Honda Philippines, Inc. v. Samahan ng Malalaya sa Honda, G.R. No.

145561, June 15, 2005

Facts:

 Petitioner Company, Honda Philippines (Honda), entered into a CBA with the Respondent Union,
Samahan ng Malalaya sa Honda, that contained the disputed provisions:

o Section 3. 13th Month Pay

 The COMPANY shall maintain the present practice in the implementation [of] the
13th month pay.

o Section 6. 14th Month Pay

 The COMPANY shall grant a 14th Month Pay, computed on the same basis as
computation of 13th Month Pay.

o Section 7. The COMPANY agrees to continue the practice of granting, in its discretion,
financial assistance to covered employees in December of each year, of not less than
100% of basic pay.

 The CBA was only effective until the year 2000. Around 1998, the two parties entered into a
renegotiation of the CBA but it bogged down. Thus, the respondent union filed a notice of strike
on the ground of bargaining deadlock. Honda filed a Notice of Lockout accordingly.

 [Unimportant factual details, but may be asked] (DOLE) Secretary Laguesma assumed
jurisdiction over the labor dispute and ordered the parties to cease and desist from committing
acts that would aggravate the situation. Both parties complied accordingly. However, respondent
union filed a second Notice of Strike on the ground of unfair labor practice alleging that Honda
illegally contracted out work to the detriment of the workers.

 It was certified for compulsory arbitration and the striking employees were ordered to return to
work and the management accepted them back under the same terms prior to the strike staged.

 The management of Honda issued a memorandum announcing its new computation of the 13th
and 14th month pay to be granted to all its employees whereby the thirty-one (31)-day long strike
shall be considered unworked days for purposes of computing said benefits.

 As per the company’s new formula, the amount equivalent to 1/12 of the employees’ basic salary
shall be deducted from these bonuses, with a commitment however that in the event that the
strike is declared legal, Honda shall pay the amount deducted.

 Voluntary Arbitrator held in favor of the respondent union, stating that the prorated computation of
the 13th and 14th month pay was invalid. A petition was filed with the CA but was denied.

Issue: Whether the pro-rated computation of the 13th month pay and the other bonuses in
question is valid and lawful.

Held: The petition lacks merit.

 A collective bargaining agreement refers to the negotiated contract between a legitimate labor
organization and the employer concerning wages, hours of work and all other terms and
conditions of employment in a bargaining unit.

 A cursory reading of the provisions will show that they did not state categorically whether the
computation of the 13th month pay, 14th month pay and the financial assistance would be based
on one full month’s basic salary of the employees, or pro-rated based on the compensation
actually received. The arbitrator thus properly resolved the ambiguity in favor of labor.

 Under the Revised Guidelines on the Implementation of the 13th month pay law, the minimum
13th month pay required by law shall not be less than one-twelfth (1/12) of the total basic salary
earned by an employee within a calendar year.

 The "basic salary" of an employee for the purpose of computing the 13th month pay shall include
all remunerations or earnings paid by his employer for services rendered. For employees
receiving regular wage, we have interpreted "basic salary" to mean, not the amount actually
received by an employee, but 1/12 of their standard monthly wage multiplied by their length of
service within a given calendar year. Thus, we exclude from the computation of "basic salary"
payments for sick, vacation and maternity leaves, night differentials, regular holiday pay and
premiums for work done on rest days and special holidays

 Considering the foregoing, the computation of the 13th month pay should be based on the length
of service and not on the actual wage earned by the worker. In the present case, there being no
gap in the service of the workers during the calendar year in question, the computation of the
13th month pay should not be pro-rated but should be given in full.

 [Important to the topic]

o More importantly, it has not been refuted that Honda has not implemented any pro-rating
of the 13th month pay before the instant case. Honda did not adduce evidence to show
that the 13th month, 14th month and financial assistance benefits were previously subject
to deductions or pro-rating

o [Important to the topic] Honda explicitly accepted that it was the strike that prompted
them to adopt a pro-rata computation, aside from being in a state of rehabilitation due to
substantial losses in lost sales in due to strike. This is an implicit acceptance that
prior to the strike, a full month basic pay computation was the "present practice"
intended to be maintained in the CBA

o The memorandum dated November 22, 1999 which Honda issued shows that it was the
first time a pro-rating scheme was to be implemented in the company.

o That a full month payment of the 13th month pay is the established practice at Honda is
further bolstered by two employees. Both attested that when they were absent from work
due to motorcycle accidents, and after they have exhausted all their leave credits and
were no longer receiving their monthly salary from Honda, they still received the full
amount of their 13th month, 14th month and financial assistance pay

o Honda’s voluntary and continuous act of not using a pro-rated calculation for 13 th month
pay prior to the strike has ripened into company practice. As this act is favorable to the
 employees, it has ripened into a practice and therefore can no longer be withdrawn,
reduced, diminished, discontinued or eliminated.

o With regard to the length of time the company practice should have been exercised to
constitute voluntary employer practice which cannot be unilaterally withdrawn by the
employer, we hold that jurisprudence has not laid down any rule requiring a specific
minimum number of years

Doctrine: A voluntary and continuous act of the employer that has ripened into a company
practice can no longer be withdrawn, reduced, diminished, discontinued or eliminated.
Vergara, Jr. v. Coca-Cola Bottlers, Phils., Inc., G.R. No. 176985, April 1, 2013

Facts:

 Petitioner Ricardo E. Vergara, Jr. was an employee of respondent Coca-Cola Bottlers Philippines,
Inc. from May 1968 until he retired on January 31, 2002 as a District Sales Supervisor (DSS). As
stipulated in respondent’s existing Retirement Plan Rules and Regulations at the time, the Annual
Performance Incentive Pay of DSSs shall be considered in the computation of retirement
benefits, as follows: Basic Monthly Salary + Monthly Average Performance Incentive (which is the
total performance incentive earned during the year immediately preceding ÷ 12 months) × No. of
Years in Service

 Petitioner claims that he is entitled to an additional PhP474,600.00 as Sales Management

Incentives (SMI), as well as the amount of PhP496,016.67 which respondent allegedly deducted
illegally, representing the unpaid accounts of two dealers within his jurisdiction. The two parties
latter compromised on the issue of the allegedly illegal deduction.

 The Labor Arbiter held in favor of Petitioner and ordered the respondent company to integrate the
SMI to Petitioner’s retirement benefits. However, upon appeal, the NLRC reversed and stated that
Petitioner is not entitled to SMI.

Issue: Whether or not petitioner is entitled to SMI

Held: No, petitioner is not entitled to SMI as he has not met the requirements to be entitled to such; and
that it is not a company practice to include the SMI to all retiring DSSs whether they have met the
requirements or not.

 Generally, employees have a vested right over existing benefits voluntarily granted to them by
their employer. Thus, any benefit and supplement being enjoyed by the employees cannot be
reduced, diminished, discontinued or eliminated by the employer.

 The principle of non-diminution of benefits is actually founded on the Constitutional mandate to

protect the rights of workers, to promote their welfare, and to afford them full protection

 There is diminution of benefits when the following requisites are present:

o (1) the grant or benefit is founded on a policy or has ripened into a practice over a long
period of time;

o (2) the practice is consistent and deliberate;

o (3) the practice is not due to error in the construction or application of a doubtful or
difficult question of law; and

o (4) the diminution or discontinuance is done unilaterally by the employer

 To be considered as a regular company practice, the employee must prove by substantial

evidence that the giving of the benefit is done over a long period of time, and that it has
been made consistently and deliberately

 Jurisprudence has not laid down any hard-and-fast rule as to the length of time that company
practice should have been exercised in order to constitute voluntary employer practice. The
 common denominator in previously decided cases appears to be the regularity and
deliberateness of the grant of benefits over a significant period of time.

 It requires an indubitable showing that the employer agreed to continue giving the benefit
knowing fully well that the employees are not covered by any provision of the law or agreement
requiring payment thereof.

 In sum, the benefit must be characterized by regularity, voluntary and deliberate intent of the
employer to grant the benefit over a considerable period of time.

 Petitioner failed to prove through substantial evidence that the inclusion of SMI to retirement
benefits is a company practice. His only evidence are two affidavits of former employees who
have been entitled to SMI when they retired although not meeting the requirements as per
company policy.

 However, the company substantially presented evidence which shows that one of those two
employees actually met the requirements to be entitled to SMI, while the other was a special case
as he was granted to be entitled to the SMI due to his help in numerous occasions to achieve
industrial peace in the plant which was then experiencing labor relations problems

 The company also substantially proved that petitioner is not entitled to SMI by not meeting the
requirements as provided by the company guidelines.

 Therefore, respondent's isolated act of including the SMI in the retirement package of one
employee that was not originally entitled thereto could hardly be classified as a company practice
that may be considered an enforceable obligation.

 To repeat, the principle against diminution of benefits is applicable only if the grant or
benefit is founded on an express policy or has ripened into a practice over a long period of
time which is consistent and deliberate; it presupposes that a company practice, policy and
tradition favorable to the employees has been clearly established; and that the payments made
by the company pursuant to it have ripened into benefits enjoyed by them

Doctrine: To be considered as a regular company practice, the employee must prove by

substantial evidence that the giving of the benefit is done over a long period of time, and that it
has been made consistently and deliberately
 MAXIMO CALALANG VS A.D. WILLIAMS et.al.

FACTS:

Maximo Calalang in his capacity as a private citizen and taxpayer of Manila brought before the Court a
petition for writ of prohibition against the respondents, A.D. Williams, Chairman of the National Traffic
Commission; Vicente Fragante, Director of Public Works; Sergio Bayan, as Acting Secretary of Public
Works and Communications; Eulogio Rodriguez, Mayor of the City of Manila and Juan Dominguez, Acting
Chief of Police of Manila.

A resolution was passed approving the recommendation that Rosario Street and Rizal Avenue be closed
to traffic of animal-drawn vehicles, from Plaza Calderon de la Barca to Dasmariñas Street from 7:30am to
12:30pm and 1:30pm to 5:30pm and from the railroad crossing at Antipolo Street to Echague Street from
7:00am to 11:00pm for a period of one year from the date of the opening of the Colgante Bridge. The
Mayor of Manila and Acting Chief of Police of Manila started to enforce the rules and regulations adopted.

Petitioner claims that this is unconstitutional because of the following:

1. It constitutes an undue delegation of legislative power

2. The rules and regulations promulgated constitute an unlawful interference with legitimate
business or trade and abridge the right to personal liberty and freedom of locomotion.

3. The rules and regulations complained of infringe upon the constitutional precept regarding the
promotion of social justice to insure the well-being and economic security of all the people.

ISSUE: [Main] should the writ of prohibition prosper? NO.

[Labor] How is Social Justice defined?

HELD:

[LABOR]

The promotion of social justice, however, is to be achieved not through a mistaken sympathy towards any
given group. Social justice is "neither communism, nor despotism, nor atomism, nor anarchy," but the
humanization of laws and the equalization of social and economic forces by the State so that justice in its
rational and objectively secular conception may at least be approximated.

Social justice means the promotion of the welfare of all the people, the adoption by the Government of
measures calculated to insure economic stability of all the competent elements of society, through the
maintenance of a proper economic and social equilibrium in the interrelations of the members of the
community, constitutionally, through the adoption of measures legally justifiable, or extra-constitutionally,
through the exercise of powers underlying the existence of all governments on the time-honored principle
of salus populi est suprema lex.

Social justice, therefore, must be founded on the recognition of the necessity of interdependence among
divers and 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."
[MAIN]

Based on the Petitioner’s claim

1. NO UNDUE DELEGATION OF LEGISLATIVE POWER. The authority conferred to them is not to

determine what public policy demands but merely to carry out the legislative policy laid down by
the National Assembly in C.A. No. 548 “to promote safe transit upon and avoid obstructions on,
roads and streets designated as national roads by acts of the National Assembly or by executive
orders of the President of the Philippines.

2. NO UNLAWFUL INTERFERENCE. Public welfare and the state in order to promote the general
welfare may interfere with personal liberty, with property, and with business and occupations.
Persons and property may be subjected to all kinds of restraints and burdens, in order to secure
the general comfort, health, and prosperity of the state.
 Philippine Long Distance Telephone Company v. NLRC, G.R. No. L-80609, August 23, 1998, 164
SCRA 671
DOCTRINE: Separation pay shall be allowed as a measure of social justice only in those instances where
the employee is validly dismissed for causes other than serious misconduct or those reflecting on his
moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an
offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may
not be required to give the dismissed employee separation pay, or financial assistance, or whatever other
name it is called, on the ground of social justice.

FACTS:
Marilyn Abucay, a traffic operator of the PLDT Co. was accused by two complainants of having demanded
and received from them the total amount of P3,800 in consideration of her promise to facilitate approval of
their applications for telephone installation. Investigated and heard, she was found guilty as charged and
accordingly separated from the service. Abucay went to the Ministry of Labor and Employment (MOLE)
claiming that she had been illegally removed. After consideration of the evidence and arguments of the
parties, LA sustained the company and dismissed the complaint. Both PLDT and Abucay appealed to the
NLRC, which upheld the decision in toto. However, the NLRC held that for equitable reasons, complainant
must be given separation pay as financial assitance considering her long years of service to the company.
Abucay took no further action thereby impliedly accepting the validity of her dismissal.
Petitioner contends that an employee illegally dismissed is entitled to reintstatement and backwages as
required by law. However, an employee dismissed for cause is entitled neither reinstatement nor
backwages and is not allowed any relief at all because his dismissal is in accordance with law. In the case
of Abucay, she has been awarded financial assistance equivalent to ten months pay corresponding to her
10 year service in the company despite her removal for cause. She is, therefore, in effect rewarded rather
than punished for her dishonesty, and without any legal authorization or justification.

ISSUE: W/N the award of financial assisatnce to an employee who had been dismissed for cause as
found by the NLRC is valid? NO

HELD: The grant of separation pay in the case at bar is unjustified. Abucay has been dismissed for
dishonesty, as found by the labor arbiter and affirmed by the NLRC and as she herself has impliedly
admitted. The fact that she has worked with the PLDT for more than a decade, if it is to be considered at
all, should be taken against her as it reflects a regrettable lack of loyalty that she should have
strengthened instead of betraying during all of her 10 years of service with the company. If regarded as a
justification for moderating the penalty of dismissal, it will actually become a prize for disloyalty, perverting
the meaning of social justice and undermining the efforts of labor to cleanse its ranks of all undesirables.
The Court also rules that the separation pay, if found due under the circumstances of each case, should
be computed at the rate of one month salary for every year of service, assuming the length of such
service is deemed material. This is without prejudice to the application of special agreements between the
employer and the employee stipulating a higher rate of computation and providing for more benefits to the
discharged employee.

RATIO:
(1)   Separation pay shall be allowed as a measure of social justice only in those instances where the
employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral
character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense
involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be
required to give the dismissed employee separation pay, or financial assistance, or whatever other name
it is called, on the ground of social justice. A contrary rule would, as the petitioner correctly argues, have
the effect, of rewarding rather than punishing the erring employee for his offense.
(2)   The policy of social justice is not intended to countenance wrongdoing simply because it is committed by
the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense.
Compassion for the poor is an imperative of every humane society but only when the recipient is not a
rascal claiming an undeserved privilege. Social justice cannot be permitted to be refuge of scoundrels any
more than can equity be an impediment to the punishment of the guilty. Those who invoke social justice
may do so only if their hands are clean and their motives blameless and not simply because they happen
to be poor.

DISPOSITIVE: PETITION GRANTED.

DISSENT:
Fernan C.J.: By providing a rigid mathematical formula for determining the amounts of such separation
pay will not be in keeping with these constitutional directives.

GRIÑO AQUINO, J.: Compassion should not be rationalized. Financial assistance should be granted.

SEPARATE OPINION:
Padilla, J: Except for terminations based on dishonesty and serious misconduct involving moral turpitude-
where no separation pay should be allowed--in other cases, the grant of separation pay, i.e. the amount
thereof, as financial assistance to the terminated employee, should be left to the judgment of the
administrative agency concerned which is the NLRC.
Toyota Motor Phils. Corp Workers Association (TMPCWA) vs NLRC
Doctrine/s:
(1) The policy of social justice is not intended to countenance wrongdoing simply because it is
committed by the underprivileged. At best it may mitigate the penalty but it certainly will not
condone the offense. 
(2) The reason is that our Constitution is replete with positive commands for the promotion of social
justice, and particularly the protection of the rights of the workers. The enhancement of their
welfare is one of the primary concerns of the present charter. In fact, instead of confining itself to
the general commitment to the cause of labor in Article II on the Declaration of Principles of State
Policies, the new Constitution contains a separate article devoted to the promotion of social
justice and human rights with a separate sub-topic for labor. Article XIII expressly recognizes the
vital role of labor, hand in hand with management, in the advancement of the national economy
and the welfare of the people in general. (PLDT vs. NLRC)
Short Facts:
Toyota Motor Phils. Corp Association (Union) filed a petition for certification election among the Toyota
rank and file employees with the National Conciliation and Mediation Board (NCMB). Subsequently after
being certified as the sole and exclusive bargaining agent (SEBA), the Union submitted its Collective
Bargaining Agreement (CBA) proposals to Toyota. However, Toyota refused to negotiate because it filed
an appeal as against the order certifying the Union as the SEBA. The Union filed a notice of strike with
the NCMB for refusal to bargain.
In connection with Toyota’s appeal, Toyota and the Union were required to attend a hearing before the
Bureau of Labor Relations (BLR) in relation to the exclusion of the votes of alleged supervisory
employees from the votes cast during the certification election.
Basically, the Union and its members went on 5 different strikes: (1) from February 21-23 and (2) May 23
and 28 (after the Secretary of Labor and Employment assumed jurisdiction).
Toyota, eventually, dismissed the union leaders and members who participated in those strikes. Likewise,
the NLRC declared that the strikes conducted by the union were illegal and the dismissal of the leaders
and the members of the union who participated in those strike was valid. However, upon appeal to the
CA, the CA affirmed that the strikes were illegal and initially ordered that the dismissed employees are not
entitled their separation pay. However, the CA modified its decision by reinstating severance
compensation to the dismissed employees based on social justice.
Facts:
Toyota Motor Philippines Corporation Workers Association (Union) is a legitimate labor organization duly
registered with the Department of Labor and Employment (DOLE) and is the sole and exclusive
bargaining agent of all Toyota rank and file employees while Toyota Motor Philippines Corporation
(Toyota), on the other hand, is a domestic corporation engaged in the assembly and sale of vehicles
and parts.
On 14 February 1999, the Union filed a petition for certification election among the Toyota rank and file
employees with the National Conciliation and Mediation Board (NCMB). Med-Arbiter Ma. Zosima C.
Lameyra denied the petition, but, on appeal, the DOLE Secretary granted the Union’s prayer, and directed
the immediate holding of the certification election.
The certification election was conducted which certified the Union as the sole and exclusive bargaining
agent of all the Toyota rank and file employees. Toyota challenged said Order through an appeal to the
DOLE Secretary.
In the meantime, the Union submitted its Collective Bargaining Agreement (CBA) proposals to Toyota, but
the latter refused to negotiate in view of its pending appeal.
Consequently, the Union filed a notice of strike with the NCMB based on Toyota’s refusal to bargain. On 5
February 2001, the NCMB-NCR converted the notice of strike into a preventive mediation case on the
ground that the issue of whether or not the Union is the exclusive bargaining agent of all Toyota rank and
file employees was still unresolved by the DOLE Secretary.
In connection with Toyota’s appeal, Toyota and the Union were required to attend a hearing before the
Bureau of Labor Relations (BLR) in relation to the exclusion of the votes of alleged supervisory
employees from the votes cast during the certification election.
In the meantime, on 21 February 2001, 135 Union officers and members failed to render the
required overtime work, and instead marched to and staged a picket in front of the BLR office in
Intramuros, Manila. The Union, in a letter of the same date, also requested that its members be allowed
to be absent on 22 February 2001 to attend the hearing and instead work on their next scheduled rest
day. This request however was denied by Toyota.
Despite denial of the Union’s request, more than 200 employees staged mass actions on February
22 and 23, 2001 in front of the BLR and the DOLE offices, to protest the partisan and anti-union
stance of Toyota. Due to the deliberate absence of a considerable number of employees on
February 22 to 23, 2001, Toyota experienced acute lack of manpower in its manufacturing and
production lines, and was unable to meet its production goals resulting in huge losses of PhP
53,849,991.
Soon thereafter, on 27 February 2001, Toyota sent individual letters to some 360 employees
requiring them to explain within 24 hours why they should not be dismissed for: (1) their obstinate
defiance of the company’s directive to render overtime work on 21 February 2001; (2) for their
failure to report for work on February 22 and 23, 2001; and (3) for their participation in the
concerted actions which severely disrupted and paralyzed the plant’s operations in violation of
Section D, paragraph 6 of the Company’s Code of Conduct. (The Code of Conduct provides that the
1st Offense for joining a riot detrimental to Toyota would be Dismissal)
Meanwhile, a Manifesto was circulated by the Union which urged its members to participate in a
strike/picket and to abandon their posts.
On the next day, the Union filed with the NCMB another notice of strike for union busting
amounting to unfair labor practice.
On 1 March 2001, the Union nonetheless submitted an explanation in compliance with the notices sent by
Toyota to the erring employees. The Union members explained that their refusal to work on their
scheduled work time for two consecutive days was simply an exercise of their constitutional right to
peaceably assemble and to petition the government for redress of grievances. It further argued that the
demonstrations staged by the employees on February 22 and 23, 2001 could not be classified as an
illegal strike or picket, and that Toyota had already condoned the alleged acts when it accepted back the
subject employees.
Consequently, Toyota issued two (2) memoranda to the concerned employees to clarify whether or not
they are adopting the Union’s explanation as their own. The employees were also required to attend an
investigative interview, but they refused to do so.
On 16 March 2001, Toyota terminated the employment of 227 employees for participation in
concerted actions in violation of its Code of Conduct and for misconduct under Article 282 of the
Labor Code.
In reaction to the dismissal of its union members and officers, the Union went on strike on 17 March
2001. Subsequently, from 28 March 2001 to 12 April 2001, the Union intensified its strike by
barricading the gates of Toyota’s Bicutan and Sta. Rosa plants. The strikers prevented workers
who reported for work from entering the plants.
On 29 March 2001, Toyota filed a petition for injunction with a prayer for the issuance of a temporary
restraining order (TRO) with the NLRC. It sought free ingress to and egress from its Bicutan and Sta.
Rosa manufacturing plants.
NLRC: issued a TRO against the Union and ordered the leaders and members of the Union as well as its
sympathizers to remove their barricades and all forms of obstruction to ensure free ingress to and egress
from the company’s premises.
Meanwhile, Toyota filed a petition to declare the strike illegal with the NLRC arbitration branch and prayed
that the erring Union officers, directors, and members be dismissed.
On 10 April 2001, the DOLE Secretary assumed jurisdiction over the labor dispute and issued an
Order certifying the labor dispute to the NLRC. In said Order, the DOLE Secretary directed all
striking workers to return to work at their regular shifts by 16 April 2001. On the other hand, it
ordered Toyota to accept the returning employees under the same terms and conditions obtaining
prior to the strike or at its option, put them under payroll reinstatement. The parties were also
enjoined from committing acts that may worsen the situation.
The Union ended the strike on 12 April 2001. The union members and officers tried to return to
work on 16 April 2001 but were told that Toyota opted for payroll-reinstatement authorized by the
Order of the DOLE Secretary.
Meanwhile, on 23 May 2001, at around 12:00 nn, despite the issuance of the DOLE Secretary’s
certification Order, several payroll-reinstated members of the Union staged a protest rally in front
of Toyota’s Bicutan Plant bearing placards and streamers in defiance of the 10 April 2001 Order.
Then, on 28 May 2001, around forty-four (44) Union members staged another protest action in
front of the Bicutan Plant. At the same time, some twenty-nine (29) payroll-reinstated employees
picketed in front of the Santa Rosa Plant’s main entrance, and were later joined by other Union
members.
On 5 June 2001, notwithstanding the certification Order, the Union filed another notice of strike. On 18
June 2001, the DOLE Secretary directed the second notice of strike to be subsumed in the 10 April 2001
certification Order.
In the meantime, the NLRC, ordered both parties to submit their respective position papers. However,
only Toyota submitted its position paper.
NLRC: declared the strikes staged by the Union as illegal on February 21 to 23, 2001 and May 23 and 28,
2001 as illegal; declared that the dismissal of the 227 who participated in the illegal strike on February 21-
23, 2001 is legal; ordered Toyota to pay the 227 Union members, who participated in the illegal strike
severance compensation in an amount equivalent to one month salary for every year of service, as an
alternative relief to continued employment; declared that the Union officers and directors to have forfeited
their employment status for having led the illegal strikes on February 21-23, 2001 and May 23 and 28,
2001; it considered the mass actions staged on February 21 to 23, 2001 illegal as the Union failed to
comply with the procedural requirements of a valid strike under Art. 263 of the Labor Code; it found the
strikes illegal as they violated Art. 264 of the Labor Code which proscribes any strike or lockout after
jurisdiction is assumed over the dispute by the President or the DOLE Secretary; it held that both parties
must have maintained the status quo after the DOLE Secretary issued the assumption/certification Order,
and ruled that the Union did not respect the DOLE Secretary’s directive.
CA: affirmed the NLRC Decision and Resolution with a modification, however, of deleting the award of
severance compensation to the dismissed Union members. (but thereafter, it modified its decision by
reinstating severance compensation to the dismissed employees based on social justice)
Issue:
Whether the dismissed employees were entitled to separation pay. NO.
Held:
The general rule is that when just causes for terminating the services of an employee under Art. 282 of
the Labor Code exist, the employee is not entitled to separation pay. As in any rule, there are
exceptions. One exception where separation pay is given even though an employee is validly
dismissed is when the court finds justification in applying the principle of social justice well
entrenched in the 1987 Constitution. In Phil. Long Distance Telephone Co. (PLDT) v. NLRC, the Court
elucidated why social justice can validate the grant of separation pay, thus:
 
The reason is that our Constitution is replete with positive commands for the
promotion of social justice, and particularly the protection of the rights of the
workers. The enhancement of their welfare is one of the primary concerns of the
 present charter. In fact, instead of confining itself to the general commitment to the
cause of labor in Article II on the Declaration of Principles of State Policies, the
new Constitution contains a separate article devoted to the promotion of social
justice and human rights with a separate sub-topic for labor. Article XIII expressly
recognizes the vital role of labor, hand in hand with management, in the
advancement of the national economy and the welfare of the people in general. The
categorical mandates in the Constitution for the improvement of the lot of the
workers are more than sufficient basis to justify the award of separation pay in
proper cases even if the dismissal be for cause.
 
 In the same case, the Court laid down the rule that severance compensation shall be allowed only when
the cause of the dismissal is other than serious misconduct or that which reflects adversely on the
employees moral character. The Court succinctly discussed the propriety of the grant of separation pay in
this wise:
 
We hold that henceforth separation pay shall be allowed as a measure of social
justice only in those instances where the employee is validly dismissed for causes
other than serious misconduct or those reflecting on his moral character. Where
the reason for the valid dismissal is, for example, habitual intoxication or an offense
involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the
employer may not be required to give the dismissed employee separation pay, or
financial assistance, or whatever other name it is called, on the ground of social justice.
 
A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding
rather than punishing the erring employee for his offense. And we do not agree that the
punishment is his dismissal only and that the separation pay has nothing to do with the
wrong he has committed. Of course it has. Indeed, if the employee who steals from the
company is granted separation pay even as he is validly dismissed, it is not unlikely that
he will commit a similar offense in his next employment because he thinks he can expect
a like leniency if he is again found out. This kind of misplaced compassion is not going to
do labor in general any good as it will encourage the infiltration of its ranks by those who
do not deserve the protection and concern of the Constitution.
 
The policy of social justice is not intended to countenance wrongdoing simply
because it is committed by the underprivileged. At best it may mitigate the penalty
but it certainly will not condone the offense. Compassion for the poor is an imperative
of every humane society but only when the recipient is not a rascal claiming an
undeserved privilege. Social justice cannot be permitted to be refuge of scoundrels
any more than can equity be an impediment to the punishment of the guilty. Those
who invoke social justice may do so only if their hands are clean and their motives
blameless and not simply because they happen to be poor. This great policy of our
Constitution is not meant for the protection of those who have proved they are not worthy
of it, like the workers who have tainted the cause of labor with the blemishes of their own
character.
  
Explicit in PLDT are two exceptions when the NLRC or the courts should not grant
separation pay based on social justice: serious misconduct (which is the first ground for
dismissal under Art. 282); or acts that reflect on the moral character of the employee. Moroever,
the Court, in a number of cases, also declined to grant termination pay for other grounds under
Art. 282 of the Labor Code if the acts are serious or grave in nature and attended by willful or
wrongful intent or they reflected adversely on the moral character of the employees. Therefore, in
addition to serious misconduct, in dismissals based on other grounds under Art. 282 like willful
disobedience, gross and habitual neglect of duty, fraud or willful breach of trust, and commission
of a crime against the employer or his family, separation pay should not be conceded to the
dismissed employee.
 
 In analogous causes for termination like inefficiency, drug use, and others, the NLRC or the
courts may opt to grant separation pay anchored on social justice in consideration of the length of service
of the employee, the amount involved, whether the act is the first offense, the performance of the
employee and the like, using the guideposts enunciated in PLDT on the propriety of the award of
separation pay.
 
The CAs grant of separation pay is an erroneous departure from our ruling in Phil. Long Distance
Telephone Co. v. NLRC that serious misconduct forecloses the award of separation pay. Secondly, the
advertence to the alleged honest belief on the part of the 227 employees that  Toyota committed a breach
of the duty to bargain collectively and an abuse of valid exercise of management prerogative has not
been substantiated by the evidence extant on record. There can be no good faith in intentionally incurring
absences in a collective fashion from work on February 22 and 23, 2001 just to attend the DOLE
hearings. The Unions strategy was plainly to cripple the operations and bring Toyota to its knees by
inflicting substantial financial damage to the latter to compel union recognition. The Union officials and
members are supposed to know through common sense that huge losses would befall the company by
the abandonment of their regular work. It was not disputed that Toyota lost more than Php 50 million
because of the willful desertion of company operations in February 2001 by the dismissed union
members. In addition, further damage was experienced by Toyota when the Union again resorted to
illegal strikes from March 28 to April 12, 2001, when the gates of Toyota were blocked and barricaded,
and the company officials, employees, and customers were intimidated and harassed. Moreover, they
were fully aware of the company rule on prohibition against concerted action inimical to the interests of
the company and hence, their resort to mass actions on several occasions in clear violation of the
company regulation cannot be excused nor justified. Lastly, they blatantly violated the
assumption/certification Order of the DOLE Secretary, exhibiting their lack of obeisance to the rule of
law. These acts indeed constituted serious misconduct.
Dispositive Portion: WHEREFORE, the petitions in G.R. Nos. 158786 and 158789 are DENIED while
those in G.R. Nos. 158798-99 are GRANTED.
The June 20, 2003 CA Resolution in CA-G.R. SP Nos. 67100 and 67561 restoring the grant of severance
compensation is ANNULLED and SET ASIDE.
The February 27, 2003 CA Decision in CA-G.R. SP Nos. 67100 and 67561, which affirmed the August 9,
2001 Decision of the NLRC but deleted the grant of severance compensation, is REINSTATED and
AFFIRMED.
006 PHILIPPINE AIRLINES, INC., Petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and
AIDA M. QUIJANO, Respondents.

G.R. No. 123294; October 20, 2010

TOPIC: Application: Social Justice

FACTS: (chronological order)

1. Complainant Quijano rose from the ranks starting as accounting clerk in December 1967 until she
became Manager-Agents Services Accounting Division (ASAD) in September 1984 , vice Josefina
Sioson.

2. ASAD, the specific unit in PAL charged with the processing, verification, reconciliation, and
validation of all claims for commission filed by agents worldwide, is under the direct supervision and
control of the Vice President-Comptroller, and within the scope of the audit program of the Vice President-
Internal Audit & Control.

3. On May 5, 1989, an investigating committee chaired by Leslie W. Espino (hereinafter referred to

as the Espino Committee) formally charged Quijano as Manager-ASAD in connection with the processing
and payment of commission claims to Goldair Pty. Ltd. (Goldair for short) wherein PAL overpaid
commissions to the latter amounting to several million Australian dollars during the period 1984-1987.
Specifically, Quijano was charged as Manager-ASAD with failure on the job and gross negligence
resulting in loss of trust and confidence in that she failed to:

Exercise the necessary monitoring, control and supervision over your Senior Accounts Analyst to
ensure that the latter was performing the basic duties and responsibilities of her job in checking and
verifying the correctness and validity of the commission claims from Goldair.

Adopt and perform the necessary checks and verification procedures as demanded by your
position in order to ensure that the commission claims of Goldair which you were approving for payment
were correct and valid claims thus resulting in consistent substantial overpayments to Goldair over a
period of more than three years.

Require or otherwise cause a final reconciliation of the remaining balance due as commission
claims to Goldair for a particular month such that a claim for a particular month was never liquidated in a
final amount and thus contributing to consistent overpayments to Goldair.

4. The Senior Accounts Analyst referred to in the charge was Dora Jane Prado Curammeng who
was included as a respondent. Curammeng was specifically assigned to handle and process
commissions of agents in, among others, the Australia Region, and Goldair was among the travel agents
whose production reports and commission claims were handled by her. Curammeng was accused of
failing to verify the completeness of the documents supporting the claims; to trace and match each ticket
in the production report submitted by Goldair with the IATA, BSP and CTO sales report; and to perform a
complete verification of the net/net amounts claimed in the production reports against the approved
marketing arrangements. However, Curammeng had already resigned and became a resident of Canada
at the time of the investigation conducted by the Espino Committee.

5. Pending further investigation, the Espino Committee placed Quijano under preventive suspension
and at the same time required her to submit her answer to the charges.
6. On July 2, 1990, another Administrative charge involving the same Goldair anomaly was filed, this
time including Committee Chairman Leslie W. Espino and Committee Member Romeo R. Ines and
several others, for "gross incompetence and inefficiency, negligence, imprudence, mismanagement,
dereliction of duty, failure to observe and/or implement administrative and executive policies, and related
acts or omissions." Pending the result of investigation by another committee chaired by Judge Martin S.
Ocampo, the PAL Board of Directors suspended respondents Leslie W. Espino, Executive Vice-President
and Chief Operating Officer; Ramon C. Lozon, Senior Vice-President-Finance; Romeo R. Ines, Vice
President-Internal Audit & Control; Josefina Sioson, Manager-Staff Pricing; except respondents VP-
Comptroller Robin C. Dui and Manager-ASAD Aida Quijano who were already suspended by the Espino
Committee, and respondent Juan Yoga, former Regional Vice President-Australia who has already
retired.

7. Meantime, PAL filed a civil case in Australia against Goldair seeking to recover AUD 11 million.
Twice, Quijano went to Australia as witness for PAL. Thereafter, a settlement was reached whereby
Goldair was to pay PAL a total of around AUD 7 million inclusive of court costs. A criminal case was
nevertheless filed against Goldair’s owner, Alexandro Papazoglou, by the Fraud Squad Victorian Police.

8. The Ocampo Committee having submitted its findings to the PAL Board of Directors, the latter, in
a resolution, considered respondents Leslie W. Espino, Ramon C. Lozon, Romeo R. Ines, Robin C. Dui,
Josefina Sioson, and Aida M. Quijano, resigned from the service effective immediately, for loss of
confidence and for acts inimical to the interest of the company.

9. Her motion for reconsideration having been denied by the Board in a Resolution dated February
19, 1991, Quijano filed on March 25, 1991 the instant case against PAL for illegal suspension and illegal
dismissal.

10. LA: dismissed the complaint for lack of merit

11. NLRC: reversed the decision of the LA and ordered petitioner to pay Aida M. Quijano her
separation pay in accordance with its Special Retirement & Separation Program

12. Hence, this petition.

ISSUE(S):

Whether or not the respondent was lawfully dismissed for a just cause. If yes, whether or not the
award of separation pay to respondent is valid despite having been lawfully terminated for a just cause.

HELD: YES. YES but not under PALs Special Retirement & Separation Program

RATIO:

At the onset, it should be noted that the parties do not dispute the validity of private respondents dismissal
from employment for loss of confidence and acts inimical to the interest of the employer. The assailed
September 29, 1995 Decision of the NLRC was emphatic in declaring that it was not prepared to rule as
illegal the preventive suspension and eventual dismissal from the service of private respondent and
rightfully so because the last position that private respondent held, Manager-ASAD (Agents Services
Accounting Division), undeniably qualifies as a position of trust and confidence.

Loss of confidence as a just cause for termination of employment is premised from the fact that an
employee concerned holds a position of trust and confidence. This situation holds where a person is
entrusted with confidence on delicate matters, such as the custody, handling, or care and protection of the
employers property. But, in order to constitute a just cause for dismissal, the act complained of must be
work-related such as would show the employee concerned to be unfit to continue working for the
employer.

The January 18, 1991 Resolution of the PAL Board of Directors, the relevant portions of which are
discussed in the narration of the facts of this case as culled from the assailed September 29, 1995 NLRC
Decision, clearly laid out the reasons why it considered private respondent along with her other co-
employees in PAL resigned from the service effective immediately for loss of confidence and for acts
inimical to the interest of the company. In private respondents case, the Resolution underscored her acts
of mismanagement and gross incompetence which made her fail to detect the irregularities in the Goldair
account that resulted in huge financial losses for petitioner. Admittedly, the said findings are not backed by
proof beyond reasonable doubt but are, nevertheless, given credence since they have been adopted by
both the labor arbiter and the NLRC and are supported by substantial evidence. As we have consistently
held, the degree of proof required in labor cases is not as stringent as in other types of cases.

As a general rule, employers are allowed a wider latitude of discretion in terminating the employment of
managerial personnel or those who, while not of similar rank, perform functions which by their nature
require the employers full trust and confidence. This must be distinguished from the case of ordinary rank
and file employees, whose termination on the basis of these same grounds requires a higher proof of
involvement in the events in question; mere uncorroborated assertions and accusations by the employer
will not suffice.

Having succinctly disposed of the issue of the validity of private respondents dismissal, we now delve into
the true crux of this controversy which is the legality of the award of separation pay to private respondent
despite having been lawfully terminated for a just cause

Petitioner argues that, in light of the fact that a just cause forms the basis for her lawful termination from
the job, private respondent is not entitled to separation pay. Likewise, petitioner insists that even
assuming that the equitable considerations cited by the NLRC did exist, the same cannot justify the award
of separation pay. And, in awarding the same, the NLRC committed grave abuse of discretion amounting
to lack of jurisdiction.

We do not agree

Grave abuse of discretion is an evasion of a positive duty or a virtual refusal to perform a duty enjoined by
law or to act in contemplation of law as when the judgment rendered is not based on law and evidence
but on caprice, whim and despotism. This Court holds that the NLRC did not gravely abuse its discretion
in granting separation pay to private respondent as the same is not characterized by caprice or
arbitrariness being rooted in established jurisprudence.

Serious misconduct as a valid cause for the dismissal of an employee is defined simply as improper or
wrong conduct. It is a transgression of some established and definite rule of action, a forbidden act, a
dereliction of duty, willful in character, and implies wrongful intent and not mere error of judgment. To be
serious within the meaning and intendment of the law, the misconduct must be of such grave and
aggravated character and not merely trivial or unimportant. However serious such misconduct, it must,
nevertheless, be in connection with the employees work to constitute just cause for his separation. The
act complained of must be related to the performance of the employees duties such as would show him to
be unfit to continue working for the employer. On the other hand, moral turpitude has been defined as
everything which is done contrary to justice, modesty, or good morals; an act of baseness, vileness or
depravity in the private and social duties which a man owes his fellowmen, or to society in general,
contrary to justice, honesty, modesty, or good morals.

In the case at bar, the transgressions imputed to private respondent have never been firmly established
as deliberate and willful acts clearly directed at making petitioner lose millions of pesos. At the very most,
they can only be characterized as unintentional, albeit major, lapses in professional judgment. Likewise,
the same cannot be described as morally reprehensible actions. Thus, private respondent may be
granted separation pay on the ground of equity which this Court had defined as justice outside law, being
ethical rather than jural and belonging to the sphere of morals than of law. It is grounded on the precepts
of conscience and not on any sanction of positive law, for equity finds no room for application where there
is law

Considering the foregoing uncontroverted special circumstances, we rule that the NLRC did not commit
grave abuse of discretion amounting to lack of jurisdiction in ordering petitioner to pay private respondent
separation pay for equitable considerations.

However, we do not agree with the NLRC that private respondents separation pay should be awarded in
accordance with PALs Special Retirement & Separation Program dated February 15, 1988 plus ten
percent (10%) of the total amount by way of attorneys fees.

At the risk of stating the obvious, private respondent was not separated from petitioners employ due to
mandatory or optional retirement but, rather, by termination of employment for a just cause. Thus, any
retirement pay provided by PALs Special Retirement & Separation Program dated February 15, 1988 or,
in the absence or legal inadequacy thereof, by Article 287 of the Labor Code does not operate nor can be
made to operate for the benefit of private respondent. Even private respondents assertion that, at the time
of her lawful dismissal, she was already qualified for retirement does not aid her case because the fact
remains that private respondent was already terminated for cause thereby rendering nugatory any
entitlement to mandatory or optional retirement pay that she might have previously possessed.

Likewise, attorneys fees are not proper in this case because the same can only be awarded when the
employee is illegally dismissed in bad faith and is compelled to litigate or incur expenses to protect his
rights by reason of the unjustified act of his employer. The aforementioned conditions do not obtain in this
case.

As to the matter of the proper amount of separation pay to be awarded to private respondent on the basis
of equitable considerations, our pronouncement in Yrasuegui v. Philippine Airlines, Inc. is instructive, to
wit:

Here, We grant petitioner separation pay equivalent to one-half (1/2) months pay for every year of
service. It should include regular allowances which he might have been receiving. 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.

Private respondents circumstances are more or less identical to the above-cited case in the sense that,
as previously discussed, her dismissal was neither for serious misconduct nor for an offense involving
moral turpitude. Furthermore, her employment with petitioner spanned more than two decades
unblemished with any derogatory record prior to the infractions at issue in the case at bar.

WHEREFORE, the assailed NLRC Decision dated September 29, 1995 as well as the Resolution dated
November 14, 1995 are AFFIRMED with the MODIFICATION that petitioner Philippine Airlines, Inc. pay
private respondent Aida Quijano one-half (1/2) month salary for every year of service as separation pay
on equitable grounds.
South East International Rattan v. Coming, G.R. No. 186621, March 12, 2014
DOCTRINE:
To ascertain the existence of an employer-employee relationship jurisprudence has invariably adhered to
the four-fold test, to wit: (1) the selection and engagement of the employee; (2) the payment of wages; (3)
the power of dismissal; and (4) the power to control the employee’s conduct, or the so-called "control
test."
In resolving the issue of whether such relationship exists in a given case, substantial evidence – that
amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion –
is sufficient. Although no particular form of evidence is required to prove the existence of the relationship,
and any competent and relevant evidence to prove the relationship may be admitted, a finding that the
relationship exists must nonetheless rest on substantial evidence.

FACTS:
On November 3, 2003, respondent Jesus J. Coming filed a complaint for illegal dismissal, underpayment
of wages, non-payment of holiday pay, 13th month pay and service incentive leave pay, with prayer for
reinstatement, back wages, damages and attorney’s fees.
March 17, 1984, he was hired by SEIRI as Sizing Machine Operator March 17, 1984. His work schedule
is from 8:00 a.m. to 5:00 p.m. Initially, his compensation was on "pakiao" basis but sometime in June
1984, it was fixed at P150.00 per day which was paid weekly.

In 1990, his employment was interrupted as he was told by petitioners to resume work in two months’
time.
He was dismissed on January 1, 2002 without lawful cause. SEIRI claimed that it is not doing well
financially and that he would be called back to work only if they need his services again. Respondent
waited for almost a year but petitioners did not call him back to work. When he finally filed the complaint
before the regional arbitration branch, his brother Vicente was used by management to persuade him to
withdraw the case.

SEIRI denied having hired respondent based on the following grounds:

1.      SEIRI was incorporated only in 1986
2.     Complainant’s name does not appear in the list of employees reported to the SSS.
3.     His name does not also appear in the sample payrolls of respondents’ employees.
4.     The certification of Allan Mayol and Fasutino Apondar[,] supplier of finished rattan
products[,] that complainant had at one time or another worked with them.
5.     The Affidavit of Vicente Coming, complainant’s full brother[,] attesting that complainant
had never been an employee of respondent. The only connection was that their employer
Faustino Apondar supplies finished rattan products to respondents.
To counter this, respondent submitted an affidavit signed by his former co-workers (5 of them) stating that
he was one of the pioneer employees of SEIRI

Labor Arbiter: Respondent was a regular employee and he was illegally dismissed
NLRC – Cebu City: Set Aside, Vacated the decision and Dismissed the complaint of respondent
CA: There existed an employer-employee relationship between petitioners and respondent who was
dismissed without just and valid cause

ISSUE: Existence of Employer-Employee relationship

HELD: Yes, there is. CA affirmed.

CA gave more credence to the declarations of the five former employees of petitioners that respondent
was their co-worker in SEIRI. As to the absence of respondent’s name in the payroll and SSS
employment report, the CA observed that the payrolls submitted were only from January 1, 1999 to
December 29, 2000 and not the entire period of eighteen years when respondent claimed he worked for
SEIRI. It further noted that the names of the five affiants, whom petitioners admitted to be their former
employees, likewise do not appear in the aforesaid documents. According to the CA, it is apparent that
petitioners maintained a separate payroll for certain employees or willfully retained a portion of the payroll.
x x x As to the "control test", the following facts indubitably reveal that respondents wielded control over
the work performance of petitioner, to wit: (1) they required him to work within the company premises; (2)
they obliged petitioner to report every day of the week and tasked him to usually perform the same job;
(3) they enforced the observance of definite hours of work from 8 o’clock in the morning to 5 o’clock in the
afternoon; (4) the mode of payment of petitioner’s salary was under their discretion, at first paying him on
pakiao basis and thereafter, on daily basis; (5) they implemented company rules and regulations; (6)
[Estanislao] Agbay directly paid petitioner’s salaries and controlled all aspects of his employment and (7)
petitioner rendered work necessary and desirable in the business of the respondent company
Royale Homes Marketing Corp. v. Alcantara, G.R. No. 195190, July 28, 2014
DOCTRINE:  Not every form of control that a hiring party imposes on the hired party is indicative of
employee-employer relationship. Rules and regulations that merely serve as guidelines towards the
achievement of a mutually desired result without dictating the means and methods of accomplishing it do
not establish employer-employee relationship.
Among the four, the most determinative factor in ascertaining the existence of employer-employee
relationship is the "right of control test". It is deemed to be such an important factor that the other
requisites may even be disregarded.

FACTS:
Royale Homes is engaged in marketing real estates. In 1994, it appointed Alcantara to market exclusively
its real estate inventories for a fixed period of 1 year.  Alcantara was reappointed several consecutive
years, the last position he held was Division 5 Vice-President-Sales.
According to Royale Homes, on 2003, Alcantara decided to leave the company after his wife, who was
once connected with it as a sales agent, had formed a brokerage company that directly competed with its
business, and even recruited some of its sales agents.  In a special management committee meeting on
October 8,2003, however, Alcantara announced publicly and openly that he would leave the company by
the end of October 2003. He has decided to join his wife and pursue their own brokerage business.
Royale Homes accepted Alcantara’s decision. It then threw a despedida party in his honor and,
subsequently, appointed a new independent contractor.
On December 2003, Alcantara filed a Complaint for Illegal Dismissal against Royale Homes and its
officers. Alcantara alleged that he is a regular employee of Royale Homes since he is performing tasks
that are necessary and desirable to its business; that in 2003 the company gave him P1.2 million for the
services he rendered to it; that in the first week of November 2003, however, the executive officers of
Royale Homes told him that they were wondering why he still had the gall to come to office and sit at his
table; and that the acts of the executive officers of Royale Homes amounted to his dismissal from work
without any valid or just cause and in gross disregard of the proper procedure for dismissing employees.
Alcantara prayed to be reinstated to his former position without loss of seniority rights and other
privileges.
Royale Homes, on the other hand, denied that Alcantara is its employee. It argued that the appointment
paper of Alcantara is clear that it engaged his services as an independent sales contractor for a fixed term
of one year only. He never received any salary, 13th month pay, overtime pay or holiday pay from Royale
Homes as he was paid purely on commission basis. In addition, Royale Homes had no control on how
Alcantara would accomplish his tasks and responsibilities as he was free to solicit sales at any time and
by any manner which he may deem appropriate and necessary. He is even free to recruit his own sales
personnel to assist him in pursuance of his sales target.

Labor Arbiter - Alcantara is an employee of Royale Homes with a fixed-term employment period from
January 1 to December 31, 2003. Alcantara is entitled to an amount which he may have earned for the
unexpired portion of the contract (Nov – Dec 2003).

NLRC – Alcantara is not an employee but a mere independent contractor of Royale Homes. Being an
independent contractor Alcantara’s Complaint is cognizable by the regular courts.
Alcantara filed Petition for Certiorari with CA.

CA – Reversed NLRC’s  decision.  CA applied the four-fold and economic reality tests and held that
Alcantara is an employee of Royale Homes. Royale Homes exercised some degree of control over
Alcantara, he is subject to company rules, regulations, evaluations, bound by company code of ethics.
Moreover, contract has exclusivity clause.  Alcantara was illegally terminated.  Alcantara was entitled to
backwages, separation pay in lieu of reinstatement, back wage pay.

ISSUE:  Was Alcantara an employee of Royal Homes or an Independent Contractor?

HELD:  Alacantara was an Independent Contractor.

RATIO:
The juridical relationship of the parties based on their written contract
The primary evidence of the nature of the parties’ relationship is the written contract that they signed and
executed. While the existence of employer-employee relationship is a matter of law, the characterization
made by the parties in their contract as to the nature of their juridical relationship cannot be simply
ignored, especially when the parties unequivocally states their intention at the time they entered into it.
In this case, the contract, duly signed and not disputed by the parties, provides that "no employer-
employee relationship exists between" Royale Homes and Alcantara, as well as his sales agents. It is
clear that they did not want to be bound by employer-employee relationship at the time of the signing of
the contract.
The juridical relationship of the parties based on Control Test

In determining the existence of an employer-employee relationship, this Court has generally relied on the
four-fold test, to wit: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the employer’s power to control the employee with respect to the means and
methods by which the work is to be accomplished. Among the four, the most determinative factor in
ascertaining the existence of employer-employee relationship is the "right of control test". It is deemed to
be such an important factor that the other requisites may even be disregarded. This holds true where the
issues to be resolved is whether a person who performs work for another is the latter’s employee or is an
independent contractor, as in this case. For where the person for whom the services are performed
reserves the right to control not only the end to be achieved, but also the means by which such end is
reached, employer-employee relationship is deemed to exist.

Not every form of control is indicative of employer-employee relationship. A person who performs work for
another and is subjected to its rules, regulations, and code of ethics does not necessarily become an
employee. As long as the level of control does not interfere with the means and methods of accomplishing
the assigned tasks, the rules imposed by the hiring party on the hired party do not amount to the labor law
concept of control that is indicative of employer-employee relationship.

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.

In this case, the Court agrees with Royale Homes that the rules, regulations, code of ethics, and periodic
evaluation alluded to by Alcantara do not involve control over the means and methods by which he was to
perform his job.  They do not dictate upon him the details of how he would solicit sales or the manner as
to how he would transact business with prospective clients.

As the party claiming the existence of employer-employee relationship, it behoved upon Alcantara to
prove the elements thereof, particularly Royale Homes’ power of control over the means and methods of
accomplishing the work. He, however, failed to cite specific rules, regulations or codes of ethics that
supposedly imposed control on his means and methods of soliciting sales and dealing with prospective
clients. On the other hand, this case is replete with instances that negate the element of control and the
existence of employer-employee relationship. Notably, Alcantara was not required to observe definite
working hours. Except for soliciting sales, Royale Homes did not assign other tasks to him. He had full
control over the means and methods of accomplishing his tasks as he can "solicit sales at any time and
by any manner which he may deem appropriate and necessary." He performed his tasks on his own
account free from the control and direction of Royale Homes in all matters connected therewith, except as
to the results thereof.

This Court is, therefore, convinced that Alcantara is not an employee of Royale Homes, but a mere
independent contractor. The NLRC is, therefore, correct in concluding that the Labor Arbiter has no
jurisdiction over the case and that the same is cognizable by the regular courts.

DISPOSITIVE: WHEREFORE, the instant Petition is hereby GRANTED. The June 23, 2010 Decision of
the Court of Appeals in CA-G.R. SP No. 109998 is REVERSED and SET ASIDE. The February 23, 2009
Decision of the National Labor Relations Commission is REINSTATED and AFFIRMED. SO ORDERED.
TOPIC: Employer-employee Relationship- Economic reality/dependence test
G.R. No. 170087 August 31, 2006
ANGELINAF RANCISCO,Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO TAKAHASHI,
TIMOTEO ACEDO, DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and RAMON
ESCUETA,Respondents.
Doctrine: It is better, therefore, to adopt a two-tiered test involving: (1) the employer’s power to control;
and (2) the economic realities of the activity or relationship. The proper standard of economic
dependence is whether the worker is dependent on the alleged employer for his continued employment in
that line of business. In the United States, the touchstone of economic reality in analyzing possible
employment relationships for purposes of the Federal Labor Standards Act is dependency.By analogy, the
benchmark of economic reality in analyzing possible employment relationships for purposes of the Labor
Code ought to be the economic dependence of the worker on his employer.

FACTS: This is a petition for review on certiorari under Rule 45 of the Rules of Court.

In 1995, Petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as
Accountant and Corporate Secretary and was assigned to handle all the accounting needs of the
company. She was also designated as Liaison Officer to the City of Makati to secure business permits,
construction permits and other licenses for the initial operation of the company.

Although she was designated as Corporate Secretary, she was not entrusted with the corporate
documents; neither did she attend any board meeting nor required to do so. She never prepared any
legal document and never represented the company as its Corporate Secretary. 1996, petitioner was
designated Acting Manager. Petitioner was assigned to handle recruitment of all employees and perform
management administration functions; represent the company in all dealings with government agencies,
especially with the BIR, SSS and in the city government of Makati; and to administer all other matters
pertaining to the operation of Kasei Restaurant which is owned and operated by Kasei Corporation.

January 2001, petitioner was replaced by a certain Liza R. Fuentes as Manager. Kasei Corporation
reduced her salary, she was not paid her mid-year bonus allegedly because the company was not earning
well. On October 2001, petitioner did not receive her salary from the company.

Since she was no longer paid her salary, petitioner did not report for work and filed an action for
constructive dismissal before the labor arbiter. Private respondents averred that petitioner is not an
employee of Kasei Corporation. They alleged that petitioner was hired in 1995 as one of its technical
consultants on accounting matters and act concurrently as Corporate Secretary. As technical consultant,
petitioner performed her work at her own discretion without control and supervision of Kasei Corporation.
Petitioner had no daily time record and she came to the office any time she wanted and that her services
were only temporary in nature and dependent on the needs of the corporation.

The Labor Arbiter found that petitioner was illegally dismissed, NLRC affirmed with modification the
Decision of the Labor Arbiter. On appeal, CA reversed the NLRC decision. CA denied petitioner’s MR,
hence, the present recourse.

ISSUE: Whether there was an employer-employee relationship between petitioner and private respondent
Kasei Corporation

HELD: YES
 There are instances when, aside from the employer’s power to control the employee, economic realities
of the employment relations help provide a comprehensive analysis of the true classification of the
individual, whether as employee, independent contractor, corporate officer or some other capacity.

It is better, therefore, to adopt a two-tiered test involving: (1) the employer’s power to control; and (2) the
economic realities of the activity or relationship.

There has to be analysis of the totality of economic circumstances of the worker. Thus, the determination
of the relationship between employer and employee depends upon the circumstances of the whole
economic activity, such as: (1) the extent to which the services performed are an integral part of the
employer’s business; (2) the extent of the worker’s investment in equipment and facilities; (3) the nature
and degree of control exercised by the employer; (4) the worker’s opportunity for profit and loss; (5) the
amount of initiative, skill, judgment or foresight required for the success of the claimed independent
enterprise; (6) the permanency and duration of the relationship between the worker and the employer;
and (7) the degree of dependency of the worker upon the employer for his continued employment in that
line of business. The proper standard of economic dependence is whether the worker is dependent on the
alleged employer for his continued employment in that line of business

Under the economic reality test, the petitioner can also be said to be an employee of respondent
corporation because she had served the company for 6 yrs. before her dismissal, receiving check
vouchers indicating her salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as
deductions and Social Security contributions from. When petitioner was designated General Manager,
respondent corporation made a report to the SSS. Petitioner’s membership in the SSS evinces the
existence of an employer-employee relationship between petitioner and respondent corporation. The
coverage of Social Security Law is predicated on the existence of an employer-employee relationship.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated
October 29, 2004 and October 7, 2005, respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET
ASIDE. The Decision of the National Labor Relations Commission dated April 15, 2003 in NLRC NCR CA
No. 032766-02, is REINSTATED. The case is REMANDED to the Labor Arbiter for the recomputation of
petitioner Angelina Francisco’s full backwages from the time she was illegally terminated until the date of
finality of this decision, and separation pay representing one-half month pay for every year of service,
where a fraction of at least six months shall be considered as one whole year.
Topic: Economic dependence test
G.R. No. 155207             August 13, 2008
WILHELMINA S. OROZCO, petitioner,
vs.
THE FIFTH DIVISION OF THE HONORABLE COURT OF APPEALS, PHILIPPINE DAILY INQUIRER,
and LETICIA JIMENEZ MAGSANOC, respondents.
NACHURA, J.:
Doctrine: Aside from the control test, this Court has also used the economic reality test. The economic
realities prevailing within the activity or between the parties are examined, taking into consideration the
totality of circumstances surrounding the true nature of the relationship between the parties. 37 This is
especially appropriate when, as in this case, there is no written agreement or contract on which to base
the relationship. In our jurisdiction, the benchmark of economic reality in analyzing possible employment
relationships for purposes of applying the Labor Code ought to be the economic dependence of the
worker on his employer.38
Facts:
In March 1990, PDI engaged the services of petitioner to write a weekly column for its Lifestyle section.
She religiously submitted her articles every week, except for a six-month stint in New York City when she,
nonetheless, sent several articles through mail.
On November 7, 1992, petitioner’s column appeared in the PDI for the last time. Petitioner claims that her
then editor, Ms. Lita T. Logarta,6 told her that respondent Leticia Jimenez Magsanoc, PDI Editor in Chief,
wanted to stop publishing her column for no reason at all and advised petitioner to talk to Magsanoc
herself. Petitioner narrates that when she talked to Magsanoc, the latter informed her that it was PDI
Chairperson Eugenia Apostol who had asked to stop publication of her column, but that in a telephone
conversation with Apostol, the latter said that Magsanoc informed her (Apostol) that the Lifestyle section
already had many columnists.7
On the other hand, PDI claims that in June 1991, Magsanoc met with the Lifestyle section editor to
discuss how to improve said section. They agreed to cut down the number of columnists by keeping only
those whose columns were well-written, with regular feedback and following. In their judgment,
petitioner’s column failed to improve, continued to be superficially and poorly written, and failed to meet
the high standards of the newspaper. Hence, they decided to terminate petitioner’s column. 8
Aggrieved by the newspaper’s action, petitioner filed a complaint for illegal dismissal, backwages, moral
and exemplary damages, and other money claims before the NLRC.
Issues: whether petitioner is an employee of PDI
Held: (note: assigned topic here is the economic dependence test; for purposes of recitation, an initial
discussion of the
Aside from the control test, this Court has also used the economic reality test. The economic realities
prevailing within the activity or between the parties are examined, taking into consideration the totality of
circumstances surrounding the true nature of the relationship between the parties. 37 This is especially
appropriate when, as in this case, there is no written agreement or contract on which to base the
relationship. In our jurisdiction, the benchmark of economic reality in analyzing possible employment
relationships for purposes of applying the Labor Code ought to be the economic dependence of the
worker on his employer.38
Petitioner’s main occupation is not as a columnist for respondent but as a women’s rights advocate
working in various women’s organizations. 39 Likewise, she herself admits that she also contributes articles
to other publications.40 Thus, it cannot be said that petitioner was dependent on respondent PDI for her
continued employment in respondent’s line of business.41
The inevitable conclusion is that petitioner was not respondent PDI’s employee but an independent
contractor, engaged to do independent work.
WHEREFORE, the foregoing premises considered, the Petition is DISMISSED. The Decision and
Resolution of the Court of Appeals in CA-G.R. SP No. 50970 are hereby AFFIRMED.
SO ORDERED.
G.R. No. 179652               March 6, 2012
PEOPLE'S BROADCASTING SERVICE (BOMBO RADYO PHILS., INC.), Petitioner,
vs.
THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT, THE REGIONAL
DIRECTOR, DOLE REGION VII, and JANDELEON JUEZAN, Respondents.
RESOLUTION
VELASCO, JR., J.:

FACTS : Private respondent Jandeleon Juezan filed a complaint against petitioner with the Department of
Labor and Employment (DOLE). for illegal deduction, nonpayment of service incentive leave, 13th month
pay, premium pay for holiday and rest day and illegal diminution of benefits, delayed payment of wages
and noncoverage of SSS, PAG-IBIG and Philhealth. The DOLE Regional Director found that private
respondent was an employee of petitioner, and was entitled to his money claims.

When the matter was brought before the CA, where petitioner (Bombo Radyo) claimed that it had
been denied due process, it was held that petitioner was accorded due process as it had been
given the opportunity to be heard, and that the DOLE Secretary had jurisdiction over the matter.

In the Decision of this Court, the CA Decision was reversed and set aside, and the complaint against
petitioner was dismissed. The National Labor Relations Commission (NLRC) was held to be the
primary agency in determining the existence of an employer-employee relationship. This was the
interpretation of the Court of the clause "in cases where the relationship of employer-employee still exists"
in Art. 128(b).

From this Decision, the Public Attorney’s Office (PAO) filed a Motion for Clarification of Decision
(with Leave of Court). The PAO sought to clarify as to when the visitorial and enforcement power
of the DOLE be not considered as co-extensive with the power to determine the existence of an
employer-employee relationship

ISSUE: Under Art. 128(b) of the Labor Code, as amended by RA 7730, it is clear and beyond debate that
an employer-employee relationship must exist for the exercise of the visitorial and enforcement power of
the DOLE. The question now arises, may the DOLE make a determination of whether or not an employer-
employee relationship exists, and if so, to what extent?

HELD: The previous conclusion must be revisited. No limitation in the law was placed upon the power
of the DOLE to determine the existence of an employer-employee relationship. No procedure was
laid down where the DOLE would only make a preliminary finding, that the power was primarily
held by the NLRC. The law did not say that the DOLE would first seek the NLRC’s determination of
the existence of an employer-employee relationship, or that should the existence of the employer-
employee relationship be disputed, the DOLE would refer the matter to the NLRC.
The DOLE, in determining the existence of an employer-employee relationship, has a ready set of
guidelines to follow, the same guide the courts themselves use. The elements to determine the
existence of an employment relationship are: (1) the selection and engagement of the employee;
(2) the payment of wages; (3) the power of dismissal; (4) the employer’s power to control the
employee’s conduct.9 The use of this test is not solely limited to the NLRC
Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully empowered to make a
determination as to the existence of an employer-employee relationship in the exercise of its visitorial and
enforcement power, subject to judicial review, not review by the NLRC.
WHEREFORE, the Decision of this Court in G.R. No. 179652 is hereby AFFIRMED, with the
MODIFICATION that in the exercise of the DOLE’s visitorial and enforcement power, the Labor Secretary
or the latter’s authorized representative shall have the power to determine the existence of an employer-
employee relationship, to the exclusion of the NLRC.
SMC VS NLRC April 16, 2008

Responden Ernesto Ibias worked with SMC. Ernesto M. Ibias (respondent) was employed by
petitioner SMC on 24 December 1978 initially as a CRO operator in its Metal Closure and Lithography
Plant. Respondent continuously worked therein until he advanced as Zamatic operator

According to SMCs Policy on Employee Conduct , absences without permission or AWOPs, are
subject to disciplinary action characterized by progressively increasing weight, as follows:

VIOLATIONS 1ST Offense 2nd 3rd Offense 4th Offense 5thOffense

Offense

2. ABSENCE WITHOUT         
PERMISSION (within one
calendar year)

A. Each day absent notWritten        

exceeding two (2) days warning

B. 3rd AWOP 3 Days       
suspension

C. 4th AWOP   5 Days     
suspension

D. 5th AWOP   7 Days     
suspension

E. 6th AWOP   10 Days     
suspension

F. 7th AWOP   15 Days     
suspension

G. 8th AWOP   30 Days     
suspension

H. 9th AWOP   Discharge      

           

3. ABSENCE WITHOUTDischarge[5]        
PERMISSION FOR SIX (6) OR
MORE CONSECUTIVE
WORKING DAYS IS
CONSIDERED ABANDONMENT
OF WORK

 It appears that per company records, respondent was AWOP on the following dates in 1997: 2, 4
and 11 January; 26, 28 and 29 April; and 5, 7, 8, 13, 21, 22, 28 and 29 May (14 times AWOP).  For his
absences on 2, 4 and 11 January and 28 and 29 April, he was given a written warning dated 9 May
1997 that he had already incurred five (5) AWOPs and that further absences would be subject to
disciplinary action. For his absences on 28 and 29 April and 7 and 8 May, respondent was alleged to have
falsified his medical consultation card by stating therein that he was granted sick leave by the plant clinic
on said dates when in truth he was not.

After the completion of the investigation, SMC concluded that respondent committed the offenses
of excessive AWOPs and falsification of company records or documents, and accordingly dismissed him

Respondent Abias filed case of illegal dismissal with LA

LA, NLRC, CA sided with respondent stating as a reason the laxity of petitioner in implementing the
sanctions. They all said that the punishment of discharge is too severe in view of SMCs inconsistent and
lax implementation of its policy. They all reasoned that SMC was to be blamed for the non-
implementation of and lax compliance with the policy

The labor arbiter believed that respondent had committed the absences pointed out by SMC but
found the imposition of termination of employment based on his AWOPs to be disproportionate since
SMC failed to show by clear and convincing evidence that it had strictly implemented its company policy
on absences. It found nothing in the records that would show that respondent was suspended for his
previous AWOPs before he was meted the maximum penalty of discharge from service and thus, it ruled
that management was to be blamed for the non-implementation of and lax compliance with the policy. 

The appellate court also held that respondents AWOPs did not warrant his dismissal in view of
SMCs inconsistent implementation of its company policies. It could not understand why respondent was
given a mere warning for his absences on 28 and 29 April which constituted his 5 th and 6th AWOPs,
respectively, when these should have merited suspension under SMCs policy. According to the appellate
court, since respondent was merely warned, logically said absences were deemed committed for the first
time; thus, it follows that the subject AWOPs did not justify his dismissal because under SMCs policy, the
4th to 9th AWOPs are meted the corresponding penalty only when committed for the second time.

ISSUE: whether or not he was illegally dismissed because of his unauthorized absences

Held: YES

1. He was aware that he incurred AWOPs and should have known that these were
punishable.

Respondents time cards showed that he was on AWOP on the dates enumerated by SMC: 2, 4
and 11 January; 26, 28 and 29 April; and 5, 7, 8, 13, 21, 22, 28 and 29 May 1997 (14 TIMES). The Labor
Arbiter even found that respondent was on AWOP on all said dates. Respondent also admitted being
absent on 28 and 29 April and 7 and 8 May 1997. For each of the periods of 1 to 15 January 1997 and 16
to 30 April 1997, respondent reported for work only for two days . For the month of May 1997, he reported
only for one day.

 The Court observes that respondent admitted during the company-level investigation that that his
absences incurred on 28 and 29 April, and 7 and 8 May 1997 were without permission. He explained that
during those times, he had a family problem which needed his attention; he was confused and was
unable to inform or seek permission from his superior.

  However, while respondent has admitted these absences, before the Court, he also seeks to
belittle the plain by countering that SMC has not been too rigid in its application of company rules
pertaining to leave availments. In the proceedings below he claimed that during the days that he was
absent, he had attended to some family matters. Thus, he presented copies of two (2) medical certificates
and a barangay certification that he attended hearings on some of the days when he was absent. These
certifications, however, cannot work to erase his AWOPs; respondent had never submitted these
documents to SMC and it is only when the case was pending before the Labor Arbiter that he produced
the same.
  Respondent cannot feign surprise nor ignorance of the earlier AWOPs he had incurred. He was
given a warning for his 2, 4, and 11 January and 26, 28, and 29 April 1997 AWOPs. In the same warning,
he was informed that he already had six AWOPs for 1997. He admitted that he was absent on 7 and 8
May 1997. He was also given notices to explain his AWOPs for the period 26 May to 2 June 1997, which
he received but refused to acknowledge.It does not take a genius to figure out that as early as June 1997,
he had more than nine AWOPs.

 Thus, even if he was not punished for his subsequent AWOPs, the same remained on record.  He
was aware of the number of AWOPs he incurred and should have known that these were punishable
under company rules. The fact that he was spared from suspension cannot be used as a reason to incur
further AWOPs and be absolved from the penalty therefor.

2. SMC has the right to make rules, regulations, and sanctions. In implementing these sanctions, it
has the prerogative to implement it or not. This is within its management prerogative.

The Court of Appeals, NLRC, and the labor arbiter found that respondent incurred unauthorized
absences, but concluded that the penalty of discharge or determination was disproportionate to
respondents absences in view of SMCs inconsistent and lax implementation of its policy on employees
attendance. The Court disagrees. Respondents dismissal was well within the purview of SMCs
management prerogative.

 What the lower tribunals perceived as laxity, we consider as leniency. SMCs tendency to excuse
justified absences actually redounded to the benefit of respondent since the imposition of the
corresponding penalty would have been deleterious to him. In a world where no work-no pay is the rule of
thumb, several days of suspension would be difficult for an ordinary working man like respondent. He
should be thankful that SMC did not exact from him almost 70 days suspension before he was finally
dismissed from work.

 In any case, when SMC imposed the penalty of dismissal for the 12 th and 13th AWOPs, it was
acting well within its rights as an employer. An employer has the prerogative to prescribe reasonable rules
and regulations necessary for the proper conduct of its business, to provide certain disciplinary measures
in order to implement said rules and to assure that the same would be complied with An employer enjoys
a wide latitude of discretion in the promulgation of policies, rules and regulations on work-related activities
of the employees

 It is axiomatic that appropriate disciplinary sanction is within the purview of management
imposition. Thus, in the implementation of its rules and policies, the employer has the choice to do so
strictly or not, since this is inherent in its right to control and manage its business
effectively. Consequently, management has the prerogative to impose sanctions lighter than those
specifically prescribed by its rules, or to condone completely the violations of its erring employees. Of
course, this prerogative must be exercised free of grave abuse of discretion, bearing in mind the
requirements of justice and fair play. Indeed, we have previously stated:

All told, we find that SMC acted well within its rights when it dismissed respondent for
his numerous absences. Respondent was afforded due process and was validly dismissed for
cause.
TOPIC : Transfer; Promotion (demotion)
G.R. No. 198534               July 3, 2013
JENNY F. PECKSON, Petitioner,  vs. ROBINSONS SUPERMARKET CORPORATION, JODY GADIA,
ROENA SARTE, and RUBY ALEX,Respondents.
FACTS:

November 3, 1987 Peckson joined the Robinsons Supermarket Corporation (RSC) as a Sales Clerk.

October 26, 2006 she was holding the position of Category Buyer when respondent Roena Sarte (Sarte),
RSC’s Assistant Vice-President for Merchandising, reassigned her to the position of Provincial
Coordinator, effective November 1, 2006.

Claiming that her new assignment was a demotion because it was non-supervisory and clerical in nature,
the petitioner refused to turn over her responsibilities to the new Category Buyer, or to accept her new
responsibilities as Provincial Coordinator.

ISSUE:

Whether the said transfer was tantamount to constructive dismissal.

HELD:

No. It is the settled rule that management may transfer an employee from one office to another within the
business establishment, provided there is no demotion in rank or diminution of salary, benefits, and other
privileges, and the action is not motivated by discrimination or bad faith or effected as a form of
punishment without sufficient cause.
The respondents were able to show that the petitioner’s transfer was not unreasonable, inconvenient or
prejudicial, but was prompted by her failure to meet the demands of punctuality, diligence, and personal
attention of the position of Category Buyer; that management wanted to give the petitioner a chance to
improve her work ethic, but her obstinate refusal to assume her new position has prejudiced respondent
RSC, even while she continued to receive her salaries and benefits as Provincial Coordinator.
The lateral transfer of the petitioner from Category Buyer to Provincial Coordinator was not a demotion
amounting to constructive dismissal, since both positions belonged to Job Level 5 and between them
there is no significant disparity in terms of the requirements of skill, experience and aptitude.
JULIE’S BAKESHOP AND/OR EDGAR REYES VS HENRY ARNAIZ, EDGAR NAPAL AND JONATHAN
TOLORES
FACTS:
Reyes hired the respondents as chief bakers in his three franchise branches of Julie’s Bakeshop in
Sibalom and San Jose, Antique. Respondents filed separate complaints against petitioner for
underpayment of wages, payment of premium pay for holiday and rest day, service incentive leave pay,
13th month pay, cost of living allowance and attorney’s fees. These complaints were later on consolidated.
Subsequently, Reyes reassigned respondents as utility/security personnel tasked to clean the outside
vicinity of his bakeshops and to maintain peace and order in the area. Respondents refused to sign the
memorandum effecting the transfer and refused to perform their new assignments by not reporting for
work.
Reyes directed respondents to report back for work and to explain why they failed to assume their duties
as utility/security personnel.
Labor Arbiter: Dismissed the case.
NLRC had three decisions: (1) case remanded to LA to determine real respondents of the case; - SET
ASIDE:
(2) there was constructive dismissal of the three respondents and granted the reliefs avaible to illegally
dismissed employees – REVERSED
(3) Respondents were not dismissed but instead wilfully disobeyed the return to work order of their
employer – BECAME FINAL
CA: Respondents were constructively dismissed since their designation from chief bakers to
utility/security personnel is undoubtedly a demotion in rank.

ISSUE: Whether or not management prerogative is a sufficient or valid reason to demote a personnel? In
this case, NO.

HELD:
Note: It was correct for the CA to review the factual findings of the NLRC given that the NLRC had issued
three conflicting decisions, changing sides in every decision.
[LABOR]
[Management prerogative] Management is free to regulate, according to its own discretion and judgment,
all aspects of employment, including hiring, work assignments, working methods, time, place and manner
of work, processes to be followed, supervision of workers, working regulations, transfer of employees,
work supervision, lay off of workers and discipline, dismissal and recall of workers. The exercise of
management prerogative, however, is not absolute as it must be exercised in good faith and with due
regard to the rights of labor.

In constructive dismissal cases, the employer has the burden of proving that the transfer of an employee
is for just or valid ground, such as genuine business necessity. The employer must demonstrate that the
transfer is not unreasonable, inconvenient, or prejudicial to the employee and that the transfer does not
involve a demotion in rank or a diminution in salary and other benefits.

petitioners insist that the transfer of respondents was a measure of self-preservation and was prompted
by a desire to protect the health of the buying public, claiming that respondents should be transferred to a
position where they could not sabotage the business pending resolution of their cases. The court does not
agree.
The petitioners were not even given an opportunity to refute the reason for the transfer. The drastic
change in petitioners’ nature of work unquestionably resulted in, as rightly perceived by them, a
demeaning and humiliating work condition. The transfer was a demotion in rank, beyond doubt. There is
demotion when an employee is transferred from a position of dignity to a servile or menial job. One does
not need to stretch the imagination to distinguish the work of a chief baker to that of a security cum utility
man.

[D]emotion involves a situation in which an employee is relegated to a subordinate or less important

position constituting a reduction to a lower grade or rank, with a corresponding decrease in duties and
responsibilities, and usually accompanied by a decrease in salary." When there is a demotion in rank
and/or a diminution in pay; when a clear discrimination, insensibility or disdain by an employer becomes
unbearable to the employee; or when continued employment is rendered impossible, unreasonable or
unlikely, the transfer of an employee may constitute constructive dismissal.

Despite the claim of Reyes that there was no diminution in pay, there was undoubtedly a demotion in
titular rank. Further, respondents cannot be faulted for refusing to report for work as they were compelled
to quit their job due to a demotion without any just cause.
 Rivera v. Solidbank Corporation, G.R. No. 163269, April 19, 2006, 487 SCRA 512
DOCTRINE/S:
(1)   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 employers legitimate business
interests. The restraint may not be unduly harsh or oppressive in curtailing the employees legitimate
efforts to earn a livelihood and must be reasonable in light of sound public policy.
(2)   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.

FACTS:
Petitioner Rolando Rivera had been working for Solidbank Co. since 1977. He rose to the ranks from
being Audit Clerk to a Manager of the Credit Investigation and Appraisal Division of the Consumers
Banking Group.

In 1994, Solidbank offered two retirement programs to its employees, which are the ff: a) Ordinary
Retirement Program or b) Special Retirement Program. Since Rivera was only 45 years old, he was not
qualified for retirement under the ORP. Deciding to devote his time to his newly-built poultry business with
his brother, he chose to avail of the SRP which entitles him to receive the net amount of P963,619.28.
Rivera received the amount and confirmed his separation from Solidbank on Feb. 25, 1995.

Subsequently, Solidbank required Rivera to sign an undated Release, Waiver and Quitclaim where he
acknowledged receipt of the net proceeds of his separation and retirement benefits and promised that he
would not, at any time, in any manner, 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.
Rivera also promised that he will not seek employment with a competitor bank or financial institution
within one year and that any breach of the Undertaking would entitle Solidbank to a cause of action
against him before the appropriate courts of law.

On May 1, 1995, Equitable Banking Co. employed Rivera as Manager of its Credit Investigation and
Appraisal Division of its Consumers Banking Group. Upon discovering this, Solidbank VP Villarosa wrote
Rivera a letter informing him of his violation and demanded the rerurn of all the monetary benefits he
received (P963,619.28 plus interests and attys fees) in consideration of the SRP. Trial court issued a Writ
of Preliminary Attachment ordering Deputy Sheriff to attach all the properties of Rivera not exempt from
execution. Rivera, in his Answer, admitted that he received the aforesaid net amount, however, the
employment ban provision in the Undertaking was never conveyed to him until he was made to sign it. He
alleged that Solidbank had never imposed such retirement schemed and employment bank to any of its
employees. He also alleged that the undertaking not to seek employment with any competitor ban or
financial institution within 1 year was void for being contrary to law, Constitution and public policy.

Solidbank filed a Verified Motion for Summary Judgment. The trial court issued an Order of Summary
Judgment. It 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. CA affirmed such ruling.
Rivera then filed a Petition for Review on Certiorari.

ISSUE: W/N the employment ban stated in the subject undertaking is unreasonable? YES

HELD:
On the face of the Undertaking, the post-retirement competitve 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 prescribed 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.

The Court found that in the Undertaking, there is a proviso that in case of failure to comply with the
promise not to accept competitive employment within one year, Solidbank 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, all inclusive of the restitution of the money 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 which is considered unreasonable.

However, on the assumption that the competitive employment ban in the Undertaking is valid, petitioner is
not automatically entitled to return the amount he received from his SRP. Solidbank is still burdened to
prove its entitlement to the aforesaid amount by producing the best evidence of which its case is
susceptible.

RATIO: (do not have to be included in the handwritten digest)

(1)   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 employers legitimate
business interests. The restraint may not be unduly harsh or oppressive in curtailing the employees
legitimate efforts to earn a livelihood and must be reasonable in light of sound public policy.
(2)   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.
(3)   Consideration must be given to the employees 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.

DISPOSITIVE: Petition is GRANTED. Case REMANDED to the trial court for further proceedings.
16 United Kimberly Clark Employees Union v. Kimberly-Clark Philippines

Doctrine:

A CBA is more than a contract; it is a generalized code to govern a myriad of cases which the draftsmen
cannot wholly anticipate and it covers the whole employment relationship and prescribes the rights and
duties of the parties.
Facts:

Way back in 1980, Kimberly-Clark Philippines (KCPI) and the United Kimberly-Clark Employees
Employees Union (UKCEU) executed a Collective Bargaining Agreement (CBA). Article XX, Section 1 of
the CBA reads:
Section 1. The Company agrees to employ, regardless of sex, the immediate member of the
family of an employee provided qualified, upon the employee's resignation, retirement, disability
or death. In case of resignation, however, employment of an immediate member of the family of
an employee may be allowed provided the employee has rendered a service of ten (10) years
and above and the resignation is not a forced resignation. For the purpose of this section, the
phrase "immediate member of the family of an employee" shall refer to the employee's legitimate
children and in default thereof to the employee's collateral relative within the third civil degree.
The recommendee of the retired/resigned employee shall, if qualified, be hired on probationary
status.
However, KCPI did not set any other employment qualifying standards for the recommendees of retired,
resigned, deceased or disabled employees and agreed to hire such recommendees who were high
school graduates as an act of liberality and generosity.
On 7 November 1995, KCPI issued Guidelines on the Hiring of Replacements of Retired/Resigned
Employees for the effective implementation of Article XX, Section 1 of the existing CBA, to take effect on
January 1, 1996. The Guidelines require, among others, that: (a) such recommendees must be at least 18
years of age but not more than 30 years old at the time of the hiring, and (b) have completed, after
graduating from high school, at least a two-year technical/vocational course or a third year level of college
education. Moreover, where both husband and wife are employees of the company, they shall be treated
as one family; hence, only one of the spouses would be allowed to avail of the benefit. However, the
implementation of the said guidelines was mutually agreed upon to be postponed until 1 January 1997 but
only with respect to the educational qualification.
During the negotiation for the 1997 CBA, UKCEU proposed the amendment of Article XX, Section 1 of the
existing CBA. However, Article XX, Section 1 of the preceding CBA was retained without any
modification. Moreover, the educational qualifications contained in the Guidelines prepared and issued by
KCPI were not incorporated in the CBA.
KCPI continued to hire employees pursuant to the CBA up to 1998. However, in the second half of
1998, KCPI started to suspend the implementation of the CBA. This was partly due to the depressed
economic conditions then prevailing in the Philippines, and in compliance with the freeze hiring policy of
its Asia-Pacific headquarters. 
On April 23, 1999, the parties filed before the National Conciliation and Mediation Board (NCMB), a
Submission Agreement referring to arbitration the issue of whether KCPI violated Article XX, Section 1 of
the CBA.
Meantime, in August 1999, KCPI and UKCEU executed a new CBA. Article XX, Section 1 of the
preceding CBA was incorporated in the new CBA, governing the relation of the parties up to June 30,
2002.
On 8 May 1999, the Voluntary Arbitrator (VA) issued a Resolution which ruled that since the CBA is the
law between the parties, KCPI could not just unilaterally change or suspend the implementation of the
existing employment requirements, even in the light of the business situation then prevailing in the
Philippines. The VA declared that management prerogative does not give license to a company to set
aside or ignore what had been agreed upon through negotiation. According to the VA, since KCPI failed to
explain why it continued to hire casual workers doing the jobs of regular employees, it failed to
substantiate its contention that the economic crisis did not warrant the hiring of regular employees.
As to the applicability of Article XX, Section 1 to spouses employed by KCPI, the VA referred to Article I of
the CBA, which provides that the Agreement covers all regular rank-and-file employees. Had the intention
of the parties been to grant husband and wife employees the privilege of recommending only one
applicant-replacement, it should have been stated in unequivocal terms.
Upon appeal to the CA by KCPI, the CA partially set aside the resolution of the VA. The CA ruled that
KCPI may validly exercise its management prerogative and impose the requirement that recommendees
should have at least completed a two-year technical/vocational course or reached the third year of any
college-level course. The CA concluded that the right of retired, resigned, disabled or deceased
employees to recommend their replacements is not absolute. It emphasized that the recommendees must
still meet the standard set by KCPI.
Only UKCEU moved for a partial reconsideration of the CA Decision with respect to its ruling on the
upgraded educational qualification of the recommendees. However, the CA denied the motion.
Issue: Whether KCPI may only hire those recommendees of retired/resigned, deceased or disabled
members of KCPI who had completed at least a two-year technical/vocational course or a third-year level
of college education. YES.
Held:
As a general proposition, an arbitrator is confined to the interpretation and application of the collective
bargaining agreement. He does not sit to dispense his own brand of industrial justice: his award is
legitimate only in so far as it draws its essence from the CBA, i.e., when there is a rational nexus between
the award and the CBA under consideration.
A CBA is more than a contract; it is a generalized code to govern a myriad of cases which the draftsmen
cannot wholly anticipate. It covers the whole employment relationship and prescribes the rights and duties
of the parties.
In the present case, the parties are in agreement that, on its face, Article XX, Section 1 of their 1997 CBA
does not contain any provision relative to the employment qualification standards of recommendees of
retired/resigned, deceased or disabled employees of KCPI who are members of UKCEU. However, in
determining the employment qualification standards for said recommendees, the VA should have relied on
the November 7, 1995 Guidelines issued by KCPI.
By agreement of the parties, the implementation of the Guidelines was deferred until January 1, 1997,
unless revoked or amended by the 1997 CBA. UKCEU proposed that the practice of hiring
recommendees of retired/resigned, deceased or disabled employees who were union members, who
were at least high school graduates, be included in their CBA, but KCPI did not agree. Hence, Article XX,
Section 1 of the 1997 CBA of the parties remained intact. By executing the 1997 CBA, in its
present form, UKCEU is bound by the terms and conditions therein set forth.
The VA, however, ignored the plain language of the 1997 CBA of the parties, as well as the Guidelines
issued by KCPI. He capriciously based his resolution on the KCPI’s practice of hiring which,
however, by agreement of KCPI and EKCEU, was discontinued.
Management prerogative must be exercised in good faith for the advancement of the employer’s
interest and not for the purpose of defeating or circumventing the rights of the employees under
special laws, valid agreements such as the individual contract of employment and the collective
bargaining agreement, and general principles of justice and fair play. In this case, the Court finds
that KCPI acted in accord with the CBA and the November 7, 1995 Guidelines, which, by agreement of
the parties, may be implemented by KCPI after January 1, 1997.
Dispositive Portion: IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs
against petitioner.SO ORDERED.
017 STAR PAPER CORP., Josephine Ongsitco & Sebastian Chua v. Ronaldo SIMBOL, Wilfreda N.
Comia and Lorna E. Estrella

[G.R. No. 164774; April 12, 2006 ]

TOPIC: Employment Restriction Bona fide occupational qualification exception

PONENTE: PUNO, J.

STAR PAPER was unable to show reasonable business necessity for requiring co-workers who marry or
get personally involved with another, to resign from their position. Specifically, it was unable to justify how
the marriage of SIMBOL to Dayrit, and COMIA to Howard, is detrimental to the operations of the
company. Estrella was illegally dismissed, when forced to resign when she was impregnated by a married
co-worker.

FACTS: (chronological order)

1. STAR PAPER Corp. is a corporation engaged in trading – principally of paper products. Josephine
Ongsitco is its Manager of the Personnel and Administration Department while Sebastian Chua is its
Managing Director.

2. COMPANY POLICY promulgated in 1995 states that: (a) New applicants will not be allowed to be hired
if in case he/she has [a] relative, up to [the] 3rd degree of relationship, already employed by the company;
(b) In case of two of our employees (both singles [sic], one male and another female) developed a friendly
relationship during the course of their employment and then decided to get married, one of them should
resign to preserve the policy stated above.

2. The evidence for the STAR PAPER show that: respondents Ronaldo D. SIMBOL, Wilfreda N. COMIA
and Lorna E. ESTRELLA were all regular employees of the company. SIMBOL and COMINA met and
married their co-workers at STAR PAPER. Prior to marriage, both was advised to resign. ESTRELLA
resigned under threat of termination for getting involved with a married co-worker. SIMBOL resigned on
June 20, 1998 pursuant to the company policy.4 Comia resigned on June 30, 2000. ESTRELLA opted to
resign on December 21, 1999.

• SIMBOL was employed by STAR PAPER on October 27, 1993. He met ALMA Dayrit, also an
employee at STAR PAPER., whom he married on June 27, 1998. Prior to the marriage, Ongsitco advised
the couple that should they decide to get married, one of them should resign pursuant to a company
policy

• COMIA was hired by the company on Feb. 5, 1997. She met HOWARD, a co-employee. They
married on June 1, 2000. Ongsitco likewise reminded them that as per co. policy, one must resign should
they decide to get married.

• ESTRELLA was hired on July 29, 1994. She met LUISITO Zuñiga, a co-worker who is a married.
LUISITO got her pregnant. The co. allegedly could have terminated her services due to immorality so she
chose to resign.
• SIMBOL et al. each signed a Release and Confirmation Agreement, where they stated that they
have no money and property accountabilities in the company, release the latter of any claim or demand of
whatever nature.7

3. SIMBOL et al’ offers a different version of their dismissal:

• SIMBOL and COMIA allege that: (1) they did not resign voluntarily; (2) they were compelled to
resign due to the company policy;

• ESTRELLA alleges that: (1) she had a relationship with co-worker LUISITO who misrepresented
himself as a married but separated man; (2) After he got her pregnant, she discovered he was not
separated. She severed her relationship with him to avoid dismissal; (3) When she met an accident, she
was advised by the doctor to recuperate for 21 days; (4) upon her return to work on December 21, 1999,
but her name was on-hold at the gate and was denied entry but she found out that her name was on-hold
at the gate. She was denied entry.; (5) She was directed to proceed to the personnel office where she
was handed a memorandum stating she was being dismissed for immoral conduct; (6) She refused to
sign the memorandum because she was on leave for twenty-one (21) days and has not been given a
chance to explain; (7) The management asked her to write an explanation. However, after submission of
the explanation, she was nonetheless dismissed by the company; (8) Due to her urgent need for money,
she later submitted a letter of resignation in exchange for her thirteenth month pay.

4. SIMBOL et al. later filed a complaint for unfair labor practice, constructive dismissal, separation pay
and attorney’s fees. They averred that the aforementioned company policy is illegal and contravenes
Article 136 of the Labor Code. They also contended that they were dismissed due to their union
membership.

5. May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the complaint for lack of merit, viz.:
[T]his company policy was decreed pursuant to what the respondent corporation perceived as
management prerogative. This management prerogative is quite broad and encompassing for it covers
hiring, work assignment, working method, time, place and manner of work, tools to be used, processes to
be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay-off
of workers and the discipline, dismissal and recall of workers. Except as provided for or limited by special
law, an employer is free to regulate, according to his own discretion and judgment all the aspects of
employment.9

6. On appeal at NLRC, LA decision was affirmed (1/11/02). Motion for Recon was denied. Appeal was
made to CA, which reversed the NLRC ruling (8/3/04), declaring that dismissal of SIMBOL et al is illegal,
ordering their reinstatement to former positions without loss of seniority rights with full backwages from
the time of their dismissal until actual reinstatement; and (2) Ordering STAR PAPER et al. to pay
petitioners attorney’s fees amounting to 10% of the award and the cost of this suit

ISSUE(S): Whether the policy of the employer banning spouses from working in the same company
violates the rights of the employee under the Constitution and the Labor Code.

HELD: YES. Decision of the Court of Appeals in CA-G.R. SP No. 73477 dated August 3, 2004
isAFFIRMED.

RATIO:

1. Unlike in our jurisdiction where there is no express prohibition on marital discrimination,19 there are
twenty state statutes20 in the United States prohibiting marital discrimination. Some state courts21 have
been confronted with the issue of whether no-spouse policies violate their laws prohibiting both marital
status and sex discrimination. In challenging the anti-nepotism employment policies in the United States,
complainants utilize two theories of employment discrimination: the disparate treatment and the disparate
impact. Under the disparate treatment analysis, the plaintiff must prove that an employment policy is
discriminatory on its face. No-spouse employment policies requiring an employee of a particular sex to
either quit, transfer, or be fired are facially discriminatory. For example, an employment policy prohibiting
the employer from hiring wives of male employees, but not husbands of female employees, is
discriminatory on its face.22 On the other hand, to establish disparate impact, the complainants must
prove that a facially neutral policy has a disproportionate effect on a particular class. For example,
although most employment policies do not expressly indicate which spouse will be required to transfer or
leave the company, the policy often disproportionately affects one sex.23 The state courts’ rulings on the
issue depend on their interpretation of the scope of marital status discrimination within the meaning of
their respective civil rights acts. Though they agree that the term "marital status" encompasses
discrimination based on a person's status as either married, single, divorced, or widowed, they are
divided on whether the term has a broader meaning. Thus, their decisions vary.24 The courts narrowly25
interpreting marital status to refer only to a person's status as married, single, divorced, or widowed
reason that if the legislature intended a broader definition it would have either chosen different language
or specified its intent. They hold that the relevant inquiry is if one is married rather than to whom one is
married. They construe marital status discrimination to include only whether a person is single, married,
divorced, or widowed and not the "identity, occupation, and place of employment of one's spouse." These
courts have upheld the questioned policies and ruled that they did not violate the marital status
discrimination provision of their respective state statutes.

The courts that have broadly26 construed the term "marital status" rule that it encompassed the identity,
occupation and employment of one's spouse. They strike down the no-spouse employment policies based
on the broad legislative intent of the state statute. They reason that the no-spouse employment policy
violate the marital status provision because it arbitrarily discriminates against all spouses of present
employees without regard to the actual effect on the individual's qualifications or work performance.27
These courts also find the no-spouse employment policy invalid for failure of the employer to present any
evidence of business necessity other than the general perception that spouses in the same workplace
might adversely affect the business.28 They hold that the absence of such a bona fide occupational
qualification29 invalidates a rule denying employment to one spouse due to the current employment of
the other spouse in the same office.30 Thus, they rule that unless the employer can prove that the
reasonable demands of the business require a distinction based on marital status and there is no better
available or acceptable policy which would better accomplish the business purpose, an employer may not
discriminate against an employee based on the identity of the employee’s spouse.31 This is known as the
bona fide occupational qualification exception.

2. We note that since the finding of a bona fide occupational qualification justifies an employer’s no-
spouse rule, the exception is interpreted strictly and narrowly by these state courts. There must be a
compelling business necessity for which no alternative exists other than the discriminatory practice. To
justify a bona fide occupational qualification, the employer must prove two factors: (1) that the
employment qualification is reasonably related to the essential operation of the job involved; and, (2) that
there is a factual basis for believing that all or substantially all persons meeting the qualification would be
unable to properly perform the duties of the job.
3. The concept of a bona fide occupational qualification is not foreign in our jurisdiction. We employ the
standard ofreasonableness of the company policy which is parallel to the bona fide occupational
qualification requirement. In the recent case of Duncan Association of Detailman-PTGWO and Pedro
Tecson v. Glaxo Wellcome Philippines, Inc.,34 we passed on the validity of the policy of a pharmaceutical
company prohibiting its employees from marrying employees of any competitor company. We held that
Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other
confidential programs and information from competitors. We considered the prohibition against personal
or marital relationships with employees of competitor companies upon Glaxo’s employees reasonable
under the circumstances because relationships of that nature might compromise the interests of Glaxo. In
laying down the assailed company policy, we recognized that Glaxo only aims to protect its interests
against the possibility that a competitor company will gain access to its secrets and procedures.

4. The requirement that a company policy must be reasonable under the circumstances to qualify as a
valid exercise of management prerogative was also at issue in the 1997 case of Philippine Telegraph and
Telephone Company v. NLRC.36 In said case, the employee was dismissed in violation of petitioner’s
policy of disqualifying from work any woman worker who contracts marriage. We held that the company
policy violates the right against discrimination afforded all women workers under Article 136 of the Labor
Code, but established a permissible exception, viz.:[A] requirement that a woman employee must remain
unmarried could be justified as a "bona fide occupational qualification," or BFOQ, where the particular
requirements of the job would justify the same, but not on the ground of a general principle, such as the
desirability of spreading work in the workplace. A requirement of that nature would be valid provided it
reflects an inherent quality reasonably necessary for satisfactory job performance.37

5. The cases of Duncan and PT&T instruct us that the requirement of reasonableness must be clearly
established to uphold the questioned employment policy. The employer has the burden to prove the
existence of a reasonable business necessity. The burden was successfully discharged in Duncan but not
in PT&T.

6. We do not find a reasonable business necessity in the case at bar. Petitioners’ sole contention that "the
company did not just want to have two (2) or more of its employees related between the third degree by
affinity and/or consanguinity"38 is lame. That the second paragraph was meant to give teeth to the first
paragraph of the questioned rule39 is evidently not the valid reasonable business necessity required by
the law. It is significant to note that in the case at bar, respondents were hired after they were found fit for
the job, but were asked to resign when they married a co-employee. Petitioners failed to show how the
marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then an employee of the
Repacking Section, could be detrimental to its business operations. Neither did petitioners explain how
this detriment will happen in the case of Wilfreda Comia, then a Production Helper in the Selecting
Department, who married Howard Comia, then a helper in the cutter-machine. The policy is premised on
the mere fear that employees married to each other will be less efficient. If we uphold the questioned rule
without valid justification, the employer can create policies based on an unproven presumption of a
perceived danger at the expense of an employee’s right to security of tenure.
STAR PAPER contend that their policy will apply only when one employee marries a co-employee, but
they are free to marry persons other than co-employees. The questioned policy may not facially violate
Article 136 of the Labor Code but it creates a disproportionate effect and under the disparate impact
theory, the only way it could pass judicial scrutiny is a showing that it is reasonable despite the
discriminatory, albeit disproportionate, effect. The failure of petitioners to prove a legitimate business
concern in imposing the questioned policy cannot prejudice the employee’s right to be free from arbitrary
discrimination based upon stereotypes of married persons working together in one company.40

Lastly, the absence of a statute expressly prohibiting marital discrimination in our jurisdiction cannot
benefit the petitioners. The protection given to labor in our jurisdiction is vast and extensive that we
cannot prudently draw inferences from the legislature’s silence41 that married persons are not protected
under our Constitution and declare valid a policy based on a prejudice or stereotype. Thus, for failure of
petitioners to present undisputed proof of a reasonable business necessity, we rule that the questioned
policy is an invalid exercise of management prerogative. Corollarily, the issue as to whether respondents
Simbol and Comia resigned voluntarily has become moot and academic.

The contention of STAR PAPER that Estrella was pressured to resign because she got impregnated by a
married man and she could not stand being looked upon or talked about as immoralis incredulous. If she
really wanted to avoid embarrassment and humiliation, she would not have gone back to work at all. Nor
would she have filed a suit for illegal dismissal and pleaded for reinstatement. We have held that in
voluntary resignation, the employee is compelled by personal reason(s) to dissociate himself from
employment. It is done with the intention of relinquishing an office, accompanied by the act of
abandonment. 44 Thus, it is illogical for Estrella to resign and then file a complaint for illegal dismissal.
Given the lack of sufficient evidence on the part of petitioners that the resignation was voluntary, Estrella’s
dismissal is declared illegal.

CASE LAW/ DOCTRINE:

• Absence of such a bona fide occupational qualification invalidates a rule denying employment to
one spouse due to the current employment of the other spouse in the same office. [U]nless the employer
can prove that the reasonable demands of the business require a distinction based on marital status and
there is no better available or acceptable policy which would better accomplish the business purpose, an
employer may not discriminate against an employee based on the identity of the employee’s spouse. This
is known as the bona fide occupational qualification exception.

• To justify a bona fide occupational qualification, the employer must prove two factors: (1)
that the employment qualification is reasonably related to the essential operation of the job
involved; and, (2) that there is a factual basis for believing that all or substantially all persons
meeting the qualification would be unable to properly perform the duties of the job.
PILTEL v. NLRC, G.R. No. 118978, May 23, 1997

DOCTRINE:
Hence, while it is true that the parties to a contract may establish any agreements, terms, and conditions
that they may deem convenient, the same should not be contrary to law, morals, good customs, public
order, or public policy. Carried to its logical consequences, it may even be said that petitioner's policy
against legitimate marital bonds would encourage illicit or common-law relations and subvert the
sacrament of marriage.

FACTS:
Grace de Guzman was initially hired by petitioner as a reliever, specifically as a "Supernumerary Project
Worker," for a fixed period from November 21, 1990 until April 20, 1991. Thereafter, from June 10, 1991 to
July 1, 1991, and from July 19, 1991 to August 8, 1991, private respondent's services as reliever were
again engaged by petitioner. After August 8, 1991, and pursuant to their Reliever Agreement, her services
were terminated.

On September 2, 1991, private respondent was once more asked to join petitioner company as a
probationary employee, the probationary period to cover 150 days. In the job application form that was
furnished her to be filled up for the purpose, she indicated in the portion for civil status therein that
she was single although she had contracted marriage a few months earlier, that is, on May 26,
1991.

It now appears that private respondent had made the same representation in the two successive reliever
agreements which she signed on June 10, 1991 and July 8, 1991.

She was given a memorandum and was reminded about the company's policy of not accepting married
women for employment. Private respondent was dismissed from the company effective January 29, 1992,
which she readily contested by initiating a complaint for illegal dismissal, coupled with a claim for non-
payment of cost of living allowances (COLA), before the Regional Arbitration Branch of the National Labor
Relations Commission in Baguio City.

Labor Arbiter: private respondent, who had already gained the status of a regular employee, was illegally
dismissed by petitioner.

NLRC: upheld the labor arbiter and, in its decision dated April 29, 1994, it ruled that private respondent
had indeed been the subject of an unjust and unlawful discrimination by her employer, PT & T.
SC: Extra Ordinary Relief thru Certiorari

ISSUE: Is PILTEL’s policy of not accepting married women for employment legal?

HELD: No.
In the case at bar, petitioner's policy of not accepting or considering as disqualified from work any woman
worker who contracts marriage runs afoul of the test of, and the right against, discrimination, afforded all
women workers by our labor laws and by no less than the Constitution. Contrary to petitioner's assertion
that it dismissed private respondent from employment on account of her dishonesty, the record discloses
clearly that her ties with the company were dissolved principally because of the company's policy that
married women are not qualified for employment in PT & T, and not merely because of her supposed acts
of dishonesty.
Petitioner's policy is not only in derogation of the provisions of Article 136 of the Labor Code on the right
of a woman to be free from any kind of stipulation against marriage in connection with her employment,
but it likewise assaults good morals and public policy, tending as it does to deprive a woman of the
freedom to choose her status, a privilege that by all accounts inheres in the individual as an intangible
and inalienable right. Hence, while it is true that the parties to a contract may establish any agreements,
terms, and conditions that they may deem convenient, the same should not be contrary to law, morals,
good customs, public order, or public policy. Carried to its logical consequences, it may even be said that
petitioner's policy against legitimate marital bonds would encourage illicit or common-law relations and
subvert the sacrament of marriage.
ON THE FOREGOING PREMISES, the petition of Philippine Telegraph and Telephone Company is
hereby DISMISSED for lack of merit, with double costs against petitioner.
TOPIC: General Concepts: Employment Restriction: Prohibition on Marrying Employees of Competitor

[G.R. No. 162994.  September 17, 2004]

DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A. TECSON, petitioners, vs. GLAXO

WELLCOME PHILIPPINES, INC. respondent.

TINGA, J.:

DOCTIRNE: The prohibition against personal or marital relationships with employees of competitor
companies upon Glaxos 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.

FACTS:

Petitioner Tecson was hired by respondent Glaxo as medical representative. The contract of employment
stipulates that he agrees 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 provides that if found in conflict, the management and the employee will
explore the possibility of a transfer to another department in a non-counterchecking position.

Tecson was assigned in the Camarines Sur-Camarines Norte area. Subsequently, Tecson entered into a
romantic relationship with Bettsy, an employee of Astra, a competitor of Glaxo.  Bettsy  supervised the
district managers and medical representatives of her company and prepared marketing strategies for
Astra in that area.

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.

January 1999 ,Tecsons superiors reminded him that he and Bettsy should decide which one of them
would resign from their jobs. Tecson requested for a time since Asta, Bettsys 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. 

September 1999, Tecson applied for a transfer in Glaxos milk division to eliminate the potential conflict of
interest but the least-movement policy of Glaxo hindered his application.

November 1999, Glaxo transferred Tecson to Butuan-Surigao-Agusan area. Tecson defied the transfer
order and continued acting as medical representative in the Camarines Sur-Norte area. Glaxo offered
Tecson separation pay, P50,000. Tecson declined the offer.

NCMB – declared valid the policies of Glaxo on relationships between its employees and persons
employed with competitor companies. Affirmed Glaxos right to transfer Tecson to another sales territory.

Tecson filed Petition for Review with CA.

CA – Denied the petition. Glaxos policy prohibiting its employees from having personal relationships with
employees of competitor companies is a valid exercise of its management prerogatives.
Hence this petition.

Tecson argued that he was constructively dismissed when he was transferred to a new sales territory, and
was excluded from attending seminars and trainings. Tecson also contend that Glaxos 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. Petitioners claim that the policy restricts the employees right to marry.

On the other hand, Glaxo 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. Tecsons marriage to Bettsy, an employee of Astra, posed a real and potential
conflict of interest. Astras products were in direct competition with 67% of the products sold by
Glaxo. Hence, Glaxos enforcement of the foregoing policy in Tecsons case was a valid exercise of its
management prerogatives.

ISSUES:

(1) Whether Glaxos policy against its employees marrying employees from competitor companies is valid
and does not violate the equal protection clause of the Constitution. – THE COMPANY POLICY IN
QUESTION IS VALID

(2) Whether Tecson was constructively dismissed. – HE WAS NOT DISMISSED

HELD:

(1) 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
Glaxos 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.

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

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.

Tecson 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. He is therefore estopped from questioning said policy.

(2) 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. None of these conditions are present in the instant 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. 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.  She takes an active participation in the market war
characterized as it is by stiff competition among pharmaceutical companies. 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 others market strategies
in the region would be inevitable.

DISPOSITIVE: WHEREFORE, the Petition is DENIED for lack of merit. Costs against petitioners. SO
ORDERED.
TOPIC: Quitclaims and Compromise Agreements- Contents of a valid quitclaim/waiver
G.R. No. 145587 October 26, 2007
EDI-STAFFBUILDERS INTERNATIONAL, INC., petitioner,vs. NATIONAL LABOR RELATIONS
COMMISSION and ELEAZAR S. GRAN, respondents.
Doctrine: Quitclaims, releases and other waivers of benefits granted by laws or contracts in favor of
workers should be strictly scrutinized to protect the weak and the disadvantaged. The waivers should be
carefully examined, in regard not only to the words and terms used, but also the factual circumstances
under which they have been executed

FACTS: Petitioner EDI is a corporation engaged in recruitment and placement of Overseas Filipino
Workers.

a. ESI is another recruitment agency which collaborated with EDI to process the
documentation and deployment of private respondent to Saudi Arabia.
b. Private respondent Gran was an OFW recruited by EDI, and deployed by ESI to work for
OAB, in Riyadh, Kingdom of Saudi Arabia.
2. OAB asked EDI a letter for curricula vitae of qualified applicants for the position of "Computer
Specialist."
3. Upon arrival in Riyadh, Gran questioned the discrepancy in his monthly salary—his employment
contract stated USD 850.00; while his Philippine Overseas Employment Agency (POEA)
Information Sheet indicated USD 600.00 only. However, through the assistance of the EDI office
in Riyadh, OAB agreed to pay Gran USD 850.00 a month.
4. After Gran had been working for about five months for OAB, his employment was terminated for:
a. Non-compliance to contract requirements by the recruitment agency primarily on your
salary and contract duration.
b. Non-compliance to pre-qualification requirements by the recruitment agency[,] vide OAB
letter ref. F-5751-93
c. Insubordination or disobedience to Top Management Order and/or instructions (non-
submittal of daily activity reports despite several instructions).
5. Labor Arbiter Manuel R. Caday: ruled that there was neither underpayment nor illegal dismissal
since according to the POEA-Overseas Contract Worker (OCW) Information Sheet, Gran's
monthly salary was USD 600.00, and in his Confirmation of Appointment as Computer Specialist,
his monthly basic salary was fixed at SR 2,500.00, which was equivalent to USD 600.00.
a. Also cited the Declaration executed by Gran, to justify that Gran had no claim for unpaid
salaries or wages against OAB.
b. Gran failed to refute EDI's allegations; namely, (1) that Gran did not submit a single
activity report of his daily activity as dictated by company policy; (2) that he was not
qualified for the job as computer specialist due to his insufficient knowledge in
programming and lack of knowledge in ACAD system; (3) that Gran refused to follow
management's instruction for him to gain more knowledge of the job to prove his worth as
computer specialist; (4) that Gran's employment contract had never been substituted; (5)
and that Gran was paid a monthly salary of USD 850.00, and USD 350.00 monthly as
food allowance.
6. NLRC held that EDI's seemingly harmless transfer of Gran's contract to ESI is actually
"reprocessing," which is a prohibited transaction under Article 34 (b) of the Labor Code. This
scheme constituted misrepresentation through the conspiracy between EDI and ESI in misleading
Gran and even POEA of the actual terms and conditions of the OFW's employment. In addition, it
was found that Gran did not commit any act that constituted a legal ground for dismissal. The
alleged non-compliance with contractual stipulations relating to Gran's salary and contract
duration, and the absence of pre-qualification requirements cannot be attributed to Gran but to
EDI, which dealt directly with OAB. In addition, the charge of insubordination was not
substantiated, and Gran was not even afforded the required notice and investigation on his
alleged offenses.
7. Appellate court held that "Gran's failure to furnish a copy of his appeal memorandum [to EDI was]
 a mere formal lapse, an excusable neglect and not a jurisdictional defect which would justify the
dismissal of his appeal
Declaration signed by Gran did not bar him from demanding benefits to which he was entitled. The
appellate court found that the Declaration was in the form of a quitclaim, and as such is frowned upon as
contrary to public policy especially where the monetary consideration given in the Declaration was very
much less than what he was legally entitled to—his backwages amounting to USD 16,150.00.

ISSUE: Whether or not the quitclaims are valid

HELD: NO.

The Court finds the waiver and quitclaim null and void for the following reasons:

1. The salary paid to Gran upon his termination, in the amount of SR 2,948.00, is unreasonably low. As
correctly pointed out by the court a quo, the payment of SR 2,948.00 is even lower than his monthly
salary of SR 3,190.00 (USD 850.00). In addition, it is also very much less than the USD 16,150.00 which
is the amount Gran is legally entitled to get from petitioner EDI as backwages.
2. A quitclaim will understandably be lower than the sum total of the amounts and benefits that can
possibly be awarded to employees or to be earned for the remainder of the contract period since it is a
compromise where the employees will have to forfeit a certain portion of the amounts they are claiming in
exchange for the early payment of a compromise amount. The court may however step in when such
amount is unconscionably low or unreasonable although the employee voluntarily agreed to it. In the case
of the Declaration, the amount is unreasonably small compared to the future wages of Gran.
3. The factual circumstances surrounding the execution of the Declaration would show that Gran did not
voluntarily and freely execute the document. Consider the following chronology of events:
a. On July 9, 1994, Gran received a copy of his letter of termination;
b. On July 10, 1994, Gran was instructed to depart Saudi Arabia and required to pay his plane
ticket;65
c. On July 11, 1994, he signed the Declaration;
d. On July 12, 1994, Gran departed from Riyadh, Saudi Arabia; and
e. On July 21, 1994, Gran filed the Complaint before the NLRC.
The foregoing events readily reveal that Gran was "forced" to sign the Declaration and constrained to
receive the amount of SR 2,948.00 even if it was against his will—since he was told on July 10, 1994 to
leave Riyadh on July 12, 1994. He had no other choice but to sign the Declaration as he needed the
amount of SR 2,948.00 for the payment of his ticket. He could have entertained some apprehensions as
to the status of his stay or safety in Saudi Arabia if he would not sign the quitclaim.
In order to prevent disputes on the validity and enforceability of quitclaims and waivers of
employees under Philippine laws, said agreements should contain the following:
1. A fixed amount as full and final compromise settlement;
2. The benefits of the employees if possible with the corresponding amounts, which the
employees are giving up in consideration of the fixed compromise amount;
3. A statement that the employer has clearly explained to the employee in English, Filipino, or in
the dialect known to the employees—that by signing the waiver or quitclaim, they are forfeiting or
relinquishing their right to receive the benefits which are due them under the law; and
4. A statement that the employees signed and executed the document voluntarily, and had fully
understood the contents of the document and that their consent was freely given without any
threat, violence, duress, intimidation, or undue influence exerted on their person.
WHEREFORE, the petition is DENIED. The October 18, 2000 Decision in CA-G.R. SP No. 56120 of the
Court of Appeals affirming the January 15, 1999 Decision and September 30, 1999 Resolution of the
NLRC is AFFIRMED with the MODIFICATION that petitioner EDI-Staffbuilders International, Inc. shall pay
the amount of PhP 30,000.00 to respondent Gran as nominal damages for non-compliance with statutory
due process.
Topic: Quit claims and compromise agreements; valid and binding agreement
G.R. No. 167225               October 22, 2014
RADIO MINDANAO NETWORK, INC., Petitioner,  vs. MICHAEL MAXIMO R. AMURAO III, Respondent.
BERSAMIN, J.:
Doctrine: Not all quitclaims are per sein valid or against public policy. A quitclaim is invalid or contrary to
public policy only: (1) where there is clear proof that the waiver was wrangled from an unsuspecting or
gullible person; or (2) where the terms of settlement are unconscionable on their face. In instances of
invalid quitclaims, the law steps in to annul the questionable waiver. Indeed, there are legitimate waivers
that represent the voluntary and reasonable settlements of laborers’ claims that should be respected by
the Court as the law between the parties. Where the party has voluntarily made the waiver, with a full
understanding of its terms as well as its consequences, and the consideration for the quitclaimis credible
and reasonable, the transaction must be recognized as a valid and binding undertaking, and may not later
be disowned simply because of a change of mind.20 A waiver is essentially contractual.
Facts:
On February 16, 1989, petitioner Radio Mindanao Network, Inc. (RMN) hired respondent Michael Maximo
R. Amurao III (Michael) as a radio broadcaster for its DWKC-FM station and production manager for its
metropolitan radio operations at a monthly salary of P28,400.00.1
Years later, RMN decided to reformat and restructure the programming of its DWKC-FM station to meet
the demands of the broadcasting industry. On April 25, 2002, the president of RMN met with Michael and
other personnel of the station to inform them of the management's decision, advising them that the
reformatting and restructuring of the station's programs would necessarily affect their employment; but
assuring that they would be paid their retirement pay and other benefits. 2 To formalize the discussions
had in their meeting, RMN furnished Michael and other personnel separate letters dated May 14, 2002.
(Contents of letter omitted_
However, Michael and the other personnel refused to sign in receipt when the letters were served on
them. Not long after, however, they accepted the offer of RMN and executed affidavits relinquishing all
their claims against the employer. In Michael’s case, the Affidavit of Release/Quitclaim Dated May 30,
2002 (quitclaim)
On October 14, 2002, or 5 months after receiving his benefits and his execution of the quitclaim, Michael
filed a complaint against RMN for illegal dismissal with money claims in the National Labor Relations
Commission (NLRC).5
Issue: whether or not the quitclaim signed by Amurao is valid and binding
Held:
Not all quitclaims are per sein valid or against public policy. A quitclaim is invalid or contrary to public
policy only: (1) where there is clear proof that the waiver was wrangled from an unsuspecting or gullible
person; or (2) where the terms of settlement are unconscionable on their face. In instances of invalid
quitclaims, the law steps in to annul the questionable waiver. Indeed, there are legitimate waivers that
represent the voluntary and reasonable settlements of laborers’ claims that should be respected by the
Court as the law between the parties. Where the party has voluntarily made the waiver, with a full
understanding of its terms as well as its consequences, and the consideration for the quitclaimis credible
and reasonable, the transaction must be recognized as a valid and binding undertaking, and may not later
be disowned simply because of a change of mind.20 A waiver is essentially contractual.
In our view, the requisites for the validity of Michael’s quitclaim were satisfied. We explain.
Firstly, Michael acknowledged in his quitclaim that he had read and thoroughly understood the terms of
his quitclaim and signed it of his own volition. Being a radio broadcaster and production manager, he
occupied a highly responsible position in the company. It would be implausible to hold, therefore, that he
could be easily duped into simply signing away his rights. Besides, the language and content ofthe
quitclaim were clear and uncomplicated such that he could not claim that he did not understand what he
was signing.
Secondly, the settlement pay of P311,922.00 was credible and reasonable considering that Michael did
not even assail such amount as unconscionably low, or even state that he was entitled to a higher
amount.
Thirdly, that he was required to sign the quitclaim as a condition to the release of the settlement pay 21 did
not prove that its execution was coerced. Having agreed to part with a substantial amount of money, RMN
took steps to protect its interest and obtain its release from all obligations once it paid Michael his
settlement pay, which it did in this case.
And, lastly, that he signed the quitclaim out of fear of not being able to provide for the needs of his family
and for the schooling of his children did not immediately indicate that he had been forced to sign the
same. Dire necessity should not necessarily be an acceptable ground for annulling the quitclaim,
especially because it was not at all shown that he had been forced to execute it. Nor was it even proven
that the consideration for the quitclaim was unconscionably low, and that he had been tricked into
accepting the consideration.23
With the quitclaim having been freely and voluntarily signed, RMN was released and absolved from any
liability in favor of Michael. Suffice it to say that the quitclaim is ineffective in barring recovery of the full
measure of an employee's rights only when the transaction is shown to be questionable and the
consideration is scandalously low and inequitable.24 Such is not true here.
WHEREFORE, the Court GRANTS the petition for review on certiorari; REVERSES and SETS ASIDE the
decision promulgated on August 31, 2004; DECLARES the Affidavit of Release/Quitclaim executed by
and between respondent Michael Maximo R. Amurao III and petitioner Radio Mindanao Network, Inc.
valid and binding; and DISMISSES the complaint for illegal dismissal of Michael Maximo R. Amurao III.
No pronouncement on costs of suit.
SO ORDERED.
ZUELLIG PHARMA CORP VS SIBAL JULY 15, 2013

FACTS: Respondents (36 in all), on the other hand, were the employees of Zuellig at its Syntex Division.
In 1995, Roche Philippines, Inc. (Roche) purchased Syntex and took over from Zuellig the distribution of
Syntex products. Consequently, Zuellig closed its Syntex Division and terminated the services of
respondents due to redundancy. They were properly notified of their termination 6 and were paid their
respective separation pay in accordance with Section 3(b), Article XIV of the March 21, 1995 Collective
Bargaining Agreement (CBA)7 for which, respondents individually signed Release and Quitclaim 8 in
full settlement of all claims arising from their employment with Zuellig.

Controversy arose when respondents filed before the Arbitration Branch of the NLRC separate
Complaints9 (which were later consolidated) for payment of retirement gratuity and monetary equivalent of
their unused sick leave on top of the separation pay already given them. Respondents claimed that
they are still entitled to retirement benefits and that their receipt of separation pay and execution
of Release and Quitclaim do not preclude pursuing such claim.

Zuellig concedes that, in the absence of contractual prohibition, payment of both separation pay and
retirement pay may be allowed as ruled by this Court in Aquino. On the other hand, Zuellig insists that
in this case, Section 2, Article XIV of the parties’ CBA prohibits the recovery of both retirement
gratuity and severance pay. In addition, Section 2, Article VII of the Retirement and Gratuity Plan
likewise expressly limits the benefits the employees may receive to their choice between (i) the
benefits enumerated therein and (ii) separation pay or other benefits that Zuellig may be required
by law or competent authority to pay them.

Respondents counter that there is nothing in the CBA which categorically prohibits the recovery
of retirement benefits in addition to separation pay. They assert that Section 2, Article XIV of the
CBA alluded to by Zuellig does not constitute as an express prohibition that would foreclose
recovery of retirement gratuity after the employees had received redundancy pay. Hence,
following the ruling of this Court in Aquino, they are entitled to said retirement gratuity.

ISSUE: Are the respondents entitled to the retirement gratuity?

Held: It is true that quitclaims executed by employees are often frowned upon as contrary to
public policy. But that is not to say that all waivers and quitclaims are invalid as against public
policy.31 Quitclaims will be upheld as valid if the following requisites are present: "(1) the employee
executes a deed of quitclaim voluntarily; (2) there is no fraud or deceit on the part of any of the parties; (3)
the consideration of the quitclaim is credible and reasonable; and, (4) the contract is not contrary to law,
public order, public policy, morals or good customs or prejudicial to a third person with a right recognized
by law."32
In this case, there is no showing that Zuellig coerced or forced respondents to sign the Release and
Quitclaim. In fact, there is no allegation that Zuellig employed fraud or deceit in making respondents sign
the Release and Quitclaim. On the other hand, respondents declared that they had received the
separation pay in full settlement of all claims arising from their employment with Zuellig. For which reason,
they have remised, released and discharged Zuellig.

It is a familiar and fundamental doctrine in labor law that the CBA is the law between the parties
and they are obliged to comply with its provisions. Here, and as discussed above, the parties’ CBA
provides in no uncertain terms that whatever amount of money the employees will receive as retirement
gratuity shall be chargeable against separation pay. It is the unequivocal manifestation of their agreement
that acceptance of retirement gratuity forecloses receipt of separation pay and vice versa. The CBA
likewise exclusively enumerates departing employees who are entitled to the monetary equivalent of their
unused sick leave. These agreements must prevail and be given full effect.
G.R. No. 186475               June 26, 2013
POSEIDON INTERNATIONAL MARITIME SERVICES, INC., Petitioner,  vs. TITO R. TAMALA, FELIPE
S. SAURIN, JR., ARTEMIO A. BO-OC and JOEL S. FERNANDEZ, Respondents

Facts:

In 2004, Poseidon hired the respondents, in behalf of Van Doorn, to man the fishing vessels of Van Doorn
and those of its partners – Dinko Tuna Farmers Pty. Ltd. (Dinko) and Snappertuna Cv. Lda.
(Snappertuna) - at the coastal and offshore area of Cape Verde Islands. They were hired as

Third Engineer Chief Mate Third Engineer Ordinary

Seaman

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

Artemio A. Bo-oc US$6,047.99

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

On May 26, 2005, however, Poseidon and Van Doorn, with Goran of Snappertuna and Dinko Lukin of
Dinko (the immediate employers abovementioned), entered into another agreement (letter of acceptance)
reducing the previously agreed amount to 50% of the respondents’ unpaid salaries (settlement pay) for
the unexpired portion of their contract. 9 On May 28, 2005, the respondents arrived in Manila. On June 10,
2005, the respondents received the settlement pay under their letter of acceptance. The respondents then
signed a waiver and quitclaim10 and the corresponding cash vouchers.11
On November 16, 2005, the respondents filed a complaint 12 before the Labor Arbitration Branch of the
NLRC, National Capital Region for illegal termination of employment with prayer for the payment of their
salaries for the unexpired portion of their contracts; and for non-payment of salaries, overtime pay and
vacation leave pay

Poseidon and Van Doorn argued that the respondents had no cause of action to collect the remaining
50% of their unpaid wages. To Poseidon and Van Doorn, the respondents’ voluntary and knowing
agreement to the settlement pay,

LA and NLRC dismissed the respondents claim. They reasoned that the quitclaims were voluntarily
agreed upon.

CA reversed LA and NLRC ruling. CA noted that the respondents in fact questioned in their pleadings the
letter’s due execution. In contrast with the NLRC, the CA observed that the respondents were coerced
and unduly influenced into accepting the 50% settlement pay and into signing the waivers and quitclaims
because of their financial distress

ISSUE:
At the core of this case are the validity of the respondents’ waivers and quitclaims and the issue of
whether these should bar their claim for unpaid salaries.

w/n the quitclaim is valid?

Held:Yes

1. There was no illegal dismissal. Hence, RA 8042 Sec 10 cannot be invoked

CA essentially found the waivers and quitclaims unreasonable and involuntarily executed, and could not
have superseded the May 25, 2005 agreement. In doing so, and in giving weight to the May 25, 2005
agreement, the CA found justification under Section 10 of R.A. No. 8042.
The respondents are not entitled to the unpaid portion of their salaries under Section 10 of R.A. No.
8042.A plain reading of this provision readily shows that it applies only to cases of illegal dismissal or
dismissal without any just, authorized or valid cause and finds no application in cases where the overseas
Filipino worker was not illegally dismissed
Here, the manner of dismissal was not a contested issue; the records clearly showed that the
respondents’ employment was terminated because Van Doorn and its partners simply decided to stop
their fishing operations in the exercise of their management prerogative, which prerogative even our labor
laws recognize.
2. Quitclaim is valid because it was done voluntary with a full understanding of its terms and
with the payment of credible and reasonable consideration.

we find the latter documents to be reasonable and duly executed, we also find that they superseded the
May 25, 2005 agreement.
Generally, this Court looks with disfavor at quitclaims executed by employees for being contrary to public
policy. Where the person making the waiver, however, has done so voluntarily, with a full understanding of
its terms and with the payment of credible and reasonable consideration, we have no option but to
recognize the transaction to be valid and binding.
We find the requisites for the validity of the respondents’ quitclaim present in this case. We base this
conclusion on the following observations:
First, the respondents acknowledged in their various pleadings, as well as in the very document
denominated as "waiver and quitclaim," that they voluntarily signed the document after receiving the
agreed settlement pay.
Second, the settlement pay is reasonable under the circumstances, especially when contrasted with the
amounts to which they were respectively entitled to receive as termination pay pursuant to Section 23 of
the POEA-SEC and Article 283 of the Labor Code. The comparison of these amounts is tabulated below:
1âwphi1

Settlement Pay Termination Pay

Joel S. Fernandez US$3134.33 US$1120.00

Artemio A. Bo-oc US$2342.37 US$800.00
Felipe S. Saurin, Jr. US$2639.37 US$800.00
Tito R. Tamala US$2593.79 US$280.00

Thus, the respondents undeniably received more than what they were entitled to receive under the law as
a result of the cessation of the fishing operations.
Third, the contents of the waiver and quitclaim are clear, unequivocal and uncomplicated so that the
respondents could fully understand the import of what they were signing and of its consequences.
Nothing in the records shows that what they received was different from what they signed for.
Fourth, the respondents are mature and intelligent individuals, with college degrees, and are far from the
naive and unlettered individuals they portrayed themselves to be.1âwphi1
Fifth, while the respondents contend that they were coerced and unduly influenced in their decision to
accept the settlement pay and to sign the waivers and quitclaims, the records of the case do not support
this claim. The respondents’ claims that they were in "dire need for cash" and that they would not be paid
anything if they would not sign do not constitute the coercion nor qualify as the undue influence
contemplated by law sufficient to invalidate a waiver and quitclaim, particularly in the circumstances
attendant in this case. The records show that the respondents, along with their other fellow seafarers,
served as each other’s witnesses when they agreed and signed their respective waivers and quitclaims.
In these lights and in the absence of any evidence showing that fraud, deception or misrepresentation
attended the execution of the waiver and quitclaim, we are sufficiently convinced that a valid transaction
took place
TOPIC: Preliminary Title, Chapter I, Arts. 1-6: Scope/Application

G.R. No. 86773 February 14, 1992

SOUTHEAST ASIAN FISHERIES DEVELOPMENT CENTER-AQUACULTURE DEPARTMENT

(SEAFDEC-AQD), DR. FLOR LACANILAO (CHIEF), RUFIL CUEVAS (HEAD, ADMINISTRATIVE DIV.),
BEN DELOS REYES (FINANCE OFFICER), petitioners, vs. NATIONAL LABOR RELATIONS COMMIS-
SION and JUVENAL LAZAGA, respondents.

FACTS:

SEAFDEC-AQD is a department of an international organization, the Southeast Asian Fisheries Develop-

ment Center, organized through an agreement entered into in Bangkok, Thailand on December 28, 1967
by the governments of Malaysia, Singapore, Thailand, Vietnam, Indonesia and the Philippines with Japan
as the sponsoring country.

On April 20, 1975, private respondent Juvenal Lazaga was employed as a Research Associate an a pro-
bationary basis by the SEAFDEC-AQD and was appointed Senior External Affairs Officer on January 5,
1983 with a monthly basic salary of P8,000.00 and a monthly allowance of P4,000.00. Thereafter, he was
appointed to the position of Professional III and designated as Head of External Affairs Office with the
same pay and benefits.

On May 8, 1986, petitioner Lacanilao in his capacity as Chief of SEAFDEC-AQD sent a notice of termina-
tion to private respondent informing him that due to the financial constraints being experienced by the de-
partment, his services shall be terminated at the close of office hours on May 15, 1986 and that he is enti-
tled to separation benefits equivalent to one (1) month of his basic salary for every year of service plus
other benefits.

Upon petitioner SEAFDEC-AQD's failure to pay private respondent his separation pay, the latter filed on
March 18, 1987 a complaint against petitioners for non-payment of separation benefits plus moral dam-
ages and attorney's fees with the Arbitration Branch of the NLRC.

Petitioners in their answer with counterclaim alleged that the NLRC has no jurisdiction over the case inas-
much as the SEAFDEC-AQD is an international organization and that private respondent must first se-
cure clearances from the proper departments for property or money accountability before any claim for
separation pay will be paid, and which clearances had not yet been obtained by the private respondent.

ISSUE:

Whether the NLRC has jurisdiction over the case

HELD:

NONE. Petitioner Southeast Asian Fisheries Development Center-Aquaculture Department (SEAFDEC-

AQD) is an international agency beyond the jurisdiction of public respondent NLRC.

Being an intergovernmental organization, SEAFDEC including its Departments (AQD), enjoys functional
independence and freedom from control of the state in whose territory its office is located.

Pursuant to its being a signatory to the Agreement, the Republic of the Philippines agreed to be repre-
sented by one Director in the governing SEAFDEC Council and that its national laws and regulations shall
apply only insofar as its contribution to SEAFDEC of "an agreed amount of money, movable and immov-
able property and services
necessary for the establishment and operation of the Center" are concerned. It expressly waived the ap-
plication of the Philippine laws on the disbursement of funds of petitioner SEAFDEC-AQD

Respondent Lazaga's invocation of estoppel with respect to the issue of jurisdiction is unavailing because
estoppel does not apply to confer jurisdiction to a tribunal that has none over a cause of action

Note: contrast with Lacanilao v. De Leon

Lacanilao v. De Leon relates to a controversy between two claimants to the same position; this is not a
controversy between the SEAFDEC on the one hand, and an officer or employee, or a person claiming to
be an officer or employee, of the SEAFDEC, on the other hand. There is before us no question involving
immunity from the jurisdiction of the Court, there being no plea for such immunity whether by or on behalf
of SEAFDEC, or by an official of SEAFDEC with the consent of SEAFDEC.
 HIDALGO VS REPUBLIC

FACTS

The republic of the Philippines represented respondent Armed Forces of the Philippine Commissary and
Exchange Services [AFPCES]. The latter is a unit/facility of the AFP pursuant to LOI No. 31 series 1972.
General Order No. 920 was issued by the AFP General HQ with the effect that the centralized
management of the commissary exchange services to the AFPCES as a regular unit under the direct
control of the AFP Chief of Staff.

Petitioners were hired as regular employees of AFPCES. Sometime in 1999 to 2001, AFPPCES advised
petitioners to undergo an indefinite leave of absence without pay, allegedly upon a conditional promise
that they would be allowed to return to work as soon as the tax subsidy is released. AFPCES however
failed to recall petitioners to their work as promised. Petitioners filed a complaint for illegal [constructive]
dismissal with damages against AFPCES before the NLRC.

LA ruled in favour of the petitioners. NLRC dismissed appeal and granted the execution of the LA’s
decision. Pending the appeal to CA, AFPCES reinstated petitioners to their former positions but gave no
assurance regarding the payment of petitioners’ salaries. CA ruled that the complaints for illegal dismissal
should be filed with the CSC not with the LA because the petitioners are government employees.

ISSUE: Whether or not the petitioners are covered by the Labor Code or by the Civil Service Law as
government employees? Petitioners are government employees therefore, the Labor Code does not
apply. Case should have been filed with the CSC.

HELD:

EO 180 defined government employees as all employees of all branches, subdivisions, instrumentalities
and agencies of the Government, including GOCCs with original charter.

AFPCES committed acts which created an impression upon petitioners that they fall within the coverage
of pertinent labor laws, i.e. payment of SSS contributions rather than with the GSIS, appointment and
discipline of AFOCES employees never went through the proper procedure as required by pertinent civil
service laws and regulations.

The acts of AFPCES cannot be used against the CSC to deprive it of its jurisdiction. It is the regulation or
the law creating the Service that determines the position of the employee. Petitioners are government
personnel since they are employed by an agency attached to the AFP.

The court records of the case should be forwarded to the CSC which is ordered to promptly proceed with
the resolution of the case on the merits with deliberate dispatch.

SIDE NOTE: Art 6 of the Labor Code provides for the Applicability of the Labor Code: “All rights and
benefits granted to workers under this Code shall, except as may otherwise be provided herein, apply
alike to all workers, whether agricultural or non-agricultural. “
Juco v. NLRC, G.R. No. 98107, August 18, 1997

Facts:

 Petitioner Benjamin C. Juco was hired as a project engineer of respondent National Housing
Corporation (NHC). He was separated from the service for having been implicated in a crime of
theft and/or malversation of public funds.

 Petitioner filed a complaint for illegal dismissal against the NHC with the Department of Labor.
The Labor Arbiter rendered a decision dismissing the complaint on the ground that the NLRC had
no jurisdiction over the case. The NLRC reversed the decision of the LA, and on appeal to the
Supreme Court, they set aside the NLRC decision and upheld the decision of the LA.

 Thus, Petitioner filed a case for illegal dismissal with the Civil Service Commission. The NHC
moved for dismissal as the CSC had no jurisdiction. The CSC dismissed the case, stating that it
had no jurisdiction since the NHC was not disputed to be a government corporation without an
original charter.

 As such, petitioner filed a case for illegal dismissal with the NLRC. Respondent NLRC held in
favor of petitioner, stating that petitioner was illegally dismissed by NHC as there was evidence in
the record that the criminal case against him was purely fabricated, prompting the trial court to
dismiss the charges against him. Hence, he concluded that the dismissal was illegal as it was
devoid of basis, legal or factual.

 When the NHC filed an appeal before the NLRC, the NLRC reversed their decision for lack of
jurisdiction.

Issue: Whether or not the NLRC has jurisdiction over petitioner

Held: Yes, the case of petitioner falls under the jurisdiction of the NLRC

 The 1987 Constitution provides “The civil service embraces all branches, subdivision,
instrumentalities, and agencies of the Government, including government owned or controlled
corporations with original charter.” (Article IX-B, Section 2[1])

 The new phrase with original charter means that government-owned and controlled corporations
refer to corporations chartered by special law as distinguished from corporations organized under
the Corporation Code

 The National Housing Corporation is a government owned corporation, one hundred percent
(100%) owned by the Government from its incorporation. Considering the fact that the NHA had
been incorporated under act 1459, the former corporation law, it is but correct to say that it is a
government-owned or controlled corporation whose employees are subject to the provisions of
the Labor Code as it is a government-owned and/or controlled corporation without an original
charter

Doctrine: Government owned or controlled corporations without an original charter are under the
jurisdiction of the NLRC