC as regards the denial of the claims for holiday
pay, service incentive leave pay, and the balance of Virgilio Agabon's thirteenth (13th) month pay. It
ruled that the failure to adduce proof in support thereof was not fatal and that the burden of proving
that such benefits had already been paid rested on Riviera Homes.16 Given that Riviera Homes failed
to present proof of payment to the Agabons of their holiday pay and service incentive leave pay for
the years 1996, 1997 and 1998, the Court of Appeals chose to believe that such benefits had not
actually been received by the employees. It also ruled that the apparent deductions made by Riviera
Homes on the thirteenth (13th) month pay of Virgilio Agabon violated Section 10 of the Rules and
Regulations Implementing Presidential Decree No. 851.17 Accordingly, Riviera Homes was ordered
to pay the Agabons holiday for four (4) regular holidays in 1996, 1997 and 1998, as well as their
service incentive leave pay for said years, and the balance of Virgilio Agabon's thirteenth (13th)
month pay for 1998 in the amount of Two Thousand One Hundred Fifty Pesos (P2,150.00).18

In their Petition for Review, the Agabons claim that they had been illegally dismissed, reasserting
their version of events, thus: (1) that they had not been given new assignments since 23 February
1999; (2) that they were told that they would only be re-hired on a "pakyaw" basis, and; (3) that
Riviera Homes had knowingly sent the notices to their old address despite its knowledge of their
change of address as indicated in the identification cards.19 Further, the Agabons note that only one
notice was sent to each of them, in violation of the rule that the employer must furnish two written
notices before termination — the first to apprise the employee of the cause for which dismissal is
sought, and the second to notify the employee of the decision of dismissal.20 The Agabons likewise
maintain that they did not seek reinstatement owing to the strained relations between them and
Riviera Homes.

The Agabons present to this Court only one issue, i.e.: whether or not they were illegally dismissed
from their employment.21 There are several dimensions though to this issue which warrant full
consideration.

The Abandonment Dimension

Review of Factual Finding of Abandonment

As the Decision points out, abandonment is characterized by the failure to report for work or

absence without valid or justifiable reason, and a clear intention to sever the employer-employee
relationship. The question of whether or not an employee has abandoned employment is essentially
a factual issue.22 The NLRC and the Court of Appeals, both appropriate triers of fact, concluded that
the Agabons had actually abandoned their employment, thus there is little need for deep inquiry into
the correctness of this factual finding. There is no doubt that the Agabons stopped reporting for work
sometime in February of 1999. And there is no evidence to support their assertion that such absence
was due to the deliberate failure of Riviera Homes to give them work. There is also the fact, as noted
by the NLRC and the Court of Appeals, that the Agabons did not pray for reinstatement, but only for
separation

pay and money claims.23 This failure indicates their disinterest in maintaining the employer-employee
relationship and their unabated avowed intent to sever it. Their excuse that strained relations
between them and Riviera Homes rendered reinstatement no longer feasible was hardly given
credence by the NLRC and the Court of Appeals.24

The contrary conclusion arrived at by the Labor Arbiter as regards abandonment is of little bearing to
the case. All that the Labor Arbiter said on that point was that Riviera Homes was not able to refute
the Agabons' claim that they were terminated on 23 February 1999.25 The Labor Arbiter did not
explain why or how such finding was reachhy or how such finding was reachhe Agabons was more
credible than that of Riviera Homes'. Being bereft of reasoning, the conclusion deserves scant
consideration.

Compliance with Notice Requirement

At the same time, both the NLRC and the Court of Appeals failed to consider the apparent fact that
the rules governing notice of termination were not complied with by Riviera Homes. Section 2, Book
V, Rule XXIII of the Omnibus Rules Implementing the Labor Code (Implementing Rules) specifically
provides that for termination of employment based on just causes as defined in Article 282, there
must be: (1) written notice served on the employee specifying the grounds for termination and giving
employee reasonable opportunity to explain his/her side; (2) a hearing or conference wherein the
employee, with the assistance of counsel if so desired, is given opportunity to respond to the charge,
present his evidence or rebut evidence presented against him/her; and (3) written notice of
termination served on the employee indicating that upon due consideration of all the circumstances,
grounds have been established to justify termination.
At the same time, Section 2, Book V, Rule XXIII of the Implementing Rules does not require strict
compliance with the above procedure, but only that the same be "substantially observed."

Riviera Homes maintains that the letters it sent on 10 March 1999 to the Agabons sufficiently
complied with the notice rule. These identically worded letters noted that the Agabons had stopped
working without permission that they failed to return for work despite having been repeatedly told to
report to the office and resume their employment.26 The letters ended with an invitation to the
Agabons to report back to the office and return to work.27

The apparent purpose of these letters was to advise the Agabons that they were welcome to return
back to work, and not to notify them of the grounds of termination. Still, considering that only
substantial compliance with the notice requirement is required, I am prepared to say that the letters
sufficiently conform to the first notice required under the Implementing Rules. The purpose of the
first notice is to duly inform the employee that a particular transgression is being considered against
him or her, and that an opportunity is being offered for him or her to respond to the charges. The
letters served the purpose of informing the Agabons of the pending matters beclouding their
employment, and extending them the opportunity to clear the air.

Contrary to the Agabons' claim, the letter-notice was correctly sent to the employee's last known
address, in compliance with the Implementing Rules. There is no dispute that these letters were not
actually received by the Agabons, as they had apparently moved out of the address indicated
therein. Still, the letters were sent to what Riviera Homes knew to be the Agabons' last known
address, as indicated in their personnel file. The Agabons insist that Riviera Homes had known of
the change of address, offering as proof their company IDs which purportedly print out their correct
new address. Yet, as pointed out by the NLRC and the Court of Appeals, the addresses indicated in
the IDs are not the Agabons, but that of the person who is to be notified in case on emergency
involve either or both of the Agabons.

The actual violation of the notice requirement by Riviera Homes lies in its failure to serve on the
Agabons the second notice which should inform them of termination. As the Decision notes, Riviera
Homes' argument that sending the second notice was useless due to the change of address is
inutile, since the Implementing Rules plainly require that the notice of termination should be served
at the employee's last known address.

The importance of sending the notice of termination should not be trivialized. The termination letter
serves as indubitable proof of loss of employment, and its receipt compels the employee to evaluate
his or her next options. Without such notice, the employee may be left uncertain of his fate; thus, its
service is mandated by the Implementing Rules. Non-compliance with the notice rule, as evident in
this case, contravenes the Implementing Rules. But does the violation serve to invalidate the
Agabons' dismissal for just cause?

The So-Called Constitutional Law Dimension

Justices Puno and Panganiban opine that the Agabons should be reinstated as a consequence of
the violation of the notice requirement. I respectfully disagree, for the reasons expounded below.

Constitutional Considerations
Of Due Process and the Notice-Hearing
Requirement in Labor Termination Cases

Justice Puno proposes that the failure to render due notice and hearing prior to dismissal for just
cause constitutes a violation of the constitutional right to due process. This view, as acknowledged
by Justice Puno himself, runs contrary to the Court's pronouncement in Serrano v. NLRC28 that the
absence of due notice and hearing prior to dismissal, if for just cause, violates statutory due process.

The ponencia of Justice Vicente V. Mendoza in Serrano provides this cogent overview of the history
of the doctrine:

Indeed, to contend that the notice requirement in the Labor Code is an aspect of due
process is to overlook the fact that Art. 283 had its origin in Art. 302 of the Spanish Code of
Commerce of 1882 which gave either party to the employer-employee relationship the right
to terminate their relationship by giving notice to the other one month in advance. In lieu of
notice, an employee could be laid off by paying him a mesada equivalent to his salary for
one month. This provision was repealed by Art. 2270 of the Civil Code, which took effect on
August 30, 1950. But on June 12, 1954, R.A. No. 1052, otherwise known as the Termination
Pay Law, was enacted reviving the mesada. On June 21, 1957, the law was amended by
R.A. No. 1787 providing for the giving of advance notice for every year of service.29

Under Section 1 of the Termination Pay Law, an employer could dismiss an employee without just
cause by serving written notice on the employee at least one month in advance or one-half month for
every year of service of the employee, whichever was longer.30 Failure to serve such written notice
entitled the employee to compensation equivalent to his salaries or wages corresponding to the
required period of notice from the date of termination of his employment.

However, there was no similar written notice requirement under the Termination Pay Law if the
dismissal of the employee was for just cause. The Court, speaking through Justice JBL Reyes, ruled
in Phil. Refining Co. v. Garcia:31

[Republic] Act 1052, as amended by Republic Act 1787, impliedly recognizes the right of the
employer to dismiss his employees (hired without definite period) whether for just case, as
therein defined or enumerated, or without it. If there be just cause, the employer is not
required to serve any notice of discharge nor to disburse termination pay to the
employee. xxx32

Clearly, the Court, prior to the enactment of the Labor Code, was ill-receptive to the notion that
termination for just cause without notice or hearing violated the constitutional right to due process.
Nonetheless, the Court recognized an award of damages as the appropriate remedy. In Galsim v.
PNB,33 the Court held:

Of course, the employer's prerogative to dismiss employees hired without a definite period
may be with or without cause. But if the manner in which such right is exercised is abusive,
the employer stands to answer to the dismissed employee for damages.34

The Termination Pay Law was among the repealed laws with the enactment of the Labor Code in
1974. Significantly, the Labor Code, in its inception, did not require notice or hearing before an
employer could terminate an employee for just cause. As Justice Mendoza explained:

Where the termination of employment was for a just cause, no notice was required to be
given to the employee. It was only on September 4, 1981 that notice was required to be
given even where the dismissal or termination of an employee was for cause. This was made
in the rules issued by the then Minister of Labor and Employment to implement B.P. Blg. 130
which amended the Labor Code. And it was still much later when the notice requirement was
embodied in the law with the amendment of Art. 277(b) by R.A. No. 6715 on March 2, 1989.35
It cannot be denied though that the thinking that absence of notice or hearing prior to termination
constituted a constitutional violation has gained a jurisprudential foothold with the Court. Justice
Puno, in his Dissenting Opinion, cites several cases in support of this theory, beginning
with Batangas Laguna Tayabas Bus Co. v. Court of Appeals 36 wherein we held that "the failure of
petitioner to give the private respondent the benefit of a hearing before he was dismissed constitutes
an infringement on his constitutional right to due process of law.37

Still, this theory has been refuted, pellucidly and effectively to my mind, by Justice Mendoza's
disquisition in Serrano, thus:

xxx There are three reasons why, on the other hand, violation by the employer of the notice
requirement cannot be considered a denial of due process resulting in the nullity of the
employee's dismissal or layoff.

The first is that the Due Process Clause of the Constitution is a limitation on governmental
powers. It does not apply to the exercise of private power, such as the termination of
employment under the Labor Code. This is plain from the text of Art. III, §1 of the
Constitution, viz.: "No person shall be deprived of life, liberty, or property without due
process of law. . . ." The reason is simple: Only the State has authority to take the life, liberty,
or property of the individual. The purpose of the Due Process Clause is to ensure that the
exercise of this power is consistent with what are considered civilized methods.

The second reason is that notice and hearing are required under the Due Process Clause
before the power of organized society are brought to bear upon the individual. This is
obviously not the case of termination of employment under Art. 283. Here the employee is
not faced with an aspect of the adversary system. The purpose for requiring a 30-day written
notice before an employee is laid off is not to afford him an opportunity to be heard on any
charge against him, for there is none. The purpose rather is to give him time to prepare for
the eventual loss of his job and the DOLE an opportunity to determine whether economic
causes do exist justifying the termination of his employment.

xxx

The third reason why the notice requirement under Art. 283 can not be considered a
requirement of the Due Process Clause is that the employer cannot really be expected to be
entirely an impartial judge of his own cause. This is also the case in termination of
employment for a just cause under Art. 282 (i.e., serious misconduct or willful disobedience
by the employee of the lawful orders of the employer, gross and habitual neglect of duties,
fraud or willful breach of trust of the employer, commission of crime against the employer or
the latter's immediate family or duly authorized representatives, or other analogous cases).38

The Court in the landmark case of People v. Marti39 clarified the proper dimensions of the Bill of
Rights.

That the Bill of Rights embodied in the Constitution is not meant to be invoked against acts of
private individuals finds support in the deliberations of the Constitutional Commission. True,
the liberties guaranteed by the fundamental law of the land must always be subject to
protection. But protection against whom? Commissioner Bernas in his sponsorship speech in
the Bill of Rights answers the query which he himself posed, as follows:

"First, the general reflections. The protection of fundamental liberties in the essence
of constitutional democracy. Protection against whom? Protection against the state.
 The Bill of Rights governs the relationship between the individual and the state. Its
concern is not the relation between individuals, between a private individual and
other individuals. What the Bill of Rights does is to declare some forbidden zones in
the private sphere inaccessible to any power holder." (Sponsorship Speech of
Commissioner Bernas; Record of the Constitutional Commission, Vol. 1, p. 674; July
17,1986; Italics supplied)40

I do not doubt that requiring notice and hearing prior to termination for just cause is an admirable
sentiment borne out of basic equity and fairness. Still, it is not a constitutional requirement that can
impose itself on the relations of private persons and entities. Simply put, the Bill of Rights affords
protection against possible State oppression against its citizens, but not against an unjust or
repressive conduct by a private party towards another.

Justice Puno characterizes the notion that constitutional due process limits government action alone
as "passé," and adverts to nouvelle vague theories which assert that private conduct may be
restrained by constitutional due process. His dissent alludes to the American experience making
references to the post-Civil War/pre-World War II era when the US Supreme Court seemed overly
solicitous to the rights of big business over those of the workers.

Theories, no matter how entrancing, remain theoretical unless adopted by legislation, or more
controversially, by judicial opinion. There were a few decisions of the US Supreme Court that,
ostensibly, imposed on private persons the values of the constitutional guarantees. However, in
deciding the cases, the American High Court found it necessary to link the actors to adequate
elements of the "State" since the Fourteenth Amendment plainly begins with the words "No State
shall…"41

More crucially to the American experience, it had become necessary to pass legislation in order to
compel private persons to observe constitutional values. While the equal protection clause was
deemed sufficient by the Warren Court to bar racial segregation in public facilities, it necessitated
enactment of the Civil Rights Acts of 1964 to prohibit segregation as enforced by private persons
within their property. In this jurisdiction, I have trust in the statutory regime that governs the
correction of private wrongs. There are thousands of statutes, some penal or regulatory in nature,
that are the source of actionable claims against private persons. There is even no stopping the
State, through the legislative cauldron, from compelling private individuals, under pain of legal
sanction, into observing the norms ordained in the Bill of Rights.

Justice Panganiban's Separate Opinion asserts that corporate behemoths and even individuals may
now be sources of abuses and threats to human rights and liberties.42 The concern is not unfounded,
but appropriate remedies exist within our statutes, and so resort to the constitutional trump card is
not necessary. Even if we were to engage the premise, the proper juristic exercise should be to
examine whether an employer has taken the attributes of the State so that it could be compelled by
the Constitution to observe the proscriptions of the Bill of Rights. But the strained analogy simply
does not square since the attributes of an employer are starkly incongruous with those of the State.
Employers plainly do not possess the awesome powers and the tremendous resources which the
State has at its command.

The differences between the State and employers are not merely literal, but extend to their very
essences. Unlike the State, the raison d'etre of employers in business is to accumulate profits.
Perhaps the State and the employer are similarly capacitated to inflict injury or discomfort on
persons under their control, but the same power is also possessed by a school principal, hospital
administrator, or a religious leader, among many others. Indeed, the scope and reach of authority of
an employer pales in comparison with that of the State. There is no basis to conclude that an
employer, or even the employer class, may be deemed a de facto state and on that premise,
compelled to observe the Bill of Rights. There is simply no nexus in their functions, distaff as they
are, that renders it necessary to accord the same jurisprudential treatment.

It may be so, as alluded in the dissent of Justice Puno, that a conservative court system overly
solicitous to the concerns of business may consciously gut away at rights or privileges owing to the
labor sector. This certainly happened before in the United States in the early part of the twentieth
century, when the progressive labor legislation such as that enacted during President Roosevelt's
New Deal regime — most of them addressing problems of labor — were struck down by an arch-
conservative Court.43 The preferred rationale then was to enshrine within the constitutional order
business prerogatives, rendering them superior to the express legislative intent. Curiously, following
its judicial philosophy at the time the U. S. Supreme Court made due process guarantee towards
employers prevail over the police power to defeat the cause of labor.44

Of course, this Court should not be insensate to the means and methods by which the entrenched
powerful class may maneuver the socio-political system to ensure self-preservation. However, the
remedy to rightward judicial bias is not leftward judicial bias. The more proper judicial attitude is to
give due respect to legislative prerogatives, regardless of the ideological sauce they are dipped in.

While the Bill of Rights maintains a position of primacy in the constitutional hierarchy,45 it has scope
and limitations that must be respected and asserted by the Court, even though they may at times
serve somewhat bitter ends. The dissenting opinions are palpably distressed at the effect of
the Decision, which will undoubtedly provoke those reflexively sympathetic to the labor class. But
haphazard legal theory cannot be used to justify the obverse result. The adoption of the dissenting
views would give rise to all sorts of absurd constitutional claims. An excommunicated Catholic might
demand his/her reinstatement into the good graces of the Church and into communion on the
ground that excommunication was violative of the constitutional right to due process. A celebrity
contracted to endorse Pepsi Cola might sue in court to void a stipulation that prevents him/her from
singing the praises of Coca Cola once in a while, on the ground that such stipulation violates the
constitutional right to free speech. An employee might sue to prevent the employer from reading
outgoing e-mail sent through the company server using the company e-mail address, on the ground
that the constitutional right to privacy of communication would be breached.

The above concerns do not in anyway serve to trivialize the interests of labor. But we must avoid
overarching declarations in order to justify an end result beneficial to labor. I dread the doctrinal
acceptance of the notion that the Bill of Rights, on its own, affords protection and sanctuary not just
from the acts of State but also from the conduct of private persons. Natural and juridical persons
would hesitate to interact for fear that a misstep could lead to their being charged in court as a
constitutional violator. Private institutions that thrive on their exclusivity, such as churches or cliquish
groups, could be forced to renege on their traditional tenets, including vows of secrecy and the like, if
deemed by the Court as inconsistent with the Bill of Rights. Indeed, that fundamental right of all
private persons to be let alone would be forever diminished because of a questionable notion that
contravenes with centuries of political thought.

It is not difficult to be enraptured by novel legal ideas. Their characterization is susceptible to the
same marketing traps that hook consumers to new products. With the help of unique wrapping, a
catchy label, and testimonials from professed experts from exotic lands, a malodorous idea may gain
wide acceptance, even among those self-possessed with their own heightened senses of
perception. Yet before we join the mad rush in order to proclaim a theory as "brilliant," a rigorous test
must first be employed to determine whether it complements or contradicts our own system of laws
and juristic thought. Without such analysis, we run the risk of abnegating the doctrines we have
fostered for decades and the protections they may have implanted into our way of life.
Should the Court adopt the view that the Bill of Rights may be invoked to invalidate actions by
private entities against private individuals, the Court would open the floodgates to, and the docket
would be swamped with, litigations of the scurrilous sort. Just as patriotism is the last refuge of
scoundrels, the broad constitutional claim is the final resort of the desperate litigant.

Constitutional Protection of Labor

The provisions of the 1987 Constitution affirm the primacy of labor and advocate a multi-faceted
state policy that affords, among others, full protection to labor. Section 18, Article II thereof provides:

The State affirms labor as a primary social economic force. It shall protect the rights of
workers and promote their welfare.

Further, Section 3, Article XIII states:

The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equal 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 to 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.

The constitutional enshrinement of the guarantee of full protection of labor is not novel to the 1987
Constitution. Section 6, Article XIV of the 1935 Constitution reads:

The State shall afford protection to labor, especially to working women, and minors, and shall
regulate the relations between the landowner and tenant, and between labor and capital in
industry and in agriculture. The State may provide for compulsory arbitration.

Similarly, among the principles and state policies declared in the 1973 Constitution, is that provided
in Section 9, Article II thereof:

The State shall afford full protection to labor, promote full employment and equality in
employment, ensure equal work opportunities regardless of sex, race or creed, and regulate
the relations between workers and employers. The State shall assure the rights of workers to
self-organization, collective bargaining, security of tenure, and just and humane conditions of
work. The State may provide for compulsory arbitration.

On the other hand, prior to the 1973 Constitution, the right to security of tenure could only be found
in legislative enactments and their respective implementing rules and regulations. It was only in the
1973 Constitution that security of tenure was elevated as a constitutional right. The development of
the concept of security of tenure as a constitutionally recognized right was discussed by this Court
in BPI Credit Corporation v. NLRC,46 to wit:

The enthronement of the worker's right to security or tenure in our fundamental law was not
achieved overnight. For all its liberality towards labor, our 1935 Constitution did not elevate
the right as a constitutional right. For a long time, the worker's security of tenure had only the
protective mantle of statutes and their interpretative rules and regulations. It was as
uncertain protection that sometimes yielded to the political permutations of the times. It took
labor nearly four decades of sweat and tears to persuade our people thru their leaders, to
exalt the worker's right to security of tenure as a sacrosanct constitutional right. It was Article
II, section 2 [9] of our 1973 Constitution that declared as a policy that the State shall assure
the right of worker's to security tenure. The 1987 Constitution is even more solicitous of the
welfare of labor. Section 3 of its Article XIII mandates that the State shall afford full protection
to labor and declares that all workers shall be entitled to security of tenure. Among the
enunciated State policies are the

promotion of social justice and a just and dynamic social order. In contrast, the prerogative of
management to dismiss a worker, as an aspect of property right, has never been endowed
with a constitutional status.

The unequivocal constitutional declaration that all workers shall be entitled to security of
tenure spurred our lawmakers to strengthen the protective walls around this hard earned
right. The right was protected from undue infringement both by our substantive and
procedural laws. Thus, the causes for dismissing employees were more defined and
restricted; on the other hand, the procedure of termination was also more clearly delineated.
These substantive and procedural laws must be strictly complied with before a worker can be
dismissed from his employment.47

It is quite apparent that the constitutional protection of labor was entrenched more than eight
decades ago, yet such did not prevent this Court in the past from affirming dismissals for just cause
without valid notice. Nor was there any pretense made that this constitutional maxim afforded a
laborer a positive right against dismissal for just cause on the ground of lack of valid prior notice. As
demonstrated earlier, it was only after the enactment of the Labor Code that the doctrine relied upon
by the dissenting opinions became en vogue. This point highlights my position that the violation of
the notice requirement has statutory moorings, not constitutional.

It should be also noted that the 1987 Constitution also recognizes the principle of shared
responsibility between workers and employers, and the right of enterprise to reasonable returns,
expansion, and growth. Whatever perceived imbalance there might have been under previous
incarnations of the provision have been obviated by Section 3, Article XIII.

In the case of Manila Prince Hotel v. GSIS,48 we affirmed the presumption that all constitutional
provisions are self-executing. We reasoned that to declare otherwise would result in the pernicious
situation wherein by mere inaction and disregard by the legislature, constitutional mandates would
be rendered ineffectual. Thus, we held:

As against constitutions of the past, modern constitutions have been generally ed upon a
different principle and have often become in effect extensive codes of laws intended to
operate directly upon the people in a manner similar to that of statutory enactments, and the
function of constitutional conventions has evolved into one more like that of a legislative
body. Hence, unless it is expressly provided that a legislative act is necessary to enforce a
constitutional mandate, the presumption now is that all provisions of the constitution are self-
 executing. If the constitutional provisions are treated as requiring legislation instead of self-
executing, the legislature would have the power to ignore and practically nullify the mandate
of the fundamental law. This can be cataclysmic. That is why the prevailing view is, as it has
always been, that —

. . . in case of doubt, the Constitution should be considered self-executing rather than

non-self-executing. . . . Unless the contrary is clearly intended, the provisions of the
Constitution should be considered self-executing, as a contrary rule would give the
legislature discretion to determine when, or whether, they shall be effective. These
provisions would be subordinated to the will of the lawmaking body, which could
make them entirely meaningless by simply refusing to pass the needed implementing
statute.49

In further discussing self-executing provisions, this Court stated that:

In self-executing constitutional provisions, the legislature may still enact legislation to

facilitate the exercise of powers directly granted by the constitution, further the operation of
such a provision, prescribe a practice to be used for its enforcement, provide a convenient
remedy for the protection of the rights secured or the determination thereof, or place
reasonable safeguards around the exercise of the right. The mere fact that legislation may
supplement and add to or prescribe a penalty for the violation of a self-executing
constitutional provision does not render such a provision ineffective in the absence of such
legislation. The omission from a constitution of any express provision for a remedy for
enforcing a right or liability is not necessarily an indication that it was not intended to be self-
executing. The rule is that a self-executing provision of the constitution does not necessarily
exhaust legislative power on the subject, but any legislation must be in harmony with the
constitution, further the exercise of constitutional right and make it more available.
Subsequent legislation however does not necessarily mean that the subject constitutional
provision is not, by itself, fully enforceable.50

Thus, the constitutional mandates of protection to labor and security of tenure may be deemed as
self-executing in the sense that these are automatically acknowledged and observed without need
for any enabling legislation. However, to declare that the constitutional provisions are enough to
guarantee the full exercise of the rights embodied therein, and the realization of ideals therein
expressed, would be impractical, if not unrealistic. The espousal of such view presents the
dangerous tendency of being overbroad and exaggerated. The guarantees of "full protection to
labor" and "security of tenure", when examined in isolation, are facially unqualified, and the broadest
interpretation possible suggests a blanket shield in favor of labor against any form of removal
regardless of circumstance. This interpretation implies an unimpeachable right to continued
employment-a utopian notion, doubtless-but still hardly within the contemplation of the framers.
Subsequent legislation is still needed to define the parameters of these guaranteed rights to ensure
the protection and promotion, not only the rights of the labor sector, but of the employers' as well.
Without specific and pertinent legislation, judicial bodies will be at a loss, formulating their own
conclusion to approximate at least the aims of the Constitution.

Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a positive
enforceable right to stave off the dismissal of an employee for just cause owing to the failure to serve
proper notice or hearing. As manifested by several framers of the 1987 Constitution, the provisions
on social justice require legislative enactments for their enforceability. This is reflected in the record
of debates on the social justice provisions of the Constitution:
 MS. [FELICITAS S.] AQUINO: We appreciate the concern of the Commissioner. But this
Committee [on Social Justice] has actually become the forum already of a lot of specific
grievances and specific demands, such that understandably, we may have been, at
one time or another, dangerously treading into the functions of legislation. Our only
plea to the Commission is to focus our perspective on the matter of social justice and its
rightful place in the Constitution. What we envision here is a mandate specific enough
that would give impetus for statutory implementation. We would caution ourselves in
terms of the judicious exercise of self-censorship against treading into the functions
of legislation. (emphasis supplied)51

xxx

[FLORENZ D.] REGALADO: I notice that the 1935 Constitution had only one section on
social justice; the same is true with the 1973 Constitution. But they seem to have stood us in
good stead; and I am a little surprised why, despite that attempt at self-censorship,
there are certain provisions here which are properly for legislation.52

xxx

BISHOP [TEODORO S.] BACANI: [I] think the distinction that was given during the
presentation of the provisions on the Bill of Rights by Commissioner Bernas is very apropos
here. He spoke of self-executing rights which belong properly to the Bill of Rights, and
then he spoke of a new body of rights which are more of claims and that these have
come about largely through the works of social philosophers and then the teaching of
the Popes. They focus on the common good and hence, it is not as easy to pinpoint
precisely these rights nor the situs of the rights. And yet, they exist in relation to the
common good.53

xxx

MS. [MINDA LUZ M.] QUESADA: I think the nitty-gritty of this kind of collaboration will
be left to legislation but the important thing now is the conservation, utilization or
maximization of the very limited resources. xxx

[RICARDO J.] ROMULO: The other problem is that, by and large, government services are
inefficient. So, this is a problem all by itself. On Section 19, where the report says that
people's organizations as a principal means of empowering the people to pursue and protect
through peaceful means…, I do not suppose that the Committee would like to either
preempt or exclude the legislature, because the concept of a representative and
democratic system really is that the legislature is normally the principal means.

[EDMUNDO G.] GARCIA: That is correct. In fact, people cannot even dream of

influencing the composition or the membership of the legislature, if they do not get
organized. It is, in fact, a recognition of the principle that unless a citizenry is organized and
mobilized to pursue its ends peacefully, then it cannot really participate effectively.54

There is no pretense on the part of the framers that the provisions on Social Justice, particularly
Section 3 of Article XIII, are self-executory. Still, considering the rule that provisions should be
deemed self-executing if enforceable without further legislative action, an examination of Section 3
of Article XIII is warranted to determine whether it is complete in itself as a definitive law, or if it
needs future legislation for completion and enforcement.55 Particularly, we should inquire whether or
not the provision voids the dismissal of a laborer for just cause if no valid notice or hearing is
attendant.

Constitutional Commissioner Fr. Joaquin G. Bernas makes a significant comment on Section 3,

Article XIII of the 1987 Constitution:

The [cluster] of rights guaranteed in the second paragraph are the right "to security of tenure,
humane conditions of work, and a living wage." Again, although these have been set apart
by a period (.) from the next sentence and are therefore not modified by the final phrase "as
may be provided by law," it is not the intention to place these beyond the reach of valid
laws. xxx (emphasis supplied)56

At present, the Labor Code is the primary mechanism to carry out the Constitution's directives. This
is clear from Article 357 under Chapter 1 thereof which essentially restates the policy on the
protection of labor as worded in the 1973 Constitution, which was in force at the time of enactment of
the Labor Code. It crystallizes the fundamental law's policies on labor, defines the parameters of the
rights granted to labor such as the right to security of tenure, and prescribes the standards for the
enforcement of such rights in concrete terms. While not infallible, the measures provided therein
tend to ensure the achievement of the constitutional aims.

The necessity for laws concretizing the constitutional principles on the protection of labor is evident
in the reliance placed upon such laws by the Court in resolving the issue of the validity of a worker's
dismissal. In cases where that was the issue confronting the Court, it consistently recognized the
constitutional right to security of tenure and employed the standards laid down by prevailing laws in
determining whether such right was violated.58 The Court's reference to laws other than the
Constitution in resolving the issue of dismissal is an implicit acknowledgment that the right to
security of tenure, while recognized in the Constitution, cannot be implemented uniformly absent a
law prescribing concrete standards for its enforcement.

As discussed earlier, the validity of an employee's dismissal in previous cases was examined by the
Court in accordance with the standards laid down by Congress in the Termination Pay Law, and
subsequently, the Labor Code and the amendments thereto. At present, the validity of an
employee's dismissal is weighed against the standards laid down in Article 279, as well as Article
282 in relation to Article 277(b) of the Labor Code, for a dismissal for just cause, and Article 283 for
a dismissal for an authorized cause.

The Effect of Statutory Violation

Of Notice and Hearing

There is no doubt that the dismissal of an employee even for just cause, without prior notice or
hearing, violates the Labor Code. However, does such violation necessarily void the dismissal?

Before I proceed with my discussion on dismissals for just causes, a brief comment regarding
dismissals for authorized cause under Article 283 of the Labor Code. While the justiciable question
in Serrano pertained to a dismissal for unauthorized cause, the ruling therein was crafted as
definitive to dismissals for just cause. Happily, the Decision today does not adopt the same unwise
tack. It should be recognized that dismissals for just cause and dismissals for authorized cause are
governed by different provisions, entail divergent requisites, and animated by distinct rationales. The
language of Article 283 expressly effects the termination for authorized cause to the service of
written notice on the workers and the Ministry of Labor at least one (1) month before the intended
date of termination. This constitutes an eminent difference than dismissals for just cause, wherein
the causal relation between the notice and the dismissal is not expressly stipulated. The
circumstances distinguishing just and authorized causes are too markedly different to be subjected
to the same rules and reasoning in interpretation.

Since the present petition is limited to a question arising from a dismissal for just cause, there is no
reason for making any pronouncement regarding authorized causes. Such declaration would be
merely obiter, since they are neither the law of the case nor dispositive of the present petition. When
the question becomes justiciable before this Court, we will be confronted with an appropriate factual
milieu on which we can render a more judicious disposition of this admittedly important question.

B. Dismissal for Just Cause

There is no express provision in the Labor Code that voids a dismissal for just cause on the ground
that there was no notice or hearing. Under Section 279, the employer is precluded from dismissing
an employee except for a just cause as provided in Section 282, or an authorized cause under
Sections 283 and 284. Based on reading Section 279 alone, the existence of just cause by itself is
sufficient to validate the termination.

Just cause is defined by Article 282, which unlike Article 283, does not condition the termination on
the service of written notices. Still, the dissenting opinions propound that even if there is just cause,
a termination may be invalidated due to the absence of notice or hearing. This view is anchored
mainly on constitutional moorings, the basis of which I had argued against earlier. For determination
now is whether there is statutory basis under the Labor Code to void a dismissal for just cause due
to the absence of notice or hearing.

As pointed out by Justice Mendoza in Serrano, it was only in 1989 that the Labor Code was
amended to enshrine into statute the twin requirements of notice and hearing.59 Such requirements
are found in Article 277 of the Labor Code, under the heading "Miscellaneous Provisions." Prior to
the amendment, the notice-hearing requirement was found under the implementing rules issued by
the then Minister of Labor in 1981. The present-day implementing rules likewise mandate that the
standards of due process, including the requirement of written notice and hearing, "be substantially
observed."60

Indubitably, the failure to substantially comply with the standards of due process, including the notice
and hearing requirement, may give rise to an actionable claim against the employer. Under Article
288, penalties may arise from violations of any provision of the Labor Code. The Secretary of Labor
likewise enjoys broad powers to inquire into existing relations between employers and employees.
Systematic violations by management of the statutory right to due process would fall under the broad
grant of power to the Secretary of Labor to investigate under Article 273.

However, the remedy of reinstatement despite termination for just cause is simply not authorized by
the Labor Code. Neither the Labor Code nor its implementing rules states that a termination for just
cause is voided because the requirement of notice and hearing was not observed. This is not simply
an inadvertent semantic failure, but a conscious effort to protect the prerogatives of the employer to
dismiss an employee for just cause. Notably, despite the several pronouncements by this Court in
the past equating the notice-hearing requirement in labor cases to a constitutional maxim, neither
the legislature nor the executive has adopted the same tack, even gutting the protection to provide
that substantial compliance with due process suffices.

The Labor Code significantly eroded management prerogatives in the hiring and firing of employees.
Whereas employees could be dismissed even without just cause under the Termination Pay Law61,
the Labor Code affords workers broad security of tenure. Still, the law recognizes the right of the
employer to terminate for just cause. The just causes enumerated under the Labor Code ¾ serious
misconduct or willful disobedience, gross and habitual neglect, fraud or willful breach of trust,
commission of a crime by the employee against the employer, and other analogous causes ¾ are
characterized by the harmful behavior of an employee against the business or the person of the
employer.

These just causes for termination are not negated by the absence of notice or hearing. An employee
who tries to kill the employer cannot be magically absolved of trespasses just because the employer
forgot to serve due notice. Or a less extreme example, the gross and habitual neglect of an
employee will not be improved upon just because the employer failed to conduct a hearing prior to
termination.

In fact, the practical purpose of requiring notice and hearing is to afford the employee the opportunity
to dispute the contention that there was just cause in the dismissal. Yet it must be understood – if a
dismissed employee is deprived of the right to notice and hearing, and thus denied the
opportunity to present countervailing evidence that disputes the finding of just cause,
reinstatement will be valid not because the notice and hearing requirement was not
observed, but because there was no just cause in the dismissal. The opportunity to dispute the
finding of the just cause is readily available before the Labor Arbiter, and the subsequent levels of
appellate review. Again, as held in Serrano:

Even in cases of dismissal under Art. 282, the purpose for the requirement of notice and hearing is
not to comply with the Due Process Clause of the Constitution. The time for notice and hearing is at
the trial stage. Then that is the time we speak of notice and hearing as the essence of procedural
due process. Thus, compliance by the employer with the notice requirement before he dismisses an
employee does not foreclose the right of the latter to question the legality of his dismissal. As Art.
277(b) provides, "Any decision taken by the employer shall be without prejudice to the right of the
worker to contest the validity or legality of his dismissal by filing a complaint with the regional branch
of the National Labor Relations Commission.62

The Labor Code presents no textually demonstrable commitment to invalidate a dismissal for just
cause due to the absence of notice or hearing. This is not surprising, as such remedy will not restore
the employer or employee into equity. Absent a showing of integral causation, the mutual infliction of
wrongs does not negate either injury, but instead enforces two independent rights of relief.

The Damages' Dimensions

Award for Damages Must Have Statutory Basis

The Court has grappled with the problem of what should be the proper remedial relief of an
employee dismissed with just cause, but not afforded either notice or hearing. In a long line of cases,
beginning with Wenphil Corp. v. NLRC63 and up until Serrano in 2000, the Court had deemed an
indemnification award as sufficient to answer for the violation by the employer against the employee.
However, the doctrine was modified in Serrano.

I disagree with Serrano insofar as it held that employees terminated for just cause are to be paid
backwages from the time employment was terminated "until it is determined that the termination is
for just cause because the failure to hear him before he is dismissed renders the termination of his
employment without legal effect."64 Article 279 of the Labor Code clearly authorizes the payment of
backwages only if an employee is unjustly dismissed. A dismissal for just cause is obviously
antithetical to an unjust dismissal. An award for backwages is not clearly warranted by the law.
The Impropriety of Award for Separation Pay

The formula of one month's pay for every year served does have statutory basis. It is found though
in the Labor Code though, not the Civil Code. Even then, such computation is made for separation
pay under the Labor Code. But separation pay is not an appropriate as a remedy in this case, or in
any case wherein an employee is terminated for just cause. As Justice Vitug noted in his separate
opinion in Serrano, an employee whose employment is terminated for a just cause is not entitled to
the payment of separation benefits.65 Separation pay is traditionally a monetary award paid as an
alternative to reinstatement which can no longer be effected in view of the long passage of time or
because of the realities of the situation.66 However, under Section 7, Rule 1, Book VI of the Omnibus
Rules Implementing the Labor Code, "[t]he separation from work of an employee for a just cause
does not entitle him to the termination pay provided in the Code."67 Neither does the Labor Code
itself provide instances wherein separation pay is warranted for dismissals with just cause.
Separation pay is warranted only for dismissals for authorized causes, as enumerated in Article 283
and 284 of the Labor Code.

The Impropriety of Equity Awards

Admittedly, the Court has in the past authorized the award of separation pay for duly terminated
employees as a measure of social justice, provided that the employee is not guilty of serious
misconduct reflecting on moral character.68 This doctrine is inapplicable in this case, as the Agabons
are guilty of abandonment, which is the deliberate and unjustified refusal of an employee to resume
his employment. Abandonment is tantamount to serious misconduct, as it constitutes a willful breach
of the employer-employee relationship without cause.

The award of separation pay as a measure of social justice has no statutory basis, but clearly
emanates from the Court's so-called "equity jurisdiction." The Court's equity jurisdiction as a basis for
award, no matter what form it may take, is likewise unwarranted in this case. Easy resort to equity
should be avoided, as it should yield to positive rules which pre-empt and prevail over such
persuasions.69 Abstract as the concept is, it does not admit to definite and objective standards.

I consider the pronouncement regarding the proper monetary awards in such cases as Wenphil
Corp. v. NLRC,70 Reta,71 and to a degree, even Serrano as premised in part on equity. This decision
is premised in part due to the absence of cited statutory basis for these awards. In these cases, the
Court deemed an indemnity award proper without exactly saying where in statute could such award
be derived at. Perhaps, equity or social justice can be invoked as basis for the award. However, this
sort of arbitrariness, indeterminacy and judicial usurpation of legislative prerogatives is precisely the
source of my discontent. Social justice should be the aspiration of all that we do, yet I think it the
more mature attitude to consider that it ebbs and flows within our statutes, rather than view it as an
independent source of funding.

Article 288 of the Labor Code as a Source of Liability

Another putative source of liability for failure to render the notice requirement is Article 288 of the
Labor Code, which states:

Article 288 states:

Penalties. — Except as otherwise provided in this Code, or unless the acts complained of
hinges on a question of interpretation or implementation of ambiguous provisions of an
existing collective bargaining agreement, any violation of the provisions of this Code
declared to be unlawful or penal in nature shall be punished with a fine of not less than One
 Thousand Pesos (P1,000.00) nor more than Ten Thousand Pesos (P10,000.00), or
imprisonment of not less than three months nor more than three years, or both such fine and
imprisonment at the discretion of the court.

It is apparent from the provision that the penalty arises due to contraventions of the provisions of the
Labor Code. It is also clear that the provision comes into play regardless of who the violator may be.
Either the employer or the employee may be penalized, or perhaps even officials tasked with
implementing the Labor Code.

However, it is apparent that Article 288 is a penal provision; hence, the prescription for penalties
such as fine and imprisonment. The Article is also explicit that the imposition of fine or imprisonment
is at the "discretion of the court." Thus, the proceedings under the provision is penal in character.
The criminal case has to be instituted before the proper courts, and the Labor Code violation subject
thereof duly proven in an adversarial proceeding. Hence, Article 288 cannot apply in this case and
serve as basis to impose a penalty on Riviera Homes.

I also maintain that under Article 288 the penalty should be paid to the State, and not to the person
or persons who may have suffered injury as a result of the violation. A penalty is a sum of money
which the law requires to be paid by way of punishment for doing some act which is prohibited or for
not doing some act which is required to be done.72 A penalty should be distinguished from damages
which is the pecuniary compensation or indemnity to a person who has suffered loss, detriment, or
injury, whether to his person, property, or rights, on account of the unlawful act or omission or
negligence of another. Article 288 clearly serves as a punitive fine, rather than a compensatory
measure, since the provision penalizes an act that violates the Labor Code even if such act does not
cause actual injury to any private person.

Independent of the employee's interests protected by the Labor Code is the interest of the State in
seeing to it that its regulatory laws are complied with. Article 288 is intended to satiate the latter
interest. Nothing in the language of Article 288 indicates an intention to compensate or remunerate a
private person for injury he may have sustained.

It should be noted though that in Serrano, the Court observed that since the promulgation of Wenphil
Corp. v. NLRC73 in 1989, "fines imposed for violations of the notice requirement have varied
from P1,000.00 to P2,000.00 to P5,000.00 to P10,000.00."74 Interestingly, this range is the same
range of the penalties imposed by Article 288. These "fines" adverted to in Serrano were paid to the
dismissed employee. The use of the term "fines," as well as the terminology employed a few other
cases,75 may have left an erroneous impression that the award implemented beginning
with Wenphil was based on Article 288 of the Labor Code. Yet, an examination of Wenphil reveals
that what the Court actually awarded to the employee was an "indemnity", dependent on the facts of
each case and the gravity of the omission committed by the employer. There is no mention
in Wenphil of Article 288 of the Labor Code, or indeed, of any statutory basis for the award.

The Proper Basis: Employer's Liability under the Civil Code

As earlier stated, Wenphil allowed the payment of indemnity to the employee dismissed for just
cause is dependent on the facts of each case and the gravity of the omission committed by the
employer. However, I considered Wenphil flawed insofar as it is silent as to the statutory basis for
the indemnity award. This failure, to my mind, renders it unwise for to reinstate the Wenphil rule, and
foster the impression that it is the judicial business to invent awards for damages without clear
statutory basis.
The proper legal basis for holding the employer liable for monetary damages to the employee
dismissed for just cause is the Civil Code. The award of damages should be measured
against the loss or injury suffered by the employee by reason of the employer's violation or,
in case of nominal damages, the right vindicated by the award. This is the proper paradigm
authorized by our law, and designed to obtain the fairest possible relief.

Under Section 217(4) of the Labor Code, the Labor Arbiter has jurisdiction over claims for actual,
moral, exemplary and other forms of damages arising from the employer-employee relations. It is
thus the duty of Labor Arbiters to adjudicate claims for damages, and they should disabuse
themselves of any inhibitions if it does appear that an award for damages is warranted. As triers of
facts in a specialized field, they should attune themselves to the particular conditions or problems
attendant to employer-employee relationships, and thus be in the best possible position as to the
nature and amount of damages that may be warranted in this case.

The damages referred under Section 217(4) of the Labor Code are those available under the Civil
Code. It is but proper that the Civil Code serve as the basis for the indemnity, it being the law that
regulates the private relations of the members of civil society, determining their respective rights and
obligations with reference to persons, things, and civil acts.76 No matter how impressed with the
public interest the relationship between a private employer and employee is, it still is ultimately a
relationship between private individuals. Notably, even though the Labor Code could very well have
provided set rules for damages arising from the employer-employee relationship, referral was
instead made to the concept of damages as enumerated and defined under the Civil Code.

Given the long controversy that has dogged this present issue regarding dismissals for just cause, it
is wise to lay down standards that would guide the proper award of damages under the Civil Code in
cases wherein the employer failed to comply with statutory due process in dismissals for just cause.

First. I believe that it can be maintained as a general rule, that failure to comply with the statutory
requirement of notice automatically gives rise to nominal damages, at the very least, even if the
dismissal was sustained for just cause.

Nominal damages are adjudicated in order that a right of a plaintiff which has been violated or
invaded by another may be vindicated or recognized without having to indemnify the plaintiff for any
loss suffered by him.77 Nominal damages may likewise be awarded in every obligation arising from
law, contracts, quasi-contracts, acts or omissions punished by law, and quasi-delicts, or where any
property right has been invaded.

Clearly, the bare act of failing to observe the notice requirement gives rise to nominal damages
assessable against the employer and due the employee. The Labor Code indubitably entitles the
employee to notice even if dismissal is for just cause, even if there is no apparent intent to void such
dismissals deficiently implemented. It has also been held that one's employment, profession, trade,
or calling is a "property right" and the wrongful interference therewith gives rise to an actionable
wrong.78

In Better Buildings, Inc. v. NLRC,79 the Court ruled that the while the termination therein was for just
and valid cause, the manner of termination was done in complete disregard of the necessary
procedural safeguards.80 The Court found nominal damages as the proper form of award, as it was
purposed to vindicate the right to procedural due process violated by the employer.81 A similar
holding was maintained in Iran v. NLRC82 and Malaya Shipping v. NLRC.83 The doctrine has express
statutory basis, duly recognizes the existence of the right to notice, and vindicates the violation of
such right. It is sound, logical, and should be adopted as a general rule.
The assessment of nominal damages is left to the discretion of the court,84 or in labor cases, of the
Labor Arbiter and the successive appellate levels. The authority to nominate standards governing
the award of nominal damages has clearly been delegated to the judicial branch, and it will serve
good purpose for this Court to provide such guidelines. Considering that the affected right is a
property right, there is justification in basing the amount of nominal damages on the particular
characteristics attaching to the claimant's employment. Factors such as length of service, positions
held, and received salary may be considered to obtain the proper measure of nominal damages.
After all, the degree by which a property right should be vindicated is affected by the estimable value
of such right.

At the same time, it should be recognized that nominal damages are not meant to be compensatory,
and should not be computed through a formula based on actual losses. Consequently, nominal
damages usually limited in pecuniary value.85 This fact should be impressed upon the prospective
claimant, especially one who is contemplating seeking actual/compensatory damages.

Second. Actual or compensatory damages are not available as a matter of right to an employee

dismissed for just cause but denied statutory due process. They must be based on clear factual and
legal bases,86 and correspond to such pecuniary loss suffered by the employee as duly
proven.87 Evidently, there is less degree of discretion to award actual or compensatory damages.

I recognize some inherent difficulties in establishing actual damages in cases for terminations
validated for just cause. The dismissed employee retains no right to continued employment from the
moment just cause for termination exists, and such time most likely would have arrived even before
the employer is liable to send the first notice. As a result, an award of backwages disguised as
actual damages would almost never be justified if the employee was dismissed for just cause. The
possible exception would be if it can be proven the ground for just cause came into being only after
the dismissed employee had stopped receiving wages from the employer.

Yet it is not impossible to establish a case for actual damages if dismissal was for just cause.
Particularly actionable, for example, is if the notices are not served on the employee, thus hampering
his/her opportunities to obtain new employment. For as long as it can be demonstrated that the
failure of the employer to observe procedural due process mandated by the Labor Code is the
proximate cause of pecuniary loss or injury to the dismissed employee, then actual or compensatory
damages may be awarded.

Third. If there is a finding of pecuniary loss arising from the employer violation, but the amount
cannot be proved with certainty, then temperate or moderate damages are available under Article
2224 of the Civil Code. Again, sufficient discretion is afforded to the adjudicator as regards the
proper award, and the award must be reasonable under the circumstances.88 Temperate or nominal
damages may yet prove to be a plausible remedy, especially when common sense dictates that
pecuniary loss was suffered, but incapable of precise definition.

Fourth. Moral and exemplary damages may also be awarded in the appropriate circumstances. As
pointed out by the Decision, moral damages are recoverable where the dismissal of the employee
was attended by bad faith, fraud, or was done in a manner contrary to morals, good customs or
public policy, or the employer committed an act oppressive to labor.89 Exemplary damages may avail
if the dismissal was effected in a wanton, oppressive or malevolent manner.

Appropriate Award of Damages to the Agabons

The records indicate no proof exists to justify the award of actual or compensatory damages, as it
has not been established that the failure to serve the second notice on the Agabons was the
proximate cause to any loss or injury. In fact, there is not even any showing that such violation
caused any sort of injury or discomfort to the Agabons. Nor do they assert such causal relation.
Thus, the only appropriate award of damages is nominal damages. Considering the circumstances, I
agree that an award of Fifteen Thousand Pesos (P15,000.00) each for the Agabons is sufficient.

All premises considered, I VOTE to:

(1) DENY the PETITION for lack of merit, and AFFIRM the Decision of the Court of Appeals
dated 23 January 2003, with the MODIFICATION that in addition, Riviera Homes be

ORDERED to pay the petitioners the sum of Fifteen Thousand Pesos (P15,000.00) each, as
nominal damages.

(2) HOLD that henceforth, dismissals for just cause may not be invalidated due to the failure
to observe the due process requirements under the Labor Code, and that the only indemnity
award available to the employee dismissed for just cause are damages under the Civil Code
as duly proven. Any and all previous rulings and statements of the Court inconsistent with
this holding are now deemed INOPERATIVE.

DANTE O. TINGA
Associate Justice

Footnotes

Penned by Associate Justice Marina L. Buzon and concurred in by Associate Justices

1 

Josefina Guevara-Salonga and Danilo B. Pine.

Rollo, p. 41.
2 

Id., pp. 13-14.

3 

Id., p. 92.
4 

Id., p. 131.
5 

Id., p. 173.
6 

Id., p. 20.
7 

Id., pp. 21-23.

8 

Id., p. 45.
9 

10 
Id., pp. 42-43.

11 
Rosario v. Victory Ricemill, G.R. No. 147572, 19 February 2003, 397 SCRA 760, 767.
12 
Reyes v. Maxim's Tea House, G.R. No. 140853, 27 February 2003, 398 SCRA 288, 298.

13 
Santos v. San Miguel Corporation, G.R. No. 149416, 14 March 2003, 399 SCRA 172, 182.

14 
Columbus Philippine Bus Corporation v. NLRC, 417 Phil. 81, 100 (2001).

15 
De Paul/King Philip Customs Tailor v. NLRC, 364 Phil. 91, 102 (1999).

16 
Sta. Catalina College v. NLRC, G.R. No. 144483, 19 November 2003.

Cosmos Bottling Corporation v. NLRC, G.R. No. 111155, 23 October 1997, 281 SCRA 146,
17 

153-154.

18 
G.R. No. L-49875, 21 November 1979, 94 SCRA 472, 478.

19 
Judy Philippines, Inc. v. NLRC, 352 Phil. 593, 606 (1998).

20 
Philippine-Singapore Transport Services, Inc. v. NLRC, 343 Phil. 284, 291 (1997).

See Stolt-Nielsen Marine Services, Inc. v. NLRC, G.R. No. 128395, 29 December 1998,
21 

300 SCRA 713, 720.

22 
G.R. No. 117040, 27 January 2000, 323 SCRA 445.

23 
G.R. No. 80587, 8 February 1989, 170 SCRA 69.

24 
Id. at 76.

25 
Id.

Solesbee v. Balkcom, 339 U.S. 9, 16 (1950) (Frankfurter, J., dissenting). Due process is
26 

violated if a practice or rule "offends some principle of justice so rooted in the traditions and
conscience of our people as to be ranked as fundamental;" Snyder v. Massachusetts, 291
U.S. 97, 105 (1934).

Department Order No. 9 took effect on 21 June 1997. Department Order No. 10 took effect
27 

on 22 June 1997.

28 
G.R. No. 115394, 27 September 1995, 248 SCRA 535.

29 
G.R. No. 122666, 19 June 1997, 274 SCRA 386.

30 
G.R. No. 114313, 29 July 1996, 259 SCRA 699, 700.

Serrano, supra, Vitug, J., Separate (Concurring and Dissenting) Opinion, 323 SCRA 524,
31 

529-530 (2000).

32 
Capili v. NLRC, G.R. No. 117378, 26 March 1997, 270 SCRA 488, 495.

33 
Filipro, Inc. v. NLRC, G.R. No. L-70546, 16 October 1986, 145 SCRA 123.
 34 
Calalang v. Williams, 70 Phil. 726, 735 (1940).

35 
Gelos v. Court of Appeals, G.R. No. 86186, 8 May 1992, 208 SCRA 608, 616.

36 
G.R. No. 112100, 27 May 1994, 232 SCRA 613, 618.

37 
Art. 2221, Civil Code.

G.R. No. 108405. April 4, 2003 citing Kwikway Engineering Works v. NLRC, G.R. No.
38 

85014, 22 March 1991, 195 SCRA 526, 532; Aurelio v. NLRC, G.R. No. 99034, 12 April
1993, 221 SCRA 432, 443; and Sampaguita Garments Corporation v. NLRC, G.R. No.
102406, 17 June 1994, 233 SCRA 260, 265.

Id. citing Better Buildings, Inc. v. NLRC, G.R. No. 109714, 15 December 1997, 283 SCRA
39 

242, 251; Iran v. NLRC, G.R. No. 121927, 22 April 1998, 289 SCRA 433, 442.

40 
Savellano v. Northwest Airlines, G.R. No. 151783, 8 July 2003.

41 
Villar v. NLRC, G.R. No. 130935, 11 May 2000.

42 
Rollo, pp. 60-71.

43 
UST Faculty Union v. NLRC, G.R. No. 90445, 2 October 1990.

44 
"Whereas" clauses, P.D. No. 851.

"Art. 113. Wage deduction. - No employer, in his own behalf or in behalf of any person,
45 

shall make any deduction from the wages of his employees except:

(a) In cases where the worker is insured with his consent by the employer, and the
deduction is to recompense the employer for the amount paid by him as premium on
the insurance;

(b) For union dues, in cases where the right of the worker or his union to check off
has been recognized by the employer or authorized in writing by the individual
worker concerned; and

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

TINGA, J:

1
 380 Phil. 416 (2000).

2
 Id.

3
 Id. at 443, 445, 448.

4
 Rollo, p. 42.
5
 Id. at 32.

6
 Ibid.

7
 Id. at 59-60.

8
 Id. at 15.

9
 Id. at 34.

10
 Id. at 92.

 Id. at 91. The address indicated in the identification cards was "V 6 Cruz Iron Works, E.
11

Rodriguez Parañaque City."

12
 Ibid citing PAL v. NLRC, 279 SCRA 533.

 In a Decision dated 21 August 2000, penned by Commissioner V.R. Calaycay, and
13

concurred in by Presiding Commissioner R. Aquino and Commissioner A. Gacutan.

14
 Rollo, p. 127.

 Penned by Associate Justice M. Buzon, concurred in by Associate Justices J. Guevara-

15

Salonga and D. Pine.

16
 In their Petition for Certiorari before the Court of Appeals, the Agabons particularly claimed
that they were required to work on four holidays, namely, Araw Ng Kagitingan, National
Heroes Day, Bonifacio Day, and Rizal Day. See Rollo, p. 154.

 Deducted from Virgilio Agabon's thirteenth (13th) month pay were his SSS loan and
17

expenses for shoes. Rollo, pp. 171-172.

18
 Rollo, p. 173.

19
 Id. at 22.

20
 Id. at 23 citing Kingsize Manufacturing Corporation v. NLRC, 238 SCRA 349.

21
 Rollo, p. 20.

 Palencia v. NLRC, G.R. No. L-75763, 21 August 1987; Pure Blue Industries v. NLRC, G.R.
22

No. 115879, 16 April 1997.

23
 Rollo, pp. 129, 170.

24
 Both the NLRC and the Court of Appeals noted that the 10 June 1999 conference between
the Agabons and Riviera Homes was at the behest of the Agabons, thus countering the
claim of strained relations. Rollo, pp. 130, 170-171.

25
 Rollo, p. 91.
26
 Supra note 6.

27
 Id.

28
 Supra note 1.

29
 Supra note 1 at 446.

30
 See Section 1, Republic Act No. 1052, which states:

Sec. 1. In cases of employment, without a definite period, in a commercial, industrial,

or agricultural establishment or enterprise, the employer or the employee may
terminate at any time the employment with just cause; or without just cause in the
case of an employee by serving written notice on the employer at least one month in
advance, or in the case of an employer, by serving such notice to the employee at
least one month in advance or one-half month for every year of service of the
employee, whichever is longer, a fraction of at least six months being considered as
one whole year.

The employee, upon whom no such notice was served in case of termination of
employment without just cause shall be entitled to compensation from the date of
termination of his employment in an amount equivalent to his salaries or wages
corresponding to the required period of notice.

31
 124 Phil. 698 (1966).

32
 Id. at 703.

33
 139 Phil. 747 (1969).

34
 Id. at 754.

35
 Serrano v. NLRC, supra note 1 at 447.

36
 G.R. No. L-38482, 18 June 1976, 71 SCRA 470.

37
 Serrano v. NLRC, supra note 1 at 480.

38
 Serrano, supra note 1 at 445-446.

39
 G.R. No. 81561, 18 January 1991, 193 SCRA 57.

40
 Id. at 67.

41
 See G. Gunther and K. Sullivan, Constitutional Law (14th ed.) at 867.

42
 Separate Opinion of Justice Panganiban, p. 12.
43
 See e.g., Morehead v. State of New York, 298 U.S. 587 (1936), which affirmed the
invalidity of minimum wage laws as previously declared in Adkins v. Children's Hospital, 261
U.S. 525 (1923).

44
 Famously justified by the Supreme Court as an assertion of the "liberty of contract", or "the
right to contract about one's affairs", as contained in the Fourteenth Amendment. Adkins v.
Children's Hospital, 261 U.S. 525, 545. (1923). But as Justice Holmes famously critiqued:
"Contract is not specially mentioned in the text (of the Fourteenth Amendment) that we have
to construe. It is merely an example of doing what you want to do, embodied in the word
liberty. But pretty much all law consists in forbidding men to do some things that they want to
do, and contract is no more exempt from law than other acts." Adkins v. Children's
Hospital. Id. at 568.

45
 See People v. Tudtud, G.R. No. 144037, 26 September 2003.

46
 G.R. No. 106027, 234 SCRA 441, 25 July 1994.

47
 Id. at 451-452.

 335 Phil. 82 (1997). The Court therein was divided, with twelve voting for, and three
48

against the decision. Interestingly, both Justices Puno and Panganiban adopted the
dissenting position that the provisions of Article XII of the Constitution alone were insufficient
to accord the Filipino bidder a preferential right to obtain the winning bid for Manila Hotel.
Their concession as to the enforceability of paragraph 2, Section 10, Article XII of the
Constitution without enabling legislation was in a situation wherein if the bids of the Filipino
and the foreign entity were tied. Id. at 154 (J. Puno, dissenting) and 154 (J.
Panganiban, dissenting).

49
 Id. at 102 citing 16 Am Jur. 2d 281.

50
 Id. at 103-104 citing 16 Am Jur 2d 283-284.

51
 II Record of the Constitutional Commission: Proceedings and Debates 613.

52
 Id. at 617.

53
 Id. at 626.

54
 Id. at 644.

55
 The test suggested by Justice Puno in the Manila Hotel case, supra note 47, is as definitive
as any proposed method of analysis could ever be. "A searching inquiry should be made to
find out if the provision is intended as a present enactment, complete in itself as a definitive
law, or if it needs future legislation for completion and enforcement. The inquiry demands a
micro-analysis and the context of the provision in question." J. Puno, dissenting, id. at 141-
142. See also Rev. Pamatong v. COMELEC, G.R. No. 161872, 13 April 2004.

 J. Bernas, The 1987 Constitution of the Republic of the Philippines: A Commentary (1996),
56

at 1064.

57
 Article 3, Chapter I of the Labor Code declares:
 Declaration of basic policy.—The State shall afford full protection to labor, promote
full employment, ensure equal work opportunities regardless of sex, race or creed,
and regulate the relations between workers and employers. The State shall assure
the rights of workers to self-organization, collective bargaining, security of tenure and
just and humane conditions of work.

 See Phil. Aeolus Automotive United Corp. v. NLRC, 387 Phil 250 (2000); Gonzales v.
58

National Labor Relations Commission, 372 Phil 39 (1999); Jardine Davies v. National Labor
Relations Commission, 370 Phil 310 (1999); Pearl S. Buck Foundation v. National Labor
Relations Commission, G.R. No. 80728, February 21, 1990, 182 SCRA 446; Bagong Bayan
Corporation, Realty Investors & Developers v. National Labor Relations Commission, G.R.
No. 61272, September 29, 1989, 178 SCRA 107; Labajo v. Alejandro, et al., G.R. No/ L-
80383, September 26, 1988, 165 SCRA 747; D.M. Consunji, Inc. v. Pucan, et al., G.R. No. L-
71413, March 21, 1988; 159 SCRA 107; Santos v. National Labor Relations Commission,
G.R. No. L-76271,September 21, 1987, 154 SCRA 166; People's Bank & Trust Co. v.
People's Bank & Trust Co. Employees Union, 161 Phil 15 (1976); Philippine Movie Pictures
Association v. Premiere Productions, 92 Phil. 843 (1953); Phil. Refining Co. v. Garcia, supra.

59
 Serrano v. NLRC, supra note 1.

60
 Section 2, Rule XXIII, Book V, Omnibus Rules Implementing the Labor Code.

61
 Supra note 2.

62
 Serrano v. NLRC, supra note 1 at 445.

63
 G.R. No. 80587, 8 February 1989, 170 SCRA 69.

64
 Serrano, supra note 1 at 453.

65
 Serrano, supra note 1 at 485; J. Vitug, separate concurring and dissenting.

66
 Balaquezon EWTU v. Zamora, G.R. No. L-46766-7, 1 April 1980, 97 SCRA 5, 8.

 "xxx without prejudice, however, to whatever rights, benefits, and privileges he may have
67

under the applicable individual or collective bargaining agreement with the employer or
voluntary employer policy or practice". Section 7, Rule 1, Book VI, Omnibus Rules
Implementing the Labor Code.

 See Philippine Rabbit Bus Lines, Inc. v. NLRC, G.R. No. 98137, 15 September 1997, 279
68

SCRA 106, 115, citing cases.

 Aguila v. CFI, G.R. No. L-48335, 15 April 1988, 160 SCRA 352, 360. "For all its conceded
69

merits, equity is available only in the absence of law and not as its replacement. Equity is
described as justice outside legality, which simply means that it cannot supplant although it
may, as often happens, supplement the law." Id.

70
 170 SCRA 69 (1989).

71
 G.R. No. 112100, May 27, 1994, 232 SCRA 613.
  Black's Law Dictionary, 1990 ed., p. 1133; citing Hidden Hollow Ranch v. Collins, 146
72

Mont. 321, 406 P.2d 365, 368.

73
 170 SCRA 69 (1989).

74
 Serrano v. NLRC, supra note 1 at 442.

 See e.g., Reta v. NLRC, G.R. No. 112100, 27 May 1994, 232 SCRA 613, wherein the
75

Court held that "private respondents should pay petitioner P10,000.00 as penalty for failure
to comply with the due process requirement." Id. at 618.

76
 A. Tolentino, Civil Code of the Philippines (1990 ed.), at 11; citing 9 Fabres 10.

77
 Article 2221, Civil Code.

78
 Ferrer v. NLRC, G.R. No. 100898, 5 July 1993; citing Callanta vs. Carnation Philippines,
Inc., 145 SCRA 268.

79
 347 Phil. 521, 531 (1997).

80
 Id. at 531.

81
 Id.

82
 G.R. No. 121927, 22 April 1998.

 G.R. No. 121698, 26 March 1998. The ponente in all three cases was Justice Flerida Ruth
83

Romero.

 See Article 2216, Civil Code. See also Saludo v. Court of Appeals, G.R. No. 95536, 23
84

March 1992.

85
 In relation to Article 2224 of the Civil Code, nominal damages are less than
temperate/moderate damages or compensatory damages.

86
 See De la Paz, Jr. v. IAC, 154 SCRA 65; Chavez v. Gonzales, 32 SCRA 547.

87
 See Art. 2199, Civil Code.

88
 Art. 2225, Civil Code.

89
 Page 16, Decision, citing jurisprudence.

CASE DIGEST LINK: https://www.scribd.com/doc/125851634/Agabon-v-NLRC-Digest

RIGHT TO
EQUAL
PROTECTION
OF THE
LAW
Duncan Association vs. Glaxo Welcome, G.R. No. 162944, September 17, 2004

FULL TEXT:

G.R. No. 162994             September 17, 2004

DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A. TECSON, petitioners,

vs.
GLAXO WELLCOME PHILIPPINES, INC., Respondent.

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 Court finds no merit in the petition.

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.

Specifically, this means that employees are expected:

a. To avoid having personal or family interest, financial or otherwise, in any

competitor supplier or other businesses which may consciously or unconsciously
influence their actions or decisions and thus deprive Glaxo Wellcome of legitimate
profit.

b. To refrain from using their position in Glaxo Wellcome or knowledge of Company

plans to advance their outside personal interests, that of their relatives, friends and
other businesses.

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.

1.1. Employee Relationships

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

As held in a Georgia, U.S.A case,22 it is a legitimate business practice to guard business

confidentiality and protect a competitive position by even-handedly disqualifying from jobs male and
female applicants or employees who are married to a competitor. Consequently, the court ruled than
an employer that discharged an employee who was married to an employee of an active competitor
did not violate Title VII of the Civil Rights Act of 1964.23 The Court pointed out that the policy was
applied to men and women equally, and noted that the employer’s business was highly competitive
and that gaining inside information would constitute a competitive advantage.

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:

By the very nature of his employment, a drug salesman or medical representative is

expected to travel. He should anticipate reassignment according to the demands of their
business. It would be a poor drug corporation which cannot even assign its representatives
or detail men to new markets calling for opening or expansion or to areas where the need for
pushing its products is great. More so if such reassignments are part of the employment
contract.33

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

WHEREFORE, the Petition is DENIED for lack of merit. Costs against petitioners.

SO ORDERED.

Puno, Austria-Martinez, Callejo, Sr., and Chico-Nazario*, JJ., concur.

Footnotes

 Penned by Associate Justice Rosmari D. Carandang and concurred in by Justices Conrado

1

M. Vasquez, Jr. and Mercedes Gozo-Dadole. Rollo,pp. 22-32.

 Duncan Association of Detailman-PTGWO and Pedro A. Tecson, petitioners, v. Glaxo

2

Wellcome Philippines, Inc., respondent.

3
 Now Astra Zeneca Pharmaceuticals, Inc.

4
 Rollo, pp. 28-32.

5
 Id. at 55.

6
 Id. at 9.
7
 Id. at 9-11.

8
 Id. at 14-17.

9
 Id. at 96-112.

10
 Id. at 99-100.

11
 Id. at 101-102.

12
 Id. at 102-103.

13
 Id. at 102-104.

14
 Id. at 104-105.

15
 Id. at 64.

16
 Id. at 106-110.

17
 See Decision of the Court of Appeals; Rollo, pp. 23-24.

 Item No. 6 of Tecson’s employment contract cited by the Court of Appeals in its
18

Decision, Id.

19
 Excerpt of Glaxo’s Employee Handbook, Annex "A" of respondent’s Comment, Id. at 114.

20
 Section 3, Article XIII of the Constitution provides:

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.

 Sta. Catalina College v. National Labor Relations Commission, G.R. No. 144483,
21

November 19, 2003.

 Emory v. Georgia Hospital Service Association (1971), DC Ga., 4 CCH EPD ¶ 7785, 4
22

BNA FEP Cas 891, affd (CA5) 446 F2d 897, 4 CCH EPD ¶ 7786; Cited 45 Am Jr 2d Sec.
469.

23
 42 USCS §§2000e–2002e–17. Title VII prohibits certain employers, employment agencies,
labor organizations, and joint labor-management training committees from discriminating
against applicants and employees on the basis of race or color, religion, sex, national origin,
or opposition to discriminatory practices.

There is no similar legislation in the Philippines.

 Avery v. Midland County, 390 US 474, 20 L. Ed 2d 45, 88 S Ct 1114, on remand (Tex) 430
24

SW2d 487; Cooper v. Aaron, 358 US 1, 3 L Ed 2d 5, 78 S Ct 1401.

  District of Columbia v. Carter, 409 US 418, 34 L.Ed.2d 613, 93 S. Ct. 602, 35 L.Ed.2d 694,
25

93 S. Ct. 1411; Moose Lodge No. 107 v. Irvis, 407 US 163, 32 L.Ed.2d 627, 92 S. Ct. 1965;
United States v. Price, 383 US 787, 16 L.Ed. 2d 267, 86 S. Ct. 1152; Burton v. Wilmington
Parking Authority, 365 US 715, 6 L.Ed.2d 45, 81 S. Ct. 856; Shelley v. Kraemer, 334 US 1,
92 L.Ed.1161, 68 S. Ct. 836, 3 ALR2d 441; United States v. Classic, 313 US 299, 85 L.Ed
1368, 61 S. Ct. 1031, 86 L.Ed 565, 62 S. Ct. 51; Nixon v. Condon, 286 US 73, 76 L.Ed. 984,
52 S. Ct. 484, 88 ALR 458; Iowa-Des Moines Nat. Bank v. Bennet, 284 US 239, 76 L.Ed
265, 52 S. Ct. 133; Corrigan v. Buckley, 271 US 323, 70 L.Ed. 969, 46 S. Ct. 521; U.S.
¾Adickes v. S. H. Kress & Co., N.Y., 90 S. Ct. 1598, 398 U.S. 144, 26 L. Ed. 2d 142.

 The equal protection clause contained in the Fourteenth Amendment of the U.S.
26

Constitution is a restriction on the state governments and operates exclusively upon them. It
does not extend to authority exercised by the Government of the United States. 16 A Am Jur
2d §742.

 Gilmore v. Montgomery, 417 US 556, 41 L Ed 2d 304, 94 S Ct 2416; Evans v. Newton, 382

27

US 296, 15 L Ed 2d 373, 86 S Ct 486; Anderson v. Martin, 375 US 399, 11 L Ed 2d 430, 84

S Ct 454; Peterson v. Greenville, 373 US 244, 10 L Ed 2d 323, 83 S Ct 1119; Burton v.
Wilmington Parking Authority, supra note 25.

28
 Decision of the Court of Appeals, Rollo, p. 28.

 Article 1159, Civil Code. See National Sugar Trading and/or the Sugar Regulatory
29

Administration v. Philippine National Bank, G.R. No. 151218, January 18, 2003, 396 SCRA
528; Pilipinas Hino, Inc. v. Court of Appeals, G.R. No. 126570, August 18, 2000, 338 SCRA
355.

 Leonardo v. National Labor Relations Commission, et al., G.R. Nos. 125303, and 126937,
30

June 16, 2000, 333 SCRA 589.

31
 Rollo, pp. 30-31.

32
 G.R. No. L-76959, October 12, 1987, 154 SCRA 713.

33
 Id. at 719.

34
 Decision of the Court of Appeals, Rollo, pp. 24-27.

CASE DIGEST:
DUNCAN ASSOCIATION OF DETAILMAN-PTGWO v. GLAXO WELLCOME PHILIPPINES,
GR No. 162994, 2004-09-17
Facts:
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-Sur
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
Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome Philippines,
Inc. (Glaxo) as medical representative... 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.
Tecson entered into a romantic relationship with Bettsy, an employee of Astra
Pharmaceuticals[3] (Astra), a competitor of Glaxo
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.
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.
With Bettsy's separation from her company, the potential conflict of interest would be
eliminated.
Tecson applied for a transfer in Glaxo's milk division,... Tecson applied for a transfer in
Glaxo's milk division, thinking that since Astra did not have a milk division,... 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 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.
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 P50,000.00 but he
declined... the offer.
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.
Petition for Review with the Court of Appeals assailing the NCMB Decision.
Court of Appeals promulgated its Decision denying the Petition for Review on the ground
that the NCMB did not err in rendering its Decision.
prohibiting its employees from... having personal relationships with employees of competitor
companies is a valid exercise of its management prerogatives.[4]
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
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;
It likewise asserts that the policy does not prohibit marriage per se but only proscribes
existing or future relationships with employees of competitor companies,... 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
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.

Ruling:
Tecson's supervisors at Glaxo constantly reminded him about its effects on his employment
with the company and on the company's interests.
WHEREFORE, the Petition is DENIED for lack of merit.
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.
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
The law    also... recognizes that management has rights which are also entitled to respect
and enforcement in the interest of fair play... 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.
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 Tecson, 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.
He is therefore estopped from questioning said policy.
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
Yrasuegui vs. Philippine Airlines, Inc., G.R. No. 168801, October 17, 2008

FULL TEXT:

G.R. No. 168081              October 17, 2008

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.

After a meticulous consideration of all arguments pro and con, We uphold the legality of dismissal.

Separation pay, however, should be awarded in favor of the employee as an act of social justice or
based on equity. This is so because his dismissal is not for serious misconduct. Neither is it
reflective of his moral character.

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 Manual1 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 commitment3 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,

F/S Armando Yrasuegui4

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.

Labor Arbiter, NLRC and CA Dispositions

On November 18, 1998, Labor Arbiter Valentin C. Reyes ruled13 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;

b. Attorney’s fees of five percent (5%) of the total award.

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

Both parties appealed to the National Labor Relations Commission (NLRC).19

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 denied21 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 judgment24 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

By Decision dated August 31, 2004, the CA reversed31 the NLRC:

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.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING

THAT PETITIONER’S OBESITY CAN BE A GROUND FOR DISMISSAL UNDER PARAGRAPH (e)
OF ARTICLE 282 OF THE LABOR CODE OF THE PHILIPPINES;

II.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING

THAT PETITIONER’S DISMISSAL FOR OBESITY CAN BE PREDICATED ON THE "BONA FIDE
OCCUPATIONAL QUALIFICATION (BFOQ) DEFENSE";

III.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING

THAT PETITIONER WAS NOT UNDULY DISCRIMINATED AGAINST WHEN HE WAS DISMISSED
WHILE OTHER OVERWEIGHT CABIN ATTENDANTS WERE EITHER GIVEN FLYING DUTIES OR
PROMOTED;

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 x45

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

Both arguments must fail.

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 guaranty86 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
At this point, Article 223 of the Labor Code finds relevance:

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.

In insisting that he be reinstated to his actual position despite being overweight, petitioner in effect

wants to render the issues in the present case moot. He asks PAL to comply with the impossible.
Time and again, the Court ruled that the law does not exact compliance with the impossible.100

V. Petitioner is entitled to separation pay.

Be that as it may, all is not lost for petitioner.

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.

Exceptionally, separation pay is granted to a legally dismissed employee as an act "social

justice,"101 or based on "equity."102 In both instances, it is required that the dismissal (1) was not for
serious misconduct; and (2) does not reflect on the moral character of the employee.103

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.

WHEREFORE, the appealed Decision of the Court of Appeals is AFFIRMED but MODIFIED in that

petitioner Armando G. Yrasuegui is entitled to separation pay in an amount equivalent to one-half
(1/2) month’s pay for every year of service, which should include his regular allowances.

SO ORDERED.

RUBEN T. REYES
Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice<brchairperson< p="">

MA. ALICIA AUSTRIA-MARTINEZ MINITA V. CHICO-NAZARIO

Associate Justice Associate Justice

</brchairperson<>

ANTONIO EDUARDO B. NACHURA

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.

CONCHITA CARPIO MORALES

Associate Justice
Acting 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

Footnotes
1
 Rollo, p. 136; Annex "A" of Annex "G."

The Cabin Crew Administration Manual of PAL provides:

"C. A cabin crew one (1) to four (4) pounds over his/her weight maximum shall be
given a verbal warning and a two (2)-week period in which to meet weight standards.

1. A record of the verbal warning shall be maintained in the cabin crew’s permanent
file.

2. A cabin crew who fails to progress shall be given a written letter and an additional
two (2)-week period to meet weight standards.

3. A cabin crew who fails to reach the prescribed weights standard as required shall
be removed from schedule.

a. A cabin crew who has been removed from schedule shall report to his/her
assigned Check Cabin Crew for a weight check every two (2) weeks and will
be required to lose two (2) pounds per week.

b. A cabin crew who fails to reach his/her required weight standard within a
maximum period of ninety (90) days shall be terminated.

c. A cabin crew will return to active flight duty when he/she has reduced to
his/her maximum weight requirement.

1. A cabin crew who returns to active flight duty after being removed from
schedule and within the following three (3) months exceeds the maximum
weight standard will be removed from schedule until he/she reached his/her
maximum allowable standard.

D. A cabin crew who is five (5) pounds or more over his/her weight maximum will be
given a written letter and a two (2) week period to show substantial weight reduction
to meet standards. At the end of the initial two (2) weeks period, a cabin crew who
has shown progress will continue on weight check until he/she reached his/her
maximum allowable standard.

1. Cabin crew who fails to show substantial weight reduction shall be removed from
schedules.

a. Refer to letter C above for discipline guideline.

2. A cabin crew who is ten (10) pounds or more over his/her weight maximum shall
be removed from schedule immediately."

MEN
HEIGHT SMALL FRAME MEDIUM FRAME LARGE FRAME
FEET inches w/o shoes
Five 7 128-137 134-147 142-161
8 132-141 138-152 147-166
 9 136-145 142-156 151-170
10 140-150 146-160 155-174
11 144-154 150-165 159-179
Six 0 148-158 154-170 164-184
1 152-162 158-175 168-189
2 156-167 162-180 173-194
3 160-171 167-185 178-199
4 164-175 172-190 180-204
WOMEN
HEIGHT SMALL FRAME MEDIUM FRAME LARGE FRAME
FEET inches w/o shoes
Five 2 102-110 107-119 115-131
3 105-113 110-122 118-134
4 108-116 113-126 121-138
5 111-119 116-130 125-142
6 114-123 120-135 129-146
7 118-127 124-139 133-150
8 122-131 128-143 137-154
9 126-135 132-147 141-158
10 130-140 136-151 145-163
11 134-144 144-159 153-173

2
 Annex "C" of Annex "G."

3
 Annex "D" of Annex "G."

4
 Rollo, p. 139.

5
 Annex "E" of Annex "G."

6
 Annex "F" of Annex "G."

7
 Annex "G" of Annex "G."

8
 Annex "H" of Annex "G."

9
 Annex "J" of Annex "G."

10
 Annex "K" of Annex "G."

11
 Annex "M" of Annex "G."

12
 Annex "N" of Annex "G."

 Rollo, pp. 94-99; Annex "E." NLRC NCR Case No. 00-05-03078-96-A, promulgated on
13

November 18, 1998.

14
 Id. at 99.
15
 Id. at 96.

16
 Id. at 96-98.

17
 Id. at 98.

18
 Id.

19
 Annexes "N" and "O."

20
 Annex "Q."

21
 Annex "U."

22
 Annex "R."

23
 Annex "V."

 Rollo, pp. 76-88; Annex "C." NLRC NCR Case No. 019725-99, promulgated on June 23,
24

2000. Penned by Commissioner Alberto R. Quimpo and concurred in by Commissioner

Vicente S.E. Veloso.

25
 Id. at 87-88.

26
 Id. at 83.

27
 Id.

28
 Id. at 83-86.

29
 Annex "E."

30
 Annex "BB."

 Rollo, 46-64; Annex "A." CA-G.R. SP No. 63027, promulgated on August 31, 2004.
31

Penned by Associate Justice Arturo D. Brion (now a member of this Court), with Associate
Justices Delilah Vidallon-Magtolis and Eliezer R. De los Santos, concurring.

32
 Id. at 64.

33
 Id. at 60.

34
 Id. at 61.

35
 Id.

36
 Id.

37
 Id.
38
 Id. at 62.

39
 Id.

40
 Id.

41
 Annex "B."

42
 Rollo, p. 70.

43
 Id. at 659-660.

44
 Termination by employer. – An employer may terminate an employment for any of the
following causes.

a) Serious misconduct or willful disobedience by the employee of the lawful orders of

his employer or representative in connection with his work;

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

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

d) Commission of a crime or offense by the employee against the person of his

employer or any immediate member of his family or his duly authorized
representatives; and

e) Other causes analogous to the foregoing.

45
 Id. at 60-61.

46
 Id. at 663.

47
 G.R. No. L-17780, August 24, 1962, 5 SCRA 879.

48
 Nadura v. Benguet Consolidated, Inc., id. at 881-882.

49
 Rollo, p. 153.

50
 Id.

51
 Id. at 137.

52
 10 F. 3d 17, 20 (Ist Cir. 1993).

53
 (a) Promulgation of rules and regulations

No otherwise qualified individual with handicaps in the United States, as defined in

section 706(8) of this title, shall, solely by reason of her or his handicap, be excluded
from the participation in, be denied the benefits of, or be subjected to discrimination
 under any program or activity receiving Federal financial assistance or under any
program or activity conducted by any Executive agency or by the United States
Postal Service. The head of each such agency shall promulgate such regulations as
may be necessary to carry out the amendments to this section made by the
Rehabilitation, Comprehensive Services, and Developmental Disabilities Act of 1978.
Copies of any proposed regulation shall be submitted to appropriate authorizing
committees of the Congress, and such regulation may take effect no earlier than the
thirtieth day after the date on which such regulation is so submitted to such
committees.

54
 Id. at 71.

55
 Black’s Law Dictionary, 6th ed.

56
 45A Am. Jur. 2d, Job Discrimination, § 269.

57
 Rollo, p. 669.

58
 Id. at 670.

 Constitution (1987), Art. XIII, Sec. 3. The State shall afford full protection to labor, local and
59

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 to investments, and to expansion and growth.

60
 ART. 3. Declaration of Basic Policy. – The State shall afford protection to labor, promote
full employment, ensure equal work opportunities regardless of sex, race or creed, and
regulate the relations between workers and employers. The State shall assure the rights of
workers to self-organization, collective bargaining, security of tenure, and just and humane
conditions of work.

61
 Approved on March 24, 1992.

 Sec. 32. Discrimination of Employment. – No entity, whether public or private shall

62

discriminate against a qualified disabled person by reason of disability in regard to job

application procedures, the hiring, promotion, or discharge of employees compensation, job
training and other terms, conditions and privileges of employment. The following constitute
acts of discrimination:

a) Limiting, segregating or classifying a disabled job applicant in such a manner that

adversely affects his work opportunities;

b) Using qualification standards, employment tests or other selection criteria that

screen out or tend to screen out a disabled person unless such standards, tests or
other selection criteria are shown to be related for the position in question and are
consistent with business necessity;

c) Utilizing standards, criteria, or methods of administration that:

1) have the effect of discrimination on the basis of disability; or

2) perpetuate the discrimination of others who are the subject to common

administrative control.

d) Providing less compensation, such as salary, wage or other forms of remuneration

and fringe benefits, to qualified disabled employee, by reason of his disability, than
the amount to which a non-disabled person performing the same work is entitled;

e) Favoring a non-disabled employee over a qualified disabled employee with

respect to promotion, training opportunities, study and scholarship grants, solely on
account of the latter’s disability;

f) Re-assigning or transferring a disabled employee to a job or position he cannot

perform by reason of his disability;

g) Dismissing or terminating the services of a disabled employee by reason of his

disability unless the employer can prove that he impairs the satisfactory performance
of the work involved to the prejudice of the business entity; Provided, however, That
the employer first sought to provide reasonable accommodations for the disabled
persons;

h) Failing to select or administer in the most effective manner employment tests

which accurately reflect the skills, aptitude or other factor of the disabled applicant or
employee that such test purports to measure, rather than the impaired sensory,
manual or speaking skills of such applicant or employee, if any; and

i) Excluding disabled persons from membership in labor unions or similar

organizations.

63
 3 SCR 3 (1999).

 The focus is not on the validity of the particular standard but rather on the validity of its
64

more general purpose.

 To show that the standard is reasonably necessary, it must be demonstrated that it is
65

impossible to accommodate individual employees sharing the characteristics of the claimant

without imposing undue hardship on the employer.
66
 G.R. No. 164774, April 12, 2006, 487 SCRA 228.

 Star Paper Corporation v. Simbol, id. at 242-243, citing Flood, R.G. and Cahill, K.A., The
67

River Bend Decision and How It Affects Municipalities’ Personnel Rule and Regulations
(June 1993), Illinois Municipal Review, p. 7.

68
 Id. at 243.

 Philippine Telegraph and Telephone Company v. National Labor Relations Commission,

69

G.R. No. 118978, May 23, 1997, 272 SCRA 596, 613.

70
 G.R. No. 162994, September 17, 2004, 438 SCRA 343.

71
 Rollo, p. 96. "In light of the nature of complainant’s function as a cabin flight crew member,
the setting of weight standard by company policy finds relevance, and in fact,
reasonableness. But in judging what is reasonably set for a cabin crew member to comply
should not be viewed in isolation from its obvious ultimate objective, which is to maintain
agility at all time while on flight, especially in time of emergencies, effect to grooming merely
secondary. x x x"

72
 Id. at 84. "Observe that the reasonableness of the rule [i.e., the weight standards of PAL]
was already established with his [i.e., the Labor Arbiter] finding – to which we agree – that
the aim thereof is to maintain their agility to as to assure the air safety of passengers, as well
by his finding of the parties unanimity in the correctness of the weight range that should be
observed by complainant as prescribed in the rule. x x x"

73
 Id. at 61-62. "While the private respondent disputes in his position paper the
reasonableness of PAL’s weight standards, the NLRC’s assailed decision finds the weight
standard to be valid and reasonable. In our view, this is a fair and correct assessment as the
weight limits are not whimsical standards. They are standards put in place by an air carrier
for reasons of safety in order to comply with the extraordinary diligence in the care of
passengers that the law exacts. x x x"

74
 Civil Code, Art. 1733.

 Id., Art. 1755. Thus, in case of death or injuries to passengers, a common carrier is
75

presumed to have been at fault or to have acted negligently, unless it proves that it observed
extraordinary diligence. (Id., Art. 1756)

Not only that. The responsibility of a common carrier for the safety of passengers
cannot be dispensed with or lessened by stipulation, by the posting of notices, by
statements on tickets, or otherwise. (Id., Art. 1757) So much so that when a
passenger is carried gratuitously, a stipulation limiting the liability for negligence of a
common carrier is valid, but not for willful acts or gross negligence. (Id., Art. 1758)
Even a reduction of fare does not justify any limitation of the liability of the common
carrier. (Id.)

The burden that the law imposes on a common does not stop there. A common
carrier is liable for the death or injuries to passengers through the negligence or
willful acts of its employees. (Id., Art. 1759) This liability attaches although such
employees may have acted beyond the scope of their authority or in violation of the
 orders of the common carrier. (Id.) Truly, the requirement of the law is very strict in
that the liability of a common carrier for the death of or injuries to passengers does
not cease upon proof that it exercised all the diligence of a good father of a family in
the selection and supervision of its employees. (Id.) The liability of a common carrier
cannot be eliminated or limited by stipulation, by the posting of notices, by
statements on the tickets or otherwise. (Id., Art. 1760) Although the passenger must
observe the diligence of a good father of a family to avoid injury to himself (id., Art.
1761), the contributory negligence of the passenger does not bar recovery of
damages for his death or injuries, if the proximate cause is the negligence of the
common carrier. (Id., Art. 1762) In such case, the amount of damages shall only be
equitably reduced. (Id.) It does not totally excuse the common carrier.

Lastly, a common carrier is responsible for injuries suffered by a passenger on the

account of the willful acts or negligence of the other passengers or of strangers, if the
employees of the common carrier through the exercise of the diligence of a good
father of a family could have prevented or stopped the act or omission. (Id., Art.
1763)

76
 472 US 400 (1985).

77
 Rules of Court, Rule 129, Sec. 2.

 See Duncan Association of Detailman-PTGWO v. Glaxo Wellcome Philippines, Inc., G.R.

78

No. 162994, September 17, 2004, 438 SCRA 343, 356.

79
 Rollo, p. 673.

80
 Id. at 63.

 Jimenez v. National Labor Relations Commission, G.R. No. 116960, April 2, 1996, 256
81

SCRA 84, 89.

82
 Rollo, p. 63.

83
 Zarate, Jr. v. Olegario, G.R. No. 90655, October 7, 1996, 263 SCRA 1.

84
 Id.

 Philippine Airlines, Inc. v. National Labor Relations Commission, G.R. No. 117038,
85

September 25, 1997, 279 SCRA 445.

86
 Constitution (1987), Art. III, Sec. 1. "No person shall be deprived of life, liberty, or property
without due process of law, nor shall any person be denied the equal protection of the
laws."

87
 People v. Marti, G.R. No. 81561, January 18, 1991, 193 SCRA 57, 65.

 Id. at 67. The Court, in buttressing its ruling also cited the Sponsorship Speech of
88

Commissioner Bernas in the Bill of Rights; Record of the Constitutional Commission, Vol. 1,
p. 674; July 17, 1986, viz.:
 "First, the general reflections. The protection of the fundamental liberties in the
essence of constitutional democracy. Protection against whom? Protection against
the state. The Bill of Rights governs the relationship between the individual and the
state. Its concern is not the relation between individuals, between a private individual
and other individuals. What the Bill of Rights does is to declare some forbidden
zones in the private sphere inaccessible to any power holder."

 United States Constitution, Fourteenth Amendment (ratified July 9, 1868), Sec. 1. "All
89

persons born or naturalized in the United States, and subject to the jurisdiction thereof, are
citizens of the United States and of the State wherein they reside. No State shall make or
enforce any law which shall abridge the privileges or immunities of citizens of the United
States; nor shall any State deprive any person of life, liberty, or property, without due
process of law; nor deny to any person within its jurisdiction the equal protection of the laws."

 16B Am. Jur. 2d, Constitutional Law, § 799 citing District of Columbia v. Carter, 409 US
90

418, 93 S. Ct. 602, 34 L. Ed. 2d 613 (1973), reh’g denied, 410 US 959, 93 S. Ct. 1411, 35 L.
Ed. 2d 694 (1973) and on remand to, 489 F. 2d 1272 (D.C. Cir. 1974); Moose Lodge No.
107 v. Irvis, 407 US 163, 92 S. Ct. 1965, 32 L. Ed. 2d 627 (1972); Equality Foundation of
Greater Cincinnati, Inc. v. City of Cincinnati, 54 F. 3d 261, 67 Fair Empl. Prac. Cas. (BNA)
1290, 66 Empl. Prac. Dec. (CCH) ¶ 43542, 1995 FED App. 147P (6th Cir. 1995), cert.
granted, judgment vacated on other grounds, 116 S. Ct. 2519, 135 L. Ed. 2d 1044, 71 Fair
Empl. Prac. Cas. (BNA) 64 (US 1996), ON REMAND TO, 128 F. 3d 289, 75 Fair Empl. Prac.
Cas. (BNA) 115, 1997 FED App. 318P (6th Cir. 1997); Gallagher v. Neil Young Freedom
Concert, 49 F. 3d 1442, 98 Ed. Law Rep. 639 (10th Cir. 1995); Mahoney v. Babbitt, 105 F.
3d 1452 (DC Cir. 1997), reh’g denied, 113 F. 3d 219 (DC Cir. 1997).

 Id., citing Medical Institute of Minnesota v. National Ass’n of Trade and Technical Schools,
91

817 F. 2d 1310, 39 Ed. Law Rep. 62 (8th Cir. 1987); First Nat. Bank of Kansas City v.
Danforth, 523 S.W. 2d 808 (Mo. 1975), cert. denied, 421 US 992, 95 S. Ct. 1999, 44 L. Ed.
2d 483 (1975) and cert. denied, 421 US 1016, 95 S. Ct. 2424, 44 L. Ed. 2d 685 (1975).

92
 Rollo, p. 687.

 Pioneer Texturizing Corporation v. National Labor Relations Commission, G.R. No.

93

118651, October 16, 1997, 280 SCRA 806.

94
 Rollo, p. 684.

95
 Id. at 648. Petitioner was informed that:

"In connection with our manifestation dated 25 January 2001 you are hereby directed
to physically return to work effective 01 March 2001. You are to report to the Office of
the Vice-President-Airport Services.

Pending appeal you are going to be assigned to a ‘substantially equivalent’ position

in accordance with the 18 November 1998 Decision of Labor Arbiter Ramon Valentin
Reyes as modified by the 23 June Resolution of the National Labor Relations
Commission.
 Failure on your part to heed this order may be a ground to administratively charge
you in accordance with the Company Code of Discipline, policy, rules and
regulations.

CESAR B. LAMBERTE"

96
 Id.

97
 Roquero v. Philippine Airlines, Inc., G.R. No. 152329, April 22, 2003, 401 SCRA 424.

98
 Id. at 430.

99
 Id.

 Pizza Inn/Consolidated Foods Corporation v. National Labor Relations Commission, G.R.

100

No. L-74531, June 28, 1988, 162 SCRA 773; Philippine Engineering Corporation v. Court of
Industrial Relations, G.R. No. L-27880, September 30, 1971, 41 SCRA 89.

 San Miguel Corporation v. Lao, 433 Phil. 890, 898 (2002); Philippine Long Distance
101

Telephone Company v. National Labor Relations Commission, G.R. No. L-80609, August 23,
1988, 164 SCRA 671, 682.

102
 Aparente, Sr. v. National Labor Relations Commission, 387 Phil. 96, 107 (2000).

 San Miguel Corporation v. Lao, supra at 898; Aparente, Sr. v. National Labor Relations
103

Commission, id.; Philippine Long Distance Telephone Company v. National Labor Relations

Commission, supra at 682.

104
 Aparente, Sr. v. National Labor Relations Commission, supra at 108.

 Planters Products, Inc. v. National Labor Relations Commission, G.R. No. 78524, January
105

20, 1989, 169 SCRA 328; Insular Life Assurance Co., Ltd. v. National Labor Relations
Commission, G.R. No. L-74191, December 21, 1987, 156 SCRA 740; Soriano v. National
Labor Relations Commission, G.R. No. L-75510, October 27, 1987, 155 SCRA 124.

CASE DIGEST LINK:

https://www.academia.edu/11620572/Case_Digest_Yrasuegui_vs_Philippine_Airlines
RIGHT TO
COUNSEL
Manuel vs. N.C. Construction Supply, G.R. No. 127553, November 28, 1997

FULL TEXT:

[G.R. No. 127553. November 28, 1997.]

EDDIE MANUEL, ROMEO BANA, ROGELIO PAGTAMA, JR. and JOEL

REA, Petitioners, v. N.C. CONSTRUCTION SUPPLY, JOHNNY LIM, ANITA SY and
NATIONAL LABOR RELATIONS COMMISSION (SECOND
DIVISION), Respondents.

DECISION

PUNO, J.:

This special civil action for certiorari seeks to review the decision of the National Labor
Relations Commission (NLRC) dated June 27, 1996 in NLRC-NCR-00-07-04925-95
entitled Eddie Manuel, Romeo Bana, Rogelio Pagtama, Jr. and Joel Rea v. N.C.
Construction Supply, Johnny Lim and Anita Sy. 1

Petitioners Eddie Manuel, Romeo Bana, Rogelio Pagtama, Jr. and Joel Rea were
employed as drivers at N.C. Construction Supply owned by private respondents Johnny
Lim (a.k.a. Lao Ching Eng) and Anita Sy. chanrobles.com.ph : virtual law library

On June 3, 1995, the security guards of respondent company caught Aurelio Guevara, a
company driver, and Jay Calso, his helper ("pahinante"), taking out from the company
premises two rolls of electrical wire worth P500.00 without authority. Calso was brought
to the Pasig Police station for questioning. During the investigation, Calso named seven
other employees who were allegedly involved in a series of thefts at respondent
company, among them petitioners Manuel, Bana, Pagtama, Jr. and Rea. 2

On June 5, 1995, petitioners received separate notices from respondent company

informing them that they were positively identified by their co-worker, Jay Calso, as
perpetrators of the series of thefts committed at respondent company. They were thus
invited to the Pasig police station for investigation regarding their alleged involvement
in the offense.

Atty. Ramon Reyes, private respondents’ counsel conducted in their behalf an

investigation regarding petitioners’ involvement in the theft. Atty. Reyes interrogated
the petitioners on their alleged participation in the series of thefts committed at
respondent company. Petitioners initially denied the charge. However, after being
positively identified by Jay Calso, petitioners admitted their guilt and offered to resign
in exchange for the withdrawal of any criminal charge against them. 3 Petitioners Bana
and Rea filed separate resignation letters while petitioners Manuel and Pagtama, Jr.
tendered their resignations orally. Petitioner Bana’s resignation letter 4 reads: chanrob1es virtual 1aw library

Hunyo 6, 1995

Dear Bong,

Sa ganitong sitwasyon nagpapasalamat rin ako na humantong sa ganito para hindi na

tumagal ang masama naming gawain. Piro lubos rin ako nagpapasalamat sa iyong
pagpapatawad sa akin, at ang masasabi ko lang na I’m very, very sorry na lang. Kasi
alam mo naman na kapos na kapos talaga ako. Kaya alam mo halos hindi na nga ako
nag-a-absent dahil sa sahod ko lang kapos pa sa pamilya ko. Kaya sana sa pag-resign
ko sana mabigyan mo man lang ako nang kaunti para makapamasahi man lang pau-wi
sa Mindanao kasama ang mga anak ko. Yon lang. . .

Gumagalang,

Boy

Petitioner Rea’s resignation letter, 5 on the other hand, states: chanrob1es virtual 1aw library

Hunyo 6, 1995

Boss,

Dahil sa hindi maganda ang aking naging performance sa inyo sa loob ng NC

Construction Supply sa nakakahiya na aking nasangkutan magreresign na ho ako,
magsisimula Hunyo 6, 1995. Siguro naman Boss alam naman ninyo ang totoo
nakikisama lang ako sa mga dati ninyong tauhan dahil kailangan ko talaga ng trabaho
kahit labag man sa aking kalooban ang gumawa ng hindi maganda.

Boss, kahit paano sana maintindihan mo ako, tatanggalin nyo na ho ako sana bigyan
nyo na lang ako ng kahit pamasahe namin pauwing probinsya para makapagbagong
buhay na ako.

Salamat po.

Sumasainyo,

Joel Rea
Atty. Reyes accepted petitioners’ resignation effective June 5, 1995.

On July 17, 1995, petitioners filed a complaint against private respondents for illegal
dismissal. Petitioners alleged that they were not informed of the charge against them
nor were they given an opportunity to dispute the same. They also alleged that their
admission made at the Pasig police station regarding their involvement in the theft as
well as their resignation were not voluntary but were obtained by private respondents’
lawyer by means of threat and intimidation. chanroblesvirtual|awlibrary

Labor Arbiter Manuel R. Caday ruled in favor of petitioners and found their dismissal to
be illegal. He held that private respondents failed to show a just cause for the
termination of petitioners’ services. He declared that petitioners’ admission regarding
their involvement in the theft was inadmissible in evidence as it was taken without the
assistance of counsel, in violation of Section 12 Article III of the 1987 Constitution. 6
He also held that petitioners were not afforded due process before their services were
terminated. Hence, Labor Arbiter Caday ordered private respondents to reinstate
petitioners to their former position without loss of seniority rights and to pay them full
backwages. He also ordered private respondents to pay petitioners their service
incentive leave benefits plus attorney’s fees. 7

On appeal, the NLRC reversed the decision of the Labor Arbiter. It ruled that petitioners
were dismissed for a just cause. It held that petitioners failed to adduce competent
evidence to show a vitiation of their admission regarding their participation in the theft.
It further stated that such admission may be admitted in evidence because Section 12
Article III of the 1987 Constitution applies only to criminal proceedings but not to
administrative proceedings. The NLRC, however, agreed with the Labor Arbiter that
petitioners were denied due process. Hence, it ordered private respondents to pay
petitioners the amount of P1,000.00 as indemnity. The dispositive portion of the
decision reads:chanrob1es virtual 1aw library

WHEREFORE, premises duly considered, the decision appealed from is hereby reversed
and set aside. A new one is hereby entered ordering respondents to pay to the
complainants the amount of P1,000.00 each as and for indemnity for failure of the
respondents to observe due process.

SO ORDERED. 8

Petitioners filed the instant petition on the following grounds: chanrob1es virtual 1aw library

1. The National Labor Relations Commission committed grave abuse of discretion in

declaring the dismissal legal;

2. The National Labor Relations Commission committed grave abuse of discretion in

declaring that the admission of petitioners is admissible in evidence despite the fact
that it was obtained in a hostile environment and without the presence or assistance of
counsel;

3. The National Labor Relations Commission committed grave abuse of discretion in

finding that respondents N.C. Construction Supply et. al. are right in withdrawing their
trust and confidence with petitioners without any valid and legal basis. 9

We affirm the decision of the NLRC.

An employer has a right to terminate the services of an employee subject to both

substantive and procedural limitations. This means that (1) the dismissal must be for a
just or authorized cause provided in the Labor Code, 10 and (2) the employee must be
accorded due process before his employment is terminated. The validity of the
dismissal hinges on the employer’s compliance with these two requirements. 11

In the case at bar, petitioners who were employed as drivers at respondent company
were found guilty of stealing company property consisting of electrical wire, welding
rod, G.I. sheet, steel bar and plywood. Article 282 of the Labor Code authorizes an
employer to terminate the services of an employee for loss of trust and confidence,
provided that the loss of confidence arises from particular proven facts. The law does
not require proof beyond reasonable doubt of the employee’s misconduct. Substantial
evidence is sufficient. 12 Substantial evidence has been defined as such relevant
evidence which a reasonable mind might accept as adequate to justify a conclusion. 13

Petitioners’ culpability in the instant case was sufficiently proved by private

respondents. Jay Calso, an employee of respondent company who has personal
knowledge about the series of thefts that has been going on at respondent company,
positively identified petitioners as among the perpetrators of the theft. Petitioners have
not shown any ill motive on the part of Calso to implicate them in the offense, unless it
was true. In addition, petitioners admitted their participation in the theft during an
investigation conducted by private respondents’ lawyer. chanrobles law library : red

We are not convinced by petitioners’ allegation that such admission was obtained by
means of threat or intimidation as such allegation is couched in general terms and is
unsupported by evidence.

We also reject petitioners’ argument that said admission is inadmissible as evidence

against them under Section 12 Article III of the 1987 Constitution. The right to counsel
under Section 12 of the Bill of Rights is meant to protect a suspect in a criminal case
under custodial investigation. Custodial investigation is the stage where the police
investigation is no longer a general inquiry into an unsolved crime but has begun to
focus on a particular suspect who had been taken into custody by the police to carry
out a process of interrogation that lends itself to elicit incriminating statements. It is
when questions are initiated by law enforcement officers after a person has been taken
into custody or otherwise deprived of his freedom of action in any significant way. The
right to counsel attaches only upon the start of such investigation. 14 Therefore, the
exclusionary rule under paragraph (3) Section 12 of the Bill of Rights applies only to
admissions made in a criminal investigation but not to those made in an administrative
investigation.

In the case at bar, the admission was made by petitioners during the course of the
investigation conducted by private respondents’ counsel to determine whether there is
sufficient ground to terminate their employment. Petitioners were not under custodial
investigation as they were not yet accused by the police of committing a crime. The
investigation was merely an administrative investigation conducted by the employer,
not a criminal investigation. The questions were propounded by the employer’s lawyer,
not by police officers. The fact that the investigation was conducted at the police station
did not necessarily put petitioners under custodial investigation as the venue of the
investigation was merely incidental. Hence, the admissions made by petitioners during
such investigation may be used as evidence to justify their dismissal.

Private respondents, however, failed to observe due process in terminating the

employment of petitioners. Due process demands that the employer should furnish the
worker whose employment is sought to be terminated a written notice containing a
statement of the cause(s) for termination and afford him ample opportunity to be heard
and to defend himself with the assistance of a representative if he so desires.
Specifically, the employer must furnish the worker with two written notices before
termination of employment can be legally effected: (1) notice which apprises the
employee of the particular acts or omissions for which his dismissal is sought, and (2)
the subsequent notice which informs the employee of the employer’s decision to
dismiss him. 15 There is no showing in this case that private respondents furnished
petitioners with such notices. Private respondents, through their counsel, Atty. Reyes,
immediately terminated petitioners’ services upon conclusion of the investigation.
Private respondents must therefore indemnify petitioners for failure to observe due
process before dismissing them from work.

IN VIEW WHEREOF, the petition is DISMISSED. The assailed decision is hereby

AFFIRMED. No costs. chanrobles.com : virtual lawlibrary

SO ORDERED.

Regalado and Martinez, JJ., concur.

Mendoza, J., is on official leave.

Endnotes:

1. Penned by Commissioner Rogelio I. Rayala with the concurrence of Presiding

Commissioner Raul I. Aquino and Commissioner Victoriano R. Calaycay.

2. Sworn Statement executed by Jay S. Calso before the PO1 Enrique R. Jimenez on
June 4, 1995 at the Pasig Police Station; Annex "A" of private respondents’ Comment;
Rollo, p. 78.

3. Police Blotter of the Pasig Police Station dated June 5, 1995; Annex "B" of private
respondent’s Comment; Rollo, p. 80.

4. Annex "C" of private respondents’ Comment; Rollo, p. 82.

5. Annex "D" of private respondents’ Comment; Rollo, p. 83.

6. Sec. 12. (1) Any person under investigation for the commission of an offense shall
have the right to be informed of his right to remain silent and to have competent and
independent counsel preferably of his own choice. If the person cannot afford the
services of counsel, he must be provided with one. These rights cannot be waived
except in writing and in the presence of counsel.

x          x           x

(3) Any confession or admission obtained in violation of this or Section 17 hereof shall
be inadmissible in evidence against him.

7. Rollo, pp. 13-25.

8. NLRC Decision, p. 8; Rollo, p. 33.

9. Petition, p. 5; Rollo, p. 7.

10. Articles 282 and 283 of the Labor Code provide: chanrob1es virtual 1aw library

Art. 282. Termination by employer. — An employer may terminate an employment for

any of the following reasons: chanrob1es virtual 1aw library

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

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

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

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

(e) Other causes analogous to the foregoing.

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. . . .

11. Ranises v. NLRC, 262 SCRA 371 (1996); Shoppers Gain Supermart v. NLRC, 259
SCRA 411 (1996); Midas Touch Food Corp. v. NLRC, 259 SCRA 652 (1996).

12. ComSavings Bank v. NLRC, 257 SCRA 307 (1996); MGG Marine Services, Inc. v.
NLRC, 259 SCRA 664 (1996).

13. Section 5 Rule 133 of the Revised Rules of Court; Domasig v. NLRC, 261 SCRA 779
(1996).
14. People v. Bandula, 232 SCRA 566 (1994), citing Gamboa v. Judge Cruz, 162 SCRA
642 (1988); see also People v. Evangelista, 256 SCRA 611 (1996).

15. Stolt-Nielsen Marine Services (Phils.), Inc. v. NLRC, 264 SCRA 307 (1996).

CASE DIGEST :

Eddie Manuel, Romeo Bana, Rogelio Pagtama, Jr. and Joel Rea vs. N.C. Construction
Supply, Johnny Lim, Anita Sy and National Labor Relations Commission (Second
Division)
G.R. No. 127553, November 28, 1997
FACTS: Petitioners were employed as drivers at. N.C. Construction Supply owned
by private respondents. Another company driver and his helper was found stealing
company property consisting of electrical wire, welding rod, G.I. sheet, steel bar and
plywood. The helper identified petitioners as among the perpetrators of the theft.
The petitioners received separate notices informing them that they were positively
identified by their co-worker and were thus invited to Pasig Police Station for
investigation. Petitioners admitted their guilt and offered to resign in exchange for
the withdrawal of any criminal charge against them. The resignation was accepted
by the counsel of the respondents.

ISSUES:
1. Whether or not petitioners were illegally dismissed because they were not
informed of the charge against them nor were they given an opportunity to dispute
the same.
2. Whether or not the employer observed due process in terminating the
employment of the petitioners.
3. Whether or not the petitioner’s admission is inadmissible as evidence against
them as they were not assisted by counsel during the conduct of investigation at
the police station.
RULING:
1. Petitioners were dismissed for a just cause. They were found guilty of stealing company
property and it was proved during an investigation conducted by respondents’
lawyer. An employer is authorized to terminate the services of an employee for loss
of trust and confidence, provided that the loss of confidence arises from particular
proven facts. The law does not require proof beyond reasonable doubt of the
employee’s misconduct. Substantial evidence is sufficient. Substantial evidence has
been defined as such relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion.
2. Employers failed to observe due process in terminating the employment of petitioners. Due
process requires that the employer should furnish the worker whose employment
is sought to be terminated a written notice containing a statement of the cause(s)
for termination and afford him ample opportunity to be heard and to defend
himself with the assistance of a representative if he so desires. Specifically, the
employer must furnish the worker with two written notices before termination of
employment can be legally effected: (1) notice which apprises the employee of the
particular acts or omissions for which his dismissal is sought, and (2) the
subsequent notice which informs the employee of the employer’s decision to
dismiss him.
3. The right to counsel under Section 12 of the Bill of Rights is meant to protect a
suspect in a criminal case under custodial investigation. Custodial investigation is
the stage where the police investigation is no longer a general inquiry into an
unsolved crime but has begun to focus on a particular suspect who had been taken
into custody by the police to carry out a process of interrogation that lends itself to
elicit incriminating statements. It is when questions are initiated by law
enforcement officers after a person has been taken into custody or otherwise
deprived of his freedom of action in any significant way. The right to counsel
attaches only upon the start of such investigation. Therefore, the exclusionary rule
under paragraph (3) Section 12 of the Bill of Rights applies only to admissions made
in a criminal investigation but not to those made in an administrative investigation.
In this case, petitioners were not under custodial investigation as they were not yet
accused by the police of committing a crime. The investigation was merely an
administrative investigation conducted by the employer, not a criminal
investigation. The questions were propounded by the employer’s lawyer, not by
police officers. The fact that the investigation was conducted at the police station
did not necessarily put petitioners under custodial investigation as the venue of the
investigation was merely incidental. Hence, the admissions made by petitioners
during such investigation may be used as evidence to justify their dismissal.

NOTES:
An employer has a right to terminate the services of an employee subject to both
substantive and procedural limitations. This means that (1) the dismissal must be
for a just or authorized cause provided in the Labor Code, and (2) the employee
must be accorded due process before his employment is terminated.
Punzal vs. ETSI Technologies, Inc., G.R. No. 170384-85, March 9, 2007

FULL TEXT:

G.R. Nos. 170384-85             March 9, 2007

LORNA DISING PUNZAL, Petitioner,

vs.
ETSI TECHNOLOGIES, INC., WERNER GEISERT, and CARMELO D. REMUDARO, Respondents.

DECISION

CARPIO MORALES, J.:

Petitioner, Lorna Dising Punzal, had been working for respondent, ETSI Technologies, Inc. (ETSI),
for 12 years prior to the termination of her services on November 26, 2001 on which date she was
holding the position of Department Secretary.

On October 30, 2001, petitioner sent an electronic mail (e-mail) message to her officemates

announcing the holding of a Halloween party that was to be held in the office the following day. The
e-mail message read verbatim:

Dear ETSI-JMT Colleagues,

Good day!

As you all know, tomorrow is the day before HALLOWEEN. And many of our kids will go around
"TRICK OR TREATING". We will be dressing them up in costumes of all sorts, from cute to
outrageous, from wild to "scary."

What we want to have is a similar activity here in the office. So we invite you to participate in this
effort. You can also dress your kids up in funny costumes. Also the kids will then go around the
office Trick or Treating. So, we ask you to prepare your Treats, like candies, biscuits, cookies, etc.,
(Cash is also welcome for parents like me . . . he he he)
Why are we doing this? Well, we just want the kids to have a good time. Kung gusto ninyo, mag-
costume din kayo.

Alright! See you tomorrow morning, [October 31, 2001].1 (Underscoring supplied)

Petitioner’s immediate superior, respondent Carmelo Remudaro (Remudaro), who was one of those
to whom the e-mail message was sent, advised petitioner to first secure the approval of the Senior
Vice President, respondent Werner Geisert (Geisert), for the holding of the party in the office.

Petitioner soon learned that Geisert did not approve of the plan to hold a party in the office. She
thereupon sent also on October 30, 2001 another e-mail message to her officemates, reading
verbatim:

Sorry for the mail that I sent you, unfortunately the SVP of ETSI Technologies, Inc. did not agree to
our idea to bring our children in the office for the TRICK or TREATING. He was so unfair…para bang
palagi siyang iniisahan sa trabaho…bakit most of the parents na mag-joined ang anak ay naka-VL
naman. Anyway, solohin na lang niya bukas ang office.

Anyway, to those parents who would like to bring their Kids in Megamall there will be Trick or
Treating at Mc Donalds Megamall Bldg. A at 10:00 AM tomorrow and let’s not spoil the fun for our
kids.2 (Underscoring supplied)

Remudaro and Arnold Z. David (David), the Assistant Vice President of Human Resources/TQM of
ETSI, later informed petitioner, by letter of November 13, 2001, that Geisert got a copy of her e-mail
message and that he required her to explain in writing within 48 hours why she

. . . should not be given disciplinary action for committing Article IV, No. 5 & 8 Improper conduct
or acts of discourtesy or disrespect and Making malicious statements concerning Company
Officer, whereby such offenses may be subject to suspension to termination depending upon the
gravity of the offense/s as specified in our ETSI’s Code of Conduct and Discipline.3 (Emphasis in the
original)

Petitioner replied by letter of November 14, 2001 that she had no malicious intention in sending the
second e-mail message and that she "never expected such kind of words can be called as ‘acts of
discourtesy or disrespect.’" 4

On November 19, 2001, Geisert and Remudaro conferred with petitioner to give her a chance to
explain her side.5

David and Remudaro subsequently sent petitioner a letter on November 26, 2001, finding her
explanation "not acceptable" and terminating her services, effective immediately, "for committing
Article IV, No[s]. 5 & 8, Improper conduct or act of discourtesy or disrespect and making malicious
statements concerning company officer."6

On February 11, 2002, petitioner filed before the National Labor Relations Commission (NLRC) a
complaint7 for illegal dismissal against ETSI, Geisert, and Remudaro.

By Order of November 26, 2002, the Labor Arbiter dismissed petitioner’s complaint, finding that she
was legally dismissed for serious misconduct, and that she was afforded due process.8
On petitioner’s appeal, the NLRC, by Resolution9 dated October 27, 2003, found that while she was
indeed guilty of misconduct, the penalty of dismissal was disproportionate to her infraction.10 The
NLRC thus ordered that petitioner was entitled to reinstatement which, however, was no longer
feasible due to strained relations. The NLRC thus ordered that petitioner be awarded separation pay
equivalent to one month pay for every year of service, a period of at least six months to be
considered one whole year.11

Noting that petitioner was not entirely faultless, the NLRC denied her prayer for backwages12 as well
as her prayer for exemplary and moral damages and attorney’s fees in the absence of the legal
conditions justifying their award.13

Both parties filed their respective motions for reconsideration14 which the NLRC denied.15 Both
parties thereupon filed their respective petitions for certiorari16 with the Court of Appeals.

In the petition of petitioner, docketed as CA-G.R. SP No. 83296, she questioned the denial of her
prayer for backwages.17 Upon the other hand, in the petition of respondent ETSI, et al., docketed as
CA-G.R. SP No. 83205, they questioned the finding of illegal dismissal, the grant of separation pay,
and the imputation of liability to Geisert and Remudaro.18

In her comment to the petition of ETSI, et al. in CA-G.R. SP No. 83205, petitioner raised the issue of
due process, alleging that her employer did not inform her of her right to be assisted by counsel
during the conference with respondents Geisert and Remudaro.19

By Decision20 of May 13, 2005, the Court of Appeals, which priorly consolidated the petitions of both
parties, held that petitioner’s dismissal was in order:21

The gravity of Punzal’s infraction is borne by the fact that her e-mail message to the workers of
ETSI tended to cast scorn and disrespect toward a senior vice president of the company. The
message itself resounds of subversion and undermines the authority and credibility of management.

xxxx

Also, this message was not a mere expression of dissatisfaction privately made by one person to
another, but was circulated to everyone in the work area. The message was sent close at the heels
of SVP Geisert’s disapproval of Punzal’s plan to hold a Halloween affair in the office, because the
said event would disrupt the operations and peace and order in the office. Punzal
therefore displayed a tendency to act without management’s approval, and even against
management’s will, as she invited her co-workers to join a trick or treating activity at another venue
during office hours.

The message also comes across as an encouragement to ignore SVP Geisert’s authority, and
portrayed him as unworthy of respect because of his unpopular personality.

This is in clear violation of Article IV, Section 5 of the company’s Code of Conduct and Discipline,
which clearly imposes the penalty of "suspension to dismissal, depending upon the gravity of the
offense" in cases where an employee displays "improper conduct or acts of discourtesy or
disrespect to fellow employees, visitors, guests, clients, at any time."

The imposition of the penalty of dismissal is proper, because of the gravity of Punzal’s misconduct,
as earlier pointed out, and considering that:
 (1) Punzal’s statements were discourteous and disrespectful not only to a mere co-
employee, but to a high ranking executive official of the company;

(2) Punzal’s statements tended to ridicule and undermine the credibility and authority of SVP
Geisert, and even encouraged disobedience to the said officer;

(3) Punzal’s message was sent to a great number of employees of ETSI, which tended to
sow dissent and disrespect to management among a great number of employees of ETSI;

(4) Punzal’s message could not have been made in good faith, because the message itself
used language that placed SVP Geisert in ridicule and portrayed him as an object of scorn,
betraying the sender’s bad faith.

Given these circumstances, the fact that Punzal’s infraction occurred only once should be largely
insignificant. The gravity and publicity of the offense as well as its adverse impact in the workplace is
more than sufficient to place the same in the level of a serious misconduct.22 (Underscoring supplied)

Contrary to petitioner’s contention, the Court of Appeals also found that due process was observed
in her dismissal.23

The Court of Appeals thus reinstated the Labor Arbiter’s Order. Thus it disposed:

WHEREFORE, premises considered, the petition filed by Lorna Dising Punzal in CA-G.R. SP No.
83296 is hereby DISMISSED, while the petition filed by ETSI, Werner Geisert and Carmelo D.
Remudaro is hereby GRANTED. The assailed Resolutions, dated October 27, 2003 and January 28,
2004, of the respondent National Labor Relations Commission are hereby SET ASIDE. In lieu
thereof, the Decision of Labor Arbiter Joel S. Lustria, dated November 26, 2002, dismissing the
complaint filed by Lorna Dising Punzal is hereby REINSTATED.

SO ORDERED.24 (Underscoring supplied)

Hence, petitioner’s present Petition for Review on Certiorari,25 faulting the appellate court to have
erred

. . . WHEN IT RULED THAT PETITIONER’S STATEMENT WAS DISCOURTEOUS AND

DISRESPECTFUL CONSTITUTING GROSS DISRESPECT AND SERIOUS MISCONDUCT;

. . . WHEN IT FOUND THAT DUE PROCESS WAS ACCORDED THE PETITIONER;

. . . WHEN IT FAILED TO AWARD THE PETITIONER HER RIGHT TO REINSTATEMENT

AND BACKWAGES.26

Petitioner posits that her second e-mail message was merely an exercise of her right to freedom of
expression without any malice on her part.27

On the other hand, ETSI, et al. maintain that petitioner’s second e-mail message was tainted with
bad faith and constituted a grave violation of the company’s code of discipline.28

In Philippines Today, Inc. v. NLRC,29 this Court, passing on the attitude or respect that an employee
is expected to observe towards an employer, held:
Alegre’s choice of words and way of expression betray his allegation that the memorandum was
simply an "opportunity to open the eyes of (Petitioner) Belmonte to the work environment in
petitioner’s newspaper with the end in view of persuading (her) to take a hand at improving said
environment." Apprising his employer (or top-level management) of his frustrations in his job and
differences with his immediate superior is certainly not done in an abrasive, offensive, and
disrespectful manner. A cordial or, at the very least, civil attitude, according due deference to one’s
superiors, is still observed, especially among high-ranking management officers. The Court takes
judicial notice of the Filipino values of pakikisama and paggalang which are not only prevalent
among members of a family and community but within organizations as well, including work sites. An
employee is expected to extend due respect to management, the employer being the "proverbial hen
that lays the golden egg," so to speak. An aggrieved employee who wants to unburden himself of his
disappointments and frustrations in his job or relations with his immediate superior would normally
approach said superior directly or otherwise ask some other officer possibly to mediate and discuss
the problem with the end in view of settling their differences without causing ferocious conflicts. No
matter how [much] the employee dislikes the employer professionally, and even if he is in a
confrontational disposition, he cannot afford to be disrespectful and dare to talk with an unguarded
tongue and/or with a bileful pen.30 (Underscoring supplied)

A scrutiny of petitioner’s second e-mail message shows that her remarks were not merely an
expression of her opinion about Geisert’s decision; they were directed against Geisert himself, viz:
"He was so unfair . . . para bang palagi siyang iniisahan sa trabaho. . . Anyway, solohin na
lang niya bukas ang office." (Emphasis supplied)31

As the Court of Appeals noted, petitioner, in her closing statement – "Anyway, to those parents who
would like to bring their Kids in Megamall there will be Trick or Treating at Mc Donalds x x x
tomorrow and let’s not spoil the fun for our kids"32 – even invited her co-workers to join a trick or
treating activity at another venue during office hours33 (10:00 AM), October 31, 2001 being a
Wednesday and there is no showing that it was declared a holiday, encouraging them to ignore
Geisert’s authority.

Additionally, petitioner sent the e-mail message in reaction to Geisert’s decision which he had all the
right to make. That it has been a tradition in ETSI to celebrate occasions such as Christmas,
birthdays, Halloween, and others34 does not remove Geisert’s prerogative to approve or disapprove
plans to hold such celebrations in office premises and during company time. It is settled that

x x x it is the prerogative of management to regulate, according to its discretion and judgment, all

aspects of employment. This flows from the established rule that labor law does not authorize the
substitution of the judgment of the employer in the conduct of its business. Such management
prerogative may be availed of without fear of any liability so long as it is exercised in good faith for
the advancement of the employers’ interest and not for the purpose of defeating or circumventing the
rights of employees under special laws or valid agreement and are not exercised in a malicious,
harsh, oppressive, vindictive or wanton manner or out of malice or spite.35 (Underscoring supplied)

In the case at bar, the disapproval of the plan to hold the Halloween party on October 31, 2001 may
not be considered to have been actuated by bad faith. As the Labor Arbiter noted:

It may not be ignored that holding a trick or treat party in the office premises of respondent ETSI
would certainly affect the operations of the office, since children will be freely roaming around the
office premises, things may get misplaced and the noise in the office will simply be too hard to
ignore. Contrary to complainant’s position, it is immaterial if the parents of the children who will
participate in the trick or treat will be on vacation leave, since it is the work of the employees who will
not be on leave and who will be working on that day which will be disrupted, possibly resulting in the
disruption of the operations of the company.36 (Underscoring supplied)

Given the reasonableness of Geisert’s decision that provoked petitioner to send the second e-mail
message, the observations of the Court of Appeals that "the message x x x resounds of subversion
and undermines the authority and credibility of management"37 and that petitioner "displayed a
tendency to act without management’s approval, and even against management’s will" are well
taken.38

Moreover, in circulating the second e-mail message, petitioner violated Articles III (8) and IV (5) of
ETSI’s Code of Conduct on "making false or malicious statements concerning the Company, its
officers and employees or its products and services"39 and "improper conduct or acts of discourtesy
or disrespect to fellow employees, visitors, guests, clients, at any time."40

Petitioner invokes Samson v. National Labor Relations Commission 41 where this Court held that the
dismissal of the therein petitioner was too harsh a penalty for uttering "Si EDT [Epitacio D. Titong,
the General Manager and President of the employer], bullshit yan," "sabihin mo kay EDT yan" and
"sabihin mo kay EDT, bullshit yan," while making the "dirty finger" gesture, and warning that the
forthcoming national sales conference of the company would be a "very bloody one."

Petitioner’s reliance on Samson is misplaced. First, in that case, this Court found that the
misconduct committed was not related with the employee’s work as the offensive remarks were
verbally made during an informal Christmas gathering of the employees, an occasion "where
tongues are more often than not loosened by liquor or other alcoholic beverages"42 and "it is to be
expected x x x that employees freely express their grievances and gripes against their employers."43

In petitioner’s case, her assailed conduct was related to her work. It reflects an unwillingness to
comply with reasonable management directives.

While in Samson, Samson was held to be merely expressing his dissatisfaction over a management
decision,44 in this case, as earlier shown, petitioner’s offensive remarks were directed against
Geisert.

Additionally, in Samson, this Court found that unlike in Autobus Workers’ Union (AWU) v.
NLRC45 where dismissal was held to be an appropriate penalty for uttering insulting remarks to the
supervisor,46 Samson uttered the insulting words against EDT in the latter’s absence.47 In the case at
bar, while petitioner did not address her e-mail message to Geisert, she circulated it knowing – or at
least, with reason to know – that it would reach him. As ETSI notes, "[t]hat [petitioner] circulated this
e-mail message with the knowledge that it would reach the eyes of management may be reasonably
concluded given that the first e-mail message reached her immediate supervisor’s attention."48

Finally, in Samson, this Court found that the "lack of urgency on the part of the respondent company
in taking any disciplinary action against [the employee] negates its charge that the latter’s
misbehavior constituted serious misconduct."49 In the case at bar, the management acted 14 days
after petitioner circulated the quoted e-mail message.50

Petitioner asks that her 12 years of service to ETSI during which, so she claims, she committed no
other offense be taken as a mitigating circumstance.51 This Court has held, however, that "the longer
an employee stays in the service of the company, the greater is his responsibility for knowledge and
compliance with the norms of conduct and the code of discipline in the company."52
In fine, petitioner, having been dismissed for just cause, is neither entitled to reinstatement nor to
backwages.

Petitioner’s contention that she was denied due process is well-taken however, as the records do not
show that she was informed of her right to be represented by counsel during the conference with
Geisert and Remudaro.

The protestations of ETSI, et al. that the right to be informed of the right to counsel does not apply to
investigations before administrative bodies and that law and jurisprudence merely give the employee
the option to secure the services of counsel in a hearing or conference53 fall in light of the clear
provision of Article 277 (b) of the Labor Code that

the employer xxx shall afford [the worker whose employment is sought to be terminated] ample
opportunity to be heard and to defend himself with the assistance of his representatives if he so
desires in accordance with company rules and regulations pursuant to guidelines set by the
Department of Labor and Employment,

and this Court’s explicit pronouncement that "[a]mple opportunity connotes every kind of assistance
that management must accord the employee to enable him to prepare adequately for his defense
including legal representation."54

Following Agabon, et al. v. National Labor Relations Commission,55 the violation of petitioner’s

statutory due process right entitles her to an award of nominal damage, which this Court fixes at
₱30,000.56

WHEREFORE, the petition is in part GRANTED. The questioned decision is AFFIRMED with

the MODIFICATION that respondent ETSI Technologies, Inc. is ordered to pay petitioner, Lorna
Punzal, nominal damages in the amount of ₱30,000.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

ANTONIO T. CARPIO DANTE O. TINGA

Associate Justice Asscociate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.
LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson’s Attestation, it
is hereby certified that the conclusions in the above Decision were reached in consultation before
the case was assigned to the writer of the opinion of the Court.

REYNATO S. PUNO
Chief Justice

Footnotes

1
 NLRC records, p. 21.

2
 Id. at 22.

3
 Id. at 23.

4
 Id. at 24.

5
 Id. at 49, 109, 243; CA rollo (CA-G.R. SP No. 83205), p. 293.

6
 Id. at 49.

7
 Id. at 2.

8
 Id. at 99-120.

 Id. at 241-250. Penned by Commissioner Tito F. Genilo, with the concurrence of

9

Commissioner Ernesto C. Verceles, Presiding Commissioner Lourdes C. Javier, on leave.

10
 Id. at 247-248.

11
 Id. at 248-249.

12
 Ibid.

13
 Id. at 249.

14
 Id. at 256-275.

15
 Id. at 290.

16
 CA rollo (CA-G.R. SP No. 83296), pp. 2-14; CA rollo (CA-G.R. SP No. 83205), pp. 2-31.
17
 Id. at 9-11.

18
 CA rollo (CA-G.R. SP No. 83205), pp. 11-26.

19
 Id. at 136-137.

 Id. at 285-294. Penned by Associate Justice Rodrigo V. Cosico, with the concurrences of
20

Associate Justices Danilo B. Pine and Arcangelita Romilla Lontok.

21
 Id. at 292-293.

22
 Ibid.

23
 Id. at 293.

24
 Id. at 293-294.

25
 Rollo, pp. 5-27.

26
 Id. at 10-11.

27
 Id. at 11-16.

28
 Id. at 71-78.

29
 334 Phil. 854 (1997).

30
 Id. at 869.

31
 NLRC records, p. 46.

32
 Ibid.

33
 CA rollo (CA-G.R. SP No. 83205), p. 292.

34
 NLRC records, p. 14.

 Wise and Co., Inc. v. Wise & Co., Inc. Employees Union, G.R. No. 87672, October 13,
35

1989, 178 SCRA 536, 540.

36
 NLRC records, pp. 107-108.

37
 CA rollo (CA-G.R. SP No. 83205), p. 292.

38
 Ibid.

39
 NLRC records, p. 56.

40
 Ibid.
 41
 386 Phil. 669 (2000); Rollo, pp. 89-92.

42
 Id. at 683.

43
 Ibid.

44
 Ibid.

45
 353 Phil. 419 (1998).

46
 Id. at 423-428; Samson v. NLRC, supra note 41 at 683.

47
 Samson v. NLRC, supra note 41 at 683-684.

48
 Rollo, p. 73.

49
 Samson v. NLRC, supra note 41 at 685.

50
 NLRC records, p. 23.

51
 Rollo, pp. 22-23.

 Cruz v. Coca Cola, Inc., G.R. No. 165586, June 15, 2005, 460 SCRA 340; Central
52

Pangasinan Electric Cooperative, Inc. v. Macaraeg, 443 Phil. 866, 877 (2003); Citibank, N.A.
v. Gatchalian, 310 Phil. 211, 220 (1995).

53
 Rollo, pp. 81-82.

54
 Mañebo v. NLRC, G.R. No. 107721, January 10, 1994, 229 SCRA 240, 251.

55
 G.R. No. 158693, November 17, 2004, 442 SCRA 573.

 Id. at 617. Vide Aberdeen Court, Inc. v. Agustin, Jr., G.R. No. 149371, April 13, 2005, 456
56

SCRA 32, 43-44; Aladdin Transit Corporation v. Court of Appeals, G.R. No. 152123, June
21, 2005, 460 SCRA 468, 472.

CASE DIGEST:
Punzal vs. ETSI Technologies [G.R. No. 170384-85. March 9, 2007] Facts: Lorna Punzal worked as a
department secretary in ETSI. One day, she sent an e-mail to her officemates announcing the holding of
a Halloween party that was to be held in the office the following day. She invited her officemates to
bring their kids to the office in their Halloween costumes and to go “trick or treating” in the office. Her
immediate superior advised Punzal to seek the approval of management. Then she learned that Senior
Vice President Geisert did not approve of the plan to hold a party in the office. So, she sent another
email to her officemates expressing her disappointment, particularly saying that: He was so unfair…para
bang palagi siyang iniisahan sa trabaho…bakit most of the parents na mag-joined ang anak ay naka-VL
naman. Anyway, solohin na lang niya bukas ang office. To those parents who would like to bring their
Kids in Megamall there will be Trick or Treating at Mc Donalds Megamall Bldg. A at 10:00 AM tomorrow
and let’s not spoil the fun for our kids. The management said that she committed an offense under
Article IV, No. 5 & 8 Improper conduct or acts of discourtesy or disrespect and Making malicious
statements concerning Company Officer, punishable by suspension to termination depending upon the
gravity of the offense/s as specified in our ETSI’s Code of Conduct and Discipline. Issue: Was Punzal
validly terminated? Held: A scrutiny of petitioner’s second e-mail message shows that her remarks were
not merely an expression of her opinion about Geisert’s decision; they were directed against Geisert.
Further, her closing statement even invited her co-workers to join a trick or treating activity at another
venue during office hours, encouraging them to ignore Geisert’s authority. That it has been a tradition in
ETSI to celebrate occasions such as Christmas, birthdays, Halloween, and others does not remove
Geisert’s prerogative to approve or disapprove plans to hold such celebrations in office premises and
during company time. In the case at bar, the disapproval of the plan to hold the Halloween party on
October 31, 2001 may not be considered to have been actuated by bad faith. As the Labor Arbiter
noted: the holding of a trick or treat party in the office premises of respondent ETSI would certainly
affect the operations of the office, since children will be freely roaming around the office premises,
things may get misplaced and the noise in the office will simply be too hard to ignore. Given the
reasonableness of Geisert’s decision that provoked petitioner to send the second e-mail message, the
Court of Appeals correctly ruled that "the message x x x resounds of subversion and undermines the
authority and credibility of management” and that petitioner "displayed a tendency to act without
management’s approval, and even against management’s will." © 2010 www.pinoylegal.com Page 2
Moreover, in circulating the second e-mail message, petitioner violated Articles III (8) and IV (5) of ETSI’s
Code of Conduct on "making false or malicious statements concerning the Company, its officers and
employees or its products and services" and "improper conduct or acts of discourtesy or disrespect to
fellow employees, visitors, guests, clients, at any time." Nevertheless, the violation of her statutory due
process right entitles her to an award of nominal damage, which this Court fixes at P30,000, pursuant to
the ruling in Agabon.
RIGHT
AGAINST
SELF-
INCRIMINATION
Pascual Jr. vs. Board of Medical Examiners, G.R. No. L-25018, May 26, 1969

FULL TEXT:

G.R. No. L-25018               May 26, 1969

ARSENIO PASCUAL, JR., petitioner-appellee,

vs.
BOARD OF MEDICAL EXAMINERS, respondent-appellant, SALVADOR GATBONTON and
ENRIQUETA GATBONTON, intervenors-appellants.

Conrado B. Enriquez for petitioner-appellee.

Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Antonio A. Torres and
Solicitor Pedro A. Ramirez for respondent-appellant.
Bausa, Ampil and Suarez for intervenors-appellants.

FERNANDO, J.:

The broad, all-embracing sweep of the self-incrimination clause,1 whenever appropriately invoked,

has been accorded due recognition by this Court ever since the adoption of the
Constitution.2 Bermudez v. Castillo,3 decided in 1937, was quite categorical. As we there stated:
"This Court is of the opinion that in order that the constitutional provision under consideration may
prove to be a real protection and not a dead letter, it must be given a liberal and broad interpretation
favorable to the person invoking it." As phrased by Justice Laurel in his concurring opinion: "The
provision, as doubtless it was designed, would be construed with the utmost liberality in favor of the
right of the individual intended to be served." 4

Even more relevant, considering the precise point at issue, is the recent case of Cabal v.
Kapunan,5where it was held that a respondent in an administrative proceeding under the Anti-Graft
Law 6 cannot be required to take the witness stand at the instance of the complainant. So it must be
in this case, where petitioner was sustained by the lower court in his plea that he could not be
compelled to be the first witness of the complainants, he being the party proceeded against in an
administrative charge for malpractice. That was a correct decision; we affirm it on appeal.

Arsenio Pascual, Jr., petitioner-appellee, filed on February 1, 1965 with the Court of First Instance of
Manila an action for prohibition with prayer for preliminary injunction against the Board of Medical
Examiners, now respondent-appellant. It was alleged therein that at the initial hearing of an
administrative case7 for alleged immorality, counsel for complainants announced that he would
present as his first witness herein petitioner-appellee, who was the respondent in such malpractice
charge. Thereupon, petitioner-appellee, through counsel, made of record his objection, relying on
the constitutional right to be exempt from being a witness against himself. Respondent-appellant, the
Board of Examiners, took note of such a plea, at the same time stating that at the next scheduled
hearing, on February 12, 1965, petitioner-appellee would be called upon to testify as such witness,
unless in the meantime he could secure a restraining order from a competent authority.

Petitioner-appellee then alleged that in thus ruling to compel him to take the witness stand, the
Board of Examiners was guilty, at the very least, of grave abuse of discretion for failure to respect
the constitutional right against self-incrimination, the administrative proceeding against him, which
could result in forfeiture or loss of a privilege, being quasi-criminal in character. With his assertion
that he was entitled to the relief demanded consisting of perpetually restraining the respondent
Board from compelling him to testify as witness for his adversary and his readiness or his willingness
to put a bond, he prayed for a writ of preliminary injunction and after a hearing or trial, for a writ of
prohibition.

On February 9, 1965, the lower court ordered that a writ of preliminary injunction issue against the
respondent Board commanding it to refrain from hearing or further proceeding with such an
administrative case, to await the judicial disposition of the matter upon petitioner-appellee posting a
bond in the amount of P500.00.

The answer of respondent Board, while admitting the facts stressed that it could call petitioner-
appellee to the witness stand and interrogate him, the right against self-incrimination being available
only when a question calling for an incriminating answer is asked of a witness. It further elaborated
the matter in the affirmative defenses interposed, stating that petitioner-appellee's remedy is to
object once he is in the witness stand, for respondent "a plain, speedy and adequate remedy in the
ordinary course of law," precluding the issuance of the relief sought. Respondent Board, therefore,
denied that it acted with grave abuse of discretion.

There was a motion for intervention by Salvador Gatbonton and Enriqueta Gatbonton, the
complainants in the administrative case for malpractice against petitioner-appellee, asking that they
be allowed to file an answer as intervenors. Such a motion was granted and an answer in
intervention was duly filed by them on March 23, 1965 sustaining the power of respondent Board,
which for them is limited to compelling the witness to take the stand, to be distinguished, in their
opinion, from the power to compel a witness to incriminate himself. They likewise alleged that the
right against self-incrimination cannot be availed of in an administrative hearing.
A decision was rendered by the lower court on August 2, 1965, finding the claim of petitioner-
appellee to be well-founded and prohibiting respondent Board "from compelling the petitioner to act
and testify as a witness for the complainant in said investigation without his consent and against
himself." Hence this appeal both by respondent Board and intervenors, the Gatbontons. As noted at
the outset, we find for the petitioner-appellee.

1. We affirm the lower court decision on appeal as it does manifest fealty to the principle announced
by us in Cabal v. Kapunan. 8 In that proceeding for certiorari and prohibition to annul an order of
Judge Kapunan, it appeared that an administrative charge for unexplained wealth having been filed
against petitioner under the Anti-Graft Act,9the complainant requested the investigating committee
that petitioner be ordered to take the witness stand, which request was granted. Upon petitioner's
refusal to be sworn as such witness, a charge for contempt was filed against him in the sala of
respondent Judge. He filed a motion to quash and upon its denial, he initiated this proceeding. We
found for the petitioner in accordance with the well-settled principle that "the accused in a criminal
case may refuse, not only to answer incriminatory questions, but, also, to take the witness stand."

It was noted in the opinion penned by the present Chief Justice that while the matter referred to an a
administrative charge of unexplained wealth, with the Anti-Graft Act authorizing the forfeiture of
whatever property a public officer or employee may acquire, manifestly out proportion to his salary
and his other lawful income, there is clearly the imposition of a penalty. The proceeding for forfeiture
while administrative in character thus possesses a criminal or penal aspect. The case before us is
not dissimilar; petitioner would be similarly disadvantaged. He could suffer not the forfeiture of
property but the revocation of his license as a medical practitioner, for some an even greater
deprivation.

To the argument that Cabal v. Kapunan could thus distinguished, it suffices to refer to an American

Supreme Court opinion highly persuasive in character. 10 In the language of Justice Douglas: "We
conclude ... that the Self-Incrimination Clause of the Fifth Amendment has been absorbed in the
Fourteenth, that it extends its protection to lawyers as well as to other individuals, and that it should
not be watered down by imposing the dishonor of disbarment and the deprivation of a livelihood as a
price for asserting it." We reiterate that such a principle is equally applicable to a proceeding that
could possibly result in the loss of the privilege to practice the medical profession.

2. The appeal apparently proceeds on the mistaken assumption by respondent Board and
intervenors-appellants that the constitutional guarantee against self-incrimination should be limited to
allowing a witness to object to questions the answers to which could lead to a penal liability being
subsequently incurred. It is true that one aspect of such a right, to follow the language of another
American decision, 11 is the protection against "any disclosures which the witness may reasonably
apprehend could be used in a criminal prosecution or which could lead to other evidence that might
be so used." If that were all there is then it becomes diluted.
lawphi1 .ñet

The constitutional guarantee protects as well the right to silence. As far back as 1905, we had
occasion to declare: "The accused has a perfect right to remain silent and his silence cannot be
used as a presumption of his guilt." 12 Only last year, in Chavez v. Court of Appeals, 13 speaking
through Justice Sanchez, we reaffirmed the doctrine anew that it is the right of a defendant "to
forego testimony, to remain silent, unless he chooses to take the witness stand — with undiluted,
unfettered exercise of his own free genuine will."

Why it should be thus is not difficult to discern. The constitutional guarantee, along with other rights
granted an accused, stands for a belief that while crime should not go unpunished and that the truth
must be revealed, such desirable objectives should not be accomplished according to means or
methods offensive to the high sense of respect accorded the human personality. More and more in
line with the democratic creed, the deference accorded an individual even those suspected of the
most heinous crimes is given due weight. To quote from Chief Justice Warren, "the constitutional
foundation underlying the privilege is the respect a government ... must accord to the dignity and
integrity of its citizens." 14

It is likewise of interest to note that while earlier decisions stressed the principle of humanity on
which this right is predicated, precluding as it does all resort to force or compulsion, whether physical
or mental, current judicial opinion places equal emphasis on its identification with the right to privacy.
Thus according to Justice Douglas: "The Fifth Amendment in its Self-Incrimination clause enables
the citizen to create a zone of privacy which government may not force to surrender to his
detriment." 15 So also with the observation of the late Judge Frank who spoke of "a right to a private
enclave where he may lead a private life. That right is the hallmark of our democracy." 16 In the light
of the above, it could thus clearly appear that no possible objection could be legitimately raised
against the correctness of the decision now on appeal. We hold that in an administrative hearing
against a medical practitioner for alleged malpractice, respondent Board of Medical Examiners
cannot, consistently with the self-incrimination clause, compel the person proceeded against to take
the witness stand without his consent.

WHEREFORE, the decision of the lower court of August 2, 1965 is affirmed. Without pronouncement
as to costs.

Reyes, Dizon, Makalintal, Zaldivar, Sanchez and Capistrano, JJ., concur.

Teehankee and Barredo, JJ., took no part.
Concepcion, C.J., and Castro, J., are on leave.

Footnotes

1
Section 1, Clause 18, Art. III, Constitution.

It was so even under previous organic acts. Cf. United States v. Navarro, 3 Phil. 143 (1904);
2

Beltran v. Samson, 53 Phil. 570 (1929).

3
64 Phil. 483.

4
Ibid., p. 492. This constitutional command, according to Justice Fortas, "has [been] broadly
applied and generously implemented in accordance with the teaching of the history of the
privilege and its great office in mankind's battle for freedom." Re GauIt, 387 US 1 (1967).

5
6 SCRA 1059 (1962).

6
Republic Act No. 1379 (1955).

7
No. 639 of Respondent Board entitled Salvador Gatbonton v. Arsenio Pascual.

8
6 SCRA 1059 (1962).

9
Republic Act No. 1379.

10
Spevack v. Klein, 385 US 511 (1967).

11
Murphy v. Waterfront Commission of New York, 378 US 52 (1964).
 12
United States v. Luzon, 4 Phil. 343 (1905). Cf. United States v. Junio, 1 Phil. 50, decided
three years earlier: "It appears from the record that a copy of the complaint was served upon
the accused and he was required to plead "guilty" or "not guilty" in accordance with section
18 of General Orders, No. 58. He pleaded "not guilty." In response to this request the
defendant made a statement. We are of the opinion that this procedure is illegal. The judge
had no right to compel the accused to make any statement whatever."

13
24 SCRA 663.

14
Miranda v. Arizona, 284 US 436 (1966).

15
Criswold v. Connecticut, 381 US 479 (1965).

United States v. Grunewold, 233 F 2d 556 quoted in Miranda v. Arizona, 384 US 476
16

(1966).

CASE DIGEST:

ARSENIO PASCUAL, JR. VS.

BOARD OF MEDICAL EXAMINERS,
ET AL. G.R. No. L-25018 May 26,
1969 Ponente: Justice Enrique
Fernando
DOCTRINE:

FACTS: This case stemmed from an administrative case filed against herein petitioner
Arsenio Pascual, Jr. for alleged immorality being heard by the respondent Board of
Medical Examiners (BEM). In this administrative case against petitioner, he was asked
to be the first witness for the complainants – thus compelling him to be a witness
against himself. Petitioner objected to the said act of the complainants, hence the BEM
required Pascual to secure a restraining order from a competent authority so as he
cannot be compelled to be a witness against himself.

The answer of respondent Board, while admitting the facts stressed that it could call
petitioner to the witness stand and interrogate him, the right against self-incrimination
being available only when a question calling for an incriminating answer is asked of a
witness. They likewise alleged that the right against self-incrimination cannot be availed
of in an administrative hearing. 

Petitioner was sustained by the lower court in his plea that he could not be compelled to
be the first witness of the complainants, he being the party proceeded against in an
administrative charge for malpractice. Hence, this appeal by respondent Board. 

ISSUE: Whether or not the right against self-incrimination may be invoked in

administrative proceedings.

RULING: YES. The Supreme Court ruled in favor of herein petitioner citing the case
of Cabal v. Kapunan. In that proceeding for certiorari and prohibition to annul an order
of Judge Kapunan, it appeared that an administrative charge for unexplained wealth
having been filed against petitioner under the Anti-Graft Act, the complainant requested
the investigating committee that petitioner be ordered to take the witness stand, which
request was granted. Upon petitioner’s refusal to be sworn as such witness, a charge
for contempt was filed against him in the sala of respondent Judge. He filed a motion to
quash and upon its denial, he initiated this proceeding. We found for the petitioner in
accordance with the well-settled principle that “the accused in a criminal case may
refuse, not only to answer incriminatory questions, but, also, to take the witness stand.”

It was noted in the opinion penned by the then Chief Justice that while the matter
referred to an administrative charge of unexplained wealth, with the Anti-Graft Act
authorizing the forfeiture of whatever property a public officer or employee may acquire,
manifestly out of proportion to his salary and his other lawful income, there is clearly the
imposition of a penalty. The proceeding for forfeiture while administrative in character
thus possesses a criminal or penal aspect. The case before us is not dissimilar;
petitioner would be similarly disadvantaged. He could suffer not the forfeiture of property
but the revocation of his license as medical practitioner, for some an even greater
deprivation.
Cabal vs. Kapunan, Jr., G.R. No. L-19052, December 29, 1962

FULL TEXT:

G.R. No. L-19052           December 29, 1962

MANUEL F. CABAL, petitioner,
vs.
HON. RUPERTO KAPUNAN, JR., and THE CITY FISCAL OF MANILA, respondents.

Francisco Carreon for petitioner.

Assistant City Fiscal Manuel T. Reyes for respondent City of Manila.

CONCEPCION, J.:

This is an original petition for certiorari and prohibition with preliminary injunction, to restrain the Hon.
Ruperto Kapunan, Jr., as Judge of the Court of First Instance of Manila, from further proceeding in
Criminal Case No. 60111 of said court, and to set aside an order of said respondent, as well as the
whole proceedings in said criminal case. .
On or about August 1961, Col. Jose C. Maristela of the Philippine Army filed with the Secretary of
Nation Defense a letter-complaint charging petitioner Manuel Cabal, then Chief of Staff of the Armed
Forces of the Philippines, with "graft, corrupt practices, unexplained wealth, conduct unbecoming of
an officer and gentleman dictatorial tendencies, giving false statements of his as sets and liabilities
in 1958 and other equally reprehensible acts". On September 6, 1961, the President of the
Philippines created a committee of five (5) members, consisting of former Justice Marceliana R.
Montemayor, as Chairman, former Justices Buenaventura Ocampo and Sotero Cabahug, and
Generals Basilio J. Valdez and Guillermo B. Francisco, to investigate the charge of unexplained
wealth contained in said letter-complaint and submit its report and recommendations as soon as
possible. At the beginning of the investigation, on September 15, 1961, the Committee, upon request
of complainant Col. Maristela, or considered petitioner herein to take the witness stand and be sworn
to as witness for Maristela, in support of his aforementioned charge of unexplained wealth.
Thereupon, petitioner objected, personally and through counsel, to said request of Col. Maristela
and to the aforementioned order of the Committee, invoking his constitutional right against self-
incrimination. The Committee insisted that petitioner take the witness stand and be sworn to, subject
to his right to refuse to answer such questions as may be incriminatory. This notwithstanding,
petitioner respectfully refused to be sworn to as a witness to take the witness stand. Hence, in a
communication dated September 18, 1961, the Committee referred the matter to respondent City
Fiscal of Manila, for such action as he may deem proper. On September 28, 1961, the City Fiscal
filed with the Court of First Instance of Manila a "charge" reading as follows:

The undersigned hereby charges Manuel F. Cabal with contempt under section 580 of the
Revised Administrative Code in relation to sections I and 7, Rule 64 of the Rules of Court,
committed as follows:

That on or about September 15, 1961, in the investigation conducted at the U.P.
Little Theater:, Padre Faura, Manila, by the Presidential Committee, which was
created by the President of the Republic of the Philippines in accordance with law to
investigate the charges of alleged acquisition by respondent of unexplained wealth
and composed of Justice Marceliano Montemayor, as Chairman, and Justices
Buenaventura Ocampo and Sotero Cabahug and Generals Basilio Valdez and
Guillermo Francisco, as members, with the power, among others, to compel the
attendance of witnesses and take their testimony under oath, respondent who was
personally present at the time before the Committee in compliance with a subpoena
duly issued to him, did then and there willfully, unlawfully, and contumaciously,
without any justifiable cause or reason refusal and fail and still refuses and fails to
obey the lawful order of the Committee to take the witness stand, be sworn and
testify as witness in said investigation, in utter disregard of the lawful authority of the
Committee and thereby obstructing and degrading the proceedings before said body.

Wherefore, it is respectfully prayed that respondent be summarily adjudged guilty of

contempt of the Presidential Committee and accordingly disciplined as in contempt of court
imprisonment until such time as he shall obey the subject order of said committee.

This charge, docketed as Criminal Case No. 60111 of said court, was assigned to Branch XVIII
thereof, presided over by respondent Judge. On October 2, 1961, the latter issued an order requiring
petitioner to show cause and/or answer the charge filed against him within ten (10) days. Soon
thereafter, or on October 4, 1961, petitioner filed with respondent Judge a motion to quash the
charge and/or order to show cause, upon the ground: (1) that the City Fiscal has neither authority
nor personality to file said char and the same is null and void, for, if criminal, the charge has been
filed without a preliminary investigation, and, civil, the City Fiscal may not file it, his authority in
respect of civil cases being limited to representing the City of Manila; (2) that the facts charged
constitute no offense for section 580 of the Revised Administrative Code, upon which the charge is
based, violates due process, in that it is vague and uncertain as regards the offense therein defined
and the fine imposable therefor and that it fail to specify whether said offense shall be treated also
contempt of an inferior court or of a superior court (3) that more than one offense is charged, for the
contempt imputed to petitioner is sought to be punished as contempt of an inferior court, as
contempt of a superior court an as contempt under section 7 of Rule 64 of the Rules Court; (4) that
the Committee had no power to order an require petitioner to take the witness stand and be sworn
to, upon the request of Col. Maristela, as witness for the latter, inasmuch as said order violates
petitioner's constitutional right against self-incrimination.

By resolution dated October 14, 1961. respondent Judge denied said motion to quash. Thereupon,
or on October 20, 1961, petitioner began the present action for the purpose adverted to above,
alleging that, unless restrained by this court, respondent Judge may summarily punish him for
contempt, and that such action would not be appealable.

In their answer, respondents herein allege, inter alia, that the investigation being conducted by the
Committee above referred to is administrative, not criminal, in nature; that the legal provision relied
upon by petitioner in relation to preliminary investigations (Section '08-C, Republic Act No. 409, as
amended by Republic Act No. 1201) is inapplicable to contempt proceedings; that, under section
580 of the Revised Administrative Code. contempt against an administrative officer is to be dealt
with as contempt of a superior court; that petitioner herein is charged with only one offense; and that,
tinder the constitutional guarantee against self-incrimination, petitioner herein may refuse, not to take
the witness stand, but to answer incriminatory questions.

At the outset, it is not disputed that the accused in a criminal case may refuse, not only to answer
incriminatory questions, but, also, to take the witness stand (3 Wharton's Criminal Evidence, pp.
1959-1960; 98 C.J.S., p. 264). Hence, the issue before us boils down to whether or not the
proceedings before the aforementioned Committee is civil or criminal in character.

In this connection, it should be noted that, although said Committee was created to investigate the
administrative charge of unexplained wealth, there seems to be no question that Col. Maristela does
not seek the removal of petitioner herein as Chief of Staff of the Armed Forces of the Philippines. As
a matter of fact he no longer holds such office. It seems, likewise conceded that the purpose of the
charge against petitioner is to apply the provisions of Republic Act No. 1379, as amended, otherwise
known as the Anti-Graft Law, which authorizes the forfeiture to the State of property of a public
officer or employee which is manifestly out of proportion to his salary as such public officer or
employee and his other lawful income and the income from legitimately acquired property. Such for
forfeiture has been held, however, to partake of the nature of a penalty.

In a strict signification, a forfeiture is a divestiture property without compensation, in

consequence of a default an offense, and the term is used in such a sense in this article. A
forfeiture, as thus defined, is imposed by way of punishment not by the mere convention of
the parties, but by the lawmaking power, to insure a prescribed course of conduct. It is a
method deemed necessary by the legislature to restrain the commission of an offense and to
aid in the prevention of such a offense. The effect of such a forfeiture is to transfer the title to
the specific thing from the owner to the sovereign power (23 Am. Jur. 599) (Emphasis ours.)

In Black's Law Dictionary a "forfeiture" is defined to be "the incurring of a liability to pay a

definite sum of money as the consequence of violating the provisions of some statute or
refusal to comply with some requirement of law." It may be said to be a penalty imposed for
misconduct or breach of duty. (Com. vs. French, 114 S.W. 255.)
As a consequence, proceedings for forfeiture of proper are deemed criminal or penal, and, hence,
the exemption of defendants in criminal case from the obligation to be witnesses against themselves
are applicable thereto.

Generally speaking, informations for the forfeiture of goods that seek no judgment of fine or
imprisonment against any person are deemed to be civil proceedings in rem. Such
proceedings are criminal in nature to the extent that where the person using the res illegally
is the owner or rightful possessor of it, the forfeiture proceeding is in the nature of a
punishment. They have been held to be so far in the nature criminal proceedings that a
general verdict on several count in an information is upheld if one count is good. According
to the authorities such proceedings, where the owner of the property appears, are so far
considered as quasi-criminal proceeding as to relieve the owner from being a witness
against himself and to prevent the compulsory production of his books and papers. ... (23
Am. Jur. 612; emphasis ours.)

Although the contrary view formerly obtained, the late decisions are to the effect that suits
for forfeitures incurred by the commission of offenses against the law are so far of quasi-
criminal nature as to be within the reason of criminal proceedings for all purposes of ... that
portion of the Fifth Amendment which declares that no person shall be compelled in any
criminal case to be a witness against himself. .... It has frequently been held upon
constitutional grounds under the various State Constitution, that a witness or party called as
witness cannot be made to testify against himself as to matters which would subject his
property to forfeiture. At early common law no person could be compelled to testify against
himself or to answer any question which would have had a tendency to expose his property
to a forfeiture or to form a link in a chain of evidence for that purpose, as well as to
incriminate him. Under this common-law doctrine of protection against compulsory
disclosures which would tend to subject the witness to forfeiture, such protection was
claimed and availed of in some early American cases without placing the basis of the
protection upon constitutional grounds. (23 Am. Jur., 616; emphasis ours.)

Proceedings for forfeitures are generally considered to be civil and in the nature of
proceedings in rem. The statute providing that no judgment or other proceedings in civil
cases shall be arrested or reversed for any defect or want of form is applicable to them. In
some aspects, however, suits for penalties and forfeitures are of quasi-criminal nature and
within the reason of criminal proceedings for all the purposes of ... that portion of the Fifth
Amendment which declares, that no person shall be compelled in any criminal case to be a
witness against himself. The proceeding is one against the owner, as well as against the
goods; for it is his breach of the laws which has to be proved to establish the forfeiture and
his property is sought to be forfeited. (15 Am. Jur., Sec. 104, p. 368; emphasis ours.) lawphil.net

The rule protecting a person from being compelled to furnish evidence which would
incriminate him exists not only when he is liable criminally to prosecution and
punishment, but also when his answer would tend to expose him to a ... forfeiture .... (58 Am.
Jur., See. 43, p. 48; emphasis ours.)

As already observed, the various constitutions provide that no person shall be compelled in
any criminal case to be a witness against himself. This prohibition against compelling a
person to take the stand as a witness against himself applied only to criminal, quasi-criminal,
and penal proceedings, including a proceeding civil in form for forfeiture of property by
reason of the commission of an offense, but not a proceeding in which the penalty
recoverable is civil or remedial in nature, .... (58 Am. Jur., Sec. 44, p. 49: emphasis ours.)
 The privilege of a witness not to incriminate himself is not infringed by merely asking the
witness a question which he refuses to answer. The privilege is simply an option of refusal,
and not a prohibition of inquiry. A question is not improper merely because the answer may
tend to incriminate but, where a witness exercises his constitutional right not to answer, a
question by counsel as to whether the reason for refusing to answer is because the answer
may tend to incriminate the witness is improper.

The possibility that the examination of the witness will be pursued to the extent of requiring
self-incrimination will not justify the refusal to answer questions. However, where the position
of the witness is virtually that of an accused on trial, it would appear that he may invoke the
privilege in support of a blanket refusal to answer any and all questions. (C.J.S., p. 252;
emphasis ours.)

A person may not be compelled to testify in an action against him for a penalty or to answer
any question as a witness which would subject him to a penalty or forfeiture, where the
penalty or forfeiture is imposed as a vindication of the public justice of the state.

In general, both at common law and under a constitution provision against compulsory self-
incrimination, a person may not be compelled to answer any question as a witness which
would subject him to a penalty or forfeiture, or testify in action against him for a penalty.

The privilege applies where the penalty or forfeiture recoverable, or is imposed in vindication
of the public justice the state as a statutory fine or penalty, or a fine or penalty for violation of
a municipal ordinance, even though the action or proceeding for its enforcement is not
brought in a criminal court but is prosecuted through the modes of procedure applicable to
ordinary civil remedy. (98 C. J. S., pp. 275-6.)

Thus, in Boyd vs. U.S. (116 U.S. 616, 29 L. ed. 746), it was held that the information, in a
proceeding to declaration a forfeiture of certain property because of the evasion of a certain revenue
law, "though technically a civil proceeding is in substance and effect a criminal one", and that suits
for penalties and forfeitures are within the reason criminal proceedings for the purposes of that
portion the Fifth Amendment of the Constitution of the U.S. which declares that no person shall be
compelled in a criminal case to be a witness against himself. Similarly, a proceeding for the removal
of an officer was held, in Thurston vs. Clark (107 Cal. 285, 40 pp. 435, 437), to be in substance
criminal, for said portion of the Fifth Amendment applies "to all cases in which the action prosecution
is not to establish, recover or redress private and civil rights, but to try and punish persons charged
with the commission of public offenses" and "a criminal case is a action, suit or cause instituted to
punish an infraction the criminal laws, and, with this object in view, it matters not in what form a
statute may clothe it; it is still a criminal case ...". This view was, in effect confirmed in Lees vs.
U.S. (37 L. ed. 1150-1151). Hence, the Lawyer Reports Annotated (Vol. 29, p. 8), after an extensive
examination of pertinent cases, concludes that said constitutional provision applies whenever the
proceeding is not "purely remedial", or intended "as a redress for a private grievance", but primarily
to punish "a violation of duty or a public wrong and to deter others from offending in likewise
manner. ...".

We are unmindful of the doctrine laid down in Almeda vs. Perez, L-18428 (August 30, 1962) in which
the theory that, after the filing of respondents' answer to a petition for forfeiture under Republic Act
No. 1379, said petition may not be amended as to substance pursuant to our rules of criminal
procedure, was rejected by this Court upon the ground that said forfeiture proceeding in civil in
nature. This doctrine refers, however, to the purely procedural aspect of said proceeding, and has
no bearing the substantial rights of the respondents therein, particularly their constitutional right
against self-incrimination.
WHEREFORE, the writ prayed for is granted and respondent Judge hereby enjoined permanently
from proceeding further in Criminal Case No. 60111 of the Court of First Instance of Manila. It is so
ordered.

Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala and Makalintal,
JJ., concur.
Bengzon, C.J., is on leave.

CASE DIGEST:

[G.R. No. L-19052. December 29, 1962.]

FACTS:, Col. Jose C. Maristela of the Philippine Army filed with the Secretary of National Defense a letter-complaint
(Col. Maristela) charging petitioner Manuel F. Cabal, then Chief of Staff of the Armed Forces of the Philippines, with
“graft, corrupt practices, unexplained wealth, conduct unbecoming of an officer and gentleman, dictatorial tendencies,
giving false statements of his assets and liabilities in 1958 and other equally reprehensible acts”. The President of the
Philippines created a committee of five (5) members to investigate the charge of unexplained wealth contained in said
letter-complaint and submit its report and recommendations as soon as possible. At the beginning of the
investigation, the Committee ordered petitioner herein to take the witness stand and be sworn to as witness for
Maristela, in support of his aforementioned charge of unexplained wealth. Thereupon, petitioner objected, personally
and through counsel, to said request of Col. Maristela and to the aforementioned order of the Committee, invoking his
constitutional right against self-incrimination. The Committee insisted that petitioner take the witness stand and be
sworn to, subject to his right to refuse to answer such questions as may be incriminatory. This notwithstanding,
petitioner respectfully refused to be sworn to as a witness or take the witness stand. Hence, in a communication
dated the Committee referred the matter to respondent City Fiscal of Manila, for such action as he may deem proper.

The City Fiscal filed with the CFI of Manila a “charge” praying respondent be summarily adjudged guilty of contempt
of the Presidential Committee..”
Respondent filed a motion to quash upon the ground that the Committee had no power to order and require petitioner
to take the witness stand and be sworn to, upon the request of Col. Maristela, as witness for the latter, inasmuch as
said order violates petitioner’s constitutional right against self-incrimination.
The judge denied said motion to quash. Hence, petitioner filed a petition for Certiorari and prohibition in the SC.
In their answer, respondents herein allege, inter alia, that the investigation being conducted by the Committee above
referred to is administrative, not criminal, in nature

ISSUE: Whether or not the proceedings before the aforementioned Committee is civil or criminal in character.

HELD: CRIMINAL
It seems conceded that the purpose of the charge against petitioner is not seek the removal of petitioner herein as
Chief of Staff of the AFP. As a matter of fact he no longer holds such office. But apply the provisions of the Anti-Graft
Law, which authorizes the forfeiture to the State of property of a public officer or employee which is manifestly out of
proportion to his salary as such public officer or employee and his other lawful income and the income from
legitimately acquired property. Such forfeiture has been held, however, to partake of the nature of a penalty.

FORFEITURE OF PROPERTY IN SUBSTANCE IS A CRIMINAL PROCEEDING FOR THE PURPOSE OF

PROTECTION OF THE RIGHTS OF THE DEFENDANT AGAINST SELF-INCRIMINATION; CASE OF BOYD vs.
U.S. and THURSTON vs. CLARK, CITED. — In Boyd vs. U.S. (116 U.S. 616, 29 L. ed., 746), it was held that the
information, in a proceeding to declare a forfeiture of certain property because of the evasion of a certain revenue
law, “though technically a civil proceeding, is in substance and effect a criminal one”, and that suits for penalties and
forfeitures are within the reason of criminal proceedings for the purposes of that portion of the Fifth Amendment of the
Constitution of the U.S. which declares that no person shall be compelled in a criminal to be a witness against
himself. Similarly, a proceeding for the removal of an officer was held, in Thurston vs. Clark (107 Cal. 285, 40 pp.
435, 437), to be in substance criminal, for said portion of the Fifth Amendment applies “to all cases in which the
action prosecuted is not to establish, recover or redress private and civil rights, but to try and punish persons charged
with the commission of public offenses” and “a criminal case is an action, suit or cause instituted to punish an
infraction of the criminal laws, and, with this object in view, it matters not in what form a statute may clothe it; it is still
a criminal case . . . .”

CASE OF ALMEDA vs. PEREZ, DISTINGUISHED. — In Almeda vs. Perez, L-18428 (August 30, 1962) the theory
that, after the filing of respondents’ answer to a petition for forfeiture under Republic Act No. 1379, said petition may
not be amended as to substance pursuant to our rules of criminal procedure, was rejected by this Court upon the
ground that said forfeiture proceeding is civil in nature. This doctrine refers, however, to the purely procedural aspect
of said proceeding, and has no bearing on the substantial rights of the respondents therein, particularly their
constitutional right against self-incrimination.
RIGHT
AGAINST
UNREASONABLE
SEARCHES
AND
SEIZURES
Waterous Drug Corporation vs. NLRC, G.R. No. 113271, October 16, 1997

FULL TEXT:
[G.R. No. 113271. October 16, 1997.]

WATEROUS DRUG CORPORATION and MS. EMMA CO, Petitioners, v. NATIONAL

LABOR RELATIONS COMMISSION and ANTONIA MELODIA
CATOLICO, Respondents.

DECISION

DAVIDE, JR., J.:

"Nor is he a true Servant [who] buys dear to share in the Profit with the Seller." 1
This petition for certiorari under Rule 65 of the Rules of Court seeks to declare private
respondent Antonia Melodia Catolico (hereafter Catolico) not a "true Servant," thereby assailing
the 30 September 1993 decision 2 and 2 December 1993 Resolution 3 of the National Labor
Relations Commission (NLRC) in NLRC-NCR CA No. 005160-93, which sustained the
reinstatement and monetary awards in favor of private respondent 4 and denied the petitioner’s
motion for reconsideration. 5

The facts are as follows: chanrob1es virtual 1aw library

Catolico was hired as a pharmacist by petitioner Waterous Drug Corporation (hereafter

WATEROUS) on 15 August 1988.

On 31 July 1989, Catolico received a memorandum 6 from WATEROUS Vice President-

General Manager Emma R. Co warning her not to dispense medicine to employees chargeable to
the latter’s accounts because the same was a prohibited practice. On the same date, Co issued
another memorandum 7 to Catolico warning her not to negotiate with suppliers of medicine
without consulting the Purchasing Department, as this would impair the company’s control of
purchases and, besides she was not authorized to deal directly with the suppliers.

As regards the first memorandum, Catolico did not deny her responsibility but explained that her
act was "due to negligence," since fellow employee Irene Soliven "obtained the medicines in bad
faith and through misrepresentation when she claimed that she was given a charge slip by the
Admitting Dept." Catolico then asked the company to look into the fraudulent activities of
Soliven. 8

In a memorandum 9 dated 21 November 1989, WATEROUS Supervisor Luzviminda E. Bautro

warned Catolico against the "rush delivery of medicines without the proper documents." cralaw virtua1aw library

On 29 January 1990, WATEROUS Control Clerk Eugenio Valdez informed Co that he noticed
an irregularity involving Catolico and Yung Shin Pharmaceuticals, Inc. (hereafter YSP), which
he described as follows:chanrob1es virtual 1aw library

. . . A case in point is medicine purchased under our Purchase Order (P.O.) No. 19045 with YSP
Sales Invoice No. 266 representing purchase of ten (10) bottles of Voren tablets at P384.00 per
unit. Previous P.O.’s issued to YSP, Inc. showed that the price per bottle is P320.00 while P.O.
No. 19045 is priced at P384.00 or an over price of P64.00 per bottle (or total of P640.00).
WDRC paid the amount of P3,840.00 thru MBTC Check No. 222832 dated December 15, 1988,
Verification was made to YSP, Inc. to determine the discrepancy and it was found that the cost
per bottle was indeed overpriced. YSP, Inc. Accounting Department (Ms. Estelita Reyes)
confirmed that the difference represents refund of jack-up price of ten bottles of Voren tablets
per sales invoice no. 266 as per their check voucher no. 629552 (shown to the undersigned),
which was paid to Ms. Catolico through China Bank check no. 892068 dated November 9, 1989 .
..

The undersigned talked to Ms. Catolico regarding the check but she denied having received it
and that she is unaware of the overprice. However, upon conversation with Ms. Saldana, EDRC
Espana Pharmacy Clerk, she confirmed that the check amounting to P640.00 was actually
received by Ms. Catolico. As a matter of fact, Ms. Catolico even asked Ms. Saldana if she
opened the envelope containing the check but Ms. Saldana answered her "talagang ganyan,
bukas." It appears that the amount in question (P640.00) had been pocketed by Ms. Catolico. 10
virtual lawlibrary
chanrobles.com :

Forthwith, in her memorandum 11 dated 31 January 1990, Co asked Catolico to explain, within
twenty-four hours, her side of the reported irregularity. Catolico asked for additional time to give
her explanation, 12 and she was granted a 48-hour extension from 1 to 3 February 1990.
However, on 2 February 1990, she was informed that effective 6 February 1990 to 7 March
1990, she would be placed on preventive suspension to protect the interests of the company. 13

In a letter dated 2 February 1990, Catolico requested access to the file containing Sales Invoice
No. 266 for her to be able to make a satisfactory explanation. In said letter she protested
Saldaña’s invasion of her privacy when Saldaña opened an envelope addressed to Catolico. 14

In a letter 15 to Co dated 10 February 1990, Catolico, through her counsel, explained that the
check she received from YSP was a Christmas gift and not a "refund of overprice." She also
averred that the preventive suspension was ill-motivated, as it sprang from an earlier incident
between her and Co’s secretary, Irene Soliven.

On 5 March 1990, WATEROUS Supervisor Luzviminda Bautro, issued a memorandum 16

notifying Catolico of her termination; thus:chanrob1es virtual 1aw library

We received your letter of explanation and your lawyer’s letter dated Feb. 2, 1990 and Feb. 10,
1990 respectively regarding our imposition of preventive suspension on you for acts of
dishonesty. However, said letters failed to rebut the evidences [sic] in our possession which
clearly shows that as a Pharmacist stationed at Espana Branch, you actually made Purchase
Orders at YSP Phils., Inc. for 10 bottles of Voren tablets at P384.00/bottle with previous price of
P320.00/bottle only. A check which you received in the amount of P640.00 actually represents
the refund of over price of said medicines and this was confirmed by Ms. Estelita Reyes, YSP
Phils., Inc. Accounting Department.

Your actuation constitutes an act of dishonesty detrimental to the interest of the company.
Accordingly, you are hereby terminated effective March 8, 1990.

On 5 May 1990, Catolico filed before the Office of the Labor Arbiter a complaint for unfair labor
practice, illegal dismissal, and illegal suspension. 17

In his decision 18 of 10 May 1993, Labor Arbiter Alex Arcadio Lopez found no proof of unfair
labor practice against petitioners. Nevertheless, he decided in favor of Catolico because
petitioners failed to "prove what [they] alleged as complainant’s dishonesty," and to show that
any investigation was conducted. Hence, the dismissal was without just cause and due process.
He thus declared the dismissal and suspension illegal but disallowed reinstatement, as it would
not be to the best interest of the parties. Accordingly, he awarded separation pay to Catolico
computed at one-half month’s pay for every year of service; back wages for one year; and the
additional sum of P2,000.00 for illegal suspension "representing 30 days work." Arbiter Lopez
computed the award in favor of Catolico as follows: chanrob1es virtual 1aw library

30 days Preventive Suspension P2,000.00

Backwages 26,858.50

1/12 of P26,858.50 2,238.21

Separation pay (3 years) 4,305.15

—————

TOTAL AWARD: P35,401.86

—————

Petitioners seasonably appealed from the decision and urged the NLRC to set it aside because the
Labor Arbiter erred in finding that Catolico was denied due process and that there was no just
cause to terminate her services.

In its decision 19 of 30 September 1993, the NLRC affirmed the findings of the Labor Arbiter on
the ground that petitioners were not able to prove a just cause for Catolico’s dismissal from her
employment. It found that petitioner’s evidence consisted only of the check of P640.00 drawn by
YSP in favor of complainant, which her co-employee saw when the latter opened the envelope.
But, it declared that the check was inadmissible in evidence pursuant to Sections 2 and 3(1 and
2) of Article III of the Constitution. 20 It concluded: chanrob1es virtual 1aw library

With the smoking gun evidence of respondents being rendered inadmissible, by virtue of the
constitutional right invoked by complainants, respondents’ case falls apart as it is bereft of
evidence which cannot be used as a legal basis for complainant’s dismissal.

The NLRC then dismissed the appeal for lack of merit, but modified the dispositive portion of
the appealed decision by deleting the award for illegal suspension as the same was already
included in the computation of the aggregate of the awards in the amount of P35,401.86.

Their motion for reconsideration having been denied, petitioners filed this special civil action
for certiorari, which is anchored on the following grounds: chanrob1es virtual 1aw library

I. Public respondent committed grave abuse of discretion in its finding of facts.

II. Due process was duly accorded to private Respondent.

III. Public respondent gravely erred in applying Section 3, Article III of the 1987 Constitution.

As to the first and second grounds, petitioners insist that Catolico had been receiving
"commissions" from YSP, or probably from other suppliers, and that the check issued to her on 9
November 1989 was not the first or the last. They also maintained that Catolico occupied a
confidential position and that Catolico’s receipt of YSP’s check, aggravated by her "propensity
to violate company rules," constituted breach of confidence. And contrary to the findings of
NLRC, Catolico was given ample opportunity to explain her side of the controversy.

Anent the third ground, petitioners submit that, in light of the decision in the People v. Marti, 21
the constitutional protection against unreasonable searches and seizures refers to the immunity of
one’s person from interference by government and cannot be extended to acts committed by
private individuals so as to bring it within the ambit of alleged unlawful intrusion by the
government.

In its Manifestation in Lieu of Comment, the Office of the Solicitor General (OSG) disagreed
with the NLRC’s decision, as it was of the persuasion that (a) the conclusions reached by public
respondent are inconsistent with its findings of fact; and (b) the incident involving the opening of
envelope addressed to private respondent does not warrant the application of the constitutional
provisions. It observed that Catolico was given "several opportunities" to explain her side of the
check controversy, and concluded that the opportunities granted her and her subsequent
explanation "satisfy the requirements of just cause and due process." The OSG was also
convinced that Catolico’s dismissal was based on just cause and that Catolico’s admission of the
existence of the check, as well as her "lame excuse" that it was Christmas gift from YSP,
constituted substantial evidence of dishonesty. Finally, the OSG echoed petitioners’ argument
that there was no violation of the right of privacy of communication in this case, 22 adding that
petitioner WATEROUS was justified in opening an envelope from one of its regular suppliers as
it could assume that the letter was a business communication in which it had an interest.

In its Comment which we required to be filed in view of the adverse stand of the OSG, the
NLRC contends that petitioners miserably failed to proved their claim that it committed grave
abuse of discretion in its findings of fact. It then prays that we dismiss this petition.
chanroblesvirtuallawlibrary:red

In her Comment, Catolico assets that petitioners’ evidence is too "flimsy" to justify her
dismissal. The check in issue was given to her, and she had no duty to turn it over to her
employer. Company rules do not prohibit an employee from accepting gifts from clients, and
there is no indication in the contentious check that it was meant as a refund for overpriced
medicines. Besides, the check was discovered in violation of the constitutional provision on the
right to privacy and communication; hence, as correctly held by the NLRC, it was inadmissible
in evidence.

Catolico likewise disputes petitioners’ claim that the audit report and her initial response that she
never received a check were sufficient to justify her dismissal. When she denied having received
a check from YSP, she meant that she did not receive any refund of overprice, consistent with
her position that what she received was a token gift. All that can be gathered from the audit
report is that there was apparently an overcharge, with no basis to conclude that Catolico
pocketed the amount in collusion with YSP. She thus concluded that her dismissal was based on
a mere suspicion.

Finally, Catolico insists that she could not have breached the trust and confidence of
WATEROUS because, being merely a pharmacist, she did not handle "confidential information
or sensitive properties." She was doing the task of a saleslady: selling drugs and making
requisitions when supplies were low.

A thorough review of the record leads us to no other conclusion than that, except as to the third
ground, the instant petition must fail.

Concededly, Catolico was denied due process. Procedural due process requires that an employee
be apprised of the charge against him, given reasonable time to answer the charge, allowed
amply opportunity to be heard and defend himself, and assisted by a representative if the
employee so desires. 23 Ample opportunity connotes every kind of assistance that management
must accord the employee to enable him to prepare adequately for his defense, including legal
representation. 24

In the case at bar, although Catolico was given an opportunity to explain her side, she was
dismissed from the service in the memorandum of 5 March 1990 issued by her Supervisor after
receipt of her letter and that of her counsel. No hearing was ever conducted after the issues were
joined through said letters. The Supervisor’s memorandum spoke of "evidences [sic] in
[WATEROUS] possession," which were not, however, submitted. What the "evidences" [sic]
other than the sales invoice and the check were, only the Supervisor knew.

Catolico was also unjustly dismissed. It is settled that the burden is on the employer to prove just
and valid cause for dismissing an employee, and its failure to discharge that burden would result
in a finding that the dismissal is unjustified. 25 Here, WATEROUS proved unequal to the task.

It is evident from the Supervisor’s memorandum that Catolico was dismissed because of an
alleged anomalous transaction with YSP. Unfortunately for petitioners, their evidence does not
establish that there was an overcharge. Control Clerk Eugenio C. Valdez, who claims to have
discovered Catolico’s inappropriate transaction, stated in his affidavit: 26

4. My findings revealed that on or before the month of July 31, 1989, Ms. Catolico in violation
of the [company] procedure, made an under the table deal with YSP Phils. to supply WDRC
needed medicines like Voren tablets at a jack-up price of P384.00 per bottle of 50 mg. which has
a previous price of only P320.00;

5. I verified the matter to YSP Phils. to determine the discrepancy and I found out that the cost
per bottle was indeed overpriced. The Accounting Department of YSP Phils. through Ms.
Estelita Reyes confirmed that there was really an overprice and she said that the difference was
refunded through their check voucher no. 629552 which was shown to me and the payee is
Melodia Catolico, through a China Bank Check No. 892068 dated November 9, 1989.

It clearly appears then that Catolico’s dismissal was based on hearsay information. Estelita Reyes
never testified nor executed an affidavit relative to this case; thus, we have to reject the
statements attributed to her by Valdez. Hearsay evidence carries no probative value. 27

Besides, it was never shown that petitioners paid for the Voren tablets. While Valdez informed
Co, through the former’s memorandum 28 of 29 January 1990, that WATEROUS paid YSP
P3,840.00 "thru MBTC Check No. 222832," the said check was never presented in evidence, nor
was any receipt from YSP offered by petitioners. chanrobles virtual lawlibrary

Moreover, the two purchase orders for Voren tablets presented by petitioners do not indicate an
overcharge. The purchase order dated 16 August 1989 29 stated that the Voren tablets cost
P320.00 per box, while the purchase order dated 5 October 1989 30 priced the Voren tablets at
P384.00 per bottle. The difference in price may then be attributed to the different packaging used
in each purchase order.

Assuming that there was an overcharge, the two purchase orders for the Voren tablets were
recommended by Director-MMG Mario R. Panuncio, verified by AVP-MNG Noli M. Lopez and
approved by Vice President-General Manager Emma R. Co. The purchase orders were silent as
to Catolico’s participation in the purchase. If the price increase was objectionable to petitioners,
they or their officers should have disapproved the transaction. Consequently, petitioners had no
one to blame for their predicament but themselves. This set of facts emphasizes the exceedingly
incredible situation proposed by petitioners. Despite the memorandum warning Catolico not to
negotiate with suppliers of medicine, there was no proof that she ever transacted, or that she had
the opportunity to transact, with the said suppliers. Again, as the purchase orders indicate,
Catolico was not at all involved in the sale of the Voren tablets. There was no occasion for
Catolico to initiate, much less benefit from, what Valdez called an "under the table deal" with
YSP.

Catolico’s dismissal then was obviously grounded on mere suspicion, which in no case can
justify an employee’s dismissal. Suspicion is not among the valid causes provided by the Labor
Code for the termination of employment; 31 and even the dismissal of an employee for loss of
trust and confidence must rest on substantial grounds and not on the employer’s arbitrariness,
whims, caprices, or suspicion. 32 Besides, Catolico was not shown to be a managerial employee,
to which class of employees the term "trust and confidence" is restricted. 33

As regards the constitutional violation upon which the NLRC anchored its decision, we find no
reason to revise the doctrine laid down in People v. Marti 34 that the Bill of Rights does not
protect citizens from unreasonable searches and seizures perpetrated by private individuals. It is
not true, as counsel for Catolico claims, that the citizens have no recourse against such assaults.
On the contrary, and as said counsel admits, such an invasion gives rise to both criminal and civil
liabilities.

Finally, since it has been determined by the Labor Arbiter that Catolico’s reinstatement would
not be to the best interest of the parties, he correctly awarded separation pay to Catolico.
Separation pay in lieu of reinstatement is computed at one month’s salary for every year of
service. 35 In this case, however, Labor Arbiter Lopez computed the separation pay at one-half
month’s salary for every year of service. Catolico did not oppose or raise an objection. As such,
we will uphold the award of separation pay as fixed by the Labor Arbiter.

WHEREFORE, the instant petition is hereby DISMISSED and the challenged decision and
resolution of the National Labor Relations Commission dated 30 September 1993 and 2
December 1993, respectively, in NLRC-NCR CA No. 005160-93 are AFFIRMED, except as to
its reason for upholding the Labor Arbiter’s decision, viz., that the evidence against private
respondent was inadmissible for having been obtained in violation of her constitutional rights of
privacy of communication and against unreasonable searches and seizures which is hereby set
aside.

Costs against petitioners.

SO ORDERED.

Bellosillo, Vitug, Kapunan and Hermosisima, Jr., JJ., concur.

Endnotes:

1. WILLIAMS PENN, More Fruits of Solitude, maxim 209, in I Harvard Classics 389
(Charles W. Eliot ed., 1937).

2. Per Commissioners Rogelio I. Rayala, with Commissioners Domingo H. Zapanta and

Edna Bonto-Perez, concurring. Original Record (OR), unpaginated; Annex "A" of
Petition, Rollo, 25-36.

3. OR, 86-92; Annex "J" of Petition, Rollo, 96-102.

4. OR, unpaginated.

5. Id.

6. OR, 15.

7. Id., 16.

8. Id., 60.

9. Id., 17.

10. OR, 18.

11. Id., 19.

12. Id., 32.

13. Id., 20.

14. Id., 21.

15. Id., 35.

16. OR., 36.

17. Id., 2.

18. Supra, note 3.

19. Supra, note 2.

20. These sections pertinently provide as follows: chanrob1es virtual 1aw library

Sec. 2. The right of the people to be secure in their persons, houses, papers, and
effects against unreasonable searches and seizures of whatever nature and for any
purpose shall be inviolable, and no search warrant or warrant of arrest shall issue
except upon probable cause to be determined personally by the judge after
examination under oath or affirmation of the complainant and the witnesses he may
produce, and particularly describing the place to be searched and the persons or things
to be seized.

Sec. 3. (1) The privacy of communication and correspondence shall be inviolable except
upon lawful order of the Court, or when public safety or order requires other wise as
prescribed by law.

(2) Any evidence obtained in violation of this or the preceding section shall be
inadmissible for any purpose in any proceeding.

21. 193 SCRA 57 [1991].

22. Citing People v. Marti, supra note 21.

23. Tiu, v. NLRC, 215 NLRC 540, 551 [1992].

24. Mañebo v. NLRC, 229 SCRA 240, 251 [1994].

25. Reno Foods, Inc. v. NLRC, 249 SCRA 379, 386 [1995]; Metro Transit Organization,
Inc. v. NLRC, G.R. No. 121574, 17 October 1996, 5-6.

26. Rollo, 71-72.

27. People v. Laurente, 255 SCRA 543, 567 [1996]; Batiquin v. Court of Appeals, 258
SCRA 334, 342 [1996].

28. OR, 18.

29. Annex "A" of Petitioner’s Reply to Complainant’s Position, Paper, OR, 42.
30. Annex "B," id., id., 43.

31. See LABOR CODE, Art. 282.

32. Falguera v. Linsangan, 251 SCRA 364, 376 [1995]; De la Cruz v. NLRC, G.R. No.
119536, 17 February 1997, 7.

33. Marina Port Services, Inc. v. NLRC, 193 SCRA 420, 425 [1991]; De la Cruz v. NLRC,
supra note 32, at 7.

34. Supra note 21.

35. Reformist Union of R.B. Liner, Inc. v. NLRC, G.R. No. 120482, 27 January 1997, 9;
De la Cruz v. NLRC, supra note 31, at 8.

CASE DIGEST LINK:

https://www.academia.edu/41271887/Consti2Digest_091_Waterous_Drug_Corporation_Vs_
NLRC_280_SCRA_735_GR_113271_Oct_16_1997_
People vs. Marti, G.R. No. 81561 January 18, 1991

FULL TEXT:

G.R. No. 81561             January 18, 1991

PEOPLE OF THE PHILIPPINES, plaintiff-appellee

vs.
ANDRE MARTI, accused-appellant.

The Solicitor General for plaintiff-appellee.

Reynaldo B. Tatoy and Abelardo E. Rogacion for accused-appellant.

BIDIN, J.:
This is an appeal from a decision * rendered by the Special Criminal Court of Manila (Regional Trial
Court, Branch XLIX) convicting accused-appellant of violation of Section 21 (b), Article IV in relation
to Section 4, Article 11 and Section 2 (e) (i), Article 1 of Republic Act 6425, as amended, otherwise
known as the Dangerous Drugs Act.

The facts as summarized in the brief of the prosecution are as follows:

On August 14, 1987, between 10:00 and 11:00 a.m., the appellant and his common-law wife,
Shirley Reyes, went to the booth of the "Manila Packing and Export Forwarders" in the
Pistang Pilipino Complex, Ermita, Manila, carrying with them four (4) gift wrapped packages.
Anita Reyes (the proprietress and no relation to Shirley Reyes) attended to them. The
appellant informed Anita Reyes that he was sending the packages to a friend in Zurich,
Switzerland. Appellant filled up the contract necessary for the transaction, writing therein his
name, passport number, the date of shipment and the name and address of the consignee,
namely, "WALTER FIERZ, Mattacketr II, 8052 Zurich, Switzerland" (Decision, p. 6)

Anita Reyes then asked the appellant if she could examine and inspect the packages.
Appellant, however, refused, assuring her that the packages simply contained books, cigars,
and gloves and were gifts to his friend in Zurich. In view of appellant's representation, Anita
Reyes no longer insisted on inspecting the packages. The four (4) packages were then
placed inside a brown corrugated box one by two feet in size (1' x 2'). Styro-foam was placed
at the bottom and on top of the packages before the box was sealed with masking tape, thus
making the box ready for shipment (Decision, p. 8).

Before delivery of appellant's box to the Bureau of Customs and/or Bureau of Posts, Mr. Job
Reyes (proprietor) and husband of Anita (Reyes), following standard operating procedure,
opened the boxes for final inspection. When he opened appellant's box, a peculiar odor
emitted therefrom. His curiousity aroused, he squeezed one of the bundles allegedly
containing gloves and felt dried leaves inside. Opening one of the bundles, he pulled out a
cellophane wrapper protruding from the opening of one of the gloves. He made an opening
on one of the cellophane wrappers and took several grams of the contents thereof (tsn, pp.
29-30, October 6, 1987; Emphasis supplied).

Job Reyes forthwith prepared a letter reporting the shipment to the NBI and requesting a
laboratory examination of the samples he extracted from the cellophane wrapper (tsn, pp. 5-
6, October 6, 1987).

He brought the letter and a sample of appellant's shipment to the Narcotics Section of the
National Bureau of Investigation (NBI), at about 1:30 o'clock in the afternoon of that
date, i.e., August 14, 1987. He was interviewed by the Chief of Narcotics Section. Job Reyes
informed the NBI that the rest of the shipment was still in his office. Therefore, Job Reyes
and three (3) NBI agents, and a photographer, went to the Reyes' office at Ermita, Manila
(tsn, p. 30, October 6, 1987).

Job Reyes brought out the box in which appellant's packages were placed and, in the
presence of the NBI agents, opened the top flaps, removed the styro-foam and took out the
cellophane wrappers from inside the gloves. Dried marijuana leaves were found to have
been contained inside the cellophane wrappers (tsn, p. 38, October 6, 1987; Emphasis
supplied).

The package which allegedly contained books was likewise opened by Job Reyes. He
discovered that the package contained bricks or cake-like dried marijuana leaves. The
 package which allegedly contained tabacalera cigars was also opened. It turned out that
dried marijuana leaves were neatly stocked underneath the cigars (tsn, p. 39, October 6,
1987).

The NBI agents made an inventory and took charge of the box and of the contents thereof,
after signing a "Receipt" acknowledging custody of the said effects (tsn, pp. 2-3, October 7,
1987).

Thereupon, the NBI agents tried to locate appellant but to no avail. Appellant's stated address in his
passport being the Manila Central Post Office, the agents requested assistance from the latter's
Chief Security. On August 27, 1987, appellant, while claiming his mail at the Central Post Office, was
invited by the NBI to shed light on the attempted shipment of the seized dried leaves. On the same
day the Narcotics Section of the NBI submitted the dried leaves to the Forensic Chemistry Section
for laboratory examination. It turned out that the dried leaves were marijuana flowering tops as
certified by the forensic chemist. (Appellee's Brief, pp. 9-11, Rollo, pp. 132-134).

Thereafter, an Information was filed against appellant for violation of RA 6425, otherwise known as
the Dangerous Drugs Act.

After trial, the court a quo rendered the assailed decision.

In this appeal, accused/appellant assigns the following errors, to wit:

THE LOWER COURT ERRED IN ADMITTING IN EVIDENCE THE ILLEGALLY SEARCHED

AND SEIZED OBJECTS CONTAINED IN THE FOUR PARCELS.

THE LOWER COURT ERRED IN CONVICTING APPELLANT DESPITE THE UNDISPUTED

FACT THAT HIS RIGHTS UNDER THE CONSTITUTION WHILE UNDER CUSTODIAL
PROCEEDINGS WERE NOT OBSERVED.

THE LOWER COURT ERRED IN NOT GIVING CREDENCE TO THE EXPLANATION OF

THE APPELLANT ON HOW THE FOUR PARCELS CAME INTO HIS POSSESSION
(Appellant's Brief, p. 1; Rollo, p. 55)

1. Appellant contends that the evidence subject of the imputed offense had been obtained in
violation of his constitutional rights against unreasonable search and seizure and privacy of
communication (Sec. 2 and 3, Art. III, Constitution) and therefore argues that the same should be
held inadmissible in evidence (Sec. 3 (2), Art. III).

Sections 2 and 3, Article III of the Constitution provide:

Sec. 2. The right of the people to be secure in their persons, houses, papers and effects
against unreasonable searches and seizures of whatever nature and for any purpose shall
be inviolable, and no search warrant or warrant of arrest shall issue except upon probable
cause to be determined personally by the judge after examination under oath or affirmation
of the complainant and the witnesses he may produce, and particularly describing the place
to be searched and the persons or things to be seized.

Sec. 3. (1) The privacy of communication and correspondence shall be inviolable except
upon lawful order of the court, or when public safety or order requires otherwise as
prescribed by law.
 (2) Any evidence obtained in violation of this or the preceding section shall be inadmissible
for any purpose in any proceeding.

Our present constitutional provision on the guarantee against unreasonable search and seizure had
its origin in the 1935 Charter which, worded as follows:

The right of the people to be secure in their persons, houses, papers and effects against
unreasonable searches and seizures shall not be violated, and no warrants shall issue but
upon probable cause, to be determined by the judge after examination under oath or
affirmation of the complainant and the witnesses he may produce, and particularly describing
the place to be searched, and the persons or things to be seized. (Sec. 1 [3], Article III)

was in turn derived almost verbatim from the Fourth Amendment ** to the United States Constitution.
As such, the Court may turn to the pronouncements of the United States Federal Supreme Court
and State Appellate Courts which are considered doctrinal in this jurisdiction.

Thus, following the exclusionary rule laid down in Mapp v. Ohio by the US Federal Supreme
Court (367 US 643, 81 S.Ct. 1684, 6 L.Ed. 1081 [1961]), this Court, in Stonehill v. Diokno (20 SCRA
383 [1967]), declared as inadmissible any evidence obtained by virtue of a defective search and
seizure warrant, abandoning in the process the ruling earlier adopted in Moncado v. People's
Court (80 Phil. 1 [1948]) wherein the admissibility of evidence was not affected by the illegality of its
seizure. The 1973 Charter (Sec. 4 [2], Art. IV) constitutionalized the Stonehill ruling and is carried
over up to the present with the advent of the 1987 Constitution.

In a number of cases, the Court strictly adhered to the exclusionary rule and has struck down the
admissibility of evidence obtained in violation of the constitutional safeguard against unreasonable
searches and seizures. (Bache & Co., (Phil.), Inc., v. Ruiz, 37 SCRA 823 [1971]; Lim v. Ponce de
Leon, 66 SCRA 299 [1975]; People v. Burgos, 144 SCRA 1 [1986]; Roan v. Gonzales, 145 SCRA
687 [1987]; See also Salazar v. Hon. Achacoso, et al., GR No. 81510, March 14, 1990).

It must be noted, however, that in all those cases adverted to, the evidence so obtained were
invariably procured by the State acting through the medium of its law enforcers or other authorized
government agencies.

On the other hand, the case at bar assumes a peculiar character since the evidence sought to be
excluded was primarily discovered and obtained by a private person, acting in a private capacity and
without the intervention and participation of State authorities. Under the circumstances, can
accused/appellant validly claim that his constitutional right against unreasonable searches and
seizure has been violated? Stated otherwise, may an act of a private individual, allegedly in violation
of appellant's constitutional rights, be invoked against the State?

We hold in the negative. In the absence of governmental interference, the liberties guaranteed by
the Constitution cannot be invoked against the State.

As this Court held in Villanueva v. Querubin (48 SCRA 345 [1972]:

1. This constitutional right (against unreasonable search and seizure) refers to the immunity

of one's person, whether citizen or alien, from interference by government, included in which
is his residence, his papers, and other possessions. . . .
 . . . There the state, however powerful, does not as such have the access except under the
circumstances above noted, for in the traditional formulation, his house, however humble, is
his castle. Thus is outlawed any unwarranted intrusion by government, which is called upon
to refrain from any invasion of his dwelling and to respect the privacies of his life. . . . (Cf.
Schermerber v. California, 384 US 757 [1966] and Boyd v. United States, 116 US 616
[1886]; Emphasis supplied).

In Burdeau v. McDowell (256 US 465 (1921), 41 S Ct. 547; 65 L.Ed. 1048), the Court there in
construing the right against unreasonable searches and seizures declared that:

(t)he Fourth Amendment gives protection against unlawful searches and seizures, and as
shown in previous cases, its protection applies to governmental action. Its origin and history
clearly show that it was intended as a restraint upon the activities of sovereign authority, and
was not intended to be a limitation upon other than governmental agencies; as against such
authority it was the purpose of the Fourth Amendment to secure the citizen in the right of
unmolested occupation of his dwelling and the possession of his property, subject to the right
of seizure by process duly served.

The above ruling was reiterated in State v. Bryan (457 P.2d 661 [1968]) where a parking attendant
who searched the automobile to ascertain the owner thereof found marijuana instead, without the
knowledge and participation of police authorities, was declared admissible in prosecution for illegal
possession of narcotics.

And again in the 1969 case of Walker v. State (429 S.W.2d 121), it was held that the search and
seizure clauses are restraints upon the government and its agents, not upon private individuals
(citing People v. Potter, 240 Cal. App.2d 621, 49 Cap. Rptr, 892 (1966); State v. Brown, Mo., 391
S.W.2d 903 (1965); State v. Olsen, Or., 317 P.2d 938 (1957).

Likewise appropos is the case of Bernas v. US (373 F.2d 517 (1967). The Court there said:

The search of which appellant complains, however, was made by a private citizen — the
owner of a motel in which appellant stayed overnight and in which he left behind a travel
case containing the evidence*** complained of. The search was made on the motel owner's
own initiative. Because of it, he became suspicious, called the local police, informed them of
the bag's contents, and made it available to the authorities.

The fourth amendment and the case law applying it do not require exclusion of evidence
obtained through a search by a private citizen. Rather, the amendment only proscribes
governmental action."

The contraband in the case at bar having come into possession of the Government without the latter
transgressing appellant's rights against unreasonable search and seizure, the Court sees no cogent
reason why the same should not be admitted against him in the prosecution of the offense charged.

Appellant, however, would like this court to believe that NBI agents made an illegal search and
seizure of the evidence later on used in prosecuting the case which resulted in his conviction.

The postulate advanced by accused/appellant needs to be clarified in two days. In both instances,
the argument stands to fall on its own weight, or the lack of it.
First, the factual considerations of the case at bar readily foreclose the proposition that NBI agents
conducted an illegal search and seizure of the prohibited merchandise. Records of the case clearly
indicate that it was Mr. Job Reyes, the proprietor of the forwarding agency, who made
search/inspection of the packages. Said inspection was reasonable and a standard operating
procedure on the part of Mr. Reyes as a precautionary measure before delivery of packages to the
Bureau of Customs or the Bureau of Posts (TSN, October 6 & 7, 1987, pp. 15-18; pp. 7-8; Original
Records, pp. 119-122; 167-168).

It will be recalled that after Reyes opened the box containing the illicit cargo, he took samples of the
same to the NBI and later summoned the agents to his place of business. Thereafter, he opened the
parcel containing the rest of the shipment and entrusted the care and custody thereof to the NBI
agents. Clearly, the NBI agents made no search and seizure, much less an illegal one, contrary to
the postulate of accused/appellant.

Second, the mere presence of the NBI agents did not convert the reasonable search effected by
Reyes into a warrantless search and seizure proscribed by the Constitution. Merely to observe and
look at that which is in plain sight is not a search. Having observed that which is open, where no
trespass has been committed in aid thereof, is not search (Chadwick v. State, 429 SW2d 135).
Where the contraband articles are identified without a trespass on the part of the arresting officer,
there is not the search that is prohibited by the constitution (US v. Lee 274 US 559, 71 L.Ed. 1202
[1927]; Ker v. State of California 374 US 23, 10 L.Ed.2d. 726 [1963]; Moore v. State, 429 SW2d 122
[1968]).

In Gandy v. Watkins (237 F. Supp. 266 [1964]), it was likewise held that where the property was
taken into custody of the police at the specific request of the manager and where the search was
initially made by the owner there is no unreasonable search and seizure within the constitutional
meaning of the term.

That the Bill of Rights embodied in the Constitution is not meant to be invoked against acts of private
individuals finds support in the deliberations of the Constitutional Commission. True, the liberties
guaranteed by the fundamental law of the land must always be subject to protection. But protection
against whom? Commissioner Bernas in his sponsorship speech in the Bill of Rights answers the
query which he himself posed, as follows:

First, the general reflections. The protection of fundamental liberties in the essence of
constitutional democracy. Protection against whom? Protection against the state. The Bill of
Rights governs the relationship between the individual and the state. Its concern is not the
relation between individuals, between a private individual and other individuals. What the Bill
of Rights does is to declare some forbidden zones in the private sphere inaccessible to any
power holder. (Sponsorship Speech of Commissioner Bernas , Record of the Constitutional
Commission, Vol. 1, p. 674; July 17, 1986; Emphasis supplied)

The constitutional proscription against unlawful searches and seizures therefore applies as a
restraint directed only against the government and its agencies tasked with the enforcement of the
law. Thus, it could only be invoked against the State to whom the restraint against arbitrary and
unreasonable exercise of power is imposed.

If the search is made upon the request of law enforcers, a warrant must generally be first secured if
it is to pass the test of constitutionality. However, if the search is made at the behest or initiative of
the proprietor of a private establishment for its own and private purposes, as in the case at bar, and
without the intervention of police authorities, the right against unreasonable search and seizure
cannot be invoked for only the act of private individual, not the law enforcers, is involved. In sum, the
protection against unreasonable searches and seizures cannot be extended to acts committed by
private individuals so as to bring it within the ambit of alleged unlawful intrusion by the government.

Appellant argues, however, that since the provisions of the 1935 Constitution has been modified by
the present phraseology found in the 1987 Charter, expressly declaring as inadmissible any
evidence obtained in violation of the constitutional prohibition against illegal search and seizure, it
matters not whether the evidence was procured by police authorities or private individuals
(Appellant's Brief, p. 8, Rollo, p. 62).

The argument is untenable. For one thing, the constitution, in laying down the principles of the
government and fundamental liberties of the people, does not govern relationships between
individuals. Moreover, it must be emphasized that the modifications introduced in the 1987
Constitution (re: Sec. 2, Art. III) relate to the issuance of either a search warrant or warrant of
arrest vis-a-vis the responsibility of the judge in the issuance thereof (See Soliven v. Makasiar, 167
SCRA 393 [1988]; Circular No. 13 [October 1, 1985] and Circular No. 12 [June 30, 1987]. The
modifications introduced deviate in no manner as to whom the restriction or inhibition against
unreasonable search and seizure is directed against. The restraint stayed with the State and did not
shift to anyone else.

Corolarilly, alleged violations against unreasonable search and seizure may only be invoked against
the State by an individual unjustly traduced by the exercise of sovereign authority. To agree with
appellant that an act of a private individual in violation of the Bill of Rights should also be construed
as an act of the State would result in serious legal complications and an absurd interpretation of the
constitution.

Similarly, the admissibility of the evidence procured by an individual effected through private seizure
equally applies, in pari passu, to the alleged violation, non-governmental as it is, of appellant's
constitutional rights to privacy and communication.

2. In his second assignment of error, appellant contends that the lower court erred in convicting him
despite the undisputed fact that his rights under the constitution while under custodial investigation
were not observed.

Again, the contention is without merit, We have carefully examined the records of the case and
found nothing to indicate, as an "undisputed fact", that appellant was not informed of his
constitutional rights or that he gave statements without the assistance of counsel. The law enforcers
testified that accused/appellant was informed of his constitutional rights. It is presumed that they
have regularly performed their duties (See. 5(m), Rule 131) and their testimonies should be given full
faith and credence, there being no evidence to the contrary. What is clear from the records, on the
other hand, is that appellant refused to give any written statement while under investigation as
testified by Atty. Lastimoso of the NBI, Thus:

Fiscal Formoso:

You said that you investigated Mr. and Mrs. Job Reyes. What about the accused here, did
you investigate the accused together with the girl?

WITNESS:
 Yes, we have interviewed the accused together with the girl but the accused availed of his
constitutional right not to give any written statement, sir. (TSN, October 8, 1987, p. 62;
Original Records, p. 240)

The above testimony of the witness for the prosecution was not contradicted by the defense on
cross-examination. As borne out by the records, neither was there any proof by the defense that
appellant gave uncounselled confession while being investigated. What is more, we have examined
the assailed judgment of the trial court and nowhere is there any reference made to the testimony of
appellant while under custodial investigation which was utilized in the finding of conviction.
Appellant's second assignment of error is therefore misplaced.

3. Coming now to appellant's third assignment of error, appellant would like us to believe that he was
not the owner of the packages which contained prohibited drugs but rather a certain Michael, a
German national, whom appellant met in a pub along Ermita, Manila: that in the course of their 30-
minute conversation, Michael requested him to ship the packages and gave him P2,000.00 for the
cost of the shipment since the German national was about to leave the country the next day
(October 15, 1987, TSN, pp. 2-10).

Rather than give the appearance of veracity, we find appellant's disclaimer as incredulous, self-
serving and contrary to human experience. It can easily be fabricated. An acquaintance with a
complete stranger struck in half an hour could not have pushed a man to entrust the shipment of four
(4) parcels and shell out P2,000.00 for the purpose and for appellant to readily accede to comply
with the undertaking without first ascertaining its contents. As stated by the trial court, "(a) person
would not simply entrust contraband and of considerable value at that as the marijuana flowering
tops, and the cash amount of P2,000.00 to a complete stranger like the Accused. The Accused, on
the other hand, would not simply accept such undertaking to take custody of the packages and ship
the same from a complete stranger on his mere say-so" (Decision, p. 19, Rollo, p. 91). As to why he
readily agreed to do the errand, appellant failed to explain. Denials, if unsubstantiated by clear and
convincing evidence, are negative self-serving evidence which deserve no weight in law and cannot
be given greater evidentiary weight than the testimony of credible witnesses who testify on
affirmative matters (People v. Esquillo, 171 SCRA 571 [1989]; People vs. Sariol, 174 SCRA 237
[1989]).

Appellant's bare denial is even made more suspect considering that, as per records of the Interpol,
he was previously convicted of possession of hashish by the Kleve Court in the Federal Republic of
Germany on January 1, 1982 and that the consignee of the frustrated shipment, Walter Fierz, also a
Swiss national, was likewise convicted for drug abuse and is just about an hour's drive from
appellant's residence in Zurich, Switzerland (TSN, October 8, 1987, p. 66; Original Records, p. 244;
Decision, p. 21; Rollo, p. 93).

Evidence to be believed, must not only proceed from the mouth of a credible witness, but it must be
credible in itself such as the common experience and observation of mankind can approve as
probable under the circumstances (People v. Alto, 26 SCRA 342 [1968], citing Daggers v. Van Dyke,
37 N.J. Eg. 130; see also People v. Sarda, 172 SCRA 651 [1989]; People v. Sunga, 123 SCRA 327
[1983]); Castañares v. CA, 92 SCRA 567 [1979]). As records further show, appellant did not even
bother to ask Michael's full name, his complete address or passport number. Furthermore, if indeed,
the German national was the owner of the merchandise, appellant should have so indicated in the
contract of shipment (Exh. "B", Original Records, p. 40). On the contrary, appellant signed the
contract as the owner and shipper thereof giving more weight to the presumption that things which a
person possesses, or exercises acts of ownership over, are owned by him (Sec. 5 [j], Rule 131). At
this point, appellant is therefore estopped to claim otherwise.
 Premises considered, we see no error committed by the trial court in rendering the assailed
judgment.

WHEREFORE, the judgment of conviction finding appellant guilty beyond reasonable doubt of the
crime charged is hereby AFFIRMED. No costs.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr. and Feliciano, JJ., concur.

Footnotes

* Penned by Judge Romeo J. Callejo.

** It reads: "The right of the people to be secure in their persons, houses, papers and effects,
against unreasonable searches and seizures, shall not be violated, and no warrants shall
issue, but upon probable cause, supported by oath or affirmation, and particularly describing
the place to be searched, and the persons or things to be seized."

*** Forged checks.

CASE DIGEST:
PEOPLE V. ANDRE MARTI G.R. No. 81561    January 18, 1991

FACTS:

l The appellant Andre Marti, together with his common-law wife went to Manila Packing and Export Forwarders to
send four (4) parcels of boxes alleged to contained books, cigars, and gloves for his friend Waltier Fierz living in
Zurich, Switzerland.
l The attendant, Anita Reyes, received their package and asked the appellant if she could examine and inspect the
packages. The appellant refused and Anita Reyes no longer insists on examining the packages.

l Before delivery of appellant's box to the Bureau of Customs and/or Bureau of Posts, Mr. Job Reyes and husband of
Anita Reyes, following standard operating procedure, opened the boxes for final inspection.
l When Job Reyes opened appellant's box, a peculiar odor emitted therefrom. His curiosity aroused, he squeezed one
of the bundles allegedly containing gloves and felt dried leaves inside. Opening one of the bundles, he pulled out a
cellophane wrapper protruding from the opening of one of the gloves. He made an opening on one of the
cellophane wrappers and took several grams of the contents thereof.
l Job Reyes forthwith prepared a letter reporting the shipment to the NBI and requesting a laboratory examination of
the samples he extracted from the cellophane wrapper.
l He brought the letter and a sample of appellant's shipment to the Narcotics Section of the National Bureau of
Investigation (NBI), at about 1:30 o'clock in the afternoon of that date, (August 14, 1987).
l Job Reyes was interviewed by the Chief of Narcotics Section.
l Job Reyes informed the NBI that the rest of the shipment was still in his office. Therefore, Job Reyes and three (3) NBI
agents, and a photographer went to the Reyes' office at Ermita, Manila.
l Job Reyes brought out the box in which appellant's packages were placed and, in the presence of the NBI agents,
opened the top flaps, removed the styrofoam and took out the cellophane wrappers from inside the gloves. Dried
marijuana leaves were found to have been contained inside the cellophane wrappers.
l The package which allegedly contained books was likewise opened by Job Reyes. He discovered that the package
contained bricks or cake-like dried marijuana leaves. The package which allegedly contained Tabacalera cigars was
also opened. It turned out that dried marijuana leaves were neatly stocked underneath the cigar.
l The NBI agents made an inventory and took charge of the box and of the contents thereof, after signing a "Receipt"
acknowledging custody of the said effects.
l The NBI agents tried to locate appellant but to no avail.
l The NBI agents asked for assistance to Manila Central Post Office’s Chief Security, where the appellants passport
addressed was indicated.
l Appellant, while claiming his mail at the Central Post Office, was invited by the NBI to shed light on the attempted
shipment of the seized dried leaves.
l On the same day the Narcotics Section of the NBI submitted the dried leaves to the Forensic Chemistry Section for
laboratory examination. It turned out that the dried leaves were marijuana flowering tops as certified by the
forensic chemist.
l An Information was filed against appellant for violation of RA 6425, otherwise known as the Dangerous Drugs Act.
l Trial court convicted him for violation of  Section 21 (b), Article IV in relation to Section 4, Article 11 and Section 2 (e)
(i), Article 1 of Republic Act 6425, as amended, otherwise known as the Dangerous Drugs Act.
l Accused appealed to the court averring that his constitutional right to illegal searches and seizures is violated when
his parcels were opened without his permission.

ISSUE:

WON an act of a private individual, allegedly in violation of appellant's constitutional rights, be invoked against the
State?

HELD:

1. NO. The court ruled in the negative. 

In a number of cases, the Court strictly adhered to the exclusionary rule and has struck down the admissibility of
evidence obtained in violation of the constitutional safeguard against unreasonable searches and seizures.
However, on the cases cited by the SC, the evidence so obtained were invariably  procured by the State acting
through the medium of its law enforcers or other authorized government agencies.

The case at bar assumes a peculiar character since the evidence sought to be excluded was primarily discovered
and obtained by a private person, acting in a private capacity and without the intervention and participation of
State authorities.

Therefore, In the absence of governmental interference, the liberties guaranteed by the Constitution cannot be
invoked against the State.

If the search is made upon the request of law enforcers, a warrant must generally be first secured if it is to pass the
test of constitutionality. However, if the search is made at the behest or initiative of the proprietor of a private
establishment for its own and private purposes, as in the case at bar, and without the intervention of police
authorities, the right against unreasonable search and seizure cannot be invoked for only the act of private
individual, not the law enforcers, is involved.

In sum, the protection against unreasonable searches and seizures cannot be extended to acts committed by
private individuals so as to bring it within the ambit of alleged unlawful intrusion by the government.
RESTRICTIVE
PROVISIONS IN
EMPLOYMENT
CONTRACTS
Rivera vs. Solidbank, G.R. No. 163269, April 19, 2006

FULL TEXT:

G.R. No. 163269             April 19, 2006

ROLANDO C. RIVERA, Petitioner,
vs.
SOLIDBANK CORPORATION, Respondent.

DECISION

CALLEJO, SR., J.:
Assailed in this Petition for Review on Certiorari is the Decision1 of the Court of Appeals (CA) in CA-
G.R. CV No. 52235 as well as its Resolution2 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 Attachment14 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:

WHEREFORE, it is respectfully prayed that:

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 Attachment17 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:

WHEREFORE, SUMMARY JUDGMENT is hereby rendered in favor of plaintiff and against

defendant ordering the latter to pay to plaintiff bank the amount of NINE HUNDRED SIXTY-THREE
THOUSAND SIX HUNDRED NINETEEN AND 28/100 (P963,619.28) PESOS, Philippine Currency,
as of May 23, 1995, plus legal interest at 12% per annum until fully paid, and the costs of the suit.

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.

Hence, this recourse to the Court.

Petitioner avers that –

I.

THE COURT OF APPEALS ERRED IN UPHOLDING THE PROPRIETY OF THE SUMMARY

JUDGMENT RENDERED BY THE TRIAL COURT CONSIDERING THE EXISTENCE OF GENUINE
ISSUES AS TO MATERIAL FACTS WHICH CALL FOR THE PRESENTATION OF EVIDENCE IN A
TRIAL ON THE MERITS.

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.

The petition is meritorious.

Sections 1 and 3, Rule 34 of the Revised Rules of Civil Procedure provide:

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:

4. That as a supplement to the Release and Quitclaim, I executed in favor of Solidbank

on FEBRUARY 28, 1995, I hereby expressly undertake that I will not seek employment with any
competitor bank or financial institution within one (1) year from February 28, 1995.41

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

The Court proceeded to define "trade" as follows:

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
Respondent, as employer, is burdened to establish that a restrictive covenant barring an employee
from accepting a competitive employment after retirement or resignation is not an unreasonable or
oppressive, or in undue or unreasonable restraint of trade, thus, unenforceable for being repugnant
to public policy. As the Court stated in Ferrazzini v. Gsell,52 cases involving contracts in restraint of
trade are to be judged according to their circumstances, to wit:

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.

ROMEO J. CALLEJO, SR.

Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson

CONSUELO YNARES-SANTIAGO MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice Asscociate Justice

MINITA V. CHICO-NAZARIO
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in
the above Decision were reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.

ARTEMIO V. PANGANIBAN
Chief Justice
Footnotes

 Penned by Associate Justice Oswaldo D. Agcaoili, with Associate Justices Eriberto U.

1

Rosario, Jr. and Danilo B. Pine, concurring; rollo, pp. 35-44.

 Penned by Associate Justice Danilo B. Pine, with Associate Justices Portia A.

2

Hormachuelos and Rodrigo V. Cosico, concurring; id. at 46.

3
 Id. at 64.

4
 Records, p. 2.

5
 Id.

6
 Rollo, p. 55.

7
 Records, p. 7.

8
 Rollo, pp. 57-58.

9
 Id. at 57.

10
 Id. at 57-58.

11
 Id. at 56.

12
 Records, p. 13.

13
 Rollo, p. 59.

14
 Id. at 48-54.

15
 Id. at 53.

16
 Records, pp. 7-15.

17
 Id. at 16.

18
 Id. at 107-109.

19
 Id. at 116, 119-120.

20
 Id. at 163-165.

21
 Id. at 170-171.
22
 Penned by Presiding Judge Juan C. Nabong, Jr.

23
 Rollo, p. 143.

24
 Id. at 44.

25
 Id. at 16-17.

26
 G.R. No. 97412, July 12, 1994, 234 SCRA 78.

27
 Solidbank Corporation v. Court of Appeals, 439 Phil. 23, 25, 34 (2002).

28
 Planmatics, Inc. v. Showers, 137 F.Supp.2d 616 (2001).

29
 Paz v. Court of Appeals, G.R. No. 85332, January 11, 1990, 181 SCRA 26, 31.

30
 Warner and Company v. Solberg, 639 N.W.2d 65, 69 (2001).

31
 Supra note 27, at 25 and 35.

32
 Jones v. Barnett, 619 N.W.2d 490, 492 (2000).

33
 Demst v. CSF Transportation Company, 153 F.3d 326 (1998).

34
 Supra note 28, at 628.

35
 United Rentals (North America), Inc. v. Keizer, 202 F.Supp.2d 727 (2004).

36
 Allen, Gibbs & Houlik v. Ristow, 32 Kan.App.2d 1051, 1053, 94 P.3d 724, 726.

37
 Supra note 35, at 410.

38
 Id. at 406.

39
 Id.

40
 Rollo, p. 57.

41
 Id. at 56.

42
 Id. at 58.

43
 Id. at 56.

 Government Service Insurance System v. Province of Tarlac, G.R. No. 157860, December
44

1, 2003, 417 SCRA 60, 64 (2003).

45
 Sanchez v. Court of Appeals, 345 Phil. 155, 190-191 (1997).
  Brion v. South Philippine Union Mission of the 7th Day Adventist Church, 366 Phil. 967,
46

976 (1999).

 Sta. Catalina College v. National Labor Relations Commission, G.R. No. 144483,
47

November 19, 2003, 416 SCRA 233, 243.

48
 34 Phil. 697 (1916).

49
 Id. at 711-712.

50
 Id. at 714.

51
 Ouano v. Court of Appeals, 446 Phil. 690, 708 (2003).

52
 Supra note 48.

53
 Id. at 712-713.

54
 Foti v. Cook, Jr., 263 S.E.2d 430 (1980).

55
 Motion Control Systems, Inc. v. East, 546 S.E.2d 424, 425 (2001).

56
 Faust v. Rohr, 81 S.E. 1096.

57
 Scott v. Gillis, 148 S.E. 315 (1929).

58
 Weber v. Tillman, Jr., 259 Kan. 457, 464, 913 P.2d 84, 90 (1996).

59
 418 F.3d 841, 846 (2005).

60
 Smithereen Co. v. Renfroe, 59 N.E.2d 545, 549 (1945).

61
 W.R. Grace Co. v. Mouyal, 422 S.E.2d 529, 531 (1992).

62
 Supra note 58, at 464.

 Philippine Commercial International Bank v. Court of Appeals, G.R. No. 121413, January
63

29, 2001, 350 SCRA 446, 472.

64
 450 F.2d 118 (1971).

65
 Id at 123.

66
 Van Pelt v. Berefco, Inc., 208 N.E.2d 858, 865 (1965).

67
 Flores v. Uy, 420 Phil. 408, 420 (2001).

68
 Ticzon v. Video Post Manila, Inc., 389 Phil. 20, 33 (2000).
 69
 Tsai v. Court of Appeals, 418 Phil. 606, 622 (2001).

70
 Producers Bank of the Philippines v. Court of Appeals, 417 Phil. 646, 660 (2001).

CASE DIGEST:

G.R. No. 163269             April 19, 2006  

ROLANDO C. RIVERA, Petitioner, 
vs.
SOLIDBANK CORPORATION, Respondent.
FACTS: Petitioner had been working for Solidbank Corporation since July 1,
1977. 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.
Solidbank offered a retirement program which Rivera accepted. Rivera was entitled to
receive the net amount of P963,619.28, which he received.
(THE RELEASE WAIVER AND QUITCLAIM)
Subsequently, Solidbank required Rivera to sign an undated Release, Waiver
and Quitclaim, which was notarized on March 1, 1995. 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.”
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.
(THE SEPARATE UN-NOTARIZED UNDERTAKING)
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. 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. Solidbank then, through a
letter, demanded the return of the 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. Rivera refused.
RTC: Solidbank filed a complaint for Sum of Money with Prayer for Writ of
Preliminary Attachment. SOLIDBANK 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.
In his Answer with Affirmative Defenses and Counterclaim, Rivera admitted that he
received the net amount ofP963,619.28 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.
BANK filed motion for summary judgment for lack of a genuine issue. Rivera
opposed.
RTC ORDERED RIVERA TO PAY back to solidbank all his received
benefits. 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.
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.1avvphil.netMoreover, Rivera’s justification for 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.
ISSUE: Whether the employment ban incorporated in the Undertaking which
petitioner executed upon his retirement is unreasonable, oppressive, hence, contrary to
public policy.
(minor issue: WON the ruling of the RTC through summary judgment was proper)
HELD: 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. (summary
judgment was wrong)
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. 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.
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. 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.
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.
(Even if he received the amount for retirement, that does not mean he was already
estopped from questioning the other provisions of the contract)
In Ferrazzini v. Gsell 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.
1. The injury to the public by being deprived of the restricted party’s industry;
2. The injury to the party himself by being precluded from pursuing his
occupation, and thus being prevented from supporting himself and his family.
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. 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
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.

Remanded to RTC
Tiu vs. Platinum, G.R. No. 163512, February 28, 2007

FULL TEXT:

G.R. No. 163512             February 28, 2007

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.

The relevant facts are as follows:

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.

… [IT SUSTAINED] THE VALIDITY OF THE NON-INVOLVEMENT CLAUSE IN PETITIONER’S

CONTRACT CONSIDERING THAT THE PERIOD FIXED THEREIN IS VOID FOR BEING
OFFENSIVE TO PUBLIC POLICY

B.

… [IT SUSTAINED] THE AWARD OF LIQUIDATED DAMAGES CONSIDERING THAT IT BEING IN

THE NATURE OF A PENALTY THE SAME IS EXCESSIVE, INIQUITOUS OR UNCONSCIONABLE7

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.

Finally, in Consulta v. Court of Appeals,11 we considered a non-involvement clause in accordance

with Article 130612 of the Civil Code. While the complainant in that case was an independent agent
and not an employee, she was prohibited for one year from engaging directly or indirectly in activities
of other companies that compete with the business of her principal. We noted therein that the
restriction did not prohibit the agent from engaging in any other business, or from being connected
with any other company, for as long as the business or company did not compete with the principal’s
business. Further, the prohibition applied only for one year after the termination of the agent’s
contract and was therefore a reasonable restriction designed to prevent acts prejudicial to the
employer.

Conformably then with the aforementioned pronouncements, a non-involvement clause is not

necessarily void for being in restraint of trade as long as there are reasonable limitations as to time,
trade, and place.

In this case, the non-involvement clause has a time limit: two years from the time petitioner’s
employment with respondent ends. It is also limited as to trade, since it only prohibits petitioner from
engaging in any pre-need business akin to respondent’s. 1awphi1.net

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

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice

CONCHITA CARPIO MORALES DANTE O. TINGA

Associate Justice Asscociate Justice

PRESBITERO J. VELASCO, JR.

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.

LEONARDO A. QUISUMBING
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

Footnotes

1
 Rollo, pp. 58-64. Penned by Associate Justice Delilah Vidallon-Magtolis, with Associate
Justices Jose L. Sabio, Jr. and Hakim S. Abdulwahid concurring.

2
 Id. at 66.

3
 Records, Vol. I, pp. 213-219.

4
 Id. at 175-178.

5
 Id. at 176.

6
 Id. at 219.

7
 Rollo, p. 44.

8
 34 Phil. 697, 714 (1916).

9
 39 Phil. 120, 125 (1918).

10
 45 Phil. 679, 683 (1924).

11
 G.R. No. 145443, March 18, 2005, 453 SCRA 732, 745.

 Art. 1306. The contracting parties may establish such stipulations, clauses, terms and
12

conditions as they may deem convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy.

13
 See Ollendorff v. Abrahamsom, 38 Phil. 585, 592 (1918).

 Art. 1159. Obligations arising from contracts have the force of law between the contracting
14

parties and should be complied with in good faith.

 Philippine Communications Satellite Corporation v. Globe Telecom, Inc., G.R. Nos. 147324
15

& 147334, May 25, 2004, 429 SCRA 153, 164.

 Duncan Association of Detailman-PTGWO v. Glaxo Wellcome Philippines, Inc., G.R. No.

16

162994, September 17, 2004, 438 SCRA 343, 356.

 Art. 2226. Liquidated damages are those agreed upon by the parties to a contract, to be
17

paid in case of breach thereof.

 Art. 2227. Liquidated damages, whether intended as an indemnity or a penalty, shall
be equitably reduced if they are iniquitous or unconscionable.

CASE DIGEST LINK:

https://www.scribd.com/document/168797997/digest-tiu-vs-platinum-plans-docx
Oxales vs. United Laboratories, G.R. No. 152991, July 21, 2008

FULL TEXT:

[G.R. NO. 152991 : July 21, 2008]

ALBERTO P. OXALES, Petitioner, v. 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 Resolution 2 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 2' % 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 1' 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 1'

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 P1,599,179.00, instead

of P4,260,255.70. He also received P176,313.06, instead
of P456,039.20 as cash equivalent of his unused sick leaves. Lastly,
he received P397,738.33 from his contributions to Trust Fund B. In
sum, Oxales received the total amount of P2,173,230.39 as his
retirement benefits.

On August 21, 1997, Oxales wrote UNILAB, claiming that he should

have been paid P1,775,907.23 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.

Labor Arbiter, NLRC and CA Dispositions

On June 30, 1998, Labor Arbiter Romulus A. Protasio rendered a

decision dismissing the complaint, thus:

WHEREFORE, premises considered, judgment is hereby rendered

dismissing the instant complaint for lack of merit.

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 1' month salary as
multiplier under the URP to - 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 forcertiorari 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:

1. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY

ERRED IN NOT FINDING THAT ACCORDING TO PREVAILING
JURISPRUDENCE, SUCH ERRORS IN THE COMPUTATION OF
RETIREMENT BENEFITS OF PETITIONER SHOULD BE CORRECTED IN
A SPECIAL ACTION FOR CERTIORARI;

2. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY

ERRED IN NOT FINDING THAT THE NLRC COMMITTED GRAVE
ABUSE OF DISCRETION IN INCORRECTLY INTERPRETING THE URP
TO EXCLUDE SEVERAL REMUNERATIONS FROM THE SAID SALARY
BASE;

3. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED

AND COMMITTED GRAVE ABUSE OF DISCRETION IN TOTALLY
IGNORING THE ISSUE AND IN NOT FINDING THAT THE NLRC
COMMITTED GRAVE ABUSE OF DISCRETION IN INCORRECTLY
INTERPRETING THE URP TO EXCLUDE PERMANENT AND REGULAR
ALLOWANCES FROM THE SALARY BASE FOR COMPUTING
RETIREMENT BENEFITS OF PETITIONER;

4. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED

IN NOT FINDING THAT THE NLRC COMMITTED GRAVE ABUSE OF
DISCRETION IN INCORRECTLY INTERPRETING THE URP TO
EXCLUDE PERMANENT AND REGULAR REMUNERATIONS
MISLABELED AS BONUSES FROM THE SALARY BASE FOR
COMPUTING THE RETIREMENT BENEFITS OF THE PETITIONER;

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;

6. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED

IN THE INTERPRETATION OF R.A. NO. 7641 WHEN IT CONCLUDED
THAT THE SAID LAW IS APPLICABLE ONLY IN THE ABSENCE OF
RETIREMENT PLAN OR AGREEMENT PROVIDING FOR THE
RETIREMENT BENEFITS OF EMPLOYEES IN AN ESTABLISHMENT;

7. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY

ERRED IN NOT FINDING THAT THE DEFINITION OF "SALARY"
UNDER THE IMPLEMENTING RULES OF R.A. NO. 7641 SHOULD BE
INTERPRETED TO INCLUDE THE PERMANENT AND REGULAR
REMUNERATIONS OF PETITIONER IN 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;

9. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY

ERRED IN NOT RULING THAT THE NLRC GRAVELY ABUSED ITS
DISCRETION IN ITS FAILURE TO PROPERLY INTERPRET THE URP IN
DETERMINING THE EMPLOYMENT PERIOD OF PETITIONER FOR THE
PURPOSE OF COMPUTING RETIREMENT BENEFITS;

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;

13. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY

ERRED IN NOT GRANTING MORAL AND EXEMPLARY DAMAGES AND
ATTORNEY'S FEES TO PETITIONER;

14. WHETHER OR NOT THE SUPREME COURT SHOULD GRANT

PETITIONER UNPAID RETIREMENT PAY, UNPAID CASH EQUIVALENT
OF UNUSED LEAVE CREDITS, REINSTATEMENT OF MEDICAL
BENEFITS, MORAL AND EXEMPLARY DAMAGES, AND ATTORNEY'S
FEES.20 (Underscoring supplied)cralawlibrary

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

The clear language of the URP should be respected.

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.

Mathematically speaking therefore, complainant's [Oxales] benefits

received amounting to P1,599,179.00 under Trust Fund A together
with the cash equivalent of his unused leaves which has an amount
of P176,313.06 and his contribution in the Trust Fund B amounting
to P397,738.33 are way above the entitlement he could have
received under Republic Act 7641, otherwise known as the New
Retirement Law.32 (Underscoring supplied) cralawlibrary

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)cralawlibrary

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. ςηαñrοblεš  νιr†υαl  lαω lιbrαrÿ

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 v. 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) cralawlibrary

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.

In Villena v. National Labor Relations Commission,50 the

"compulsory retirement" of Villena was, in fact, an illegal dismissal
in disguise. Thus, the Court ordered the Batangas, Laguna, Tayabas
Bus Co. to pay Villena "his full backwages, allowances, and other
benefits for a period of three (3) years after his illegal dismissal on
April 24, 1987, until he reached the compulsory retirement age plus
his retirement benefits equivalent to his gross monthly pay,
allowances and other benefits for every year of service up to age
sixty (60), which is the normal retirement age for him."51

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 1' pay per year of
service, compared to the minimum - 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 1' 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.
We agree with the NLRC observation on this score:

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 1' month salary as multiplier under
the URP to - 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)  chanroblesvirtuallawlibrary

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

WHEREFORE, the appealed Decision is AFFIRMED. No costs.

SO ORDERED.

Endnotes:

*
 Vice Associate Justice Minita V. Chico-Nazario. Justice Nazario is on official leave per Special Order No. 508 dated June
25, 2008.

 Designated as additional member vice Associate Justice Antonio Eduardo B. Nachura per raffle dated June 25, 2008.
**

Justice Nachura participated as Solicitor General in the present case.

1
 Rollo, pp. 122-128; Annex "A." CA-G.R. SP No. 55528. Penned by Associate Justice Juan Q. Enriquez, Jr., with Associate
Justices Delilah Vidallon-Magtolis and Eliezer R. De Los Santos, concurring.

2
 Id. at 170-182; Annex "O." NLRC-CA 016627-98. Penned by Commissioner Alberto R. Quimpo, with Commissioners
Rogelio I. Rayala and Vicente S.E. Veloso, concurring.

3
 Id. at 163-169; Annex "N." NLRC-NCR Case No. 00-08-06073-97. Penned by Labor Arbiter Romulus S. Protasio.

4
 Annex "C."
5
 United Retirement Plan, Art. V, Sec. 1(a).

6
 Annex "L."

7
 Annex "L-1."

8
 Rollo, p. 169.

9
 Id. at 168.

10
 Id. at 168-169.

11
 Id. at 169.

12
 Id. at 181.

13
 Id. at 179-180.

14
 Id. at 178-179.

15
 Id. at 126.

16
 Id. at 127.

17
 Id. at 126-127.

18
 Id. at 11-120.

19
 Id. at 438-568.

20
 Id. at 456-458.

 Brion v. South Philippine Union Mission of the Seventh Day Adventist Church, G.R. No. 135136, May 19, 1999, 307 SCRA
21

497, 504.

22
 See Civil Code, Art. 1306.

23
 165 US 578, 591.

24
 246 US 357, 373, 374.

25
 236 US 1, 10, 14.

26
 208 US 161.

27
 198 US 45, 49.

28
 208 US 412, 421.

 See Civil Code, Art. 1159; Pichel v. Alonzo, G.R. No. L-36902, January 30, 1982, 111 SCRA 341; De Cortes v.
29

Venturanza, G.R. No. L-26058, October 28, 1977, 79 SCRA 709; Villonco Realty Company v. Bormaheco, Inc., G.R. No. L-
26872, July 25, 1975, 65 SCRA 352; Government v. Vaca, 64 Phil. 6 (1937); Government v. Lim, 61 Phil. 737 (1935);
Government v. Conde, 61 Phil. 714 (1935); Hanlon v. Haussermann, 41 Phil. 276 (1920); Ollendorff v. Abrahamson, 38
Phil. 585 (1918); Compañia de Tabacos v. Obed, 13 Phil. 391 (1909); De la Rama v. Inventor, 12 Phil. 44 (1908);
Alcantara v. Alinea, 8 Phil. 111 (1907); Borromeo v. Franco, 5 Phil. 49 (1905); Salonga v. Concepcion, 3 Phil. 563 (1904);
Co-Tiangco v. To-Jamco, 3 Phil. 210 (1908).
30
 Id., Art. 1306.

31
 Rollo, p. 131; United Retirement Plan, Art. II, Sec. 1(j). (Emphasis supplied.)

32
 Id. at 179.

33
 Civil Code, Art. 1370. See also Rules of Court, Rule 130, Secs. 10-19 on Interpretation of Documents.

 Chinchilla v. Rafel, 39 Phil. 888 (1919); Escario v. Regis, 31 Phil. 618 (1915); De Lizardi v. Yaptico, 30 Phil. 211 (1915);
34

Nolan v. Majinay, 12 Phil. 559 (1909); Nolan v. Majinay, 12 Phil. 140 (1908); Palacios v. Municipality of Cavite, 12 Phil.
140 (1908); Azarraga v. Rodriguez, 9 Phil. 637 (1908); Alburo v. Villanueva, 7 Phil. 277 (1907).

35
 17A Am. Jur. 2d - 337, citing Binghamton Bridge, 70 US 51, 18 L. Ed. 137; South Hampton Co. v. Stinnes Corp., (CA5
Tex) 733 F. 2d 1108, 38 UCCRS 1137; Murray v. Kaiser Aluminum & Chemical Corp., (SD W Va) 591 F. Supp. 1550, affd
without op. (CA4 W Va) 767 F. 2d 912; Schulist v. Blue Cross of Iowa, (ND Ill) 553 F. Supp. 248, 4 EBC 1193, aff d (CA7
Ill) 717 F. 2d 1127, 4 EBC 2237; P & S Business, Inc. v. South Cent. Bell Tel. Co., (Ala) 466 So. 2d 928; Estate of
Wamack, (2nd Dist) 137 Cal. App. 2d 112, 289 P. 2d 871; BMW of North America, Inc. v. Krathen, (Fla App D4) 471 So.
2d 585, 10 FLW 1452, review den (Fla) 484 So. 2d 7, later proceeding (Fla App D4) 510 So. 2d 366, 12 FLW 1857;
Petroziello v. United States Leasing Corp., EOS Leasing Div., 176 Ga. App. 858, 338 SE 2d 63; Hanagami v. China Airlines,
Ltd., 67 Hawaii 357, 688 P. 2d 1139; P. A. Bergner & Co. v. Lloyds Jewelers, Inc., 112 Ill. 2d 196, 97 Ill. Dec. 415, 492 NE
2d 1288; Jenkins v. King, 224 Ind. 164, 65 NE 2d 121, 163 ALR 397; Scott v. Anderson Newspapers, Inc., (Ind App) 477
NE 2d 553; Allen v. Highway Equipment Co., (Iowa) 239 NW 2d 135; General Motors Acceptance Corp. v. Daniels, 303 Md.
254, 492 A. 2d 1306; Craig v. Bossenbery, 134 Mich. App. 543, 351 NW 2d 596; Kuhlman v. Educational Publishers, 245
Minn. 171, 71 NW 2d 889; State by Crow Wing Environment Protection Asso. v. Breezy Point, (Minn App) 363 NW 2d 778,
later app (Minn App) 394 NW 2d 592; Adams v. Kerr, (Mo App) 655 SW 2d 49; T.V. Transmission, Inc. v. Lincoln, 220
Neb. 887, 374 NW 2d 49; Parks v. Venters Oil Co., 255 NC 498, 121 SE 2d 850; Re Robinson's Will, 101 Vt. 464, 144 A.
457, 75 ALR 59; Ross v. Harding, 64 Wash. 2d 231, 391 P. 2d 526; Cotiga Dev. Co. v. United Fuel Gas Co., 147 W. Va.
484, 128 SE 2d 626, 17 OGR 583.

 Id., citing Gulf Cities Gas Corp. v. Tangelo Park Service Co., (Fla App D4) 253 So. 2d 744; Sears, roebuck & Co. v.
36

Poling, 248 Iowa 582, 81 NW 2d 462; Gans v. Aetna Life Ins. Co., 214 NY 326, 108 NE 443; General American Indem. Co.
v. Pepper, 161 Tex. 263, 339 SW 2d 660; Griffin v. Fairmont Coal Co., 59 W. Va. 480, 53 SE 24.

37
 Id., citing Massey-Ferguson v. Bent Equipment Co., (CA5 Fla) 283 F. 2d 12, 3 FR Serv. 2d 135; Atlas Sewing Center,
Inc. v. Belk's Dept. Store, Inc., (Fla App D2) 162 So. 2d 274; Coopersmith v. Isherwood, 219 Md. 455, 150 A. 2d 243;
Shapleigh Hardware Co. v. Spiro, 141 Miss. 38, 106 So. 209, 44 ALR 393, later app 153 Miss. 81, 118 So. 429, motion
overr 153 Miss. 195, 119 So. 206; Wood v. Security Mut. Life Ins. Co., 112 Neb. 66, 198 NW 537, 34 ALR 712; Republic
Nat. Life Ins. Co. v. Spillars, (Tex) 368 SW 2d 92, 5 ALR 3d 957.

 CJC Trading, Inc. v. National Labor Relations Commission, G.R. No. 115884, July 20, 19995, 246 SCRA 724; Oro
38

Enterprises v. National Labor Relations Commission, G.R. No. 110861, November 14, 1994, 238 SCRA 105.

39
 G.R. No. 82895, November 7, 1989, 179 SCRA 175.

 Article 287. Retirement. - Any employee may be retired upon reaching the age established in the Collective Bargaining
40

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 or other agreement.

41
 Section 13. Retirement. - In the absence of any collective bargaining agreement or other applicable agreement
concerning terms and conditions of employment which provides for retirement at an older age, an employee may be
retired upon reaching the age of sixty (60) years.

Section 14. Retirement Benefits. - (a) An employee who is retired pursuant to a bona-fide retirement plan or in accordance
with the applicable individual or collective agreement or established employer policy shall be entitled to all the retirement
benefits provided therein or to termination pay equivalent at least to one-half month salary for every year of service,
whichever is higher, a fraction of at least six (6) months being considered as one whole year.

(b) Where both the employer and the employee contribute to the retirement plan, agreement or policy, the employer's
total contribution thereto shall not be less than the total termination pay to which the employee would have been entitled
had there been no retirement fund. In case the employer's contribution is less than the termination pay the employee is
entitled to receive, the employer shall pay the deficiency upon the retirement of the employee.
(c) This Section shall apply where the employee retires at the age of sixty (60) years or older. (Rules to Implement the
Labor Code, Book VI, Rule I, Sec. 14.)

42
 Llora Motors, Inc. v. Drilon, supra note 39, at 181-187.

43
 G.R. No. 110861, November 14, 1994, 238 SCRA 105.

44
 Oro Enterprises, Inc. v. National Labor Relations Commission, id. at 112.

45
 G.R. No. 95940, July 24, 1996, 259 SCRA 161.

46
 Pantranco North Express, Inc. v. National Labor Relations Commission, id. at 173.

47
 Id.

48
 G.R. No. 135136, May 19, 1999, 307 SCRA 497.

49
 Brion v. South Philippine Union Mission of the Seventh Day Adventist Church, id. at 504.

50
 G.R. No. 90664, February 7, 1991, 193 SCRA 686.

51
 Villena v. National Labor Relations Commission, id. at 693.

52
 G.R. NOS. 78524 & 78739, January 20, 1989, 169 SCRA 328.

53
 Planters Products, Inc. v. National Labor Relations Commission, id. at 339.

54
 G.R. No. 141673, October 17, 2001, 367 SCRA 488.

55
 Manuel L. Quezon University v. National Labor Relations Commission, id. at 494.

56
 G.R. NOS. 50999-51000, March 23, 1990, 183 SCRA 610.

57
 Article XIV. Retirement Gratuity.

Section 1(a). Any employee, who is separated from employment, due to old age, sickness, death or permanent lay-off not
due to the fault of said employee shall receive from the company a retirement gratuity in an amount equivalent to one (1)
month's salary per year of service. One month of salary shall be deemed equivalent to the salary at date of retirement;
years of service shall be deemed equivalent to total service credits, a fraction of at least six months being considered as
one year, including probationary employment. (Songco v. National Labor Relations Commission, id. at 613, citing rollo, p.
71.)

58
 Rollo, p. 180.

59
 Id. at 432.

60
 Supra note 48.

61
 G.R. No. 106648, June 17, 1999, 308 SCRA 340.

62
 Audion v. Electric Co., Inc. v. National Labor Relations Commission, id. at 355.

 Revidad v. National Labor Relations Commission, G.R. No. 111105, June 27, 1995, 245 SCRA 356, 372-373, citing
63

Mercury Drug Corporation v. National Labor Relations Commission, G.R. No. 75662, September 15, 1989, 177 SCRA 580.
 CASE DIGEST:

GR 152991
July 21, 2008

Facts: Alberto Oxales was compulsory retired by UNILAB and he received his share in Trust
Fund A, Trust Fund B and unused sick leaves and under United Retirement Plan (URP). He
claimed that total computed retirement pay was lacking P1,775,907.23. UNILAB countered
that provision of the URP excludes commissions, overtime, bonuses, or extra compensations
in the computation of basic salary of the retiring employee.

            Issues:
1.    W/N in the computation of his retirement and sick leaves benefits, UNILAB should
have factored such benefits like bonuses, cash and meal allowances, rice rations,
service incentive leaves, and ½ of the 13th month pay
2.    W/N RA 7641 is applicable for purposes of computing retirement benefits
3.    W/N UNILAB is liable for moral damages, exemplary damages, and atty’s fees

Held:   1. The clear language of the URP should be respected. The law respects the freedom
to contract but, at the same time, it is very zealous in protecting the contracting parties and
the public in general. So much so that the contracting parties need not incorporate existing
laws in their contract. §quando abest, proviso parties, adest proviso legis (when the
provision of the party islacking, provision of the law supplies it)
            Oxales is not entitled to the additional retirement benefits he is asking because URP
is very clear. URP is not contrary to law, morals, public policy, public order thus it must be
sustained. §inclusio unius est exclusion alterius (inclusion of one is the exclusion of others)
2. RA 7641 does not apply in view of the URP which gives retiring employee more
than what the law requires. The Retirement Pay Law (RA 7641) only applies in the situation
where (1) there is no collective bargaining agreement/ other applicable employment
contract providing for retirement benefits or (2) there is such agreement but is below
requirements set by law because private contracts cannot derogate from public law (§pacta
privata juri public derogare non possunt).
            Legislative intent (RA 7641) because many employers refuse/ neglect to adopt a
retirement plan for their employees due to the absence of any legal compulsion
            URP grants more than what the law gives. Oxales is trying to have the best of both
worlds thus a sign of covetousness.
3. Oxales is not entitled to the awards. He claimed that the revocation of his medical
benefits caused him humiliation and anxiety. Medical benefits are not included in the URP.
After he retired, he joined rival company which gives more reason to discontinue
benefits

DOCTRINE

            Management also has its own rights. Justice should be dispensed in light of the
established facts and applicable law and doctrine. RA 7641 applies only when there’s no
agreement/ if there is, is below requirements set by law.