Money Claims (Paragraph 5, Section 10 of RA 8042)

Serrano v. Gallant Maritime Services, Inc., GR No. 167614, 24 March 2009

(Austria-Martinez)
Yap v. Thenamaris Ships Management and Intermare Maritime Agencies, Inc., GR
No. 179532, 30 May 2011 (Nachura)
Guideposts of Labor Law (Social Justice, Equal Pay for Equal Work, Right to SelfOrganization)
Calalang v. Williams, GR No. 47800, 2 December 1940 (Laurel)
ISAE v. Quisumbing, GR No. 128845, 1 June 2000 (Kapunan)
USTFU v. Bitonio, GR No. 131235, 16 November 1999 (Panganiban)
Regulation of Recruitment and Placement Activities (Arts. 25-35)
Sagun v. Sunace International Management Services, GR No. 179242, 23 February
2011 (Nachura)
Apprenticeship (Arts. 57-72)
Atlanta Industries v. Sebolino, GR No. 187320, 26 January 2011 (Brion)
Handicapped Workers
Bernardo v. NLRC, GR No. 122917, 12 July 1999
Non-Diminution Rule (Art. 100)
Central Azucarera de Tarlac v. Central Azucarera de Tarlac Labor Union-NLU, GR
No. 188949, 26 July 2010 (Nachura)
Characteristics of Employer-Employee Relationship
Sonza v. ABS-CBN Broadcasting Corporation, GR No. 138051, 10 June 2004
(Carpio)
Dumpit-Murillo v. CA, GR No. 164652, 8 June 2007 (Quisumbing)
Labor Contracting (Arts. 106-109)
Philippine Airlines Inc. v. Ligan, GR No. 146408, 30 April 2009 (Carpio-Morales)
Aliviado v. Procter & Gamble Philippines, Inc., GR No. 160506, 9 March 2010 (Del
Castillo)
Article 136
Zialcita, et al. v. PAL, RO4-3-3398-76, 20 February 1977
PT&T v. NLRC, GR No. 118978, 23 May 1997 (Regalado)
Duncan Association of Detailman-PTGWO v. Glaxo Wellcome Philippines, GR No.
162994, 17 September 2004 (Tinga)

Money Claims (Paragraph 5, Section 10 of RA 8042)

Serrano v. Gallant Maritime Services, Inc., GR No. 167614, 24
March 2009 (Austria-Martinez)
Facts: Complainant Serrano was hired by Gallant Maritime Services, Inc. and Marlow
Navigation Co., Inc. under a POEA-approved contract as a Chief Officer for 12
months. On the date of his departure, he was constrained to accept a downgraded
employment contract for the position of Second Officer upon the assurance that he
would be made Chief Officer by the end of the following month. Because he was not
made Chief Officer as promised, he refused to stay on as Second Officer and was
repatriated to the Philippines with 9 months and 23 days remaining in his
employment contract. He then filed a complaint for constructive dismissal and for
payment of money claims with the Labor Arbiter against Gallant and Marlow.
The LA declared Serranos dismissal as illegal and awarded him the amount
equivalent to 3 months worth of salary for the unexpired portion of his term,
following Paragraph 5, Section 10 of RA 8042. On appeal, the NLRC only corrected
the LAs computation of the lump-sum salary awarded to Serrano, but affirmed the
LA judgment in all other respects. Serrano moved for partial reconsideration and
assailed the constitutionality of Section 10 of RA 8042. The CA subsequently
affirmed the NLRC but skirted the constitutional issue raised by Serrano.
Issue: W/N the clause or for 3 months for every year of the unexpired term,
whichever is less, found in Section 10 (5) of RA 8042, violates Section 18 of Article
II (The State affirms labor as a primary social economic force. It shall protect the
rights of workers and promote their welfare.), Section 1 of Article III (due process
and equal protection clauses), and Section 3 of Article XIII (The State shall afford full
protection to labor, local and overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all.) of the 1987
Philippine Constitution.
Ruling:
YES, VIOLATIVE OF ARTICLE III SECTION 1 OF THE PHILIPPINE
CONSTITUTION. The Court concludes that the subject clause contains a suspect
classification in that, in the computation of the monetary benefits of fixed-term
employees who are illegally discharged, it imposes a 3-month cap on the claim of
OFWs with an unexpired portion of one year or more in their contracts, but none on
the claims of other OFWs or local workers with fixed-term employment. The subject
clause singles out one classification of OFWs and burdens it with a peculiar
disadvantage. There being a suspect classification involving a vulnerable sector
protected by the Constitution, the Court now subjects the classification to a strict
judicial scrutiny, and determines whether it serves a compelling state interest

through the least restrictive means. When the challenge to a statute is premised on
the perpetuation of prejudice against persons favored by the Constitution with
special protectionsuch as the working class or a section thereofthe Court may
recognize the existence of a suspect classification and subject the same to a strict
judicial scrutiny.
The subject clause has a discriminatory intent against, and invidious impact
on, OFWs at three levels:
First, OFWs with employment contracts of LESS THAN ONE YEAR vis--vis
OFWs with employment contracts of ONE YEAR OR MORE;
Second, among OFWs with employment contracts of MORE THAN ONE YEAR;
and
Third, OFWs vis--vis local workers WITH FIXED-PERIOD EMPLOYMENT.
Under the first level, a review of previous jurisprudence shows that the
subject clause classifies OFWs into two categories. The first category includes OFWs
with fixed-period employment contracts of less than one year; in case of illegal
dismissal, they are entitled to their salaries for the entire unexpired portion of their
contract. The second category consists of OFWs with fixed-period employment
contracts of one year or more; in case of illegal dismissal, they are entitled to
monetary award equivalent to only three months per year of the unexpired portion
of their contracts. This disparity becomes more aggravating when jurisprudence
prior to the effectivity of RA 8042 is taken into account, wherein illegally dismissed
OFWs, no matter how long the period of their employment contracts, were entitled
to their salaries for the entire unexpired portions of their contracts. The enactment
of the subject clause in RA 8042 introduced a differentiated rule of computation of
the money claims of illegally dismissed OFWs based on their employment periods,
in the process singling out one category whose contracts have an unexpired portion
of one year or more and subjecting them to the peculiar disadvantage of having
their monetary awards limited to their salaries for three months or for the unexpired
portion thereof, whichever is less, but all the while sparing the other category from
such prejudice, simply because the latters unexpired contracts fall short of one
year.
With respect to the second level, the subject clause applies in cases when the
unexpired portion of the contract period is at least one year, which arithmetically
requires that the original contract period be more than one year. Viewed in that
light, the subject clause creates a sub-layer of discrimination among OFWs whose
contract periods are for more than one year: those who are illegally dismissed with
less than one year left in their contracts shall be entitled to their salaries for the
entire unexpired portion thereof, while those who are illegally dismissed with one
year or more remaining in their contracts shall be covered by the subject clause,
and their monetary benefits limited to their salaries for 3 months only.

With respect to the third level: Prior to RA 8042, OFWs and local workers with
fixed-term employment who were illegally discharged were treated alike in terms of
the computation of their money claims: they were uniformly entitled to their salaries
for the entire unexpired portions of their contracts. But with the enactment of RA
8042, specifically the adoption of the subject clause, illegally dismissed OFWs with
an unexpired portion of one year or more in their employment contract have since
been differently treated in that their money claims are subject to a 3-month cap,
whereas no such limitation is imposed on local workers with fixed-term employment.
Lastly, the Court dug deep into the records but found no compelling state
interest that the subject clause may possibly serve. In fine, the Government has
failed to discharge its burden of proving the existence of a compelling state interest
that would justify the perpetuation of the discrimination against OFWs under the
subject clause. There can never be a justification for any form of government action
that alleviates the burden of one sector, but imposes the same burden on another
sector, especially when the favored sector is composed of private businesses such
as placement agencies, while the disadvantaged sector is composed of OFWs whose
protection no less than the Constitution commands. The idea that private business
interest can be elevated to the level of a compelling state interest is odious.
Moreover, even if the purpose of the subject clause is to lessen the solidary liability
of placement agencies vis--vis their foreign principals, there are mechanisms
already in place that can be employed to achieve that purpose without infringing on
the constitutional rights of OFWs.
Petition granted. The clause or for three months for every year of the
unexpired term, whichever is less, in the fifth paragraph of Section 10 of RA 8042 is
declared unconstitutional. Subject clause being unconstitutional, Serrano is entitled
to his salaries for the entire unexpired period of 9 months and 23 days of his
contract, pursuant to law and jurisprudence prior to the enactment of RA 8042.

To Filipino workers, the rights guaranteed under Section 18, Article II and
Section 3, Article XIII translate to economic security and parity: all monetary
benefits should be equally enjoyed by workers of similar category, while all
monetary obligations should be borne by them in equal degree; none should
be denied the protection of the laws which is enjoyed by, or spared the
burden imposed on, others in like circumstances.
Under the policy of social justice, the law bends over backward to
accommodate the interests of the working class on the humane justification
that those with less privilege in life should have more in law. And the
obligation to afford protection to labor is incumbent not only on the
legislative and executive branches but also on the judiciary to translate this
pledge into a living reality. Social justice calls for 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.

Congress retains its wide discretion in providing for a valid classification, and
its policies should be accorded recognition and respect by the courts of
justice except when they run afoul of the Constitution. The deference stops
where the classification violates a fundamental right, or prejudices persons
accorded special protection by the Constitution. When these violations arise,
this Court must discharge its primary role as the vanguard of constitutional
guarantees, and require a stricter and more exacting adherence to
constitutional limitations. Rational basis should not suffice.
Under most circumstances, the Court will exercise judicial restraint in
deciding questions of constitutionality, recognizing the broad discretion given
to Congress in exercising its legislative power. Judicial scrutiny would be
based on the rational basis test, and the legislative discretion would be
given deferential treatment. But if the challenge to the statute is premised on
the denial of a fundamental right, or the perpetuation of prejudice against
persons favored by the Constitution with special protection, judicial scrutiny
ought to be more strict.

Yap v. Thenamaris Ships Management and Intermare Maritime

Agencies, Inc., GR No. 179532, 30 May 2011 (Nachura)
Facts: Complainant Yap was hired as an electrician of M/T Seascout by Intermare in
behalf of its principal, Vulture Shipping Ltd. for a duration of 12 months. While Yaps
contract was still effective, the ship was sold for scrapping. The employees,
including Yap, were informed that they had a choice whether to be transferred to
other vessels or just go home. Yap received seniority bonus, vacation bonus, extra
bonus, along with scrapping bonus, but with respect to the payment of his wage, he
refused to accept the payment of one-month basic wage, insisting that he was
entitled to the payment of the unexpired portion of his contract because he was
illegally dismissed. He also stated that the opted for immediate transfer but none
was made. Intermare and Thenamaris alleged that Yaps employment contract was
validly terminated due to the sale of the vessel and no arrangement was made for
Yaps transfer to Thenamaris other vessels. Thus, Yap filed with the Labor Arbiter a
complaint for illegal dismissal with damages and attorneys fees.
The LA ruled in Yaps favor, finding that he was constructively and illegally
dismissed, and that Thenamaris and Intermare were in bad faith when they assured
Yap of re-embarkation. It then stated that Yap was entitled to the unexpired portion
of his contract, which was a period of nine months. The NLRC affirmed the LAs
findings of constructive and illegal dismissal, and on the bad faith on the part of
Thenamaris and Intermare, but it held that instead of an award of salaries
corresponding to nine months, Yap was only entitled to salaries for three months as
provided under Section 10 of RA 8042. Upon Yaps motion for partial
reconsideration, the NLRC modified its ruling, stating that Yap was indeed entitled to
his salary corresponding to the unexpired portion of his contract. The CA then
modified the NLRCs ruling, stating that Yap was only entitled to three months

worth of basic salary. While the case was pending on appeal with the Supreme
Court, the Supreme Court ruled on Serrano v. Gallant Maritime Services that the
clause or for three months for every year of the expired term, whichever is less is
unconstitutional.
Issue: W/N the Serrano ruling should be applied to the present case.
Ruling:
YES. As a general rule, an unconstitutional act is not a law; it confers
no rights; it imposes no duties; it affords no protection; it creates no office; it is
inoperative as if it had not been passed at all. The general rule is supported by
Article 7 of the Civil Code, which provides:
Art. 7. Laws are repealed only by subsequent ones, and their violation
or non-observance shall not be excused by disuse or practice to the
contrary.
The doctrine of operative fact serves as an exception to the aforementioned general
rule. It only applies as a matter of equity and fair play. It nullifies the effects of an
unconstitutional law by recognizing that the existence of a statute prior to a
determination of unconstitutionality is an operative fact and may have
consequences which cannot always be ignored. The past cannot always be erased
by a new judicial declaration. This doctrine is applicable when a declaration of
unconstitutionality will impose an undue burden on those who have relied on the
invalid law.
Following Serrano, this case should not be included in the aforementioned
exception. After all, it was not the fault of Yap that he lost his job due to an act of
illegal dismissal committed by Thenamaris and Intermare. To rule otherwise would
be iniquitous to Yap and other OFWs, and would, in effect, send a wrong signal that
principals/employers and recruitment/manning agencies may violate an OFWs
security of tenure which an employment contract embodies and actually profit from
such violation based on an unconstitutional provision of law.
Yap awarded salaries for the entire unexpired portion of his employment
contract consisting of nine months.

As a rule, an unconstitutional act is not a law; it confers no rights; it imposes

no duties; it affords no protection; it creates no office; it is inoperative as if it
has not been passed at all.

Guideposts of Labor Law (Social Justice, Equal Pay for

Equal Work, Right to Self-Organization)
Calalang v. Williams, GR No. 47800, 2 December 1940 (Laurel)
Facts: When the Mayor of Manila and the Acting Chief of Police of Manila enforced
the recommendations of the National Traffic Commission to prohibit animal-drawn
vehicles from certain streets in Manila for a period of one year from the opening of
the Colgante Bridge to traffic, a petition for writ of prohibition against NTC Chairman
Williams, stating that Commonwealth Act 548, pursuant to which the
recommendations were made, is unconstitutional.
Issue: W/N CA 548 constitutes an unlawful interference with business or trade and
abridges the right to personal liberty and freedom of locomotion.
Ruling:
NO. CA 548 was passed by the National Assembly in the exercise of the
paramount police power of the State. Said Act, by virtue of which the rules and
regulations complained of were promulgated, aims to promote safe transit upon and
avoid obstructions on national roads, in the interest and convenience of the public.
In enacting said law, therefore, the National Assembly was prompted by
considerations of public convenience and welfare. It was inspired by a desire to
relieve congestion of traffic, which is, to say the least, a menace to public safety.
Public welfare, then, lies at the bottom of the enactment of said law, 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. To this fundamental aim of our
Government, the rights of the individual are subordinated. Liberty is a blessing
without which life is a misery, but liberty should not be made to prevail over
authority because then society will fall into anarchy. Neither should authority be
made to prevail over liberty because then the individual will fall into slavery. The
citizen should achieve this required balance of liberty and authority in his mind
through education and personal discipline, so that there may be established the
resultant equilibrium, which means peace and order and happiness for all. The
moment greater authority is conferred upon the government, logically so much is
withdrawn from the residuum of liberty which resides in the people. The paradox
lies in the fact that the apparent curtailment of liberty is precisely the very means of
insuring its preservation.
Writ denied.

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
extraconstitutionally, 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 diverse 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.

ISAE v. Quisumbing, GR No. 128845, 1 June 2000 (Kapunan)

Facts: International School is a domestic educational institution established
primarily for dependents of foreign diplomatic personnel and other temporary
residents. As such, it hires both foreign and local teachers as members of its faculty,
classifying them into (1) foreign-hires; and (2) local-hires. The foreign-hires get
higher salaries and more benefits than their local counterparts, which is justified by
the school with two significant economic disadvantages: (a) the dislocation factor,
and (b) limited tenure.
The local-hires decry this classification as being discriminatory. The DOLE
initially ruled in favor of the school.
Issues and Ruling:
1. W/N the point-of-hire classification employed by IS is discriminatory to
Filipinos.
YES. There is no reasonable distinction between the services rendered by foreignhires and local-hires. Although the school contends that ISAE has not adduced
evidence that local-hires perform work equal to that of the foreign-hires, the
presumption is that employees which have the same position and rank perform
equal work. There is no evidence that foreign-hires perform 25% more efficiently or
effectively than the local-hires. Both groups have similar functions and
responsibilities, which they perform under similar working conditions. While the
Court recognizes the need of the school to attract foreign-hires, salaries should not
be used as an enticement to the prejudice of local-hires. The local-hires perform the
same services as foreign-hires and they ought to be paid the same salaries as the
latter.

2. W/N the foreign-hires should belong to the same bargaining unit as the localhires.
NO. The basic test of an asserted bargaining units acceptability is whether or not it
is fundamentally the combination which will best assure to all employees the
exercise of their collective bargaining rights. Although foreign-hires perform similar
functions under the same working conditions as the local-hires, foreign-hires are
accorded certain benefits not granted to local-hires. These benefits are reasonably
related to their status as foreign-hires, and justify the exclusion of the former from
the latter. To include foreign-hires in a bargaining unit with local-hires would not
assure either group the exercise of their respective collective bargaining rights.

Equal pay for equal workPersons who work with substantially equal
qualifications, skill, effort, and responsibility, under similar conditions, should
be paid similar salaries. Discrimination, particularly in terms of wages, is
frowned upon by the Labor Code.

USTFU v. Bitonio, GR No. 131235, 16 November 1999

(Panganiban)
Facts: When a notice was posted that the UST Faculty Union was to hold its election
of new officers on 5 October 1996, the old set of officers contested this notice
because the Commission of Elections that the notice constituted was allegedly not
in accordance with USTFUs constitution and by-laws. The Med-Arbiter issued a TRO
enjoining the new officers from conducting the elections.
The TRO notwithstanding, a general assembly was called for by the secretary
general of the UST on 4 October 1996, where a new set of USTFU officers was
elected by acclamation and clapping of hands. Some of the participants were not
members of the USTFU. The new set of officers subsequently entered into another
CBA with UST from June 1996 to May 2001.
Acting upon the petition of the old officers, Director Bitonio, the Labor
Secretary, held that the 4 October 1996 election was void.
Issues and Ruling:
1. W/N the election of new officers was a legitimate exercise of USTFUs
members right to self-organization.
NO. The election is not binding, because it cannot be properly called a union
election for the procedures laid down in the USTFUs CBL were not followed.
a. The 4 October assembly was not called by the USTFU. It was merely a
convocation of faculty clubs. It was not convened in accordance with the
provision on general membership meetings as found in the USTFUs CBL.

b. There was no Commission on Elections to oversee the election, as

mandated by the USTFUs CBL.
c. The purported election was not done by secret balloting, in violation of the
USTFUs CBL.
2. W/N the CBL of the USTFU was suspended during the 4 October 1996
elections.
NO. The unions CBL is the fundamental law that governs the relationship between
and among the members of the union. It is where the rights, duties and obligations,
powers, functions, and authority of the officers as well as the members are defined.
It is the organic law that determines the validity of acts done by any officer or
member of the union. Without respect for the CBL, a union as a democratic
institution degenerates into nothing more than a group of individuals governed by
mob rule. Moreover, allowing a non-union member to initiate the suspension of a
unions CBL, and non-union members to participate in a union election on the
premise that the unions CBL had been suspended in the meantime, is incompatible
with the freedom of association and protection of the right to organize.

The ratification of a new CBA entered into by a union whose officers were
elected not in accordance with the unions CBL does not validate the election
of the said officers. Ratification of a new CBA ratifies the said CBAs new
terms, not the issue of union leadershipa matter that should be decided
only by union members in the proper forum at the proper time and after
observance of proper procedures.
Self-organization is a fundamental right guaranteed by the Philippine
Constitution and the Labor Code. Employees have the right to form, join, or
assist labor organizations for the purpose of collective bargaining or for their
mutual aid and protection. Whether employed for a definite period or not, any
employee shall be considered as such, beginning on his first day of service,
for purposes of membership in a labor union. Corollary to this right is the
prerogative not to join, affiliate with, or assist a labor union.

Regulation of Recruitment and Placement Activities (Arts.

25-35)
Sagun v. Sunace International Management Services, GR No.
179242, 23 February 2011 (Nachura)
Facts: Complainant Sagun filed before the POEA a complaint for the alleged
violation of Articles 32 and 34(a) & (b) of the Labor Code against Sunace, alleging
that she applied with the latter for the position of caretaker in Taiwan and was
charged P30,000.00 in cash, P10,000.00 in the form of a promissory note, and
NT$60,000.00 through salary deduction, in violation of the prohibition on excessive
placement fees. She additionally claimed that she was promised to be employed as

a caretaker but, at the job site, she worked as a domestic helper, and at the same
time, in a poultry farm. Sunace, on the other hand, denied Saguns claims,
maintaining that it only collected the amount authorized by the POEA and for which
the corresponding official receipt was issued, and stressed that it did not furnish or
publish any false notice or information or document in relation to recruitment or
employment as it was duly received, passed upon, and approved by the POEA.
The POEA Administrator dismissed the complaint for lack of merit, because
complainant failed to establish facts showing a violation of Article 32, since it was
proven that the amount received by Sunace as placement fee was covered by an
official receipt; or of Article 34(a) as it was not shown that Sunace charged
excessive fees; and of Article 34(b) simply because Sunace processed Saguns
papers as caretaker, the position she applied and was hired for. The Secretary of
Labor then overturned the POEA decision and held Sunace liable for collection of
excessive placement fees in violation of Article 34(a). It imposed the penalty of
suspension of its license for two months, or in lieu thereof, the penalty of fine in the
amount of P20,000.00. It was also ordered to refund Sagun the excess of the
placement fee exacted from her. The Office of the President affirmed the Secretary
of Labor, saying that it was immaterial that no evidence was presented to show the
overcharging since the issuance of a receipt could not be expected.
The CA then reversed the OP decision for lack of sufficient evidence. It then
affirmed the POEA decision.
Issue: W/N Sunace is liable for collection of excess placement fee from Sagun.
Ruling:
NO. In proceedings before administrative and quasi-judicial agencies,
the quantum of evidence required to establish a fact is substantial evidence, or that
level of relevant evidence which a reasonable mind might accept as adequate to
justify a conclusion.
To show the amount it collected as placement fee from Sagun, Sunace
presented an acknowledgement receipt showing that Sagun paid and Sunace
received P20,840.00. This notwithstanding, Sagun claimed that she paid more than
this amount. In support of her allegation, she presented a photocopy of a
promissory note she executed, and testified on the purported deductions made by
her foreign employer. In the promissory note, Sagun promised to pay Sunace the
amount of P10,000.00 that she borrowed for only two weeks. Sagun also explained
that her foreign employer deducted from her salary a total amount of
NT$60,000.00. She claimed that the P10,000.00 covered by the promissory note
was never obtained as a loan but as part of the placement fee collected by Sunace.
Moreover, she alleged that the salary deductions made by her foreign employer still
formed part of the placement fee collected by Sunace.
Although a receipt is not conclusive evidence, an exhaustive review of the
records of this case fails to disclose any other evidence sufficient and strong enough

to overturn the acknowledgement embodied in Sunaces receipt as to the amount it

actually received from Sagun. Having failed to adduce sufficient rebuttal evidence,
Sagun is bound by the contents of the receipt issued by Sunace. The subject receipt
remains as the primary or best evidence. To be sure, mere general allegations of
payment of excessive placement fees cannot be given merit as the charge of illegal
exaction is considered a grave offense which could cause the suspension or
cancellation of the agencys license. They should be proven and substantiated by
clear, credible, and competent evidence.
Petition denied for lack of merit.

While the Constitution is committed to the policy of social justice and to the
protection of the working class, it should not be presumed that every dispute
will automatically be decided in favor of labor.

Apprenticeship (Arts. 57-72)

Atlanta Industries v. Sebolino, GR No. 187320, 26 January 2011
(Brion)
Facts: Complainants Sebolino, Costales, Almoite, and Sagun, along with several
others, filed complaints for illegal dismissal, regularization, underpayment,
nonpayment of wages, and other money claims against Altanta Industries, Inc.,
which is a domestic corporation engaged in the manufacture of steel pipes. The
complainants allege that they were already regular employees of Atlanta even
before they entered into two separate, subsequent apprenticeship agreements with
the said company. The first apprenticeship agreement was for a period of 5 months,
after the expiration of which they entered into a second apprenticeship agreement
with Atlanta for the training of a second skill. Now, they claim to have been illegally
dismissed when the apprenticeship agreements expired. The Labor Arbiter ruled
that the dismissal was indeed illegal and awarded the workers backwages, wage
differentials, holiday pay, and service incentive leave pay.
While the case was on appeal with the NLRC, Costales and Almoite, together
with other workers allegedly entered into a compromise agreement wherein the
workers were to be paid by Atlanta a specified amount as settlement and to
acknowledge them as regular employees. The NLRC approved the said compromise
agreement, withdrew the finding of illegal dismissal with respect to Sebolino and
Sagun, and denied all the other claims.
The CA overturned the NLRC decision and found that the complainants were
already employees of Atlanta even before they entered into the apprenticeship
agreements; that the said apprenticeship agreements were executed in violation of
the law and the rules; that the positions occupied by the complainants are usually
necessary and desirable in the companys main business; and that the compromise

agreement entered into by Costales and Almoite were not binding because they did
not sign the agreement.
Issues and Ruling:
1. W/N a second apprenticeship agreement is valid.
NO. Even if the companys need to train its employees through apprenticeship is
recognized, only the first apprenticeship agreement may be considered for the
purpose. With the expiration of the first agreement and the retention of the
employees, Atlanta had, to all intents and purposes, recognized the completion of
their training and their acquisition of a regular employee status. To foist upon them
the second apprenticeship agreement for a second skill which was not even
mentioned in the agreement itself, is a violation of the Labor Codes rules and
regulations and is an act manifestly unfair to the employees, to say the least.
2. W/N complainants were illegally dismissed.
YES. The fact that the complainants were already rendering service to the company
when they were made to undergo apprenticeship renders the apprenticeship
agreements irrelevant. This reality is highlighted by the finding that the
complainants occupied positions that are usually necessary and desirable in
Atlantas usual business or trade, which characterize them as regular employees
under Article 280 of the Labor Code. Thus, when they were dismissed without just or
authorized cause, without notice, and without the opportunity to be heard, their
dismissal was illegal under the law.
Petition denied for lack of merit. CA decision affirmed.

Handicapped Workers
Bernardo v. NLRC, GR No. 122917, 12 July 1999
Facts: Between 1988 and 1993, Far East Bank and Trust Co. hired 56 deaf-mutes as
Money Sorters and Counters through a uniformly worded agreement called
Employment Contract for Handicapped Workers. This contract was renewed every
six months, as per its stipulations. The contract also stated that the employment of
the deaf-mutes was temporary, and they were a special type of workers apart from
the regular employees; and that the provisions of Book Six of the Labor Code,
particularly on regulation of employment and separation pay, are not applicable to
them.
43 deaf-mutes who were hired as Money Sorters and Counters by FEBTC filed
a case against the said company, arguing that they should be deemed as regular
workers. The labor arbiter ruled in favor of FEBTC, stating that they could not be
deemed regular employees, but only as special employees falling under Article 80

of the Labor Code. The NLRC affirmed the labor arbiter and stated additionally that
the Magna Carta for Disabled Persons was not applicable considering the prevailing
circumstances/milieu of the case.
Issue: W/N the deaf-mutes have already become regular employees.
Ruling:
YES. At the outset, let it be known that the Court appreciates the
nobility of FEBTCs effort to provide employment to physically impaired individuals
and to make them more productive members of society. However, it cannot be
allowed to elude the legal consequences of that effort, simply because it now
deems their employment irrelevant. The facts, viewed in light of the Labor Code and
the Magna Carta for Disabled Persons, indubitably show that the petitioners, except
sixteen of them, should be deemed regular employees. As such, they have acquired
legal rights that the Court is duty-bound to protect and uphold, not as a matter of
compassion but as a consequence of law and justice. The stipulations in their
employment contracts indubitably conform with Article 80 of the Labor Code, but
succeeding events and the enactment of RA 7277 (the Magna Carta for Disabled
Persons) justify the application of Article 280 of the Labor Code.
FEBTC entered into the aforesaid contract with a total of 56 handicapped
workers and renewed the contracts of 37 of them. In fact, two of them worked from
1988 to 1993. Verily, the renewal of the contracts of the handicapped workers and
the hiring of others lead to the conclusion that their tasks were beneficial and
necessary to the bank. More important, these facts show that they were qualified to
perform the responsibilities of their positions. In other words, their disability did not
render them unqualified or unfit for the tasks assigned to them. Section 5 of the
Magna Carta for Disabled Persons mandates that a qualified disabled employee
should be given the same terms and conditions of employment as a qualified ablebodied person. The fact that the employees were qualified disabled persons
necessarily removes the employment contracts from the ambit of Article 80. Since
the Magna Carta accords them the rights of qualified able-bodied persons, they are
thus covered by Article 280 of the Labor Code. Without a doubt, the task of counting
and sorting bills is necessary and desirable to the business of FEBTC. The contract
signed by petitioners is akin to a probationary employment, during which the bank
determined the employees fitness for the job. When the bank renewed the contract
after the lapse of the six-month probationary period, the employees thereby
became regular employees. No employer is allowed to determine indefinitely the
fitness of its employees. As regular employees, the 27 petitioners are entitled to
security of tenure; that is, their services may be terminated only for a just or
authorized cause. Because FEBTC failed to show such cause, these 27 petitioners
are deemed illegally dismissed and therefore entitled to backwages and
reinstatement without loss of seniority rights and other privileges. Considering the
allegation of FEBTC that the job of money sorting is no longer available because it
has been assigned back to the tellers to whom it originally belonged, the said
petitioners are hereby awarded separation pay in lieu of reinstatement.

In rendering this decision, the Court emphasizes not only the constitutional
bias in favor of the working class, but also the concern of the State for the plight of
the disabled. The noble objectives of the Magna Carta for Disabled Persons are not
based merely on charity or accommodation, but on justice and the equal treatment
of qualified persons, disabled or not. In the present case, the handicap of the
petitioners is not a hindrance to their work. The eloquent proof of this statement is
the repeated renewal of their employment contracts. Why then should they be
dismissed, simply because they are physically impaired? The Court believes that,
after showing their fitness for the work assigned to them, they should be treated
and granted the same rights like any other regular employees.
NLRC decision reversed, FEBTC ordered to pay backwages and separation pay
to 27 petitioners.

The Magna Carta for Disabled Persons mandates that qualified disabled
persons be granted the same terms and conditions of employment as
qualified able-bodied employees. Once they have attained the status of
regular workers, they should be accorded all the benefits granted by law,
notwithstanding written or verbal contracts to the contrary. This treatment is
rooted not merely on charity or accommodation, but on justice for all.
Articles 280 and 281 of the Labor Code put an end to the pernicious practice
of making permanent casuals of our lowly employees by the simple expedient
of extending to them probationary appointments, ad infinitum.
A contract of employment is impressed with public interest. Provisions of
applicable statutes are deemed written into the contract, and the parties are
not at liberty to insulate themselves and their relationships from the impact
of labor laws and regulations by simply contracting with each other.
An employee is regular because of the nature of the work and the length of
service, not because of the mode or even the reason for hiring them. The
determination of whether employment is casual or regular does not depend
on the will or word of the employer, and the procedure of hiring, but on the
nature of the activities performed by the employee, and to some extent, the
length of performance and its continued existence.

Non-Diminution Rule (Art. 100)

Central Azucarera de Tarlac v. Central Azucarera de Tarlac
Labor Union-NLU, GR No. 188949, 26 July 2010 (Nachura)
Facts: Central Azucarera de Tarlac, in compliance with PD No. 851, had been
granting its employees the mandatory thirteenth month pay since 1975. The
formulas used were:
13th Month Pay = Total Basic Salary / 12

Total Basic Salary = Basic Monthly Salary + First Eight Hours Overtime Pay on
Sunday and Legal/Special Holiday + Night Premium Pay + Vacation and Sick Leaves
for each Year
These formulas were used from 1975 until 2006, despite the fact that in 1976, the
Supplementary Rules and Regulations Implementing PD 851 clarified that overtime
pay, earnings, and other remuneration that are not part of the basic salary shall not
be included in the computation of the 13 th-month pay.
In November 2004, Centrals Labor Union staged a strike. During the
pendency of the strike, Central declared a temporary cessation of operations. In
December 2005, all the striking union members were allowed to return to work.
Subsequently, Central declared another temporary cessation of operation for April
and May of 2006. The suspension of operations was lifted on June 2006, but the
rank-and-file employees were allowed to report for work on a 15-day-per-month
rotation basis that lasted until September 2006. In December 2006, Central gave
the employees their 13th-month pay based on the employees total earnings during
the year, divided by 12.
The Labor Union objected to the computation, stating that Central did not
adhere to the usual computation of the 13 th-month pay. It claimed that the divisor
should have been 8 instead of 12, because the employees worked only for 8 months
in 2006. The union also asserted that there were some instances wherein the 13 thmonth pay was actually less than their basic monthly pay.
Central insists that the difference in the computation of the 13 th-month pay
was due to an error that was only discovered and rectified only after almost 30
years. It insists that the length of time during which an employer has performed a
certain act beneficial to the employees does not prove that such an act was not
done in error, and that for the claim of mistake to be negated, there must be a clear
showing that the employer had freely, voluntarily, and continuously performed the
act, knowing that he is under no obligation to do so. It asserts that such
voluntariness was absent in this case.
Issue: W/N Central is permitted to change the formula for the 13 th-month pay, which
results to the reduction of the amounts being received by the workers, after almost
30 years of its implementation.
Ruling:
NO. The practice of Central in giving the 13th-month pay based on the
employees gross annual earnings which included the basic monthly salary,
premium pay for work on rest days and special holidays, night shift differential pay
and holiday pay continued for almost thirty years, and has ripened into a company
policy or practice which cannot be unilaterally withdrawn. Article 100 of the Labor
Code, otherwise known as the Non-Diminution Rule, mandates that benefits given to
employees cannot be taken back or reduced unilaterally by the employer because
the benefit has become part of the employment contract, written or unwritten. The

rule against diminution of benefits applies if it is shown that the grant of the benefit
is based on an express policy or has ripened into a practice over a long period of
time and that the practice is consistent and deliberate. Nevertheless, the rule will
not apply if the practice is due to error in the construction or application of a
doubtful or difficult question of law. But even in cases of error, it should be shown
that the correction is done soon after discovery of the error.
Centrals argument that the grant of the benefit was not voluntary and was
due to error in the interpretation of what is included in the basic salary deserves
scant consideration. No doubtful or difficult question of law is involved in this case.
The guidelines set by the law are not difficult to decipher. The voluntariness of the
grant of the benefit was manifested by the number of years the employer had paid
the benefit to its employees. Central only changed its formula in the computation of
the 13th-month pay after almost 30 years and only after the dispute between the
management and employees erupted. Centrals act of changing the formula at this
time cannot be sanctioned, as it indicates a badge of bad faith.
Furthermore, Central cannot use the argument that it is suffering from
financial losses to claim exemption from the coverage of the law on 13 th-month pay,
or to spare it from its erroneous unilateral computation of the 13 th-month pay of its
employees. Under Section 7 of the Rules and Regulations Implementing PD No. 851,
distressed employers shall qualify for exemption from the requirement of the decree
only upon prior authorization by the Secretary of Labor. In this case, no such prior
authorization has been obtained by Central, thus, it is not entitled to claim such
exemption.

In 1987, the Revised Guidelines on the Implementation of the 13 th-Month Pay

Law was issued, and it specifically stated that the minimum 13 th-month pay
required by law shall not be less than one-twelfth of the total basic salary
earned by an employee within a calendar year. Furthermore, the term basic
salary of an employee for the purpose of computing the 13 th-month pay was
interpreted to include all remuneration on earnings paid by the employer for
services rendered, but does not include allowances and monetary benefits
which are not integrated as part o the regular or basic salary, such as the
cash equivalent of unused vacation and sick leave credits, overtime,
premium, night differential and holiday pay, and cost-of-living allowances.
However, these salary related benefits should be included as part of the basic
salary in the computation of the 13th-month pay if, by individual or collective
agreement, company practice or policy, the same are treated as part of the
basic salary of the employees.

Characteristics of Employer-Employee Relationship

Sonza v. ABS-CBN Broadcasting Corporation, GR No. 138051,
10 June 2004 (Carpio)
Facts: In May 1994, ABS-CBN Broadcasting Corporation signed an agreement with
the Mel and Jay Management and Development Corporation (MJMDC). ABS-CBN was
represented by its corporate officers while MJMDC was represented by Sonza, as
President and General Manager, and Carmela Tiangco, as EVP and Treasurer. In the
said Agreement, MJMDC agreed to provide Sonzas services exclusively to ABS-CBN
as talent for radio and television. For the first year, Sonzas services would be paid a
monthly talent fee of P310,000.00 for the first year and P317,000.00 for the second
and third years of the Agreement.
On 1 April 1996, Sonza wrote a letter to ABS-CBNs President, Eugenio Lopez
III, stating that their Agreement has been rescinded because of ABS-CBNs breach
thereof. Sonza subsequently filed a complaint against ABS-CBN before the DOLE,
complaining that ABS-CBN did not pay his salaries, separation pay, service incentive
leave pay, 13th-month pay, signing bonus, travel allowance, and amounts due under
the Employees Stock Option Plan. The LA subsequently dismissed Sonzas complaint
for lack of jurisdiction, based on the absence of employer-employee relationship
between ABS-CBN and Sonza. The NLRC and CA, on appeal, also dismissed Sonzas
complaint.
Issues and Ruling:
1. W/N an employer-employee relationship existed between ABS-CBN and
Sonza.
NO. The elements of an employer-employee relationship are:
(1)
(2)
(3)
(4)

The selection and engagement of the employee;

The payment of wages;
The power of dismissal; and
The employers power to control the employee on the means and
methods by which the work is accomplished.

The last element, the so-called control test, is the most important element. The
control test is the most important test our courts apply in distinguishing an
employee from an independent contractor. This test is based on the extent of
control the hirer exercises over a worker. The greater the supervision and control
the hirer exercises, the more likely the worker is deemed an employee. The
converse holds true as wellthe less control the hirer exercises, the more likely the
worker is considered an independent contractor.
First, Sonza contends that ABS-CBN exercised control over the means and
methods of his work. His argument is misplaced. ABS-CBN engaged Sonzas services

specifically to co-host the Mel & Jay programs. ABS-CBN did not assign any other
work to Sonza. To perform his work, Sonza only needed his skills and talent. How
Sonza delivered his lines, appeared on television, and sounded on radio were
outside ABS-CBNs control. Sonza did not have to render eight hours of work per
day. The Agreement required Sonza to attend only rehearsals and tapings of the
shows, as well as pre-and post-production staff meetings. ABS-CBN could not dictate
the contents of Sonzas script. However, the Agreement prohibited Sonza from
criticizing in his shows ABS-CBN or its interests. The clear implication is that Sonza
had a free hand on what to say or discuss in his shows provided he did not attack
ABS-CBN or its interests.
ABS-CBN was not involved in the actual performance that produced the
finished product of Sonzas work. ABS-CBN did not instruct Sonza how to perform his
job. ABS-CBN merely reserved the right to modify the program format and airtime
schedule for more effective programming. ABS-CBNs sole concern was the quality
of the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise
control over the means and methods of performance of Sonzas work.
Sonza claims that ABS-CBNs power not to broadcast his shows proves ABSCBNs power over the means and methods of the performance of his work. Although
ABS-CBN did have the option not to broadcast Sonzas show, ABS-CBN was still
obligated to pay Sonzas talent fees. Thus, even if ABS-CBN was completely
dissatisfied with the means and methods of Sonzas performance of his work, ABSCBN could not dismiss or even discipline Sonza. All that ABS-CBN could do is not to
broadcast Sonzas show but ABS-CBN must still pay his talent fees in full. This
proves that ABS-CBNs control was limited only to the result of Sonzas work,
whether to broadcast the final product or not. In either case, ABS-CBN must still pay
Sonzas talent fees in full until the expiry of the Agreement.
Sonza further contends that ABS-CBN exercised control over his work by
supplying all equipment and crew. No doubt, ABS-CBN supplied the equipment, crew
and airtime needed to broadcast the Mel & Jay programs. However, the
equipment, crew, and airtime are not the tools and instrumentalities Sonza
needed to perform his job. What Sonza principally needed were his talent or skills
and the costumes necessary for his appearance. Even though ABS-CBN provided
Sonza with the place of work and the necessary equipment, Sonza was still an
independent contractor since ABS-CBN did not supervise and control his work. ABSCBNs sole concern was for Sonza to display his talent during the airing of the
programs.
Second, Sonza claims that he was ABS-CBNs employee because the latter
subjected him to its rules and standards of performance. The Agreement stipulates
that Sonza shall abide with the rules and standards of performance covering
talents of ABS-CBN. The Agreement does not require Sonza to comply with the
rules and standards of performance prescribed for employees of ABS-CBN. The code

of conduct imposed on Sonza under the Agreement refers to the Television and
Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been
adopted by ABS-CBN as its Code of Ethics. The KBP Code applies to broadcasters,
not to employees of radio and television stations. Clearly, the rules and standards of
performance referred to in the Agreement are those applicable to talents and not to
employees of ABS-CBN. In any event, not all rules imposed by the hiring party on
the hired party indicate that the latter is an employee of the former. In this case,
Sonza failed to show that these rules controlled his performance. The Court finds
that these general rules are merely guidelines towards the achievement of the
mutually desired result, which are top-rating television and radio programs that
comply with standards of the industry.
Lastly, Sonza insists that the exclusivity clause in the Agreement is the
most extreme form of control which ABS-CBN exercised over him. This argument is
futile. Being an exclusive talent does not by itself mean that Sonza is an employee
of ABS-CBN. Even an independent contractor can validly provide his services
exclusively to the hiring party. In the broadcast industry, exclusivity is not
necessarily the same as control. The hiring of exclusive talents is a widespread and
accepted practice in the entertainment industry. This practice is not designed to
control the means and methods of work of the talent, but simply to protect the
investment of the broadcast station. The broadcast station normally spends
substantial amounts of money, time, and effort in building up its talents as well as
the programs they appear in and thus expects that said talents remain exclusive
with the station for a commensurate period of time. Normally, a much higher fee is
paid to talents who agree to work exclusively for a particular radio or television
station. In short, the huge talent fees partially compensates for exclusivity, as in the
present case.
2. W/N MJMDC, Sonzas agent, is a labor-only contractor.
NO. In a labor-only contract, there are three parties involved: (1) the labor-only
contractor; (2) the employee who is ostensibly under the employ of the labor-only
contractor; and (3) the principal who is deemed the real employer. Under this
scheme, the labor-only contractor is the agent of the principal. The law makes the
principal responsible to the employees of the labor-only contractor as if the
principal itself directly hired or employed the employees. These circumstances are
not present in this case. There are essentially only two parties involved under the
Agreement, namely, Sonza and ABS-CBN. MJMDC merely acted as Sonzas agent.
The records do not show that MJMDC acted as ABS-CBNs agent. MJMDC is a
corporation organized and owned by Sonza and Tiangco. The President and General
Manager of MJMDC is Sonza himself. It is absurd to hold that MJMDC, which is
owned, controlled, headed, and managed by Sonza, acted as agent of ABS-CBN in
entering into the Agreement with Sonza, who himself is represented by MJMDC. That
would make MJMDC the agent of both ABS-CBN and Sonza.

3. W/N the practice of broadcast and entertaining industries of treating talents

like Sonza as independent contractors is void for violating the right of labor to
security of tenure.
NO. The right of labor to security of tenure as guaranteed in the Constitution arises
only if there is an employer-employee relationship under labor laws. Not every
performance of services for a fee creates an employer-employee relationship. To
hold that every person who renders service to another for a fee is an employeeto
give meaning to the security of tenure clausewill lead to absurd results.
Individuals with special skills, expertise, or talent enjoy the freedom to offer their
services as independent contractors. The right to life and livelihood guarantees this
freedom to contract as independent contractors. The right of labor to security of
tenure cannot operate to deprive an individual, possessed with special skills,
expertise, and talent, of his right to contract as an independent contractor. An
individual like an artist or talent has a right to render his services without any one
controlling the means and methods by which he performs his art or craft. This Court
will not interpret the right of labor to security of tenure to compel artists and talents
to render their services only as employees. If radio and television program hosts can
render their services only as employees, the station owners and managers can
dictate to the radio and television hosts what they say in their shows. This is not
conducive to freedom of the press.
Petition denied. Sonzas claims not based on the Labor Code, but the May
1994 Agreement, and his cause of action is therefore for breach of contract.

The existence of an employer-employee relationship is a question of fact.

Appellate courts accord the factual findings of the LA and the NLRC not only
respect but also finality when supported by substantial evidence.

Dumpit-Murillo v. CA, GR No. 164652, 8 June 2007

(Quisumbing)
Facts: On 2 October 1995, Thelma Dumpit-Murillo was hired by Associated
Broadcasting Company (ABC) as a newscaster and co-anchor for Balitang-Balita, an
evening news program. On 30 September 1999, after four years of repeated
renewals, Murillos talent contract expired. She sent a letter to the Vice President for
News and Public Affairs of ABC, signifying her interest in renewing her contract
subject to a salary increase. When she did not receive a reply, she demanded for a
reinstatement to her former position, payment of unpaid services from 1 September
until 20 October 1999 and full backwages, and payment of other benefits due to a
regular employee starting 31 March 1996. ABC told her a check for her talent fee
covering 16 September until 20 October 1999 had already been processed, but
answered that her other claims had no basis in fact or in law. Murillo filed a claim
with the NLRC RAB.

The LA dismissed her complaint. Upon appeal, the NLRC reversed the LA,
holding that an employer-employee relationship between the parties existed, and
that Murillo was illegally dismissed. The NLRC also held that Murillo was entitled to
reinstatement and backwages or separation pay, aside from 13 th-month pay and
service incentive leave pay, moral and exemplary damages, and attorneys fees.
The CA reversed the NLRC decision on the ground that Murillo was a fixed-term
employee, as was on her employment contract.
Issues and Ruling:
1. W/N there was an employer-employee relationship between ABC and Murillo.
YES. Murillo was a regular employee of ABC under contemplation of law. The
assertion that a talent contract exists does not necessarily prevent a regular
employment status. In the case at bar, an employer-employee relationship was
created when ABC started to merely renew the contracts fifteen times, or for four
consecutive years.
Moreover, ABC had control over the performance of Murillos work. Murillos
duties as enumerated in her contract indicate that ABC had control of her work.
Aside from control, ABC also dictated the work assignments and payment of
Murillos wages. ABC also had the power to dismiss her. All these being present,
clearly, there existed an employer-employee relationship between Murillo and ABC.
2. W/N Murillo was illegally dismissed.
YES. As a regular employee, Murillo is entitled to security of tenure and can be
dismissed only for just cause and after due compliance with procedural due process.
Since ABC did not observe due process in constructively dismissing Murillo, the
latter was illegally dismissed.
CA decision set aside, NLRC decision affirmed.

The practice of having fixed-term contracts in the industry does not

automatically make all talent contracts valid and compliant with labor law.
Elements of an employment relationship:
(1)
The selection and engagement of the employee;
(2)
The payment of wages;
(3)
The power of dismissal;
(4)
Employers power to control.
The most important element is the employers control of the
employees conduct, not only as to the result of the work to be
done, but also as to the means and methods to accomplish it.
Considering regular employment, the law provides for two kinds of
employees, namely:
(1)
Those who are engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer;

(2)

Those who have rendered at least one year of service, whether

continuous or broken, with respect to the activity in which they are
employed.
Regular status arises from either the nature of work of the employee or the
duration of his employment.

Labor Contracting (Arts. 106-109)

Philippine Airlines Inc. v. Ligan, GR No. 146408, 30 April 2009
(Carpio-Morales)
Facts: Philippine Airlines and Synergy Services Corporation entered into an
Agreement as principal and contractor, respectively, whereby Synergy undertook to
provide loading, unloading, delivery of baggage and cargo and other related
services to and from PALs aircraft at the Mactan Station. The Agreement expressly
provided that Synergy was an independent contractor and that there would be no
employer-employee relationship between Synergy and/or its employees on the one
hand, and PAL on the other.
Synergy assigned Ligan and the other respondents to PAL following the
execution of the Agreement on 15 July 1991. On 3 March 1992, the respondents
filed complaints before the NLRC for underpayment, non-payment of premium pay
for
s, premium pays for rest days, service incentive leave pay, 13 th month pay and
allowances, and for regularization of employment status with PAL against Synergy,
PAL, and their respective officials. Benedicto Auxtero, on the other hand, filed a
complaint against Synergy and PAL for illegal dismissal and reinstatement with full
backwages. All the complaints were consolidated.
The LA found Synergy to be an independent contractor and dismissed
respondents complaint for regularization, but granted their money claims. On
appeal, the NLRC declared that Synergy was a labor-only contractor and ordered
PAL to accept respondents as its regular employees. Only PAL assailed the NLRC
decision. The CA affirmed the NLRC.
Issue: Whether Synergy is a mere labor-only contractor or a legitimate contractor.
Ruling:
Synergy is a LABOR-ONLY CONTRACTOR. According to Article 106 of the
Labor Code, there is labor-only contracting where the person supplying workers to
an employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers recruited
and placed by such person are performing activities which are directly related to the
principal business of such employer. In such cases, the person or intermediary shall
be considered merely as an agent of the employer who shall be responsible to the

workers in the same manner and extent as if the latter were directly employed by
him. From the records of the case, it is gathered that the work performed by almost
all of the respondentsloading and unloading of baggage and cargo of passengers
is directly related to the main business of PAL. And the equipment used by
respondents as station loaders, such as trailers and conveyors, are owned by PAL.
The records also show that PAL failed to present evidence that Synergy had
sufficient capital to engage in legitimate contracting. More significantly, however, is
that respondents worked alongside PALs regular employees who were performing
identical work.
For labor-only contracting to exist, Section 5 of D.O. No. 18-02 requires any of
two elements to be present:
(i)

(ii)

The contractor or subcontractor does not have substantial capital or

investment which relates to the job, work or service to be performed and
the employees recruited, supplied, or placed by such contractor or
subcontractor are performing activities which are directly related to the
main business of the principal, or
The contractor does not exercise the right to control over the performance
of the work of the contractual employee.

Even if only one of the two elements is present, then there is labor-only
contracting. While PAL claims that it was Synergys supervisors who actually
supervised respondents, it failed to present evidence thereon. It did not even
specify who the Synergy supervisors assigned at the workplace were.
PAL moreover admitted that it fixes the respondents work schedule as their
work was dependent on the frequency of plane arrivals. As the NLRC found, PALs
managers and supervisors approved respondents weekly work assignments, and
respondents and other regular PAL employees were all referred to as station
attendants of PALs cargo operation and airfreight services. Since respondents
performed tasks which are usually necessary and desirable in PALs air
transportation business, they should be deemed its regular employees and Synergy
as a labor-only contractor.
Court affirms the ruling of the NLRC and CA, ordering PAL to accept
respondents as its regular employees and to give each of them salaries, allowances,
and other employment benefits and privileges of a regular employee under the
pertinent Collective Bargaining Agreement.

One who claims to be an independent contractor has to prove that he

contracted to do the work according to his own methods and without being
subject to the employers control except only as to the results.
An express provision in the Service Agreement that the contractor is an
independent contractor and there would be no employer-employee

relationship between contractor and its employees on one hand, and principal
on the other hand is not legally binding and conclusive as contractual
provisions are not valid determinants of the existence of such relationship. It
is the totality of facts and surrounding circumstances of the case which is
determinative of the parties relationship.

Aliviado v. Procter & Gamble Philippines, Inc., GR No. 160506,

9 March 2010 (Del Castillo)
Facts: P&G is principally engaged in the manufacture and production of different
consumer and health products, which it sells on a wholesale basis to various
supermarkets and distributors. To enhance consumer awareness and acceptance of
the products, P&G entered into contracts with Promm-Gem and SAPS for the
promotion and merchandising of its products.
Aliviado and other petitioners worked as P&Gs merchandisers, and
individually signed employment contracts with either Promm-Gem or SAPS for
periods of more or less five months at a time. They were assigned at different
outlets, supermarkets, and stores where they handled all the products of P&G, and
received their wages from Promm-Gem or SAPS. Promm-Gem and SAPS imposed
disciplinary measures on erring merchandisers.
In December 1991, petitioners filed a complaint against P&G for
regularization, service incentive leave pay, and other benefits, with damages. The
LA dismissed the case for lack of merit and ruled that there was no employeremployee relationship between the petitioners and P&G. He found that the selection
and engagement of the petitioners, the payment of their wages, the power of
dismissal and control with respect to the means and methods by which their work
was accomplished, were all done by Promm-Gem/SAPS. He further found that
Promm-Gem and SAPS were legitimate independent job contractors. The NLRC and
the CA subsequently affirmed the LAs findings.
Issue: W/N Promm-Gem and SAPS are legitimate job contractors.
Ruling:
Promm-Gem is a legitimate job contractor, while SAPS is a labor-only
contractor. Therefore, the employees of SAPS are the employees of P&G, SAPS being
merely the agent of P&G.
Promm-Gem has shown evidence that it has substantial investment which
relates to the work to be performed, such as authorized stock of P1M and a paid-in
capital, or capital available for operations, of P500k; it has long-term assets worth
over P400k and current assets worth over P700k; it maintained its own warehouse
and office space with a floor area of 870 square meters; it had under its name three
registered vehicles which were used for its promotional/merchandising business;
and it has clients aside from P&G. Promm-Gem also supplied its complainantworkers with the relevant materials, such as markers, tapes, liners, and cutters,

necessary for them to perform their work. Promm-Gem also issued them uniforms.
Also, Promm-Gem already considered the complainants working under it as its
regular, not merely contractual or project, employees. This negates, on the part of
Promm-Gem, bad faith and intent to circumvent labor laws which factors have often
been tipping points that lead the Court to strike down the employment practice or
agreement concerned as contrary to public policy, morals, good customs, or public
order.
On the other hand, SAPS Articles of Incorporation shows that it has a paid-in
capital of only little over P31k. There is no other evidence presented to show how
much its working capital and assets are. Furthermore, there is no showing of
substantial investment in tools, equipment, or other assets. It failed to show that its
paid-in capital is sufficient for its 6-month contract period with P&G to generate its
needed revenue to sustain its operations independently. Instead, it could be readily
seen that its capital is not even sufficient for one months payroll, which is pegged
at little over P44k. Furthermore, petitioners have been charged with the
merchandising and promotion of the products of P&G, an activity that has already
been considered by the Court as doubtlessly directly related to the manufacturing
business, which is the principal business of P&G. Considering that SAPS has no
substantial capital or investment and the workers it recruited are performing
activities which are directly related to the principal business of P&G, SAPS is
engaged in labor-only contracting.
Petition granted.

Labor laws expressly prohibit labor-only contracting. To prevent its

circumvention, the Labor Code establishes an employer-employee
relationship between the employer and the employees of the labor-only
contractor.
There is labor-only contracting when the contractor or sub-contractor merely
recruits, supplies, or places workers to perform a job, work, or service for a
principal and any of the following elements are present:
(i) The contractor or subcontractor does not have substantial capital or
investment which relates to the job, work, or service to be performed
and the employees recruited, supplied, or placed by such contractor or
subcontractor are performing activities which are directly related to the
main business of the principal; or
(ii) The contractor does not exercise the right to control over the
performance of the work of the contractual employee.
Where labor-only contracting exists, the Labor Code itself establishes an
employer-employee relationship between the employer and the employees of
the labor-only contractor. The statute establishes this relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The
contractor is considered merely an agent of the principal employer and the

latter is responsible to the employees of the labor-only contractor as if such

employees had been directly employed by the principal employer.
In termination cases, the burden of proof rests upon the employer to show
that the dismissal is for just and valid cause.

Article 136
Zialcita, et al. v. PAL, RO4-3-3398-76, 20 February 1977
Facts: Complainant Zialcita, an international flight stewardess of PAL, was
discharged from the service on account of her marriage. In separating Zialcita, PAL
invoked its policy which stated that flight attendants must be single, and shall be
automatically separated from employment in the event they subsequently get
married. They claimed that this policy was in accordance with Article 132 of the
Labor Code. On the other hand, Zialcita questioned her termination on account of
her marriage, invoking Article 136 of the same law.
Issue: W/N Zialcita was validly terminated on account of her marriage.
Ruling:
NO. When Presidential Decree No. 148, otherwise known as the Women
and Child Labor Law, was promulgated in 13 March 1973, PALs policy had met its
doom. However, since no one challenged its validity, the said policy was able to
obtain a momentary reprieve. Section 8 of PD148 is exactly the same provision
reproduced verbatim in Article 136 of the Labor Code, which was promulgated on 1
May 1974 and took effect six months later.
Although Article 132 enjoins the Secretary of Labor to establish standards
that will ensure the safety and health of women employees and in appropriate cases
shall by regulation require employers to determine appropriate minimum standards
for termination in special occupations, such as those of flight attendants, it is logical
to presume that, in the absence of said standards or regulations which are yet to be
established, the policy of PAL against marriage is patently illegal.

Article 136 is not intended to apply only to women employed in ordinary

occupations, or it should have categorically expressed so. The sweeping
intendment of the law, be it on special or ordinary occupations, is reflected in
the whole text and supported by Article 135 that speaks of non-discrimination
on the employment of women.

PT&T v. NLRC, GR No. 118978, 23 May 1997 (Regalado)

Facts: Grace de Guzman was initially hired by PT&T as a reliever (or
Supernumerary Project Worker). Under the Reliever Agreement, her employment
would immediately be terminated upon expiration of the agreed period. After 8
August 1991, pursuant to their agreement, de Guzmans services were terminated.
The following month, PT&T asked de Guzman to join the company as a probationary

employee for 150 days. In the job application form, de Guzman indicated that she
was single in her civil status although she had contracted marriage a few months
earlier. When PT&T learned about the same, its branch supervisor sent de Guzman a
memorandum requiring her to explain the discrepancy. In that memorandum, de
Guzman was reminded about the companys policy of not accepting married women
for employment. PT&T subsequently dismissed de Guzman and the latter filed a
case for illegal dismissal. At the preliminary conference at the Regional Arbitration
Branch of the NLRC, de Guzman admitted that she had failed to remit the amount
ofP2,380.75 from her collections.
The Labor Arbiter declared that de Guzman, who had already gained the
status of a regular employee, was illegally dismissed by PT&T and ordered her
reinstatement. The NLRC upheld the decision of the LA, modified with the
qualification that de Guzman deserved to be suspended for three months in view of
the dishonest nature of her acts which should not be condoned.
Issue: W/N de Guzman was discriminated against on account of her marriage.
Ruling:
YES. PT&Ts policy of not accepting or considering as disqualified from
work any woman who contracts marriage runs afoul the test of, and the right
against, discrimination, afforded all women workers by our labor laws and by no less
than the Constitution. Contrary to PT&Ts assertion that it dismissed de Guzman
from employment on account of her dishonesty, the record discloses clearly that her
ties with the company were dissolved principally because of the companys policy
that married women are not qualified for employment in PT&T, and not merely
because of her supposed acts of dishonesty.
Verily, de Guzmans act of concealing the true nature of her status from PT&T
could not be properly characterized as willful or in bad faith as she was moved to
act the way she did mainly because she wanted to retain a permanent job in a
stable company. In other words, she was practically forced by that very same illegal
policy into misrepresenting her civil status for fear of being disqualified from work.
While loss of confidence is a just cause for termination of employment, it should not
be simulated. It must rest on an actual breach of duty committed by the employee
and not on the employers caprices. Furthermore, it should never be used as a
subterfuge for causes which are improper, illegal, or unjustified. PT&T glosses over
the fact that it was its unlawful policy against married women, both on the aspects
of qualification and retention, which compelled de Guzman to conceal her
supervenient marriage. It was, however, that very policy alone which was the cause
of de Guzmans secretive conduct now complained of. It is then apropos to recall the
familiar saying that he who is the cause of the cause is the cause of the evil caused.
PT&Ts policy is not only in derogation of the provisions of Article 136 of the
Labor Code on the right of a woman to be free from any kind of stipulation against
marriage in connection with her employment, but it likewise assaults good morals

and public policy, tending as it does to deprive a woman of the freedom to choose
her status, a privilege that by all accounts inheres in the individual as an intangible
and inalienable right. Hence, while it is true that the parties to a contract may
establish any agreements, terms and conditions that they may deem convenient,
the same should not be contrary to law, morals, good customs, public order, or
public policy. Carried to its logical consequences, it may even be said that PT&Ts
policy against legitimate marital bonds would encourage illicit or common-law
relations and subvert the sacrament of marriage.
De Guzman, it must be observed, had gained regular status at the time of her
dismissal. When she was served her walking papers, she was about to complete the
150-day probationary period. That her dismissal would be effected just when her
probationary period was winding down clearly raises the plausible conclusion that it
was done in order to prevent her from earning security of tenure. On the other
hand, her earlier stints with the company as reliever were undoubtedly those of a
regular employee, even if the same were for fixed periods, as she performed
activities which were essential or necessary in the usual trade and business of PT&T.
As an employee who had therefore gained regular status, and as she had been
dismissed without just cause, she is entitled to reinstatement without loss of
seniority rights and other privileges and to full back wages, inclusive of allowances
and other benefits or their monetary equivalent. However, as she had undeniably
committed an act of dishonesty in concealing her status, albeit under the
compulsion of an unlawful imposition of PT&T, the three-month suspension imposed
by NLRC must be upheld to obviate the impression or inference that such act should
be condoned. It would be unfair to the employer if she were to return to its fold
without any sanction whatsoever for her act which was not totally justified. Thus,
her entitlement to back wages, which shall be computed from the time her
compensation was withheld up to the time of her actual reinstatement, shall be
reduced by deducting therefrom the amount corresponding to her three months
suspension.
Petition dismissed.

An employer is free to regulate, according to his discretion and best business

judgment, all aspects of employment, from hiring to firing, except in cases
of unlawful discrimination or those which may be provided by law.
The primary standard of determining regular employment is the reasonable
connection between the activity performed by the employee in relation to the
business or trade of the employer.
The Civil Code provisions on the contract of labor state that the relations
between the parties, that is, of capital and labor, are not merely contractual,
impressed as they are with so much public interest that the same should
yield to the common good. It goes on to intone that neither capital nor labor
should visit acts of oppression against the other, nor impair the interest or

convenience of the public. In the final reckoning, the danger of such a policy
against marriage is that it strikes at the very essence, ideals, and purpose of
marriage as an inviolable social institution and, ultimately, of the family as
the foundation of the nation. That it must be effectively interdicted here in all
its indirect, disguised, or dissembled forms as discriminatory conduct
derogatory of the laws of the land is not only in order but imperatively
required.

Duncan Association of Detailman-PTGWO v. Glaxo Wellcome

Philippines, GR No. 162994, 17 September 2004 (Tinga)
Facts: Pedro A. Tecson, a medical representative hired by Glaxo Wellcome
Philippines, signed a contract of employment which stipulates, among others, that
he agrees to study and abide by existing company rules; to disclose to management
any existing or future relationship by consanguinity or affinity with co-employees or
employees of competing drug companies and should management find that such
relationship poses a possible conflict of interest, to resign from the company. The
Employee Code of Conduct of Glaxo similarly provides that an employee is expected
to inform management of any existing or future relationship by consanguinity or
affinity with co-employees or employees of competing drug companies. If
management perceives a conflict of interest or a potential conflict between such
relationship and the employees employment with the company, the management
and the employee will explore the possibility of a transfer to another department in
a non-counterchecking position or preparation for employment outside the
company after six months.
Tecson was initially assigned to cover the Camarines Sur-Camarines Norte
sales area. He then had a romantic relationship with Bettsy, a Branch Coordinator of
Astra Pharmaceuticals, which is a competitor of Glaxo. As Branch Coordinator, she
supervised the district managers and medical representatives of her company and
prepared marketing strategies for Astra in that area. Tecson then received several
reminders from his District Manager regarding the conflict of interest which may be
brought about by his relationship with Bettsy. Notwithstanding those reminders,
Tecson married Bettsy in September 1998. In 1999, Tecsons superiors informed him
that his marriage to Bettsy gave rise to a conflict of interest and told him to choose
which of them should resign from their jobs. When Glaxo moved to transfer Tecson
to the Butuan-Surigao-Agusan del Sur sales area, Tecson brought the matter to
Glaxos Grievance Committee. During the pendency of the grievance proceedings,
Tecson was paid his salary, but was not issued samples of products which were
competing with similar products manufactured by Astra. When the parties failed to
resolve the issue at the grievance machinery level, they submitted the matter for
voluntary arbitration. Glaxo offered Tecson a separation pay of one-half month pay
for every year of service, but he declined the offer. The NCMB subsequently
declared Glaxos policy on relationships between its employees and person

employed with competitor companies as valid, and affirmed Glaxos right to transfer
Tecson to another sales territory. The CA affirmed the NCMB decision.
Issues and Ruling:
1. W/N Glaxos policy against employees marrying employees of competitor
companies violates the equal protection clause of the Constitution by
creating invalid distinctions among employees on account only of marriage,
thus restricting its employees right to marry.
NO. The challenged company policy does not violate the equal protection clause of
the Constitution. 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.
The equal protection clause erects no shield against merely private conduct,
however discriminatory or wrongful. The only exception occurs when the state in
any of its manifestations or actions has been found to have become entwined or
involved in the wrongful private conduct. Obviously, the exception is not present in
this case. Significantly, the company actually enforced the policy after repeated
requests to the employee to comply with the policy. Indeed, the application of the
policy was made in an impartial and even-handed manner, with due regard for the
lot of the employee. Moreover, 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 expansion and
growth. In any event, from the wordings of the contractual provision and the policy
in its employee handbook, it is clear that Glaxo does not impose an absolute
prohibition against relationships between its employees and those of competitor
companies. Its employees are free to cultivate relationships with and marry persons
of their own choosing. What the company merely seeks to avoid is a conflict of
interest between the employee and the company that may arise out of such
relationships. Lastly, the assailed company policy which forms part of Glaxos
Employee Code of Conduct and of its contracts with its employees, such as that
signed by Tecson, was made known to him prior to his employment. Tecson,
therefore, was aware of that restriction when he signed his employment contract
and when he entered into a relationship with Bettsy. 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. Tecson is estopped from questioning said policy.
2. W/N Tecson was constructively dismissed.
NO. Glaxo properly exercised its management prerogative in reassigning Tecson to
the Butuan City sales area. As noted earlier, the challenged policy has been
implemented by Glaxo impartially and disinterestedly for a long period of time. In
the case at bar, the record shows that Glaxo gave Tecson several chances to
eliminate the conflict of interest brought about by his relationship with Bettsy. When
their relationship was still in its initial stage, Tecsons supervisors at Glaxo
constantly reminded him about its effects on his employment with the company and
on the companys interests. After Tecson married Bettsy, Glaxo gave him time to
resolve the conflict by either resigning from the company or asking his wife to
resign from Astra. Glaxo even expressed its desire to retain Tecson in its employ
because of his satisfactory performance and suggested that he ask Bettsy to resign
from her company instead. Glaxo likewise acceded to his repeated requests for
more time to resolve the conflict of interest. When the problem could not be
resolved after several years of waiting, Glaxo was constrained to reassign Tecson to
a sales area different from that handled by his wife for Astra. Notably, Glaxo did not
terminate Tecson from employment but only reassigned him to another area where
his home province, Agusan del Sur, was included. In effecting Tecsons transfer,
Glaxo even considered the welfare of Tecsons family. Clearly, the foregoing dispels
any suspicion or unfairness and bad faith on the part of Glaxo.
Petition denied for lack of merit.

While our laws endeavor to give life to the constitutional policy on social
justice and the protection of labor, it does not mean that every labor dispute
will be decided in favor of the workers. The law also recognizes that
management has rights which are also entitled to respect and enforcement in
the interest of fair play.
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.