LABOR AND THE CONSTITUTION

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. (Calalang vs. Williams [G.R. No. L-47800, 02 December 1940])
The State is bound under the Constitution to afford full protection to labor
and when conflicting interests of labor and capital are to be weighed on the
scales of social justice the heavier influence of the latter should be
counterbalanced with the sympathy and compassion the law accords the
less privileged workingman. This is only fair if the worker is to be given the
opportunity and the right to assert and defend his cause not as a subordinate
but as part of management with which he can negotiate on even plane. Thus
labor is not a mere employee of capital but its active and equal partner.
(Fuente vs. NLRC [G.R. No. 110017, 02 January 1997])
The cause of social justice is not served by upholding the interest of
petitioners in disregard of the right of private respondents. Social justice
ceases to be an effective instrument for the "equalization of the social and
economic forces" by the State when it is used to shield wrongdoing. While it
is true that compassion and human consideration should guide the
disposition of cases involving termination of employment since it affects
one's source or means of livelihood, it should not be overlooked that the
benefits accorded to labor do not include compelling an employer to retain
the services of an employee who has been shown to be a gross liability to
the employer. It should be made clear that when the law tilts the scale of
justice in favor of labor, it is but a recognition of the inherent economic
inequality between labor and management. The intent is to balance the scale
of justice; to put the two parties on relatively equal positions. There may be
cases where the circumstances warrant favoring labor over the interests of

management but never should the scale be so tilted if the result is an

injustice to the employer, Justicia remini regarda est (Justice is to be denied
to none). (Jamer vs. NLRC [G.R. No. 112630, 05 September 1997])
It is true the Constitution regards labor as "a primary social economic
force." But so does it declare that it "recognizes the indispensable role of the
private sector, encourages private enterprise, and provides incentives to
needed investment." The Constitution bids the State to "afford full protection
to labor." But it is equally true that "the law, in protecting the right's of the
laborer, authorizes neither oppression nor self-destruction of the employer."
And it is oppression to compel the employer to continue in employment one
who is guilty or to force the employer to remain in operation when it is not
economically in his interest to do so. (Serrano vs. NLRC [G.R. No. 117040,
27 January 2000])
EMPLOYER-EMPLOYEE RELATIONSHIP
Importance of the existence of an employment relation
A basic factor underlying the exercise of rights under the Labor Code is
status of employment. The question of whether employer-employee
relationship exists is a primordial consideration before extending labor
benefits under the workmen's compensation, social security, medicare,
termination pay and labor relations law. It is important in the determination of
who shall be included in a proposed bargaining unit because it is the sine
qua non, the fundamental and essential condition that a bargaining unit be
composed of employees. Failure to establish this juridical relationship
between the union members and the employer affects the legality of the
union itself. It means the ineligibility of the union members to present a
petition for certification election as well as to vote therein. (La Suerte vs.
Director [123 SCRA 679])
Tests for the existence of Employer-Employee Relationship South West Disaster
Control
In determining the existence of employer-employee relationship, the
following elements are generally considered, namely: (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 employees' conduct-although
the latter is the most important element. (35 Am. Jur. 445).

[T]o determine whether a person who performs work for another is the
latter's employee or an independent contractor, the National Labor Relations
relies on 'the right to control' test. Under this test an employer-employee
relationship exist where the person for whom the services are performed
reserves the right to control not only the end to be achieved, but also the
manner and means to be used in reaching the end. (LVN vs. Philippine
Musicians Guild [G.R. No. 12582] citing United Insurance Company, 108,
NLRB No. 115.)
[T]he relationship between jeepney owners/operators on one hand and
jeepney drivers on the other under the boundary system is that of employeremployee and not of lessor-lessee. We explained that in the lease of
chattels, the lessor loses complete control over the chattel leased although
the lessee cannot be reckless in the use thereof, otherwise he would be
responsible for the damages to the lessor. In the case of jeepney
owners/operators and jeepney drivers, the former exercise supervision and
control over the latter. The management of the business is in the owner's
hands. The owner as holder of the certificate of public convenience must see
to it that the driver follows the route prescribed by the franchising authority
and the rules promulgated as regards its operation. Now, the fact that the
drivers do not receive fixed wages but get only that in excess of the so-called
"boundary" they pay to the owner/operator is not sufficient to withdraw the
relationship between them from that of employer and employee. We have
applied by analogy the abovestated doctrine to the relationships between
bus owner/operator and bus conductor, auto-calesa owner/operator and
driver, and recently between taxi owners/operators and taxi drivers. Hence,
petitioners are undoubtedly employees of private respondent because as taxi
drivers they perform activities which are usually necessary or desirable in the
usual business or trade of their employer. (Jardin vs. NLRC [G.R. No.
119268, 23 February 2000])
The case of Pajarillo vs. SSS, invoked by the public respondent as
authority for the ruling that a "joint fishing venture" existed between private
respondent and petitioners is not applicable in the instant case. There is
neither light of control nor actual exercise of such right on the part of the
boat-owners in the Pajarillo case, where the Court found that the pilots
therein are not under the order of the boat-owners as regards their
employment; that they go out to sea not upon directions of the boat-owners,
but upon their own volition as to when, how long and where to go fishing; that
the boat-owners do not in any way control the crew-members with whom the

former have no relationship whatsoever; that they simply join every trip for
which the pilots allow them, without any reference to the owners of the
vessel; and that they only share in their own catch produced by their own
efforts.
The aforementioned circumstances obtaining in Pajarillo do not exist in
the instant case. The conduct of the fishing operations was undisputably
shown by the testimony of Alipio Ruga, the patron/pilot of 7/B Sandyman II,
to be under the control and supervision of private respondent's operations
manager. Matters dealing on the fixing of the schedule of the fishing trip and
the time to return to the fishing port were shown to be the prerogative of
private respondent. While performing the fishing operations, petitioners
received instructions via a single-side band radio from private respondent's
operations manager who called the patron/pilot in the morning. They are told
to report their activities, their position, and the number of tubes of fish-catch
in one day. Clearly thus, the conduct of the fishing operations was monitored
by private respondent thru the patron/pilot of 7/B Sandyman II who is
responsible for disseminating the instructions to the crew members. (Ruga
vs. NLRC [G.R. No. L-72654-61, 22 January 1990])
The business venture operated under Geminesse Enterprise did not
result in an employer-employee relationship between petitioners and private
respondent. While it is true that the receipt of a percentage of net profits
constitutes only prima facie evidence that the recipient is a partner in the
business, the evidence in the case at bar controverts an employer-employee
relationship between the parties. In the first place, private respondent had a
voice in management of the affairs of the sales force. Secondly, petitioner
Tocaos admissions militate against an employer-employee relationship. She
admitted that, like her who owned Geminesse Enterprise, private respondent
only received commissions and transportation and representation allowances
and not a fixed salary. If indeed petitioner Tocano was private respondents
employer, it is difficult to believe that they shall receive the same income in
the business. In a partnership, each partner must share in the profits and
losses of the venture, except that the industrial partner shall not be liable for
losses. As an industrial partner, private respondent had the right to demand
for a formal accounting of the business and to receive her share in the profit.
(Tocao vs. CA [G.R. No. 127405, 04 October 2000])
The barbershop claims it had no control over its barbers. The power to
control refers to the existence of the power and not necessarily to the actual
exercise thereof, nor is it essential for the employer to actually supervise the
2

performance of duties of the employee. It is enough that the employer has

the right to exercise the power. As to the control test, the following facts
indubitably reveal that the respondent company wielded control over the
work performance of petitioners; in that (1) they worked in the barber shop
owned and operated by the respondents; (2) that they were required to
report daily and observe definite hours of work; (3) they were not free to
accept other employment elsewhere but devoted their full time working at the
New Looks Barber Shop for all the fifteen (15) years they have worked until
April 15, 1995; (4) that some have worker with respondents since the early
1960s; (5) that petitioner Patricia Nas was instructed by the respondents to
watch the other six (6) petitioners in their daily task. Certainly, respondent
company was clothed with the power to dismiss any or all of them for just
and vald cause. Petitioners were unarguably performing work necessary and
desiriable in the business of respondent company. (Corporal vs. NLRC [G.R.
No. 129315, 02 October 2000])
Labor Only Contractor vis--vis an Independent Contractor
In LEGITIMATE JOB CONTRACTING, no employer-employee
relationship exists between the employees of the job contractor and the
principal employer. Even then, the principal employer becomes jointly and
severally liable with the job contractor for the payment of the employees'
wages whenever the contractor fails to pay the same. In such case, the law
creates an employer-employee relationship between the principal employer
and the job contractor's employees for a limited purpose, that is, to ensure
that the employees are paid their wages. Other than the payment of wages,
the principal employer is not responsible for any claim made by the
employees.
On the other hand, in LABOR-ONLY CONTRACTING, an employeremployee relationship is created by law between the principal employer and
the employees of the labor-only contractor. In this case, the labor-only
contractor is considered merely an agent of the principal employer. The
principal employer is responsible to the employees of the labor-only
contractor as if such employees had been directly employed by the principal
employer. The principal employer therefore becomes solidarily liable with the
labor-only contractor for all the rightful claims of the employees. (PCI
Automation vs. NLRC [GR No. 115920, 1996]
Basis of Liability
The distinction between Articles 106 and 107 was in the fact that Article
106 deals with "labor-only" contracting. Here, by operation of law, the

contractor is merely considered as an agent of the employer, who is deemed

"responsible to the workers to the same extent as if the latter were directly
employed by him." On the other hand, Article 107 deals with "job
contracting." In the latter situation, while the contractor himself is the direct
employer of the employees, the employer is deemed, by operation of law, as
an indirect employer.
In other words, the phrase "not an employer" found in Article 107 must be
read in conjunction with Article 106. A contrary interpretation would render
the provisions of Article 107 meaningless considering that everytime an
employer engages a contractor, the latter is always acting in the interest of
the former, whether directly or indirectly, in relation to his employees.
It should be recalled that a finding that a contractor is a "labor-only"
contractor is equivalent to declaring that there is an employer-employee
relationship between the owner of the project and the employees of the
"labor-only" contractor (Associated Anglo-American Tobacco Corp. v. Clave,
G.R. No. 50915, 30 August 1990, 189 SCRA 127; Industrial Timber Corp. v.
NLRC, G.R. No. 83616, 20 January 1989, 169 SCRA 341). This is evidently
because, as heretofore stated, the "labor-only" contractor is considered as a
mere agent of an employer. In contrast, in "job contracting," no employeremployee relationship exists between the owner and the employees of his
contractor. The owner of the project is not the direct employer but merely an
indirect employer, by operation of law, of his contractor's employees.
(Baguio vs. NLRC [G.R. No. 79004, 04 October 1991])
Requisites for allowable job contracting: (I ARM Free Capital)
1.
2.
3.
4.
5.
6.

INDEPENDENT business.
according to his own ACCOUNT.
Under his own RESPONSIBILITY.
According to his own METHOD of conducting business.
Free from the control of the principal except as to the result.
Sufficient Capital or investment in the form of tools, equipment,
materials, work premises (TEM Work).

More importantly, the petitioners, individually or collectively, did not have

substantial capital or investment in the form of tools, equipment, work
premises and other materials which is necessary in the conduct of the
business of the respondent company. What the petitioners owned were only
combs, scissors, razors, nail cutters, nail polishers, nippers nothing else.
3

By no standard can these be considered substantial capital necessary to

operate a barbershop. (Corporal vs. NLRC [G.R. No. 129315, 02 October
2000])
Substantial Capital or Investment The Neri and Fuji Xerox cases
[I]n the case of Neri vs. NLRC, we held that in order to be considered as
a job contractor it is enough that a contractor has substantial capital. In other
words, once substantial capital established it is no longer necessary for the
contractor to show evidence that it has investment in the form of tools,
equipment, machineries, work premises, among others. The rational for this
is that Article 106 of the Labor Code does not require that the contractor
possess both substantial capital and investment in the form of tools,
equipment, machineries, work premises, among others. The decision of the
Court in Neri, thus, states:
Respondent BCC need not prove that it made investments in the
form of tools, equipment, machineries, work premises, among others,
because it has established that it has sufficient capitalization. The
Labor Arbiter and the NLRC both determined that BCC had a capital
stock of P1 million fully subscribed and paid for. BCC is therefore a
highly capitalized venture and cannot be deemed engaged in "laboronly" contracting.
However, in declaring that Building Care Corporation ("BCC") was an
independent contractor, the Court considered not only the fact that it had
substantial capitalization. The Court noted that BCC carried on an
independent business and undertook the performance of its contract
according to its own manner and method, free from the control and
supervision of its principal in all matters except as to the results thereof. The
Court likewise mentioned that the employees of BCC were engaged to
perform specific special services for its principal. Thus, the Court ruled that
BCC was an independent contractor.
The Court further clarified the import of the Neri decision in the
subsequent case of Philippine Fuji Xerox Corporation vs. NLRC. In the said
case, petitioner Fuji Xerox implored the Court to apply the Neri doctrine to its
alleged job-contractor, Skillpower, Inc., and declare the same as an
independent contractor. Fuji Xerox alleged that Skillpower, Inc. was a highly
capitalized venture registered with the Securities and Exchange
Commission, the Department of Labor and Employment, and the Social
Security System with assets exceeding P5,000,000.00 possessing at least
29 typewriters, office equipment and service vehicles, and its own pool of

employees with 25 clerks assigned to its clients on a temporary basis.

Despite the evidence presented by Fuji Xerox the Court refused to apply the
Neri case and explained:
Petitioners cite the case of Neri v. NLRC, in which it was held that
the Building Care Corporation (BCC) was an independent contractor
on the basis of finding that it had substantial capital, although there
was no evidence that it had investments in the form of tools,
equipment, machineries and work premises. But the Court in that
case considered not only the capitalization of the BCC but also the
fact that BCC was providing specific special services (radio/telex
operator and janitor) to the employer; that in another case, the Court
had already found that BCC was an independent contractor; that
BCC retained control over the employees and the employer was
actually just concerned with the end-result; that BCC had the power
to reassign the employees and their deployment was not subject to
the approval of the employer; and that BCC was paid in lump sum for
the services it rendered. These features of that case make it
distinguishable from the present one.
(Vinoya vs. NLRC [G.R. No. 126586, 02 February 2000])
Liability of indirect employer for unpaid salaries/wages
The joint and several liability of the employer or principal was enacted to
ensure compliance with the provisions of the Code, principally those on
statutory minimum wage. The contractor or subcontractor is made liable by
virtue of his or her status as a direct employer, and the principal as the
indirect employer of the contractor's employees. This liability facilitates, if not
guarantees, payment of the workers' compensation, thus, giving the workers
ample protection as mandated by the 1987 Constitution. This is not unduly
burdensome to the employer. Should the indirect employer be constrained to
pay the workers, it can recover whatever amount it had paid in accordance
with the terms of the service contract between itself and the contractor.
Withal, fairness likewise dictates that the indirect employer should not,
however, be held liable for wage differentials incurred while the complainants
were assigned to other companies. Under these cited provisions of the Labor
Code, should the contractor fail to pay the wages of its employees in
accordance with law, the indirect employer, is jointly and severally liable with
the contractor, but such responsibility should be understood to be limited to
the extent of the work performed under the contract, in the same manner and
extent that he is liable to the employees directly employed by him. This
4

liability of petitioner covers the payment of the workers' performance of any

work, task, job or project. So long as the work, task, job or project has been
performed for indirect employer's benefit or on its behalf, the liability accrues
for such period even if, later on, the employees are eventually transferred or
reassigned elsewhere.
We repeat: The indirect employer's liability to the contractor's employees
extends only to the period during which they were working for the petitioner,
and the fact that they were reassigned to another principal necessarily ends
such responsibility. The principal is made liable to his indirect employees,
because it can protect itself from irresponsible contractors by withholding
such sums and paying them directly to the employees or by requiring a bond
from the contractor or subcontractor for this purpose.
(Rosewood Processing, Inc. vs. NLRC [G.R. Nos. 116476-84, 21 May 1998])
Liability of indirect employer for unpaid backwages and separation pay
Similarly, the solidary liability for payment of back wages and separation
pay is limited, under Article 106, "to the extent of the work performed under
the contract"; under Article 107, to "the performance of any work, task, job or
project"; and under Article 109, to "the extent of their civil liability under this
Chapter [on payment of wages]."
These provisions cannot apply to the indirect employer, considering that
the complainants were no longer working for or assigned to it when they
were illegally dismissed. Furthermore, an order to pay back wages and
separation pay is invested with a punitive character, such that an indirect
employer should not be made liable without a finding that it had committed or
conspired in the illegal dismissal.
The liability arising from an illegal dismissal is unlike an order to pay the
statutory minimum wage, because the workers' right to such wage is derived
from law. The proposition that payment of back wages and separation pay
should be covered by Article 109, which holds an indirect employer solidarily
responsible with his contractor or subcontractor for "any violation of any
provision of this Code," would have been tenable if there were proof there
was none in this case that the principal/employer had conspired with the
contractor in the acts giving rise to the illegal dismissal.
(Rosewood Processing, Inc. vs. NLRC [G.R. Nos. 116476-84, 21 May 1998])
Liability of indirect employer for statutory wage increases
[T]he liability of the petitioner to reimburse the respondent only arises if
and when contractor actually pays its employees the increases granted by

Wage Order Nos. 5 and 6. Payment, which means not only the delivery of
money but also the performance, in any other manner, of the obligation, is
the operative fact which will entitle either of the solidary debtors to seek
reimbursement for the share which corresponds to each of the debtors.
(Lapanday Agricultural Development Corp. vs. CA [G.R. No. 112139, 31
January 2000])
Jurisdiction of labor courts
[W]here the claim to the principal relief sought is to be resolved not by
reference to the Labor Code or other labor relations statute or a collective
bargaining agreement but by the general civil law, the jurisdiction over the
dispute belongs to the regular courts of justice and not to the Labor Arbiter
and the NLRC. In such situations, resolution of the dispute requires
expertise, not in labor management relations nor in wage structures and
other terms and conditions of employment, but rather in the application of the
general civil law. Clearly, such claims fall outside the area of competence or
expertise ordinarily ascribed to Labor Arbiters and the NLRC and the
rationale for granting jurisdiction over such claims to these agencies
disappears. (SMC vs. NLRC [G.R. No. 80774, 161 SCRA 719])
[P]etitioner seeks protection under the civil laws and claims no benefits
under the labor Code. The primary relief sought is for liquidated damages for
breach of a contractual obligation. The other items demanded are not labor
benefits demanded by workers generally taken cognizance of in labor
disputes, such as payment of wages, overtime compensation or separation
pay. The items claimed are the natural consequences flowing from breach of
an obligation, intrinsically a civil dispute. (Singapore Airlines vs. Pao [G.R.
No. 47739])
Petitioner filed the third-party claim before the court a quo by reason of a
writ of execution issued by the NLRC-CAR Sheriff against a property to
which it claims ownership. The writ was issued to enforce and execute the
commission's decision in NLRC Case No. 0165 (Illegal Dismissal and ULP)
against Green Mountain Farm, Roberto Ongpin and Almus Alabe.
Ostensibly the complaint before the trial court was for the recovery of
possession and injunction, but in essence it was an action challenging the
legality or propriety of the levy vis-a-vis the alias writ of execution, including
the acts performed by the Labor Arbiter and the Deputy Sheriff implementing
the writ. The complainant was in effect a motion to quash the writ of
5

execution of a decision rendered on a case properly within the jurisdiction of

the Labor Arbiter, to wit: Illegal Dismissal and ULP. Considering the factual
setting, it is then logical to conclude that the subject matter of the third party
claim is but an incident of the labor case, a matter beyond the jurisdiction of
regional trial courts.
Precedents abound confirming the rule that said courts have no labor
jurisdiction to act on labor cases or various incidents arising therefrom,
including the execution of decisions, awards or orders. Jurisdiction to try and
adjudicate such cases pertains exclusively to the proper labor official
concerned under the Department of Labor and Employment. To hold
otherwise is to sanction split jurisdiction which is obnoxious to the orderly
administration of justice.
Petitioner failed to realize that by filing its third-party claim with the
deputy sheriff, it submitted itself to the jurisdiction of the Commission acting
through the Labor Arbiter. It failed to perceive the fact that what it is really
controverting is the decision of the Labor arbiter and not the act of the deputy
sheriff in executing said order issued as a consequence of said decision
rendered.
Jurisdiction once acquired is not lost upon the instance of the parties but
continues until the case is terminated. Whatever irregularities attended the
issuance and execution of the alias writ of execution should be referred to
the same administrative tribunal which rendered the decision. This is
because any court which issued a writ of execution has the inherent power,
for the advancement of justice, to correct errors of its ministerial officers and
to control its own processes.
(Deltaventures Resources, Inc. vs. Cabato [G.R. No. 118216, 09 March
2000])
Labor Dispute
"Labor dispute" includes any controversy or matter concerning terms
or conditions of employment or the association or representation of
persons in negotiating, fixing, maintaining, changing or arranging the
terms and conditions of employment, regardless of whether the
disputants stand in the proximate relation of employer and employee.
[Article 212 (l) of the Labor Code]

While it is SMC's submission that no employer-employee relationship

exists between itself, on the one hand, and the contractual workers of
Lipercon and D'Rite on the other, a labor dispute can nevertheless exist
"regardless of whether the disputants stand in the proximate relationship of
employer and employee" (Article 212 [1], Labor Code, supra) provided the
controversy concerns, among others, the terms and conditions
of
employment or a "change" or "arrangement" thereof (ibid). Put differently,
and as defined by law, the existence of a labor dispute is not negative by the
fact that the plaintiffs and defendants do not stand in the proximate relation
of employer and employee.
That a labor dispute, as defined by the law, does exist herein is evident.
At bottom, what the Union seeks is to regularize the status of the employees
contracted by Lipercon and D'Rite in effect, that they be absorbed into the
working unit of SanMig. This matter definitely dwells on the working
relationship between said employees vis-a-vis SanMig. Terms, tenure and
conditions of their employment and the arrangement of those terms are thus
involved bringing the matter within the purview of a labor dispute. Further, the
Union also seeks to represent those workers, who have signed up for Union
membership, for the purpose of collective bargaining. SanMig, for its part,
resists that Union demand on the ground that there is no employer-employee
relationship between it and those workers and because the demand violates
the terms of their CBA. Obvious then is that representation and association,
for the purpose of negotiating the conditions of employment are also
involved. In fact, the injunction sought by SanMig was precisely also to
prevent such representation. Again, the matter of representation falls within
the scope of a labor dispute. Neither can it be denied that the controversy
below is directly connected with the labor dispute already taken cognizance
of by the NCMB-DOLE.
Whether or not the Union demands are valid; whether or not SanMig's
contracts with Lipercon and D'Rite constitute "labor-only" contracting and,
therefore, a regular employer-employee relationship may, in fact, be said to
exist; whether or not the Union can lawfully represent the workers of
Lipercon and D'Rite in their demands against SanMig in the light of the
existing CBA; whether or not the notice of strike was valid and the strike itself
legal when it was allegedly instigated to compel the employer to hire
strangers outside the working unit; those are issues the resolution of which
call for the application of labor laws, and SanMig's cause's of action in the
Court below are inextricably linked with those issues. (SMC Employee
Union-PTGWO vs. Hon. Bersamira [G.R. No. 87700, 1990])
6

MANAGEMENT PREROGATIVES
An owner of a business enterprise is given considerable leeway in
managing his business because it is deemed important to society as a whole
that he should succeed. Our law, therefore, recognizes certain rights as
inherent in the management of business enterprises. These rights are
collectively called management prerogatives or acts by which one directing a
business is able to control the variables thereof so as to enhance the
chances of making a profit. "Together, they may be taken as the freedom to
administer the affairs of a business enterprise such that the costs of running
it would be below the expected earnings or receipts. In short, the ELBOW
ROOM IN THE QUEST FOR PROFITS." (Chu vs. NLRC [G.R. No. 106107,
02 June 1994])
It is noteworthy to state that an employer is free to manage and regulate,
according to his own discretion and judgment, all phases of employment,
which includes hiring, work assignments, working methods, time, place and
manner of work, supervision of workers, working regulations, transfer of
employees, lay-off of workers, and the discipline, dismissal and recall of
work. While the law recognizes and safeguards this right of an employer to
exercise what are clearly management prerogatives, such right should not be
abused and used as a tool of oppression against labor. The company's
prerogatives must be EXERCISED IN GOOD FAITH and with due regard to
the rights of labor. A priori, they are not absolute prerogatives but are
SUBJECT TO LEGAL LIMITS, COLLECTIVE BARGAINING AGREEMENTS
and the GENERAL PRINCIPLES OF FAIR PLAY AND JUSTICE.
The power to dismiss an employee is a recognized prerogative that is
inherent in the employer's right to freely manage and regulate his business.
Corollarily, an employer cannot rationally be expected to retain the
employment of a person whose lack of morals, respect and loyalty to his
employer, regard for his employer's rules and appreciation of the dignity and
responsibility of his office, has so plainly and completely been bared. He may
not be compelled to continue to employ such person whose continuance in
the service will patently be inimical to his employer's interest. The right of the
company to dismiss an employee is a measure of self-protection. Such right,
however, is subject to regulation by the State, basically in the exercise of its
paramount police power. Thus, the dismissal of employees must be made

within the parameters of the law and pursuant to the basic tenets of equity,
justice and fairplay. It must not be done arbitrarily and without just cause.
(Philippine-Singapore Transit vs. NLRC [GR No. 95449, August 1997])
Reorganization
The free will of management to conduct its own business affairs to
achieve its purpose cannot be denied (Abbot Laboratories v. NLRC, G.R. No.
76959, October 12, 1987, 154 SCRA 713). Even as the law is solicitous of
the welfare of employees, it must also protect the right of an employer to
exercise what are clearly management prerogatives. Hence, management is
not precluded from undertaking a reorganization within the company or
entering into mergers with other companies to meet the demands of the
enterprise. In such cases, the company has the prerogative to abolish
managerial and confidential positions or create new ones as the necessity for
them requires. (Yap vs. Ichong [G.R. No. L-51314, 21 June 1990])
Obedience to Company Rules and Regulations
This Court fails to see, however, how these objections and accusations
justify the deliberate and obdurate refusal of the sales representatives to
obey the management's simple requirement for submission by all Premise
Sales Representatives (PSRs) of individual reports or memoranda requiring
reflecting target revenues which is all that GTE basically required and which
it addressed to the employees concerned no less than six (6) times. The
Court fails to see how the existence of objections made by the union justify
the studied disregard, or wilful disobedience by the sales representatives of
direct orders of their superior officers to submit reports. Surely, compliance
with their superiors' directives could not have foreclosed their demands for
the revocation or revision of the new sales policies or rules; there was
nothing to prevent them from submitting the requisite reports with the
reservation to seek such revocation or revision.
To sanction disregard or disobedience by employees of a rule or order
laid down by management, on the pleaded theory that the rule or order is
unreasonable, illegal, or otherwise irregular for one reason or another, would
be disastrous to the discipline and order that it is in the interest of both the
employer and his employees to preserve and maintain in the working
establishment and without which no meaningful operation and progress is
possible. Deliberate disregard or disobedience of rules, defiance of
management authority cannot be countenanced. This is not to say that the
employees have no remedy against rules or orders they regard as unjust or
illegal. They may object thereto, ask to negotiate thereon, bring proceedings
for redress against the employer before the Ministry of Labor. But until and
7

Unless the rules or orders are declared to be illegal or improper by

competent authority, the employees ignore or disobey them at their peril. It is
impermissible to reverse the process: suspend enforcement of the orders or
rules until their legality or propriety shall have been subject of negotiation,
conciliation, or arbitration. (GTE Directories vs. Sanchez [G.R. No. 76219, 27
May 1991])
Transfers
The situation here presented is of an employer transferring an employee
to another office in the exercise of what it took to be sound business
judgment and in accordance with pre-determined and established office
policy and practice, and of the latter having what was believed to be
legitimate reasons for declining that transfer, rooted in considerations of
personal convenience and difficulties for the family. Under these
circumstances, the solution proposed by the employee herself, of her
voluntary termination of her employment and the delivery to her of
corresponding separation pay, would appear to be the most equitable.
Certainly, the Court cannot accept the proposition that when an employee
opposes his employer's decision to transfer him to another work place, there
being no bad faith or underhanded motives on the part of either party, it is the
employee's wishes that should be made to prevail. In adopting that
proposition by way of resolving the controversy, the respondent NLRC
gravely abused its discretion. (PT & T vs. Laplana [G.R. No. 76645, 23 July
1991])
[T]he Court has recognized and upheld the prerogative of management
to transfer an employee from one office to another within the business
establishment provided that there is no demotion in rank or a diminution of
his salary, benefits and other privileges. This is a privilege inherent in the
employer's right to control and manage its enterprise effectively. Even as the
law is solicitous of the employees' welfare, it cannot ignore the right of the
employer to exercise what are clearly and obviously management
prerogatives. The freedom of management to conduct its business
operations to achieve its purpose cannot be denied.
But like all other rights, there are limits. The managerial prerogative to
transfer personnel must be exercised without grave abuse of discretion and
putting to mind the basic elements of justice and fair play. HAVING THE
RIGHT SHOULD NOT BE CONFUSED WITH THE MANNER IN WHICH
THAT RIGHT MUST BE EXERCISED. Thus it cannot be used as a
subterfuge by the employer to rid himself of an undesirable worker. Nor when

the real reason is to penalize an employee for his union activities and
thereby defeat his right to self-organization. But the transfer can be upheld
when there is no showing that it is unnecessary, inconvenient and prejudicial
to the displaced employee .
The reassignment of Halili and Magno to Manila is legally indefensible on
several grounds. Firstly, it was grossly inconvenient to private respondents.
They are working students. When they received the transfer memorandum
directing their relocation to Manila within seven days from notice, classes
had already started. The move from Tarlac to Manila at such time would
mean a disruption of their studies. Secondly, there appears to be no genuine
business urgency that necessitated their transfer. As well pointed out by
private respondents' counsel, the fabrication of aluminum handles for ice
boxes does not require special dexterity. Many workers could be contracted
right in Manila to perform that particular line of work. (Yuco Chemicals vs.
Minster of Labor [G.R. No. L-75656, 1991])
Waiver of Management Prerogatives Possible; CBA provision to the contrary
Section 2, Article II of the CBA expressly provides that:
Sec. 2. In the exercise of its functions of management, the
COMPANY shall have the sole and exclusive right and power, among
other things, to direct the operations and the working force of its
business in all respects; to be the sole judge in determining the
capacity or fitness of an employee for the position or job to which he
has been assigned; to schedule the hours of work, shifts and work
schedules; to require work to be done in excess of eight hours or
Sundays or holidays as the exigencies of the service may require; to
plan, schedule, direct, curtail and control factory operations and
schedules of production; to introduce and install new or improved
methods or facilities; to designate the work and the employees to
perform it; to select and hire new employees; to train new employees
and improve the skill and ability of employees from one job to another
or form one shift to another; to classify or reclassify employees; and to
make such changes in the duties of its employees as the COMPANY
may see fit or convenient for the proper conduct of its business.
Verily and wisely, management retained the prerogative, whenever
exigencies of the service so require, to change the working hours of its
employees. And as long as such prerogative is exercised in good faith for
the advancement of the employer's interest and not for the purpose of
defeating or circumventing the rights of the employees under special laws or

under valid agreements, this Court will uphold such exercise (Union Carbide
Labor Union vs. Union Carbide [215 SCRA 554])
Imposition of Penalty; A commensurate penalty for an offense
[W]hile Clarete may be guilty of violation of company rules, we find the
penalty of dismissal imposed upon him by respondent Caltex too harsh and
unreasonable. As enunciated in Radio Communications of the Philippines,
Inc. v. National Labor Relations Commission, supra, "such a penalty (of
dismissal) must be commensurate with the act, conduct or omission imputed
to the employee and imposed in connection with the employer's disciplinary
authority" (at p. 667). Even when there exist some rules agreed upon
between the employer and employee on the subject of dismissal, we have
ruled in Gelmart Industries Phils., Inc. v. National Labor Relations
Commission, 176 SCRA 295 (1989), that the same cannot preclude the
State from inquiring on whether its rigid application would work too harshly
on the employee. (Caltex Refinery vs. NLRC [ G.R. No. 102993, 14 July
1995])
Application of; With minor infractions, first violations and length of service.
Mary Johnston Hospital v. NLRC, where the employee had a heated
argument with the department head, the Court held that since the incident
was her first offense during her seventeen (17) years of employment the
penalty of termination was not commensurate with the act committed.
Manila Electric Company v. NLRC, where the employee was declared
guilty of breach of trust and violation of company rules the penalty of
dismissal was not meted to him considering his twenty (20) years of service
without any previous derogatory record and his two (2) commendations for
honesty from the company.
Dolores v. NLRC, where the employee absented herself without
permission from her superior, the Court ruled that the penalty of dismissal
was too severe considering her twenty-one (21) years of service with the
company and it appearing that it was her first offense.
Philippine Telegraph and Telephone Corporation v. NLRC, where the
employee was adjudged guilty of tampering a receipt, the Court ruled that
the imposition of the supreme penalty of dismissal would certainly be very
harsh and disproportionate to the infraction committed, especially after
noting that it was his first offense after seven (7) long years of satisfactory
service.

Radio Communications of the Philippines, Inc. v. NLRC, where the

employee was found guilty of misappropriating company funds and
withholding messages for transmission, the Court ruled that in view of the
employee's continuous service of ten (10) years with the company the
penalty of dismissal for the minor infractions would be unduly harsh and
grossly disproportionate.
Bonotan v. NLRC, where the employee shouted at the operations
manager, the Court ruled that since the employee has been with the
company for twenty-six (26) years and nowhere in the records did it appear
that she committed any previous violation of company rules and regulations,
dismissal from work would be too severe a penalty under the circumstances.
Tanduay Distillery Labor Union v. NLRC, where the employees were
found guilty of eating while at work, the Court ruled that inasmuch as they
had served the company without any record of violation or infraction of
company rules and regulations prior to the incident for periods ranging from
16 to 26 years, respectively, the dismissal meted out on them was too harsh
a penalty.
EMPLOYEE CLASSIFICATION AND/OR STATUS
Regular, Casual and Seasonal employees
Regular and casual employment. - The provisions of written
agreement to the contrary notwithstanding and regardless of the oral
agreements of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer except where the employment has been fixed for a specific
project or undertaking, the completion or termination of which has been
determined at the time of the engagement of the employee or where the
work or service to be performed is seasonal in nature and the
employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by
the preceding paragraph: Provided, That any employee who has
rendered at least one year of service, whether such service is continuous
or broken, shall be considered a regular employee with respect to the
activity in which he is employed and his employment shall continue while
such activity exists. (Article 280 of the Labor Code)
[A]n employment shall be deemed regular if the employee performs
activities usually necessary or desirable in the usual business and trade of
9

the employer OR if the employee has rendered at least one (1) year of
service, whether the service be continuous or broken. Ferrochrome Phils. vs.
NLRC, 236 SCRA 315 G.R. 105538 [5 September 1994]
The primary standard, therefore, of determining a regular employment is
the reasonable connection between the particular activity performed by the
employee in relation to the usual business or trade of the employer. THE
TEST IS WHETHER THE FORMER IS USUALLY NECESSARY OR
DESIRABLE IN THE USUAL BUSINESS OR TRADE OF THE EMPLOYER.
The connection can be determined by considering the nature of the work
performed and its relation to the scheme of the particular business or trade in
its entirety. ALSO, if the employee has been performing the job for at least
one year, even if the performance is not continuous or merely intermittent,
the law deems the repeated and continuing need for its performance as
sufficient evidence of the necessity if not indispensability of that activity to the
business. Hence, the employment is also considered regular, but ONLY
WITH RESPECT TO SUCH ACTIVITY AND WHILE SUCH ACTIVITY
EXISTS. (De Leon vs. NLRC [G.R. No. 70705, 21 August 1989])
[T]he second paragraph of Article 280 relates only to casual employees
and is not applicable to those who fall within the definition of said Article's
first paragraph, i.e., project employees. The familiar grammatical rule is that
a proviso is to be construed with reference to the immediately preceding part
of the provision to which it is attached, and not to other sections thereof,
unless the clear legislative intent is to restrict or qualify not only the phrase
immediately preceding the proviso but also earlier provisions of the statute or
even the statute itself as a whole. No such intent is observable in Article 280
of the Labor Code.
The second paragraph of Art. 280 demarcates as "casual" employees, all
other employees who do not fall under the definition of the preceding
paragraph. The proviso, in said second paragraph, deems as regular
employees those "casual" employees who have rendered at least one year
of service regardless of the fact that such service may be continuous or
broken. (Mercado, Sr. vs. NLRC [G.R. No. 79869, 05 September 1991])
In the case at bar, while it may appear that the work of the petitioner is
seasonal, inasmuch as petitioners have served the company for many years,
a number for over 20 years, performing services which are necessary and
indispensable to LUTORCOs business, serve as badges of regular
employment. Moreover, the fact that petitioners do not work continuously for

one whole year but only for the duration of the tobacco season does not
detract from considering them in regular employment since in a litany of
cases this Court has already settled that seasonal employees who are called
to work from time to time and are temporarily laid off during off-season are
not separated from service in said period, but merely considered on leave
until re-employed.
Private respondents reliance on the case of Mercado vs. NLRC is
misplaced considering that since in said case of Mercado, although
respondent company therein consistently availed of the services of the
petitioners therein from year to year, it was clear that petitioners therein were
not in respondent companys regular employ. Petitioners therein performed
different phases of agricultural work in a given year. However, during that
period, they were free to contract services to work for other farm owners, as
in fact they did. Thus, the Court ruled in that case that their employment
would naturally end upon completion of each project or phase of farm work
for which they have been contracted.
All the foregoing considered, the public respondent NLRC in the case at
bar erred in its total affirmance of the dismissal of the consolidated
complaint, for separation pay, against private respondents LUTORCO and
See Lin Chan considering that petitioners are regular seasonal employees
entitled to the benefits of Article 283 of the Labor Code which applies to
closure or cessation of an establishment or undertaking, whether it be a
complete or partial cessation of business operation. (Abasolo vs. NLRC
[G.R. No. 118475, 29 November 2000])
Probationary Employees
Probationary employment. - Probationary employment shall not exceed
six months from the date the employee started working, unless it is covered
by an apprenticeship agreement stipulating a longer period. The services of
an employee who has been engaged on a probationary basis may be
terminated for a just cause or when he fails to qualify as a regular employee
in accordance with reasonable standards made known by the employer to
the employee at the time of his engagement. An employee who is allowed to
work after a probationary period shall be considered a regular employee.
(Article 281 of the Labor Code)
[A] probationary employee, as understood under Article 282 of the Labor
Code, is one who is on trial by an employer during which the employer
10

determines whether or not he is qualified for permanent employment. A

probationary appointment is made to afford the employer an opportunity to
observe the fitness of a probationer while at work, and to ascertain whether
he will become a proper and efficient employee. The word
"PROBATIONARY", as used to describe the period of employment, IMPLIES
THE PURPOSE OF THE TERM OR PERIOD, BUT NOT ITS LENGTH.
Being in the nature of a "trial period" the essence of a probationary
period of employment fundamentally lies in the purpose or objective sought
to be attained by both the employer and the employee during said period.
The length of time is immaterial in determining the correlative rights of both
in dealing with each other during said period. While the employer, as stated
earlier, observes the fitness, propriety and efficiency of a probationer to
ascertain whether he is qualified for permanent employment, the probationer,
on the other, seeks to prove to the employer, that he has the qualifications to
meet the reasonable standards for permanent employment.
It is well settled that the employer has the right or is at liberty to choose
who will be hired and who will be denied employment. In that sense, it is
within the exercise of the right to select his employees that the employer may
set or fix a probationary period within which the latter may test and observe
the conduct of the former before hiring him permanently.
xxx

xxx

xxx

As the law now stands, Article 281 of the Labor Code gives ample
authority to the employer to terminate a probationary employee for a just
cause or when he fails to qualify as a regular employee in accordance with
reasonable standards made known by the employer to the employee at the
time of his engagement. There is nothing under Article 281 of the Labor
Code that would preclude the employer from extending a regular or a
permanent appointment to an employee once the employer finds that the
employee is qualified for regular employment even before the expiration of
the probationary period. Conversely, if the purpose sought by the employer is
neither attained nor attainable within the said period, Article 281 does not
likewise preclude the employer from terminating the probationary
employment on justifiable causes as in the instant case. (International
Catholic Migration vs. NLRC [G.R. 72222, 30 January 1989])
This is by no means to assert that the security of tenure protection of the
constitution does not apply to probationary employees. The Labor code has
wisely provided for such a case thus: "The termination of employment of
probationary employees and those employed with a fixed period shall be
subject to such regulations as the Secretary of Labor may prescribe to

prevent the circumvention of the right of the employees to be secured in their

employment as provided herein." There is no question here, as noted in the
assailed order of Presidential Executive Assistant Clave, that petitioners did
not enjoy a permanent status. During such period they could remain in their
positions and any circumvention of their of the rights, in accordance with the
statutory statutory scheme, subject to inquiry and therafter correction by the
Department of Labor. Thus there was the safeguard as to the duration of
their employment being respected. To that extent, their tenure was secure.
The moment, however, the period expired in accordance with contracts freely
entered into, they could no longer invoke the constitutional protection.
(Biboso vs. Victorias Milling [G.R. No. L-44360, 31 March 1977])
[T]he extension of Dequila's probation was ex gratia, an act of liberality
on the part of his employer affording him a second chance to make good
after having initially failed to prove his worth as an employee. Such an act
cannot now unjustly be turned against said employer's account to compel it
to keep on its payroll one who could not perform according to its work
standards. The law, surely, was never meant to produce such an inequitable
result.
By voluntarily agreeing (the extension was with Dequila's written consent)
to an extension of the probationary period, Dequila in effect waived any
benefit attaching to the completion of said period if he still failed to make the
grade during the period of extension. The Court finds nothing in the law
which by any fair interpretation prohibits such a waiver. And no public policy
protecting the employee and the security of his tenure is served by
prescribing voluntary agreements which, by reasonably extending the period
of probation, actually improve and further a probationary employee's
prospects of demonstrating his fitness for regular employment. (Mariwasa vs.
Leodegario [G.R. No. 74246, 26 January 1989])
Generally, the probationary period of employment is limited to six (6)
months. The exception to this general rule is when the parties to an
employment contract may agree otherwise, such as when the same is
established by company policy or when the same is required by the nature of
work to be performed by the employee. In the latter case, there is recognition
of the exercise of managerial prerogatives in requiring a longer period of
probationary employment, such as in the present case where the
probationary period was set for eighteen (18) months, i.e. from May 1980 to
October 1981, especially where the employee must learn a particular kind of

11

work such as selling, or when the job requires certain qualifications, skills,
experience or training.
Policy Instruction No. 11 of the Minister of Labor and Employment has
clarified any and all doubts on the period of probationary employment. It
states as follows:
Probationary
Employment
has
been
the
subject
of
misunderstanding in some quarter. Some people believe six (6)
months is the probationary period in all cases. On the other hand
employs who have already served the probationary period are
sometimes required to serve again on probation.
Under the Labor Code, six (6) months is the general probationary
period but the probationary period is actually the period needed to
determine fitness for the job. This period, for lack of a better
measurement is deemed to be the period needed to learn the job.
The purpose of this policy is to protect the worker at the same time
enable the employer to make a meaningful employee selection. This
purpose should be kept in mind in enforcing this provision of the Code.
This issuance shall take effect immediately.
In the case at bar, it is shown that private respondent Company needs at
least eighteen (18) months to determine the character and selling capabilities
of the petitioners as sales representatives. The Company is engaged in
advertisement and publication in the Yellow Pages of the PLDT Telephone
Directories. Publication of solicited ads are only made a year after the sale
has been made and only then win the company be able to evaluate the
efficiency, conduct, and selling ability of its sales representatives, the
evaluation being based on the published ads. Moreover, an eighteen month
probationary period is recognized by the Labor Union in the private
respondent company, which is Article V of the Collective Bargaining
Agreement,...
xxx

xxx

xxx

And as indicated earlier, the very contracts of employment signed and

acquiesced to by the petitioners specifically indicate that "the company
hereby employs the employee as telephone sales representative on a
probationary status for a period of eighteen (18) months, i.e. from May 1980
to October 1981, inclusive. This stipulation is not contrary to law, morals and
public policy. (Ver Buiser vs. GTE Directories [G.R. No. L-63316, 1984])
Managerial employees and supervisory employees

"Managerial employee" is one who is vested with powers or

prerogatives to lay down and execute management policies and/or to hire,
transfer, suspend, lay-off, recall, discharge, assign or discipline employees.
Supervisory employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the exercise of such
authority is not merely routinary or clerical in nature but requires the use of
independent judgment. All employees not falling within any of the above
definitions are considered rank-and-file employees for purposes of this
Book. [Article 212 (m), of the Labor Code]
The grave abuse of discretion committed by public respondent is at
once apparent. Art. 212, par. (m), of the Labor Code is explicit. A managerial
employee is (a) one who is vested with powers or prerogatives to lay down
and execute management policies, or to hire, transfer, suspend, lay off,
recall, discharge, assign or discipline employees; or (b) one who is vested
with both powers or prerogatives. A supervisory employee is different from a
managerial employee in the sense that the supervisory employee, in the
interest of the employer, effectively recommends such managerial actions, if
the exercise of such managerial authority is not routinary in nature but
requires the use of independent judgment.
Ranged against these definitions and after a thorough examination of
the evidence submitted by both parties, we arrive at a contrary conclusion.
Branch Managers, Cashiers and Controllers of respondent Bank are not
managerial employees but supervisory employees. The finding of public
respondent that bank policies are laid down and/or executed through the
collective action of these employees is simply erroneous. His discussion on
the division of their duties and responsibilities does not logically lead to the
conclusion that they are managerial employees, as the term is defined in
Art. 212, par. (m). (NATU-RPB vs. Torres (G.R. No. 93468, 20 December
1994])
[A] thorough dissection of the job description of the concerned
supervisory employees and section heads show that they are not actually
managerial but only supervisory employees since they do not lay down
company policies. PICOPs contention that the subject section heads and
unit managers exercise the authority to hire and fire is ambiguous and quite
misleading for the reason that any authority they my exercise is not
supreme but merely advisory in character. Theirs is not a final determination
of the company policies inasmuch as any action taken by them on matters
relating to hiring, promotion, transfer, suspension and termination of
12

employees is still subject to confirmation and approval of their respective

superior. Thus, where such power, which is in effect recommendatory in
character, is subject to evaluation, review and final action by the department
heads and other higher executives of the company, the same, although
present, is not effective and not an exercise of independent judgment as
required by law. (PICOP vs. Laguesma [G.R. No. 101738, 12 April 2000])
FIRST-LINE MANAGERS The lowest level in an organization at which
individuals are responsible for the work of others is called first-line or firstlevel management. First-line managers direct operating employees only;
they do not supervise other managers. Examples of first-line managers are
the "foreman" or production supervisor in a manufacturing plant, the
technical supervisor in a research department, and the clerical supervisor in
a large office. First-level managers are often called supervisors.
MIDDLE MANAGERS The term middle management can refer to more
than one level in an organization. Middle managers direct the activities of
other managers and sometimes also those of operating employees. Middle
managers' principal responsibilities are to direct the activities that implement
their organizations' policies and to balance the demands of their superiors
with the capacities of their subordinates. A plant manager in an electronics
firm is an example of a middle manager.
TOP MANAGERS Composed of a comparatively small group of
executives, top management is responsible for the overall management of
the organization. It establishes operating policies and guides the
organization's interactions with its environment. Typical titles of top
managers are "chief executive officer," "president," and "senior vicepresident." Actual titles vary from one organization to another and are not
always a reliable guide to membership in the highest management
classification.
As can be seen from this description, a distinction exists between those
who have the authority to devise, implement and control strategic and
operational policies (top and middle managers) and those whose task is
simply to ensure that such policies are carried out by the rank-and-file
employees of an organization (first-level managers/supervisors). What
distinguishes them from the rank-and-file employees is that they act in the
interest of the employer in supervising such rank-and-file employees.
"Managerial employees" may therefore be said to fall into two distinct
categories: the "managers" per se, who compose the former group described
above, and the "supervisors" who form the latter group. Whether they belong

to the first or the second category, managers, vis-a-vis employers, are,

likewise, employees.
xxx

xxx

xxx

Earlier in this opinion, reference was made to the distinction between

managers per se (top managers and middle managers) and supervisors
(first-line managers). That distinction is evident in the work of the route
managers which sets them apart from supervisors in general. Unlike
supervisors who basically merely direct operating employees in line with set
tasks assigned to them, route managers are responsible for the success of
the company's main line of business through management of their respective
sales teams. Such management necessarily involves the planning, direction,
operation and evaluation of their individual teams and areas which the work
of supervisors does not entail.
(United Pepsi Cola Supervisory Union vs. Laguesma [288 SCRA 15,
1998])
[A] thorough dissection of the job description of the concerned
supervisory employees and section heads indisputably show that they are
not actually managerial but supervisory employees since they do not lay
down company policies. PICOPs contention that the subject section heads
and unit managers exercise the authority to hire and fire is ambiguous and
misleading for the reason that any authority they exercise is not supreme but
merely advisory in character. Theirs is not a final determination of the
company policies inasmuch as any action taken by them on matters relative
to hiring, promotion, transfer, suspension and termination of employees is
still subject to the confirmation and approval by their respective supervisor.
Thus, where power, which is in effect recommendatory in character, is
subject to evaluation, review and final action by department heads and other
higher executives of the company, the same, although present, is not
effective and not an exercise of independent judgment as required by law.
(PICOP vs. Laguesma [G.R. No. 101738, 12 April 2000])
Term employment
The question immediately provoked by a reading of Article 319 is whether
or not a voluntary agreement on a fixed term or period would be valid where
the employee "has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer." The
definition seems a non sequitur. From the premise that the duties of an
employee entail "activities which are usually necessary or desirable in the
usual business or trade of the employer the" conclusion does not necessarily
13

follow that the employer and employee should be forbidden to stipulate any
period of time for the performance of those activities. There is nothing
essentially contradictory between a definite period of an employment
contract and the nature of the employee's duties set down in that contract as
being "usually necessary or desirable in the usual business or trade of the
employer." The concept of the employee's duties as being "usually necessary
or desirable in the usual business or trade of the employer" is not
synonymous with or identical to employment with a fixed term. Logically, THE
DECISIVE DETERMINANT IN TERM EMPLOYMENT SHOULD NOT BE
THE ACTIVITIES THAT THE EMPLOYEE IS CALLED UPON TO
PERFORM, BUT THE DAY CERTAIN AGREED UPON BY THE PARTIES
FOR THE COMMENCEMENT AND TERMINATION OF THEIR
EMPLOYMENT RELATIONSHIP, A DAY CERTAIN BEING UNDERSTOOD
TO BE "THAT WHICH MUST NECESSARILY COME, ALTHOUGH IT MAY
NOT BE KNOWN WHEN." Seasonal employment, and employment for a
particular project are merely instances employment in which a period, where
not expressly set down, necessarily implied.
xxx

xxx

xxx

There can of course be no quarrel with the proposition that where from
the circumstances it is apparent that periods have been imposed to preclude
acquisition of tenurial security by the employee, they should be struck down
or disregarded as contrary to public policy, morals, etc. But where no such
intent to circumvent the law is shown, or stated otherwise, where the reason
for the law does not exist, e.g., where it is indeed the employee himself who
insists upon a period or where the nature of the engagement is such that,
without being seasonal or for a specific project, a definite date of termination
is a sine qua non, would an agreement fixing a period be essentially evil or
illicit, therefore anathema? Would such an agreement come within the scope
of Article 280 which admittedly was enacted "to prevent the circumvention of
the right of the employee to be secured in . . . (his) employment?"
As it is evident from even only the three examples already given that
Article 280 of the Labor Code, under a narrow and literal interpretation, not
only fails to exhaust the gamut of employment contracts to which the lack of
a fixed period would be an anomaly, but would also appear to restrict, without
reasonable distinctions, the right of an employee to freely stipulate with his
employer the duration of his engagement, it logically follows that such a
literal interpretation should be eschewed or avoided. The law must be given
a reasonable interpretation, to preclude absurdity in its application. Outlawing
the whole concept of term employment and subverting to boot the principle
of freedom of contract to remedy the evil of employer's using it as a means to

prevent their employees from obtaining security of tenure is like cutting off
the nose to spite the face or, more relevantly, curing a headache by lopping
off the head.
xxx

xxx

xxx

Accordingly, and since the entire purpose behind the development of

legislation culminating in the present Article 280 of the Labor Code clearly
appears to have been, as already observed, to prevent circumvention of the
employee's right to be secure in his tenure, the clause in said article
indiscriminately and completely ruling out all written or oral agreements
conflicting with the concept of regular employment as defined therein should
be construed to refer to the substantive evil that the Code itself has singled
out: agreements entered into precisely to circumvent security of tenure. It
should have no application to instances where a fixed period of employment
was agreed upon knowingly and voluntarily by the parties, without any force,
duress or improper pressure being brought to bear upon the employee and
absent any other circumstances vitiating his consent, or where it satisfactorily
appears that the employer and employee dealt with each other on more or
less equal terms with no moral dominance whatever being exercised by the
former over the latter. Unless thus limited in its purview, the law would be
made to apply to purposes other than those explicitly stated by its framers; it
thus becomes pointless and arbitrary, unjust in its effects and apt to lead to
absurd and unintended consequences. (Brent School vs. Zamora (G.R. No.
L-48494, 05 February 1990])
The private respondent's intention is obvious. It is remarkable that neither
the NLRC nor the Solicitor General recognized it. There is no question that
the purpose behind these individual contracts was to evade the application of
the labor laws by making it appear that the drivers of the trucking company
were not its regular employees.
Under these arrangements, the private respondent hoped to be able to
terminate the services of the drivers without the inhibitions of the Labor
Code. All it had to do was refuse to renew the agreements, which,
significantly, were uniformly limited to a six-month period. No cause had to
be established because such renewal was subject to the discretion of the
parties. In fact, the private respondent did not even have to wait for the
expiration of the contract as it was there provided that it could be "earlier
terminated at the option of either party."
By this clever scheme, the private respondent could also prevent the
drivers from becoming regular employees and thus be entitled to security of
tenure and other benefits, such as a minimum wage, cost-of-living
14

allowances, vacation and sick leaves, holiday pay, and other statutory
requirements. The private respondent argues that there was nothing wrong
with the affidavit because all the affiant acknowledged therein was full
payment of the amount due him under the agreement. Viewed in this light,
such acknowledgment was indeed not necessary at all because this was
already embodied in the vouchers signed by the payee-driver. But the
affidavit, for all its seeming innocuousness, imported more than that. What
was insidious about the document was the waiver the affiant was unwarily
making of the statutory rights due him as an employee of the trucking
company.
xxx

xxx

xxx

The Court looks with stern disapproval at the contract entered into by the
private respondent with the petitioner (and who knows with how many other
drivers). The agreement was a clear attempt to exploit the unwitting
employee and deprive him of the protection of the Labor Code by making it
appear that the stipulations of the parties were governed by the Civil Code as
in ordinary private transactions. They were not, to be sure. The agreement
was in reality a contract of employment into which were read the provisions
of the Labor Code and the social justice policy mandated by the Constitution.
It was a deceitful agreement cloaked in the habiliments of legality to conceal
the selfish desire of the employer to reap undeserved profits at the expense
of its employees. The fact that the drivers are on the whole practically
unlettered only makes the imposition more censurable and the avarice more
execrable.
(Cielo vs. NLRC [G.R. No. 78693, 28 January 1991])
[T]he two guidelines, by which fixed contracts of employments can be said
NOT to circumvent security of tenure, are either:
1. The fixed period of employment was KNOWINGLY AND
VOLUNTARILY AGREED UPON by the parties, without any force,
duress or improper pressure being brought to bear upon the
employee and absent any other circumstances vitiating his consent;
or:
2. It satisfactorily appears that the employer and employee DEALT
WITH EACH OTHER ON MORE OR LESS EQUAL TERMS with no
moral dominance whatever being exercised by the former on the
latter.
(PNOC vs. NLRC [G.R. No. 97747, 31 March 1993])

It is apparent from Brent School that the critical consideration is the

presence or absence of a substantial indication that the period specified in
an employment agreement was designed to circumvent the security of tenure
of regular employees which is provided for in Articles 280 and 281 of the
Labor Code. This indication must ordinarily rest upon some aspect of the
agreement other than the mere specification of a fixed term of the
ernployment agreement, or upon evidence aliunde of the intent to evade.
Examining the provisions of paragraphs 5 and 6 of the employment
agreement between petitioner PIA and private respondents, we consider that
those provisions must be read together and when so read, the fixed period of
three (3) years specified in paragraph 5 will be seen to have been effectively
neutralized by the provisions of paragraph 6 of that agreement. Paragraph 6
in effect took back from the employee the fixed three (3)-year period
ostensibly granted by paragraph 5 by rendering such period in effect a
facultative one at the option of the employer PIA. For petitioner PIA claims to
be authorized to shorten that term, at any time and for any cause satisfactory
to itself, to a one-month period, or even less by simply paying the employee
a month's salary. Because the net effect of paragraphs 5 and 6 of the
agreement here involved is to render the employment of private respondents
Farrales and Mamasig basically employment at the pleasure of petitioner
PIA, the Court considers that paragraphs 5 and 6 were intended to prevent
any security of tenure from accruing in favor of private respondents even
during the limited period of three (3) years, and thus to escape completely
the thrust of Articles 280 and 281 of the Labor Code. (Pakistan Air Lines vs.
Ople [G.R. No. 61594, 28 September 1990])
Project employees
[W]here the employment has been fixed for a specific project or
undertaking, the completion or termination of which has been
determined at the time of the engagement of the employee or where
the work or service to be performed is seasonal in nature and the
employment is for the duration of the season. (1st paragraph of Article
280 of the Labor Code)
A project employee has been defined to be one whose employment has
been fixed for a specific project or undertaking, the completion or termination
of which has been determined at the time of the engagement of the

15

employee, . . . . (Mercado, Sr. vs. NLRC [G.R. No. 79869, 05 September

1991])
In the realm of business and industry, we note that "project" could refer to
one or the other of at least two (2) distinguishable types of activities.
FIRSTLY, a project could refer to a particular job or undertaking that is
WITHIN THE REGULAR OR USUAL BUSINESS OF THE EMPLOYER
company, but which is distinct and separate, and identifiable as such, from
the other undertakings of the company. Such job or undertaking begins and
ends at determined or determinable times. The typical example of this first
type of project is a particular construction job or project of a construction
company. A construction company ordinarily carries out two or more discrete
identifiable construction projects: e.g., a twenty-five-storey hotel in Makati; a
residential condominium building in Baguio City; and a domestic air terminal
in Iloilo City. Employees who are hired for the carrying out of one of these
separate projects, the scope and duration of which has been determined and
made known to the employees at the time of employment, are properly
treated as "project employees," and their services may be lawfully terminated
at completion of the project.
The term "project" could also refer to, SECONDLY, a particular job or
undertaking that is NOT WITHIN THE REGULAR BUSINESS OF THE
CORPORATION. Such a job or undertaking must also be identifiably
separate and distinct from the ordinary or regular business operations of the
employer. The job or undertaking also begins and ends at determined or
determinable times. The case at bar presents what appears to our mind as a
typical example of this kind of "project." (ALU-TUCP vs. NLRC [G.R. No.
109902, 02 August 1994])
As an electrical contractor, the private respondent depends for its
business on the contracts it is able to obtain from real estate developers and
builders of buildings. Since its work depends on the availability of such
contracts or "projects," necessarily the duration of the employment of its work
force is not permanent but co-terminus with the projects to which they are
assigned and from whose payrolls they are paid. It would be extremely
burdensome for their employer who, like them, depends on the availability of
projects, if it would have to carry them as permanent employees and pay
them wages even if there are no projects for them to work on. We hold,
therefore, that the NLRC did not abuse its discretion in finding, based on
substantial evidence in the records, that the petitioners are only project

workers of the private respondent. (Cartagenas vs. Romago Electric [G.R. No.
82973, 1989])
[P]etitioner relies on Policy Instruction No. 20 which was issued by then
Secretary Ople to stabilize employer-employee relations in the construction
industry to support his contention that workers in the construction industry
may now be considered regular employees after their long years of service
with private respondent. The pertinent provision of Policy Instruction No. 20
reads:
Members of a work pool from which a construction company draws
its project employees, if considered employees of the construction
company while in the work pool, are non-project employees or
employees for an indefinite period. If they are employed in a particular
project, the completion of the project or of any phase thereof will not
mean severance of employer-employee relationship.
Respondent Commission correctly observed in its decision that
complainants, one of whom petitioner, failed to consider the requirement in
Policy Instruction No. 20 that to qualify as member of a work pool, the worker
must still be considered an employee of the construction company while in
the work pool. In other words, there must be proof to the effect that petitioner
was under an obligation to be always available on call of private respondent
and that he was not free to offer his services to other employees.
Unfortunately, petitioner miserably failed to introduce any evidence of such
nature during the times when there were no project. (Fernandez vs. NLRC
[G.R. No. 106090, 28 February 1994])
Confidential Employees
Confidential employees are those who (1) ASSIST OR ACT IN A
CONFIDENTIAL CAPACITY, in regard (2) TO PERSONS WHO
FORMULATE, DETERMINE, AND EFFECTUATE MANAGEMENT
POLICIES [specifically in the field of LABOR RELATIONS]. The two criteria
are cumulative, and both must be met if an employee is to be considered a
confidential employee that is, the confidential relationship must exist between
the employee and his superior officer; and that officer must handle the
prescribed responsibilities relating to labor relations. (Sugbuanon Rural
Bank, Inc. vs. Laguesma [G.R. No. 116194, 02 February 2000])
Granting arguendo that an employee has access to confidential labor
relations information but such is merely incidental to his duties and
16

knowledge thereof is not necessary in the performance of such duties, said

access does not render the employee a confidential employee. If access to
confidential labor relations information is to be a factor in the determination
of an employee's confidential status, such information must relate to the
employer's labor relations policies. Thus, an employee of a labor union, or of
a management association, must have access to confidential labor relations
information with respect to his employer, the union, or the association, to be
regarded a confidential employee, and knowledge of labor relations
information pertaining to the companies with which the union deals, or which
the association represents, will not cause an employee to be excluded from
the bargaining unit representing employees of the union or association."
"Access to information which is regarded by the employer to be confidential
from the business standpoint, such as financial information or technical trade
secrets, will not render an employee a confidential employee. (SMC vs.
Laguesma [G.R. No. 110399, 15 August 1997])
Teachers
The acquisition of security of tenure by the teacher in the manner
indicated signifies that he shall thenceforth have the right to remain in
employment as such teacher until he reaches the compulsory retirement age
in accordance with the rules of the school or the law. That tenure, once
acquired, cannot be adversely affected or defeated by requiring the teacher
to execute contracts stipulating the termination of his employment upon the
expiration of a fixed period or term. Contracts of that sort are anathema and
will be struck down as null and void.
Now, a teacher may also be appointed as a department head or
administrative officer of the school, e.g., as member of the school's
governing council, as college dean or assistant dean, as high school's
principal, as college secretary. Except in the case of a clear and explicit
agreement to the contrary, the acceptance by a teacher of an administrative
position offered to him or to which he might have aspired, does not operate
as a relinquishment or loss by him of his security of tenure as a faculty
member; he retains his tenure as a teacher during all the time that he
occupies the additional position of department head or administrative officer
of the school. Indeed, the agreement between him and the school may very
well include a provision for him to continue teaching even on a part-time
basis.
xxx

xxx

xxx

A distinction should thus be drawn between the teaching staff of private

educational institutions, on one hand
teachers, assistant instructors,

assistant professors, associate professors, full professors and department or

administrative heads or officials on the other college or department
secretaries, principals, directors, assistant deans, deans. The teaching staff,
the faculty members, may and should acquire tenure in accordance with the
rules and regulations of the DECS and the school's own rules and standards.
On the other hand, teachers appointed to serve as administrative officials do
not normally and should not expect to, acquire a second or additional tenure.
The acquisition of such an additional tenure is not normal, is the exception
rather than the rule, and should therefore be clearly and specifically provided
by law or contract.
(La Salette of Santiago, Inc. vs. NLRC [195 SCRA 80, 1991])
RIGHT TO SELF-ORGANIZATION
As to Government Employees and Employees of GOCCs with original charters
EXECUTIVE ORDER NO. 180
(Effective: 01 June 1987)
PROVIDING GUIDELINES FOR THE EXERCISE OF THE RIGHT TO
RGANIZE OF GOVERNMENT EMPLOYEES, CREATING A PUBLIC
SECTOR LABOR- MANAGEMENT COUNCIL, AND FOR OTHER
PURPOSES
The scope of the constitutional right to self-organization of "government
employees" above mentioned, was defined and delineated in Executive
Order No. 180. According to this Executive Order, the right of selforganization does indeed pertain to all "employees of all branches,
subdivisions, instrumentalities and agencies of the Government, including
government-owned or controlled corporations with original charters;" such
employees "shall not be discriminated against in respect of their employment
by reason of their membership in employees' organizations or participation in
the normal activities of their organization x x (and their) employment shall not
be subject to the condition that they shall not join or shall relinquish their
membership in the employees' organizations.
However, the concept of the government employees' right of selforganization differs significantly from that of employees in the private sector.
The latter's right of self-organization, i.e., "to form, join or assist labor
organizations for purposes of collective bargaining," admittedly includes the
right to deal and negotiate with their respective employers in order to fix the
terms and conditions of employment and also, to engage in concerted
17

activities for the attainment of their objectives, such as strikes, picketing,

boycotts. But the right of GOVERNMENT EMPLOYEES to "form, join or
assist employees organizations of their own choosing" under Executive
Order No. 180 is not regarded as existing or available for "purposes of
collective bargaining," but simply "FOR THE FURTHERANCE AND
PROTECTION OF THEIR INTERESTS."
In other words, the right of Government employees to deal and negotiate
with their respective employers is not quite as extensive as that of private
employees. Excluded from negotiation by government employees are the
"terms and conditions of employment ... that are fixed by law," it being only
those terms and conditions not otherwise fixed by law that "may be subject of
negotiation between the duly recognized employees' organizations and
appropriate government authorities," And while EO No. 180 concedes to
government employees, like their counterparts in the private sector, the right
to engage in concerted activities, including the right to strike, the executive
order is quick to add that those activities must be exercised in accordance
with law, i.e. are subject both to "Civil Service Law and rules" and "any
legislation that may be enacted by Congress," that "the resolution of
complaints, grievances and cases involving government employees" is not
ordinarily left to collective bargaining or other related concerted activities, but
to "Civil Service Law and labor laws and procedures whenever applicable;"
and that in case "any dispute remains unresolved after exhausting all
available remedies under existing laws and procedures, the parties may
jointly refer the dispute to the (Public Sector Labor-Management) Council for
appropriate action." What is more, the Rules and Regulations implementing
Executive Order No. 180 explicitly provide that since the "terms and
conditions of employment in the government, including any political
subdivision or instrumentality thereof and government-owned and controlled
corporations with original charters are governed by law, the employees
therein shall not strike for the purpose of securing changes thereof.
On the matter of limitations on membership in labor unions of
government employees, Executive Order No. 180 declares that "high level
employees whose functions are normally considered as policy making or
managerial, or whose duties are of a highly confidential nature shall not be
eligible to join the organization of rank-and-file government employees. A
"high level employee" is one "whose functions are normally considered policy
determining, managerial or one whose duties are highly confidential in
nature. A managerial function refers to the exercise of powers such as: 1. To
effectively recommend such managerial actions; 2. To formulate or execute

management policies and decisions; or 3. To hire, transfer, suspend, lay off,

recall, dismiss, assign or discipline employees.
(Arizala vs. CA [G.R. Nos. 43633-34, 14 September 1990])
I.

COVERAGE

Section 1.
This Executive Order applies to all employees of all branches,
subdivisions, instrumentalities, and agencies, of the Government, including
government-owned or controlled corporations with original charters. For this
purpose, employees, covered by this Executive Order shall be referred to as
"government employees".
Section 2.
All government employees can form, join or assist employees'
organizations of their own choosing for the furtherance and protection of their
interests. They can also form, in conjunction with appropriate government
authorities, labor-management committees, works councils and other forms of
workers' participation schemes to achieve the same objectives.
Section 3.
High-level employees whose functions are normally considered as
policy-making or managerial or whose duties are of a highly confidential nature shall
not be eligible to join the organization of rank-and-file government employees.
Section 4.
The Executive Order shall not apply to the members of the Armed
Forces of the Philippines, including police officers, policemen, firemen and jail
guards.
II.

PROTECTION OF THE RIGHT TO ORGANIZE

Section 5.
Government employees shall not be discriminated against in respect
of their employment by reason of their membership in employees' organizations or
participation in the normal activities of their organization. Their employment shall not
be subject to the condition that they shall not join or shall relinquish their
membership in the employees' organizations.
Section 6.
Government authorities shall not interfere in the establishment,
functioning or administration of government employees' organizations through acts
designed to place such organizations under the control of government authority.
III. REGISTRATION OF EMPLOYEES' ORGANIZATION
Section 7.
Government employees' organizations shall register with the Civil
Service Commission and the Department of Labor and Employment. The application
shall be filed with the Bureau of Labor Relations of the Department which shall
18

process the same in accordance with the provisions of the Labor Code of the
Philippines, as amended. Applications may also be filed with the Regional Offices of
the Department of Labor and Employment which shall immediately transmit the said
applications to the Bureau of Labor Relations within three (3) days from receipt
thereof.
Section 8.
Upon approval of the application, a registration certificate be issued
to the organization recognizing it as a legitimate employees' organization with the
right to represent its members and undertake activities to further and defend its
interest. The corresponding certificates of registration shall be jointly approved by
the Chairman of the Civil Service Commission and Secretary of Labor and
Employment.
IV. SOLE AND EXCLUSIVE EMPLOYEES' REPRESENTATIVES
Section 9.
The appropriate organizational unit shall be the employers unit
consisting of rank-and-file employees unless circumstances otherwise require.
Section 10.
The duly registered employees' organization having the support of
the majority of the employees in the appropriate organizational unit shall be
designated as the sole and exclusive representative of the employees.
Section 11.
A duly registered employees' organization shall be accorded
voluntary recognition upon a showing that no other employees' organization is
registered or is seeking registration, based on records of the Bureau of Labor
Relations, and that the said organizations has the majority support of the rank-andfile employees in the organizational unit.
Section 12.
Where there are two or more duly registered employees'
organizations in the appropriate organizational unit, the Bureau of Labor Relations
shall, upon petition, order the conduct of a certification election and shall certify the
winner as the exclusive representative of the rank-and-file employees in said
organization unit.
V.

TERMS AND CONDITIONS OF EMPLOYMENT IN GOVERNMENT SERVICES

Section 13.
Terms and conditions of employment or improvements thereof,
except those that are fixed by law, may be the subject of negotiations between duly
recognized employees' organizations and appropriate government authorities.
Government employees. - The terms and conditions of employment of all
government employees, including employees of government-owned and

controlled corporations, shall be governed by the Civil Service Law, rules

and regulations. Their salaries shall be standardized by the National
Assembly as provided for in the new constitution. However, there shall be no
reduction of existing wages, benefits and other terms and conditions of
employment being enjoyed by them at the time of the adoption of this Code.
(Article 276 of the Labor Code.)
Government employees may, therefore, through their unions or
associations, either petition the Congress for the betterment of the terms and
conditions of employment which are within the ambit of legislation or
negotiate with the appropriate government agencies for the improvement of
those which are not fixed by law. If there be any unresolved grievances, the
dispute may be referred to the Public Sector Labor - Management Council
for appropriate action. But employees in the civil service may not resort to
strikes, walk-outs and other temporary work stoppages, like workers in the
private sector, to pressure the Government to accede to their demands. As
now provided under Sec. 4, Rule III of the Rules and Regulations to Govern
the Exercise of the Right of Government- Employees to Self- Organization,
which took effect after the instant dispute arose, "[t]he terms and conditions
of employment in the government, including any political subdivision or
instrumentality thereof and government- owned and controlled corporations
with original charters are governed by law and employees therein shall not
strike for the purpose of securing changes thereof." (SSSEA vs. CA [G.R.
No. 85279, 28 July 1989])
VI. PEACEFUL CONCERTED ACTIVITIES AND STRIKES
Section 14.
The Civil Service laws and rules governing concerted activities and
strikes in the government service shall be observed, subject to any legislation that
may be enacted by Congress.
[T]o implement the constitutional guarantee of the right of government
employees to organize, the President issued E.O. No. 180 which provides
guidelines for the exercise of the right to organize of government employees.
In Section 14 thereof, it is provided that "[t]he Civil Service law and rules
governing concerted activities and strikes in the government service shall be
observed, subject to any legislation that may be enacted by Congress." The
President was apparently referring to Memorandum Circular No. 6, s. 1987
of the Civil Service Commission under date April 21, 1987 which, "prior to
the enactment by Congress of applicable laws concerning strike by
government employees ... enjoins under pain of administrative sanctions, all
19

government officers and employees from staging strikes, demonstrations,

mass leaves, walk-outs and other forms of mass action which will result in
temporary stoppage or disruption of public service." The air was thus cleared
of the confusion. At present, in the absence of any legislation allowing
government employees to strike, recognizing their right to do so, or
regulating the exercise of the right, they are prohibited from striking, by
express provision of Memorandum Circular No. 6 and as implied in E.O. No.
180. [At this juncture, it must be stated that the validity of Memorandum
Circular No. 6 is not at issue].
But are employees of the SSS covered by the prohibition against strikes?
The Court is of the considered view that they are. Considering that under
the 1987 Constitution "[t]he civil service embraces all branches,
subdivisions, instrumentalities, and agencies of the Government, including
government-owned or controlled corporations with original charters" [Art.
IX(B), Sec. .2(l) see also Sec. 1 of E.O. No. 180 where the employees in the
civil service are denominated as "government employees"] and that the SSS
is one such government-controlled corporation with an original charter,
having been created under R.A. No. 1161, its employees are part of the civil
service [NASECO v. NLRC, G.R. Nos. 69870, 1988] and are covered by the
Civil Service Commission's memorandum prohibiting strikes. This being the
case, the strike staged by the employees of the SSS was illegal.
(SSSEA vs. CA [G.R. No. 85279, 28 July 1989])
We now come to the case before us. Petitioners, who are public
schoolteachers and thus government employees, do not seek to establish
that they have a right to strike. Rather, they tenaciously insist that their
absences during certain dates in September 1990 were a valid exercise of
their constitutional right to engage in peaceful assembly to petition the
government for a redress of grievances. They claim that their gathering was
not a strike; therefore, their participation therein did not constitute any
offense. MPSTA vs. Laguio 36 and ACT vs. Cario, 37 in which this Court
declared that "these 'mass actions' were to all intents and purposes a strike;
they constituted a concerted and unauthorized stoppage of, or absence
from, work which it was the teachers' duty to perform, undertaken for
essentially economic reasons," should not principally resolve the present
case, as the underlying facts are allegedly not identical.
Strike, as defined by law, means any temporary stoppage of work by the
concerted action of employees as a result of an industrial or labor dispute.
38 A labor dispute includes any controversy or matter concerning terms and
conditions of employment; or the association or representation of persons in

negotiating, fixing, maintaining, changing or arranging the terms and

conditions of employment, regardless of whether the disputants stand in the
proximate relation of employers and employees. 39 With these premises, we
now evaluate the circumstances of the instant petition.
It cannot be denied that the mass action or assembly staged by the
petitioners resulted in the non-holding of classes in several public schools
during the corresponding period. Petitioners do not dispute that the
grievances for which they sought redress concerned the alleged failure of
public authorities essentially, their "employers" to fully and justly implement
certain laws and measures intended to benefit them materially,
(Jacinto vs. CA [G.R. No. 124540, 14 November 1997])
It has long been settled that the mass actions of September/October
1990 staged by Metro Manila public school teachers amounted to a strike in
every sense of the term, constituting, as they did, "concerted and
unauthorized stoppage of or absence from, work which it was the teachers"
duty to perform, undertaken for essentially economic reasons." The claim
that the teachers involved in the 1990 mass actions were merely exercising
their constitutional right to peaceful assembly was already rejected in Gan
vs. Civil Service Commission. MPSTA vs. Laguio [G.R. No. 95445, 06 August
1991])
[T]he claim that the teachers were thereby denied their rights to
peaceably assemble and petition the government for redress of grievances
reasoning that this constitutional liberty to be upheld like any other liberty,
must be exercised within reasonable limits so as not to prejudice the public
welfare. But the school teachers in the case of the 1990 mass actions did not
exercise their constitutional rights within reasonable limits. On the contrary,
they committed acts prejudicial to the best interest of the service by staging
the mass protest on regular school days, abandoning their classes and
refusing to go back even after they had been ordered to do so, Had the
teachers availed of their free-time recess, after classes, weekends or
holidays to dramatize their grievances and to dialogue with the proper
authorities within bounds of the law, no one not the DECS, the CSC or
even the Supreme Court could have held them liable for their participation
in the mass action. (Gan vs. CSC [G.R. No. 110717, 14 December 1993])
VII. PUBLIC SECTOR LABOR-MANAGEMENT COUNCIL
Section 15.
A Public Sector Labor Management Council, hereinafter referred to
as the Council, is hereby constituted to be composed of the following:
20

1)
2)
3)
4)
5)

Chairman, Civil Service Commission

- Chairman
Secretary, Department of Labor and Employment
- Vice Chairman
Secretary, Department of Finance
- Member
Secretary, Department of Justice
- Member
Secretary, Department of Budget and Management - Member

The Council shall implement and administer the provisions of this Executive
Order. For this purpose, the Council shall promulgate the necessary rules and
regulations to implement this Executive Order.
Since NPDC is a government agency, its employees are covered by civil
service rules and regulations (Sec. 2, Article IX, 1987 Constitution). Its
employees are civil service employees (Sec. 14, Executive Order No. 180).
While NPDC employees are allowed under the 1987 Constitution to
organize and join unions of their choice, there is as yet no law permitting
them to strike. In case of a labor dispute between the employees and the
government, Section 15 of Executive Order No. 180 dated June 1, 1987
provides that the Public Sector Labor-Management Council, not the
Department of Labor and Employment, shall hear the dispute. Clearly, the
Court of Appeals and the lower court erred in holding that the labor dispute
between the NPDC and the members of the NPDSA is cognizable by the
Department of Labor and Employment. (Republic vs. CA [G.R. No. 87676, 20
December 1989])
It is futile for the petitioners to assert that the subject labor dispute falls
within the exclusive jurisdiction of the NLRC and, hence, the Regional Trial
Court had no jurisdiction to issue a writ of injunction enjoining the
continuance of the strike. The Labor Code itself provides that terms and
conditions of employment of government employees shall be governed by
the Civil Service Law, rules and regulations [Art. 276]. More importantly, E.O.
No. 180 vests the Public Sector Labor - Management Council with
jurisdiction over unresolved labor disputes involving government employees
[Sec. 16]. Clearly, the NLRC has no jurisdiction over the dispute.
This being the case, the Regional Trial Court was not precluded, in the
exercise of its general jurisdiction under B.P. Blg. 129, as amended, from
assuming jurisdiction over the SSS's complaint for damages and issuing the
injunctive writ prayed for therein. Unlike the NLRC, the Public Sector Labor Management Council has not been granted by law authority to issue writs of
injunction in labor disputes within its jurisdiction. Thus, since it is the Council,

and not the NLRC, that has jurisdiction over the instant labor dispute, resort
to the general courts of law for the issuance of a writ of injunction to enjoin
the strike is appropriate.
(SSSEA vs. CA [G.R. No. 85279, 28 July 1989])
VIII. SETTLEMENT OF DISPUTES
Section 16.
The Civil Service and labor laws and procedures, whenever
applicable, shall be followed in the resolution of complaints, grievances and cases
involving government employees. In case any dispute remains unresolved after
exhausting all the available remedies under existing laws and procedures, the
parties may jointly refer the dispute to the Council, for appropriate action.
IX. EFFECTIVITY
Section 17.

This Executive Order shall take effect immediately.

As to Members of a cooperative
A cooperative, therefore, is by its nature different from an ordinary
business concern being run either, by persons, partnerships or corporations.
Its owners and/or members are the ones who run and operate the business
while the others are its employees. As above stated, irrespective of the name
of shares owned by its members they are entitled to cast one vote each in
deciding upon the affair of the cooperative. Their share capital earn limited
interests, They enjoy special privileges as exemption from income tax and
sales taxes, preferential right to supply their products to State agencies and
even exemption from minimum wage laws.
An employee therefore of such a cooperative who is a member and coowner thereof cannot invoke the right to collective bargaining for certainly an
owner cannot bargain with himself or his co-owners. In the opinion of August
14, 1981 of the Solicitor General, he corectly opined that employees of
cooperatives who are themselves members of the cooperative have no right
to form or join labor organizations for purposes of collective bargaining for
being themselves co-owners of the cooperative.
However, in so far as it involves cooperatives with employees who are
not members or co-owners thereof, certainly such employees are entitled to
exercise the rights of all workers to organization, collective bargaining,
negotiations and others as are enshrined in the Constitution and existing
laws of the country.
(Cooperative Rural Bank of Davao City vs. Ferrer-Calleja [G.R. No. 77951,
26 September 1988]

21

As to Managerial Employees
Ineligibility of managerial employees to join any labor
organization; right of supervisory employees. - Managerial
employees are not eligible to join, assist or form any labor
organization. Supervisory employees shall not be eligible for
membership in a labor organization of the rank-and-file employees
but may join, assist or form separate labor organizations of their own.
(Article 245 of the Labor Code)
The reasons for the disqualification of a managerial employee from
joining or assisting a labor organization is applied also to confidential
employees thru the doctrine of necessary implication, wherein the SC took
into consideration the rationale behind the disqualification of managerial
employees expressed in Bulletin Publishing Corporation v. Sanchez, thus: "...
if these managerial employees would belong to or be affiliated with a Union,
the latter might not be assured of their loyalty to the Union in view of evident
conflict of interests. The Union can also become company-dominated with
the presence of managerial employees in Union membership." In the
collective bargaining process, managerial employees are supposed to be on
the side of the employer, to act as its representatives, and to see to it that its
interests are well protected. The employer is not assured of such protection if
these employees themselves are union members. Collective bargaining in
such a situation can become one-sided. Unionization of confidential
employees for the purpose of collective bargaining would mean the
extension of the law to persons or individuals who are supposed to act "in
the interest of" the employers. It is not farfetched that in the course of
collective bargaining, they might jeopardize that interest which they are dutybound to protect. (NATU-RPB vs. Torres [G.R. No. 93468, 29 December
1994])
As to Confidential Employees
We have decreed as disqualified from bargaining with management in
case of Bulletin Publishing Co. Inc. vs. Hon. Augusto Sanchez (144 SCRA
628) reiterating herein the rationale for such ruling as follows: if these
managerial employees would belong to or be affiliated with a Union, the latter
might not be assured of their loyalty to the Union in view of evident conflict of
interests or that the Union can be company-dominated with the presence of

managerial employees in Union membership. A managerial employee is

defined under Art. 212 (k) of the new Labor Code as "one who is vested with
powers or prerogatives to lay down and execute management policies and/or
to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline
employees, or to effectively recommend such managerial actions. All
employees not falling within this definitions are considered rank-and-file
employees for purposes of this Book." (Golden Farms vs. Calleja [G.R. No.
78755, 19 July 1989])
Art. 245 of the Labor Code does not directly prohibit confidential
employees from engaging in union activities. However, under the doctrine of
necessary implication, the disqualification of managerial employees equally
applies to confidential employees. The confidential-employee rule justifies
exclusion of confidential employees because in the normal course of their
duties they become aware of management policies relating to labor relations.
It must be stressed, however, that when the employee does not have access
to confidential labor relations information, there is no legal prohibition against
confidential employees from forming, assisting, or joining a union.
(Sugbuanon Rural Bank, Inc. vs. Laguesma [G.R. No. 116194, 02 February
2000])
The exclusion from bargaining units of employees who, in the normal
course of their duties, become aware of management policies relating to
labor relations is a principal objective sought to be accomplished by the
''confidential employee rule." The broad rationale behind this rule is that
employees should not be placed in a position involving a potential conflict of
interests. "Management should not be required to handle labor relations
matters through employees who are represented by the union with which the
company is required to deal and who in the normal performance of their
duties may obtain advance information of the company's position with regard
to contract negotiations, the disposition of grievances, or other labor relations
matters." (SMC vs. Laguesma [G.R. No. 110399, 15 August 1997])
As to Supervisory Employees
The rationale for the amendment is the government's recognition of the
right of supervisors to organize with the qualification that they shall not join or
assist in the organization of rank-and-file employees. The reason behind the
Industrial Peace Act provision on the same subject matter has been adopted
in the present statute. The interests of supervisors on the one hand, and the
22

rank-and-file employees on the other, are separate and distinct. The

functions of supervisors, being recommendatory in nature, are more
identified with the interests of the employer. The performance of those
functions may, thus, run counter to the interests of the rank-and-file.
xxx

xxx

xxx

Thus, if the intent of the law is to avoid a situation where supervisors

would merge with the rank and-file or where the supervisors' labor
organization would represent conflicting interests, then a local supervisors'
union should not be allowed to affiliate with the national federation of union of
rank-and-file employees where that federation actively participates in union
activity in the company.
xxx

xxx

xxx

The prohibition against a supervisors' union joining a local union of rankand-file is replete with jurisprudence. The Court emphasizes that the
limitation is not confined to a case of supervisors wanting to join a rank-andfile local union. The prohibition extends to a supervisors' local union applying
for membership in a national federation the members of which include local
unions of rank-and-file employees. The intent of the law is clear especially
where, as in the case at bar, the supervisors will be co-mingling with those
employees whom they directly supervise in their own bargaining unit. (Atlas
Lithographic vs. Laguesma [205 SCRA])
As to Security Guards
Section 6 of E.O. No. 111, enacted on 24 December 1986, repealed the
original provisions of Article 245 of the Labor Code, reading as follows:
Art. 245. Ineligibility of security personnel to join any labor
organization. Security guards and other personnel employed for
the protection and security of the person, properties and premises
of the employer shall not be eligible for membership, in any labor
organization.
and substituted it with the following provision:
Art. 245.
Right of employees in the public service.
By virtue of such repeal and substitution, security guards became eligible
for membership in any labor organization. (Philips Industrial vs. NLRC [G.R.
No. 88957, 25 June 1992])
Right to Unionize vs. Freedom of Religion
Both the Constitution and Republic Act No. 875 recognize freedom of
association. Section 1 (6) of Article III of the Constitution of 1935, as well as
Section 7 of Article IV of the Constitution of 1973, provide that the right to

form associations or societies for purposes not contrary to law shall not be
abridged. Section 3 of Republic Act No. 875 provides that employees shall
have the right to self-organization and to form, join of assist labor
organizations of their own choosing for the purpose of collective bargaining
and to engage in concerted activities for the purpose of collective bargaining
and other mutual aid or protection. What the Constitution and the Industrial
Peace Act recognize and guarantee is the "right" to form or join associations.
Notwithstanding the different theories propounded by the different schools of
jurisprudence regarding the nature and contents of a "right", it can be safely
said that whatever theory one subscribes to, a right comprehends at least
two broad notions, namely: first, LIBERTY OR FREEDOM, i.e., the absence
of legal restraint, whereby an employee may act for himself without being
prevented by law; and second, POWER, whereby an employee may, as he
pleases, join or refrain from Joining an association. It is, therefore, the
employee who should decide for himself whether he should join or not an
association; and should he choose to join, he himself makes up his mind as
to which association he would join; and even after he has joined, he still
retains the liberty and the power to leave and cancel his membership with
said organization at any time. It is clear, therefore, that the RIGHT TO JOIN A
UNION INCLUDES THE RIGHT TO ABSTAIN FROM JOINING ANY UNION.
Inasmuch as what both the Constitution and the Industrial Peace Act have
recognized, and guaranteed to the employee, is the "right" to join
associations of his choice, it would be absurd to say that the law also
imposes, in the same breath, upon the employee the duty to join
associations. The law does not enjoin an employee to sign up with any
association.
The right to refrain from joining labor organizations recognized by Section
3 of the Industrial Peace Act is, however, limited. The legal protection
granted to such right to refrain from joining is withdrawn by operation of law,
where a labor union and an employer have agreed on a closed shop, by
virtue of which the employer may employ only member of the collective
bargaining union, and the employees must continue to be members of the
union for the duration of the contract in order to keep their jobs. Thus Section
4 (a) (4) of the Industrial Peace Act, before its amendment by Republic Act
No. 3350, provides that although it would be an unfair labor practice for an
employer "to discriminate in regard to hire or tenure of employment or any
term or condition of employment to encourage or discourage membership in
any labor organization" the employer is, however, not precluded "from
making an agreement with a labor organization to require as a condition of
23

employment membership therein, if such labor organization is the

representative of the employees". By virtue, therefore, of a closed shop
agreement, before the enactment of RA No. 3350, if any person, regardless
of his religious beliefs, wishes to be employed or to keep his employment, he
must become a member of the collective bargaining union. Hence, the right
of said employee not to join the labor union is curtailed and withdrawn.
To that all-embracing coverage of the closed shop arrangement, Republic
Act No. 3350 introduced an exception, when it added to Section 4 (a) (4) of
the Industrial Peace Act the following proviso: "but such agreement shall not
cover members of any religious sects which prohibit affiliation of their
members in any such labor organization". Republic Act No. 3350 merely
excludes ipso jure from the application and coverage of the closed shop
agreement the employees belonging to any religious sects which prohibit
affiliation of their members with any labor organization. What the exception
provides, therefore, is that members of said religious sects cannot be
compelled or coerced to join labor unions even when said unions have
closed shop agreements with the employers; that in spite of any closed shop
agreement, members of said religious sects cannot be refused employment
or dismissed from their jobs on the sole ground that they are not members of
the collective bargaining union. It is clear, therefore, that the assailed Act, far
from infringing the constitutional provision on freedom of association,
upholds and reinforces it. It does not prohibit the members of said religious
sects from affiliating with labor unions. It still leaves to said members the
liberty and the power to affiliate, or not to affiliate, with labor unions. If,
notwithstanding their religious beliefs, the members of said religious sects
prefer to sign up with the labor union, they can do so. If in deference and
fealty to their religious faith, they refuse to sign up, they can do so; the law
does not coerce them to join; neither does the law prohibit them from joining;
and neither may the employer or labor union compel them to join. Republic
Act No. 3350, therefore, does not violate the constitutional provision on
freedom of association. (Victoriano vs. Elizalde [G.R. No. L-25246,
September 1974])
Under Section 4(a), paragraph 4, of Republic Act No. 875 (IPA), prior to
its amendment by Republic Act No. 3350, the employer was not precluded
"from making an agreement with a labor organization to require as a
condition of employment membership therein, if such labor organization is
the representative of the employees." On June 18, 1961, however, Republic
Act No. 3350 was enacted, introducing an amendment to paragraph (4)
subsection (a) of section 4 of Republic Act No. 875, as follows: ... "but such

agreement shall not cover members of any religious sects which prohibit
affiliation of their members in any such labor organization". (Victoriano vs.
Elizalde [G.R. No. L-25246, 12 September 1974])
Bargaining Unit
A "bargaining unit" has been defined as a group of employees of a given
employer, comprised of all or less than all of the entire body of employees,
which the collective interest of all the employees, consistent with equity to
the employer, indicate to be the best suited to serve the reciprocal rights and
duties of the parties under the collective bargaining provisions of the law.
(University of the Philippines vs. Ferrer-Calleja [G.R. No. 96189, 14 July
1992])
(1)
(2)
(3)
(4)
(5)

Factors to be considered in determining the proper bargaining unit:

Will of the employees (Globe Doctrine);
Affinity and unit of employees' interest, such as substantial similarity
of work and duties, or similarity of compensation and working
conditions;
Prior collective bargaining history;
Employment status, such as temporary, seasonal probationary
employees; and
Other factors: the history, extent and type of organization of
employees in other plants of the same employer, or other employers
in the same industry; the skill, wages, work, and working conditions of
the employees; the desires of the employees; the eligibility of the
employees for membership in the union or unions involved; and the
relationship between the unit or units proposed and the employer's
organization, management, and operation.

One Company One Union Policy

We see no need for the formation of another union in PHILTRANCO. The
qualified members of the KASAMA KO may join the NAMAWU-MIF if they
want to be union members, and to be consistent with the one-union, onecompany policy of the Department of Labor and Employment, and the laws it
enforces. As held in the case of General Rubber and Footwear Corp. v.
Bureau of Labor Relations (155 SCRA 283 [1987]):
... It has been the policy of the Bureau to encourage the
formation of an employer unit 'unless circumstances otherwise
24

require. The proliferation of unions in an employer unit is

discouraged as a matter of policy unless there are compelling
reasons which would deny a certain class of employees the right to
self-organization for purposes of collective bargaining. This case
does not fall squarely within the exception.
xxx

xxx

xxx

It is natural in almost all fairly sized companies to have groups of workers

discharging different functions. No company could possibly have all
employees performing exactly the same work. Variety of tasks is to be
expected. It would not be in the interest of sound labor-management
relations if each group of employees assigned to a specialized function or
section would decide to break away from their fellow-workers and form their
own separate bargaining unit. We cannot allow one unit for typists and
clerks, one unit for accountants, another unit for messengers and drivers,
and so on in needless profusion. Where shall the line be drawn? The
questioned decision of the public respondent can only lead to confusion,
discord and labor strife.
(Philtranco Service Enterprises vs. BLR [G.R. No. 85343, 28 June 1989])

LABOR ORGANIZATIONS
Labor Organization,
"Labor organization" means any union or association of employees
which exists in whole or in part for the purpose of collective
bargaining or of dealing with employers concerning terms and
conditions of employment. (Article 212 (g) of the Labor Code)
Legitimate Labor Organization,
"Legitimate labor organization" means any labor organization duly
registered with the Department of Labor and Employment, and
includes any branch or local thereof. (Article 212 (h) of the Labor
Code)
Registration Requirement
In PAFLU vs. Sec. of Labor, 27 SCRA 40, We had occasion to interpret
Section 23 of R.A. No. 875 (Industrial Peace Act) requiring of labor unions

registration by the Department of Labor in order to qualify as "LEGITIMATE

LABOR ORGANIZATION," and We said:
The theory to the effect that Section 23 of Republic Act No. 875
unduly curtails the freedom of assembly and association
guaranteed in the Bill of Rights is devoid of factual basis. The
registration prescribed in paragraph (b) of said section 17 is not a
limitation to the right of assembly or association, which may be
exercised with or without said registration. The latter is merely a
condition sine qua non for the acquisition of legal personality by
labor organizations, associations or unions and the possession of
the 'rights and privileges granted by law to legitimate labor
organizations.' The Constitution does not guarantee these rights
and privileges, much less said personality, which are mere statutory
creations, for the possession and exercise of which registration is
required to protect both labor and the public against abuses, fraud,
or impostors who pose as organizers, although not truly accredited
agents of the union they purport to represent. Such requirement is a
valid exercise of the police power, because the activities in which
labor organizations, associations and union or workers are engaged
affect public interest, which should be protected.
Simply put, the Amigo Employees Union (Independent) Which petitioners
claim to represent, not being a legitimate labor organization, may not validly
present representation issues. Therefore, the act of petitioners cannot be
considered a legitimate exercise of their right to self-organization. Hence, We
affirm and reiterate the rationale explained in Phil Association of Free Labor
Unions vs. Sec. of Labor case, supra, in order to protect legitimate labor and
at the same time maintain discipline and responsibility within its ranks. (Villar
vs. Inciong [G.R. No. L-50283-84, 20 April 1983])
Ordinarily, a labor organization acquires legitimacy only upon registration
with the BLR. Under Article 234 (Requirements of Registration):
Any applicant labor organization, association or group of unions or
workers shall acquire legal personality and shall be entitled to the rights and
privileges granted by law to legitimate labor organizations upon issuance of
the certificate of registration based on the following requirements:
(a) Fifty-pesos (P50.00) registration fee;
(b) The names of its officers, their addresses, the principal address of
the labor organization, the minutes of the organizational meeting
and the list of the workers who participated in such meetings;

25

(c) The names of all its members comprising at least twenty 20%
percent of all the employees in the bargaining unit where it seek
to operate;
(d) If the applicant has been in existence for one or more years,
copies , of its annual financial reports; and
(e) Four copies of the constitution and by-laws of the applicant union,
the minutes of its adoption or ratification and the list of the
members who participated in it.
xxx

xxx

Role of Constitution and By-Laws

[T]he Constitution and By-laws of an organization serve as a contract
that binds its members. (Oca vs. Trajano [G.R. No. 76189, 08 August 1991])
(The labor organization owes its personality to the state, and when such
personality was granted, it was granted under the conditions laid down in the
documentary requirements submitted. The constitution and by-laws of the
organization are part and parcel of the documents submitted, hence the
terms and conditions set forth therein must be complied with.)

xxx

Absent compliance with these mandatory requirements, the local or

chapter does not become a legitimate labor organization.
(Progressive Development vs. Secretary [G.R. No. 96425, 04 February
1992])
By virtue of DEPARTMENT ORDER NO. 9, SERIES OF 1997, however,
the documents needed to be submitted by a local or chapter have been
reduced to the following:
(a) A charter certificate issued by the federation or national union
indicating the creation or establishment of the local/chapter;
(b) The names of the local/chapter's officers, their addresses, and the
principal office of the local/chapter;
(c) The local/chapter's constitution and by-laws; provided that where
the local/chapter's constitution and by-laws is the same as that of
the federation or national union, this fact shall be indicated
accordingly.
All the foregoing supporting requirements shall be certified under oath by
the Secretary or Treasurer of the local/chapter and attested by its President.
Since Department Order No. 9 has done away with the submission of
books of account as a requisite for registration, Pagpalain's only recourse
now is to have said order declared null and void. It premises its case on the
principles laid down in Progressive and Protection Technology. First,
Pagpalain maintains that Department Order No. 9 is illegal, allegedly
because it contravenes the above-mentioned rulings of this Court. Citing
Article 8 of the Civil Code, which provides that [j]udicial decisions applying or
interpreting the laws or the Constitution shall form a part of the legal system
of the Philippines," Pagpalain declares the two cases part of the law of the
land which, under the third paragraph of Article 7 of the Civil Code, may not
be supplanted by mere regulation.
(Pagpalain Haulers, Inc. vs. Trajano [G.R. No. 133215, 15 July 1999])

When the Constitution and by-laws of both unions dictated the remedy for
intra-union dispute, such as petitioner's complaint against private respondents
for unauthorized or illegal disbursement of unions funds, this should be resorted
to before recourse can be made to the appropriate administrative or judicial
body, not only to give the grievance machinery or appeals' body of the union the
opportunity to decide the matter by itself, but also to prevent unnecessary and
premature resort to administrative or judicial bodies. Thus, a party with an
administrative remedy must not merely initiate the prescribed administrative
procedure to obtain relief, but also pursue it to its appropriate conclusion before
seeking judicial intervention. This rule clearly applies to the instant case. The
underlying principle of the rule on exhaustion of administrative remedies rests on
the presumption that when the administrative body, or grievance machinery, as
in this case, is afforded a chance to pass upon the matter, it will decide the same
correctly. Petitioner's premature invocation of public respondent's intervention is
fatal to his cause of action.
Evidently, when petitioner brought before the DOLE his complaint charging
private respondents with unauthorized and illegal disbursement of union funds,
he overlooked or deliberately ignored the fact that the same is clearly dismissible
for non-exhaustion of administrative remedies. Thus, public respondent
Bienvenido E. Laguesma, in dismissing petitioner's complaint, committed no
grave abuse of discretion.
(Diamonon vs. DOLE [G.R. No. 108951, 07 March 2000])
Right of Local to Disaffiliate from the Federation
The right of a local union to disaffiliate from its mother federation is wellsettled. A local union, being a separate and voluntary association, is free to
serve the interest of all its members including the freedom to disaffiliate when
circumstances warrant. This right is consistent with the constitutional
guarantee of freedom of association (Volkschel Labor Union v. Bureau of
Labor Relations, No. L-45824, June 19, 1985, 137 SCRA 42).
26

xxx
xxx
xxx
The inclusion of the word NATU after the name of the local union THEU
in the registration with the Department of Labor is merely to stress that the
THEU is NATU's affiliate at the time of the registration. It does not mean that
the said local union cannot stand on its own. Neither can it be interpreted to
mean that it cannot pursue its own interests independently of the federation.
A local union owes its creation and continued existence to the will of its
members and not to the federation to which it belongs.
When the local union withdrew from the old federation to join a new
federation, it was merely exercising its primary right to labor organization for
the effective enhancement and protection of common interests. In the
absence of enforceable provisions in the federation's constitution preventing
disaffiliation of a local union a local may sever its relationship with its parent
(People's Industrial and Commercial Employees and Workers Organization
(FFW) v. People's Industrial and Commercial Corporation, No. 37687, March
15, 1982, 112 SCRA 440).
xxx
xxx
xxx
Further, there is no merit in the contention of the respondents that the act
of disaffiliation violated the union security clause of the CBA and that their
dismissal as a consequence thereof is valid. A perusal of the collective
bargaining agreements shows that the THEU-NATU, and not the NATU
federation, was recognized as the sole and exclusive collective bargaining
agent for all its workers and employees in all matters concerning wages,
hours of work and other terms and conditions of employment (pp. 667-706,
Rollo). Although NATU was designated as the sole bargaining agent in the
check-off authorization form attached to the CBA, this simply means it was
acting only for and in behalf of its affiliate. The NATU POSSESSED THE
STATUS OF AN AGENT WHILE THE LOCAL UNION REMAINED THE
BASIC PRINCIPAL UNION WHICH ENTERED INTO CONTRACT WITH
THE RESPONDENT COMPANY. When the THEU disaffiliated from its
mother federation, the former did not lose its legal personality as the
bargaining union under the CBA. (Tropical Hut Employees Union vs. Tropical
Hut [181 SCRA 173, 1990])
CERTIFICATION ELECTIONS
Nature of
It is thus of the very essence of the regime of industrial democracy
sought to be attained through the collective bargaining process that there be

no obstacle to the freedom Identified with the exercise of the right to selforganization. Labor is to be represented by a union that can express its
collective will. In the event, and this is usually the case, that there is more
than one such group fighting for that privilege, a certification election must be
conducted. That is the teaching of a recent decision, under the new Labor
Code, United Employees Union of Gelmart Industries v. Noriel. There is this
relevant excerpt: "The institution of collective bargaining is, to recall Cox a
prime manifestation of industrial democracy at work. The two parties to the
relationship, labor and management, make their own rules by coming to
terms. That is to govern themselves in matters that really count. As labor,
however, is composed of a number of individuals, it is indispensable that they
be represented by a labor organization of their choice. Thus may be
discerned how crucial is a certification election. So our decisions from the
earliest case of PLDT Employees Union v. PLDT Co. Free Telephone
Workers Union to the latest, Philippine Communications Electronics &
Electricity Workers' Federation (PCWF) v. Court of Industrial Relations, have
made clear." An even later pronouncement in Philippine Association of Free
Labor Unions v. Bureau of Labor Relations speaks similarly: "Petitioner thus
appears to be woefully lacking in awareness of the significance of a
certification election for the collective bargaining process. It is the fairest and
most effective way of determining which labor organization can truly
represent the working force. It is a fundamental postulate that the will of the
majority, if given expression in an honest election with freedom on the part of
the voters to make their choice, is controlling. No better device can assure
the institution of industrial democracy with the two parties to a business
enterprise, management and labor, establishing a regime of self rule."
(FOITAF vs. Noriel [G.R. No. L-41937, 06 July 1976])
In any case, this Court notes that it is petitioner, the employer, which has
offered the most tenacious resistance to the holding of a certification election
among its monthly-paid rank-and-file employees. This must not be so, for the
choice of a collective bargaining agent is the sole concern of the employees.
The only exception to this rule is where the employer has to file the petition
for certification election pursuant to Article 258 of the Labor Code because it
was requested to bargain collectively, which exception finds no application in
the case before us. Its role in a certification election has aptly been described
in Trade Unions of the Philippines and Allied Services (TUPAS) v. Trajano, as
that of a mere by-stander. It has no legal standing in a certification election
as it cannot oppose the petition or appeal the Med-Arbiter's orders related
27

thereto. An employer that involves itself in a certification election lends

suspicion to the fact it wants to create a company union. This Court should
be the last agency to lend support to such an attempt at interference with a
purely internal affair of labor.
While employers may rightfully be notified or informed of petitions of such
nature, they should not, however, be considered parties thereto with the
concomitant right to oppose it. Sound policy dictates that they should
maintain a strictly hands-off policy.
It bears stressing that no obstacle must be placed to the holding of
certification elections, for it is a statutory policy that should not be
circumvented. The certification election is the most democratic and
expeditious method by which the laborers can freely determine the union that
shall act as their representative in their dealings with the establishment
where they are working. It is the appropriate means whereby controversies
and disputes on representation may be laid to rest, by the unequivocal vote
of the employees themselves. Indeed, it is the keystone of industrial
democracy. (San Miguel vs. Laguesma [G.R. No. 116172, 10 October 1996])

proceeding. A certification election is not a litigation in the sense in which

this term is understood, but a mere investigation of a non-adversary, factfinding character, in which the investigating agency plays the part of a
disinterested investigator seeking merely to ascertain the desires of the
employees as to the matter of their representation. (Sandoval Shipyards vs.
Pepito [G.R. No. 143428, 25 June 2001])
[V]erification of a pleading is a formal, not jurisdictional requisite. Even if
verification is lacking and the pleading is formally defective, the courts may
dispense with the requirement in the interest of justice and order of
correction of the pleading accordingly. Generally, technical and rigid rules of
procedure are not binding in labor cases; and this rule is specifically applied
in certification election proceedings, which are non-litigious but merely
investigative and non-adversarial in character (National Mines vs. Secretary
[G.R. No. 106446, 16 November 1993])
Direct Certification
We rule, however, that the direct certification ordered by respondent
Secretary is not proper. By virtue of Executive Order No. 111, which became
effective on March 4, 1987, the direct certification originally allowed under
Article 257 of the Labor Code has apparently been discontinued as a method
of selecting the exclusive bargaining agent of the workers. This amendment
affirms the superiority of the certification election over the direct certification
which is no longer available now under the change in said provision. (Central
Negros vs. Secretary [G.R. No. 94045, 13 September 1991])

This Court has always stressed that a certification proceeding is not a

litigation, in the sense in which this term is ordinarily understood, but an
investigation of a non-adversary, fact finding character in which the Court of
Industrial Relations plays the part of a disinterested investigator seeking
merely to ascertain the desires of employees as to the matter of their
representation (NLU vs. Go Soc and Sons, 23 SCRA 436; Benguet
Consolidated, Inc. vs. Bobok Lumber Jack Ass'n., L-11029, May 23, 1958;
Bulakena Restaurant vs. C.I.R., 45 SCRA 95; LVN Pictures, Inc. vs.
Philippine Musicians Guild (FFW) and C.I.R., 1 SCRA 132).

Voluntary Recognition

The decision in a certification election case, by the very nature of such

proceeding, is not such as to foreclose all further disputes as to the existence
or non-existence of an employer-employee relationship between SSI and
private respondents herein. It is an established doctrine that for res
adjudicata to apply, the following requisites must concur: .. Clearly implicit
in these requirements is that the action or proceedings in which is issued the
prior judgment that would operate in bar of a subsequent action between
the same parties for the same cause, be adversarial, or contentious as
distinguished from an ex parte hearing or proceeding of which the party
seeking relief has given legal notice to the other party and afforded the latter
an opportunity to contest it, and a certification election is not such a

The petition has no merit. Ordinarily, in an unorganized establishment

like the SMC Calasiao Beer Region, it is the union that files a petition for a
certification election if there is no certified bargaining agent for the workers in
the establishment. If a union asks the employer to voluntarily recognize it as
the bargaining agent of the employees, as the petitioner did, it in effect asks
the employer to certify it as the bargaining representative of the employees a
certification which the employer has no authority to give, for it is the
employees' prerogative (not the employer's) to determine whether they want
a union to represent them, and, if so, which one it should be. (IBM vs. FerrerCalleja [G.R. No. 84685, 23 February 1990])
Consent Election
28

To resolve the issue of union representation at the Universal Robina

Textile plant, what was agreed to be held at the company's premises and
which became the root of this controversy, was a consent election, not a
certification election.
It is unmistakable that the election held on November 15, 1990 was a
consent election and not a certification election. It was an agreed one, the
purpose being merely to determine the issue of majority representation of all
the workers in the appropriate collective bargaining unit. It is a separate and
distinct process and has nothing to do with the import and effort of a
certification election. (Algire vs. De Mesa [G.R. No. 97622, 19 October
1994])
Certification Election Proceedings
The right to refuse to join or be represented by any labor organization is
recognized not only by law but also in the rules drawn up for implementation
thereof. The original Rules on Certification promulgated by the defunct CIR
required that the ballots to be used at a certification election to determine
which of two or more competing labor unions would represent the employees
in the appropriate bargaining unit should contain, aside from the names of
each union, an alternative choice of the employee voting, to the effect that he
desires not to which of two or more competing labor unions would represent
the employees in the appropriate bargaining unit should contain, aside from
the names of each union, an alternative choice of the employee voting, to the
effect that he desires not to be represented by any union. And where only
one union was involved, the ballots were required to state the question "Do
you desire to be represented by said union?" as regards which the
employees voting would mark an appropriate square, one indicating the
answer, "Yes" the other, "No."
xxx

xxx

xxx

Withal, neither the quoted provision nor any other in the Omnibus
Implementing Rules expressly bars the inclusion of the choice of "NO
UNION" in the ballots. Indeed it is doubtful if the employee's alternative right
NOT to form, join or assist any labor organization or withdraw or resign from
one may be validly eliminated and he be consequently coerced to vote for
one or another of the competing unions and be represented by one of them.
Besides, the statement in the quoted provision that "(i)f only one union is
involved, the voter shall make his cross or check in the square indicating
"YES" or "NO," is quite clear acknowledgment of the alternative possibility
that the "NO" votes may outnumber the "YES" votes indicating that the

majority of the employees in the company do not wish to be represented by

any union in which case, no union can represent the employees in collective
bargaining. And whether the prevailing "NO" votes are inspired by
considerations of religious belief or discipline or not is beside the point, and
may not be inquired into at all.
The purpose of a certification election is precisely the ascertainment of
the wishes of the majority of the employees in the appropriate bargaining
unit: to be or not to be represented by a labor organization, and in the
affirmative case, by which particular labor organization. If the results of the
election should disclose that the majority of the workers do not wish to be
represented by any union, then their wishes must be respected, and no
union may properly be certified as the exclusive representative of the
workers in the bargaining unit in dealing with the employer regarding wages,
hours and other terms and conditions of employment. The minority
employees who wish to have a union represent them in collective bargaining
can do nothing but wait for another suitable occasion to petition for a
certification election and hope that the results will be different. They may not
and should not be permitted, however, to impose their will on the majority
who do not desire to have a union certified as the exclusive workers' benefit
in the bargaining unit upon the plea that they, the minority workers, are being
denied the right of self-organization and collective bargaining. As repeatedly
stated, the right of self-organization embraces not only the right to form, join
or assist labor organizations, but the concomitant, converse right NOT to
form, join or assist any labor union.
(Reyes vs. Trajano [G.R. No. 84433, 02 June 1992])
Who can vote in CE Proceedings
In a certification election all rank-and-file employees in the appropriate
bargaining unit are entitled to vote. This principle is clearly stated in Art. 255
of the Labor Code which states that the "labor organization designated or
selected by the majority of the employees in an appropriate bargaining unit
shall be the exclusive representative of the employees in such unit for the
purpose of collective bargaining." Collective bargaining covers all aspects of
the employment relation and the resultant CBA negotiated by the certified
union binds all employees in the bargaining unit. Hence, all rank-and-file
employees, probationary or permanent, have a substantial interest in the
selection of the bargaining representative. The Code makes no distinction as
to their employment status as basis for eligibility in supporting the petition for
29

certification election. The law refers to "all" the employees in the bargaining
unit. All they need to be eligible to support the petition is to belong to the
"bargaining unit." (Airtime Specialists, Inc. vs. Ferrer-Calleja [G.R. No.
80612-16, 29 December 1989])
At any rate, it is now well-settled that employees who have been
improperly laid off but who have a present, unabandoned right to or
expectation of re-employment, are eligible to vote in certification elections.
Thus, and to repeat, if the dismissal is under question, as in the case now at
bar whereby a case of illegal dismissal and/or unfair labor practice was filed,
the employees concerned could still qualify to vote in the elections. (Phil.
Fruits And Vegetables vs. Torres [G.R. No. 92391, 03 July 1992])
Close of Election Proceedings
[T]he phrase "close of election proceedings" as used in Sections 3 and 4
of the pertinent Implementing Rules refers to that period from the closing of
the polls to the counting and tabulation of the votes as it could not have been
the intention of the Implementing Rules to include in the term "close of the
election proceedings" the period for the final determination of the challenged
votes and the canvass thereof, as in the case at bar which may take a very
long period. Thus, if a protest can be formalized within five days after a final
determination and canvass of the challenged votes have been made, it
would result in an undue delay in the affirmation of the employees'
expressed choice of a bargaining representative. (Phil. Fruits and Vegetables
vs. Torres [G.R. No. 92391, 03 July 1992])
Bars to Certification Election
(1) CONTRACT BAR RULE - during the existence of a collective bargaining
agreement except within the freedom period;
This rule simply provides that a petition for certification election or a
motion for intervention can only be entertained within sixty days prior to the
expiry date of an existing collective bargaining agreement. Otherwise put, the
rule prohibits the filing of a petition for certification election during the
existence of a collective bargaining agreement except within the freedom
period, as it is called, when the said agreement is about to expire. The
purpose, obviously, is to ensure stability in the relationships of the workers
and the management by preventing frequent modifications of any collective
bargaining agreement earlier entered into by them in good faith and for the

stipulated original period. (ALU-TUCP v. Trajano, G.R. No. 77539, April 12,
1989, 172 SCRA 49, citing ATU v. Trajano, G.R. No. L-75321, 20 June 1988,
162 SCRA 318)
In order to allow the employer to validly suspend the bargaining process
theremust be a valid petition for certification election raising a legitimate
representation issue. Hence, mere filing of a petition for certification election
does not ipso facto justify the negotiation by the employer. The petition must
comply with the provisions of the Labor Code and its Implementing Rules.
Foremost is that a petition for certification election must be filed during the
sixty day freedom period. The Contract Bar Rule under Section 3, Rule XI,
Book V, of the Omnibus Rules Implementing the Labor Code, provides that:
. If a collective bargaining agreement has been duly registered in
accordance with Article 231 of the Code, a petition for certification election or
motion for intervention can only be entertained within sixty (60) days prior to
the expiry date of such agreement. The rule is based on Article 232, in
relation to Articles 253, 253-A and 256 of the Labor Code. No petition for
certification election for any representation issue may be filed after the lapse
of the sixty-day freedom period. The old CBA is extended until a new CBA
shall have been validly executed. Hence, the contract bar rule still applies.
The purpose is to ensure stability in the relationship of the workers and the
company by preventing frequent modifications of any CBA earlier entered
into by them in good faith and for the stipulated original period. (Colegio de
San Juan de Letran vs. Association of Employees and Faculty of Letran
[G.R. No. 14171, 18 September 2000])
[A] contract does not operate as a bar to representation proceedings,
where it is shown that because of a schism in the union the contract can no
longer serve to promote industrial stability, and the direction of the election is
in the interest of industrial stability as well as in the interest of the employees'
right in the selection of their bargaining representatives. Basic to the contract
bar rule is the proposition that the delay of the right to select representatives
can be justified only where stability is deemed paramount. Excepted from the
contract bar rule are certain types of contracts which do not foster industrial
stability, such as contracts where the Identity of the representative is in
doubt. Any stability derived from such contracts must be subordinated to the
employees' freedom of choice because it does not establish the type of
industrial peace contemplated by the law. (Firestone Tire & Rubber Company
Employees Union vs. Estrella [G.R. No. L-45513-14, 06 January 1978])
30

(Mirpuri vs. CA [G.R. No. 114508, 19 November 1999])

The receipt by petitioner's "supervisor" employees of certain benefits
under the CBA between BUKLOD and petitioner is not sufficient to deny the
petition for certification election filed by the labor organization formed by the
excluded employees. It is not equivalent to and does not compensate for the
denial of the right of the excluded employees to self-organization and
collective bargaining. We concur with the findings of the Undersecretary of
Labor, thus:
It is not disputed that the members of both petitioning unions
NSBPI and NEMPEBPI are excluded from the coverage of the
existing CBA entered into between the respondent BPI and
BUKLOD. Thus, respondent BPI being privy to the said exclusion
has to accept the inescapable consequences of its act of depriving
the excluded employees of their right to self-organization for the
purpose of collective bargaining. We find immaterial and irrelevant
the allegation of hereby respondent BPI to the effect that the benefit
being enjoyed by the rank and file employees covered by the
existing CBA are extended/accorded to the excluded employees.
Indeed, what is crucial and of paramount consideration is the fact
that the excluded rank and file employees are afforded the right to
bargain collectively.
The Supreme Court in the cases of General Rubber vs. BLR
and Manila Bay Spinning Mills vs. Hon. Pura Ferrer-Calleja, ruled
that the employees excluded from the coverage of the CBA, who
not being excluded by law, have the right to bargain collectively.
Further, the Supreme Court aptly stated that:
The allegation that some benefits under the existing
CBA were extended to the monthly paid employees, even
if true will not preclude them from entering into a CBA of
their own. Neither is the inconvenience that may befall
petitioner for having to administer two CBAs an excuse for
depriving the monthly paid employees of their
constitutionally guaranteed right to collective bargaining.
The petition for certification election cannot likewise be deterred by the
"contract-bar rule," which finds no application in the present case. The
petitioning union NSBPI is not questioning the majority status of Buklod as
the incumbent bargaining agent of petitioner's rank and file employees. The
petition for certification election is addressed to a separate bargaining unit
the excluded employees of petitioner.

(2) CERTIFICATION YEAR BAR RULE - within one (1) year from the date of
issuance of declaration of a final certification election result; or
It is evident that the prohibition imposed by law on the holding of a
certification election "within one year from the date of issuance of declaration
of a final certification election result in this case, from February 27, 1981, the
date of the Resolution declaring NAFLU the exclusive bargaining
representative of rank-and-file workers of VIRON can have no application to
the case at bar. That one-year period-known as the "certification year" during
which the certified union is required to negotiate with the employer, and
certification election is prohibited has long since expired. (Kaisahan Ng
Manggagawang vs. Trajano [G.R. No. 75810, 09 September 1991])
(3) DEADLOCK BAR RULE - during the existence of a bargaining deadlock to
which an incumbent or certified bargaining agent is a party and which had
been submitted to conciliation or arbitration or had become the subject of a
valid notice of strike or lockout.
A "deadlock" is defined as the "counteraction of things producing entire
stoppage: a state of inaction or neutralization caused by the opposition of
persons or of factions (as in government or a voting body): standstill." There
is a deadlock if there is a "complete blocking or stoppage resulting from the
action of equal and opposed forces; as, the deadlock of a jury or legislature."
The word is synonymous with the word impasse which, within the meaning of
the American federal labor laws, "presupposes reasonable efforts at good
faith bargaining which, despite noble intentions, does not conclude in a
agreement between the parties." (Divine Word University of Tacloban vs.
Secretary [G. R. No. 91915, 11 September 1992])
The Deadlock Bar Rule simply provides that a petition for certification
election can only be entertained if there is no pending bargaining deadlock
submitted to conciliation or arbitration or had become the subject of a valid
notice of strike or lockout. The principal purpose is to ensure stability in the
relationship of the workers and the management. (NACUSIP-TUCP vs.
Trajano [G.R. No. L-67485, 10 April 1992])
Prejudicial Question; When applicable to certification election proceedings
31

Under settled jurisprudence, the pendency of a formal charge of

company domination is a prejudicial question that, until decided, bars
proceedings for a certification election, the reason being that the votes of the
members of the dominated union would not be free. (United CMC Textile
Workers Union vs. BLR [G.R. No. L-51337, 22 March 1984])
COLLECTIVE BARGAINING AND ADMINISTRATION OF AGREEMENT
It is important to determine whether or not a particular labor organization
is legitimate since legitimate labor organizations have exclusive rights under
the law which cannot be exercised by non-legitimate unions, one of which is
the right to be certified as the exclusive representative of all the employees in
an appropriate collective bargaining unit for purposes of collective
bargaining. (San Miguel Foods, Inc. vs. Laguesma [G.R. No. 116172, 10
October 1996])
A collective bargaining agreement (CBA), as used in Article 252 of the
Labor Code, refers to a contract executed upon request of either the
employer or the exclusive bargaining representative incorporating the
agreement reached after negotiations with respect to wages, hours of work
and all other terms and conditions of employment, including proposals for
adjusting any grievances or questions arising under such agreement.
While the terms and conditions of a CBA constitute the law between the
parties, it is not, however, an ordinary contract to which is applied the
principles of law governing ordinary contracts. A CBA, as a labor contract
within the contemplation of Article 1700 of the Civil Code of the Philippines
which governs the relations between labor and capital, is not merely
contractual in nature but impressed with public interest, thus, it must yield to
the common good. As such, it must be construed liberally rather than
narrowly and technically, and the courts must place a practical and realistic
construction upon it, giving due consideration to the context in which it is
negotiated and purpose which it is intended to serve. (Davao Integrated Port
Stevedoring Services vs. Abarquez [G.R. No. 102132, 19 March 1993])
[T]he general rule laid out in Fernando vs. Angat Labor Union (5 SCRA
248 [1962], that a collective bargaining agreement is a contract in personam
and, therefore, not enforceable against the successor-employer, (E.
Razon, Inc. vs. Secretary [G.R. No. 85867, 13 May 1993])
It appears that the procedural requirement of filing the CBA within 30
days from date of execution under Article 231 was not met. The subject CBA

was executed on November 28, 1989. It was ratified on December 8, 1989,

and then filed with DOLE for registration purposes on March 14, 1990. Be
that as it may, the delay in the filing of the CBA was sufficiently explained,
i.e., there was an inter-union conflict on who would succeed to the
presidency of ILO-PHILS. The CBA was registered by the DOLE only on May
4, 1990. It would be injudicious for us to assume, as what petitioner did, that
the said CBA was filed only on April 30, 1990, or five (5) days before its
registration, on the unsupported surmise that it was done to suit the law that
enjoins Regional Offices of Dole to act upon an application for registration of
a CBA within five (5) days from its receipt thereof. In the absence of any
substantial evidence that DOLE officials or personnel, in collusion with
private respondent, had antedated the filing date of the CBA, the
presumption on regularity in the performance of official functions hold.
More importantly, non-compliance with the cited procedural requirement
should not adversely affect the substantive validity of the CBA between ILOPHILS and the Transunion Corporation-Glassware Division covering the
company's rank and file employees. A collective bargaining agreement is
more than a contract. It is highly impressed with public interest for it is an
essential instrument to promote industrial peace. Hence, it bears the
blessings not only of the employer and employees concerned but even the
DOLE. To set it aside on technical grounds is not conducive to the public
good. (TUCP vs. Laguesma, G.R. No. 95013, 1994])
Duty to Bargain Collectively
Meaning of duty to bargain collectively. - The duty to bargain collectively
means the performance of a mutual obligation to meet and convene
promptly and expeditiously in good faith for the purpose of negotiating an
agreement with respect to wages, hours of work and all other terms and any
grievances or questions arising under such agreement and executing a
contract incorporating such agreements if requested by either party, but such
duty does not compel any party to agree to a proposal or to make any
concession. (Article 252 of the Labor Code)
Collective bargaining which is defined as negotiations towards a
collective agreement, is one of the democratic frameworks under the New
Labor Code, designed to stabilize the relation between labor and
management and to create a climate of sound and stable industrial peace. It
is a mutual responsibility of the employer and the Union and is characterized
as a legal obligation. So much so that Article 249, par. (g) of the Labor Code
makes it an unfair labor practice for an employer to refuse "to meet and
32

convene promptly and expeditiously in good faith for the purpose of

negotiating an agreement with respect to wages, hours of work, and all other
terms and conditions of employment including proposals for adjusting any
grievance or question arising under such an agreement and executing a
contract incorporating such agreement, if requested by either party.
While it is a mutual obligation of the parties to bargain, the employer,
however, is not under any legal duty to initiate contract negotiation. The
mechanics of collective bargaining is set in motion only when the following
jurisdictional preconditions are present, namely, (1) possession of the status
of majority representation of the employees' representative in accordance
with any of the means of selection or designation provided for by the Labor
Code; (2) proof of majority representation; and (3) a demand to bargain
under Article 251, par. (a) of the New Labor Code . ... all of which
preconditions are undisputedly present in the instant case.
xxx

xxx

xxx

The case at bar is not a case of first impression, for in the Herald
Delivery Carriers Union (PAFLU) vs. Herald Publications the rule had been
laid down that "unfair labor practice is committed when it is shown that the
respondent employer, after having been served with a written bargaining
proposal by the petitioning Union, did not even bother to submit an answer or
reply to the said proposal. This doctrine was reiterated anew in Bradman vs.
CIR wherein it was further ruled that "while the law does not compel the
parties to reach an agreement, it does contemplate that both parties will
approach the negotiation with an open mind and make a reasonable effort to
reach a common ground of agreement.
(Kiok Loy vs. NLRC [G.R. No. L-54334, 22 January 1986])
It is essential to the right of a putative bargaining agent to represent the
employees that it be the delegate of a majority of the employees and,
conversely, an employer is under duty to bargain collectively only when the
bargaining agent is representative of the majority of the employees. A natural
consequence of these principles is that the employer has the right to demand
of the asserted bargaining agent proof of its representation of its employees.
Having the right to demonstration of this fact, it is not an 'unfair labor practice'
for an employer to refuse to negotiate until the asserted bargaining agent
has presented reasonable proof of majority representation. It is necessary
however, that such demand be made in good faith and not merely as a
pretext or device for delay or evasion. The employer's right is however to
reasonable proof. ...

... Although an employer has the undoubted right to bargain with a

bargaining agent whose authority has been established, without the
requirement that the bargaining agent be officially certified by the NLRB as
such, if the informally presented evidence leaves a real doubt as to the issue,
the employer has a right to demand a certification and to refuse to negotiate
until such official certification is presented."
(LAKAS vs. Marcelo Enterprises [G.R. No. L-38258, 19 November 1982]
citing Rothenberg)
We hold that there existed no duty to bargain collectively with the
complainant LAKAS on the part of said companies. And proceeding from this
basis, it follows that all acts instigated by complainant LAKAS such as the
filing of the Notice of strike on June 13, 1967 (although later withdrawn) and
the 'two strikes of September 4, 1967 and November 7, 1967 were
calculated , designed and intended to compel the respondent Marcelo
Companies to recognize or bargain with it notwithstanding that it was an
uncertified union, or in the case of respondent Marcelo Tire and Rubber
Corporation, to bargain with it despite the fact that the MUEWA of Paulino
Lazaro vas already certified as the sole bargaining agent in said respondent
company. These concerted activities executed and carried into effect at the
instigation and motivation of LAKAS ire all illegal and violative of the
employer's basic right to bargain collectively only with the representative
supported by the majority of its employees in each of the bargaining units.
This Court is not unaware of the present predicament of the employees
involved but much as We sympathize with those who have been misled and
so lost their jobs through hasty, ill-advised and precipitate moves, We rule
that the facts neither substantiate nor support the finding that the respondent
Marcelo Companies are guilty of unfair labor practice. (LAKAS vs. Marcelo
Enterprises [G.R. No. L-38258, 19 November 1982])
[I]n a situation like this where the issue of legitimate representation in
dispute is viewed for not only by one legitimate labor organization but two or
more, there is every equitable ground warranting the holding of a certification
election. In this way, the issue as to who is really the true bargaining
representative of all the employees may be firmly settled by the simple
expedient of an election. (PAFLU vs. The Bureau of Labor Relations [69
SCRA 132])
The inference that respondents did not refuse to bargain collectively with
the complaining union because they accepted some of the demands while
they refused the others even leaving open other demands for future
33

discussion is correct, especially so when those demands were discussed at

a meeting called by respondents themselves precisely in view of the letter
sent by the union on April 29, 1960. It is true that under Section 14 of
Republic Act 875 whenever a party serves a written notice upon the
employer making some demands the latter shall reply thereto not later than
10 days from receipt thereof, but this rendition is merely procedural and as
such its non-compliance cannot be deemed to be an act of unfair labor
practice. The fact is that respondents did not ignore the letter sent by the
union so much so that they called a meeting to discuss its demands, as
already stated elsewhere. (National Union of Restaurant Workers vs. CIR
[G.R. No. L-20044, 30 April 1964])
Duration of a CBA
Art. 253-A. Terms of a Collective Bargaining Agreement. Any
Collective Bargaining Agreement that the parties may enter into
shall, insofar as the representation aspect is concerned, be for a
term of five (5) years. No petition questioning the majority status
of the incumbent bargaining agent shall be entertained and no
certification election shall be conducted by the Department of
Labor and Employment outside of the sixty-day period
immediately before the date of expiry of such five year term of the
Collective Bargaining Agreement. All other provisions of the
Collective Bargaining Agreement shall be renegotiated not later
than three (3) years after its execution. Any agreement on such
other provisions of the Collective Bargaining Agreement entered
into within six (6) months from the date of expiry of the term of
such other provisions as fixed in such Collective Bargaining
Agreement, shall retroact to the day immediately following such
date. If any such agreement is entered into beyond six months,
the parties shall agree on the duration of retroactivity thereof. In
case of a deadlock in the renegotiation of the collective
bargaining agreement, the parties may exercise their rights under
this Code.
Article 253-A is a new provision. This was incorporated by Section 21 of
Republic Act No. 6715 (the Herrera-Veloso Law) which took effect on March
21, 1989. This new provision states that the CBA has a term of five (5) years
instead of three years, before the amendment of the law as far as the

representation aspect is concerned. All other provisions of the CBA shall be

negotiated not later than three (3) years after its execution. The
"representation aspect" refers to the identity and majority status of the union
that negotiated the CBA as the exclusive bargaining representative of the
appropriate bargaining unit concerned. "All other provisions" simply refers to
the rest of the CBA, economic as well as non-economic provisions, except
representation.
xxx
xxx
xxx
From the aforesaid discussions, the legislators were more inclined to
have the period of effectivity for three (3) years insofar as the economic as
well as non-economic provisions are concerned, except representation.
Obviously, the framers of the law wanted to maintain industrial peace and
stability by having both management and labor work harmoniously together
without any disturbance. Thus, no outside union can enter the establishment
within five (5) years and challenge the status of the incumbent union as the
exclusive bargaining agent. Likewise, the terms and conditions of
employment (economic and non-economic) cannot be questioned by the
employers or employees during the period of effectivity of the CBA. The CBA
is a contract between the parties and the parties must respect the terms and
conditions of the agreement. Notably, the framers of the law did not give a
fixed term as to the effectivity of the terms and conditions of employment. It
can be gleaned from their discussions that it was left to the parties to fix the
period.
(SMC vs. Confesor [G.R. No. 111262, 19 September 1996])
The signing of the CBA is not determinative of the question whether "the
agreement was entered into within six months from the date of expiry of the
term of such other provisions as fixed in such collective bargaining
agreement" within the contemplation of Art. 253-A.
As already stated, on November 12, 1992, the Union sent the Company
a notice of deadlock in view of their inability to reconcile their positions on the
main issues, particularly on wages. The Union filed a notice of strike.
However, on December 18, 1992, in a conference called by the NCMB, the
Union and the Company agreed on a number of provisions of the CBA,
including the provision on wage increase, leaving only the issue of retirement
to be threshed out. In time, this, too, was settled, so that in his record of the
January 14, 1993 conference, the Med-Arbiter noted that "the issues raised
by the notice of strike had been settled and said notice is thus terminated." It
would therefore seem that at that point, there was already a meeting of the
34

minds of the parties, which was before the February 1993 end of the six-month
period provided in Art. 253-A.
The fact that no agreement was then signed is of no moment. Art. 253-A
refers merely to an "agreement" which, according to Black's Law Dictionary
is "a coming together of minds; the coming together in accord of two minds
on a given proposition." This is similar to Art. 1305 of the Civil Code's
definition of "contract" as "a meeting of minds between two persons."
The two terms, "agreement" and "contract," are indeed similar, although
the former is broader than the latter because an agreement may not have all
the elements of a contract. As in the case of contracts, however, agreements
may be oral or written. Hence, even without any written evidence of the CBA
made by the parties, a valid agreement existed in this case from the moment
the minds of the parties met on all matters they set out to discuss.
(Mindanao Terminal & Brokerage vs. Roldan-Confessor [G.R. No. 111809,
05May 1997])

The Court in the January 27, 1999 Decision, stated that the CBA shall be
"effective for a period of 2 years counted from December 28, 1996 up to
December 27, 1999." Parenthetically, this actually covers a three-year
period. Labor laws are silent as to when an arbitral award in a labor dispute
where the Secretary had assumed jurisdiction by virtue of Article 263 (g) of
the Labor Code shall retroact. In general, a CBA negotiated within six months
after the expiration of the existing CBA retroacts to the day immediately
following such date and if agreed thereafter, the effectivity depends on the
agreement of the parties. On the other hand, the law is silent as to the
retroactivity of a CBA arbitral award or that granted not by virtue of the
mutual agreement of the parties but by intervention of the government.
Despite the silence of the law, the Court rules herein that CBA arbitral
awards granted after six months from the expiration of the last CBA shall
retroact to such time agreed upon by both employer and the employees or
their union. Absent such an agreement as to retroactivity, the award shall
retroact to the first day after the six-month period following the expiration of
the last day of the CBA should there be one. In the absence of a CBA, the
Secretary's determination of the date of retroactivity as part of his
discretionary powers over arbitral awards shall control.
It is true that an arbitral award cannot per se be categorized as an
agreement voluntarily entered into by the parties because it requires the
interference and imposing power of the State thru the Secretary of Labor
when he assumes jurisdiction. However, the arbitral award can be
considered as an approximation of a collective bargaining agreement which

would otherwise have been entered into by the parties. The terms or periods
set forth in Article 253-A pertains explicitly to a CBA. But there is nothing that
would prevent its application by analogy to an arbitral award by the Secretary
considering the absence of an applicable law. Under Article 253-A: "(I)f any
such agreement is entered into beyond six months, the parties shall agree on
the duration of retroactivity thereof." In other words, the law contemplates
retroactivity whether the agreement be entered into before or after the said
six-month period. The agreement of the parties need not be categorically
stated for their acts may be considered in determining the duration of
retroactivity. In this connection, the Court considers the letter of petitioner's
Chairman of the Board and its President addressed to their stockholders,
which states that the CBA "for the rank-and-file employees covering the
period December 1, 1995 to November 30, 1997 is still with the Supreme
Court," as indicative of petitioner's recognition that the CBA award covers the
said period. Earlier, petitioner's negotiating panel transmitted to the Union a
copy of its proposed CBA covering the same period inclusive. In addition,
petitioner does not dispute the allegation that in the past CBA arbitral
awards, the Secretary granted retroactivity commencing from the period
immediately following the last day of the expired CBA. Thus, by petitioner's
own actions, the Court sees no reason to retroact the subject CBA awards to
a different date. The period is herein set at two (2) years from December 1,
1995 to November 30, 1997.
(MERALCO vs. Quisumbing [G.R. No. 127598, 22 February 2000])
Effect of Failure to Bargain Collectively
A thorough study of the records reveals that there was no "reasonable
effort at good faith bargaining" specially on the part of the University. Its
indifferent towards collective bargaining inevitably resulted in the failure of
the parties to arrive at an agreement. As it was evident that unilateral moves
were being undertaken only by the DWUEU-ALU, there was no
"'counteraction" of forces or an impasse to speak of. While collective
bargaining should be initiated by the union, there is a corresponding
responsibility on the part of the employer to respond in some manner to such
acts. This is a clear from the provisions of the Labor Code Art 250(a) of
which states:
xxx

xxx

xxx

Hence, petitioner's contention that the DWUEU-ALU's proposals may not

be unilaterally imposed on it on the ground that a collective bargaining
agreement is a contract wherein the consent of both parties is indispensable
is devoid of merit. A similar argument had already been disregarded in the
35

case of Kiok Loy v. NLRC, where we upheld the order of the NLRC declaring
the unions draft CBA proposal as the collective agreement which should
govern the relationship between the parties. Kiok Loy v. NLRC is applicable
in the instant case considering that the fact therein have also been
indubitably established in this case. These factors are: (a) the union is the
duly certified bargaining agent; (b) it made a definite request to bargain
submitted its collective bargaining proposals, and (c) the University made no
further proposal whatsoever. As we said in Kiok Loy v. NLRC, [a] company's
refusal to make counter proposal if considered in relation to the entire
bargaining process, may indicate bad faith and this is especially true where
the Union's request for a counter proposal is left unanswered." Moreover, the
Court added in the same case that "it is not obligatory upon either side of a
labor controversy to precipitately accept or agree to the proposal of the other.
But an erring party should not be tolerated and allowed with impunity to
resort to schemes feigning negotiations by going through empty gestures."
(Divine Word University of Tacloban vs. Secretary [G. R. No. 91915, 11
September 1992])
Any provision in the CBA is deemed to be a bilateral agreement, hence subject
to negotiation
The company's contention that its retirement plan is non-negotiable, is
not well-taken. The NLRC correctly observed that the inclusion of the
retirement plan in the collective bargaining agreement as part of the package
of economic benefits extended by the company to its employees to provide
them a measure of financial security after they shall have ceased to be
employed in the company, reward their loyalty, boost their morale and
efficiency and promote industrial peace, gives "A CONSENSUAL
CHARACTER" to the plan so that it may not be terminated or modified at will
by either party (Nestle Phil., Inc. vs. NLRC [G.R. No. 91231, 04 February
1991]
ADMINISTRATION OF THE CBA; GRIEVANCE AND VOLUNTARY ARBITRATION
COMPULSORY ARBITRATION is a system whereby the parties to a
dispute are compelled by the government to forego their right to strike and
are compelled to accept the resolution of their dispute through arbitration by
a third party. The essence of arbitration remains since a resolution of a
dispute is arrived at by resort to a disinterested third party whose decision is
final and binding on the parties, but in compulsory arbitration, such a third
party is normally appointed by the government.

Under VOLUNTARY ARBITRATION, on the other hand, referral of a

dispute by the parties is made, pursuant to a voluntary arbitration clause in
their collective agreement, to an impartial third person for a final and binding
resolution. Ideally, arbitration awards are supposed to be complied with by
both parties without delay, such that once an award has been rendered by an
arbitrator, nothing is left to be done by both parties but to comply with the
same. After all, they are presumed to have freely chosen arbitration as the
mode of settlement for that particular dispute. Pursuant thereto, they have
chosen a mutually acceptable arbitrator who shall hear and decide their
case. Above all, they have mutually agreed to de bound by said arbitrator's
decision.
In the Philippine context, the parties to a CBA are required to include
therein provisions for a machinery for the resolution of grievances arising
from the interpretation or implementation of the CBA or company personnel
policies. For this purpose, parties to a CBA shall name and designate
therein a voluntary arbitrator or a panel of arbitrators, or include a procedure
for their selection, preferably from those accredited by the NCMB. Article 261
of the Labor Code accordingly provides for exclusive original jurisdiction of
such voluntary arbitrator or panel of arbitrators over (1) the interpretation or
implementation of the CBA and (2) the interpretation or enforcement of
company personnel policies. Article 262 authorizes them, but only upon
agreement of the parties, to exercise jurisdiction over other labor disputes.
(Luzon Development Bank vs. Association [G.R. No. 120319, 06 October 1995])
The terms and conditions of a collective bargaining contract constitute
the law between the parties. Those who are entitled to its benefits can invoke
its provisions. In the event that an obligation therein imposed is not fulfilled,
the aggrieved party has the right to go to court for redress. Nor does it suffice
as a defense that the claim is made on behalf of non-members of intervenor
ALU, for it is a well-settled doctrine that the benefits of a collective bargaining
agreement extend to the laborers and employees in the collective bargaining
unit, including those who do not belong to the chosen bargaining labor
organization. Any other view would be a discrimination on which the law
frowns. It is appropriate that such should be the case. As was held in United
Restauror's Employees v. Torres, this Court speaking through Justice
Sanchez, "the right to be the exclusive representative of all the employees in
an appropriate collective bargaining unit is vested in the labor union
'designated or selected' for such purpose 'by the majority of the employees'
36

in the unit concerned." If it were otherwise, the highly salutory purpose and
objective of the collective bargaining scheme to enable labor to secure better
terms in employment condition as well as rates of pay would be frustrated
insofar as non-members are concerned, deprived as they are of participation
in whatever advantages could thereby be gained. The labor union that gets
the majority vote as the exclusive bargaining representative does not act for
its members alone. It represents all the employees in such a bargaining unit.
It is not to be indulged in any attempt on its part to disregard the rights of
non-members. Yet that is what intervenor labor union was guilty of, resulting
in the complaint filed on behalf of the laborers, who were in the ranks of
plaintiff Mactan Labor Union. (Mactan Workers Union vs. Don Ramon Aboitiz
[G.R. No. L-30241, 1972])

inter alios nec prodest nec nocet. (Benguet vs. BCI Employees [G.R. No. L24711, 30 April 1968])

In formulating the "substitutionary" doctrine, the only consideration

involved was the employees' interest in the existing bargaining agreement.
The agent's interest never entered the picture. In fact, the justification for
said doctrine was:
... that the majority of the employees, as an entity under the
statute, is the true party in interest to the contract, holding rights
through the agency of the union representative. Thus, any
exclusive interest claimed by the agent is defeasible at the will of
the principal....
Stated otherwise, the "SUBSTITUTIONARY" DOCTRINE only provides
that the employees cannot revoke the validly executed collective bargaining
contract with their employer by the simple expedient of changing their
bargaining agent. And it is in the light of this that the phrase "said new agent
would have to respect said contract" must be understood. It only means that
the employees, thru their new bargaining agent, cannot renege on their
collective bargaining contract, except of course to negotiate with
management for the shortening thereof.
The "substitutionary" doctrine, therefore, cannot be invoked to support
the contention that a newly certified collective bargaining agent automatically
assumes all the personal undertakings like the no-strike stipulation here in
the collective bargaining agreement made by the deposed union. When
BBWU bound itself and its officers not to strike, it could not have validly
bound also all the other rival unions existing in the bargaining units in
question. BBWU was the agent of the employees, not of the other unions
which possess distinct personalities. To consider UNION contractually bound
to the no-strike stipulation would therefore violate the legal maxim that res

The procedure introduced in RA 6715 of referring certain grievances

originally and exclusively to the grievance machinery and when not settled at
this level, to a panel of voluntary arbitrators outlined in CBA's does not only
include grievances arising from the interpretation or implementation of the
CBA but applies as well to those arising from the implementation of company
personnel policies. No other body shall take cognizance of these cases.
xxx
xxx
xxx
In the instant case, however, We hold that the Labor Arbiter and not the
Grievance Machinery provided for in the CBA has the jurisdiction to hear and
decide the complaints of the private respondents. While it appears that the
dismissal of the private respondents was made upon the recommendation of
PSSLU pursuant to the union security clause provided in the CBA, We are of
the opinion that these facts do not come within the phrase "grievances
arising from the interpretation or implementation of (their) Collective
Bargaining Agreement and those arising from the interpretation or
enforcement of company personnel policies," the jurisdiction of which
pertains to the Grievance Machinery or thereafter, to a voluntary arbitrator or
panel of voluntary arbitrators. Article 260 of the Labor Code on grievance
machinery and voluntary arbitrator states that "(t)he parties to a Collective
Bargaining Agreement shall include therein provisions that will ensure the
mutual observance of its terms and conditions. They shall establish a
machinery for the adjustment and resolution of grievances arising from the
interpretation or implementation of their Collective Bargaining Agreement and
those arising from the interpretation or enforcement of company personnel
policies." It is further provided in said article that the parties to a CBA shall
name or designate their respective representatives to the grievance

The reference to a Grievance Machinery and Voluntary Arbitrators for the

adjustment or resolution of grievances arising from the interpretation or
implementation of their CBA and those arising from the interpretation or
enforcement of company personnel policies is mandatory. The law grants to
voluntary arbitrators original and exclusive jurisdiction to hear and decide all
unresolved grievances arising from the interpretation or implementation of
the Collective Bargaining Agreement and those arising from the interpretation
or enforcement of company personnel policies (Article 261 of the Labor
Code).

37

machinery and if the grievance is not settled in that level, it shall

automatically be referred to voluntary arbitrators (or panel of voluntary
arbitrators) designated in advance by the parties. It need not be mentioned
that the parties to a CBA are the union and the company. Hence, only
disputes involving the union and the company shall be referred to the
grievance machinery or voluntary arbitrators.
In the instant case, both the union and the company are united or have
come to an agreement regarding the dismissal of private respondents. No
grievance between them exists which could be brought to a grievance
machinery. The problem or dispute in the present case is between the union
and the company on the one hand and some union and non-union members
who were dismissed, on the other hand. The dispute has to be settled before
an impartial body. The grievance machinery with members designated by the
union and the company cannot be expected to be impartial against the
dismissed employees. Due process demands that the dismissed workers
grievances be ventilated before an impartial body. Since there has already
been an actual termination, the matter falls within the jurisdiction of the Labor
Arbiter. (Sanyo Phil. Workers Union-PSSLU vs. Canizares [G.R. No. 101619,
08 July 1992])
[T]ermination cases fall under the original and exclusive jurisdiction of the
Labor Arbiter. It should be noted, however, that in the opening there appears
the phrase: "Except as otherwise provided under this Code . . . ." It is
paragraph (c) of the same Article which respondent Commission has
erroneously interpreted as giving the voluntary arbitrator jurisdiction over the
illegal dismissal case.
However, Article 217 (c) should be read in conjunction with Article 261 of
the Labor Code which grants to voluntary arbitrators original and exclusive
jurisdiction to hear and decide all unresolved grievances arising from the
interpretation or implementation of the collective bargaining agreement and
those arising from the interpretation or enforcement of company personel
policies. Note the phrase "unresolved grievances." In the case at bar, the
termination of petitioner is not an unresolved grievance.
The stance of the Solicitor General in the Sanyo case is totally the
reverse of its posture in the case at bar. In Sanyo, the Solicitor General was
of the view that a distinction should be made between a case involving
"interpretation or implementation of Collective Bargaining Agreement" or
interpretation or "enforcement" of company personel policies, on the one
hand and a case involving termination, on the other hand. It argued that the

dismissal of the private respondents does not involve an "interpretation or

implementation" of a Collective Bargaining Agreement or "interpretation or
enforcement" of company personel policies but involves "termination." The
Solicitor General further said that where the dispute is just in the
interpretation, implementation or enforcement stage, it may be referred to the
grievance machinery set up the Collective Bargaining Agreement or by
voluntary arbitration. Where there was already actual termination, i.e.,
violation of rights, it is already cognizable by the Labor Arbiter. We fully agree
with the theory of the Solicitor General in the Sanyo case, which is radically
apposite to its position in this case.
Moreover, the dismissal of petitioner does not fall within the phrase
"grievance arising from the interpretation or implementation of collective
bargaining agreement and those arising from the interpretation or
enforcement of company personel policies," the jurisdiction of which pertains
to the grievance machinery or thereafter, to a voluntary arbitrator or panel of
voluntary arbitrators. It is to be stressed that under Article 260 of the Labor
Code, which explains the function of the grievance machinery and voluntary
arbitrator. "(T)he parties to a Collective Bargaining Agreement shall include
therein provisions that will ensure the mutual observance of its terms and
conditions. They shall establish a machinery for the adjustment and
resolution of grievances arising from the interpretation or implementation of
their CBA and those arising from the interpretation or enforcement of
company personel policies." Article 260 further provides that the parties to a
CBA shall name or designate their respective representative to the grievance
machinery and if the grievance is unsettled in that level, it shall automatically
be refered to the voluntary arbitrators designated in advance by the parties to
a CBA of the union and the company. It can thus be deduced that only
disputes involving the union and the company shall be referred to the
grievance machinery or voluntary arbitrators.
(Maneja vs. NLRC [G.R. No. 124013, 05 June 1998]
It should be explained that "company personnel policies" are guiding
principles stated in broad, long-range terms that express the philosophy or
beliefs of an organization's top authority regarding personnel matters. They
deal with matters affecting efficiency and well-being of employees and
include, among others, the procedure in the administration of wages,
benefits, promotions, transfer and other personnel movements which are
usually not spelled out in the collective agreement. The usual source of
grievances, however, are the rules and regulations governing disciplinary
actions. (Maneja vs. NLRC [G.R. No. 124013, 05 June 1998]
38

[T]he award of a Voluntary Arbitrator is final and executory after ten (10)
calendar days from receipt of the award by the parties. There was a time
when the award of a Voluntary Arbitrator relating to money claims amounting
to more than P 100,000.00 or forty percent (40%) of the paid-up capital of the
employer (whichever was lower), could be appealed to the National Labor
Relations Commission upon the grounds of (a) abuse of discretion; or (b)
gross incompetence, presumably of the arbitrator. This is no longer so today
although, of course, certiorari will lie in appropriate cases. A petition for
certiorari under Rule 65 of the Revised Rules of Court will lie only where a
grave abuse of discretion or an act without or in excess of jurisdiction on the
part of the Voluntary Arbitrator is clearly shown. It must be borne in mind that
the writ of certiorari is an extraordinary remedy and that certiorari jurisdiction
is not to be equated with appellate jurisdiction. In a special civil action of
certiorari, the Court will not engage in a review of the facts found nor even of
the law as interpreted or applied by the Arbitrator unless the supposed errors
of fact or of law are so patent and gross and prejudicial as to amount to a
grave abuse of discretion or an excess de pouvoir on the part of the
Arbitrator. The Labor Code and its Implementing Rules thus clearly reflect
the important public policy of encouraging recourse to voluntary arbitration
and of shortening the arbitration process by rendering the arbitral award nonappealable to the NLRC. The result is that a voluntary arbitral award may be
modified and set aside only upon the same grounds on which a decision of
the NLRC itself may be modified or set aside, by this Court. (Sime Darby vs.
Magsalin [G.R. No. 90426, 15 December 1989])
The Union erred in filing a motion for reconsideration of the decision
dated July 12, 1988. So did the respondent Voluntary Arbitrator in
entertaining the motion and vacating his first decision.
When the parties submitted their grievance to arbitration, they expressly
agreed that the decision of the Voluntary Arbitrator would be final, executory
and inappealable. In fact, even without this stipulation, the first decision had
already become so by virtue of Article 263 of the Labor Code making
voluntary arbitration awards or decisions final and executory. (Imperial Textile
Mills, Inc. vs. Sampang [G.R. No. 94960, 08 March 1993])
Levy;Check-Off
A check-off is a process or device whereby the employer, on agreement
with the union recognized as the proper bargaining representative, or on
prior authorization from its employees, deducts union dues or agency fees
from the latter's wages and remits them directly to the union. Its desirability

to a labor organization is quite evident; by it, it is assured of continuous

funding. Indeed, this Court has acknowledged that the system of check-off is
primarily for the benefit of the union and, only indirectly, of the individual
laborers. When so stipulated in a collective bargaining agreement, or
authorized in writing by the employees concerned the Labor Code and its
Implementing Rules recognize it to be the duty of the employer to deduct
sums equivalent to the amount of union dues from the employees' wages for
direct remittance to the union, in order to facilitate the collection of funds vital
to the role of the union as representative of employees in a bargaining unit if
not, indeed, to its very existence. And it may be mentioned in this connection
that the right to union dues deducted pursuant to a check-off, pertains to the
local union which continues to represent the employees under the terms of a
CBA, and not to the parent association from which it has disaffiliated.
The legal basis of check-off is thus found in statute or in contract.
Statutory limitations on check-offs generally require written authorization
from each employee to deduct wages; however, a resolution approved and
adopted by a majority to the union members at a general meeting will suffice
when the right to check-off has been recognized by the employer, including
collection of reasonable assessments in connection with mandatory activities
of the union, or other special assessments and extraordinary fees.
Authorization to effect a check-off of union dues is co-terminous with the
union affiliation or membership of employees. On the other hand, the
collection of agency fees in an amount equivalent to union dues and fees,
from employees who are not union members, is recognized by Article 248 (e)
of the Labor Code. No requirement of written authorization from the nonunion employee is imposed. The employee's acceptance of benefits resulting
from a collective bargaining agreement justifies the deduction of agency fees
from his pay and the union's entitlement thereto. In this aspect, the legal
basis of the union's right to agency fees is neither contractual nor statutory,
but quasi-contractual, deriving from the established principle that non-union
employees may not unjustly enrich themselves by benefiting from
employment conditions negotiated by the bargaining union.
No provision of law makes the employer directly liable for the payment to
the labor organization of union dues and assessments that the former fails to
deduct from its employees' salaries and wages pursuant to a check-off
stipulation. The employer's failure to make the requisite deductions may
constitute a violation of a contractual commitment for which it may incur
liability for unfair labor practice. But it does not by that omission, incur liability
39

to the union for the aggregate of dues or assessments uncollected from the
union members, or agency fees for non-union employees.
Check-offs in truth impose an extra burden on the employer in the form of
additional administrative and bookkeeping costs. It is a burden assumed by
management at the instance of the union and for its benefit, in order to
facilitate the collection of dues necessary for the latter's life and sustenance.
But the obligation to pay union dues and agency fees obviously devolves not
upon the employer, but the individual employee. It is a personal obligation
not demandable from the employer upon default or refusal of the employee
to consent to a check-off. The only obligation of the employer under a checkoff is to effect the deductions and remit the collections to the union. The
principle of unjust enrichment necessarily precludes recovery of union dues
or agency fees from the employer, these being, to repeat, obligations
pertaining to the individual worker in favor of the bargaining union. Where the
employer fails or refuses to implement a check-off agreement, logic and
prudence dictate that the union itself undertake the collection of union dues
and assessments from its members (and agency fees from non-union
employees); this, of course, without prejudice to suing the employer for unfair
labor practice. Holy Cross of Davao vs. Joaquin [G.R. No. 110007, 18
October 1996])
Art. 241 has three (3) requisites for the validity of the special assessment
for union's incidental expenses, attorney's fees and representation expenses.
These are:
(1) authorization by a written resolution of the majority of all the
members at the general membership meeting called for the
purpose;
(2) secretary's record of the minutes of the meeting; and
(3) individual written authorization for check off duly signed by the
employees concerned.
(Gabriel vs. Secretary [G.R. No. 115949, 16
March 2000])
Article
241 [n]

Provision
No special assessment or other
extraordinary fees may be levied upon
the members of a labor organization
unless authorized by a written resolution
of a majority of all the members at a
general membership meeting duly called

Requisites
A levy/special assessment
via a written resolution of
the majority of all the
members in a general
membership meeting duly
called for the purpose with

241 [o]

222 [b]

for the purpose. The secretary of the

organization shall record the minutes of
the meeting including the list of all
members present, the votes cast, the
purpose of the special assessment or
fees and the recipient of such
assessment or fees. The record shall be
attested to by the president
Other than for mandatory activities
under the Code, no special assessment,
attorney's fees, negotiation fees or any
other extraordinary fees may be checked
off from any amount due an employee
without an individual written authorization
duly signed by the employee. The
authorization should specifically state the
amount, purpose and beneficiary of the
deduction;
No attorney's fees, negotiation fees or
similar charges of any kind arising from
any collective bargaining negotiations or
conclusion of the collective agreement
shall be imposed on any individual
member of the contracting union:
Provided, however, That attorney's fees
may be charged against union funds in
an amount to be agreed upon by the
parties. Any contract, agreement or
arrangement of any sort to the contrary
shall be null and void.

the secretary recording

the
minutes
of
the
meeting, list of members
as well as the votes cast.

A check-off via individual

written
authorization
signed
by
every
employee.

Prohibits attorney's fees,

negotiations fees and
similar charges arising out
of the conclusion of a
collective
bargaining
agreement from being
imposed on any individual
union member.

Enforcement of Union Security Clause; Obligation of Employer

Turning now to the involvement of the Company in the dismissal of
petitioner Cario we note that the Company upon being formally advised in
writing of the expulsion of petitioner Carino from the Union, in turn simply
issued a termination letter to Cario, the termination being made effective the
very next day. We believe that the Company should have given petitioner
Carino an opportunity to explain his side of the controversy with the Union.
Notwithstanding the Unions Security Clause in the CBA, the Company
40

should have reasonably satisfied itself by its own inquiry that the Union had
not been merely acting arbitrarily and capriciously in impeaching and
expelling petitioner Cario. From what was already discussed above, it is
quite clear that had the Company taken the trouble to investigate the acts
and proceedings of the Union, it could have very easily determined that the
Union had not acted arbitrarily in impeaching and expelling from its ranks
petitioner Cario. The Company offered the excuse that the Union had
threatened to go on strike if its request had not been forthwith granted.
Assuming that such a threat had in fact been made, if a strike was in fact
subsequently called because the Company had insisted on conducting its
own inquiry, the Court considers that such would have been prima facie an
illegal strike. The Company also pleaded that for it to inquire into the
lawfulness of the acts of the Union in this regard would constitute
interference by the Company in the administration of Union affairs. We do
not believe so.
xxx
xxx
xxx
5.
We conclude that the Company had failed to accord to petitioner
Cario the latter's right to procedural due process. The right of an employee
to be informed of the charges against him and to reasonable opportunity to
present his side in a controversy with either the Company or his own Union,
is not wiped away by a Union Security Clause or a Union Shop Clause in a
CBA. An employee is entitled to be protected not only from a company which
disregards his rights but also from his own Union the leadership of which
could yield to the temptation of swift and arbitrary expulsion from
membership and hence dismissal from his job. (Cario vs. NLRC [G.R. No.
91086, 08 May 1990])
UNFAIR LABOR PRACTICE
Of Employers
Indeed, it is an unfair labor practice for an employer operating under a
collective bargaining agreement to negotiate or to attempt to negotiate with
his employees individually in connection with changes in the agreement. And
the basis of the prohibition regarding individual bargaining with the strikers is
that although the union is on strike, the employer is still under obligation to
bargain with the union as the employees' bargaining representative (Melo
Photo Supply Corporation vs. National Labor Relations Board, 321 U.S.
332).
xxx

xxx

xxx

The test of whether an employer has interfered with and

coerced employees within the meaning of subsection (a) (1) is

whether the employer has engaged in conduct which it may
reasonably be said tends to interfere with the free exercise of
employees' rights under section 3 of the Act, and it is not necessary
that there be direct evidence that any employee was in fact
intimidated or coerced by statements of threats of the employer if
there is a reasonable inference that anti-union conduct of the
employer does have an adverse effect on self-organization and
collective bargaining. (Francisco, Labor Laws 1956, Vol. II, p. 323,
citing NLRB v. Ford, C.A., 1948, 170 F2d 735).
Besides, the letters, exhibits A and B, should not be considered by
themselves alone but should be read in the light of the preceding and
subsequent circumstances surrounding them. The letters should be
interpreted according to the "TOTALITY OF CONDUCT DOCTRINE,"
... whereby the culpability of an employer's remarks were to be
evaluated not only on the basis of their implicit implications, but
were to be appraised against the background of and in conjunction
with collateral circumstances. Under this "doctrine" expressions of
opinion by an employer which, though innocent in themselves,
frequently were held to be culpable because of the circumstances
under which they were uttered, the history of the particular
employer's labor relations or anti-union bias or because of their
connection with an established collateral plan of coercion or
interference. (Rothenberg on Relations, p. 374, and cases cited
therein.)
(Insular Life Assurance Co., Ltd., Employees Assoc. vs. Insular Life [G.R. No. L25291, 1971])
An employer is not denied the privilege of interrogating its employees as
to their union affiliation, provided the same is for a legitimate purpose and
assurance is given by the employer that no reprisals would be taken against
unionists. Nonetheless, any employer who engages in interrogation does so
with notice that he risks a finding of unfair labor practice if the circumstances
are such that his interrogation restrains or interferes with employees in the
exercise of their rights to self-organization. (Blue Flash Express Co., Inc.,
109 NLRB 591.)
xxx
xxx
xxx
The rule in this jurisdiction is that subjection by the company of its
employees to a series of questionings regarding their membership in the
union or their union activities, in such a way as to hamper the exercise of
41

free choice on their part, constitutes unfair labor practice (Scoty's

Department Store vs. Micaller, 52 O.G. 5119). PHILSTEAM's aforestated
interrogation squarely falls under this rule. (Phil. Steam Navigation Co. vs.
Phil. Officers Guild [G.R. No. L-20667/69, 29 October 1965])
[I]t can be established that the true and basic inspiration for the
employer's act is derived from the employee's union affiliations or activities,
the assignment by the employer or another reason, whatever its semblance
of validity, is unavailing. Thus, it has been held that the facts disclosed that
the employer's acts in discharging employees were actually prompted by the
employers 'improper interest in the affected employee's improper interest in
the affected employee's union affiliations and activities, even though the
employer urged that his acts were predicated on economic necessity, desire
to give employment to more needy persons, lack of work, cessation of
operations, refusal to work overtime, refusal of non-union employees to work
with union employees, seasonal lay-off, libelous remarks against
management, violation of company rules. (Visayan Bicycle, Mfg., Co., Inc.
vs. NLU [G.R. No. L-19997, 19 May 1965] citing Rothenberg on Labor
Relations)
The petitioner further claims that it could not have committed
the unfair labor practice charge for dismissing some of its
employees due to their alleged union activities because the alleged
dismissal took place more than four (4) months before the
organizational meeting of the union and more than one (1) year
before actual registration of said union with the Labor Organization
Division of the BLR.
The contention is without merit. Under Article 248(a) of the Labor Code of
the Philippines, "to interfere with, restrain, or coerce employees in their
exercise of the right to self-organization" is an unfair labor practice on the
part of the employer. Paragraph (d) of said Article also considers it an unfair
labor practice for an employer "to initiate, dominate, assist or otherwise
interfere with the formation or administration of any labor organization,
including the giving of financial or other support to it. In this particular case,
the private respondents were dismissed or their services were terminated,
because they were soliciting signatures in order to form a union within the
plant. (Judric Canning Corp. vs. Inciong [G.R. No. L-51494, 19 August 1982])
Respondent court thus correctly held that: "(T)o the mind of the Court,
whether or not the Pines Hotel incurred losses is of no moment. The fact that
management granted Christmas bonus to its employees, the same should

have been divided equally as it has been done before. Aside from the
Christmas bonus of 50% that was allocated to the Manila Hotel employees,
some of them were granted year-end bonus while the employees of the
Pines Hotel did not receive any year-end bonus. This is a clear case of
discrimination, it appearing that there is no union at the Manila Hotel or the
Taal Vista Lodge and considering further that lately respondents had always
been beset with demands for better living conditions from the complainant
union as well as strikes being staged by the union." (Manila Hotel Co. vs.
CIR, [G.R. No. L-30139, 28 September 1972])
Under the CBA between the parties that was in force and effect from May
1, 1985 to April 30,1988 it was agreed that the "bargaining unit" covered by
the CBA "consists of all regular or permanent employees, below the rank of
assistant supervisor, Also expressly excluded from the term "appropriate
bargaining unit" are all regular rank and file employees in the office of the
president, vice-president, and the other offices of the company personnel
office, security office, corporate affairs office, accounting and treasurer
department .
It is to this class of employees who were excluded in the "bargaining unit"
and who do not derive benefits from the CBA that the profit sharing privilege
was extended by petitioner.
There can be no discrimination committed by petitioner thereby as the
situation of the union employees are different and distinct from the non-union
employees. Indeed, discrimination per se is not unlawful. There can be no
discrimination where the employees concerned are not similarly situated.
(Wise & Co., Inc., vs. Wise & Co. Employees Union [G.R. No. L-87672, 13
October 1989])
The case before us does not pertain to any controversy involving
discrimination of employees but only the issue of whether the change of work
schedule, which management deems necessary to increase production,
constitutes unfair labor practice. As shown by the records, the change
effected by management with regard to working time is made to apply to all
factory employees engaged in the same line of work whether or not they are
members of private respondent union. Hence, it cannot be said that the new
scheme adopted by management prejudices the right of private respondent
to self-organization.
xxx
xxx
xxx

42

While the Constitution is committed to the policy of social justice and the
protection of the working class, it should not be supposed that every dispute
will be automatically decided in favor of labor. Management also has rights
which, as such, are entitled to respect and enforcement in the interest of
simple fair play. Although this Court has inclined more often than not toward
the worker and has upheld his cause in his conflicts with the employer, such
favoritism has not blinded the Court to the rule that justice is in every case for
the deserving, tobe dispensed in the light of the established facts and the
applicable law and doctrine.
(Sime Darby Pilipinas, Inc. vs. NLRC [G.R. No. 119205, 15 April 1998])
Petitioner's appeal must be dismissed. It is speciously grounded on mere
form rather than the realities of the case. In form, respondent court gently
treated petitioner's scheme to deprive the fifteen drivers and helpers of their
rightful status as employees and did not denounce it as a betrayal of the
salutary purpose and objective of the Industrial Peace Act, but instead
remarked that since the grant of employees' benefits hinged on the court's
decision on their status as such employees, petitioner "could not have been
guilty of refusal to bargain in accordance with the Act." The reality, however,
is that respondent court expressly found that "in truth and in fact, (petitioner)
corporation is the "employer" of the driver or helper and not the salesman or
propagandist who is merely expressly authorized by the former to engage
such services." Petitioner's failure to comply with its duty under the collective
bargaining agreement to extend the privileges, rights and benefits thereof to
the drivers and helpers as its actual employees clearly amounted to the
commission of an unfair labor practice. And consequently respondent court
properly ordered in, its judgment that said drivers and helpers "should be
given and/or extended all the privileges, rights and benefits that are given to
all the other regular employees retroactive as of the effectivity of the first
agreement of March 14, 1962 up to the present." In ordering, respondent
court but discharging its function under section 5(c) of the Act, supra, to order
the cessation of an unfair labor practice and "take such affirmative action as
will effectuate the policies of this Act."
Failure on petitioner's part to live up in good faith to the terms of its
collective bargaining agreement by denying the privileges and benefits
thereof to the fifteen drivers and helpers through its device of trying to pass
them off as "employees" of its salesmen and propagandists was a serious
violation of petitioner's duty to bargain collectively and constituted unfair
labor practice in any language. As succinctly stated by Mr. Justice Castro on

Republic Savings Bank vs. CIR, in unfair labor practice cases, "(T)he
question is whether the (respondent) committed the act charged in the
complaint. If it did, it is of no consequence either as a matter of procedure or
of substantive law, what the act is denominated whether as a restraint,
interference or coercion, as some members of the Court believe it to be, or
as a discriminatory discharge as other members think it is, or as refusal to
bargain as some other members view it, or even as a combination of any or
all of these."
(Alhambra Industries, Inc. vs. CIR [G.R. No. L-25984, 30 October 1970])
In the bargaining process, the workers and employer shall be
represented by their exclusive bargaining representatives. The labor
organization designated or selected by the majority of employees in an
appropriate collective bargaining unit, shall be the exclusive representative of
the employees in such unit for the purpose of collective bargaining. In the
case at bar, it is the ALU which is the exclusive bargaining representative of
BALMAR employees and as such it has the right and duty to bargain
collectively with BALMAR.
The duty to bargain collectively means the performance of a mutual
obligation to meet and convene promptly and expeditiously in good faith for
the purpose of negotiating an agreement with respect to wages, hours of
work and all other terms and conditions or employment including proposals
for adjusting any grievance or questions arising under such agreement if
requested by either party but such duty does not compel any party to agree
to a proposal or to make any concession (Art. 252, Labor Code, as
amended).
Procedurally, ALU sent a letter to BALMAR, attaching therewith its
proposals for collective bargaining agreement. In reply, BALMAR refused to
negotiate with ALU allegedly because` it received a copy of a letter
purportedly written on November 12, 1982 by one Johnny Luces, who
claimed to be the president of Balmar Farms Employees Association,
informing the Labor Regional Director that more than a majority of them
would like to negotiate directly with their employer BALMAR. There is no
showing, however, that said letter was favorably acted upon, much less, is
there an order superseding the Med-Arbiter's order of October 27, 1982
certifying ALU as the sole and exclusive bargaining representative of the
rank and file workerks of BALMAR.

43

BALMAR cannot also invoke good faith in refusing to negotiate with ALU,
considering that the latter has been certified as the exclusive bargaining
representative of BALMAR rank and file employees. As observed by the
SolGen, BALMAR'S pretense that majority of its rank and file employees
disaffiliated simply because of a letter it received to that effect, all the more
sustains the finding of bad faith for it is not for the petitioner BALMAR to
question which group is the collective bargaining representative of its rank
and file employees.
(Balmar Farms, Inc. vs. NLRC [G.R. No. 73504, 15 October 1991])
Of Employees
This Court has held that a closed-shop is a valid form of union security,
and such a provision in a collective bargaining agreement is not a restriction
of the right of freedom of association guaranteed by the Constitution. (Lirag
Textile Mills, Inc. vs. Blanco, 109 SCRA 87; Manalang vs. Artex Development
Company, Inc., 21 SCRA 561).

purposes as regards wages, hours of work, rates of pay and/or such other
terms and conditions of employment allowed them by law."
The consent election, it should be noted, was ordered by CIR pursuant to
the Union's petition for direct certification docketed as Case 1455-MC and a
similar petition for certification filed by SELU docketed as Case 1464-MC.
Verily, the Union can no longer demand collective bargaining. For, it became
the minority union. As matters stand, said right properly belongs to SELU,
which commands the majority. By law, the right to be the exclusive
representative of all the employees in an appropriate collective bargaining
unit is vested in the labor union "designated or selected" for such purpose
"by the majority of the employees" in the unit concerned. SELU has the right
as well as the obligation to hear, voice out and seek remedies for the
grievances of all Sulo employees, including employees who are members of
petitioner Union, regarding the "rates of pay, wages, hours of employment, or
other conditions of employment."
(United Restauror's vs. Torres [G.R. No. L-24993, 18 December 1968])
STRIKES, LOCKOUTS and CONCERTED ACTIONS

The Court stresses, however, that union security clauses are also
governed by law and by principles of justice, fair play, and legality. Union
security clauses cannot be used by union officials against an employer, much
less their own members, except with a high sense of responsibility, fairness,
prudence, and judiciousness.
A union member may not be expelled from her union, and consequently
from her job, for personal or impetuous reasons or for causes foreign to the
closed-shop agreement and in a manner characterized by arbitrariness and
whimsicality.
(Manila Mandarin Employees Union vs. NLRC [G.R. No. 76989, 29
September 1987])
When the Union struck and picketed on January 16, 1965, it might have
been true that the Union commanded a majority of Sulo's employees.
Without need of certification, it could, under such circumstances, conclude a
collective bargaining agreement with Sulo. But it is not disputed that on
October 4, 1965, i.e., shortly after this case was filed on September 18,
1965, a consent election was held. Not controverted, too, is the fact that, in
that consent election, SELU defeated the Union, petitioner herein. Because
of this, SELU was certified to the Sulo management as the "collective
bargaining representative of the employees ... for collective bargaining

A LOCKOUT mans the temporary refusal of the employer to furnish work

as a result of an industrial or labor dispute. (Article 212 [p] of the Labor
Code)
A STRIKE, considered as the most effective weapon of labor, is defined
as any temporary stoppage of work by the concerted action of employees as
a result of an industrial or labor dispute. A labor dispute includes any
controversy or matter concerning terms or conditions of employment or the
association or representation of persons in negotiating, fixing, maintaining,
changing or arranging the terms and conditions of employment, regardless of
whether or not the disputants stand in the proximate relation of employers
and employees. (Gold City Integrated Port Service, Inc. vs. NLRC [G.R. No.
103560, 06 July 1995])

44

A strike is "any temporary stoppage of work by the concerted action of

employees as a result of an industrial or labor dispute." It is the most
preeminent of the economic weapons of workers which they unsheathe to
force management to agree to an equitable sharing of the joint product of
labor and capital. Undeniably, strikes exert some disquieting effects not only
on the relationship between labor and management but also on the general
peace and progress of society. Our laws thus regulate their exercise within
reasons by balancing the interests of labor and management together with
the overarching public interest. (Lapanday Workers Union vs. NLRC [G.R.
Nos. 95494-97, 07 September 1995])
Some of the limitations on the exercise of the right of strike are provided
for in paragraphs (c) and (f) of Article 263 of the Labor Code, as amended,
supra. They provide for the procedural steps to be followed before staging a
strike filing of notice of strike, taking of strike vote, and reporting of the strike
vote result to the Department of Labor and Employment. (Lapanday Workers
Union vs. NLRC [G.R. Nos. 95494-97, 07 September 1995])
Requisites for a lawful lockout
[T]he requisites for a valid lockout are as follows:
1. a notice of intention to declare a lockout has been filed with the
Department of Labor;
2. at least 30 days has elapsed since the filing of notice before the
lockout is declared;
3. an impasse has resulted in the negotiations; and
4. the lockout is not discriminatory.
(San Pablo Oil Factory vs. CIR [6 SCRA 628])
It is not herein controverted that the complainants were locked out or
denied work by the respondent Company. Under Republic Act 875, however,
for the discrimination by reason of union membership to be considered an
unfair labor practice, the same must have been committed to courage or
discourage such membership in the union. This cannot be said of the act of
the Company complained of. As clearly established by the evidence, its
refusal to all complainants to work and requirement that the latter stay out of
the premises in the meantime (perhaps while the strike was still going on at
the factory) was borne out of the Company's justified apprehension and fear

that sabotage might be committed in the warehouse where the products

machinery and spare parts were stored, as has been the case in
Binangonan. It has never been shown that the act of the Company was
intended to induce the complain ants to renounce their union-membership or
as a deterrent for non-members to affiliate therewith, nor as a retaliatory
measure for activities in the union or in furtherance of the cause of the union.
(Rizal Cement Workers Union vs. Madrigal Co. [G.R. No. L-19767, 30 April
1964])
Requisites for a Lawful Strike
[T]he requisites for a valid strike are as follows:
1. a notice of strike filed with the Department of Labor at least 30
days before the intended date thereof or 15 days in case of unfair
labor practice;
2. strike vote approved by a majority of the total union membership
in the bargaining unit concerned, obtained by secret ballot in a
meeting called for that purpose;
3. notice given to the Department of Labor and Employment of the
results of the voting at least 7 days before the intended strike.
These requirements are mandatory.
(First City Interlink vs. Confesor [G.R. No. 106316, 05 May 1997])
Purposes of strike notice and strike-vote report. In requiring a strike
notice and a cooling-off period, the avowed intent of the law is to provide an
opportunity for mediation and conciliation. It thus directs the MOLE "to exert
all efforts at mediation and conciliation to effect a voluntary settlement"
during the cooling-off period. As applied to the CAC-NFSW dispute regarding
the 13th month pay, MOLE intervention could have possibly induced CAC to
provisionally give the 13th month pay in order to avert great business loss
arising from the project strike, without prejudice to the subsequent resolution
of the legal dispute by competent authorities; or mediation/conciliation could
have convinced NFSW to at least postpone the intended strike so as to avoid
great waste and loss to the sugar central, the sugar planters and the sugar
workers themselves, if the strike would coincide with the mining season.
So, too, the 7-day strike-vote report is not without a purpose. As pointed
out by the Solicitor General:
Many disastrous strikes have been staged in the past based
merely on the insistence of minority groups within the union. The
45

submission of the report gives assurance that a strike vote has

been taken and that, if the report concerning it is false, the majority
of the members can take appropriate remedy before it is too late.
(NFSW vs. Ovejera [G.R. No. L-59743, 13 May 1982])
The SEVEN (7) DAY WAITING PERIOD is intended to give the
Department of Labor and Employment an opportunity to verify whether the
projected strike really carries the imprimatur of the majority of the union
members. The need for assurance that majority of the union members
support the strike cannot be gainsaid. Strike is usually the last weapon of
labor to compel capital to concede to its bargaining demands or to defend
itself against unfair labor practices of management. It is a weapon that can
either breathe life to or destroy the union and its members in their struggle
with management for a more equitable due of their labors. The decision to
wield the weapon of strike must, therefore, rest on a rational basis, free from
emotionalism, unswayed by the tempers and tantrums of a few hotheads,
and firmly focused on the legitimate interest of the union which should not,
however, be antithetical to the public welfare. Thus, our laws require the
decision to strike to be the consensus of the majority for while the majority is
not infallible, still, it is the best hedge against haste and error. In addition, a
majority vote assures the union it will go to war against management with the
strength derived from unity and hence, with better chance to succeed.
(Lapanday Workers Union vs. NLRC [G.R. Nos. 95494-97, 07 September
1995])
When the law says "the labor union may strike" should the dispute
"remain unsettled until the lapse of the requisite number of days (cooling-off
period) from the filing of the notice," the unmistakable implication is that the
union may not strike before the lapse of the cooling-off period. Similarly, the
mandatory character of the 7-day strike ban after the report on the strikevote is manifest in the provision that "in every case," the union shall furnish
the MOLE with the results of the voting "at least seven (7) days before the
intended strike, subject to the (prescribed) cooling-off period." It must be
stressed that the requirements of cooling-off period and 7-day strike ban
must both be complied with, although the labor union may take a strike vote
and report the same within the statutory cooling-off period.
If only the filing of the strike notice and the strike-vote report would be
deemed mandatory, but not the waiting periods so specifically and
emphatically prescribed by law, the purposes (hereafter discussed) for which

the filing of the strike notice and strike-vote report is required would not be
achieved, as when a strike is declared immediately after a strike notice is
served, or when as in the instant case the strike-vote report is filed with
MOLE after the strike had actually commenced Such interpretation of the law
ought not and cannot be countenanced. It would indeed be self-defeating for
the law to imperatively require the filing on a strike notice and strike-vote
report without at the same time making the prescribed waiting periods
mandatory.
(NFSW vs. Ovejera [G.R. No. L-59743, 13 May 1982])
Assumption of Jurisdiction
Article 263 (g) of the Labor Code does not violate the workers'
constitutional right to strike. The section provides in part, viz.:
When in his opinion, there exists a labor dispute causing or likely
to cause a strike or lockout in an industry indispensable to the
national interest, the Secretary of Labor and Employment may
assume jurisdiction over the dispute and decide it or certify the
same to the Commission for compulsory arbitration. .
The foregoing article clearly does not interfere with the workers' right to
strike but merely regulates it, when in the exercise of such right, national
interests will be affected. The rights granted by the Constitution are not
absolute. They are still subject to control and limitation to ensure that they
are not exercised arbitrarily. The interests of both the employers and
employees are intended to be protected and not one of them is given undue
preference.
(PTWU vs. CONFESOR [G.R. No. 117169, 12 March 1997])
The Labor Code vests upon the Secretary of Labor the discretion to
determine what industries are indispensable to national interest. Thus, upon
the determination of the Secretary of Labor that such industry is
indispensable to the national interest, it will assume jurisdiction over the labor
dispute of said industry. The assumption of jurisdiction is in the nature of
police power measure. This is done for the promotion of the common good
considering that a prolonged strike or lockout can be inimical to the national
economy. The Secretary of Labor acts to maintain industrial peace. Thus, his
certification for compulsory arbitration is not intended to impede the workers'
right to strike but to obtain a speedy settlement of the dispute. (PTWU vs.
Confesor [G.R. No. 117169, 12 March 1997])
46

The intervention of the Secretary of Labor was therefore necessary to

settle the labor dispute which had lingered and which had affected both
respondent company and petitioner union. Had it not been so, the deadlock
will remain and the situation will remain uncertain. Thus, it cannot be deemed
that the Secretary of Labor had acted with grave abuse of discretion in
issuing the assailed order as she had a well-founded basis in issuing the
assailed order. It is significant at this point to point out that grave abuse of
discretion implies capricious and whimsical exercise of judgment. Thus, an
act may be considered as committed in grave abuse of discretion when the
same was performed in a capricious or whimsical exercise of judgment which
is equivalent to lack of jurisdiction. The abuse of discretion must be so patent
and gross as to amount to an evasion of positive duty or to a virtual refusal to
perform a duty enjoined by law, or to act at all in contemplation of law, as
where the power is exercised in an arbitrary and despotic manner by reason
of passion or personal hostility. (PTWU vs. Confesor [G.R. No. 117169, 12
March 1997] citing International Pharmaceuticals, Inc. vs. Secretary of
Labor)
[T]he fact remains that under the circumstances the Secretary had the
power and the duty to assume jurisdiction over the labor dispute and,
corollary to the assumption of jurisdiction, issue a return-to-work order. Given
this factual and legal backdrop, no grave abuse of discretion can be
attributed to the Secretary. (PSBA-Manila vs. Noriel [G.R. No. 80648, 15
August 1988])
A strike that is undertaken despite the issuance by the Secretary of Labor
of an assumption or certification order becomes a prohibited activity and thus
illegal, pursuant to the second paragraph of Art. 264 of the Labor Code as
amended. The Union officers and members, as a result, are deemed to have
lost their employment status for having knowingly participated in an illegal
act. (Zamboanga Wood Products, Inc. v. NLRC [G.R. 82088, 13
October1989])
Incidental Issues
[T]he fundamental normative rule that jurisdiction is the authority to bear
and determine a cause the right to act in a case. However, this should be
distinguished from the exercise of jurisdiction. The authority to decide a case
at all and not the decision rendered therein is what makes up jurisdiction.
Where there is jurisdiction over the person and the subject matter, the

decision of all other questions arising in the case is but an exercise of that
jurisdiction.
[T]he Secretary was explicitly granted by Article 263 (g) of the Labor Code
the authority to assume jurisdiction over a labor dispute causing or likely to
cause a strike or lockout in an industry indispensable to the national interest,
and decide the same accordingly. Necessarily, this authority to assume
jurisdiction over the said labor dispute must include and extend to all
questions and include and extend to all questions and controversies arising
therefrom, including cases over which the Labor Arbiter has exclusive
jurisdiction.
(International Pharmaceuticals, Inc. v. Secretary [G.R. Nos. 92981-83, 09
January 1992])
Before the Secretary of Labor and Employment may take cognizance of
an issue which is merely incidental to the labor dispute, therefore, the same
must be involved in the labor disputed itself, or otherwise submitted to him for
resolution. If it was not, as was the case in PAL v. Secretary or Labor and
Employment, supra, and he nevertheless acted on it, that assumption of
jurisdiction is tantamount to a grave abuse of discretion. Otherwise, the ruling
in International Pharmaceuticals, Inc. v. Secretary of Labor and Employment,
supra, will apply.
The submission of an incidental issue of a labor dispute, in assumption
and/or certification cases, to the Secretary of Labor for his resolution is thus
one of the instances referred to whereby the latter may exercise concurrent
jurisdiction together with the Labor Arbiters.
(St. Scholastica's College vs. Torres [G.R. No. 100158, 02 June 1992])
Return to Work Order
Once the Secretary of Labor assumes jurisdiction over, or certifies for
compulsory arbitration, a labor dispute adversely affecting the national
interest, the law mandates that if a strike or lockout has already taken place
at the time of assumption or certification, "all striking or locked out
employees shall immediately return to work and the employer shall
immediately resume operations and readmit all workers under the same
terms and conditions prevailing before the strike." [Art. 263 (g), Labor Code,
as amended.] Far from erring, the Acting Secretary, in issuing the return to
work order, merely implemented the clear mandates of the law. Thus, the
contention that error attended the issuance of such order is without any legal
basis. (PSBA - Manila vs. Noriel [G.R. No. 80648, 15 August 1988])
47

Article 263 (g) of the Labor Code provides that if a strike has already
taken place at the time of assumption, "all striking . . . employees shall
immediately return to work." This means that by its very terms, a return-towork order is immediately effective and executory notwithstanding the filing
of a motion for reconsideration. It must be strictly complied with even during
the pendency of any petition questioning its validity. After all, the assumption
and/or certification order is issued in the exercise of respondent Secretary's
compulsive power of arbitration and, until set aside, must therefore be
immediately complied with. (St. Scholastica's vs. Torres [G.R. No. 100158,
02 June 1992])
To say that its (return-to-work order) effectivity must wait affirmance in a
motion for reconsideration is not only to emasculate it but indeed to defeat its
import, for by then the deadline fixed for the return to work would, in the
ordinary course, have already passed and hence can no longer be affirmed
insofar as the time element is concerned. (PALEA vs. PAL)
The respective liabilities of striking union officers and members who
failed to immediately comply with the return-to-work order is outlined in Art.
264 of the Labor Code which provides that any declaration of a strike or
lockout after the Secretary of Labor and Employment has assumed
jurisdiction over the labor dispute is considered an illegal act. Any worker or
union officer who knowingly participates in a strike defying a return-to-work
order may, consequently, "be declared to have lost his employment status."
(St. Scholastica's vs. Torres [G.R. No. 100158, 02 June 1992])
[T]he underlying principle embodied in Art. 264(g) on the settlement of
labor disputes is that assumption and certification orders are executory in
character and are to be strictly complied with by the parties even during the
pendency of any petition questioning their validity. This extraordinary
authority given to the Secretary of Labor is aimed at arriving at a peaceful
and speedy solution to labor disputes, without jeopardizing national interests.
Regardless therefore of their motives, or the validity of their claims, the
striking workers must cease and/or desist from any and all acts that tend to,
or undermine this authority of the Secretary of Labor, once an assumption
and/or certification order is issued. They cannot, for instance, ignore returnto-work orders, citing unfair labor practices on the part of the company, to
justify their actions.
(UFE vs. Nestle Phil., Inc. [G.R. No. 88710-13, 19 December 1990])

[T]he return-to-work order not so much confers a right as it imposes a

duty; and while as a right it may be waived, it must be discharged as a duty
even against the worker's will. Returning to work in this situation is not a
matter of option or voluntariness but of obligation. The worker must return to
his job together with his co-workers so the operations of the company can be
resumed and it can continue serving the public and promoting its interest.
That is the real reason such return can be compelled. So imperative is the
order in fact that it is not even considered violative of the right against
involuntary servitude. The worker can of course give up his work, thus
severing his ties with the company, if he does not want to obey the order; but
the order must be obeyed if he wants to retain his work even if his inclination
is to strike. (Sarmiento vs. Tuico [G.R. No. 75271-73, 27 June 1988])
We also wish to point out that an assumption and/or certification order of
the Secretary of Labor automatically results in a return-to-work of all striking
workers, whether or not a corresponding order has been issued by the
Secretary of Labor. Thus, the striking workers erred when they continued
with their strike alleging absence of a return-to-work order. Article 264(g) is
clear. Once an assumption/certification order is issued, strikes are enjoined,
or if one has already taken place, all strikers shall immediately return to work.
(UFE vs. Nestle Phil., Inc. [G.R. No. 88710-13, 19 December 1990])
Liabilities for an Illegal Strike
A UNION OFFICER who knowingly participates in an illegal strike and
any worker or union officer who knowingly participates in the commission of
illegal acts during a strike may be declared to have lost their employment
status. An ordinary STRIKING WORKER cannot be terminated for mere
participation in an illegal strike. There must be proof that he committed illegal
acts during a strike. A union officer, on the other hand, may be terminated
from work when he knowingly participates in an illegal strike, and like other
workers, when he commits an illegal act during a strike. (Gold City Integrated
Port Service, Inc. vs. NLRC [G.R. No. 103560, 06 July 1995])
[I]f the existence of force (acts of violence) while the strike lasts is not
pervasive and widespread, nor consistently and deliberately resorted to as a
matter of policy, responsibility for serious acts of violence should be
individual and not collective. (Shell Oil Workers Union vs. Shell Company Of
The Phil. [G.R. No. L-30658-59, 31 March 1976])

48

Nevertheless, we are constrained to uphold the respondent Secretary's

ruling that responsibility for these illegal acts must be on an individual and
not collective basis. Therefore, although the strike was illegal because of the
commission of illegal acts, only the union officers and strikers who engaged
in violent, illegal and criminal acts against the employer are deemed to have
lost their employment status. Union members who were merely instigated to
participate in the illegal strike should be treated differently. (First City Interlink
Transportation Co., Inc., vs. Roldan-Confesor [G.R. No. 106316, 05 May
1997])
Thus, although rejecting that PNOC and its subsidiaries were guilty of
discrimination, the NLRC reiterated the policy enunciated in several labor
cases "that a strike does not automatically carry the stigma of illegality even
if no unfair labor practice were committed by the employer. It suffices if such
a belief in good faith is entertained by labor as the inducing factor for staging
a strike." Indeed, the presumption of legality prevails even if the allegation of
unfair labor practice is subsequently found to be untrue, provided that the
union and its members believed in good faith in the truth of such averment.
(PNOC Dockyard vs. NLRC [G.R. No. 118223, 26 June 1998])
Injunction
The right to picket as a means of communicating the facts of a labor
dispute is a phrase of the freedom of speech guaranteed by the constitution.
If peacefully carried out, it cannot be curtailed even in the absence of
employer-employee relationship.
The right is, however, not an absolute one. While peaceful picketing is
entitled to protection as an exercise of free speech, we believe that courts
are not without power to confine or localize the sphere of communication or
the demonstration to the parties to the labor dispute, including those with
related interest, and to insulate establishments or persons with no industrial
connection or having interest totally foreign to the context of the dispute.
Thus, the right may be regulated at the instance of third parties or "innocent
bystanders" if it appears that the inevitable result of its exercise is to create
an impression that a labor dispute with which they have no connection or
interest exists between them and the picketing union or constitute an
invasion of their rights. In one case decided by this Court, we upheld a trial
court's injunction prohibiting the union from blocking the entrance to a feed
mill located within the compound of a flour mill with which the union had a

dispute. Although sustained on a different ground, no connection was found

other than their being situated in the same premises. It is to be noted that in
the instances cited, peaceful picketing has not been totally banned but
merely regulated. And in one American case, a picket by a labor union in
front of a motion picture theater with which the union had a labor dispute was
enjoined by the court from being extended in front of the main entrance of
the building housing the theater wherein other stores operated by third
persons were located.
(PAFLU vs. Cloribel [L-25878, 28 March 1969])
Among the powers expressly conferred on the Commission by Article 218
is the power to "enjoin or restrain any actual or threatened commission of
any or all prohibited or unlawful acts or to require the performance of a
particular act in any labor dispute which, if not restrained or performed
forthwith, may cause grave or irreparable damage to any party or render
ineffectual any decision in favor of such party . . ." (IBM vs. NLRC, [G.R. No.
91980, 27 June 1991]
As a rule such restraining orders or injunctions do not issue ex parte, but
only after compliance with the following requisites, to wit:
a) a hearing held "after due and personal notice thereof has been served, in
such manner as the Commission shall direct, to all known persons
against whom relief is sought, and also to the Chief Executive and other
public officials of the province or city within which the unlawful acts have
been threatened or committed charged with the duty to protect
complainant's property;"
b) reception at the hearing of "testimony of witnesses, with opportunity for
cross-examination, in support of the allegations of a complaint made
under oath," as well as "testimony in opposition thereto, if offered . . .;
c) a finding of fact by the Commission, to the effect:
(1) That prohibited or unlawful acts have been threatened and will
be committed and will be continued unless restrained, but no
injunction or temporary restraining order shall be issued on
account of any threat, prohibited or unlawful act, except against
the person or persons, association or organization making the
threat or committing the prohibited or unlawful act or actually
authorizing or ratifying the same after actual knowledge thereof;
(2) That substantial and irreparable injury to complainant's property
will follow;
(3) That as to each item of relief to be granted, greater injury will be
49

inflicted upon complainant by the denial of relief than will be

inflicted upon defendants by the granting of relief;
(4) That complainant has no adequate remedy at law; and
(5) That the public officers charged with the duty to protect
complainant's property are unable or unwilling to furnish
adequate protection.
However, a temporary restraining order may be issued ex parte under the
following conditions:
a) the complainant "shall also allege that, unless a temporary restraining
order shall be issued without notice, a substantial and irreparable injury
to complainant's property will be unavoidable;
b) there is "testimony under oath, sufficient, if sustained, to justify the
Commission in issuing a temporary injunction upon hearing after notice;"
c) the "complainant shall first file an undertaking with adequate security in
an amount to be fixed by the Commission sufficient to recompense those
enjoined for any loss, expense or damage caused by the improvident or
erroneous issuance of such order or injunction, including all reasonable
costs, together with a reasonable attorney's fee, and expense of defense
against the order or against the granting of any injunctive relief sought in
the same proceeding and subsequently denied by the Commission;" and
d) the "temporary restraining order shall be effective for no longer than
twenty (20) days and shall become void at the expiration of said twenty
(20) days.
(IBM vs. NLRC, [G.R. No. 91980, 27 June 1991]
Liability of Employer for backwages
[T]he distinction earlier made between discriminatorily dismissed
employees and those who struck, albeit in protest against the company's
unfair labor practice. Discriminatorily dismissed employees received backpay
from the date of the act of discrimination, that is from the day of their
discharge. On this score, the award of backpay to Gaddi, Andrada and the
salesmen may be justified. The salesmen, as already stated, were practically
locked out when they were ordered to put their trucks in the garage; they did
not voluntarily strike. (See Macleod & Co. of the Phil. v. Progressive
Federation of Labor, G.R. No. L-7887, May 31, 1955) Hence, the award of
backwages.
In contrast, the rest of the employees struck as a voluntary act of protest
against what they considered unfair labor practices of the company. The

stoppage of their work was not the direct consequence of the company's
unfair labor practice. Hence their economic loss should not be shifted to the
employer. (See Dinglasan v. National Labor Union, G.R. No. L-14183, Nov.
28, 1959) As explained by the National Labor Relations Board in the case of
American Manufacturing Co., NLRB 443, "When employees voluntarily go on
strike, even if in protest against unfair labor practices, it has been our policy
not to award them backpay during the strike. However, when the strikers
abandon the strike and apply for reinstatement despite the unfair labor
practices and the employer either refuses to reinstate them or imposes upon
their reinstatement new conditions that constitute unfair labor practices, We
are of the opinion that the considerations impelling our refusal to award
backpay are no longer controlling. Accordingly, We hold that where, as in this
case, an employer refuses to reinstate strikers except upon their acceptance
of the new conditions that discriminate against them because of their union
membership or activities, the strikers who refuse to accept the conditions and
are consequently refused reinstatement are entitled to be made whole for
any losses of pay they may have suffered by reason of the respondent's
discriminatory acts." (Quoted in Teller, 2 Labor Disputes and Collective
Bargaining, Sec. 371, pp. 997-998)
(Cromwell Commercial Employees vs. CIR [G.R. No. L-19778, 30 September
1964])
TERMINATION OF EMPLOYMENT
By Employee
(a) An employee may terminate without just cause the employeeemployer relationship by serving a written notice on the employer at least
one month in advance. The employer upon whom no such notice was served
may hold the employee liable for damages.
(b) An employee may put an end to the relationship without serving any
notice on the employer for any of the following just causes:
(1) Serious insult by the employer or his representative on the
honor and person of the employee;
(2) Inhuman and unbearable treatment accorded the employee by
the employer or his representative;
(3) Commission of a crime or offense by the employer or his
representative against the person of the employee or any of the
immediate members of his family; and
50

(4) Other causes analogous to any of the foregoing.

(Article 285 of the Labor Code)
Resignation
The Court cannot uphold and give weight to private respondent's
resignation letter which appears to have been written and submitted at the
instance of petitioner. Its form is of the company's and its wordings are more
of a waiver and quitclaim. Moreover, the supposed resignation was not
acknowledged before a notary public. Petitioner's failure to deny that
Sugarland is its sister company and that petitioner absorbed Sugarland's
security contract and security personnel assumes overriding significance
over the resignation theorized upon, evincing petitioner's design to ignore or
violate labor laws through the use of the veil of corporate personality. The
Court cannot sanction the practice of some companies which, shortly after a
worker has become a regular employee, effects the transfer of the same
employee to another entity whose owners are the same, or identical, in order
to deprive subject employee of the benefits and protection he is entitled to
under the law. (A' Prime Security Services, Inc. vs. NLRC [G.R. No. 107320,
19 January 2000])
By Employer
Under Section 1, Rule XIV of the Implementing Rules and Regulations of
the Labor Code, the dismissal of an employee must be for a just or
authorized cause and after due process.
The two requirements of this legal provision are:
1. The legality of the act of dismissal, that is, dismissal under the
ground provided under Article 282 (Just Causes) or Articles 283 and
284 (Authorized Causes) of the Labor Code; and
2. The legality in the manner of dismissal, that is, with observance of
the procedural requirements of notice and hearing.
Just Cause
An employer may terminate an employment for any of the following just
causes:
(a) Serious misconduct or willful disobedience by the employee of the
lawful orders of his employer or representative in connection with
his work;
(b) Gross and habitual neglect by the employee of his duties;

(c)

Fraud or willful breach by the employee of the trust reposed in

him by his employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the
person of his employer or any immediate member of his family or
his duly authorized representative; and
(e) Other causes analogous to the foregoing.
(Article 282 of the Labor Code)
To be lawful, the cause for termination must be a serious and grave
malfeasance to justify the deprivation of a means of livelihood. This is merely
in keeping with the spirit of our Constitution and laws which lean over
backwards in favor of the working class, and mandate that every doubt must
be resolved in their favor. (Hongkong & Shanghai Banking Corp. vs. NLRC
[G.R. No. 116542, 30 July 1996])
In labor-management relations, there can be no higher penalty than
dismissal from employment. Dismissal severs employment ties and could
well be the economic death sentence of an employee. Dismissal prejudices
the socio-economic well being of the employee's family and threatens the
industrial peace. Due to its far reaching implications, our Labor Code
decrees that an employee cannot be dismissed, except for the most serious
causes. The overly concern of our laws for the welfare of employees is in
accord with the social justice philosophy of our Constitution. (Cebu Filveneer
vs. NLRC [G.R. No. 126601, 24 February 1998]
Serious misconduct or
willful disobedience by
the employee of the
lawful orders of his
employer
or
representative
in
connection with his work;
[I]n order that an employer may terminate an employee on the ground of
willful disobedience to the former's orders, regulations or instructions, it must
be established that the said orders, regulations or instructions are (a)
reasonable and lawful, (b) sufficiently known to the employee, and (c) in
connection with the duties which the employee has been engaged to
discharge. (Manebo vs. NLRC [G.R. No. 107721, 10 January 1994])

51

Misconduct is improper or wrong conduct. It is the 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 in
judgment. The misconduct to be serious within the meaning of the Act must
be of such a grave and aggravated character and not merely trivial or
unimportant. Such misconduct, however serious, must, nevertheless, be in
connection with the employee's work to constitute just cause for his
separation. In this case however, the misconduct has no relation to the work
of petitioners; hence, not a valid ground. (Cosep vs. NLRC [G.R. No.
124966, 16 June 1998])
Serious misconduct in the form of drunkenness and disorderly and
violent behavior, habitual neglect of duty, and insubordination or willful
disobedience of the lawful order of his superior officer, are just causes for the
dismissal of an employee. [Seahorse Maritime Corporation vs. NLRC [173
SCRA 390, 1989])
[W]here a violation of company policy or breach of company rules and
regulations was found to have been tolerated by management, then the
same could not serve as a basis for termination (Tide Water Associated Oil
Co. v. Victory Employees [85 PHIL 166, 1949])
The employee admits that she had asked someone to punch-in her time
card because at that time she was doing an errand for one of the companys
officers, Richard Tan, and that was with the permission of William Chua. She
maintains that she did it in good faith believing that she was anyway
accommodating the request of a company executive and done for the benefit
of the company with the acquiescence of her boss. Besides, the practice was
apparently tolerated as the employees were not getting any reprimand for
doing so. (Philippine Aeolus Automotive vs. NLRC [G.R. No. 124617, 29 April
2000])
Such dismissal, in our view, was too harsh a penalty for an unintentional
infraction, not to mention that it was his first offense committed without
malice, and committed also by others who were not equally penalized.
It is clear that the alleged false entry in private respondent's DTR was
actually the result of having logged his scheduled time-out in advance on
July 31, 1994. But it appears that when he timed in, he had no idea that his
work schedule (night shift) would be cancelled. When it was confirmed at
10:00 p.m. that there was no "butchering" of tuna to be done, those who
reported for work were allowed to go home, including private respondent. In

fact, Filoteo even obtained permission to leave from the Assistant Production
Manager.
Considering the factory practice which management tolerated, we are
persuaded that Filoteo, in his rush to catch the service vehicle, merely forgot
to correct his initial time-out entry. Nothing is shown to prove he deliberately
falsified his daily time record to deceive the company. The NLRC found that
even management's own evidence reflected that a certain Felix Pelayo, a coworker of private respondent, was also allowed to go home that night and
like private respondent logged in advance 7:00 a.m. as his time-out. This
supports Filoteo's claim that it was common practice among night-shift
workers to log in their usual time-out in advance in the daily time record.
(Permex vs. NLRC [G.R. No. 125031, 24 January 2000])
The act of private respondent in asking a co-employee to punch-in her
time card although a violation of company rules, likewise does not constitute
serious misconduct. Firstly, it was done in good faith considering that she
was asked by an officer to perform a task outside the office, which is for the
benefit of the company, with the consent of the plant manager. Secondly, it
eas her first time to commit such infraction during her five (5)-year service in
the company. Finally, the company did not lose anything by reason thereof
as the offense was immediately known and corrected. (Philippine Aeolus
Automotive vs. NLRC [G.R. No. 124617, 29 April 2000])
An ordinary employee, quite understandably, examines her pay slip every
time she receives her salary. But we cannot always expect the employee to
go further as to determine if her overtime pay, which is not much anyway,
was properly computed up to the last centavo or whether the overtime pay
pertained to a particular day the work was rendered. The amount in
controversy was only P254.90. Considering the employees salary was not
fixed as it fluctuated from time to time due to varying amounts of tips,
commissions and overtime pay received, it would not have been right to
assume always that the employee would examine every detail of the
computation of her salary. Needless to say, the same should not be laid
solely on the employee because the mistake is not hers alone. The mistake
resulted from the collective laxity of petitioners accounting personnel and
inadvertence on the part of the respondent. (Shangri-La Hotel vs. Dialogo
[G.R. No. 141900, 20 April 2001])

52

Gross
and
habitual
neglect by the employee
of his duties;
Sleeping on the job
Petitioner's reliance on the authorities it cited that sleeping on the job is
always a valid ground for dismissal, is misplaced. The authorities cited
involved security guards whose duty necessitates that they be awake and
watchful at all times inasmuch as their function, to use the words in Luzon
Stevedoring Corp. v. CIR, is "to protect the company from pilferage or loss."
Accordingly, the doctrine laid down in those cases is not applicable to the
case at bar.
While an employer enjoys a wide latitude of discretion in the
promulgation of policies, rules and regulations on work-related activities of
the employees, those directives, however, must always be fair and
reasonable, and the corresponding penalties, when prescribed, must be
commensurate to the offense involved and to the degree of the infraction. In
the case at bar, the dismissal meted out on private respondent for allegedly
sleeping on the job, under the attendant circumstances, appears to be too
harsh a penalty, considering that he was being held liable for first time, after
nine (9) long years of unblemished service, for an alleged offense which
caused no prejudice to the employer, aside from absence of substantiation of
the alleged offense. The authorities cited by petitioner are also irrelevant for
the reason that there is no evidence on the depravity of conduct, willfulness
of the disobedience, or conclusiveness of guilt on the part of private
respondent. Neither was it shown that private respondent's alleged
negligence or neglect of duty, if any, was gross and habitual. Thus,
reinstatement is just and proper.
(VH Manufacturing, Inc. vs. NLRC [G.R. No. 130957, 19 January 2000])
Abandonment
For abandonment to constitute a valid cause for termination of
employment, there must be a deliberate unjustified refusal of the employee
to resume his employment. This refusal must be clearly shown. Mere
absence is not sufficient; it must be accompanied by overt acts pointing to
the fact that the employee simply does not want to work anymore. (Davies,
Inc. vs. NLRC [G.R. No. 106915, 31 August 1993])

As found by the Labor Arbiter, private respondent's physician advised him

to rest for 30 days before reporting back for work in order to recuperate.
Private respondent heeded this advise and even exceeded the number of
days recommended by his doctor for his recuperation. In fact, he reported
back for work 50 days after his operation. This would clearly show that
private respondent was ready to assume his responsibilities considering that
he had fully recovered from the operation. Furthermore, the filing of a
complaint for illegal dismissal by private respondent is inconsistent with the
allegation of petitioners that he had abandoned his job. Surely, an
employee's posture will be illogical if he abandons his work and then
immediately files an action for his reinstatement (Remerco Garments v.
Minister, 135 SCRA 167 [1985]).
We have consistently ruled that a charge of abandonment is totally
inconsistent with the immediate filing of a complaint for illegal dismissal.
(Icawat vs.NLRC [GR No. 133573, 2002])
Undeniable is the over-reliance of both the Labor Arbiter and the NLRC
on the notion that the filing of a complaint for illegal dismissal is inconsistent
with the employer's defense of abandonment by the employee of his work.
While the burden of refuting a complaint for illegal dismissal is upon the
employer, fair play as well requires that, where the employer proffers
substantial evidence of the fact that it had not, in the first place, terminated
the employee but simply laid him off due to valid reasons, neither the Labor
Arbiter nor the NLRC may simply ignore such evidence on the pretext that
the employee would not have filed the complaint for illegal dismissal if he had
not indeed been dismissed. This is clearly a non sequitur reasoning that can
never validly take the place of the evidence of both the employer and the
employee.
xxx

xxx

xxx

The Labor Arbiter and the NLRC similarly answered the question with the
alleged truism: private respondent filed the complaint for illegal dismissal
because he was illegally dismissed. We, however, believe that private
respondent's motivation in filing the complaint for illegal dismissal despite his
refusal to return to work, is revealed by the following averment in his position
paper before the Labor Arbiter:
Before delving into the issues of the above entitled case,
complainant would like to request the Honorable Commissioner to
take judicial notice of the fabricated and manufactured criminal case
filed by the respondents in retaliation to the institution of this case and
in fact the latter had confronted the former to drop this case in
53

exchange of the dropping of the fabricated and manufactured

criminal case.
(Arc-Men Food Industries vs. NLRC [G.R. No. 113721, 07 May 1997])
In this case, the following circumstances clearly manifest private
respondent's intention to sever his ties with petitioners. First, private
respondent even bragged to his co-workers his plan to quit his job at Cesar's
Palace Barbershop and Massage Clinic as borne out by the affidavit
executed by his former co-workers. Second, he surrendered the shop's keys
and took away all his things from the shop. Third, he did not report anymore
to the shop without giving any valid and justifiable reason for his absence.
Fourth, he immediately sought a regular employment in another barbershop,
despite previous assurance that he could remain in petitioners' employ. Fifth,
he filed a complaint for illegal dismissal without praying for reinstatement.
Moreover, public respondent's assertion that the institution of the
complaint for illegal dismissal manifests private respondent's lack of intention
to abandon his job is untenable. The rule that abandonment of work is
inconsistent with the filing of a complainant for illegal dismissal is not
applicable in this case. Such rule applies where the complainant seeks
reinstatement as a relief. Corollarily, it has no application where the
complainant does not pray for reinstatement and just asks for separation pay
instead as in the present case. It goes without saying that the prayer for
separation pay, being the alternative remedy to reinstatement, contradicts
private respondent's stance. (Jo vs. NLRC [G.R. No. 121605, 02 February
2000])
[T]he evidence on record indubitably shows that Leonardo abandoned
his work with the respondents. As sufficiently established by respondents,
complainant, after being pressed by respondent to present the customer
regarding his unauthorized solicitation of sideline work from the latter and
whom he claims to be his aunt, he never reported back to work anymore.
This finding is further bolstered by the fact that after he left the respondent,
he got employed with Dennis Motors Corporation as Air-Con Mechanic.
It must be stressed that while Leonardo alleges that he was illegally
dismissed from his employment by the respondents, surprisingly he never
stated any reason why the respondents would want to ease him out from his
job. Moreover, why did it take him ten (10) long months to file his case if he
indeed was aggrieved by the respondents. All the above facts clearly point
that the filing of the case is a mere afterthought on the part of complainant
Leonardo.

(Leonardo vs. NLRC [G.R. No. 125303, 16 June 2000])

Excessive absences
In the case at bench, it is undisputed that respondent Edwin P. Sabuya
had within a span of almost six (6) years been repeatedly admonished,
warned and suspended for incurring excessive unauthorized absences.
Worse, he was not at home but was out driving a pedicab to earn extra
income when the company nurse visited his residence after he filed an
application for sick leave. Such conduct of respondent Edwin P. Sabuya
undoubtedly constitutes gross and habitual neglect of duties. (Worldwide
Papermills vs. NLRC [G.R. No. 113081, 12 May 1995])
Fraud or willful breach
by the employee of the
trust reposed in him by
his employer or duly
authorized
representative;
Loss of confidence as a ground for dismissal does not entail proof
beyond reasonable doubt of the employee's misconduct. It is enough that
there be "some basis" for such loss of confidence or that "the employer has
reasonable grounds to believe, if not to entertain the moral conviction that
the employee concerned is responsible for the misconduct and that the
nature of his participation therein rendered him absolutely unworthy of the
trust and confidence demanded by his position" (Reyes vs. Zamora, 90
SCRA 92, 111 [1979]; Galsim vs. PNB, 29 SCRA 293 [1969])
To be a valid ground for dismissal, loss of trust and confidence must be
based on a willful breach of trust. And, as realistically stressed by the
Solicitor General, unless based on a ground provided by law and supported
by substantial evidence, dismissal will be disallowed, for what is at stake is
not only the employee's position, but also his means of livelihood.
Considering that private respondent was acting in good faith, his dismissal
would run counter to such established doctrinal rulings. (PCI Bank vs. NLRC
[G.R. No. 114920, 23 August 1995])
The employees failure to detect and report to the respondent company
the fraudulent activities in her division as well as her failure to give a
satisfactory explanation on the irregularities constitute fraud or willful breach
of trust reposed on her by her employer or duly authorized representative
54

one of the just causes in terminating employment as provided for under

paragraph c, Article 283 of the Labor Code, as amended. Concomitantly, the
employees actuations betrayed the utmost trust and confidence reposed
upon her by the respondent company. We cannot, therefore, compel private
respondents to retain the employment of the employee who is shown to be
lacking in candor, honesty and efficiency required of her position. (Nokom vs.
NLRC [G.R. No. 140043, 18 July 2000])
We have consistently held that loss of confidence is a recognized ground
for the discharge of an employee from employment. But such ground must
be founded on facts established by substantial evidence. The burden of
establishing such facts as reasonably cause loss of confidence in an
employee such facts are reasonably generate belief by the employer that the
employee was connected with some misconduct and the nature of his
participation therein is such as to render him unworthy of trust and
confidence demanded of his position is on the employer. In this case, the
records are bereft of any showing that private respondent Jemina is
responsible, solely or partly, for the loss of the P100,000.00 in the vault of
petitioner Bank's Binondo Branch. Both the Labor Arbiter and the NLRC
analyzed the employer's proofs and came to the reasoned conclusion that
they did not adequately demonstrate Jemina's connection with the said loss.
True, Jemina is a possible suspect. After all, the cash operations of the
branch were under his control and supervision. He had joint custody with the
Branch Manager over all cash and properties inside the vault. He had access
to the vault where the monies of the bank were kept. Indeed, petitioner Bank
has every reason to suspect Jemina for the P100,000.00 shortage in its
vault. But suspicion has never been a valid ground for the dismissal of an
employee. The employee's fate cannot, in justice, be hinged upon
conjectures and surmises. (Pilipinas Bank vs. NLRC [G.R. No. 101372, 13
November 1992])
That it was so can easily be seen from the memorandum sent to private
respondent by Delia M. Oficial, the branch supervisor of the company, with
the reminder, in the words of the latter, that "you're fully aware that the
company is not accepting married women employee (sic), as it was verbally
instructed to you." Again, in the termination notice sent to her by the same
branch supervisor, private respondent was made to understand that her
severance from the service was not only by reason of her concealment of her
married status but, over and on top of that, was her violation of the
company's policy against marriage ("and even told you that married women

employees are not applicable [sic] or accepted in our company.")

Parenthetically, this seems to be the curious reason why it was made to
appear in the initiatory pleadings that petitioner was represented in this case
only by its said supervisor and not by its highest ranking officers who would
otherwise be solidarily liable with the corporation.
Verily, private respondent's 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 company 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
employer's caprices. Furthermore, it should never be used as a subterfuge
for causes which are improper, illegal, or unjustified.
(PT&T vs. NLRC [G.R. No. 118978, 23 May 1997])
[T]he rules on termination of employment, penalties for infractions, and
resort to concerted actions, insofar as managerial employees are concerned,
are not necessarily the same as those applicable to termination of
employment of ordinary employees. Employers, generally, are allowed a
wider latitude of discretion in terminating the employment of managerial
personnel or those of similar rank performing functions which by their nature
require the employer's trust and confidence, than in the case of ordinary
rank-and-file employees (Cruz vs. Medina [1989]).
As regards a managerial employee, moreover, mere existence of a basis
for believing that such employee has breached the trust of his employer
would suffice for dismissal. Proof beyond reasonable doubt is not required, it
being sufficient that there is some basis for such loss of confidence, such as
when the employer has reasonable ground to believe that the employee
concerned is responsible for the purported misconduct, and the nature of his
participation therein renders him unworthy of the trust and confidence
demanded by his position.
In the case at bar, petitioner, is tasked to perform key functions; he is
bound by an exacting work ethic. He should have realized that his position
requires the full trust and confidence of his employer in every exercise of
managerial discretion insofar as the conduct of his employer's business is
concerned. However, as found a quo, he committed acts which betrayed the
trust and confidence reposed on him by tampering with very sensitive
55

equipment at the joint terminal facility. In doing so, he exposed the terminal
complex and the residents in adjacent communities to the danger of a major
disaster that may be caused by tank explosions and conflagration. Verily, he
committed acts inimical to the interest of his employer which is mandated by
law to observe extraordinary diligence in its operations to ensure the safety
of the public. Indeed, we are constrained to conclude that petitioner's
admitted infraction as well his past violation of safety regulations is more
than sufficient ground for respondent company to terminate the employment
of petitioner.
(Deles vs. NLRC [G.R. No. 121348, 09 March 2000])
A perusal of RCPI's dismissal notice reveals that it merely stated a
conclusion to the effect that the withholding was deliberately done to hide
alleged malversation or misappropriation without, however, stating the
circumstances in support thereof. It further mentioned that the position of
cashier requires utmost trust and confidence but failed to allege the breach
of trust on the part of petitioner and how the alleged breach was committed.
On the assumption that there was indeed a breach, there is no evidence that
petitioner was a managerial employee of respondent RCPI. It should be facts
noted that the term 'trust and managerial employees. It may not even be
presumed that when there is a shortage, there is also a corresponding
breach of trust. Cash shortages in a cashier's work may happen, and when
there is no proof that the same was deliberately done for a fraudulent or
wrongful purpose, it cannot constitute breach of trust so as to render the
dismissal from work invalid. (Farrol vs. CA [G.R. No. 133259, 10

February 2000])
Commission of a crime or offense by the employee against the person of his
employer or any immediate member of his family or his duly authorized
representative;
Petitioners cannot downgrade the seriousness of their offenses. They
committed falsifications. These are crimes punished by the Revised Penal
Code itself. Their commission constitutes serious misconduct. Nor can
petitioners avoid liability by claiming that the SN Forms are not company
records but SSS documents. Their use is covered by Item No. 12 of the
Schedule of Offenses and Penalties which provides ". . . knowingly using
falsified record or document." Petitioners knew that the commission of this
offense is punishable by dismissal in view of its seriousness. They cannot

therefore complain of its harshness. (Farrol vs. NLRC [G.R. No. 133259, 10
February 2000])
Other causes analogous to the foregoing.
In the case of Nadura vs. Benguet Consolidated Inc., this Court
speaking through Justice Arsenio Dizon held inter alia that a cursory reading
of Section 1, R.A. 1787, which enumerates the just causes for which an
employer may terminate an employment with a definite period, is sufficient
to convince anyone that illness cannot be included as an analogous cause
"by any stretch of the imagination." (Soriano vs. PNR [G.R. No. L-43224, 23
August 1978)
'The employer cannot rightfully dismiss the employee who is sick even if
he complies with the requirement of the Act as to the service of the required
notice or payment of the corresponding separation pay, because sickness is
not willful or voluntary on the part of the employee.' (Eugenio Nadura v.
Benguet Consolidated, Inc. [G.R. No. L-17780, 24 August 1962])
(Hence to constitute an analogous cause under Article 282 of the Labor
Code, the act must be willful and voluntary on the part of the employee [and
illness is not])
We cannot but agree with PEPSI that "gross inefficiency" falls within the
purview of "other causes analogous to the foregoing," the constitutes,
therefore, just cause to terminate an employee under Article 282 of the
Labor Code. One is analogous to another if it is susceptible of comparison
with the latter either in general or in some specific detail; or has a close
relationship with the latter. "Gross inefficiency" is closely related to "gross
neglect," for both involve specific acts of omission on the part of the
employee resulting in damage to the employer or to his business. (Lim vs.
NLRC [G.R. No. 118434, 26 July 1996])
Totality of Infractions
Petitioner also assails the severity of the penalty imposed upon him
alleging that he should have merited a suspension only considering his past
performance.
Unfortunately, petitioner does not appear to be a first offender. Aside from
the infractions he was found to have committed, it appears that petitioner
falsified the truth when he made a false report about the incident to private
56

respondent SMC to cover up for his misdeeds. Moreover on previous

occasions, petitioner committed violations of company rules and regulations
concerning pricing as a salesman of the company in a way that is detrimental
to his employer. On one occasion, he failed to remit collections, so that in
1986, he was suspended for thirty days. Thus, the totality of the infractions
that petitioner has committed justifies the penalty of dismissal. (Mendoza vs.
NLRC [G.R. No. 94294, 22 March 1991])
Habituality
In other words, considerations of first offense and length of service are
overshadowed by the seriousness of the offense. As to whether an offense is
minor or serious will have to be determined according to the peculiar facts of
each case. And to a shipping company engaged in the transportation of
passengers and cargoes any delay of its vessels may greatly affect its
business and reputation and expose the company to unmitigated lawsuits for
breach of contract and damages. (Villeno vs. NLRC [G.R. No. 108153, 26
December 1995])
Where the totality of the evidence was sufficient to warrant the dismissal
of the employees the law warrants their dismissal without making any
distinction between a first offender and a habitual delinquent. Under the law,
respondent Minister is duly mandated to equally protect and respect not only
the labor or workers' side but also the management and/or employers' side.
The law, in protecting the rights of the laborer, authorizes neither oppression
nor self-destruction of the employer. (Colgate-Palmolive Philippines, Inc. v.
Ople)
Sexual Harassment
REPUBLIC ACT NO. 7877
15 February 1995
AN ACT DECLARING SEXUAL HARASSMENT UNLAWFUL IN THE
EMPLOYMENT, EDUCATION OR TRAINING ENVIRONMENT, AND FOR
OTHER PURPOSES
Section 1. Title. This Act shall be known as the "Anti-Sexual Harassment Act of
1995."

Section 2. Declaration of Policy. The State shall value the dignity of every
individual, enhance the development of its human resources, guarantee full
respect for human rights, and uphold the dignity of workers, employees,
applicants for employment, students or those undergoing training, instruction or
education. Towards this end, all forms of sexual harassment in the employment,
education or training environment are hereby declared unlawful.
Section 3. Work Education or Training-related Sexual Harassment Defined.
Work, education of training-related sexual harassment is committed by an
employer, employee, manager, supervisor, agent of the employer, teacher,
instructor, professor, coach, trainor, or any other person who, having authority,
influence or moral ascendancy over another in a work or training or education
environment, demands, requests or otherwise requires any sexual favor from the
other, regardless of whether the demand, request or requirement for submission
is accepted by the object of said Act.
(a)
In a work-related or employment environment, sexual harassment is
committed when:
(1) The sexual favor is made as a condition in the hiring or in the
employment, re-employment or continued employment of said
individual, or in granting said individual favorable compensation,
terms, conditions, promotions, or privileges; or the refusal to grant
the sexual favor results in limiting, segregating or classifying the
employee which in any way would discriminate, deprive or diminish
employment opportunities or otherwise adversely affect said
employee;
(2) The above acts would impair the employee's rights or privileges
under existing labor laws; or
(3) The above acts would result in an intimidating, hostile, or offensive
environment for the employee.
(b)
In an education or training environment, sexual harassment is
committed:
(1) Against one who is under the care, custody or supervision of the
offender;
(2) Against one whose education, training, apprenticeship or tutorship
is entrusted to the offender;
(3) When the sexual favor is made a condition to the giving of a
passing grade, or the granting of honors and scholarships, or the
57

payment of a stipend, allowance or other benefits, privileges or

considerations; or
(4) When the sexual advances result in an intimidating, hostile or
offensive environment for the student, training or apprentice.
Any person who directs or induces another to commit any act of sexual
harassment as herein defined, or who cooperates in the commission thereof by
another without which it would not have been committed, shall also be held liable
under this Act.
Section 4. Duty of the Employer or Head of Office in a Work-related, Education
or Training Environment. It shall be the duty of the employer or the head of the
work-related, educational or training environment or institution, to prevent or
deter the commission of acts of sexual harassment and to provide the
procedures for the resolution, settlement or prosecution of acts of sexual
harassment . Towards this end, the employer or head of office shall:
(a)
Promulgate appropriate rules and regulations in consultation with an
jointly approved by the employees or students or trainees, through their duly
designated representatives, prescribing the procedure for the investigation of
sexual harassment cases and the administrative sanctions therefor.
Administrative sanctions shall not be a bar to prosecution in the proper
courts for unlawful acts of sexual harassment.
The said rules and regulations issued pursuant to this sub-section (a) shall
include, among others, guidelines on proper decorum in the workplace and
educational or training institutions.
(b)
Create a committee on decorum and investigation of cases on sexual
harassment. The committee shall conduct meetings, as the case may be, with
officers and employees, teachers, instructors, professors, coaches, trainors and
students or trainees to increase understanding and prevent incidents of sexual
harassment. It shall also conduct the investigation of alleged cases constituting
sexual harassment.
In the case of a work-related environment, the committee shall be composed
of at least one (1) representative each from the management, the union, if any,
the employees form the supervisory rank, and from the rank and file employees.
In the case of the educational or training institution, the committee shall be
composed of at least one (1) representative from the administration, the trainors,
teachers, instructors, professors or coaches and students or trainees, as the
case may be.
The employer or head of office, educational or training institution shall
disseminate or post a copy of this Act for the information of all concerned.

Section. Liability of the Employer, Head of Office, Educational or Training

Institution. The employer or head of office, educational or training institution
shall be solidarity liable for damages arising from the acts of sexual harassment
committed in the employment, education or training environment if the employer
or head of office, educational or training institution is informed of such acts by
the offended party and no immediate action is taken thereon.
Section 6. Independent Action for Damages. Nothing in this Act shall preclude
the victim of work, education or training-related sexual harassment from
instituting a separate and independent action for damages and other affirmative
relief.
Section 7. Penalties. Any person who violates the provisions of this Act shall,
upon conviction, be penalized by imprisonment of not less than one (1) month
nor more than six (6) months, or a fine of not less than Ten thousand pesos
(P10,000) nor more than Twenty thousand pesos (P20,000) or both such fine
and imprisonment at the discretion of the court.
Any action arising from the violation of the provisions of this Act shall prescribe
in three (3) years.
With the finding that there is no substantial evidence of the imputed
immoral acts, it follows that the alleged violation of the Code of Ethics
governing school teachers would have no basis. Private respondent utterly
failed to show that petitioner took advantage of her position to court her
student. If the two eventually fell in love, despite the disparity in their ages
and academic levels, this only lends substance to the truism that the heart
has reasons of its own which reason does not know. But, definitely, yielding
to this gentle and universal emotion is not to be so casually equated with
immorality. The deviation of the circumstances of their marriage from the
usual societal pattern cannot be considered as a defiance of contemporary
social mores.
It would seem quite obvious that the avowed policy of the school in
rearing and educating children is being unnecessarily bannered to justify the
dismissal of petitioner. This policy, however, is not at odds with and should
not be capitalized on to defeat the security of tenure granted by the
Constitution to labor. In termination cases, the burden of proving just and
valid cause for dismissing an employee rests on the employer and his failure
to do so would result in a finding that the dismissal is unjustified.
(Chua-Qua vs. Clave [G.R. No. 49549, 30 August 1990])

58

Authorized Causes
Closure of establishment and reduction of personnel. - The employer
may also terminate the employment of any employee due to the installation
of labor-saving devices, redundancy, retrenchment to prevent losses or the
closing or cessation of operation of the establishment or undertaking unless
the closing is for the purpose of circumventing the provisions of this title, by
serving a written notice on the workers and the Department of Labor and
Employment at least one (1) month before the intended date thereof. In case
of termination due to the installation of labor-saving devices or redundancy,
the worker affected thereby shall be entitled to a separation pay equivalent
to at least one (1) month pay or to at least one (1) month pay for every year
of service, whichever is higher. In case of retrenchment to prevent losses
and in cases of closures or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least one-half
(1/2) month pay for every year of service, whichever is higher. A fraction of at
least six (6) months shall be considered one (1) whole year. (Article 283 of
the Labor Code)
Disease as ground for termination. - An employer may terminate the
services of an employee who has been found to be suffering from any
disease and whose continued employment is prohibited by law or is
prejudicial to his health as well as the health of his co-employees: Provided,
That he is paid separation pay equivalent to at least one month salary or to
one-half month salary for every year of service, whichever is greater, a
fraction of at least six months being considered as one whole year. (Article
284 of the Labor Code)
Authorized causes for the termination of employment:
(a)
installation of labor-saving devices;
(b)
redundancy;
(c)
retrenchment to prevent losses; and
(d)
closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of
circumventing the provisions of law.
(e)
disease which renders continued employment prohibited by
law or prejudicial to his health or to the health of his fellow
employees.

Installation of labor-saving devices

The installation of labor-saving devices contemplates the installation of
machinery to effect economy and efficiency in its method of production.
(Edge Apparel, Inc. vs. NLRC [G.R. No. 121314, 12 February 1998] citing
Phil. Sheet Metal Workers' Union vs. Court of Industrial Relations [83 Phil.
453])
Redundancy
Redundancy exists where the services of an employee are in excess of
what would reasonably be demanded by the actual requirements of the
enterprise. A position is redundant when it is superfluous, and superfluity of a
position or positions could be the result of a number of factors, such as the
overhiring of workers, a decrease in the volume of business or the dropping
of a particular line or service previously manufactured or undertaken by the
enterprise. An employer has no legal obligation to keep on the payroll
employees more than the number needed for the operation of the business.
(Edge Apparel, Inc. vs. NLRC [G.R. No. 121314, 12 February 1998])
The prerogative of management to conduct its own business affairs to
achieve its purposes cannot be denied. Management is at liberty, absent any
malice on its part, to abolish positions which it deems no longer necessary
(Great Pacific Life vs. NLRC, 188 SCRA 139 [1990]).
Moreover, the records of the present case clearly show that respondent
court's decision is amply supported by evidence and it did not err in its
findings, including the reason for the retrenchment:
When defendant-appellant was faced with the world-wide
recession of the airline industry resulting in a slow down in the
company's growth particularly in the regional operation (Asian Area)
where the Airbus 300 operates. It had no choice but to adopt cost
cutting measures, such as cutting down services, number of
frequencies of flights, and reduction of the number of flying points
for the A-300 fleet. As a result, defendant-appellant had to lay off A300 pilots, including plaintiff-appellee, which it found to be in excess
of what is reasonably needed.
All these considered, we find sufficient factual and legal basis to conclude
that petitioner's termination from employment was for an authorized cause,
for which he was given ample notice and opportunity to be heard, by
59

respondent company. No error nor grave abuse of discretion, therefore,

could be attributed to respondent appellate court.
(Laureano vs. CA [G.R. No. 114776, 02February 2000])

[T]here are three basic requisites for a valid retrenchment:

(1) the retrenchment is necessary to prevent losses and such
losses are proven;
(2) written notice to the employees and to the Department of Labor
and Employment at least one month prior to the intended date
of retrenchment; and
(3) payment of separation pay equivalent to one month pay or at
least 1/2 month pay for every year of service, whichever is
higher.

.
The REQUIREMENT OF NOTICE to both the employees concerned and
the Department of Labor and Employment (DOLE) is mandatory and must be
written and given at least one month before the intended date of
retrenchment. In this case, it is undisputed that the petitioners were given
notice of the temporary lay-off. There is, however, no evidence that any
written notice to permanently retrench them was given at least one month
prior to the date of the intended retrenchment. The NLRC found that GTI
conveyed to the petitioners the impossibility of recalling them due to the
continued unavailability of work. But what the law requires is a written notice
to the employees concerned and that requirement is mandatory. The notice
must also be given at least one month in advance of the intended date of
retrenchment to enable the employees to look for other means of
employment and therefore to ease the impact of the loss of their jobs and the
corresponding income. That they were already on temporary lay-off at the
time notice should have been given to them is not an excuse to forego the
one-month written notice because by this time, their lay-off is to become
permanent and they were definitely losing their employment.
There is also nothing in the records to prove that a written notice was
ever given to the DOLE as required by law. GTI's position paper, offer of
exhibits, Comment to the Petition, and Memorandum in this case do not
mention of any such written notice. The law requires two notices one to the
employee/s concerned and another to the DOLE not just one. The notice to
the DOLE is essential because the right to retrench is not an absolute
prerogative of an employer but is subject to the requirement of law that
retrenchment be done to prevent losses. The DOLE is the agency that will
determine whether the planned retrenchment is justified and adequately
supported by facts.

As for the FIRST REQUISITE, whether or not an employer would

imminently suffer serious or substantial losses for economic reasons is
essentially a question of fact for the Labor Arbiter and the NLRC to
determine. Here, both the Labor Arbiter and the NLRC found that the private
respondent was suffering and would continue to suffer serious losses,
thereby justifying the retrenchment of some of its employees, including the
petitioners. We are not prepared to disregard this finding of fact. It is settled
that findings of quasi-judicial agencies which have acquired expertise in the
matters entrusted to their jurisdiction are accorded by this Court not only with
respect but with finality if they are supported by Substantial Evidence.

With respect to the PAYMENT OF SEPARATION PAY, the NLRC found

that GTI offered to give the petitioners their separation pay but that the latter
rejected such offer which was accepted only by 22 out of the 38 original
complainants in this case. As to when this offer was made was not, however,
proven. All that the parties, the Labor Arbiter and the NLRC stated in their
respective pleadings and decisions was that the offer and payment were
made during the pendency of the illegal dismissal case with the Labor
Arbiter. But with or without this offer of separation pay, our conclusion would
remain the same: that the retrenchment of the petitioners is defective in the
face of our finding that the required notices to both the petitioners and the

Retrenchment
Retrenchment, is used interchangeably with the term "lay-off." It is the
termination of employment initiated by the employer through no fault of the
employee's and without prejudice to the latter, resorted to by management
during periods of business recession, industrial depression, or seasonal
fluctuations, or during lulls occasioned by lack of orders, shortage of
materials, conversion of the plant for a new production program or the
introduction of new methods or more efficient machinery, or of automation.
Simply put, it is an act of the employer of dismissing employees because of
losses in the operation of a business, lack of work, and considerable
reduction on the volume of his business, a right consistently recognized and
affirmed by this Court. (Sebuguero vs. NLRC [G.R. No. 115394, 27
September 1995])

60

DOLE were not given. (Sebuguero vs. NLRC [G.R. No. 115394, 27 September
1995])
In its ordinary connotation, the phrase "TO PREVENT LOSSES" means
that retrenchment or termination of the services of some employees is
authorized to be undertaken by the employer sometime before the
anticipated losses are actually sustained or realized. It is not, in other words,
the intention of the lawmaker to compel the employer to stay his hand and
keep all his employees until after losses shall have in fact materialized. If
such an intent were expressly written into the law, that law may well be
vulnerable to constitutional attack as unduly taking property from one man to
be given to another.
At the other end of the spectrum, it seems equally clear that not every
asserted possibility of loss is sufficient legal warrant for the reduction of
personnel. In the nature of things, the possibility of incurring losses is
constantly present, in greater or lesser degree, in the carrying on of business
operations, since some, indeed many, of the factors which impact upon the
profitability or viability of such operations may be substantially outside the
control of the employer. (Revidad vs. NLRC [G.R. No. 111105, 27 June
1995])
Anent the mandatory written notice to be filed with the labor department
one month before retrenchment, we are of the considered opinion that the
proceedings had before the voluntary arbitrator, where both parties were
given the opportunity to be heard and present evidence in their favor,
constitute substantial compliance with the requirement of the law. The
purpose of this notice requirement is to enable the proper authorities to
ascertain whether the closure of the business is being done in good faith and
is not just a pretext for evading compliance with the just obligations of the
employer to the affected employees. In fact, the voluntary arbitration
proceedings more than satisfied the intendment of the law considering that
the parties were accorded the benefit of a hearing, in addition to the right to
present their respective position papers and documentary evidence.
(Revidad vs. NLRC [G.R. No. 111105, 27 June 1995])
Retrenchment, in contrast to redundancy, is an economic ground to
reduce the number of employees. In order to be justified, the termination of
employment by reason of retrenchment must be due to business losses or

reverses which are serious, actual and real. Not every loss incurred or
expected to be incurred by the employer will justify retrenchment, since, in
the nature of things, the possibility of incurring losses is constantly present,
in greater or lesser degree, in carrying on the business operations.
Retrenchment is normally resorted to by management during periods of
business reverses and economic difficulties occasioned by such events as
recession, industrial depression, or seasonal fluctuations. It is an act of the
employer of reducing the work force because of losses in the operation of the
enterprise, lack of work, or considerable reduction on the volume of
business. Retrenchment is, in many ways, a measure oflast resort when
other less drastic means have been tried and found to be inadequate. A lull
caused by lack of orders or shortage of materials must be of such nature as
would severely affect the continued business operations of the employer to
the detriment of all and sundry if not properly addressed. The institution of
"new methods or more efficient machinery, or of automation" is technically a
ground for termination of employment by reason of installation of laborsaving devices but where the introduction of these methods is resorted to not
merely to effect greater efficiency in the operations of the business but
principally because of serious business reverses and to avert further losses,
the device could then verily be considered one of retrenchment. (Edge
Apparel, Inc. vs. NLRC [G.R. No. 121314, 12 February 1998])
Granting that the 16 May 1988 termination was a retrenchment scheme,
and the 31 July 1988 and the 28 February 1989 were due to closure, the law
requires the granting of the same amount of separation benefits to the
affected employees in any of the cases. The respondent argued that the
giving of more separation benefit to the second and third batches of
employees separated was their expression of gratitude and benevolence to
the remaining employees who have tried to save and make the company
viable in the remaining days of operations. This justification is not plausible.
There are workers in the first batch who have rendered more years of service
and could even be said to be more efficient than those separated
subsequently, yet they did not receive the same recognition. Understandably,
their being retained longer in their job and be not included in the batch that
was first terminated, was a concession enough and may already be
considered as favor granted by the respondents to the prejudice of the
complainants. As it happened, there are workers in the first batch who have
rendered more years in service but received lesser separation pay, because

61

of that arrangement made by the respondents in paying their termination

benefits.
Clearly, there was impermissible discrimination against the private
respondents in the payment of their separation benefits. The law requires an
employer to extend equal treatment to its employees. It may not, in the guise
of exercising management prerogatives, grant greater benefits to some and
less to others. Management prerogatives are not absolute prerogatives but
are subject to legal limits, collective bargaining agreements, or general
principles of fair play and justice (UST vs. NLRC, 190 SCRA 758). Article 283
of the Labor Code, as amended, protects workers whose employment is
terminated because of closure of the establishment or reduction of personnel
((Businessday Information vs. NLRC [G.R. No. 103575, 05 April 1993])
Although, as a general rule, Respondent company has the prerogative
and right to resort to temporary lay-off, such right is likewise limited to a
period of six (6) months applying Art. 286 of the Labor Code on suspension
of employer-employee relationship not exceeding six (6) months.
In this case, respondent company was justified in the temporary lay-off of
some of its employees. However, Respondent company should have recalled
them after the end of the six month period or at the least reasonably
informed them (complainants) that the Respondent company is still not in a
position to recall them due to the continuous drop of demand in the export
market (locally or internationally), thereby extending the temporary lay-off
with a definite period of recall and if the same cannot be met, then the
company should implement retrenchment and pay its employees separation
pay. Failing in this regard, respondent company chose not to recall nor send
notice to the complainants after the lapse of the six (6) month period. Hence,
there is in this complaint a clear case of constructive dismissal. While there is
a valid reason for the temporary lay-off, the same is also limited to a duration
of six months. Thereafter the employees, complainants herein, are entitled
under the law (Art. 286) to be recalled back to work. As result thereof, the
temporary lay-off of the complainants from January 22, 1991 (date of lay-off)
to July 22, 1991 is valid, however, thereafter complainants are already
entitled to backwages, in view of constructive dismissal, due to the fact that
they were no longer recalled back to work. Complainants cannot be placed
on temporary lay-off forever. The limited period of six (6) months is based
provisionally too prevent circumvention on the right to security of tenure and

to prevent grave abuse of discretion on the part of the employer. However,

since during the trial it was proven, as testified by the Vice-President for
marketing and personnel manager, that the lack of work and selection of
personnel continued to persist and considering the antagonism and hostility
displayed by both litigants, as observed by this Arbiter, during the trial of this
case and in view of the strained relations between the parties, reinstatement
of the complainants would not be prudent. (Sebuguero vs. NLRC [G.R. No.
115394, 27 September 1995])
Closure
Under Article 283 of the Labor Code, the closure of a business
establishment or reduction of personnel is a ground for the termination of the
services of any employee unless the closing or retrenching is for the purpose
of circumventing the provision of the law. But while business reverses can be
a just cause for terminating employees, these must be sufficiently proved by
the employer.
The case of Sugar Lopez Corporation v. Federation of Free Workers, lays
down the general standards under which an employer may retrench or
reduce the number of his employees. FIRSTLY, the losses expected should
be substantial and not merely de minimis in extent. If the loss purportedly
sought to be forestalled by retrenchment is clearly shown to be insubstantial
and inconsequential in character, the bonafide nature of the retrenchment
would appear to be seriously in question. SECONDLY, the substantial loss
apprehended must be reasonably imminent, as such imminence can be
perceived objectively and in good faith by the employer. There should, in
other words, be a certain degree of urgency for the retrenchment, which is
after all a drastic recourse with serious consequences for the livelihood of the
employees retired or otherwise laid-off. Because of the far-reaching nature of
the retrenchment, it must, THIRDLY, be reasonably necessary and likely to
effectively prevent the expected losses.
LASTLY, but certainly not the least important, the alleged losses if
already incurred, and the expected imminent losses sought to be forestalled,
must be proved by sufficient and convincing evidence.(Balasbas vs. NLRC
[G.R. No. 85286, 24 August 1992])

62

Article 283 of the Labor Code, however, speaks of a permanent

retrenchment as opposed to a temporary lay-off as is the case here. There is
no specific provision of law which treats of a temporary retrenchment or layoff and provides for the requisites in effecting it or a period or duration
therefor. These employees cannot forever be temporarily laid-off. To remedy
this situation or fill the hiatus, Article 286 may be applied but only by analogy
to set a specific period that employees may remain temporarily laid-off or in
floating status. Six months is the period set by law that the operation of a
business or undertaking may be suspended thereby suspending the
employment of the employees concerned. The temporary lay-off wherein the
employees likewise cease to work should also not last longer than six
months. After six months, the employees should either be recalled to work or
permanently retrenched following the requirements of the law, and that failing
to comply with this would be tantamount to dismissing the employees and
the employer would thus be liable for such dismissal. (Sebuguero vs. NLRC
[G.R. No. 115394, 27 September 1995])
We note that Section 2 of Rule XIV quoted above requires the notice to
specify "the particular acts or omissions constituting the ground for his
dismissal", a requirement which is obviously applicable where the ground for
dismissal is the commission of some act or omission falling within Article 282
of the Labor Code. Again, Section 5 gives the employee the right to answer
and to defend himself against "the allegations stated against him in the
notice of dismissal". It is such allegations by the employer and any counterallegations that the employee may wish to make that need to be heard
before dismissal is effected. Thus, Section 5 may be seen to envisage
charges against an employee constituting one or more of the just causes for
dismissal listed in Article 282 of the Labor Code. Where, as in the instant
case, the ground for dismissal or termination of services does not relate to a
blameworthy act or omission on the part of the employee, there appears to
us no need for an investigation and hearing to be conducted by the employer
who does not, to begin with, allege any malfeasance or non-feasance on the
part of the employee. In such case, there are no allegations which the
employee should refute and defend himself from. Thus, to require petitioner
Wiltshire to hold a hearing, at which private respondent would have had the
right to be present, on the business and financial circumstances compelling
retrenchment and resulting in redundancy, would be to impose upon the
employer an unnecessary and inutile hearing as a condition for legality of
termination. (Wiltshire File Co., Inc. vs. NLRC [G.R. No. 82249, 07 February
1991])

Broadly speaking, there appears no complete dissolution of petitioner's

business undertaking but the relocation of petitioner's plant to Batangas, in
our view, amounts to cessation of petitioner's business operations in Makati.
It must be stressed that the phrase "closure or cessation of operation of an
establishment or undertaking not due to serious business losses or reverses"
under Article 283 of the Labor Code includes both the complete cessation of
all business operations and the cessation of only part of a company's
business. In Philippine Tobacco Flue-Curing & Redrying Corp. vs. NLRC, a
company transferred its tobacco processing plant in Balintawak, Quezon City
to Candon, Ilocos Sur. The company therein did not actually close its entire
business but merely relocated its tobacco processing and redrying
operations to another place. Yet, this Court considered the transfer as
closure not due to serious business losses for which the workers are entitled
to separation pay.
There is no doubt that petitioner has legitimate reason to relocate its
plant because of the expiration of the lease contract on the premises it
occupied. That is its prerogative. But even though the transfer was due to a
reason beyond its control, petitioner has to accord its employees some relief
in the form of severance pay. Thus, in E. Razon, Inc. vs. Secretary, petitioner
therein provides arrastre services in all piers in South Harbor, Manila, under
a management contract with the Philippine Ports Authority. Before the
expiration of the term of the contract, the PPA cancelled the said contract
resulting in the termination of employment of workers engaged by petitioner.
Obviously, the cancellation was not sought, much less desired by petitioner.
Nevertheless, this Court required petitioner therein to pay its workers
separation pay in view of the cessation of its arrastre operations. (Cheniver
Deco Print Technics Corporation vs. NLRC [G.R. No. 122876, 17 February
2000])
It is clear that Article 283 of the Labor Code applies in cases of closures
of establishment and reduction of personnel. The peculiar circumstances in
the case at bar, however, involves neither the closure of an establishment
nor a reduction of personnel as contemplated under the aforesaid article.
When the Patalon Coconut Estate was closed because a large portion of the
estate was acquired by DAR pursuant to CARP, the ownership of that large
portion of the estate was precisely transferred to PEARA and ultimately to
the petitioners as members thereof and as agrarian lot beneficiaries. Hence,
Article 283 of the Labor Code is not applicable to the case at bench.

63

Even assuming, arguendo, that the situation in this case were a closure
of the business establishment called Patalon Coconut Estate of private
respondents, still the petitioners/employees are not entitled to separation
pay. The closure contemplated under Article 283 of the Labor Code is a
unilateral and voluntary act on the part of the employer to close the business
establishment as may be gleaned from the wording of the said legal
provision that "The employer may also terminate the employment of any
employee due to. . .". The use of the word "may," in a statute, denotes that it
is directory in nature and generally permissive only. The "plain meaning rule"
or verba legis in statutory construction is thus applicable in this case. Where
the words of a statute are clear, plain and free from ambiguity, it must be
given its literal meaning and applied without attempted interpretation.
In other words, Article 283 of the Labor Code does not contemplate a
situation where the closure of the business establishment is forced upon the
employer and ultimately for the benefit of the employees.
(NFL vs. NLRC [G.R. No. 127718, 02 March 2000])
Broadly speaking, there appears no complete dissolution of petitioner's
business undertaking but the relocation of petitioner's plant to Batangas, in
our view, amounts to cessation of petitioner's business operations in Makati.
It must be stressed that the phrase "closure or cessation of operation of an
establishment or undertaking not due to serious business losses or reverses"
under Article 283 of the Labor Code includes both the complete cessation of
all business operations and the cessation of only part of a company's
business. In Philippine Tobacco Flue-Curing & Redrying Corp. vs. NLRC, a
company transferred its tobacco processing plant in Balintawak, Quezon City
to Candon, Ilocos Sur. The company therein did not actually close its entire
business but merely relocated its tobacco processing and redrying
operations to another place. Yet, this Court considered the transfer as
closure not due to serious business losses for which the workers are entitled
to separation pay. (Cheniver Deco Print Technics Corporation vs. NLRC
[G.R. No. 122876, 17 February 2000])
Disease
The applicable rule on the ground for dismissal invoked against him is
Section 8, Rule I, Book VI, of the Rules and Regulations Implementing the
Labor Code reading as follows:

Sec. 8. Disease as a ground for dismissal.

Where the
employee suffers from a disease and his continued employment
is prohibited by law or prejudicial to his health or to the health of
his co-employees, the employer shall not terminate his
employment unless there is a certification by a competent public
health authority that the disease is of such nature or at such a
stage that it cannot be cured within a period of six (6) months
even with proper medical treatment. If the disease or ailment can
be cured within the period, the employer shall not terminate the
employee but shall ask the employee to take a leave. The
employer shall reinstate such employee to his former position
immediately upon the restoration of his normal health.
The record does not contain the certification required by the above rule.
The medical certificate offered by the petitioner came from its own physician,
who was not a "competent public health authority," and merely stated the
employee's disease, without more. We may surmise that if the required
certification was not presented, it was because the disease was not of such a
nature or seriousness that it could not be cured within a period of six months
even with proper medical treatment. If so, dismissal was unquestionably a
severe and unlawful sanction.
(Cebu Royal Plant vs. Deputy Minister Of Labor [G.R. No. L-58639, 12 August
1987])
Due Process
The essence of due process is simply an opportunity to be heard, or as
applied to administrative proceedings, an opportunity to explain one's side or
an opportunity to seek a reconsideration of the action or ruling complained
of.
A formal or trial-type hearing is not at all times and in all instances
essential. The requirements are satisfied where the parties are fair and
reasonable opportunity to explain their side of the controversy at hand. What
is frowned upon is the absolute lack of notice and hearing. (Stayfast
Philippines Corp. vs. NLRC [218 SCRA 596, 1993])
A formal trial-type hearing is not at all times and in all instances essential
to due process. It is enough that the parties are given a fair and reasonable
opportunity to explain their respective sides of the controversy and to present
supporting evidence on which a fair decision can be based. According to
64

Llora Motors Inc. vs. Drilon, this type of hearing is not even mandatory in
cases of complainants lodged before the Labor Arbiter. And in Sajonas vs.
NLRC, we observed as follows:
Finally, on the matter of due process which petitioners claim was
denied them by private respondents during the investigation which
led to their dismissal, we agree with respondents that although the
aforesaid investigations were not conducted in the manner of a
regular trial in court, the elements of due process, namely the right to
be informed of the charges, to be present and to be heard, were
accorded petitioners. In said investigations, petitioners freely and
voluntarily answered the questions and even made further statements
in their defense during the concluding stages thereof. (Aberia vs.
NLRC [G.R. No. 102023, 06 November 1992])
"AMPLE OPPORTUNITY" connotes every kind of assistance that
management must accord the employee to enable him to prepare
adequately for his defense including legal representation. (Manebo vs. NLRC
[G.R. No. 107721, 10 January 1994])
The record of this case is bereft of any indication that a hearing or other
gathering was in fact held where private respondent Calangi was given a
reasonable opportunity to confront his accuser(s) and to defend against the
charges made by the latter. Petitioner Corporation's "prior consultation" with
the labor union with which private respondent Calangi was affiliated, was
legally insufficient. So far as the record shows, neither petitioner nor the
labor union actually advised Calangi of the matters at issue. The
Memorandum of petitioner's Personnel Manager certainly offered no helpful
particulars. It is important to stress that the rights of an employee whose
services are sought to be terminated to be informed beforehand of his
proposed dismissal (or suspension) as well as of the reasons therefor, and to
be afforded an adequate opportunity to defend himself from the charges
levelled against him, are rights PERSONAL TO THE EMPLOYEE. Those
rights were not satisfied by petitioner Corporation's obtaining the consent of
or consulting with the labor union; such consultation or consent was not a
substitute for actual observance of those rights of private respondent
Calangi. The employee can waive those rights, if he so chooses, but the
union cannot waive them for him. That the private respondent simply 'kept
silent" all the while, is not adequate to show an effective waiver of his rights.
Notice and opportunity to be heard must be accorded by an employer even

though the employee does not affirmatively demand them. (Century Textile
Mills, Inc. vs. NLRC [G.R. No. 77859, 25 May 1988])
WENPHIL Doctrine
The Court holds that the policy of ordering the reinstatement to the
service of an employee without loss of seniority and the payment of his
wages during the period of his separation until his actual reinstatement but
not exceeding three (3) years without qualification or deduction, when it
appears he was not afforded due process, although his dismissal was found
to be for just and authorized cause in an appropriate proceeding in the
Ministry of Labor and Employment, should be re-examined. It will be highly
prejudicial to the interests of the employer to impose on him the services of
an employee who has been shown to be guilty of the charges that warranted
his dismissal from employment. Indeed, it will demoralize the rank and file if
the undeserving, if not undesirable, remains in the service.
Thus in the present case, where the private respondent, who appears to
be of violent temper, caused trouble during office hours and even defied his
superiors as they tried to pacify him, should not be rewarded with reemployment and back wages. It may encourage him to do even worse and
will render a mockery of the rules of discipline that employees are required to
observe. Under the circumstances the dismissal of the private respondent for
just cause should be maintained. He has no right to return to his former
employer.
However, the petitioner must nevertheless be held to account for failure
to extend to private respondent his right to an investigation before causing
his dismissal. The rule is explicit as above discussed. The dismissal of an
employee must be for just or authorized cause and after due process.
Petitioner committed an infraction of the second requirement. Thus, it must
be imposed a sanction for its failure to give a formal notice and conduct an
investigation as required by law before dismissing petitioner from
employment. Considering the circumstances of this case petitioner must
indemnify the private respondent the amount of P1,000.00. The measure of
this award depends on the facts of each case and the gravity of the omission
committed by the employer. (WENPHIL vs. NLRC [G.R. No. 80587, 08
February 1989])
WENPHIL Doctrine abandoned by Serrano vs. NLRC
65

In sum, we hold that if in proceedings for reinstatement under Art. 283, it

is shown that the termination of employment was due to an authorized
cause, then the employee concerned should not be ordered reinstated even
though there is failure to comply with the 30-day notice requirement. Instead,
he must be granted separation pay in accordance with Art. 283,
xxx

xxx

xxx

If the employee's separation is without cause, instead of being given

separation pay, he should be reinstated. In either case, whether he is
reinstated or only granted separation pay, he should be paid full backwages
if he has been laid off without written notice at least 30 days in advance.
On the other hand, with respect to dismissals for cause under Art. 282, if
it is shown that the employee was dismissed for any of the just causes
mentioned in said Art. 282, then, in accordance with that article, he should
not be reinstated. However, he must be paid backwages from the time his
employment was terminated until it is determined that the termination of
employment is for a just cause because the failure to hear him before he is
dismissed renders the termination of his employment without legal effect.
(Serrano vs. NLRC [G.R. No. 117040, 27 January 2000])
Violation of procedural due process not a violation of the Due Process Clause of the
Constitution
Violation of Notice Requirement Not a Denial of Due Process
The cases cited by both Justices Puno and Panganiban refer, however,
to the denial of due process by the State, which is not the case here. There
are three reasons why, on the other hand, violation by the employer of the
notice requirement cannot be considered a denial of due process resulting in
the nullity of the employee's dismissal or layoff.
The FIRST is that the Due Process Clause of the Constitution is a
limitation on governmental powers. It does not apply to the exercise of
private power, such as the termination of employment under the Labor Code.
This is plain from the text of Art. III, 1 of the Constitution, viz.: "No person
shall be deprived of life, liberty, or property without due process of law. . . ."
The reason is simple: Only the State has authority to take the life, liberty, or
property of the individual. The purpose of the Due Process Clause is to
ensure that the exercise of this power is consistent with what are considered
civilized methods.

The SECOND REASON is that notice and hearing are required under the
Due Process Clause before the power of organized society are brought to
bear upon the individual. This is obviously not the case of termination of
employment under Art. 283. Here the employee is not faced with an aspect
of the adversary system. The purpose for requiring a 30-day written notice
before an employee is laid off is not to afford him an opportunity to be heard
on any charge against him, for there is none. The purpose rather is to give
him time to prepare for the eventual loss of his job and the DOLE an
opportunity to determine whether economic causes do exist justifying the
termination of his employment.
Even in cases of dismissal under Art. 282, the purpose for the
requirement of notice and hearing is not to comply with Due Process Clause
of the Constitution. The time for notice and hearing is at the trial stage. Then
that is the time we speak of notice and hearing as the essence of procedural
due process. Thus, compliance by the employer with the notice requirement
before he dismisses an employee does not foreclose the right of the latter to
question the legality of his dismissal. As Art. 277(b) provides, "Any decision
taken by the employer shall be without prejudice to the right of the worker to
contest the validity or legality of his dismissal by filing a complaint with the
regional branch of the National Labor Relations Commission."
Indeed, to contend that the notice requirement in the Labor Code is an
aspect of due process is to overlook the fact that Art. 283 had its origin in Art.
302 of the Spanish Code of Commerce of 1882 which gave either party to
the employer-employee relationship the right to terminate their relationship
by giving notice to the other one month in advance. In lieu of notice, an
employee could be laid off by paying him a mesada equivalent to his salary
for one month. 28 This provision was repealed by Art. 2270 of the Civil Code,
which took effect on August 30, 1950. But on June 12, 1954, R.A. No. 1052,
otherwise known as the Termination Pay Law, was enacted reviving the
mesada. On June 21, 1957, the law was amended by R.A. No. 1787
providing for the giving of advance notice or the payment of compensation at
the rate of one-half month for every year of service.
The Termination Pay Law was held not to be a substantive law but a
regulatory measure, the purpose of which was to give the employer the
opportunity to find a replacement or substitute, and the employee the equal
opportunity to look for another job or source of employment. Where the
termination of employment was for a just cause, no notice was required to be
given to the, employee. 30 It was only on September 4, 1981 that notice was
66

required to be given even where the dismissal or termination of an employee

was for cause. This was made in the rules issued by the then Minister of
Labor and Employment to implement B.P. Blg. 130 which amended the Labor
Code. And it was still much later when the notice requirement was embodied
in the law with the amendment of Art. 277(b) by R.A. No. 6715 on March 2,
1989. It cannot be that the former regime denied due process to the
employee. Otherwise, there should now likewise be a rule that, in case an
employee leaves his job without cause and without prior notice to his
employer, his act should be void instead of simply making him liable for
damages.
The THIRD REASON why the notice requirement under Art. 283 can not
be considered a requirement of the Due Process Clause is that the employer
cannot really be expected to be entirely an impartial judge of his own cause.
This is also the case in termination of employment for a just cause under Art.
282 (i.e., serious misconduct or willful disobedience by the employee of the
lawful orders of the employer, gross and habitual neglect of duties, fraud or
willful breach of trust of the employer, commission of crime against the
employer or the latter's immediate family or duly authorized representatives,
or other analogous cases).
Justice Puno disputes this. He says that "statistics in the DOLE will prove
that many cases have been won by employees before the grievance
committees manned by impartial judges of the company." The grievance
machinery is, however, different because it is established by agreement of
the employer and the employees and composed of representatives from both
sides. That is why, in Batangas Laguna Tayabas Bus Co. v. Court of
Appeals, which Justice Puno cites, it was held that "Since the right of [an
employee] to his labor is in itself a property and that the labor agreement
between him and [his employer] is the law between the parties, his summary
and arbitrary dismissal amounted to deprivation of his property without due
process of law." But here we are dealing with dismissals and layoffs by
employers alone, without the intervention of any grievance machinery.
Accordingly in Montemayor v. Araneta University Foundation, although a
professor was dismissed without a hearing by his university, his dismissal for
having made homosexual advances on a student was sustained, it appearing
that in the NLRC, the employee was fully heard in his defense. (Serrano vs.
NLRC [G.R. No. 117040, 27 January 2000])

Effect of Lack of Notice; Termination INEFFECTUAL

Lack of Notice Only Makes Termination Ineffectual
Not all notice requirements are requirements of due process. Some are
simply part of a procedure to be followed before a right granted to a party
can be exercised. Others are simply an application of the Justinian precept,
embodied in the Civil Code, to act with justice, give everyone his due, and
observe honesty and good faith toward one's fellowmen. Such is the notice
requirement in Arts. 282-283. The consequence of the failure either of the
employer or the employee to live up to this precept is to make him liable in
damages, not to render his act (dismissal or resignation, as the case may be)
void. The measure of damages is the amount of wages the employee should
have received were it not for the termination of his employment without prior
notice. If warranted, nominal and moral damages may also be awarded.
We hold, therefore, that, with respect to Art. 283 of the Labor Code, the
employer's failure to comply with the notice requirement does not constitute
a denial of due process but a mere failure to observe a procedure for the
termination of employment which makes the termination of employment
merely INEFFECTUAL. It is similar to the failure to observe the provisions of
Art. 1592, in relation to Art. 1191, of the Civil Code in rescinding a contract
for the sale of immovable property. Under these provisions, while the power
of a party to rescind a contract is implied in reciprocal obligations,
nonetheless, in cases involving the sale of immovable property, the vendor
cannot exercise this power even though the vendee defaults in the payment
of the price, except by bringing an action in court or giving notice of
rescission by means of a notarial demand. Consequently, a notice of
rescission given in the letter of an attorney has no legal effect, and the
vendee can make payment even after the due date since no valid notice of
rescission has been given.
Indeed, under the Labor Code, only the absence of a just cause for the
termination of employment can make the dismissal of an employee illegal.
xxx

xxx

xxx

Thus, only if the termination of employment is not for any of the causes
provided by law is it illegal and, therefore, the employee should be reinstated
and paid backwages. To contend, as Justices Puno and Panganiban do, that
even if the termination is for a just or authorized cause the employee
concerned should be reinstated and paid backwages would be to amend Art.
279 by adding another ground for considering a dismissal illegal. What is
more, it would ignore the fact that under Art. 285, if it is the employee who
67

fails to give a written notice to the employer that he is leaving the service of
the latter, at least one month in advance, his failure to comply with the legal
requirement does not result in making his resignation void but only in making
him liable for damages. This disparity in legal treatment, which would result
from the adoption of the theory of the minority cannot simply be explained by
invoking resident Ramon Magsaysay's motto that "he who has less in life
should have more in law." That would be a misapplication of this noble
phrase originally from Professor Thomas Reed Powell of the Harvard Law
School.
Justice Panganiban cites Pepsi-Cola Bottling Co. v. NLRC, in support of
his view that an illegal dismissal results not only from want of legal cause but
also from the failure to observe "due process." The Pepsi-Cola case actually
involved a dismissal for an alleged loss of trust and confidence which, as
found by the Court, was not proven. The dismissal was, therefore, illegal, not
because there was a denial of due process, but because the dismissal was
without cause. The statement that the failure of management to comply with
the notice requirement "taints the dismissal with illegality" was merely a
dictum thrown in as additional grounds for holding the dismissal to be illegal.
Given the nature of the violation, therefore, the appropriate sanction for
the failure to give notice is the payment of backwages for the period when
the employee is considered not to have been effectively dismissed or his
employment terminated. The sanction is not the payment alone of nominal
damages as Justice Vitug contends. (Serrano vs. NLRC [G.R. No. 117040,
27 January 2000])
Effect of Lack of Notice: backwages until determination of just cause

authorized cause. Such rule was abandoned in Wenphil because it is really

unjust to require an employer to keep in his service one who is guilty, for
example, of an attempt on the life of the employer or the latter's family, or
when the employer is precisely retrenching in order to prevent losses.
The need is for a rule which, while recognizing the employee's right to
notice before he is dismissed or laid off, at the same time acknowledges the
right of the employer to dismiss for any of the just causes enumerated in Art.
282 or to terminate employment for any of the authorized causes mentioned
in Arts. 283-284. If the Wenphil rule imposing a fine on an employer who is
found to have dismissed an employee for cause without prior notice is
deemed ineffective in deterring employer violations of the notice requirement,
the remedy is not to declare the dismissal void if there are just or valid
grounds for such dismissal or if the termination is for an authorized cause.
That would be to uphold the right of the employee but deny the right of the
employer to dismiss for cause. Rather, the remedy is to order the payment to
the employee of full backwages from the time of his dismissal until the court
finds that the dismissal was for a just cause. But, otherwise, his dismissal
must be upheld and he should not be reinstated. This is because his
dismissal is ineffectual.
For the same reason, if an employee is laid off for any of the causes in
Arts. 283-284, i.e., installation of a labor-saving device, but the employer did
not give him and the DOLE a 30-day written notice of termination in advance,
then the termination of his employment should be considered ineffectual and
he should be paid backwages. However, the termination of his employment
should not be considered void but he should simply be paid separation pay
as provided in Art. 283 in addition to backwages. (Serrano vs. NLRC [G.R.
No. 117040, 27 January 2000])

Validity of Petitioner's Layoff Not Affected by Lack of Notice

Corporate Liability
We agree with our esteemed colleagues, Justices Puno and Panganiban,
that we should rethink the sanction of fine for an employer's disregard of the
notice requirement. We do not agree, however, that disregard of this
requirement by an employer renders the dismissal or termination of
employment null and void. Such a stance is actually a reversion to the
discredited pre-Wenphil rule of ordering an employee to be reinstated and
paid backwages when it is shown that he has not been given notice and
hearing although his dismissal or layoff is later found to be for a just or

A corporate officer is not personally liable for the money claims of

discharged corporate employees unless he acted with evident malice and
bad faith in terminating their employment. There is no evidence in this case
that Locsin acted in bad faith or with malice in carrying out the retrenchment
and eventual closure of the company, hence, he may not be held personally
and solidarily liable with the company for the satisfaction of the judgment in
favor of the retrenched employees. (Businessday vs. NLRC [G.R. No.
103575, 05 April 1993])
68

This is not a case of dismissal. The situation is that of a corporate office

having been declared vacant, and of TAN's not having been elected
thereafter. The matter of whom to elect is a prerogative that belongs to the
Board, and involves the exercise of deliberate choice and the faculty of
discriminative selection. Generally speaking, the relationship of a person to a
corporation, whether as officer or agent or employee, is not determined by
the nature of the services performed, but by the incidents of the relationship
as they actually exist.
We agree with petitioners, however, that the NLRC erred in holding
Centeno jointly and severally liable with MAM. A corporation, being a
juridical entity, may act only through its directors, officers and employees.
Obligations incurred by them, acting as such corporate agents, are not
theirs but the direct accountabilities of the corporation they represent. True,
solidary liabilities may at times be incurred but only when exceptional
circumstances warrant such as, generally, in the following cases:
1.
When directors and trustees or, in appropriate cases, the officers of a
corporation
(a) vote for or assent to patently unlawful acts of the
corporation;
(b) act in bad faith or with gross negligence in directing the
corporate affairs;
(c) are guilty of conflict of interest to the prejudice of the
corporation, its stockholders or members, and other
persons.
2.
When a director or officer has consented to the issuance of watered
stocks or who, having knowledge thereof, did not forthwith file with the
corporate secretary his written objection thereto.
3.
When a director, trustee or officer has contractually agreed or stipulated
to hold himself personally and solidarily liable with the Corporation.
4
When a director, trustee or officer is made, by specific provision of law,
personally liable for his corporate action.
In labor cases, for instance, the Court has held corporate directors and
officers solidarily liable with the corporation for the termination of employment of
employees done with malice or in bad faith. (MAM Realty vs. NLRC [G.R. No.
114787, 02 June 1995])

The fact that complainant is a corporate officer, an elective position under

the corporate by-laws and her non-election is an intra-corporate controversy
cognizable by the SEC and not by the NLRC, petitioner bank can no longer
raise the issue of jurisdiction under the principle of estoppel. The bank
participated in the proceedings from start to finish. It filed its position paper
with the Labor Arbiter. When the decision of the Labor Arbiter was adverse to
it, the bank appealed to the NLRC. When the NLRC decided in its favor, the
bank said nothing about jurisdiction. Even before the CA, it never questioned
the proceedings on the ground of lack of jurisdiction. It was only when the CA
ruled in favor of public respondent did it raise the issue of jurisdiction. The
bank actively participated in the proceedings before the Labor Arbiter, the
NLRC and the CA. While it is true that jurisdiction over the subject matter of
a case may be raised at any time of the proceedings, this rule presupposes
that laches or estoppel never supervened. (Prudential Bank vs. Reyes [G.R.
No. 141093, 20 February 2001
Sale/Merger or Consolidation
Where such transfer of ownership is in good faith, the transferee is under
no legal duty to absorb the transferor employees as there is no law
compelling such absorption. The most that the transferee may do, for
reasons of public policy and social justice, is to give preference to the
qualified separated employees in the filling of vacancies in the facilities of the
purchaser. (Manlimos vs. NLRC [G.R. No. 113337, 02 March 1995])
The rule is that unless expressly assumed, labor contracts such as
employment contracts and collective bargaining agreements are not
enforceable against a transferee of an enterprise, labor contracts being in
personam, thus binding only between the parties. A labor contract merely
creates an action in personally and does not create any real right which
should be respected by third parties. This conclusion draws its force from the
right of an employer to select his employees and to decide when to engage
them as protected under our Constitution, and the same can only be
restricted by law through the exercise of the police power.
As a general rule, there is no law requiring a bona fide purchaser of
assets of an on-going concern to absorb in its employ the employees of the
latter.

69

However, although the purchaser of the assets or enterprise is not legally

bound to absorb in its employ the employers of the seller of such assets or
enterprise, the parties are liable to the employees if the transaction between
the parties is colored or clothed with bad faith.
(Sundowner Dev. Corp. vs. Drilon [G.R. No. 82341, 06 December 1989])
We disagree with the Labor Arbiter's reliance on the case of Mobil
Employees Association vs. NLRC. The NLRC was correct in holding that
Mobil was not applicable because Mobil involved the termination of
employment under Article 283 (before Article 284) of the Labor Code and not
termination of employment as a result of the change of corporate ownership,
as in the case of private respondent Super Mahogany Plywood Corporation.
In Mobil, the original employer; Mobil Oil Philippines, Inc., completely
withdrew from business and was even dissolved. In the case at bar, there
was only a change of ownership of Super Mahogany Plywood Corporation
which resulted in a change of ownership. In short, the corporation itself, as a
distinct and separate juridical entity, continues to exist. The issue of whether
there was a closing or cessation of business operations which could have
operated as a just cause for the termination of employment was not material.
The change in ownership of the management was done bona fide and the
petitioners did not for any moment before the filing of their complaints raise
any doubt on the motive for the change. On the contrary, upon being
informed thereof and of their eventual termination from employment, they
freely and voluntarily accepted their separation pay and other benefits and
individually executed the Release or Waiver which they acknowledged
before no less than a hearing officer of the DOLE. (Manlimos vs. NLRC [G.R.
No. 113337, 02 March 1995])
Special Circumstances
Constructive Dismissal
CONSTRUCTIVE DISMISSAL as a quitting because continued
employment is rendered impossible, unreasonable or unlikely; as, an offer
involving a demotion in rank and a diminution in pay. (Philippine Japan
Active Carbon Corporation vs. NLRC)
There is a constructive dismissal when the reassignment of an employee
involves a demotion in rank or a diminution in pay (Lemery Savings and

Loan Bank v. National Labor Relations Commission, 205 SCRA 492 [1992];
Philippine Japan Active Carbon Corporation v. National Labor Relations
Commission, 171 SCRA 164 [1989]).
In the case at bench, the demotion of private respondent is tantamount to
constructive dismissal. One does not need to stretch his imagination to
distinguish the work of a security guard and that of a common agricultural
laborer in a sugar plantation. Likewise, there was a diminution of salary, for a
security guard is paid on a monthly basis while a laborer in the sugar
plantation is paid either on a daily or piece work basis. Laborers do not work
year round but only when needed and on off-season months, they are not
required to work at all.
(Oscar Ledesma & Co. vs. NLRC [G.R. No. 110930, 13 July 1995])
Preventive Suspension
Sections 3 and 4, Rule XIV, Book V of the Omnibus Rules Implementing
the Labor Code, Termination of Employment, provide:
Sec. 3. Preventive suspension. The employer may place the worker
concerned under preventive suspension if his continued employment
poses a serious and imminent threat to the life or property of the
employer or of his co-workers.
Sec. 4 Period of suspension. No preventive suspension shall last
longer than 30 days. The employer shall thereafter reinstate the worker
in his former or in a substantially equivalent position of the employer
may extend the period of suspension provided that during the period of
extension, he pays the wages and other benefits due to the worker. In
such case, the worker shall not be bound to reimburse the amount paid
to him during the extension if the employer decides, after completion of
the hearing, to dismiss the worker.
Section 4, Rule XIV, Book V of the Omnibus Rules provides that
preventive suspension cannot be more than the maximum period of 30 days.
Hence, after the 30-day period of suspension beyond the maximum period
amounts to constructive dismissal. (Hyatt Taxi Services vs. Catinoy [G.R. No.
143204, 26 June 2001])
70

Quitclaims
Burden of Proof in Labor Cases
Private respondent's documentary evidence showing the culpability of
petitioners should prevail over petitioners' uncorroborated explanations and
self-serving denials regarding their involvement in the pilferages. All
administrative determinations require only substantial proof and not clear
and convincing evidence. Proof beyond reasonable doubt of the employee's
misconduct is not required, it being sufficient that there is some basis for the
same or that the employer has reasonable ground to believe that the
employee is responsible for the misconduct, and his participation therein
renders him unworthy of the trust and confidence demanded by his position.
Thus, petitioners cannot assert that the public respondent closed its eyes to
their evidence. The latter's findings are supported by substantial evidence
which goes beyond the minimum evidentiary support required by law.
(Segismundo vs. NLRC [G.R. No. 112203, 13 December 1994])
The fact that Santos neglected to substantiate his claim for night shift
differentials is not prejudicial to his cause. After all, the burden of proving
payment rests on petitioner NSC. Santos' allegation of non-payment of this
benefit, to which he is by law entitled, is a negative allegation which need not
be supported by evidence unless it is an essential part of his cause of action.
It must be noted that his main cause of action is his illegal dismissal, and the
claim for night shift differential is but an incident of the protest against such
dismissal. Thus, the burden of proving that payment of such benefit has been
made rests upon the party who will suffer if no evidence at all is presented by
either party. National Semiconductor (HK) Distribution, Ltd. vs. NLRC [G.R.
No. 123520, 26 June 1998])
The reason for this rule is that the pertinent personnel files, payrolls,
records, remittance and other similar documents which will show that
overtime, differentials, service incentive leave and other claims of workers
have been paid are not in the possession of the worker but in the custody
and absolute control of the employer. Thus, in choosing not to present
evidence to prove that it had paid all the monetary claims of petitioners, HITECH failed once again to discharge the onus probandi. Consequently, we
have no choice but to award those claims to petitioners. (Villar vs. NLRC
[G.R. No. 130935, 11 May 2009])

The requisites of a valid quitclaim are: That (a)

It was voluntarily entered into by the parties;
(b)
There was no fraud or deceit on the part of any of the parties;
(c)
The consideration of the quitclaim is credible and reasonable;
and,
(d)
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.
Not all waivers and quitclaims are invalid as against public policy. If the
agreement was voluntarily entered into and represents a reasonable
settlement, it is binding on the parties and may not later be disowned simply
because of a change of mind. It is only where there is clear proof that the
waiver was wangled from an unsuspecting or gullible person, or the terms of
settlement are unconscionable on its face, that the law will step in to annul
the questionable transaction. But where it is shown that the person making
the waiver did so voluntarily, with full understanding of what he was doing,
and the consideration for the quitclaim is credible and reasonable, the
transaction must be recognized as a valid and binding undertaking. (Periquet
v. NLRC)
"Dire necessity" is not an acceptable ground for annulling the releases,
especially since it has not been shown that the employees had been forced
to execute them. It has not even been proven that the considerations for the
quitclaims were unconscionably low and that the petitioners had been tricked
into accepting them. (Veloso v. DOLE)
First, even if a clear majority of the union members agreed to a
settlement with the employer, the union has no authority to compromise the
individual claims of members who did not consent to such settlement. Rule
138 Section 23 of the 1964 Revised Rules of Court requires a special
authority before an attorney may compromise his client's litigation. "The
authority to compromise cannot lightly be presumed and should be duly
established by evidence."
In the case at bar, minority union members did not authorize the union to
compromise their individual claims. Absent a showing of the union's special
authority to compromise the individual claims of private respondents for
reinstatement and back wages, there is no valid waiver of the aforesaid
71

rights. As private respondents did not authorize the union to represent them
not bound by the terms thereof.
(Golden Donuts, Inc. vs. NLRC [G.R. Nos. 113666-68, 19 January 2000])
The mere fact that the employee was not physically coerced or
intimidated does not necessarily imply that he freely or voluntarily consented
to the terms of the quitclaim. Under Article 1330 of the Civil Code, consent
may be vitiated not only through intimidation or violence but also by mistake,
undue influence or fraud. Moreover, it is the employer and not the employee
who has the burden of proving that the quitclaim was voluntarily entered into.
(Philippine Carpet Employees Association vs. PCMC [G.R. No.140269-70,
14 September 2000])
Reliefs under the Labor Code
Reinstatement plus backwages
Since private respondent's dismissal was for just and valid cause, the
order of public respondent for the reinstatement of private respondent with
award of backwages has no factual and legal basis. (PAL vs. NLRC [G.R.
No. 126805, 16 March 2000])
[A]n employee who is unjustly dismissed is entitled to his full backwages
computed from the time his compensation was withheld from him up to the
time of his reinstatement. Mere offer to reinstate a dismissed employee,
given the circumstances in this case, is not enough. If petitioner were sincere
in its intention to reinstate private respondent, petitioner should have at the
very least reinstated him in its payroll right away. We are thus constrained to
conclude that private respondent should be paid by petitioner not only the
sum of P26,866.64 awarded by the NLRC, but the petitioner should be held
liable for the entire amount of backwages due the private respondent from
the day he was illegally dismissed up to the date of his reinstatement. Only
then could observance of labor laws be promoted and social justice upheld.
(Condo Suite Club Travel, Inc. vs. NLRC [G.R. No. 125671, 28 January
2000])
We agree that no full backwages from the time their pay was withheld up
to the time of actual reinstatement can be ordered paid to petitioners. R.A.
No. 6715, which amended Art. 279 of the Labor Code by requiring that an

employee who is illegally dismissed shall be paid "his full backwages,

inclusive of allowances, and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to the
time of his actual reinstatement," has no retroactive effect and does not
apply to cases of illegal dismissal taking place before its effectivity on March
21, 1989. Since petitioners were dismissed in 1987, they cannot demand
payment of full backwages until they were actually reinstated. BALLADARES
vs. NLRC G.R. No. 111342 [19 June 1995]
Strained relations
"Strained relations," as amplified in Employee's Association of the
Philippine American Life Insurance Company v. NLRC, 199 SCRA 628
[1991], must be of such a nature or degree as to preclude reinstatement.
But, where the differences between the parties are neither personal nor
physical, nor serious, then there is no reason why the illegally dismissed
employee should not be reinstated rather than simply given separation pay
and backwages. More so if the cause of the perceived 'strained relations' is
the filing of a complaint for illegal dismissal. (Kunting vs. NLRC [G.R. No.
101427, 08 November 1993])
A careful scrutiny of the records of the case at bench, however, readily
discloses the existence of strained relationship between the petitioner and
private respondents.
Firstly, petitioner consistently refused to re-admit private respondents in
his establishment. Petitioner even replaced private respondents with a new
set of workers to perform the tasks of private respondents; Moreover,
although petitioner ostensibly argued in his supplemental motion for
reconsideration that reinstatement should have been the proper remedy in
the case at bench on his premise that the existence of strained relationship
was not adequately established, yet petitioner never sincerely intended to
effect the actual reinstatement of private respondents. For if petitioner were
to pursue further the entire logic of his argument, the prayer in his
supplemental motion for reconsideration should have contained not just the
mere deletion of the award of separation pay, but precisely, the reinstatement
of private respondents. Quite obviously then, notwithstanding petitioner's
argument for reinstatement he was only interested in the deletion of the
award of separation pay to private respondents.
xxx
xxx
xxx
72

And secondly, private respondents themselves, from the very start, had
already indicated their aversion to their continued employment in petitioner's
establishment. The very filing of their second case before Labor. (Congson
vs. NLRC [G.R. No. 114250, 05 April 1995])
As the Court held in Globe-Mackay Cable and Radio Corporation v.
NLRC, 206 SCRA 701 [1992], citing]; Sibal v. Notre Dame of Greater Manila,
182 SCRA 538 [1990]:Obviously, the principle of "strained relations" cannot
be applied indiscriminately. Otherwise reinstatement can never be possible
simply because some hostility is invariably engendered between the parties
as a result of litigation. That is human nature.
Besides, no strained relations should arise from a valid and legal act of
asserting one's right; otherwise an employee who shall assert his right could
be easily separated from the service, by merely paying his separation pay on
the pretext that his relationship with his employer had already been strained.
(Anscor Transport and Terminals v. NLRC [190 SCRA 147, 1990])

taken into account. It is our view that herein private respondents had not fully
acted in good faith. However, we are cognizant that a cooperative promotes
the welfare of its own members. The economic benefits filter to the
cooperative members. Either equally or proportionally, they are distributed
among members in correlation with the resources of the association utilized.
Cooperatives help promote economic democracy and support community
development. Under these circumstances, we deem it proper to reduce
moral damages to only P10,000.00 payable by private respondent NEECO I
to each individual petitioner. We also deem it sufficient for private respondent
NEECO I to pay each individual petitioner P5,000.00 to answer for
exemplary damages, based on the provisions of Articles 2229 and 2232 of
the Civil Code.
(Nueva Ecija I Electric Cooperative, Inc. vs. NLRC [G.R. No. 116066, 24
January 2000])
Separation Pay

Moral and exemplary damages

Private respondent is not entitled to the recovery of moral damages since
these are recoverable only where the dismissal of the employee was
attended by bad faith or fraud, or constituted an act oppressive to labor, or
was done in a manner contrary to morals, good customs or public policy.
(Spartan Security Detective Agency, Inc. v. NLRC [213 SCRA 528, 1992])
Unfair labor practices violate the constitutional rights of workers and
employees to self-organization, are inimical to the legitimate interests of both
labor and management, including their right to bargain collectively and
otherwise deal with each other in an atmosphere of freedom and mutual
respect; and disrupt industrial peace and hinder the promotion of healthy and
stable labor-management relations. As the conscience of the government, it
is the Court's sworn duty to ensure that none trifles with labor rights.
For this reason, we find it proper in this case to impose moral and
exemplary damages on private respondent. However, the damages awarded
by the labor arbiter, to our mind, are excessive. In determining the amount of
damages recoverable, the business, social and financial position of the
offended parties and the business and financial position of the offender are

Finally, we hold that the contention of Sweet Lines that separation pay
and back wages are inconsistent with each other is not well-taken.
Separation pay is granted where reinstatement is no longer advisable
because of strained relations between the employee and the employer. Back
wages represent compensation that should have been earned but were not
collected because of the unjust dismissal. The bases for computing the two
are different, the first being usually the length of the employee's service and
the second the actual period when he was unlawfully prevented from
working.
We have ordered the payment of both in proper case as otherwise the
employee might be deprived of benefits justly due him. Thus, if an employee
who has worked only one year is sustained by the labor court after three
years from his unjust dismissal, granting him separation pay only would
entitle him to only one month salary. There is no reason why he should not
also be paid three years back wages corresponding to the period when he
could not return to his work or could not find employment elsewhere. (Lim vs.
NLRC [G.R. No. 79907, 16 March 1989])

73

There should be no question that where it comes to such valid but not
iniquitous causes as failure to comply with work standards, the grant of
separation pay to the dismissed employee may be both just and
compassionate, particularly if he has worked for some time with the
company. For example, a subordinate who has irreconcilable policy or
personal differences with his employer may be validly dismissed for
demonstrated loss of confidence, which is an allowable ground. A working
mother who has to be frequently absent because she has also to take care
of her child may also be removed because of her poor attendance, this being
another authorized ground. It is not the employee's fault if he does not have
the necessary aptitude for his work but on the other hand the company
cannot be required to maintain him just the same at the expense of the
efficiency of its operations. He too may be validly replaced. Under these and
similar circumstances, however, the award to the employee of separation pay
would be sustainable under the social justice policy even if the separation is
for cause.
But where the cause of the separation is more serious than mere
inefficiency, the generosity of the law must be more discerning. There is no
doubt it is compassionate to give separation pay to a salesman if he is
dismissed for his inability to fill his quota but surely he does not deserve such
generosity if his offense is misappropriation of the receipts of his sales. This
is no longer mere incompetence but clear dishonesty. A security guard found
sleeping on the job is doubtless subject to dismissal but may be allowed
separation pay since his conduct, while inept, is not depraved. But if he was
in fact not really sleeping but sleeping with a prostitute during his tour of duty
and in the company premises, the situation is changed completely. This is
not only inefficiency but immorality and the grant of separation pay would be
entirely unjustified.
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 little 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. (PLDT vs. NLRC [G.R. No. 80609, 23 August
1988])
Thus, petitioner pointed out that the SEC's order suspending all claims
against it pending before any other court, tribunal or body was pursuant to
the rehabilitation receivership proceedings. Such order was necessary to
enable the rehabilitation receiver to effectively exercise its powers free from
any judicial or extra-judicial interference that might unduly hinder the rescue
of the distressed company. Since receivership proceedings have ceased and
petitioner's rehabilitation receiver and liquidator, Ledesma Saludo &
Associates, has been given the imprimatur to proceed with corporate
liquidation, the cited order of the Securities and Exchange Commission has
been rendered functus officio. Thus, there is no legal impediment for the
execution of the decision of the Labor Arbiter for the payment of separation
pay.
Considering that petitioner's monetary obligation to private respondent is
long overdue and that petitioner has signified its willingness to comply with
such obligation by entering into an agreement with private respondent as to
the amount and manner of payment, petitioner can not delay satisfaction of
private respondent's claim. However, due to events subsequent to the filing
of this petition, private respondent must present its claim with the
rehabilitation receiver and liquidator of petitioner, subject to the rules on
preference of credits. (Alemar's Sibal & Sons, Inc. vs. NLRC [G.R. No.
114761, 19 January 2000])
It must be emphasized that the right of employee to demand separation
pay and backwages is always premised on the fact that the employee was
terminated either legally of illegally. The award of backwages belongs to an
illegally dismissed employee by direct provision of law and it is awarded on
74

grounds of equity for earnings which a worker or employee has lost due to
illegal dismissal. Separation pay, on the other hand, is awarded as an
alternative to illegal dismissed employees where reinstatement is no longer
possible. (Jo Cinema vs. Abellana [G.R. No. 132837, 28 June 2001])

Financial Assistance
With regards to the award of financial assistance to petitioner, We find
that the same is not justified. Petitioner's willful disobedience of the orders of
her employer constitutes serious misconduct. As We held in the case of Del
Monte Phils., Inc. vs. NLRC, "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". Hence, the employer, CLUB, may not be
required to give the petitioner separation pay, or financial assistance, or
whatever other name it is called, on the ground of social justice. (Aguilar vs.
NLRC [G.R. No. 100878, 02 December 1992])

appears that private respondents did not qualify for the benefits of R.A. No.
7641 under the terms of this law itself. The Court notes that when private
respondents filed their complaints more than one (1) year after they had
been allegedly illegally dismissed, respondent Ausan, Jr. was fifty-seven (57)
years old while respondent Alanan was sixty (60) years old. That would make
Ausan, Jr. fifty-five (55) years old and Alanan fifty-eight (58) years old at the
time their services with petitioner were ended by their resignation. Since the
record does not show any retirement plan or collective bargaining agreement
providing for retirement benefits to petitioner's employees, the applicable
retirement age is the optional retirement age of sixty (60) years according to
Article 287, which would qualify the retiree to retirement benefits equivalent
to one-half (1/2) month's salary for every year of service. Unfortunately, at
the time private respondents stopped working for petitioner, they had not yet
reached the age of sixty (60) years.
We stress, however, that there is nothing to prevent petitioner from
voluntarily giving private respondents some financial assistance on an ex
gratia basis. (CJC Trading, Inc. vs. NLRC [G.R. No. 115884, 20 July 1995])
Worker preference

Neither could we allow the award of P5,000.00 as financial assistance on

equitable consideration as decreed by the labor arbiter. As we have
consistently held in previous cases, such monetary award is justified only in
those instances where the employee is validly dismissed for causes other
than serious misconduct or those adversely affecting his moral character.
Thus, if the reason for the valid dismissal is, for example, habitual
intoxication or an offense involving moral turpitude, like theft, fraud,
falsification or illicit sexual relations with a fellow worker, separation pay or
financial assistance, or by whatever other name it is called, may not be
allowed. (PAL vs. NLRC [G.R. No. 126805, 16 March 2000])
Retirement
In the instant case, the complaints of private respondents were still being
resolved on the labor arbiter level when R.A. No. 7641 took effect. However,
it was quite clear, and both the Labor Arbiter and the NLRC so held, that
private respondents had ceased to be employees of petitioner, by reason of
voluntary resignation, before the statute went into effect. Moreover, it

Worker preference in case of bankruptcy. - In the event of bankruptcy or

liquidation of an employer's business, his workers shall enjoy first preference
as regards their unpaid wages and other monetary claims, any provision of
law to the contrary notwithstanding. Such unpaid wages and monetary
claims shall be paid in full before the claims of the Government and other
creditors may be paid. (Article 110 of the Labor Code)
(1) Article 110 of the Labor Code, as amended, must be viewed and read in
conjunction with the provisions of the Civil Code on concurrence and
preferences of credits;
(2) The aforesaid provisions of the Civil Code, including Article 110 of the
Labor Code, require judicial proceedings in rem in adjudication of
creditors' claims against the debtor's assets to become operative;
(3) Republic Act No. 6715 has the effect of expanding the "worker
preference" to cover not only unpaid wages but also other monetary
claims of laborers, to which even claims of the Government must be
deemed subordinate; and
75

(4) The amendatory provisions of Republic Act 6715, which took effect on
21 March 1989, should only be given prospective application.
(DBP vs. NLRC [G.R. No. 86227, 19 January 1994])
PD No. 902-A is clear that all actions for claims against corporations,
partnerships or associations under management or receivership pending
before any court, tribunal, board or body shall be suspended accordingly.
The law did not make any exception in favor of labor claims.
The justification for the automatic stay of all pending actions for claims is
to enable the management committee or the rehabilitation receiver to
effectively exercise its/his powers free from any judicial or extrajudicial
interference that might unduly hinder or prevent the rescue of the debtor
company. To allow such actions to continue would only add to the burden of
the management committee or rehabilitation receiver, whose time, effort and
resources would be wasted in defending claims against the corporation
instead of being directed towards its restructuring and rehabilitation. Thus,
the labor case would defeat the purpose of the automatic stay. To rule
otherwise would open the floodgates to numerous claims and would defeat
the rescue efforts of the management committee. (Rubberworld vs. NLRC
[305 SCRA 721])
JURISDICTION
Regional Director

Recovery of wages, simple money claims and other benefits. Upon

complaint of any interested party, the Regional Director of the Department of
Labor and Employment or any of the duly authorized hearing officers of the
Department is empowered, through summary proceeding and after due
notice, to hear and decide any matter involving the recovery of wages and
other monetary claims and benefits, including legal interest, owing to an
employee or person employed in domestic or household service or
househelper under this Code, arising from employer-employee relations:
Provided, That such complaint does not include a claim for reinstatement:
Provided, further, That the aggregate money claims of each employee or
househelper do not exceed five thousand pesos (P5,000). The Regional
Director or hearing officer shall decide or resolve the complaint within thirty
(30) calendar days from the date of the filing of the same. Any sum thus
recovered on behalf of any employee or househelper pursuant to this Article
shall be held in a special deposit account by, and shall be paid, on order of
the Secretary of Labor and Employment or the Regional Director directly to
the employee or househelper concerned. Any such sum not paid to the
employee or househelper, because he cannot be located after diligent and
reasonable effort to locate him within a period of three (3) years, shall be
held as a special fund of the Department of Labor and Employment to be
used exclusively for the amelioration and benefit of workers.
Any decision or resolution of the Regional Director or hearing officer
pursuant to this provision may be appealed on the same grounds provided in
Article 223 of this Code, within five (5) calendar days from receipt of a copy
of said decision or resolution, to the National Labor Relations Commission
which shall resolve the appeal within ten (10) calendar days from the
submission of the last pleading required or allowed under its rules.
The Secretary of Labor and Employment or his duly authorized
representative may supervise the payment of unpaid wages and other
monetary claims and benefits, including legal interest, found owing to any
employee or househelper under this Code. (Article 129 of the Labor Code)
Labor Arbiter

76

Jurisdiction of Labor Arbiters and the Commission. (a) Except as

otherwise provided under this Code, the Labor Arbiters shall have original
and exclusive jurisdiction to hear and decide, within thirty (30) calendar days
after the submission of the case by the parties for decision without extension,
even in the absence of stenographic notes, the following cases involving all
workers, whether agricultural or non-agricultural:
(1) Unfair labor practice cases;
(2) Termination disputes; (Subject to Art 261 - VA's jurisdiction over
unbresolved grievance from CBA/company personel policies)
(3) If accompanied with a claim for reinstatement, those cases that
workers may file involving wages, rate of pay, hours of work and
other terms and conditions of employment;
(4) Claims for actual, moral, exemplary and other forms of damages
arising from the employer-employee relations;
(5) Cases arising from any violation of Article 264 of this Code,
including questions involving the legality of strikes and lockouts;
and
(6) Except claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims arising from
employer-employee relations, including those of persons in
domestic or household service, involving an amount exceeding
five thousand pesos (P5,000.00), whether or not accompanied
with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all
cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of collective
bargaining agreements and those arising from the interpretation or
enforcement of company personnel policies shall be disposed of by the
Labor Arbiter by referring the same to the grievance machinery and voluntary
arbitration as may be provided in said agreements. (Article 217 of the Labor
Code)
Money Claims. - Notwithstanding any provision of law to the contrary, the
Labor Arbiters of the National Labor Relations Commission (NLRC) shall
have the original and exclusive jurisdiction to hear and decide, within ninety
(90) calendar days after the filing of the complaint, the claims arising out of
an employer-employee relationship or by virtue of any law or contract
involving Filipino workers for overseas deployment including claims for
actual, moral, exemplary and other forms of damages.

The liability of the principal/employer and the recruitment/placement

agency for any and all claims under this section shall be joint and several.
This provision shall be incorporated in the contract for overseas employment
and shall be a condition precedent for its approval. The performance bond to
be filed by the recruitment/placement agency, as provided by law, shall be
answerable for all money claims or damages that may be awarded to the
workers. If the recruitment/placement agency is a juridical being, the
corporate officers and directors and partners as the case may be, shall
themselves be jointly and solidarily liable with the corporation or partnership
for the aforesaid claims and damages.
xxx

xxx

xxx

In case of termination of overseas employment without just, valid or

authorized cause as defined by law or contract, the worker shall be entitled
to the full reimbursement of his placement fee with interest at twelve percent
(12%) per annum, plus his salaries for the unexpired portion of his
employment contract or for three (3) months for every year of the unexpired
term, whichever is less.
xxx

xxx

xxx

(Section 10 of Republic Act No. 8042 [Migrant Workers and Overseas Filipinos
Act of 1995])
Bureau of Labor Relations
The Bureau of Labor Relations and the Labor Relations Divisions in the
regional offices of the Department of Labor and Employment shall have
original and exclusive authority to act, at their own initiative or upon request
of either or both parties, on all inter-union and intra-union conflicts, and all
disputes, grievances or problems arising from or affecting labor-management
relations in all workplaces whether agricultural or non-agricultural, except
those arising from the implementation or interpretation of collective
bargaining agreements which shall be the subject of grievance procedure
and/or voluntary arbitration.
The Bureau shall have fifteen (15) calendar days to act on labor cases
before it, subject to extension by agreement of the parties. (Article 226 of the
Labor Code)
Clearly, the Secretary of Labor and Employment has no jurisdiction to
entertain the appeal of ABBOTT. The appellate jurisdiction of the Secretary of
Labor and Employment is limited only to a review of cancellation proceedings
decided by the BLR in the exercise of its exclusive and original jurisdiction. The
Secretary of Labor and Employment has no jurisdiction over decisions of the
BLR rendered in the exercise of its appellate power to review the decision of the
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Regional Director in a petition to cancel the union's certificate of registration, said

decisions being final and inappealable.
xxx

xxx

xxx

It is clear then that the Secretary of Labor and Employment did not commit
grave abuse of discretion in not acting an ABBOTT's appeal. The decisions of
the BLR on cases brought before it on appeal from the Regional Director are
final and executory. Hence, the remedy of the aggrieved party is to seasonably
avail of the special civil action of certiorari under Rule 65 of the Rules of Court.
(Abbott Laboratories vs. Abbott Laboratories Employees Union [G.R. No. 131374, 26
January 2000.)
Voluntary arbitrator
The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have
original and exclusive jurisdiction to hear and decide all unresolved
grievances arising from the interpretation or implementation of the Collective
Bargaining Agreement and those arising from the interpretation or
enforcement of company personnel policies referred to in the immediately
preceding Article. Accordingly, violations of a Collective Bargaining
Agreement, except those which are gross in character, shall no longer be
treated as unfair labor practice and shall be resolved as grievances under
the Collective Bargaining Agreement. For purposes of this Article, gross
violations of a Collective Bargaining Agreement shall mean flagrant and/or
malicious refusal to comply with the economic provisions of such agreement.
The Commission, its Regional Offices and the Regional Directors of the
Department of Labor and Employment shall not entertain disputes,
grievances or matters under the exclusive and original jurisdiction of the
voluntary arbitrator or panel of voluntary arbitrators and shall immediately
dispose and refer the same to the grievance machinery or voluntary
arbitration provided in the collective bargaining agreement.
(Article 261 of the Labor Code)
Appeal
From Labor Arbiter to NLRC
Article 221 of the Labor Code mandates that technical rules of evidence
in courts of law shall not be controlling in any of the proceedings before the
Commission or the Labor Arbiters. Further, the Commission is required to
use every reasonable means to ascertain the facts without regard to

technicalities or procedure. Technical rules may be relaxed to prevent

miscarriage of justice. They must not be allowed to stand in the way of
equitably and completely resolving the rights and obligations of the parties.
In the case at bar, petitioner had the opportunity to rebut the truth of
these additional documents. Respondent NLRC, on appeal, correctly
accorded weight to these documents considering their nature and character.
These were daily time records, certifications from the postmaster, etc.,
whose trustworthiness can be relied upon. (Caete vs. NLRC [G.R. No.
114161, 23 November 1995])
Grounds for Appeal
(a) If there is prima facie evidence of abuse of discretion on the part
of the Labor Arbiter;
(b) If the decision, order or award was secured through fraud or
coercion, including graft and corruption;
(c) If made purely on questions of law; and
(d) If serious errors in the findings of facts are raised which would
cause grave or irreparable damage or injury to the appellant.
Grave Abuse of Discretion
The phrase "grave abuse of discretion amounting to lack or excess of
jurisdiction" has settled meaning in the jurisprudence of procedure. It means
such capricious and whimsical exercise of judgment by the tribunal
exercising judicial or quasi-judicial power as to amount to lack of power.
(Arroyo vs. De Venecia [277 SCRA 268, (1997])
Private respondent, after receiving a copy of the labor arbiter's decision,
wrote the labor arbiter who rendered the decision and expressed dismay
over the judgment. Neither notice of appeal was filed nor cash or surety bond
was posted by private respondent. Nevertheless, the labor tribunal took
cognizance of the letter from private respondent and treated said letter as
private respondent's appeal. In a certiorari action before this Court, we ruled
that the labor tribunal acted with grave abuse of discretion in treating a mere
letter from private respondent as private respondent's appeal in clear
violation of the rules on appeal prescribed under Section 3(a), Rule VI of the
Rules of Procedure of NLRC. (Garcia vs. NLRC [264 SCRA 261, 1996])

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The labor arbiter committed grave abuse of discretion when he failed to

resolve immediately by written order a motion to dismiss on the ground of
lack of jurisdiction and the supplemental motion to dismiss as mandated by
Section 15 of Rule V of the New Rules of Procedure of the NLRC. Philippine
Airlines Inc. vs. NLRC [263 SCRA 638, 1996])
The NLRC gravely abused its discretion by allowing and deciding an
appeal without an appeal bond having been filed as required under Article
223 of the Labor Code. (Unicane Workers Union-CLUP vs. NLRC [261
SCRA 573, 1996])
The labor arbiter gravely abused its discretion in disregarding the rule
governing position papers. In this case, the parties have already filed their
position papers and even agreed to consider the case submitted for decision,
yet the labor arbiter still admitted a supplemental position paper and
memorandum, and by taking into consideration, as basis for his decision, the
alleged facts adduced therein and the documents attached thereto. (Maebo
vs. NLRC [229 SCRA 240, 1994])
The NLRC gravely abused its discretion in treating the motion to set
aside judgment and writ of execution as a petition for relief of judgment. In
doing so, public respondent had, without sufficient basis, extended the
reglementary period for filing petition for relief from judgment contrary to
prevailing rule and case law. (Gesulgon vs. NLRC [219 SCRA 561, 1993])
Appeal Bond
Appeal. Decisions, awards, or orders of the Labor Artiber are final and
executory unless appealed to the Commission by any or both parties within
ten (10) calendar days from receipt of such decisions, awards, or orders.
Such appeal may be entertained only on any of the following grounds:
xxx

xxx

xxx

In case of a judgment involving a monetary award, an appeal by the

employer may be perfected only upon the posting of a cash or surety bond
issued by a reputable bonding company duly accredited by the Commission
in the amount equivalent to the monetary award in the judgment appealed
from. (Article 223 of the Labor Code)

The requirement that the employer post a cash or surety bond to perfect
its/his appeal is apparently intended to assure the workers that if they prevail
in the case, they will receive the money judgment in their favor upon the
dismissal of the employer's appeal. It was intended to discourage employers
from using an appeal to delay, or even evade, their obligation to satisfy their
employee's just and lawful claims. (Viron Garments Mfg., Co. vs. NLRC [G.R.
No. 97357, 18 March 1992])
There is a clear distinction between the filing of an appeal within the
reglementary period and its perfection. The latter may transpire after the end
of the reglementary period for filing the appeal.
Under Article 223 of the Labor Code, an appeal to the NLRC from the
decisions, awards or orders of the Labor Arbiter must be made "within ten
(10) calendar days from receipt of such decisions, awards or orders." Under
Section 3(a) of Rule VI of the New Rules of Procedure of the NLRC, the
appeal fees must be paid and the memorandum of appeal must be filed
within the ten-day reglementary period.
Neither the Labor Code nor its implementing rules specifically provide for
a situation where the appellant moves for a reduction of the appeal bond.
Inasmuch as in practice the NLRC allows the reduction of the appeal
bond upon motion of appellant and on meritorious grounds, it follows that a
motion to that effect may be filed within the reglementary period for
appealing. Such motion may be filed in lieu of a bond which amount is being
contested. In the meantime, the appeal is not deemed perfected and the
Labor Arbiter retains jurisdiction over the case until the NLRC has acted on
the motion and appellant has filed the bond as fixed by the NLRC. (Star
Angel Handicraft vs. NLRC [G.R. No. 108914, 20 September 1994])
The precipitate filing of this special civil action for certiorari without first
moving for reconsideration of the assailed judgment of NLRC warrants the
outright dismissal of this case. As we consistently held in numerous cases, a
motion for reconsideration is indispensable for it affords the NLRC an
opportunity to rectify errors or mistakes it might have committed before resort
to the courts can be had.

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It is settled that certiorari will lie only if there is no appeal or any other
plain, speedy and adequate remedy in the ordinary course of law against
acts of public respondent. 5 In the case at bar, the plain and adequate
remedy expressly provided by law was a motion for reconsideration of the
impugned decision, based on palpable or patent errors, to be made under
oath and filed within ten (10) days from receipt of the questioned judgment of
the NLRC, a procedure which is jurisdictional. Hence, original action of
certiorari, as in this case will not prosper.
Further, not having filed a motion for reconsideration within the ten-day
reglementary period, the questioned order, resolution or decision of NLRC,
becomes final and executory after ten (10) calendar days from receipt
thereof. Thus, as regards petitioner, the decision of NLRC became final and
executory on December 7, 1995. Consequently, the merits of the case can
no longer be reviewed to determine if the respondent NLRC could be faulted
of grave abuse of discretion. (Lagera vs. NLRC [G.R. No. 123636, 31 March
2000])
Generally, certiorari as a special civil action will not lie unless a motion for
reconsideration is filed before the respondent tribunal to allow it an
opportunity to correct its imputed errors. However, the following have been
recognized as exceptions to the rule: Where 1.
The order is a patent nullity, as where the court a quo has no
jurisdiction;
2.
The questions raised in the certiorari proceedings have been duly
raised and passed upon by the lower court, or are the same as
those raised and passed upon in the lower court;
3.
There is an urgent necessity for the resolution of the question and
any further delay would prejudice the Government or of the
petitioner or the subject matter of the action is perishable;
4.
Under the circumstances, a motion for reconsideration would be
useless;
5.
Petitioner is deprived of due process and there is extreme
urgency of relief;
6.
In a criminal case, relief from an order of arrest is urgent and the
granting of such relief by the trial court is improbable;
7.
The proceedings in the lower court are a nullity for lack of due
process;

8.

The proceedings was ex parte or on which the petitioner had no

opportunity to object; and
9.
The issue raised is one purely of law or where public interest is
involved.
(Abraham vs. NLRC [G.R. No. 143823, 06 March 2001])
From NLRC to Court of Appeals
A review of the legislative records on the antecedents of R.A. No. 7902
persuades us that there may have been an oversight in the course of the
deliberations on the said Act or an imprecision in the terminology used
therein. In fine, Congress did intend to provide for judicial review of the
adjudications of the NLRC in labor cases by the Supreme Court, but there
was an inaccuracy in the term used for the intended mode of review. This
conclusion which we have reluctantly but prudently arrived at has been
drawn from the considerations extant in the records of Congress, more
particularly on Senate Bill No. 1495 and the Reference Committee Report on
S. No. 1495/H. No. 10452.
The Court is, therefore, of the considered opinion that ever since appeals
from the NLRC to the Supreme Court were eliminated, the legislative
intendment was that the special civil action of certiorari was and still is the
proper vehicle for judicial review of decisions of the NLRC. The use of the
word "appeal" in relation thereto and in the instances we have noted could
have been a lapsus plumae because appeals by certiorari and the original
action for certiorari are both modes of judicial review addressed to the
appellate courts. The important distinction between them, however, and with
which the Court is particularly concerned here is that the special civil action
of certiorari is within the concurrent original jurisdiction of this Court and the
Court of Appeals; whereas to indulge in the assumption that appeals by
certiorari to the Supreme Court are allowed would not subserve, but would
subvert, the intention of Congress as expressed in the sponsorship speech
on Senate Bill No. 1495.
Therefore, all references in the amended Section 9 of B.P. No. 129 to
supposed appeals from the NLRC to the Supreme Court are interpreted and
hereby declared to mean and refer to petitions for certiorari under Rule 65.
Consequently, all such petitions should hence forth be initially filed in the

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Court of Appeals in strict observance of the doctrine on the hierarchy of

courts as the appropriate forum for the relief desired.
(St. Martin Funeral Home vs. NLRC [G.R. No. 130866, 16 September 1998])
Miscellaneous

HOLD OVER PRINCIPLE states that it shall be the duty of both parties to keep the
status quo and continue in full force and effect the terms and conditions of the
existing CBA during the 60-day freedom period and/or until a new agreement is
reached by the parties. (Meralco vs. Secretary of Labor [G.R. No. 127598, 01
August 2000])

[C]OMPULSORY ARBITRATION has been defined both as "the process

of settlement of labor disputes by a government agency which has the
authority to investigate and to make an award which is binding on all the
parties," and as mode of arbitration where the parties are "compelled to
accept the resolution of their dispute through arbitration by the a third party."
(Reformist Union Of R.B. Liner vs. NLRC [G.R. No. 120482, 27 January
1997])
[C]OMPROMISE AGREEMENT, an agreement between two or more
persons, who, for preventing or putting an end to a lawsuit, adjust their
difficulties by mutual consent in the manner which they agree on, and which
everyone of them prefers to the hope of gaining, balanced by the danger of
losing. (Reformist Union Of R.B. Liner vs. NLRC [G.R. No. 120482, 27
January 1997])
WAGE DISTORTION means a situation where an increase in prescribed
wage rates results in the elimination or severe contradiction of intentional
quantitative differences in wage or salary rates between and among
employee groups in an establishment as to effectively obliterate the
distinctions embodied in such wage structure based on skills, length of
service, or other logical bases of differentiation. (Rules Implementing
Republic Act 6727)
SUBSTANTIAL EVIDENCE means that amount of relevant evidence
which a reasonable mind might accept as adequate to justify a conclusion.
(Sebuguero vs. NLRC [G.R. No. 115394, 27 September 1995])
MERCURY DRUG RULE which limited the award of back wages of
illegally dismissed workers to three (3) years "without deduction or
qualification" to obviate the need for further proceedings in the course of
execution. (Mercury Drug Co., Inc. vs. Court of Industrial Relations, 56 SCRA
694 [1974])

81