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Republic SUPREME Manila THIRD DIVISION

of

the

Philippines COURT

G.R. No. 78491 March 16, 1989 STARLITE vs. NATIONAL LABOR RELATIONS COMMISSION and EDGAR GOMEZ, respondents. Iigo S. Fojas for petitioner. The Solicitor General for public respondent. PLASTIC INDUSTRIAL CORPORATION, petitioner,

CORTES, J.: Petitioner Starlite Plastic Industrial Corporation (STARLITE) seeks to set aside the 18 February 1987 decision of the National Labor Relations Commission (NLRC) ordering the reinstatement of private respondent Edgar Gomez (GOMEZ) with full backwages, and its Resolution dated 21 April 1987 denying petitioner's motion for reconsideration. The antecedents of the case are as follows: Private respondent GOMEZ was employed as a factory worker by STARLITE sometime in March 1981. On 22 June 1984, STARLITE dismissed him on the ground that he was caught attempting to steal one ballast costing P80.00. STARLITE reported the matter to the police on 19 July 1984, after grievance meetings failed to resolve the controversy. A criminal complaint was filed against

GOMEZ, but the investigating fiscal dismissed the same saying that STARLITE failed to establish a prima facie case against GOMEZ. On 13 August 1983, private respondent GOMEZ filed a complaint for illegal dismissal against STARLITE. After the parties submitted their respective position papers, the Labor Arbiter rendered his decision on 15 January 1985 dismissing the complaint for lack of merit. GOMEZ appealed the decision to the public respondent NLRC which in a decision dated 18 February 1987 reversed the ruling of the Labor Arbiter. In contending that the decision of the public respondent NLRC was rendered in grave abuse of discretion petitioner argues that the act of dishonesty of GOMEZ led petitioner to lose its trust and confidence in him and is more than sufficient to justify his dismissal. In his position paper, GOMEZ averred that he started working as laborer in petitioner's factory sometime in March 1981. In the course of his employment, he joined and later became a board member of the labor union KAMPIL, and participated in a strike against STARLITE. On 22 June 1984, STARLITE summarily dismissed him on the claim of having attempted to steal one ballast costing P80.00. STARLITE's version of the events which led it to dismiss GOMEZ, is as follows: . . . That on 22 June 1984, at about 12:43 p.m. complainant was about to go out of the factory; that he was about 7 to 12 meters from the gate where the Security Guard was posted when he suddenly turned back and proceeded to the back of the office. He took something in the front part of his pants and place (sic) the same in the pile of woods (sic). These unusual incident (sic) was witnessed by the security guard because he was alone. Being suspicious, the guard could have followed him and look (sic) at what he put in the pile of woods (sic) but he was not able to do so

as he was talking with an office secretary who instructed him to put off the switch of the water pump. That on the same time and date, Bonnie Alvarez, a Delivery Checker was at the toilet and actually saw Edgar Gomez put in the pile of woods (sic) a ballast. That he immediately reported this matter to Mr. Tan Chi Thian Jr. the Production Supervisor Manager and he was instructed to get the said ballast and bring the same to the office. Immediately Edgar Gomez was called to the office and was asked to explain why he took the said ballast. When he replied that he does (sic) not know anything about the said ballast, Mr. Tan asked him to wait for a while and asked one of the office secretary (sic) to prepare a memorandum for Edgar Gomez to answer. That complainant refused to acknowledge receipt of the memorandum and asked Mr. Tan if it would be possible to call Mr. Arsenio Campos, Union VicePresident and Oscar Raymundo another Union Officer. When the two Union Officers were appraised of the incident, they talked with the complainant and later told Mr. Tan that Edgar Gomez could not accept the said memorandum. At this juncture, Mr. Tan told them that he would just refer the matter to the police authority for proper disposition. When the two Union Officers heard this, they requested Mr. Tan that they be allowed to call up Mr. Reynaldo Capa, President of the KAMPIL, the Federation wherein the local union was affiliated. Mr. Capa of the KAMPIL requested Mr. Tan not to take the matter to the police and he will just instruct Edgar Gomez to receive the memorandum and they will just submit the corresponding explanation. Complainant submitted his explanation on June 25, 1984, vehemently denying the imputed charge against him. After a perusal of the incident, the management deemed it proper to place complainant Edgar Gomez under preventive suspension pending the filing of the corresponding criminal charge against him. That the criminal charge was not immediately filed

because of the request of the President of the KAMPIL. In the two grievance meetings between the Union and Management, this case is (sic) always included in the agenda. In the meeting/conference at the National Capital Region in the office of Conciliator Apron Mangabat, this matter was also taken up but did not reach any point of settlement. Finally, on July 19, 1984, the company deemed it proper to report the matter to the police station. [Labor Arbiter Decision, pp. 1-3; Rollo, pp. 17-19]. GOMEZ, on the other hand, claimed that the theft charge was a "frame up" as shown by the resolution of the investigating fiscal dated 31 August 1984, dismissing the criminal complaint filed by STARLITE, as it failed to present the quantum of proof to establish a prima facie case against GOMEZ. The resolution is attached as Annex "A" of GOMEZ's position paper. GOMEZ's version of the incident leading to his dismissal as culled from his reply to the memorandum given to him the day of the incident, attached as Annex "1" of his position paper, is as follows: At 12:05 p.m. he went out to buy viand as instructed by a certain Nellie. He arrived five minutes later and soon after, took his own lunch. At around 12:30 p.m. he went out of the compound to buy candy and three minutes later, he went with Rando to the parking area to rest and chat. At around 12:45 p.m., a certain Elmer joined them and they conversed while waiting for the company bell to ring [Record p. 15]. GOMEZ denied the accusation against him arguing that if he was indeed seen attempting to take a ballast, why didn't the security guard or Alvarez apprehend him immediately. He admitted going to Rando Tamondong's department at around 11:55 a.m. to use the compressor to clean himself of sawdust, but claimed that he stayed there only for a while and then went back to his post, without taking anything.

This version of GOMEZ was corroborated by Rando Tamondong who, in a statement submitted to the investigating fiscal, attached as Annex "3" of GOMEZ's position paper, said that he was not aware of any missing ballast in his department and that he had no knowledge of whether GOMEZ took anything from his department. Arsenio Biong also executed an affidavit stating that he saw Bonifacio Alvarez, Assistant Production Manager, personally bring out one canopy containing one ballast from the painter's room and that he was surprised to learn that GOMEZ was accused of stealing the ballast that Mr. Alverez had taken [Annex "4", Record, p. 18]. STARLITE filed a supplemental position paper disputing the resolution of the investigating fiscal, contending that it never received any subpoena or summons nor was there any hearing called for or conducted regarding the case before the investigating fiscal. Petitioner also attached the recanting affidavits of Rando Tamondong and Arsenio Biong, executed about three months after they made their previous statements [Record, pp. 32-34]. The Labor Arbiter then rendered his decision dated 15 January 1985, dismissing the complaint for lack of merit, finding that, "except for his flat denial that he did not take the ballast, private respondent GOMEZ failed to present an iota of evidence to prove his innocence" [Rollo, p. 20]. Private respondent GOMEZ appealed the decision to public respondent NLRC which, on 18 February 1987, reversed the ruling of the Labor Arbiter, holding that the facts on record did not support the Labor Arbiter's conclusion. In its decision the NLRC stated thus: We see no reason why the Labor Arbiter should disregard the findings of the City Fiscal as they are entitled to great weight, and We quote: Tan Chi Thian Jr., Production Manager of the Starlite Plastics and Industrial Corporation, avers that on June 22, 1984, he received a

report that at about 12:40 p.m. of the same date, respondent Edgar Gomez, a factory helper in the said firm for about three years, was seen inserting an OSRAM ballast valued at P80.00 into a pile of wood near the gate of the said firm. A memorandum was later sent to said respondent to shed light on the matter. Respondent Gomez countered that the charged of Attempted Qualified Theft against him was a mere fabrication intended to justify his dismissal from the said company because of his participation in the strike against the company by their union of which he was a member of the board of directors. After carefully evaluating the evidence on record, the undersigned finds the explanation and/or defenses interposed by respondent Gomez to be meritorious particularly on the following points: 1. the statement of Rando Tamondong that he was not aware of any missing ballast from his department and that he did not know whether respondent Gomez took anything from his department. 2. the fact that he was not immediately placed under custody considering that he was actually allegedly seen in the act of committing the crime. 3. the statement of Arsenio Biong that he saw Bonifacio Alvarez, Assistant Production Manager of the firm, bringing out by himself one (1) canopy containing one ballast from the painter's room. Mr. Alvarez allegedly saw from the window of a comfort room where respondent Gomez was inserting the missing ballast into the pile of wood. The Labor arbiter therefore erred in finding that "complainant failed to present an iota of evidence to prove his innocence" as there

were persons who testified in his favor and whose statements are now part of the record. Thus, complainant presented the following arguments for the Labor Arbiter's perusal: a. Counter-affidavit of Mr. Edgar Gomez showing that complainant did not commit the offense of Attempted qualified theft as corroborated by Mr. Rando Tamondong and Mr. Arsenio Biong. b. In the signed statement of Mr. Tamondong (Annex B-3) he exonerated complainant thus: Tungkol sa tinatanong ninyo sa nawawalang ballast sa aking departamento ay wala po akong nalalaman at tungkol naman sa tao sa aking departamento ay dadalawa lang po kami, ako at si Mr. Elapes may taong pumunta roon si Mr. Gomez pero wala akong alam na kinuha niya. c. In the affidavit executed by Mr. Biong, (Annex B-4) he has this to say: ... That sometime on June 22, 1984 my co-worker Mr. Edgar Gomez at around 11:45 to 12:00 noon, came to our place at the painters room to purposely cleanse himself of sawdust. That immediately right after, I saw him went (sic) out of the room without bringing everything (sic) from our room; That, however, when Mr. Gomez was already out of our sight, Mr. Bonnie Alvarez went inside and asked me what the former did inside the room; that when told that Mr. Gomez cleaned himself of sawdust in his body, Mr. Alvarez went out bringing along with him the canopy containing the ballast;

That I was surprised to hear after Mr. Gomez was already accused of stealing the ballast which Mr. Alvarez had taken personally from the painter's room. The above statement was never denied by respondent including Mr. Bonnie Alvarez, himself. WHEREFORE, the appealed Decision should be as it is hereby REVERSED. Respondent is hereby ordered to immediately reinstate the complainant to his former position without loss of seniority rights and benefits and with full backwages from the time he was dismissed until actually reinstated. The claim for moral damages is hereby denied for being unsupported by evidence. SO ORDERED. [NLRC Decision, pp. 2-5; Rollo, pp. 12-15.] The NLRC denied STARLITE's motion for reconsideration hence, the instant petition for certiorari was filed on 30 May 1987, with a prayer for the issuance of a writ of preliminary injunction or a temporary restraining order. The Court issued a temporary restraining order on 10 June 1987 enjoining the NLRC from enforcing its decision and the petition was given due course on 4 November 1987. Petitioner mainly contends that it was justified in dismissing GOMEZ since it had lost its trust and confidence in him for his act of attempting to steal the ballast and public respondent NLRC therefore committed grave abuse of discretion amounting to lack of jurisdiction when it ordered the reinstatement of GOMEZ with full backwages.

Petitioner argues that even if the fiscal dismissed the charges against GOMEZ, still it has reasonable ground to believe that GOMEZ was responsible for the theft of the ballast and that such act of dishonesty justifies his dismissal on the ground of loss of confidence. The Court finds petitioner's contentions unmeritorious. At the outset, the Court finds it necessary to emphasize that contrary to the tenor of the Labor Arbiter's decision, a dismissed employee is not required to prove his innocence of the charges levelled against him by his employer. The Court has laid down the rule that in termination cases, the burden of proving the just cause of dismissing an employee rests on the employer and his failure to do so would result in a finding that the dismissal is unjustified [Polymedic General Hospital v. NLRC, G.R. No. 64190, January 31, 1985, 134 SCRA 420; Egyptair v. NLRC, G.R. No. 63185, February 27, 1987, 148 SCRA 125; Asphalt and Cement Pavers, Inc. v. Leogardo, G.R. No. 74563, June 20, 1988]. There is no dispute that loss of confidence, when adequately proven, constitutes a valid ground for dismissing an employee [Manila Midtown Commercial Corporation v. Nuwhrain G.R. No. L-57268, March 25, 1988, 159 SCRA 212] and proof beyond reasonable doubt is not required to terminate him on this charge [Gatmaitan v. MRR, G.R. No. L-19892, September 25, 1967, 21 SCRA 191]. It is sufficient that there is some basis for such loss of confidence [Galsim v. PNB, G.R. No. L-23921, August 29, 1969, 29 SCRA 293; Central Textile Mills v. NLRC, G.R. No. 50150, May 3, 1979, 90 SCRA 9] and that the employer has reasonable ground to believe or entertain the moral conviction that the employee concerned is responsible for the misconduct and that the nature of his participation therein would render him absolutely unworthy of the trust and confidence demanded of his position [Nevans v. CIR, G.R. No. L-21510, June 29, 1968, 23 SCRA 1321]. The doctrine goes on further to include the basic rule that the conviction of an employee in a criminal case is not indispensable to warrant his dismissal by his employer and that the fact that a criminal complaint against the employee has

been dropped by the city fiscal is not binding and conclusive upon a labor tribunal [Sea Land Service Inc. v. NLRC, G.R. No. 68212, May 24, 1985, 136 SCRA 544]. The Court, however, has time and again stressed that the right of an employer to dismiss employees on the ground that it has lost its trust and confidence in him must not be exercised arbitrarily and without just cause; that although the dropping of a criminal prosecution for an employee's alleged misconduct does not bar his dismissal and proof beyond reasonable doubt is not necessary to justify the same, still the basis thereof must be clearly and convincingly established [Acda v. Minister of Labor, G.R. No. 51607, December 15, 1982, 119 SCRA 326; Philippine Long Distance Telephone Co. v. NLRC, G.R. No. 58004, May 30, 1983, 122 SCRA 601]. Thus, the Court in General Bank and Trust Co. v. CA [G.R. No. L-42724, April 9, 1985, 135 SCRA 569] laid down the following guidelines in the applicability of the doctrine of loss of confidence, to wit: ... However, loss of confidence should not be simulated. It should not be used as a subterfuge for causes which are improper, illegal or unjustified. Loss of confidence may not be arbitrarily asserted in the face of overwhelming evidence to the contrary. It must be genuine, not a mere afterthought to justify earlier action taken in bad faith. [General Bank, supra, at p. 578 cited in D.M. Consunji, Inc. v. NLRC, G.R. No. 71459, July 30, 1986, 143 SCRA 204, 211]. Applying the foregoing legal precepts to the pertinent facts, the Court finds that there was utter failure here to establish or substantiate the theft charge against GOMEZ. The public respondent NLRC found, amply supported by the record, that contrary to the Labor Arbiter's findings that GOMEZ "failed to present an iota of evidence to prove his innocence," GOMEZ indeed presented exculpatory evidence consisting of the statements of his co-employees Rando Tamondong

and Arsenio Biong, the former attesting that he was not aware of any missing ballast from his department and the latter claiming that it was in fact Bonifacio Alvarez who brought out a canopy containing a ballast, which GOMEZ was accused of stealing. Although STARLITE subsequently submitted the recanting affidavits of said witnesses, said recanting affidavits did not inspire belief and the NLRC disregarded the same. The NLRC also found that the findings of the fiscal exonerating GOMEZ from the theft charge was entitled to great weight as these findings reveal at once that the theft charge which is the basis for the dismissal of GOMEZ was not clearly and convincingly established by petitioner. Moreover, the Court is guided by the well-known principle that findings of facts of quasi-judicial agencies, like the NLRC, are generally accorded great respect and will not be disturbed absent a showing that the findings are unsubstantiated by evidence [St. Luke's Hospital v. NLRC, G.R. Nos. 54068 & 54142, August 30, 1982, 116 SCRA 240; Manila Mandarin Employees Union v. NLRC, G.R. No. 76989, September 29, 1987, 154 SCRA 368]. The NLRC's findings having support in the statements of GOMEZ and his witnesses [Record, pp. 11-20,] no cogent reasons exist for the Court to digress from the settled rule. Petitioner next contends that GOMEZ submitted the alleged statements of his witnesses when the case was already submitted to the investigating fiscal for resolution without furnishing a copy to petitioner. Petitioner thus was not able to rebut the same, and that in any case, these alleged witnesses cannot be expected to tell the truth because they were the close friends of GOMEZ [Rollo, p. 7]. Petitioner's argument instead of buttressing its claim dooms it. Granting that petitioner was not furnished a copy of the affidavits of GOMEZ's witnesses during the proceedings before the investigating fiscal, still, as aforestated, the same affidavits were attached with the fiscal's resolution to GOMEZ's position paper, and STARLITE had the opportunity to assail the same, as it in fact did in its supplemental position paper, attaching the recanting affidavits of GOMEZ's own

witnesses. STARLITE's allegation that it had no opportunity to rebut said affidavits is thus unfounded. Consequently, the theft charge not having been established, the dismissal of GOMEZ on the ground of loss of trust and confidence cannot be sustained. In view of the finding that GOMEZ was dismissed illegaly, STARLITE is obligated to reinstate GOMEZ to his former position or one reasonably equivalent thereto without loss of seniority rights, and to pay backwages for three years, without qualification or deduction [Mercury Drug v. CIR, G.R. No. L-23357, April 30, 1974, 56 SCRA 694; PAL, Inc. v. NLRC, G.R. No. 64809, November 29, 1983, 126 SCRA 223; Lepanto Consolidated Mining Co. v. Olegario, G.R. No. 77437, June 23, 1988]. In the event such reinstatement is no longer feasible, or if GOMEZ decides not to be reinstated, STARLITE shall pay him separation pay in lieu of reinstatement such separation pay to be computed according to the formula used in the cases of: Santos v. National Labor Relations Commission,G.R. No. 76721, September 21, 1987, 154 SCRA 116; Soriano v. National Labor Relations Commission, G.R. No. 75510, October 27, 1987, 155 SCRA 124; and, Manila Midtown Commercial Corporation v. Nuwhrain, G.R. No. L-57268, March 25, 1988, 159 SCRA 212. WHEREFORE, the petition for certiorari is DISMISSED. The Decision of public respondent NLRC is hereby AFFIRMED, subject to the modification that (1) petitioner shall pay private respondent GOMEZ three (3) years backwages without qualification and deduction and (2) STARLITE shall reinstate GOMEZ to his former position or one reasonably equivalent thereto or if such reinstatement is no longer feasible or should GOMEZ not accept reinstatement, STARLITE shall pay him separation pay to be computed as above indicated. The Temporary Restraining Order issued on 10 June 1987 is hereby LIFTED. SO ORDERED. Fernan C.J., Gutierrez, Jr., and Bidin, JJ., concur.

Feliciano, J., is on leave.

SECOND DIVISION

[G.R. No. 120466. May 17, 1999]

COCA COLA BOTTLERS PHILS., INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and RAMON B. CANONICATO, respondents. DECISION BELLOSILLO, J.: This petition for certiorari under Rule 65 of the Revised Rules of Court assails the 3 January 1995 decision [1] of the National Labor Relations Commission (NLRC) holding that private respondent Ramon B. Canonicato is a regular employee of petitioner Coca Cola Bottlers Phils. Inc. (COCA COLA) entitled to reinstatement and back wages. The NLRC reversed the decision of the Labor Arbiter of 28 April 1994 [2] which declared that no employer-employee relationship existed between COCA COLA and Canonicato thereby foreclosing entitlement to reinstatement and back wages. On 7 April 1986 COCA COLA entered into a contract of janitorial services with Bacolod Janitorial Services (BJS) stipulating [3] among others That the First Party (COCA COLA) desires to engage the services of the Second Party (BJS), as an Independent Contractor, to perform and provide for the

maintenance, sanitation and cleaning services for the areas hereinbelow mentioned, all located within the aforesaid building of the First Party x x x x 1. The scope of work of the Second Party includes all floors, walls, doors, vertical and horizontal areas, ceiling, all windows, glass surfaces, partitions, furniture, fixtures and other interiors within the aforestated covered areas. 2. Except holidays which are rest days, the Second Party will undertake daily the following: 1) Sweeping, damp-mopping, spot scrubbing and polishing of floors; 2) Cleaning, sanitizing and disinfecting agents to be used on commodes, urinals and washbasins, water spots on chrome and other fixtures to be checked; 3) Cleaning of glass surfaces, windows and glass partitions that require daily attention; 4) Cleaning and dusting of horizontal and vertical surfaces; 5) Cleaning of fixtures, counters, panels and sills; 6) Clean, pick-up cigarette butts from sandburns and ashtrays and trash receptacles; 7) Trash and rubbish disposal and burning. In addition, the Second Party will also do the following once a week, to wit: 1) Cleaning, waxing and polishing of lobbies and offices; 2) Washing of windows, glasses that require cleaning; 3) Thorough disinfecting and cleaning of toilets and washrooms. 3. The Second Party shall supply the necessary utensils, equipment and supervision, and it shall only employ the services of fifteen (15) honest, reliable, carefully screened, cooperative and trained personnel, who are in good faith, in the performance of its herein undertaking x x x x 4. The Second Party hereby guarantees against unsatisfactory

workmanship. Minor repair of comfort rooms are free of charge provided the First Party will supply the necessary materials for such repairs at its expense. As may be necessary, the Second Party shall also report on such part or areas of the premises covered by this contract which may require repairs from time to time x x x (italics supplied).

Every year thereafter a service contract was entered into between the parties under similar terms and conditions until about May 1994. [4] On 26 October 1989 COCA COLA hired private respondent Ramon Canonicato as a casual employee and assigned him to the bottling crew as a substitute for absent employees. In April 1990 COCA COLA terminated Canonicato's casual employment. Later that year COCA COLA availed of Canonicato's services, this time as a painter in contractual projects which lasted from fifteen (15) to thirty (30) days.[5] On 1 April 1991 Canonicato was hired as a janitor by BJS [6] which assigned him to COCA COLA considering his familiarity with its premises. On 5 and 7 March 1992 Canonicato started painting the facilities of COCA COLA and continued doing so several months thereafter or so for a few days every time until 6 to 25 June 1993.[7] Goaded by information that COCA COLA employed previous BJS employees who filed a complaint against the company for regularization pursuant to a compromise agreement,[8] Canonicato submitted a similar complaint against COCA COLA to the Labor Arbiter on 8 June 1993. [9] The complaint was docketed as RAB Case No. 06-06-10337-93. Without notifying BJS, Canonicato no longer reported to his COCA COLA assignment starting 29 June 1993. On 15 July 1993 he sent his sister Rowena to collect his salary from BJS. [10] BJS released his salary but advised Rowena to tell Canonicato to report for work. Claiming that he was barred from entering the premises of COCA COLA on either 14 or 15 July 1993, Canonicato met with the proprietress of BJS, Gloria Lacson, who offered him assignments in other firms which he however refused.[11] On 23 July 1993 Canonicato amended his complaint against COCA COLA by citing instead as grounds therefor illegal dismissal and underpayment of wages. He included BJS therein as a co-respondent.[12] On 28 September 1993

BJS sent him a letter advising him to report for work within three (3) days from receipt, otherwise, he would be considered to have abandoned his job. [13] On 28 April 1994 the Labor Arbiter ruled that: (a) there was no employeremployee relationship between COCA COLA and Ramon Canonicato because BJS was Canonicato's real employer; (b) BJS was a legitimate job contractor, hence, any liability of COCA COLA as to Canonicato's salary or wage differentials was solidary with BJS in accordance with pars. 1 and 2 of Art. 106, Labor Code; (c) COCA COLA and BJS must jointly and severally pay Canonicato his wage differentials amounting to P2,776.80 and his 13th month salary of P1,068.00, including ten (10%) percent attorney's fees in the sum of P384.48. The Labor Arbiter also ordered that all other claims by Canonicato against COCA COLA be dismissed for lack of employer-employee relationship; that the complaint for illegal dismissal as well as all the other claims be likewise dismissed for lack of merit; and that COCA COLA and BJS deposit P4,429.28 with the Department of Labor Regional Arbitration Branch Office within ten (10) days from receipt of the decision.[14] The NLRC rejected on appeal the decision of the Labor Arbiter on the ground that the janitorial services of Canonicato were found to be necessary or desirable in the usual business or trade of COCA COLA. The NLRC accepted Canonicato's proposition that his work with the BJS was the same as what he did while still a casual employee of COCA COLA. In so holding the NLRC applied Art. 280 of the Labor Code and declared that Canonicato was a regular employee of COCA COLA and entitled to reinstatement and payment of P18,105.10 in back wages.[15] On 26 May 1995 the NLRC denied COCA COLA's motion for reconsideration for lack of merit.[16] Hence, this petition, assigning as errors: (a) NLRC's finding that janitorial services were necessary and desirable in COCA COLA's trade and business; (b) NLRC's application of Art. 280 of the Labor Code in resolving the issue of whether an employment relationship existed between the parties; (c) NLRC's ruling that there was an employer-employee relationship between

petitioner and Canonicato despite its virtual affirmance that BJS was a legitimate job contractor; (d) NLRC's declaration that Canonicato was a regular employee of petitioner although he had rendered the company only five (5) months of casual employment; and, (e) NLRC's order directing the reinstatement of Canonicato and the payment to him of six (6) months back wages. [17] We find good cause to sustain petitioner. Findings of fact of administrative offices are generally accorded respect by us and no longer reviewed for the reason that such factual findings are considered to be within their field of expertise. Exception however is made, as in this case, when the NLRC and the Labor Arbiter made contradictory findings. We perceive at the outset the disposition of the NLRC that janitorial services are necessary and desirable to the trade or business of petitioner COCA COLA. But this is inconsistent with our pronouncement in Kimberly Independent Labor Union v. Drilon[18] where the Court took judicial notice of the practice adopted in several government and private institutions and industries of hiring janitorial services on an "independent contractor basis." In this respect, although janitorial services may be considered directly related to the principal business of an employer, as with every business, we deemed them unnecessary in the conduct of the employer's principal business. [19] This judicial notice, of course, rests on the assumption that the independent contractor is a legitimate job contractor so that there can be no doubt as to the existence of an employer-employee relationship between contractor and the worker. In this situation, the only pertinent question that may arise will no longer deal with whether there exists an employment bond but whether the employee may be considered regular or casual as to deserve the application of Art. 280 of the Labor Code. It is an altogether different matter when the very existence of an employment relationship is in question. This was the issue generated by Canonicato's application for regularization of his employment with COCA COLA and the subsequent denial by the latter of an employer-employee relationship with the

applicant. It was error therefore for the NLRC to apply Art. 280 of the Labor Code in determining the existence of an employment relationship of the parties herein, especially in light of our explicit holding in Singer Sewing Machine Company v. Drilon[20] that x x x x [t]he definition that regular employees are those who perform activities which are desirable and necessary for the business of the employer is not determinative in this case. Any agreement may provide that one party shall render services for and in behalf of another for a consideration (no matter how necessary for the latter's business) even without being hired as an employee. This is precisely true in the case of an independent contractorship as well as in an agency agreement. The Court agrees with the petitioner's argument that Article 280 is not the yardstick for determining the existence of an employment relationship because it merely distinguishes between two kinds of employees, i.e., regular employees and casual employees, for purposes of determining the right of an employee to certain benefits, to join or form a union, or to security of tenure. Article 280 does not apply where the existence of an employment relationship is in dispute. In determining the existence of an employer-employee relationship it is necessary to determine whether the following factors are present: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power to dismiss; and, (d) the power to control the employee's conduct.
[21]

Notably, these are all found in the relationship between BJS and Canonicato

and not between Canonicato and petitioner COCA COLA. As the SolicitorGeneral manifested[22]In the instant case, the selection and engagement of the janitors for petitioner were done by BJS. The application form and letter submitted by private respondent (Canonicato) to BJS show that he acknowledged the fact that it was BJS who did the hiring and not petitioner x x x x

BJS paid the wages of private respondent, as evidenced by the fact that on July 15, 1993, private respondent sent his sister to BJS with a note authorizing her to receive his pay. Power of dismissal is also exercised by BJS and not petitioner. BJS is the one that assigns the janitors to its clients and transfers them when it sees fit. Since BJS is the one who engages their services, then it only follows that it also has the power to dismiss them when justified under the circumstances. Lastly, BJS has the power to control the conduct of the janitors. The supervisors of petitioner, being interested in the result of the work of the janitors, also gives suggestions as to the performance of the janitors, but this does not mean that BJS has no control over them. The interest of petitioner is only with respect to the result of their work. On the other hand, BJS oversees the totality of their performance. The power of the employer to control the work of the employee is said to be the most the most significant determinant. Canonicato disputed this power of BJS over him by asserting that his employment with COCA COLA was not interrupted by his application with BJS since his duties before and after he applied for regularization were the same, involving as they did, working in the maintenance department and doing painting tasks within its facilities. Canonicato cited the Labor Utilization Reports of COCA COLA showing his painting assignments. These reports, however, are not expressive of the true nature of the relationship between Canonicato and COCA COLA; neither do they detract from the fact that BJS exercised real authority over Canonicato as its employee. Moreover, a closer scrutiny of the reports reveals that the painting jobs were performed by Canonicato sporadically, either in a few days within a month and only for a few months in a year.[23] This infrequency or irregularity of assignments countervails Canonicatos submission that he was assigned specifically to undertake the task of painting the whole year round. If anything, it hews closely to the assertion of BJS that it assigned Canonicato to these jobs to maintain and

sanitize the premises of petitioner COCA COLA pursuant to its contract of services with the company.[24] It is clear from these established circumstances that NLRC should have recognized BJS as the employer of Canonicato and not COCA COLA. This is demanded by the fact that it did not disturb, and therefore it upheld, the finding of the Labor Arbiter that BJS was truly a legitimate job-contractor and could by itself hire its own employees. The Commission could not have reached any other legitimate conclusion considering that BJS satisfied all the requirements of a jobcontractor under the law, namely, (a) the ability to carry on an independent business and undertake the contract work on its own account under its own responsibility according to its manner and method, free from the control and direction of its principal or client in all matters connected with the performance of the work except as to the results thereof; and, (b) the substantial capital or investment in the form of tools, equipment, machinery, work premises, and other materials which are necessary in the conduct of its business. [25] It is to be noted that COCA COLA is not the only client of BJS which has its roster of clients like San Miguel Corporation, Distileria Bago Incorporated, University of Negros Occidental-Recolletos, University of St. La Salle, Riverside College, College Assurance Plan Phil., Inc., and Negros Consolidated Farmers Association, Inc.[26] This is proof enough that BJS has the capability to carry on its business of janitorial services with big establishments aside from petitioner and has sufficient capital or materials necessary therefor. [27] All told, there being no employer-employee relationship between Canonicato and COCA COLA, the latter cannot be validly ordered to reinstate the former and pay him back wages. WHEREFORE, the petition is GRANTED. The NLRC decision of 3 January 1995 declaring Ramon B. Canonicato a regular employee of petitioner Coca Cola Bottlers Phils., Inc., entitled to reinstatement and back wages is REVERSED and SET ASIDE. The decision of the Labor Arbiter of 28 April 1994 finding no employer-employee relationship between petitioner and private respondent but directing petitioner Coca Cola Bottlers Phils., Inc., instead and Bacolod Janitorial

Services to pay jointly and severally Ramon B. Canonicato P2,776.80 as wage differentials, P1,068.00 as 13th month pay and P384.48 as attorney's fees, is REINSTATED. SO ORDERED. Republic SUPREME Manila THIRD DIVISION G.R. No. 82580 April 25, 1989 COCA-COLA vs. NATIONAL LABOR RELATIONS COMMISSION and FERNANDO VEGA, respondents. G.R. No. 84075 April 25, 1989 FERNANDO vs. NATIONAL LABOR RELATIONS COMMISSION THIRD DIVISION, MANILA and COCA-COLA BOTTLERS, PHILIPPINES, INC., respondents. VEGA, petitioner, BOTTLERS PHILIPPINES INCORPORATED, petitioner, of the Philippines COURT

GUTIERREZ JR., J.: Before us are two separate petitions docketed as G.R. No. 82580 and G.R. No. 84075 both assailing the decision of the National Labor Relations Commission in RAB Case No. Vl0038-85.

Fernando Vega, the petitioner in G.R. No. 84075, began his employment with Coca-Cola Bottlers Philippines, Inc., the petitioner in G.R. No. 82580, on November 1, 1976 as Sprite Salesman covering the Iloilo City routes. He was subsequently promoted to regular salesman in 1978. In the same year, however, on charges of issuing temporary credit sales receipts and denying dealer's accounts, he was demoted to relief salesman He was also suspended for one (1) month and six (6) days and grounded for six (6) months. In 1981, he was again promoted to regular salesman. He held the same position until June 26,1984 when he was terminated from employment on the charge of falsification of route sales report. On July 16,1984, he filed with the then Ministry of Labor and Employment a complaint for unfair labor practice, illegal dismissal, unpaid wages and separation pay and for damages and attorney's fees. He alleged that he was dismissed without lawful cause because the falsification imputed to him did not result from deliberate and malicious intent but from honest mistake and oversight. He averred that on March 10, 1984, on the night he was about to turn over to the company the proceeds of his sales, he noticed a discrepancy of about P100.00 in his liquidation report; that after he checked his papers he found that the Incoming Load Report issued by the gate guard declared only five (5) cases of empty bottles while the duplicate copy issued by the stock clerk listed fifteen (15) cases of empties; that as he was about to correct the report, an unscheduled brown-out occurred; that he immediately submitted the uncorrected report to the pre-audit personnel with the intention to settle the error the following day. He further related that after he was informed by the cashier of his shortage, he immediately paid the amount of Pl00.00; that on May 12, 1984, he was grounded, and, that he submitted to an investigation hoping that his mistake will not be taken against him but he received a letter terminal his services on June 26,1984. He pointed out that it is unlikely that he would bargain his seven years of dedicated service to the Company for a measly sum of P100.00, and stated that the Company was bent on terminating his services because he was an active union officer.

To rebut Vega's allegations of honest mistake and oversight, however, CocaCola Bottlers Philippines, Inc. outlined the procedure for the liquidation of sales. It contended that because of the sensitive nature of a sales agent's job, a system of liquidation was required which consists of daily checks on the goods and accomplishment of several documents which are subject to regular audit. It narrated that on March 10, 1984, upon entering the company's premises, Vega had the contents of his track examined by the guard; that he prepared three (3) copies of the Incoming Load Report (ILR), one copy for him, one copy for the guard, and one for the files in a box; that the copy in the files listed five (5) cases of empty bottles; that thereafter, when Vega entered the plant, the plant checker examined his cargo and prepared two copies of checker slips, one copy for the stock clerk and one for Vega; that once inside the plant, Vega prepared his Route Sales Report (RSR) and turned over to the cashier and finance officer the RSR, ILR and checker slips together with the cash collection; that upon audit, it was discovered that while the ILR and checker slips listed only five (5) cases of empty bottles, the RSR listed fifteen (15) cases; that it was also learned that Vega's copy of the ILR and checker slips were altered and also listed fifteen (15) cases; that due to the discrepancy the company was defrauded in the amount of P100.00 more or less. Coca-Cola Bottlers Philippines, Inc. alleged that it cannot condone Vega's acts because his job exposes him to financial transactions everyday. It further averred that Vega's acts showed willful and malicious intent to defraud the company and rendered him unworthy of its trust and confidence. On July 24,1986, the Labor Arbiter found in favor of Vega. He ruled that any error in the entries in the sales report was made unintentionally and may probably be due to the sudden brown-out alleged by Vega. He opined that the penalty of dismissal was too severe considering Vega's seven years of dedicated service to the company. Thus, he ordered the company to reinstate Vega to his former position and to pay him full and complete backwages and other benefits at the

rate of P2,280.00 a month until reinstated, 10% attorney's fees and the amount of P5,000.00 as transportation and other incidental expenses. On appeal to the National Labor Relations Commission, the decision was modified. The NLRC was not convinced that the falsification was unintentional. It further observed that under company rules, the infraction calls for the penalty of dismissal. It, however, noted Vega's seven years of service to the company and accordingly ordered his reinstatement with only three (3) months backwages. Both parties appealed from the decision. Coca-Cola Bottlers Philippines, Inc. filed its petition for review docketed as G.R. No. 82580 on April 6,1988 while Vega filed the present petition for review on certiorari docketed as G.R. No. 84075 on April 21, 1988. In a resolution dated October 17,1988, this Court ordered the two cases consolidated considering that the subject matter and the issues involved in the two cases emanated from the same decision of the NLRC. In accordance with the Manifestation filed by the Office of the Solicitor General for the respondent NLRC, the Comment filled in G.R. No. 82580 is considered as the Comment required by this Court in G.R. No. 84075. We treat the Comments as Answers and decide these petitions on their merits. Coca-Cola Bottlers Philippines, Inc. alleges that the NLRC erred in ordering Vega's reinstatement not withstanding its finding that falsification was clearly committed by Vega. It contends that length of service does not warrant an employee's reinstatement where there is a clear showing that he committed acts constituting just causes of termination. On the other hand, Vega alleges that the NLRC committed grave abuse of discretion in considering facts not alleged in the labor arbiters decision. He further states that the NLRC erred in denying him full backwages in spite of the fact that the labor arbiter clearly found that Coca-Cola Bottlers Philippines, Inc. committed an unfair labor practice.

We rule in favor of Coca-Cola Bottlers Philippines, Inc. The NLRC's order of reinstatement based on the sole ground of length of service does not find support in either law or jurisprudence. When adequately proven, the dual grounds of breach of trust and loss of confidence constitute valid and ample bases to warrant termination of an errant employee. (Manila Midtown Commercial Corporation v. Nuwhrain (Ramada Chapter), 159 SCRA 212 [1988]). The employer's obligation to give his workers just compensation and treatment carries with it the corollary right to expect from the workers adequate work, diligence and good conduct. (Firestone Tire and Rubber Co. of the Phils. v. Lariosa, 148 SCRA 187 [1987]). In the last cited case, this Court held: Although as a rule this Court leans over backwards to help workers and employees continue with their employment or to mitigate the penalties imposed on them, acts of dishonesty in the handling of company property are a different matter. Thus under Article 283 of the Labor Code, an employer may terminate an employment for 'serious misconduct' or for fraud or willful breach by the employee of the trust reposed in him by by his employer or representative. If there is sufficient evidence that an employee has been guilty of a breach of trust or that his employer has ample reasons to distrust him, the labor tribunal cannot justly deny to the employer. the authority to dismiss such an employee. There is no question that Coca-Cola Bottlers Philippines, Inc., is correct when it states that Vega's position as a sales agent is of such a nature as to require a substantial amount of trust and confidence on the part of the employer. The work of a salesman exposes him to voluminous financial transactions involving his employer's goods. The life of the softdrinks company depends not so much on

the bottling or production of the product since this is primarily done by automatic machines and personnel who are easily supervised but upon mobile and far ranging salesmen who go from store to store all over the country or region. Salesmen are highly individualistic personnel who have to be trusted and left essentially on their own. A high degree of confidence is reposed in them when they are entrusted with funds or properties of their employer. As a general rule, employers are allowed a wider latitude of discretion in terminating the employment of managerial personnel or those who, while not of similar rank, perform functions which by their nature require the employer's full trust and confidence. This must be distinguished from the case of ordinary rankand-file employees, whose termination on the basis of these same grounds requires a higher proof of involvement in the events in question; mere uncorroborated assertions and accusations by the employer will not suffice. (See Manila Midtown Commercial Corporation v. Nuwhrain (Ramada Chapter), supra). Thus, in the case of San Miguel Corp. v. National Labor Relations Commission (142 SCRA 376, 384 [1986]), this Court held: Private respondent represents petitioner in his dealings with the public. When charges of theft of customer's properties and misconduct on the job are imputed on the sales agent, and these charges are supported with evidence, they constitute sufficient reasons for termination of employment. Well established in our jurisprudence is the right of an employer to dismiss an employee whose continuance in the service is inimical to the employer's interest. (Manila Trading and Supply, Co. v. Philippine Labor Union, 71 Phil. 124; Engineering Equipment, Inc. v. NLRC, 133 SCRA 752) In this case, the employee's infraction was not his first offense. We note that he was suspended and grounded for other offenses he committed in 1978. We regret, then, that this Court is powerless to extend to him the remedy of

reinstatement even on the ground of equity based on his length of service. As this Court held in the case ofPiedad v. Lanao del Norte Electric Cooperative, Inc. (153 SCRA 500, 509 [1987]): The precedents on the issue before us are clear. Dismissal of a dishonest employee is to the best interest not only of management but also of labor (International Hardwood and Veneer Co. of the Phils. v. Leogardo, Jr., 117 SCRA 967). As a measure of selfprotection against acts inimical to its interest, a company has the right to dismiss its erring employees (Dole Phils. Inc. v. National Labor Relations Commission, supra). An employer cannot be compelled to continue in employment an employee guilty of acts inimical to its interest, justifying loss of confidence in him (International Hardwood and Veneer Co., of the Philippines v. Leogardo, Jr. supra; National Service Corporation v. Leogardo, Jr. supra; Engineering Equipment, Inc. v. National Labor Relations Commission, supra). The law does not impose unjust situations on either labor or management. Because of the difference between the findings of the Labor Arbiter and the NLRC, we have examined this aspect of the petition carefully. We affirm the NLRC conclusion that there was a clear falsification of commercial documents in this case. The tampered documents in the hands of Mr. Vega and presented to the cashier and finance officer showed fifteen cases of soft drinks bottles while the earlier copies of the same documents in the hands of the gate guard and the stock clerk and in the flies reflected only five cases returned to the employer. There was no brown-out yet when the "incoming load report" was given at the guard house and the checker slip given to the stock clerk. It cannot be reason for the discrepancy. Besides, why should a salesman prepare basic reports in the dark? The tampering to reflect a bigger number of returns was effected when the salesman presented his reports for the cashier and finance officer. The allegation that the salesman would not risk his job for such a small amount is not a defense

because minor pilferages or thefts carried on over a long period of time through false reports or juggling of funds and properties may, as intended by the employee, remain unnoticed but they would destroy the company nonetheless if unchecked or tolerated. The Labor Arbiter is wrong; the NLRC is correct insofar as the appreciation of facts is concerned. WHEREFORE, the assailed decision of the National Labor Relations Commission is hereby REVERSED and SET ASIDE. The dismissal of petitioner Fernando Vega from his employment by Coca-Cola Bottlers Philippines, Incorporated is AFFIRMED as valid and according to law. SO ORDERED.

Republic SUPREME Manila THIRD DIVISION

of

the

Philippines COURT

G.R. No. L-52034 September 27, 1988 SALVADOR vs. HON. AMADO G. INCIONG in his capacity as Deputy Minister of Labor; HON. FRANCISCO L. ESTRELLA in his capacity as Regional Director, Ministry of Labor; and ASEAN FABRICATORS, INC., respondents. Benito P. Fable for petitioner. The Office of the Solicitor General for public respondent. LACORTE, petitioner,

Bengzon, Zarraga, Narciso, Cudala, Pecson Azcuna & Bengzon for private respondent.

FERNAN, C.J.: In this special civil action for certiorari and mandamus, petitioner Salvador Lacorte seeks [1] to annul and set aside the Order dated May 19, 1978, issued by respondent Labor Regional Director Francisco Estrella in T-IV 289-77 which granted the application for clearance to terminate petitioner's employment filed by private respondent Asean Fabricators, Inc., as well as the Order dated August 23, 1979, issued by the then Deputy Minister of Labor Amado Gat Inciong affirming the aforementioned order, petitioner claiming that said orders were issued by the public respondents with grave abuse of discretion and in violation of his right to due process, and [2] to direct his reinstatement with payment of backwages. Petitioner, an employee of respondent corporation, was found by respondent Estrella to have committed certain acts in breach of the trust and confidence of his employer, in the questioned Order 1 which reads as follows: ORDER This is an application for clearance to terminate the services of complainant filed by respondent. The record shows that complainant was hired as a warehouseman whose duties were among others, to receive and store the raw and junk materials used by respondent in its business. On January 19, 1977, complainant offered to purchase some obsolete, defective and non-usable junk materials from respondent. The respondent agreed and issued a cash invoice for the purchase

of the scrap items. When complainant tried to bring out these items he was accosted by respondent's security guard and in the course of the investigation, it was discovered that the items sought to be brought out by complainant weighed more than what he actually purchased. Furthermore, it was found out that the items were not junk since some parts were brand new and usable. As a consequence the respondent filed a case for qualified theft against complainant before the Provincial Fiscal of Bulacan. The criminal complaint was however, dismissed for insufficiency of evidence. While we are not unmindful of the resolution by the fiscal regarding the culpability of complainant, still we cannot put aside the fact that he occupied a fiduciary position as a warehouseman. It is noteworthy to note that the quantum of evidence in criminal cases is markedly different from that in labor cases. The complainant by his own acts show that he does not deserve the continuing trust of respondent. We would be unduly burdening respondent if we were to deny the application for it would be cast in a position where it has an employee over whom it has no trust and confidence. WHEREFORE, premises considered, the application for clearance to terminate the employment of complainant is hereby granted. SO ORDERED. On appeal by petitioner, the aforementioned order was affirmed by respondent Inciong in a one-page order, which is also questioned in this petition, on the basis of his findings that "(A)fter a careful review of the entire record of the case, we find no valid and compelling reason to disturb the Order appealed from it being sufficiently supported by the evidence on record and the law applicable."
2

Dissatisfied with the aforequoted order, petitioner took the present recourse. As correctly presented by the counsel for petitioner 3 the only issue in this case is whether or not public respondents acted arbitrarily and/or with grave abuse of discretion in connection with the grant of the application for clearance to terminate the employment of petitioner filed by respondent corporation. The thrust of petitioner's arguments is that public respondents issued the assailed orders with grave abuse of discretion and in violation of his right to due process, considering that the criminal complaint for qualified theft filed by respondent corporation against petitioner based on the alleged attempted stealing of some company property on January 22, 1977, was dismissed by the fiscal for insufficiency of evidence; that it took private respondent several months after the incident before seeking clearance to terminate his services during which he was allowed to remain in his job, negating any claim of loss of confidence arising therefrom; that the order of Estrella failed to consider the affidavits of petitioner and a fellow employee claiming that the real motive for dismissing him is not loss of confidence but his union activities; and, that petitioner was allegedly not aware of the weighing and examination of the withheld boxes containing the scrap materials conducted by respondent corporation after he was accosted by the company guards on January 22, 1977, in violation of his right to due process. At first impression, petitioner's arguments in support of his claim of denial of due process appear to hold water considering the constitutional as well as statutory commands and guarantees for the protection of the rights of labor. The records, however, do not support his allegations; neither do the law and jurisprudence on this matter. A review of the records reveals that petitioner was accorded more than ample opportunities to fully present his side of the case. After private respondent's application for clearance to terminate petitioner's employment was filed on October 7, 1977, the case was set for hearing in Regional Office No. IV on

December 6, 1977 but was reset for December 13, 1977. In the hearing on the latter date, the parties were required to submit their respective position papers. Petitioner filed his position paper on December 21, 1977, while the private respondent filed its own on December 29, 1977. The record further shows that petitioner did not introduce his affidavits during the hearing and until the case was submitted for decision. This may explain why in the order of Estrella on May 19, 1978, there was no mention of said affidavits of petitioner. When said order was appealed, further hearings were conducted but petitioner again did not introduce any evidence until the case on appeal was deemed submitted for decision on January 24, 1979. It was only on January 29, 1979, that petitioner filed the affidavits 4 claiming for the first that time the real motive for his termination was his union activities. From the time the parties were required to submit their respective position papers on December 21, 1977 until respondent Estrella issued his order which was appealed and throughout the appeal proceedings which was deemed submitted on January 24, 1979; petitioner did not present those affidavits and did so only after more than one year from the initial hearing. It defies explanation other than that it was a mere afterthought why it took petitioner so much time to prepare those two affidavits which contain nothing more than the bare allegation, obviously self-serving, that his union activities prompted his termination. We cannot understand why he failed to present them until the case was already on appeal. Petitioner's imputation of omissions must therefore fail. He has not succeeded in overcoming the presumption of regularity in the performance of respondent labor officials' functions in issuing the orders. As this Court has stated in similar cases the findings of facts of quasi- judicial agencies like the NLRC, which have acquired expertise because their jurisdiction is confined to specific matters are generally accorded not only respect but at times even finality if such findings are supported by substantial evidence 5 and that in the exercise of their jurisdiction, "when confronted with conflicting versions on factual matters, it is for them in the exercise of discretion to determine which

party deserves credence on the basis of evidence received," subject only to the requirement
6

that

their

decision

must

be

supported

by

substantial

evidence. Accordingly, petitioner needed to show by substantial evidence that he was indeed an active union member who is expected to get the ire of the company, but by way of evidence on this point all that petitioner presented were his and a fellow employee's self-serving affidavits purportedly showing that his union activities prompted his termination, which quantum of evidence fails the substantiality requirement test to support his claim. Petitioner, however, contends that the dismissal by the Provincial Fiscal of the criminal complaint for qualified theft filed against him by private respondent for insufficiency of evidence supports his claim that he is innocent of the imputed acts of stealing and this should have prompted the respondents to dismiss the application for clearance to terminate his employment on the basis of the imputed acts of stealing. We cannot subscribe to this view. The purpose of the proceedings before the fiscal is to determine if there is sufficient evidence to warrant the prosecution and conviction of the accused. In assessing the evidence before him, the fiscal considers the basic rule that to successfully convict the accused the evidence must be beyond reasonable doubt and not merely substantial. On the other hand, to support findings and conclusion of administrative bodies only substantial evidence is required. It does not follow that once the fiscal dismisses the complaint for qualified theft, respondent officials should also have decided in favor of petitioner. For one, the evidence presented before the two bodies may not be necessarily Identical. Secondly, the appreciation of the facts and evidence presented is an exercise of discretion on the part of administrative officials over which one cannot impose his conclusion on the other. As we have already ruled, "the conviction of an employee in a criminal case is not indispensable to warrant his dismissal, and the fact that a criminal complaint against the employee has been dropped by the fiscal is not binding and conclusive upon a labor tribunal . 7

Further, petitioner would like to bolster his claim that the incident on January 22, 1977 was not the real cause for the move to terminate his services but his union activities by emphasizing the fact that he was allowed to remain in his post even after the said incident, the application for clearance having been filed only several months later. We are not persuaded. It is intimated by respondents that the respondent company conducted its investigation on the alleged theft before filing the criminal charges and the application for clearance, and only after having been convinced of the veracity of the reported attempt to steal. That the company investigated the incident first while allowing petitioner to stay on his job pending the investigation is not only proper but in accord with fair process. That the investigation took time is understandable, considering that it was not the only preoccupation of respondent corporation. Finally, petitioner claims that on January 22, 1977, when the company reportedly caught petitioner attempting to spirit away some brand new and usable company property, there was no actual weighing and examination of the boxes containing the scrap materials. Suffice it to say that it is now too late in the day for petitioner to raise these matters of facts in this petition. At any rate, his evidence does not substantiate his claim. The Court considered the records of this case as a whole, and we are convinced that there is substantial basis for the Orders issued by respondent labor officials. WHEREFORE, this petition is dismissed for lack of merit. SO ORDERED.

Republic SUPREME Manila FIRST DIVISION

of

the

Philippines COURT

G.R. No. 100969 August 14, 1992 CARLO vs. NATIONAL LABOR RELATIONS COMMISSION, ORO UNION CONSTRUCTION SUPPLY AND/OR JIMMY TING CHANG, GENERAL MANAGER/OWNER, respondents. Public Attorney's Office for petitioner. Eduardo P. Cuenca for private respondents. RANARA, petitioner,

CRUZ, J.: Petitioner Carlos Ranara had been working as a driver with Oro Union Construction Supply, one of the herein private respondents, when he was told by Fe Leonar, secretary of the other private respondent, Jimmy Ting Chang, not to come back the following day. Thinking that she was only joking, be reported for work as usual on November 11, 1989, but was surprised to find some other person handling the vehicle previously assigned to him. It was only then that

Ranara realized that he had really been separated. When he approached Leonar to ask why his services were being terminated, she replied crossly: You are hard-headed. I told you last night when you turned over the key not to report for work because Mr. Jimmy Ting Chang does not like your services, yet you, come back. Three days later, Ranara filed a complaint with the Department of Labor and Employment for illegal dismissal, reinstatement with full back wages, underpayment of wages, overtime pay, non-payment of 13th month pay, service incentive leave, separation pay and moral damages. The private respondents denied the charges, contending that the petitioner had not been illegally dismissed. Chang said he was in a hospital in Manila on November 11, 1989, and that he had not authorized Leonar, or even his mother who was the officer-in-charge during his absence, to terminate Ranara's employment. The truth was that it was Ranara who abandoned his work when he stopped reporting from November 11, 1989. Chang also introduced documentary evidence, consisting of payroll and other records, to refute the petitioner's monetary claims. On May 2, 1990, the Labor Arbiter held that Ranara had not been illegally dismissed. 1 The decision stressed that at the hearing of December 28, 1989, Chang offered to re-employ the petitioner as he was needed in the store but the latter demurred, saying he was no longer interested. This attitude, according to the Labor Arbiter, showed that it was the petitioner who chose to stop working for Chang and not the latter who terminated his employment. On the monetary claims, however, the decision ordered the respondents to pay the complainant P375.00 as wage differentials, 13th month pay for 1989 of P1,110.00 minus his outstanding obligation to respondents. The rest of the claims were dismissed for lack of merit.
2

The decision was affirmed on appeal, by the NLRC, 3 prompting the petitioner to seek relief from this Court. Required to comment, the Solicitor General disagreed with the NLRC on the legality of the petitioner's dismissal. He said that the challenged decision was based on an event subsequent to the illegal dismissal, to wit, the offer of reinstatement, and that such offer did not validate the dismissal. He also disputed the contention that the petitioner had voluntarily abandoned his work, saying this was unlikely because of the difficulty of the times and the high unemployment rate. In view of this stance of the Solicitor General, and at his suggestion, the Court required the NLRC to file its own comment. The NLRC argued in its Comment that the offer to re-employ the petitioner should not be disregarded in assessing the motives of the parties as it was a genuine effort on the part of the private respondents to settle the controversy. There was no reason for the petitioner's refusal to return to work after he had been invited back to the store. Moreover, the petitioner had not filed a motion for reconsideration of its decision and should therefore not be allowed to file his petition for certiorari with this Court. The NLRC also argued that it was not necessary to require the private respondents to submit the original copies of their documentary evidence because their due execution and genuineness had not been denied under oath and were therefore deemed admitted. The Court has carefully considered the arguments of the parties and finds for the petitioner. We reject as a rank falsity the private respondents' claim that the petitioner had not been illegally dismissed and in fact abandoned his work. The secretary would not have presumed to dismiss him if she had not been authorized to do so, considering the seriousness of this act. It is worth noting that neither Chang's

mother, who was the officer-in-charge do his absence, nor Chang himself upon his return, reversed her act and reinstated the petitioner. The private respondents themselves claim they have a staff of less than ten persons, and Chang or his mother could not have failed to notice Ranara's absence after November 1, 1989. Yet they took no steps to rectify the secretary's act if it was really unauthorized and, on the contrary, accepted Ranara's replacement without question. Evidently, that person had been employed earlier, in advance of Ranara's dismissal. The charge of abandonment does not square with the recorded fact that three days after Ranara's alleged dismissal, he filed a complaint with the labor authorities. The two acts are plainly inconsistent. Neither can Ranara's rejection of Chang's offer to reinstate him be legally regarded as an abandonment because the petitioner had been placed in an untenable situation that left him with no other choice. Given again the smallness of the private respondents' staff, Ranara would have found it uncomfortable to continue working under the hostile eyes of the employer who had been forced to reinstate him. It was not as if Ranara were only one among many other complainants ordered reinstated in a big company, for whatever enmity the employer might harbor against them would be diluted and less personalized, so to speak. There would be a certain degree of anonymity, and a resultant immunity from retaliation, in the number alone of the reinstated personnel. Moreover, it is not unlikely that there would be a labor union in such a company to protect and assure the returning workers against possible reprisals from the employer. In the petitioner's case, he was only one among ten employees in a small store, and that made a great deal of difference to him. He had reason to fear that if he accepted the private respondents' offer, their watchful eyes would thereafter be focused on him, to detect every small shortcoming of his as a ground for vindictive disciplinary action. In our own view, this was a case of strained

relations between the employer and the employee that justified Ranara's refusal of the private respondents' offer to return him to his former employment. It is clear that the petitioner was illegally dismissed without even the politeness of a proper notice. Without cause and without any investigation, formal or otherwise, Ranara was simply told that he should not report back for work the following day. When he did so just the same, thinking she had only spoken in jest, he found that somebody else had been employed in his place. When he protested his replacement, he was even scolded for being "hard-headed" and not accepting his dismissal. The fact that his employer later made an offer to re-employ him did not cure the vice of his earlier arbitrary dismissal. The wrong had been committed and the harm done. Notably, it was only after the complaint had been filed that it occurred to Chang, in a belated gesture of good will, to invite Ranara back to work in his store. Chang's sincerity is suspect. We doubt if his offer would have been made if Ranara had not complained against him. At any rate, sincere or not, the offer of reinstatement could not correct the earlier illegal dismissal of the petitioner. The private respondents incurred liability under the Labor Code from the moment Ranara was illegally dismissed, and the liability did not abate as a result of Chang's repentance. The failure of the petitioner to file a motion for reconsideration of the NLRC decision before coming to this Court was not a fatal omission. In the interest of substantial justice, and especially in cases involving the rights of workers, the procedural lapse may be disregarded to enable the Court to examine and resolve the conflicting rights and responsibilities of the parties. This liberality is warranted in the case at bar, especially since it has been shown that the intervention of the Court was necessary for the protection of the dismissed laborer. We sustain the findings of fact of the Labor Arbiter regarding the petitioner's monetary claims on the basis of the documentary evidence submitted by the

private respondents. We also agree that it was not necessary for the NLRC to require the production of the originals thereof in the absence of any challenge to their genuineness and due execution from the petitioner. The petitioner in this case was an ordinary driver in the private respondents' employ. He had no special abilities to make him indispensable to his employer. He did not belong to a powerful labor union vigilant of the rights of its members. The employer thought his services were disposable at will and so arbitrarily dismissed him. They miscalculated, for the petitioner was not really that vulnerable. The fact is that. alone though he was, or so it appeared, he had behind him, even as a lowly worker, the benevolence of the law and the protection of this Court. WHEREFORE, the challenged decision of the NLRC is AFFIRMED, with the modification that in addition to the monetary awards therein specified, the petitioner shall be entitled to separation pay and three years' back wages in lieu of reinstatement. No costs. SO ORDERED.

Republic SUPREME Manila THIRD DIVISION

of

the

Philippines COURT

G.R. No. 82249 February 7, 1991

WILTSHIRE vs.

FILE

CO.,

INC., petitioner,

THE NATIONAL LABOR RELATIONS COMMISSION and VICENTE T. ONG, respondents. Angara, Abello, Concepcion, Regala & Cruz for petitioner. Jose R. Millares & Associates for private respondent.

FELICIANO, J.:p Private respondent Vicente T. Ong was the Sales Manager of petitioner Wiltshire File Co., Inc. ("Wiltshire") from 16 March 1981 up to 18 June 1985. As such, he received a monthly salary of P14,375.00 excluding commissions from sales which averaged P5,000.00 a month. He also enjoyed vacation leave with pay equivalent to P7,187,50 per year, as well as hospitalization privileges to the extent of P10,000.00 per year. On 13 June 1985, upon private respondent's return from a business and pleasure trip abroad, he was informed by the President of petitioner Wiltshire that his services were being terminated. Private respondent maintains that he tried to get an explanation from management of his dismissal but to no avail. On 18 June 1985, when private respondent again tried to speak with the President of Wiltshire, the company's security guard handed him a letter which formally informed him that his services were being terminated upon the ground of redundancy. Private respondent filed, on 21 October 1985, a complaint before the Labor Arbiter for illegal dismissal alleging that his position could not possibly be redundant because nobody (save himself) in the company was then performing the same duties. Private respondent further contended that retrenching him could

not prevent further losses because it was in fact through his remarkable performance as Sales Manager that the Company had an unprecedented increase in domestic market share the preceding year. For that accomplishment, he continued, he was promoted to Marketing Manager and was authorized by the President to hire four (4) Sales Executives five (5) months prior to his termination. In its answer, petitioner company alleged that the termination of respondent's services was a cost-cutting measure: that in December 1984, the company had experienced an unusually low volume of orders: and that it was in fact forced to rotate its employees in order to save the company. Despite the rotation of employees, petitioner alleged; it continued to experience financial losses and private respondent's position, Sales Manager of the company, became redundant. On 2 December 1986, during the proceedings before the Labor Arbiter, petitioner, in a letter 1 addressed to the Regional Director of the then Ministry of Labor and Employment, notified that official that effective 2 January 1987, petitioner would close its doors permanently due to substantial business losses. In a decision dated 11 March 1987, the Labor Arbiter declared the termination of private respondent's services illegal and ordered petitioner to pay private respondent backwages in the amount of P299,000.00, unpaid salaries in the amount of P22,352.11, accumulated sick and vacation leaves in the amount of P12,543.91, hospitalization benefit package in the amount of P10,000.00, unpaid commission in the amount of P57,500,00, moral damages in the amount of P100,000.00 and attorney's fees in the amount of P51,639.60. On appeal by petitioner Wiltshire, the National Labor Relations Commission ("NLRC") affirmed in toto on 9 February 1988 the decision of the Labor Arbiter. The NLRC held that:

The termination letter clearly spelled out that the main reason in terminating the services of complainant is REDUNDANT and not retrenchment. The supposed duplication of work of herein complainant and Mr. Deliva, the Vice-President is absent that would justify redundancy. . .. On the claim for moral damages, the NLRC pointed out that the effective date of private respondent's termination was 18 July 1985, although it was only 18 June 1985 that he received the letter of termination, and concluded that he was not given any opportunity to explain his position on the matter. The NLRC held that the termination was attended by malice and bad faith on the part of petitioner, considering the manner of private respondent was ordered by the President to pack up and remove his personal belongings from the office. Private respondent was said to have been embarrassed before his immediate family and other acquaintance due to his inability to explain the reasons behind the termination of his services. In this Petition for Certiorari, it is submitted that private respondent's dismissal was justified and not illegal. Petitioner maintains that it had been incurring business losses beginning 1984 and that it was compelled to reduce the size of its personnel force. Petitioner also contends that redundancy as a cause for termination does not necessarily mean duplication of work but a "situation where the services of an employee are in excess of what is demanded by the needs of an undertaking . . ." Having reviewed the record of this case, the Court has satisfied itself that indeed petitioner had serious financial difficulties before, during and after the termination of the services of private respondent. For one thing, the audited financial statements of the petitioner for its fiscal year ending on 31 July 1985 prepared by a firm of independent auditors, showed a net loss in the amount of

P4,431,321.00 and a total deficit or capital impairment at the end of year of P6,776,493.00. 2 In the preceding fiscal year (1983-1984), while the company showed a net after tax income of P843,506.00, it actually suffered a deficit or capital impairment of P2,345,172.00. Most importantly, petitioner Wiltshire finally closed its doors and terminated all operations in the Philippines on January 1987, barely two (2) years after the termination of private respondent's employment. We consider that finally shutting down business operations constitutes strong confirmatory evidence of petitioner's previous financial distress. The Court finds it very difficult to suppose that petitioner Wiltshire would take the final and irrevocable step of closing down its operations in the Philippines simply for the sole purpose of easing out a particular officer or employee, such as the private respondent. Turning to the legality of the termination of private respondent's employment, we find merit in petitioner's basic argument. We are unable to sustain public respondent NLRC's holding that private respondent's dismissal was not justified by redundancy and hence illegal. In the first place, we note that while the letter informing private respondent of the termination of his services used the word "redundant", that letter also referred to the company having "incur[red] financial losses which [in] fact has compelled [it] to resort to retrenchment to prevent further losses". 3 Thus, what the letter was in effect saying was that because of financial losses, retrenchment was necessary, which retrenchment in turn resulted in the redundancy of private respondent's position. In the second place, we do not believe that redundancy in an employer's personnel force necessarily or even ordinarily refers to duplication of work. That no other person was holding the same position that private respondent held prior to the termination of his services, does not show that his position had not become redundant. Indeed, in any well-organized business enterprise, it would be surprising to find duplication of work and two (2) or more people doing the work of one person. We believe that redundancy, for purposes of our Labor Code, exists where the services of an employee are in excess of what is

reasonably demanded by the actual requirements of the enterprise. Succinctly put, a position is redundant where it is superfluous, and superfluity of a position or positions may be the outcome of a number of factors, such as overhiring of workers, decreased volume of business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise. 4 The employer has no legal obligation to keep in its payroll more employees than are necessarily for the operation of its business. In the third place, in the case at bar, petitioner Wiltshire, in view of the contraction of its volume of sales and in order to cut down its operating expenses, effected some changes in its organization by abolishing some positions and thereby effecting a reduction of its personnel. Thus, the position of Sales Manager was abolished and the duties previously discharged by the Sales Manager simply added to the duties of the General Manager, to whom the Sales Manager used to report. It is of no legal moment that the financial troubles of the company were not of private respondent's making. Private respondent cannot insist on the retention of his position upon the ground that he had not contributed to the financial problems of Wiltshire. The characterization of private respondent's services as no longer necessary or sustainable, and therefore properly terminable, was an exercise of business judgment on the part of petitioner company. The wisdom or soundness of such characterization or decision was not subject to discretionary review on the part of the Labor Arbiter nor of the NLRC so long, of course, as violation of law or merely arbitrary and malicious action is not shown. It should also be noted that the position held by private respondent, Sales Manager, was clearly managerial in character. In D.M. Consunji, Inc. v. National Labor Relations Commission, 5 the Court held: An employer has a much wider discretion in terminating the employment relationship of managerial personnel as compared to rank and file employees. However, such prerogative of

management to dismiss or lay off an employee must be made without abuse of discretion, for what is at stake is not only the private respondent's position but also his means of livelihood . . . . 6 The determination of the continuing necessity of a particular officer or position in a business corporation is management's prerogative, and the courts will not interfere with the exercise of such so long as no abuse of discretion or merely arbitrary or malicious action on the part of management is shown. 7 On the issue of moral damages, petitioner assails the finding of the NLRC that the dismissal was done in bad faith. Petitioner argues that it had complied with the one-month notice required by law; that there was no need for private respondent to be heard in his own defense considering that the termination of his services was for a statutory or authorized cause; and that whatever humiliation might have been suffered by private respondent arose from a lawful cause and hence could not be the basis of an award of moral damages. Termination of an employee's services because of retrenchment to prevent further losses or redundancy, is governed by Article 283 of the Labor Code which provides as follows: Art. 283. Closure of establishment and reduction of personnel . The employer may also terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled

to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year. Termination of services for any of the above described causes should be distinguished from termination of employment by reason of some blameworthy act or omission on the part of the employee, in which case the applicable provision is Article 282 of the Labor Code which provides as follows: Art. 282. Termination by employer. An employer may terminate an employment for any of the following causes: (a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work; (b) Gross and habitual neglect by the employee of his duties; (c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative; (d) Commission of a crime or offense by the employee against the person of his employer or any

immediate member of his family or his duly authorized representative; and (e) Other causes analogous to the foregoing. Sections 2 and 5 of Rule XIV entitled "Termination of Employment:" of the "Rules to Implement the Labor Code" read as follows: Sec. 2. Notice of dismissal. Any employer who seeks to dismiss a worker shall furnish him a written notice stating the particular acts or omission constituting the grounds for his dismissal. In cases of abandonment of work, the notice shall be served at the worker's last known address. xxx xxx xxx Sec. 5. Answer and hearing. The worker may answer the allegations stated against him in the notice of dismissal within a reasonable period from receipt of such notice. The employer shall afford the worker ample opportunity to be heard and to defend himself with the assistance of his representative if he so desires. (emphasis supplied) 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 counter-allegations 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. This is not to say that the employee may not contest the reality or good faith character of the retrenchment or redundancy asserted as grounds for termination of services. The appropriate forum for such controversion would, however, be the Department of Labor and Employment and not an investigation or hearing to be held by the employer itself. It is precisely for this reason that an employer seeking to terminate services of an employee or employees because of "closure of establishment and reduction of personnel", is legally required to give a written notice not only to the employee but also to the Department of Labor and Employment at least one month before effectivity date of the termination. In the instant case, private respondent did controvert before the appropriate labor authorities the grounds for termination of services set out in petitioner's letter to him dated 17 June 1985. We hold, therefore, that the NLRC's finding that private respondent had not been accorded due process, is bereft of factual and legal bases. The award of moral damages that rests on such ground must accordingly fall.

While private respondent may well have suffered personal embarrassment by reason of termination of his services, such fact alone cannot justify the award of moral damages. Moral damages are simply a species of damages awarded to compensate one for injuries brought about by a wrongful act. 8 As discussed above, the termination of private respondent's services was not a wrongful act. There is in this case no clear and convincing evidence of record showing that the termination of private respondent's services, while due to an authorized or statutory cause, had been carried out in an arbitrary, capricious and malicious manner, with evident personal ill-will. Embarrassment, even humiliation, that is not proximately caused by a wrongful act does not constitute a basis for an award of moral damages. Private respondent is, of course, entitled to separation pay and other benefits under Act 283 of the Labor Code and petitioner's letter dated 17 June 1985. ACCORDINGLY, the Court Resolved to GRANT due course to the Petition for Certiorari. The Resolutions of the National Labor Relations Commission dated 9 February 1988 and 7 March 1988 are hereby SET ASIDE and NULLIFIED. The Temporary Restraining Order issued by this Court on 21 March 1988 is hereby made PERMANENT. No pronouncement as to costs. SO ORDERED.

SPECIAL [G.R. No. 165381

FIRST : June 27,

DIVISION 2011]

NELSON A. CULILI, PETITIONER, V. EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., ET AL., RESPONDENTS. Sirs/Mesdames: Please take notice that the Court, Special First Division, issued a Resolution dated 27 June 2011 which reads as follows: G.R. NO. 165381 NELSON A. CULILI, petitioner, v. EASTERN

TELECOMMUNICATIONS PHILIPPINES, INC., ET AL., respondents. "Before the Court are the Motion for Reconsideration and the Motion for Partial Reconsideration filed by the Petitioner and the Respondents, respectively, of this Courts February 9, 2011 Decision. Petitioners Motion for Reconsideration In asking this Court to reconsider our February 9, 2011 Decision, petitioner posits several grounds all of which we have already addressed in said Decision, except for the following: WITH ALL DUE RESPECT, THE HONORABLE COURT FAILED TO CONSIDER THE RESOLUTION OF ITS THIRD DIVISION IN G.R. NO. 165447 ENTITLED EASTERN TELECOMMUNICATIONS PHILIPPINES, INC. V. NELSON CULILI, WHICH RESOLVED THE PETITION FOR REVIEW ASSAILING THE DECISION OF THE COURT OF APPEALS GRANTING HEREIN PETITIONER (THE RESPONDENT IN THE AFOREMENTIONED CASE) FULL BACKWAGES FROM THE TIME HIS SALARIES WERE NOT PAID UNTIL FINALITY OF THE DECISION PLUS SEPARATION PAY UNDER THE SERRANO DOCTRINE. SAID RULING, WHICH WAS AFFIRMED BY THE THIRD DIVISION, BECAME FINAL AND EXECUTORY ON 5 APRIL 2005. THEREFORE, HAVING ATTAINED FINALITY, THE RULING OF THE

COURT OF APPEALS MAY NO LONGER BE MODIFIED IN ANY RESPECT, THUS NECESSITATING A RECONSIDERATION OF THE 9 FEBRUARY 2011 DECISION IN THE PRESENT CASE.[1] In essence, petitioner is asking us to apply this Courts Third Divisions Resolution denying respondents petition in G.R. No. 165447, on the apparent theory that, with the finality of the Third Divisions Resolution, the Court of Appeals award of full backwages plus separation pay under theSerrano doctrine has become final. However, in the same breadth, petitioner is asking us to reverse the very same Court of Appeals ruling, and find that he was illegally dismissed and should be reinstated. Truly, petitioners desperate resort to inconsistent arguments demonstrates the paucity of merit of his cause. While it is true that the Third Division Resolution of this Court had already attained finality, it also cannot be denied that the petitioner himself filed his own petition for review on November 11, 2004, before G.R. No. 165447 was resolved on December 1, 2004. Undoubtedly, when petitioner filed his Petition for Review with this Court, he himself prayed for us to pass upon all the issues he presented, review them, and resolve them in accordance with prevailing jurisprudence. That is exactly what the Court did. This Divisions February 9, 2011 Decision in G.R. No. 165381, contrary to petitioners thinking, is not in any way contradictory to the December 1, 2004 Resolution of the Third Division in G.R. No. 165445. They both affirmed the Court of Appeals findings that the petitioners dismissal was due to the authorized cause of redundancy, albeit there was no compliance with the procedural due process in effecting his termination. However, this Court in deciding petitioners appeal is duty bound to adjust the monetary award to be consistent with current, applicable jurisprudence. If the petitioner felt that the monetary award in his favor as it was adjudged way back in 2001 was correct, he should have manifested so instead of filing a memorandum on September 5,

2005 in the present case, wherein he asked for a complete reversal of the Court of Appeals Decision. Respondents Motion for Partial Reconsideration The respondents, also dissatisfied with our February 9, 2011 Decision, is urging us to reconsider the amount of nominal damages we awarded on the ground that it was excessive and against prevailing jurisprudence. [2] To support their arguments, they cited three recent cases wherein the nominal damages awarded was only P30,000.00, as opposed to the P50,000.00 we awarded in this instance. The respondents argument is misplaced. The cases they relied upon all have factual backgrounds markedly different from the case before us. In Phimco Industries, Inc. v. Phimco Industries Labor Association [3] and Spic N Span Services Corporation v. Paje, [4] the cause of the dismissal was a just cause, and following the doctrine in Agabon v. National Labor Relations Commission,[5] the dismissed employees who were deprived of procedural due process, were entitled to P30,000.00 as nominal damages. In Ancheta v. Destiny Financial Plans, Inc .,[6] although the cause for the employees dismissal was an authorized cause, just like in this case, the Court noted that the employer therein had to terminate some of its employees because it was incurring losses. As much as the respondents herein alleged that the Company was not performing well at the time they implemented their Right-Sizing Program, it must be remembered that the ground for their termination of petitioners services was redundancy, which is an entirely separate and different authorized cause under the Labor Code from serious losses or business reverses. We have fully explained in our February 9, 2011 Decision the distinction

between a procedurally infirm dismissal based on a just cause and one that is based on an authorized cause, to wit: In Jaka Food Processing Corporation v. Pacot, [7] this Court, taking a cue from Agabon, held that since there is a clear-cut distinction between a dismissal due to a just cause and a dismissal due to an authorized cause, the legal implications for employees who fail to comply with the notice requirements must also be treated differently: Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under Article 282 but the employer failed to comply with the notice requirement, the sanction to be imposed upon him should be tempered because the dismissal process was, in effect, initiated by an act imputable to the employee; and (2) if the dismissal is based on an authorized cause under Article 283 but the employer failed to comply with the notice requirement, the sanction should be stiffer because the dismissal process was initiated by the employers exercise of his management prerogative.[8] To reiterate, the Jaka decision further qualified the Agabon decision in the sense that when the termination or dismissal was initiated by the employer, without any act imputable to the employee, failure to comply with the procedural due process requirements would merit a higher penalty, since the dismissal was due to the employers exercise of his management prerogative. It must be remembered that the nominal damages we awarded was based on the Jaka ruling. As early as 2005, we have been awarding P50,000.00 to employees who were dismissed based on a valid authorized cause, but were not afforded procedural due process. WHEREFORE, the petitioners Motion for Reconsideration and the respondents' Motion for Partial Reconsideration are DENIED with FINALITY. No further

pleadings or motions shall be entertained in this case. Let an Entry of Judgment in this case be made in due course. SO ORDERED."

Republic SUPREME Manila THIRD DIVISION

of

the

Philippines COURT

G.R. Nos. 75700-01 August 30, 1990 LOPEZ vs. FEDERATION OF FREE WORKERS, PHILIPPINE LABOR UNION ASSOCIATION (PLUA-NACUSIP) and NATIONAL LABOR RELATIONS COMMISSION, respondents. Sicangco, Diaz, Ortiz and Lapak for petitioner. Reynaldo J. Gulmatico for private respondents. SUGAR CORPORATION, petitioner,

FELICIANO, J.: In this Petition, petitioner Lopez Sugar Corporation seeks reversal of the Decision dated 2 July 1986 of public respondent National labor Relations Commission ("NLRC") which affirmed the decision of the Labor Arbiter dated 30 September 1983. The Labor Arbiter (a) had denied petitioner's application to retrench some of its employees and (b) had ordered the reinstatement of twentyseven (27) employees and to pay them full backwages from the time of termination until actual reinstatement. Petitioner, allegedly to prevent losses due to major economic problems, and exercising its privilege under Article XI, Section 2 of its 1975-1977 Collective Bargaining Agreement ("CBA") entered into between petitioner and private respondent Philippine Labor Union Association ("PLUA-NACUSIP"), caused the retrenchment and retirement of a number of its employees. Thus, on 3 January 1980, petitioner filed with the Bacolod District Office of the then Ministry of Labor and Employment ("MOLE") a combined report on retirement and application for clearance to retrench, dated 28 December 1979, 1 affecting eighty six (86) of its employees. This was docketed as NLRC Case Ne. A-217-80. Of these eighty-six (86) employees, fifty-nine (59) were retired effective 1 January 1980 and twenty-eight (27) were to be retrenched effective 16 January 1980 "in order to prevent losses." Also, on 3 January 1980, private respondent Federation of Free Workers ("FFW"), as the certified bargaining agent of the rank-and-file employees of petitioner, filed with the Bacolod District Office of the MOLE a complaint dated 27 December 1979 for unfair labor practices and recovery of union dues docketed as NLRC Case No. A-198-80. In said complainant, FFW claimed that the terminations undertaken by petitioner were violative of the security of tenure of its members and were intended to "bust" the union and hence constituted an unfair

labor practice. FFW claimed that after the termination of the services of its members, petitioner advised 110 casuals to report to its personnel office. FFW further argued that to justify retrenchment, serious business reverses must be "actual, real and amply supported by sufficient and convincing evidence." FFW prayed for reinstatement of its members who had been retired or retrenched. Petitioner denied having hired casuals to replace those it had retired or retrenched. It explained that the announcement calling for 110 workers to report to its personnel office was only for the purpose of organizing a pool of extra workers which could be tapped whenever there were temporary vacancies by reason of leaves of absence of regular workers. On 22 January 1980, another report on retirement affecting an additional twentyfive (25) employees effective 1 February 1980 was filed by petitioner. 2 On 3 March 1980, petitioner filed its Position Paper in NLRC Case No. A-217-80 contending that certain economic factors jeopardizing its very existence rendered the dismissals necessary. Petitioner explained: As a business firm, the Applicant must earn [a] fair return of ( sic) its investment. Its income is generated from the sales of the Central's shares of sugar and molasses production. It has however no control of the selling price of both products. It is of common knowledge that for the past years the price of sugar has been very low. In order to survive, the Applicant has effected several forms of cost reduction. Now that there is hope in the price of sugar the applicant is again faced with two major economic problems, i.e., the stoppage of its railway operation and the spiralling cost of production. The Applicant was forced to stop its railway operation because the owners of the land upon which the Applicant's railway lines traverse

are no longer willing to allow the Applicant to make further use of portions of their lands. . . . The other economic problem that confronted the Applicant is the rising cost of labor, materials, supplies, equipment, etc. These two major economic problems the rising cost of production and the stoppage of its railway facilities, put together pose a very serious threat against the economic survival of the Applicant. In view of this, the Applicant was constrained to touch on the last phase of its cost reduction program which is the reduction of its workforce. xxx xxx xxx The Applicant as a business proposition must be allowed to earn income in order to survive. This is the essence of private enterprise. Being plagued with two major economic problems, the applicant is not expected to remain immobile. It has to react accordingly. As many other business firms have resorted to reduction of force in view of the present economic crisis obtaining here and abroad, the applicant was likewise compelled to do the same as a last alternative remedy for survival. 3 In a decision dated 30 September 1983, 4 the Labor Arbiter denied petitioner's application for clearance to retrench its employees on the ground that for retrenchment to be valid, the employer's losses must be serious, actual and real and must be amply supported by sufficient and convincing evidence. The application to retire was also denied on the ground that petitioner's prerogative to so retire its employees was granted by the 1975-77 collective bargaining agreement which agreement had long ago expired. Petitioner was, therefore, ordered to reinstate twenty-seven retired or retrenched employees represented by private respondent Philippine Labor Union Association ("PLUA") and FFW and

to pay them full backwages from the time of termination until actual reinstatement. Both dissatisfied with the Labor Arbiter's decision, petitioner and respondent FFW appealed the case to public respondent NLRC. On appeal, the NLRC, finding no justifiable reason for disturbing the decision of the Labor Arbiter, affirmed that decision on 2 July 1986.
5

Hence, this Petition for certiorari making the following arguments: 1. That portions of the decision of public respondent NLRC dated July 2, 1986 affirming the decision of Labor Arbiter Ethelwoldo Ovejera dated September 30, 1983 are contrary to law and jurisprudence; 2. That said decision subject of this petition are in some respects not supported by evidence and self-contradictory; 3. That said decision subject of this petition were rendered with grave abuse of discretion and in excess of jurisdiction; 4. That the dismissals at bar are valid and based on justifiable grounds. 6 Petitioner contends that the NLRC acted with grave abuse of discretion in denying its combined report on retirement and application for clearance to retrench. Petitioner argues that under the law, it has the right to reduce its workforce if made necessary by economic factors which would endanger its existence, and that for retrenchment to be valid, it is not necessary that losses be actually sustained. The existence of valid grounds to anticipate or expect losses would be sufficient justification to enable the employer to take the necessary actions to prevent any threat to its survival.

Upon the other hand the Solicitor General argued that the Decision rendered by the Labor Arbiter and affirmed by the NLRC is supported by substantial evidence on record; that, therefore, no grave abuse of discretion was committed by public respondent NLRC when it rendered that Decision. Article 283 of the Labor Code provides: Article 283. Closure of establishment and reduction of personnel . The employer may also terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of cricumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employer 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 se pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent lossesand 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. (Emphasis supplied) In ts ordinary connotation, he phrase "to revent losses" means hat retrenchment or termination of the services of some employees is authorized to be undertaken by the employer sometime before the losses anticipated 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 sometime after losses

shall have in fact materialized ; 7 if such an intent were expressly written into the law, that law may well be vulnerable to constitutional attack as taking property from one man to give to another. This is simple enough. At the other end of the spectrum, it seems equally clear that not every asserted possibility of loss is sufficient legal warrant for 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. Thus, the difficult question is determination of when, or under what circumstances, the employer becomes legally privileged to retrench and reduce the number of his employees. We consider it may be useful to sketch the general standards in terms of which the acts of petitioner employer must be appraised. 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 bona fide 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 consequential nature of retrenchment, it must, thirdly, be reasonably necessary and likely to effectively prevent the expected losses. The employer should have taken other measures prior or parallel to retrenchment to forestall losses, i.e., cut other costs than labor costs. An employer who, for instance, lays off substantial numbers of workers while continuing to dispense fat executive bonuses and perquisites or so-called "golden parachutes", can scarcely claim to be retrenching in good faith to avoid losses. To impart operational meaning to the constitutional policy of providing "full protection" to

labor, the employer's prerogative to bring down labor costs by retrenching must be exercised essentially as a measure of last resort, after less drastic means e.g., reduction of both management and rank-and-file bonuses and salaries, going on reduced time, improving manufacturing efficiencies, trimming of marketing and advertising costs, etc. have been tried and found wanting. Lastly, but certainly not the least important, alleged if already realized, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence. The reason for requiring this quantum of proof is readily apparent: any less exacting standard of proof would render too easy the abuse of this ground for termination of services of employees. In Garcia v. National Labor Relations Commissions, 8 the Court said: . . . But it is essentially required that the alleged losses in business operations must be prove[n] (National Federation of Labor Unions [NAFLU] vs. Ople, 143 SCRA 124 [1986]). Otherwise, said ground for termination would be susceptible to abuse by scheming employers who might be merely feigning business losses or reverses in their business ventures in order to ease out employees. (Emphasis supplied) 9 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. In the instant case, the Labor Arbiter found no sufficient and convincing evidence to sustain petitioner's essential contention that it was acting in order to prevent substantial and serious losses. The Labor Arbiter said: There is no question that an employer may reduce its work force to prevent losses, however, these losses must be serious, actual and real. In the instant case, even assuming arguendo that applicant company was, in fact, surrounded by the major economic problems stated earlier, the question may be asked will it suffer serious losses as a result of the said economic problems? We find the

answer to be negative. We have scanned the records but failed to find evidence submitted to show that applicant company would suffer serious business losses or reverses as a consequence of the alleged major economic problems. In fact, applicant company asseverated that these problems only threatens its survival, hence, it had to reduce its work force. Another thing, while applicant company was retrenching its regular employees, it also hired the services of casuals. This militated its claim to reduce its work force to set up cost reduction. It must be stated that settled is the rule that serious business losses or reverses must be actual, real and amply supported by sufficient and convincing evidence. 10 (Emphasis supplied) We are in principle bound by such findings in accordance with wellestablished jurisprudence that the factual findings of labor administrative officials, if supported by substantial evidence, are entitled not only to great respect but even to finality,
11

unless, indeed, petitioner is able to show

that the Labor Arbiter and the NLRC simply and arbitrarily disregarded evidence before them or had misapprehended evidence of such a nature as to compel a contrary conclusion if properly appreciated. The submissions made by petitioner in this respect are basically that from the crop year 1975-1976 to the crop year 1980-981, the amount of cane deliveries made to petitioner Central was declining and that the degree of utilization of the mill's capacity and the sugar recovery from the cane actually processed, were similarly declining. 12 Petitioner also argued that the competition among the existing sugar mills for the limited supply of sugar cane was lively and that such competition resulted in petitioner having to close approximately thirty-eight (38) of its railroad lines by the end of 1979. 13According to the petitioner, the cost of producing one (1) picul of sugar during the same period (i.e., from crop year 1976-1977 to crop year 1979-1980) increased from P69.97 to P93.11.

The principal difficulty with petitioner's case as above presented was that no proof of actual declining gross and net revenues was submitted. No audited financial statements showing the financial condition of petitioner corporation during the above mentioned crop years were submitted. Since financial statements audited by independent external auditors constitute the normal method of proof of the profit and loss performance of a company, it is not easy to understand why petitioner should have failed to submit such financial statements. Moreover, while petitioner made passing reference to cost reduction measures it had allegedly undertaken, it was, once more, a fairly conspicuous failure to specify the cost-reduction measures actually undertaken in good faith before resorting to retrenchment. Upon the other hand, it appears from the record that petitioner, after reducing its work force, advised 110 casual workers to register with the company personnel officer as extra workers. Petitioner, as earlier noted, argued that it did not actually hire casual workers but that it merely organize(d] a pool of "extra workers" from which workers could be drawn whenever vacancies occurred by reason of regular workers going on leave of absence. Both the Labor Arbiter and the NLRC did not accord much credit to petitioner's explanation but petitioner has not shown that the Labor Arbiter and the NLRC were merely being arbitrary and capricious in their evaluation. We note also that petitioner did not claim that the retrenched and retired employees were brought into the "pool of extra workers" rather than new casual workers. Petitioner next contends that the NLRC committed grave abuse of discretion in affirming the ruling of the Labor Arbiter that the retirements effected by petitioner were na valid since the basis therefor, i.e. Article XI Section 2 of the 1975-1977 CBA, had by then already expired and was thus no longer enforceable or operative. 14 Article XI, 2 of the CBA provides: 2. Section 2. Any employee may apply for after having rendered the of at least eighteen (18) year of service to the COMPANY. The COMPANY, as a right , may retire any employee who has rendered

twenty (20) years of service, or has reached the age of sixty (60) years. Employees who are physically incapacitated to continue to work in the COMPANY upon certification of the COMPANY Physician, shall be entitled to a separation pay equivalent to the retirement benefits herein provided for that may have accrued. The heirs or surviving legally married spouse of the deceased employee shall be granted by the COMPANY the amount equivalent to the accrued retirement benefit of the deceased employee at the time of his death." 15(Emphasis supplied) Petitioner argues that the CBA was "extended" not merely by implication, but by reciprocal acts in the sense that even after the CBA had expired, petitioner continued to give, and the workers continued to receive, the benefits and exercise the prerogatives provided therein. Under these circumstances, petitioner urges, the employees are estopped from denying the extended effectivity of the CBA. The Solicitor General, as well as private respondents, argue basically that petitioner's right to retire its employees was coterminous with the life of the CBA. On this point, we must find for petitioner. Although the CBA expired on 31 December 1977, it continued to have legal effects as between the parties until a new CBA had been negotiated and entered into. This proposition finds legal support in Article 253 of the Labor Code, which provides: Article 253 Duty to bargain collectively when there exists a collective bargaining agreement. When there is a collective bargaining agreement, the duty to bargain collectively shall also mean that neither party shall terminate nor modify such agreement during its lifetime. However, either party can serve a written notice to terminate or modify the agreement at least sixty (60) days prior to its expiration date. It shall be the duty of both parties to keep the

status quo and to continue in full force and effect the terms and conditions of the existing agreement during the 60-day period and/or until a new agreement is reached by the parties. (Emphasis supplied) Accordingly, in the instant case, despite the lapse of the formal effectivity of the CBA by virtue of its own provisions, the law considered the same as continuing in force and effect until a new CBA shall have been validly executed. Hence, petitioner acted within legal bounds when it decided to retire several employees in accordance with the CBA. That the employees themselves similarly acted in accordance with the CBA is plain from the record. Even after the expiration of the CBA, petitioner's employees continued to receive the benefits and enjoy the privileges granted therein. They continued to avail of vacation and sick leaves as computed in accordance with Articles VII and VIII of the CBA. They also continued to avail of medical and dental aid under Article IX, death aid and bereavement leave under Articles X and XIV, insurance coverage under Article XVI and housing allowance under Article XVIII. Seventeen (17) employees even availed of Section XI (dealing with retirement) when they voluntarily retired between 1 January 1978 and 31 December 1980 and received retirement pay computed on the basis of Section 3 of the same article. If the workers chose to avail of the CBA despite its expiration, equity if not the law-dictates that the employer should likewise be able to invoke the CBA. The fact that several workers signed quitclaims will not by itself bar them from joining in the complaint. Quitclaims executed by laborers are commonly frowned upon as contrary to public policy and ineffective to bar claims for the full measure of the worker's legal rights. In AFP Mutual Benefit Association, Inc. v. AFP-MBAIEU, 16 the Court held: In labor jurisprudence, it is well establish that quitclaims and/or complete releases executed by the employees do not estop them from pursuing their claims arising from the unfair labor practice of

the employer. The basic reason for this is that such quitclaimants and/or complete releases are against public policy and, therefore, null and void. The acceptance of termination pay does not divest a laborer of the right to prosecute his employer for unfair labor practice acts. (Cario vs. ACCFA, L-19808, September 29, 1966, 18 SCRA 183; Philippine Sugar Institute vs. CIR, L-13475, September 29, 1960, 109 Phil. 452; Mercury Drug Co. vs. CIR, L23357, April 30, 1974, 56 SCRA 694, 704) In the Cario case, supra, the Supreme Court, speaking thru Justice Sanchez, said: Acceptance of those benefits would not amount to estoppel. The reason is plain. Employer and employee, obviously, do not stand on the same footing The employer drove the employee to the wall. The latter must have to get hold of money. Because, out of job, he had to face the harsh necessities of life. He thus found himself in no position to resist money proffered. His, then, is a case of adherence, not of choice. One thing sure, however, is that petitioners did not relent their claim. They pressed it. They are deemed supplied) We conclude that because the attempted retrenchment on the part of the petitioner was legally ineffective, all retrenched employees should be reinstated and backwages paid them corresponding to a period of three (3) years without qualification or deduction, in accordance with the three-year rule laid down in a long line of cases. 17 In the case of employees who had received payments for which they had executed quitclaims, the amount of such payments shall be not to have non waived any of their rights. Renuntiatio praesumitur (Emphasis

deducted from the backwages due to them. Where reinstatement is no longer possible because the positions they had previously filled are no longer in existence, petitioner shall pay backwages plus, in lieu of reinstatement, separation pay in the amount of one-month's pay for every year of service including the three (3) year-period of putative service for which backwages will be paid. Upon the other hand, we find valid the retirement of those employees who were retired by petitioner pursuant to the applicable provisions of the CBA. WHEREFORE, the Petition for Certiorari is partially GRANTED due course and the Decision dated 2 July 1986 of the public respondent NLRC is hereby MODIFIED to the extent that it had affirmed that portion of the Decision of the Labor Arbiter dated 30 September 1983 ordering the reinstatement judgment of employees who had been retired by petitioner under the applicable provisions of the CBA. Except as so modified, the Decision of the NLRC is hereby AFFIRMED. No pronouncement as to costs. SO ORDERED.

Republic SUPREME Manila SECOND DIVISION G.R. No. 143088

of

the

Philippines COURT

January 24, 2006

PHILIPPINE AIRLINES, INC., MANOLO AQUINO, JORGE MA. CUI, JR. and PATRICIA vs. CHIONG, Petitioners,

FLIGHT

ATTENDANTS

AND

STEWARDS

ASSOCIATION

OF

THE

PHILIPPINES (FASAP) and LEONARDO BHAGWANI, Respondents. DECISION AZCUNA, J.: This petition for review on certiorari under Rule 45 of the Rules of Court presents a recurring question regarding the Courts requirement of a certification of nonforum shopping. Petitioners Philippine Airlines, Inc. (PAL) and Manolo Aquino, Jorge Ma. Cui, Jr. and Patricia Chiong, in their capacity as Executive Vice-President Administration and Services, Manager International Cabin Crew and Assistant Vice-President Cabin Services, respectively, are before the Court seeking the reversal of the resolution of the Court of Appeals in C.A. G.R. No. SP-56850, dated January 31, 2000, dismissing their appeal and the resolution of May 11, 2000, denying the motion for reconsideration. The facts on the conflict between PAL and respondents Flight Attendants and Stewards Association of the Philippines (FASAP) and Leonardo Bhagwani are not necessary for the Courts resolution of the petition. It is enough to state that on May 14, 1997 FASAP and Leonardo Bhagwani filed a complaint for unfair labor practice, illegal suspension and illegal dismissal against petitioners before the Labor Arbiter of the National Labor Relations Commission (NLRC). The Labor Arbiter rendered a decision holding that PAL committed unfair labor practice and illegal dismissal of Bhagwani and, consequently, ordered the payment of damages. The NLRC later modified the decision by setting aside the finding that PAL was guilty of unfair labor practice, but affirming the rest of the decision. What is relevant to the case is the subsequent appeal to the Court of Appeals. When petitioners filed a petition for certiorari against the decision with the Court

of Appeals, it was accompanied by a Certification of Non-Forum Shopping executed by Cesar R. Lamberte and Susan Del Carmen, Vice-President Human Resources and Assistant Vice-President Cabin Services of PAL, respectively, who are not parties to the case. The certification, however, was without proof that the two affiants had authority to sign in behalf of petitioners. As a result, the Court of Appeals dismissed the case for failure to show the authority of affiants to sign for PAL and for failure of the other petitioners to join in the execution of the certification. A motion for reconsideration was filed with a Secretarys Certificate attached evidencing that affiants Cesar R. Lamberte and Susan Del Carmen have been authorized by Board Resolution No. 00-02-03 to initiate and/or cause to be filed on behalf of PAL petitions and pleadings in all labor-related cases. As to the other petitioners, it was argued that they are mere nominal parties so that their failure to execute the certification does not justify dismissal of the petition. Despite this submission, the Court of Appeals denied the motion for reconsideration. Hence, the case is now before this Court. The petition is without merit. The necessity for a certification of non-forum shopping in filing petitions for certiorari is found in Rule 65, Section 1, in relation to Rule 46, Section 3 of the Rules of Court. These provisions require it to be executed by the corresponding petitioner or petitioners. As no distinction is made as to which party must execute the certificate, this requirement is made to apply to both natural and juridical entities.1 When the petitioner is a corporation, the certification should be executed by a natural person. Furthermore, not just any person can be called upon to execute the certification, although such a person may have personal knowledge of the facts to be attested to. 2 This Court has explained that a corporation has no power except those conferred on it by the Corporation Code and those that are implied or incidental to its existence. The exercise of these powers is done through the board of directors and/or duly authorized officers and agents. Given these corporate features, the

power of a corporation to sue in any court is generally lodged with the board of directors. The board, in turn, can delegate the physical acts needed to sue, which may be performed only by natural persons, to its attorneys-in-fact by a board resolution, if not already authorized under the corporate by-laws. 3 Thus, only individuals vested with authority by a valid board resolution may sign the certificate of non-forum shopping in behalf of a corporation. In addition, the Court has required that proof of said authority must be attached. Failure to provide a certificate of non-forum shopping is sufficient ground to dismiss the petition. Likewise, the petition is subject to dismissal if a certification was submitted unaccompanied by proof of the signatorys authority. 4 The petition filed with the Court of Appeals had a certification of non-forum shopping executed by Cesar R. Lamberte and Susan Del Carmen. The certification, however, was without proof of authority to sign. When a motion for reconsideration was filed, a Secretarys Certificate was submitted as proof that the board of directors of PAL had authorized the two to execute the certificate. Nonetheless, the Court finds that this belated submission is an insufficient compliance with the certification requirement. This Court has allowed the reinstatement of petitions that were dismissed due to lack of proof of authority to sign the certification upon its subsequent submission, saying that this amounted to substantial compliance. The rationale was that the signatories, at the time of execution of the certification, were in fact authorized to sign, although proof of their authority was lacking.5 This is not what happened in this case. A perusal of the Secretarys Certificate submitted reveals that the authority to cause the filing of the petition was granted on February 15, 2000.6 The petition, on the other hand, was filed on January 24, 2000 and was dismissed by the Court of Appeals on January 31, 2000. This means that at the time the certification was signed, Cesar R. Lamberte and

Susan Del Carmen were not duly authorized by the Board of Directors of PAL and, consequently, their signing and attestations were not in representation of PAL. This effectively translates to a petition that was filed without a certification at all as none was issued by PAL, the principal party to the case. The required certification of non-forum shopping must be valid at the time of filing of the petition. An invalid certificate cannot be remedied by the subsequent submission of a Secretarys Certificate that vests authority only after the petition had been filed. WHEREFORE, the petition is DENIED. No costs. SO ORDERED. ADOLFO Associate Justice WE CONCUR: REYNATO Chairperson ANGELINA Associate Justice CANCIO Associate Justice ATTESTATION I attest that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. C. SANDOVAL-GUTIERREZ RENATO C. CORONA S. PUNO S. AZCUNA

Asscociate Justice GARCIA

REYNATO Associate Chairperson, Second Division CERTIFICATION

S.

PUNO Justice

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairmans Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. ARTEMIO Chief Justice V. PANGANIBAN

Republic SUPREME Baguio THIRD DIVISION G.R. No. 163657 INTERNATIONAL PASCUAL, Petitioner, vs.

of

the

Philippines COURT

April 18, 2012 MANAGEMENT SERVICES/MARILYN C.

ROEL P. LOGARTA, Respondent. DECISION PERALTA, J.:

This is a petition for review on certiorari assailing the Decision 1 dated January 8, 2004 of the Court of Appeals (CA) in CA-G.R. SP No. 58739, and the Resolution2 dated May 12, 2004 denying petitioners motion for reconsideration. The factual and procedural antecedents are as follows: Sometime in 1997, the petitioner recruitment agency, International Management Services (IMS), a single proprietorship owned and operated by Marilyn C. Pascual, deployed respondent Roel P. Logarta to work for Petrocon Arabia Limited (Petrocon) in Alkhobar, Kingdom of Saudi Arabia, in connection with general engineering services of Petrocon for the Saudi Arabian Oil Company (Saudi Aramco). Respondent was employed for a period of two (2) years, commencing on October 2, 1997, with a monthly salary of eight hundred US Dollars (US$800.00). In October 1997, respondent started to work for Petrocon as Piping Designer for works on the projects of Saudi Aramco. Thereafter, in a letter3 dated December 21, 1997, Saudi Aramco informed Petrocon that for the year 1998, the former is allotting to the latter a total work load level of 170,850 man-hours, of which 100,000 man-hours will be allotted for cross-country pipeline projects. However, in a letter 4 dated April 29, 1998, Saudi Aramco notified Petrocon that due to changes in the general engineering services work forecast for 1998, the man-hours that were formerly allotted to Petrocon is going to be reduced by 40%. Consequently, due to the considerable decrease in the work requirements of Saudi Aramco, Petrocon was constrained to reduce its personnel that were employed as piping designers, instrument engineers, inside plant engineers, etc., which totaled to some 73 personnel, one of whom was respondent. Thus, on June 1, 1998, Petrocon gave respondent a written notice 5 informing the latter that due to the lack of project works related to his expertise, he is given a 30-day notice of termination, and that his last day of work with Petrocon will be

on July 1, 1998. Petrocon also informed respondent that all due benefits in accordance with the terms and conditions of his employment contract will be paid to respondent, including his ticket back to the Philippines. On June 23, 1998, respondent, together with his co-employees, requested Petrocon to issue them a letter of Intent stating that the latter will issue them a No Objection Certificate once they find another employer before they leave Saudi Arabia.6 On June 27, 1998, Petrocon granted the request and issued a letter of intent to respondent.7 Before his departure from Saudi Arabia, respondent received his final paycheck8 from Petrocon amounting SR7,488.57. Upon his return, respondent filed a complaint with the Regional Arbitration Branch VII, National Labor Relations Commission (NLRC), Cebu City, against petitioner as the recruitment agency which employed him for employment abroad. In filing the complaint, respondent sought to recover his unearned salaries covering the unexpired portion of his employment contract with Petrocon on the ground that he was illegally dismissed. After the parties filed their respective position papers, the Labor Arbiter rendered a Decision9 in favor of the respondent, the dispositive portion of which reads: WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Marilyn C. Pascual, doing business under the name and style International Management Services, to pay the complainant Roel Logarta the peso equivalent of US $5,600.00 based on the rate at the time of actual payment, as payment of his wages for the unexpired portion of his contract of employment. The other claims are dismissed for lack of merit. So Ordered.10

Aggrieved, petitioner filed an Appeal 11 before the NLRC. On October 29, 1999, the NLRC, Fourth Division, Cebu City rendered a Decision 12 affirming the decision of the Labor Arbiter, but reduced the amount to be paid by the petitioner, to wit: WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby AFFIRMED with MODIFICATION reducing the award to only US $4,800.00 or its peso equivalent at the time of payment. SO ORDERED.13 Petitioner filed a motion for reconsideration, but it was denied in the Resolution14 dated April 17, 2000. Not satisfied, petitioner sought recourse before the CA, 15 arguing that the NLRC gravely abused its discretion: (a) in holding that while Petrocons retrenchment was justified, Petrocon failed to observe the legal procedure for a valid retrenchment when, in fact, Petrocon did observe the legal procedural requirements for a valid implementation of its retrenchment scheme; and (b) in making an award under Section 10 of R.A. No. 8042 which is premised on a termination of employment without just, valid or authorized cause as defined by law or contract, notwithstanding that NLRC itself found Petrocons retrenchment to be justified.16 On January 8, 2004, the CA rendered the assailed Decision dismissing the petition, the decretal portion of which reads: WHEREFORE, premises considered, the petition is DISMISSED and the impugned Decision dated October 29, 1999 and Resolution dated April 17, 2000 are AFFIRMED. Costs against the petitioner.

SO ORDERED.17 In ruling in favor of the respondent, the CA agreed with the findings of the NLRC that retrenchment could be a valid cause to terminate respondents employment with Petrocon. Considering that there was a considerable reduction in Petrocons work allocation from Saudi Aramco, the reduction of its work personnel was a valid exercise of management prerogative to reduce the number of its personnel, particularly in those fields affected by the reduced work allocation from Saudi Aramco. However, although there was a valid ground for retrenchment, the same was implemented without complying with the requisites of a valid retrenchment. Also, the CA concluded that although the respondent was given a 30-day notice of his termination, there was no showing that the Department of Labor and Employment (DOLE) was also sent a copy of the said notice as required by law. Moreover, the CA found that a perusal of the check payroll details would readily show that respondent was not paid his separation pay. Petitioner filed a motion for reconsideration, but it was denied in the Resolution18 dated May 12, 2004. Hence, the petition assigning the following errors: I. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT THE 30-DAY NOTICE TO DOLE PRIOR TO RETRENCHMENT IS NOT APPLICABLE IN THIS CASE. II. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT RESPONDENT EMPLOYEE DID NOT CONSENT TO HIS SEPARATION FROM THE PRINCIPAL COMPANY. III.

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT JARIOL VS. IMS IS NOT APPLICABLE TO THE INSTANT CASE. IV. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT RESPONDENT DID NOT RECEIVE THE SEPARATION PAY REQUIRED BY LAW.19 Petitioner argues that the 30-day notice of termination, as required in Serrano v. NLRC,20 is not applicable in the case at bar, considering that respondent was in fact given the 30-day notice. More importantly, Republic Act (R.A.) No. 8042, or the Migrant Workers and Overseas Filipino Act of 1995 nor its Implementing Rules do not require the sending of notice to the DOLE, 30 days before the effectivity of a retrenchment of an Overseas Filipino Worker (OFW) based on grounds under Article 283 of the Labor Code. Petitioner maintains that respondent has consented to his termination, since he raised no objection to his retrenchment and actually sought another employer during his 30-day notice of termination. Respondent even requested from Petrocon a No Objection Certificate, which the latter granted to facilitate respondents application to other Saudi Arabian employers. Petitioner also posits that the CA should have applied the case of Jariol v. IMS21 even if the said case was only decided by the NLRC, a quasi-judicial agency. The said case involved similar facts, wherein the NLRC categorically ruled that employers of OFWs are not required to furnish the DOLE in the Philippines a notice if they intend to terminate a Filipino employee. Lastly, petitioner insists that respondent received his separation pay. Moreover, petitioner contends that Section 10 of R.A. No. 8042 does not apply in the present case, since the termination of respondent was due to a just, valid or

authorized cause. At best, respondent is only entitled to separation pay in accordance with Article 283 of the Labor Code, i.e., one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. On his part, respondent maintains that the CA committed no reversible error in rendering the assailed decision. The petition is partly meritorious. Retrenchment is the reduction of work personnel usually due to poor financial returns, aimed to cut down costs for operation particularly on salaries and wages.22 It is one of the economic grounds to dismiss employees and is resorted by an employer primarily to avoid or minimize business losses. 23 Retrenchment programs are purely business decisions within the purview of a valid and reasonable exercise of management prerogative. It is one way of downsizing an employers workforce and is often resorted to by the employer during periods of business recession, industrial depression, or seasonal fluctuations, and during lulls in production occasioned by lack of orders, shortage of materials, conversion of the plant for a new production program, or introduction of new methods or more efficient machinery or automation. It is a valid management prerogative, provided it is done in good faith and the employer faithfully complies with the substantive and procedural requirements laid down by law and jurisprudence.24 In the case at bar, despite the fact that respondent was employed by Petrocon as an OFW in Saudi Arabia, still both he and his employer are subject to the provisions of the Labor Code when applicable. The basic policy in this jurisdiction is that all Filipino workers, whether employed locally or overseas, enjoy the protective mantle of Philippine labor and social legislations. 25 In the case of Royal Crown Internationale v. NLRC ,26 this Court has made the policy pronouncement, thus:

x x x. Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of Philippine labor and social legislation, contract stipulations to the contrary notwithstanding. This pronouncement is in keeping with the basic public policy of the State to afford protection to labor, promote full employment, ensure equal work opportunities regardless of sex, race or creed, and regulate the relations between workers and employers. x x x 27 Philippine Law recognizes retrenchment as a valid cause for the dismissal of a migrant or overseas Filipino worker under Article 283 of the Labor Code, which provides: Closure of establishment and reduction of personnel. - The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operations of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Department of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closure or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to at least one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered as one (1) whole year. Thus, retrenchment is a valid exercise of management prerogative subject to the strict requirements set by jurisprudence, to wit:

(1) That the retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are reasonably imminent as perceived objectively and in good faith by the employer; (2) That the employer served written notice both to the employees and to the Department of Labor and Employment at least one month prior to the intended date of retrenchment; (3) That the employer pays the retrenched employees separation pay equivalent to one month pay or at least month pay for every year of service, whichever is higher; (4) That the employer exercises its prerogative to retrench employees in good faith for the advancement of its interest and not to defeat or circumvent the employees' right to security of tenure; and (5) That the employer used fair and reasonable criteria in ascertaining who would be dismissed and who would be retained among the employees, such as status, x x x efficiency, seniority, physical fitness, age, and financial hardship for certain workers.28 Applying the above-stated requisites for a valid retrenchment in the case at bar, it is apparent that the first, fourth and fifth requirements were complied with by respondents employer. However, the second and third requisites were absent when Petrocon terminated the services of respondent. As aptly found by the NLRC and justly sustained by the CA, Petrocon exercised its prerogative to retrench its employees in good faith and the considerable reduction of work allotments of Petrocon by Saudi Aramco was sufficient basis for Petrocon to reduce the number of its personnel, thus:

Moreover, from the standard form of employment contract relied upon by the Labor Arbiter, it is clear that unilateral cancellation (sic) may be effected for "legal, just and valid cause or causes." Clearly, contrary to the Labor Arbiters perception, the enumerated causes for employment termination by the employer in the standard form of employment contract is not exclusive in the same manner that the listed grounds for termination by the employer is not exclusive. As pointed out above, under Sec. 10 of RA 8042, it is clear that termination of employment may be for just, valid or authorized cause as defined by law or contract. Retrenchment being indubitably a legal and authorized cause may be availed of by the respondent. From the records, it is clearly shown that there was a drastic reduction in Petrocons 1998 work allocation from 250,000 man-hours to only 80,000 manhours. Under these circumstances over which respondents principal, Petrocon had no control, it was clearly a valid exercise of management prerogative to reduce personnel particularly those without projects to work on. To force Petrocon to continue maintaining all its workers even those without projects is tantamount to oppression. "The determination to cease operation is a prerogative of management which the state does not usually interfere with as no business or undertaking must be required to continue at a loss simply because it has to maintain its employees in employment. Such an act would be tantamount to a taking of property without due process of law. (Industrial Timber Corp. vs. NLRC, 273 SCRA 200)29 As to complying with the fifth requirement, the CA was correct when it ruled that: As to the fifth requirement, the NLRC considered the following criteria fair and reasonable in ascertaining who would be dismissed and who would be retained among the employees; (i) less preferred status; (ii) efficiency rating; (iii) seniority; and (iv) proof of claimed financial losses.

The primary reason for respondents termination is lack of work project specifically related to his expertise as piping designer. Due to the highly specialized nature of Logartas job, we find that the availability of work and number of allocated man-hours for pipeline projects are sufficient and reasonable criteria in determining who would be dismissed and who would be retained among the employees. Consequently, we find the criterion of less preferred status and efficiency rating not applicable. The list of terminated employees submitted by Petrocon, shows that other employees, with the same designation as Logartas (Piping Designer II), were also dismissed. Terminated, too, were employees designated as Piping Designer I and Piping Designer. Hence, employees whose job designation involves pipeline works were without bias terminated. As to seniority, at the time the notice of termination was given to him, Logartas employment was eight (8) months, clearly, he has not accumulated sufficient years to claim seniority. As to proof of claimed financial losses, the NLRC itself has recognized the drastic reduction of Petrocons work allocation, thereby necessitating the retrenchment of some of its employees.30 As for the notice requirement, however, contrary to petitioners contention, proper notice to the DOLE within 30 days prior to the intended date of retrenchment is necessary and must be complied with despite the fact that respondent is an overseas Filipino worker. In the present case, although respondent was duly notified of his termination by Petrocon 30 days before its effectivity, no allegation or proof was advanced by petitioner to establish that Petrocon ever sent a notice to the DOLE 30 days before the respondent was terminated. Thus, this requirement of the law was not complied with. Also, petitioners contention that respondent freely consented to his dismissal is unsupported by substantial evidence. Respondents recourse of finding a new

employer during the 30-day period prior to the effectivity of his dismissal and eventual return to the Philippines is but logical and reasonable under the circumstances. Faced with the eventuality of his termination from employment, it is understandable for respondent to seize the opportunity to seek for other employment and continue working in Saudi Arabia. Moreover, petitioners insistence that the case of Jariol v. IMS should be applied in the present case is untenable. Being a mere decision of the NLRC, it could not be considered as a precedent warranting its application in the case at bar. Suffice it to state that although Article 8 of the Civil Code 31 recognizes judicial decisions, applying or interpreting statutes as part of the legal system of the country, such level of recognition is not afforded to administrative decisions. 32 Anent the proper amount of separation pay to be paid to respondent, petitioner maintains that respondent was paid the appropriate amount as separation pay. However, a perusal of his Payroll Check Details, 33 clearly reveals that what he received was his compensation for the month prior to his departure, and hence, was justly due to him as his salary. Furthermore, the amounts which he received as his "End of Contract Benefit" and "Other Earning/Allowances: for July 1998"34 form part of his wages/salary, as such, cannot be considered as constituting his separation pay.1wphi1 Verily, respondent is entitled to the payment of his separation pay. However, this Court disagrees with the conclusion of the Labor Arbiter, the NLRC and the CA, that respondent should be paid his separation pay in accordance with the provision of Section 10 of R.A. No. 8042. A plain reading of the said provision clearly reveals that it applies only to an illegally dismissed overseas contract worker or a worker dismissed from overseas employment without just, valid or authorized cause, the pertinent portion of which provides: Sec. 10. Money Claims. x x x In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract, x x x

In the case at bar, notwithstanding the fact that respondents termination from his employment was procedurally infirm, having not complied with the notice requirement, nevertheless the same remains to be for a just, valid and authorized cause, i.e., retrenchment as a valid exercise of management prerogative. To stress, despite the employers failure to comply with the one-month notice to the DOLE prior to respondents termination, it is only a procedural infirmity which does not render the retrenchment illegal. In Agabon v. NLRC,35 this Court ruled that when the dismissal is for a just cause, the absence of proper notice should not nullify the dismissal or render it illegal or ineffectual. Instead, the employer should indemnify the employee for violation of his statutory rights.36 Consequently, it is Article 283 of the Labor Code and not Section 10 of R.A. No. 8042 that is controlling. Thus, respondent is entitled to payment of separation pay equivalent to one (1) month pay, or at least one-half (1/2) month pay for every year of service, whichever is higher. Considering that respondent was employed by Petrocon for a period of eight (8) months, he is entitled to receive one (1) month pay as separation pay. In addition, pursuant to current jurisprudence,37 for failure to fully comply with the statutory due process of sufficient notice, respondent is entitled to nominal damages in the amount P50,000.00. WHEREFORE, premises considered, the petition is DENIED. The Decision dated January 8, 2004 and the Resolution dated May 12, 2004 of the Court of Appeals are AFFIRMED with MODIFICATIONS. Petitioner is ORDERED to pay Roel P. Logarta one (1) month salary as separation pay and P50,000.00 as nominal damages. SO ORDERED. DIOSDADO Associate Justice M. PERALTA

WE CONCUR: PRESBITERO Associate Chairperson ROBERTO Associate Justice ESTELA Associate Justice ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. PRESBITERO Associate Third Division, Chairperson CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. RENATO Chief Justice C. CORONA J. VELASCO, JR. Justice M. A. ABAD JOSE CATRAL MENDOZA J. VELASCO, JR. Justice

Associate Justice PERLAS-BERNABE

Republic SUPREME Manila FIRST DIVISION

of

the

Philippines COURT

G.R. No. 113337 March 2, 1995 RONALD MANLIMOS, FROILAN PAGALAN, MERLITA DUHAY LUNGSOD, ELIZABETH ANDAGAN, DORIS SERDAN, LEONORA BIBIANO, PERLA CUMPAY, VIRGINIA ETIC, REMEGIA NOEL, ROSARIO CUARTO, RONALD BOOC, JAIME TIMBAL, GERMAN GISTA, FEDERICO AMPER, FRANCISCO EVALE, vs. NATIONAL LABOR RELATIONS COMMISSION and SUPER MAHOGANY PLYWOOD CORPORATION/ALBERT GO, respondents. and RENANTE YACAPIN, petitioners,

DAVIDE, JR., J.: This is a special civil action for certiorari under Rule 65 of the Rules of Court to set aside, for having been rendered with grave abuse of discretion, the resolutions of 2 August 1993 1 and 14 October 1993 2 of public respondent National Labor Relations Commission (NLRC) in NLRC CA No. M-001378-93. The 2 August 1993 resolution reversed the decision of Labor Arbiter Marissa Macaraig-Guillen of 30 April 1993 3 which ordered private respondent Super Mahogany Plywood Corporation/Albert Go to reinstate the petitioners to their positions without loss of seniority rights and privileges and to pay them their back wages, 13th month pay, service incentive leave pay, and attorney's fees, while

the 14 October 1993 resolution denied the motion to reconsider the 2 August 1993 resolution. After the private respondent and the public respondent, through the Office of the Solicitor General, had filed their separate comments and the petitioners, their consolidated reply to the comments, this Court resolved to give due cause to the petition. The petitioners were among the regular employees of the Super Mahogany Plywood Corporation, a domestic corporation organized in 1988 and based in Butuan City. They had been hired as patchers, taper-graders, and receiversdryers. On 1 September 1991, a new owner/management group headed by Alfredo Roxas acquired complete ownership of the corporation. The petitioners were advised of such change of ownership; however, the petitioners continued to work for the new owner and were considered terminated, with their conformity, only as of December 1991 when they received their separation pay, 13th month pay, and all other benefits due them computed as of the said month. Each of them then executed on 17 December 1991 a Release and Waiver which they acknowledged before Atty. Nolasco Discipulo, Hearing Officer of the Butuan City District Office of the Department of Labor and Employment (DOLE). On 27 December 1991, the new owner caused the publication of a notice for the hiring of workers, indicating therein who of the separated employees could be accepted on probationary basis. The petitioners then filed their applications for employment. Except for Rosario Cuarto, they were hired on probationary basis for six months as patchers or tapers, but were compensated on piece-rate or task basis. For their alleged absence without leave, Perla Cumpay and Virginia Etic were considered, as of 4 May 1992, to have abandoned their work. The rest were dismissed on 13 June 1992 because they allegedly committed acts prejudicial to the interest of the new management which consisted of their "including

unrepaired veneers in their reported productions on output as well as untaped corestock or whole sheets in their supposed taped veneers/corestock." However, upon their appeal, the effectivity of such termination was deferred to 20 June 1992.4 Petitioners Ronald Booc, Jaime Timbal, German Gista, Federico Amper, Francisco Evale, and Renante Yacapin then filed against the private respondent with the Sub-Regional Arbitration Branch No. X of the NLRC in Butuan City a complaint (NLRC-SRAB 10-07-00104-92) for "non-payment of wages, underpayment of wages, incentive leave pay, non-payment of holiday pay, overtime pay, 13th month pay, separation pay, reinstatement with back wages, illegal termination and damages." Petitioners Ronald Manlimos, Froilan Pagalan, Merlita Duhay Lungsod, Elizabeth Andagan, Doris Serdan, Leonora Bibiano, Perla Cumpay, Virginia Etic, Remegia Noel, and Rosario Cuarto also filed against the private respondent with the same office a complaint (NLRC Case No. SRAB-10-08-00124-92) for "illegal termination; reinstatement with back wages; non-payment of wages; underpayment of wages; non-payment of incentive leave pay, overtime pay, 13th month pay; and damages." Both complaints were later amended and consolidated. 5 The private respondent answered the amended complaints 6 and thereafter the parties submitted their position papers. 7 The petitioners maintained that they remained regular employees regardless of the change of management in September 1991 and their execution of the Release and Waiver. They argue that being a corporation, the private respondent's juridical personality was unaffected even if ownership of its shares of stock changed hands. Their signing of the Release and Waiver was of no moment not only because the consideration was woefully inadequate, but also because employees who receive their separation pay are not barred from

contesting the legality of their dismissal and quit claims executed by laborers are frowned upon for being contrary to public policy. On the other hand, the private respondent contended that the petitioners were deemed legally terminated from their previous employment as evidenced by the execution of the Release and Waiver and the filing of their applications for employment with the new owner; that the new owner was well within its legal right or prerogative in considering as terminated the petitioners' probationary/temporary appointment; and that the petitioners were not illegally dismissed; hence, they are not entitled to the reliefs prayed for. In her decision of 30 April 1993, 8 Labor Arbiter Marissa Macaraig-Guillen ruled for the petitioners and decreed as follows: WHEREFORE, in view of the foregoing, judgment is hereby rendered declaring the dismissals of complainant Ronald Manlimos, Froilan Pagalan, Merlita Duhay lungsod, Elizabeth Andagan, Doris Serdan, Leonora Bibiano, Perla Cumpay, Virginia Etic, Remegia Noel, Ronald Booc, German Gista, Jaime Timber [ sic], Federico Amper, Renante Yacapin, and Francisco Evale as invalid and illegal and ordering respondent Super Mahogany Plywood Corporation represented by its Vice President, Mr. Alberto Go to: 1. To reinstate the complainants to their positions without loss of seniority rights and privileges; 2. To pay then backwages, 13th month pay, service incentive leave pay and attorney's fees in the total sum of FIVE HUNDRED FORTY TWO THOUSAND ONE HUNDRED FIFTY PESOS and 40/100 ONLY (P542,150.40) in accordance with the computation herein provided for.

All other claims are dismissed for lack of merit. It is the thesis of the Labor Arbiter that the transfer of ownership partook of a cessation of business operation not due to business reverses under Article 283 of the Labor Code and pursuant to the doctrine laid down in MobilEmployees Association vs. National Labor Relations Commission , 9 the following requisites must be complied with before the dismissal of employees may be effected: (1) service of written notice to the employees and to the Ministry of Labor and Employment (MOLE) at least one month before the intended date thereof; (2) the cessation of or withdrawal from business operations must be bona fide in character; and (3) payment to the employees of termination pay amounting to at least one-half month pay for each year of service or one month pay whichever is higher. The Labor Arbiter ruled that the first and third requisites were present in this case; she explicitly held that each of the petitioners signed freely and voluntarily the Release and Waiver and that the termination and payment of separation pay by the previous owner of the corporation were done in good faith. The Labor Arbiter, however, ruled that there was no "cessation of operations which would lead to the dismissal of the employees." Thus: In this case, there was actually no cessation of business operations except for the traditional break between Christmas and New Year. In fact the notice given by Acting Resident Manager Jesus A. Cu on December 27, 1991 which is Annex 11 for respondent, clearly indicates that there was no gap to speak, between the time the previous management turned over their responsibilities to the new team of managers and the corresponding takeover. Secondly, we are merely presuming that there was a purchase because a new list of stockholders now sit on the board of the corporation and occupy various positions as corporate officers, but

this Office had never been formally apprised of what actually occurred so that the bulk of existing shareholdings were transferred to the group of Mr. Alfredo Roxas. The Labor Arbiter then concluded that "upon resumption of their work in January of 1992, the complainant re-entered respondent's employ, not as probationary employees, but as regular employees, because they were engaged in work which was necessary and desirable to the company's operations." As regular employees, they could not be dismissed without cause and without due process. She found that in this case the irregularities allegedly committed by the petitioners were not proven. From the above adverse judgment of the Labor Arbiter, the private respondent appealed to the NLRC (Fifth Division, Cagayan de Oro City). In its resolution of 2 August 1993, the NLRC reversed the judgment of the Labor Arbiter, except as to the 13th month pay which was sustained subject, however, to recomputation based on the actual services of the petitioners under the new owner up to the actual date of their separation from the service on 20 June 1992. It found that the change of ownership in this case was made in good faith since there was no evidence on record that "the former owners conspired with the new owners to insulate the former management of any liability to its workers." It ruled that the Labor Arbiter: has not only misappreciated the facts but . . . has as well distorted the facts by erroneously applying the ruling in the case of MOBIL. The facts in said Mobil are far different from the facts in the instant case. The Mobil case refers to retrenchment or termination of employment under Article 283 (ART. 284) of the Labor Code, as mended. It does not involve termination of employment as a result of the change of corporate ownership or corporate consolidation or merger.

xxx xxx xxx The case cited by appellants in their position paper is more in point. General rule is that "(C)hange of ownership or management of a business establishment or enterprise however, is not one of the just causes . . . to terminate employment without a definite period." That "(N)either can it be considered as synonymous with nor or analogous to closing or cessation of operation of an establishment or enterprise . . . ." (Central Azucarera del Danao vs. Court of Appeals, 137 SCRA 295, 303). However, it is equally a well settled rule that the sale or disposition of a business enterprise which has been motivated by good faith is "an element of exemption from liability." Thus, "an innocent transferee of a business has no liability to the employees of the transfer or to continue employing them. Nor is the transferee liable for past unfair labor practices of the previous owner, except, when the liability is assumed by the new employer under the contract of sale, or when liability arises because the new owners participated in thwarting or defeating the rights of the employees." ( Central Azucarera del Danao, ibid.). xxx xxx xxx The hiring of employees on probationary basis is an exclusive management prerogative. The labor tribunal cannot substitute its own judgment on the manner how the employer will run its own business. (National Labor Union vs. Insular Yebana Tobacco Corporation, 2 SCRA 924). The right to hire and fire is basically a sole management prerogative which the courts may not interfere. xxx xxx xxx

On the other hand, the subsequent hiring of complainants on probationary basis by the new management/corporate owners being the prerogative of management must be sustained. Since the corporate business is under a new management, the latter will therefore need time to determine the qualifications of the newly hired workers, herein complainants. As probationary employees, they are therefore on trial to afford new management to determine whether or not they would qualify for permanent employment. Their motion to reconsider the resolution having been denied by the NLRC in its resolution of 14 October 1993, the petitioners filed this special civil action for certiorari. They claim that the NLRC acted with grave abuse of discretion when it reversed the decision of the Labor Arbiter. We disagree with the Labor Arbiter's reliance on the case of Mobil Employees Association vs. National Labor Relations Commission . 10 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. A change of ownership in a business concern is not proscribed by law. 11 In Central Azucarera del Danao vs.Court of Appeals, 12 this Court-stated: There can be no controversy for it is a principle well-recognized, that it is within the employer's legitimate sphere of management control of the business to adopt economic policies or make some changes or adjustments in their organization or operations that would insure profit to itself or protect the investment of its stockholders. As in the exercise of such management prerogative, the employer may merge or consolidate its business with another, or sell or dispose all or substantially all of its assets and properties which may bring about the dismissal or termination of its employees in the process. Such dismissal or termination should not however be interpreted in such a manner as to permit the employer the very concept of social justice. In a number of cases on this point, the rule has been laid down that the sale or disposition must be motivated by good faith as an element of exemption from liability. Indeed, an innocent transferee of a business establishment has no liability to the employees of the transfer or to continue employing them. Nor is the transferee liable for past unfair labor practices of the previous owner, except, when the liability therefor is assumed by the new employer under the contract of sale, or when liability arises because of the new owner's participation in thwarting or defeating the rights of the employees. 13 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. 14 Since the petitioners were effectively separated from work due to a bona fide change of ownership and they were accordingly paid their separation pay, which they freely and voluntarily accepted, the private respondent corporation was under no obligation to employ them; it may, however, give them preference in the hiring. The private respondent in fact hired, but on probationary basis, all the petitioners, except Rosario Cuarto. The non-hiring of Cuarto was legally permissible. The hiring of employees on a probationary basis is an exclusive management prerogative. The employer has the right or privilege to choose who will be hired and who will be denied employment. It is within the exercise of this right that the employers may set or fix a probationary period within which it may test and observe the employee's conduct before hiring him permanently. 15 It is settled that while probationary employees do not enjoy permanent status, they are accorded the constitutional protection of security of tenure. They may only be terminated for just cause or when they fail to qualify as regular employees in accordance with reasonable standards made known to them by the employer at the time of their engagement. 16 This constitutional protection, however, ends upon the expiration of the period provided for in their probationary contract of employment. Thereafter, the parties are free to renew the contract or not. 17 The petitioners themselves admit that upon their request the effective date of their separation was deferred from 13 June 1992 to 20 June 1992. The latter date apparently coincided with the expiration of the six-month probationary period. This development has rendered moot the question of whether there was a just cause of the dismissal of the petitioners other than Perla Cumpay and Virginia Etic.

A different conclusion would have to be reached with respect to Perla Cumpay and Virginia Etic. They were dismissed on 4 May 1992 for having allegedly abandoned their work. It is settled that to constitute abandonment, there must be a clear and deliberate intent to discontinue ones employment, without deliberate intent to discontinue one's employment, without any intention of returning. 18 In this case, the private respondent not only failed to prove such intent, it as well violated the due process rule in dismissal of employees. The requirements of lawful dismissal of an employee by his employer are two-fold, viz., notice and hearing. 19 These requirements constitute the essential elements of due process. 20 These requirements not having been met with respect to Cumpay and Etic, their dismissal was, consequently, illegal. It results, therefore, that only petitioners Perla Cumpay and Virginia Etic were entitled to reinstatement and back wages. Nonetheless, considering that their probationary employment would have similarly expired six months after commencement, reinstatement is no longer feasible. WHEREFORE, the instant petition is partly GRANTED. The challenged resolutions of public respondent National Labor Relations Commission (Fifth Division) of 2 August 1993 and 14 October 1993 in NLRC Case No. M-00137893 are hereby MODIFIED; and as modified, private respondent Super Mahogany Plywood Corporation is further ordered to pay petitioners Perla Cumpay and Virginia Etic their backwages corresponding to the period from 4 May 1992 up to the expiration of their probationary employment contracts. No pronouncements as to costs in this instance. SO ORDERED.

Republic SUPREME Manila THIRD DIVISION

of

the

Philippines COURT

G.R. No. 103586 July 21, 1994 NATIONAL vs. NATIONAL LABOR RELATIONS COMMISSION and FRANKLIN BAKER COMPANY OF THE PHILIPPINES (DAVAO PLANT), respondents. Jose Espinas for petitioner. Siguion-Reyna, Montecillo & Ongsiako for private respondent. FEDERATION OF LABOR, petitioner,

FELICIANO, J.: Between 1 November 1983 and 1 November 1984, Wage Orders Nos. 3, 4, 5 and 6 were promulgated by the then President Ferdinand E. Marcos. Wage Order No. 3 became effective as of 1 November 1983; Wage Order No. 4, as of 1 May 1984; Wage Order No. 5, as of 16 June 1984; and Wage Order No. 6 went into effect on 1 November 1984. All these Wage Orders increased the statutory minimum wages of workers with differing increases being specified for agricultural plantation and non-agricultural workers. Before the effectivity of Wage Order No. 3, the wage rates of regular employees and of casual (or non-regular) employees of private respondent Franklin Baker Company of the Philippines (Davao Plant) ("Company") were such that there was

a positive differential between the two (2) in the amount of P4.56. The effect of the implementation of the successive Wage Orders upon the daily wage rates of these two (2) groups of employees was summarized by petitioner in the following table: Effectivity Wage of Wage of Gap Date Casuals Before After After W.O. W.O. W.O. No. No. No. 3 4 1 1 3 Nov. May P22.56 1983 1984 P18.00 22.56 32.64 20.00 31.00 P4.56 2.56 1.64 Regulars

After W.O. No. 5 16 June 1984 34.00 34.00 0.00 1 Upon the effectivity of Wage Order No. 5, grievance meetings were held by petitioner National Federation of Labor ("NFL") and private respondent Company sometime in June 1984, addressing the impact which implementation of the various Wage Orders had on the wage structure of the Company. On 21 June 1984, all the casual or non-regular employees of private respondent Company (at least in its Davao Plant) were "regularized," or converted into regular employees, pursuant to the request of petitioner NFL. On 1 July 1984, the effectivity date of the 1984 Collective Bargaining Agreement between NFL and the Company, all regular employees of the Company received an increase of P1.84 in their daily wage; the regular daily wage of the regular employees thus became P35.84 as against P34.00 per day for non-regular employees. As a result of the implementation of Wage Order No. 6, casual employees received an increase of their daily wage from P34.00 to P36.00. At the same

time, the Company unilaterally granted an across-the-board increase of P2.00 in the daily rate of all regular employees, thus increasing their daily wage from P35.84 to P37.84. Further, on 1 July 1985, the anniversary date of the increases under the CBA, all regular employees who were members of the collective bargaining unit got a raise of P1.76 in their basic daily wage, which pushed that daily wage from P37.84 to P39.60, as against the non-regular's basic wage of P36.00 per day. Finally, by November 1987, the lowest paid regular employee had a basic daily rate of P64.64, or P10.64 more than the statutory minimum wage paid to a non-regular employee. The development of the wage scales of the Company's employees after the effectivity date of Wage Order No. 5 is presented in the following table: Effectivity Wage of Wage of Gap Date Casuals After CBA After W.O. W.O. No. No. 5 1 6 16 July 1 June Nov. 1984 1984 34.00 35.84 37.84 34.00 34.00 36.00 0.00 1.84 1.84 Regulars

Increase

1984

CBA Anniversary 1 July 1985 39.60 36.00 3.60 Increase Meantime, while the above wage developments were unfolding, the Company experienced a work output slow down. The Company directed some 205 workers to explain the reduction in their work output. The workers failed to comply and they were accordingly issued notices of dismissal by the Company. As a response to its decreasing productivity levels, the Company suspended operations on 16 August 1984. Operations were resumed on 14 September 1984; the Company, however, refused to take back the 205 dismissed

employees. Petitioner Union then went on strike alleging a lock-out on the part of the Company and demanding rectification of the wage distortion. The case was certified by the Secretary of Labor to the National Labor Relations Commission ("NLRC") for compulsory conciliation. On 19 June 1985, the Union and the Company reached an agreement with respect to the lock-out issue. The agreement, which was approved by the NLRC En Banc, granted the 205 employees "financial assistance" equivalent to thirty (30) days' separation pay. This left unresolved only the wage distortion issue. On 11 November 1987, the NLRC En Banc rendered a decision which in effect found the existence of wage distortion and required the Company to pay a P1.00 wage increase effective 1 May 1984: In the computation submitted by the Union, there is a need to restore the P2.56 gap between non-regulars or "casuals" and "regular workers." This difference in the basic wage of these workers was existing at the time of the conclusion of the collective bargaining agreement and before the implementation of Wage Orders No. 4 & 5. The imprecise claim of respondent that there is P3.60 gap between non-regular and regulars may not be sustained because as aforestated, this amount represents negotiated wage increase which should not be considered covered and in compliance with the wage orders . Considering, however, the present economic conditions and the outlay involved in correcting the distortion in the wages of respondent's workers, this Commission, in the exercise of its arbitral powers, feels that an increase of P1.00 on the present basic wage of regular workers would significantly rectify or minimize the distortion in the wage structure of respondent company caused by the implementation of the various wage orders. Respondent is, therefore, required to

implement the P1.00 wage increase effective May 1, 1984 when Wage Order 4 took effect. 2 (Emphasis supplied) On motion for partial reconsideration filed by the Company, the above quoted portion of the NLRC En Banc'sdecision was reconsidered and set aside by the NLRC Fifth Division. 3 The Fifth Division of the NLRC in effect found that while a wage distortion did exist commencing 16 June 1984, the distortion persisted only for a total of fifteen (15) days and accordingly required private respondent company to pay "a wage increase of P2.00 per day to all regular workers effective June 16, 1984 up to June 30, 1984 or a total of fifteen (15) days." 4 The rest of the decision of 11 November 1987 was left untouched. In its decision dated 16 December 1991, the NLRC (Fifth Division) said: . . . At the time Wage Order No. 4 was implemented on May 1, 1984, casual employees were increased to P34.00 per day, placing them on equal salary footing with the regular employees who were likewise receiving P34.00 per day. But effective July 1, 1984 when the 1984 CBA took effect, the regular employees of the company admittedly received the basic wage of P35.84 or an increase of P1.84 as against the daily wage of P34.00 of the casual employees. Thus, the apparent wage distortion did not last long but only for 15 days, that is from June 16, 1984 when Wage Order No . 5 took effect and lasted only up to June 30, 1984 . From July 1, 1984, the regular employees received an increase of P1 .84 making their daily wage P35.84 as against the wage of casual employees of P34 .00 per day. And as rightly pointed out respondent-movant, the difference in the wage scale between the two (2) groups of employees was maintained even after the implementation of Wage

Order No. 6 which took effect on November 1, 1984. 5 (Emphasis supplied) The bottom line issue presented to the Court is thus whether or not, under the facts as summarized above, the NLRC (Fifth Division) committed a grave abuse of discretion amounting to lack or excess of jurisdiction, when it concluded that the wage distortion had ceased to exist, after 1 July 1984. The principal contention of petitioner NFL is that a wage distortion in the wage structure of private respondent Company continued to exist although a gap of P1.84 between the daily wage rate of regular employees and that of casual employees had been re-established upon the effectivity of the CBA increase on 1 July 1984. The original claim of NFL was that the initial prior to effectivity of Wage Order No. 3 differential of P4.56 in the wage rate of regular employees and that of casual employees, should be re-created this time between the wage rates of the by newly "regularized" employees (i.e., the Company on 21 June the casual employees regularized 1984) and the"old" regular

employees (employees who, allegedly, had been regular employees for at least three [3] years before the "regularization" of the casuals). 6 NFL stresses that seniority is a valid basis of distinction between differing groups of employees, under the Labor Code. We note that neither the Wage Orders noted above, nor the Implementing Rules promulgated by the Department of Labor and Employment, set forth a clear and specific notion of "wage distortion." What the Wage Orders and the Implementing Rules did was simply to recognize that implementation of the Wage Orders could result in a "distortion of the wage structure" of an employer, and to direct the employer and the union to negotiate with each other to correct the distortion. Thus, Section 6 of Wage Order No. 3, dated 7 November 1983, provided as follows:

Sec. 6. Where the application of the minimum wage rate prescribed herein results in distortions of the wage structure of an establishment, the employer and the union shall negotiate to correct the distortions. Any dispute arising from wage distortions shall be resolved through the grievance procedure under their collective bargaining agreement or through conciliation. In case where there is no collective bargaining agreement or recognized labor organization, the employer shall endeavor to correct such distortions in consultation with their workers . Any dispute shall be resolved throughconciliation by the appropriate Regional Office of the Ministry of Labor and Employment or through arbitrationby the NLRC Arbitration Branch having jurisdiction over the work-place. 7 (Emphasis supplied) In its Resolution dated 11 November 1987, the NLRC En Banc provided some elaboration of the notion of wage distortion, in the following terms: Wage visualizes distortion a hierarchy presupposes of a classification with of

positions and ranking of these positions at various levels. One positions corresponding ranks basically in terms of wages and other emoluments . Where a significant change occurs at the lowest level of positions in terms of basic wage without a corresponding change in the other level in the hierarchy of positions, negating as a result thereof the distinction between one level of position from the next higher level, and resulting in a disparity [should be "parity"] between the lowest level [and] the next higher level or rank, between new entrants and old hires, there exists a wage distortion. The various issuances on wages anticipated this occurrence so that it had been commonly provided for in these issuances

that negotiations may be initiated for the purposes of correcting the resulting distortion. 8(Emphases and brackets supplied) A statutory definition of "wage distortion" is now found in Article 124 of the Labor Code as amended by Republic Act. No. 6727 (dated 9 June 1989) which reads as follows: Article 124. Standards/Criteria for Minimum Wage Fixing . . . xxx xxx xxx As used herein, a wage distortion shall mean a situation where an increase in prescribed wage rates results in the elimination or severe contraction 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. 9 (Emphasis supplied) From the above quoted material, it will be seen that the concept of wage distortion assumes an existing grouping or classification of employees which establishes distinctions among such employees on some relevant or legitimate basis. This classification is reflected in a differing wage rate for each of the existing classes of employees. The wage distortion anticipated in Wage Orders Nos. 3, 4, 5 and 6 was a "distortion" (or "compression") which ensued from the impact of those Wage Orders upon the different wage rates of the several classes of employees. Thus distortion ensued where the result of implementation of one or another of the several Wage Orders was the total elimination or the severe reduction of the differential or gap existing between the wage rates of the differing classes of employees.
10

It is important to note that the remedy contemplated in the Wage Orders, and now in Article 124 of the Labor Code, for a wage distortion consisted of

negotiations between employer and employees for the rectification of the distortion by re-adjusting the wage rates of the differing classes of employees. As a practical matter, this ordinarily meant a wage increase for one or more of the affected classes of employees so that some gap or differential would be re-established. There was no legal requirement that the historical gap which existed before the implementation of the Wage Orders be restored in precisely the same form or amount. Applying the above concept to the case at bar, we note that there did exist a twofold classification of employees within the private respondent Company: regular employees on the one hand and casual (or non-regular) employees on the other. As can be seen from the figures referred to earlier, the differential between these two (2) classes of employees existing before Wage Order No. 3 was reduced to zero upon the effectivity of Wage Order No. 5 on 16 June 1984. Obviously, distortion consisting of complete elimination of the wage rate differential had occurred. It is equally clear, however, that fifteen (15) days later, on 1 July 1984, upon effectivity of the wage increase stipulated in the collective bargaining agreement between the parties, a gap or differential of P1.84 was re-created. This restored differential persisted after the effectivity of Wage Order No. 6 on 1 November 1984. By operation of the same CBA, by 1 July 1985, the wage differential had grown to P3.60. We believe and so hold that the re-establishment of a significant gap or differential between regular employees and casual employees by operation of the CBA was more than substantial compliance with the requirements of the several Wage Orders (and of Article 124 of the Labor Code). That this re-establishment of a significant differential was the result of collective bargaining negotiations, rather than of a special grievance procedure, is not a legal basis for ignoring it. The NLRC En Banc was in serious error when it disregarded the differential of P3.60 which had been restored by 1 July 1985 upon the ground that such differential "represent[ed] negotiated wage increase[s] which should not be considered covered and in compliance with the Wage Orders."
11

The Wage

Orders referred to above had provided for the crediting of increases in wages or allowances granted or paid by employers within a specified time against the statutorily prescribed increases in minimum wages.
12

A similar provision

recognizing crediting of increases in daily basic wage rates granted by employers pursuant to collective bargaining agreements, is set out in Section 4(d) of R.A. No. 6727, a statute which sought to "rationalize wage policy determination by establishing the mechanism and proper standards therefor ." In Apex Mining Company, Inc. v. National Labor Relations Commission, 13 the Supreme Court said: It is important to note that the creditability provisions in Wage Orders Nos. 5 and 6 (as well as the parallel provisions in Wage Orders Nos. 2, 3 and 4) are grounded in an important public policy. That public policy may be seen to be the encouragement of employers to grant wage and allowance increases to their employeeshigher than the minimum rates of increases prescribed by statute or administrative regulation . To obliterate the creditability provisions in the Wage Orders through interpretation or otherwise, and to compel employers simply to add legislated increases in salaries or allowances without regard to what is already being paid, would be to penalize employers who grant their workers more than the statutorily prescribed minimum rates of increases. Clearly, this would be counter-productive so far as securing the interests of labor is concerned. The creditability provisions in the Wage Orders prevent the penalizing of employers who are industry leaders and who do not wait for statutorily prescribed increases in salary or allowances and pay their workers more than what the law or regulations require. original)
14

(Emphases in the

We believe that the same public policy requires recognition and validation, as it were, of wage increases given by employers either unilaterally or as a result of collective bargaining negotiations, in the effort to correct wage distortions. We consider, still further, that the "regularization" of the casual or non-regular employees on 21 June 1984 which was unilaterally effected by the Company (albeit upon the request of petitioner NFL), in conjunction with the coming into effect of the increases in daily wage stipulated in the CBA, had the effect of rendering the whole problem of wage distortion academic. The act of "regularization" eliminated the classification scheme in respect of which the wage distortion had existed. Petitioner NFL's principal contention that the wage distortion persisted with respect to the "old" regular employees and the "newly regularized" employees, is realistically a claim or demand that the classification of "regular" employees be broken down into a sub-classification of "new regulars" and "old regulars." A basic problem with this contention is that, per the record of this case and during the period of time here relevant, there was in fact no pre-existing subclassification of regular employees into "new regulars" and "old regulars" ( i.e., on the basis of seniority or longevity) in the Company. It follows that, as pointed out by the Solicitor-General, the "regularization"
15

no wage distortion within the meaning of Wage of the casual employees on

Orders Nos. 3 through 6 (and of Article 124 of the Labor Code) continued beyond 21 June 1984. It may be though here again the record is silent that the Company had some other sub-grouping of regular employees on the basis, for instance, of the kind of functions discharged by employees ( e.g., rank and file; supervisory; middle management; senior management; highly technical, etc.). The basic point which needs to be stressed is that whether or not a new or additional scheme of classification of employees for compensation purposes should be established by the Company (and the legitimacy or viability of the bases of distinction there embodied) is properly a matter for management

judgment and discretion, and ultimately, perhaps, a subject matter for bargaining negotiations between employer and employees. It is assuredly something that falls outside the concept of "wage distortion." The Wage Orders and Article 124 as amended do not require the establishment of new classifications or subclassifications by the employer. The NLRC is not authorized unilaterally to impose, directly or indirectly, under the guise of rectifying a "wage distortion," upon an employer a new scheme of classification of employees where none has been established either by management decision or by collective bargaining. We conclude that petitioner NFL has not shown any grave abuse of discretion amounting to lack of excess of jurisdiction on the part of the NLRC in rendering its decision (through its Fifth Division) dated 16 December 1991. WHEREFORE, the Petition for Certiorari is hereby DISMISSED for lack of merit. No pronouncement as to costs. SO ORDERED.

Republic of the Philippines Supreme Court Manila

THIRD DIVISION

EVER

ELECTRICAL

MANUFACTURING,

INC.,

(EEMI)

and

G.R. 194795

No.

VICENTE GO,

Petitioners, Present:

- versus PERALTA, J., Acting SAMAHANG MANGGAGAWA NG EVER ELECTRICAL/ NAMAWU LOCAL PANGANIBAN, Respondents. 224 represented by FELIMON ABAD, VILLARAMA, JR.,* * MENDOZA, and PERLASBERNABE,JJ. Chairperson,*

Promulgated:

June 13, 2012 x -----------------------------------------------------------------------------------------------------x

DECISION MENDOZA, J.:

This petition for review on certiorari[1] under Rule 45 of the 1997 Rules of Civil Procedure assails the August 31, 2010 Decision [2] and the December 16, 2010 Resolution[3] of the Court of Appeals (CA) in CA-G.R. SP No. 108978.

Petitioner Ever Electrical Manufacturing, Inc. (EEMI) is a corporation engaged in the business of manufacturing electrical parts and supplies. On the other hand, the respondents are members of Samahang Manggagawa ng Ever Electrical/NAMAWU Local 224 (respondents) headed by Felimon Panganiban. The controversy started when EEMI closed its business operations on October 11, 2006 resulting in the termination of the services of its employees. Aggrieved, respondents filed a complaint for illegal dismissal with prayer for payment of 13th month pay, separation pay, damages, and attorneys fees. Respondents alleged that the closure was made without any warning, notice or memorandum and in full disregard of the requirements of the Labor Code. In its defense, EEMI explained that it had closed the business due to various factors. In 1995, it invested in Orient Commercial Banking Corporation (Orient Bank) the sum of P500,000,000.00 and during the Asian Currency crises, various economies in the South East Asian Region were hurt badly. EEMI was one of those who suffered huge losses. In November 1996, it obtained a loan in the amount of P121,400,000.00 from United Coconut Planters Bank (UCPB). As security for the loan, EEMIs land and its improvements, including the factory, were mortgaged to UCPB.

EEMIs business suffered further losses due to the continued entry of cheaper goods from China and other Asian countries. Adding to EEMIs financial woes was the closure of Orient Bank where most of its resources were invested. As a result, EEMI was not able to meet its loan obligations with UCPB.

In an attempt to save the company, EEMI entered into a dacion en pago arrangement with UCPB which, in effect, transferred ownership of the companys property to UCPB as reflected in TCT No. 429159. Originally, EEMI wanted to lease the premises to continue its business operation but under UCPBs policy, a previous debtor who failed to settle its loan obligation was not eligible to lease its acquired assets. Thus, UCPB agreed to lease it to an affiliate corporation, EGO Electrical Supply Co, Inc. (EGO), for and in behalf of EEMI. On February 2, 2002, a lease agreement was entered into between UCPB and EGO.[4] The said lease came to a halt when UCPB instituted an unlawful detainer suit against EGO before the Metropolitan Trial Court, Branch 5, Makati City (MeTC) docketed as Civil Case No. 88602. On August 11, 2006, the MeTC ruled in favor of UCPB and ordered EGO to vacate the leased premises and pay rentals to UCPB in the amount of P21,473,843.65.
[5]

On September 19, 2006, a writ of execution was issued. [6] Consequently,

on October 11, 2006, the Sheriff implemented the writ by closing the premises and, as a result, EEMIs employees were prevented from entering the factory. On April 25, 2007, the Labor Arbiter (LA) ruled that respondents were not illegally dismissed. It, however, ordered EEMI and its President, Vicente Go (Go), to pay their employees separation pay and 13 th month pay respectively.[7] The decretal portion of the LA decision, reads:

CONFORMABLY WITH THE FOREGOING, Judgment is hereby rendered ordering the respondent[s] in solidum to pay the complainants their separation pay, 13 thmonth pay of the three (3) workers and the balance of their 13 th month pay as computed which computation is made a part of this disposition.

On September 15, 2008, the NLRC reversed and set aside the decision of the LA. The NLRC dismissed the complaint for lack of merit and ruled that since EEMIs cessation of business operation was due to serious business losses, the employees were not entitled to separation pay. [8] Respondents moved for reconsideration of the NLRC decision, but the NLRC denied the motion in its March 23, 2009 Resolution.[9] Unperturbed, respondents elevated the case before the CA via a petition for certiorari under Rule 65.[10] On August 31, 2010, the CA granted the petition. [11] It nullified the decision of the NLRC and reinstated the LA decision. The dispositive portion of the CA decision reads: ACCORDINGLY, the petition is GRANTED. The Decision dated September 15, 2008 and Resolution dated March 23, 2009 of the National Labor Relations Commission are NULLIFIED and the Decision dated April 25, 2007 of Labor Arbiter Melquiades Sol Del Rosario, REINSTATED. The CA held that respondents were entitled to separation pay and 13th month pay because the closure of EEMIs business operation was effected by the enforcement of a writ of execution and not by reason of business

losses. The CA, citing Restaurante Las Conchas v. Lydia Llego ,[12] upheld the solidary liability of EEMI and Go, declaring that when the employer corporation is no longer existing and unable to satisfy the judgment in favor of the employees, the officers should be held liable for acting on behalf of the corporation.[13] EEMI and Go filed a motion for reconsideration but it was denied in the CA Resolution dated December 16, 2010.[14] Hence, this petition.[15] Issues: 1. Whether the CA erred in finding that the closure of EEMIs operation was not due to business losses; and 2. Whether the CA erred in finding Vicente Go solidarily liable with EEMI.

The petition is partly meritorious.

Article 283 of the Labor Code provides: Art. 283. Closure of establishment and reduction of

personnel. The employer may also terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended

date thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or under taking 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 identifies closure or cessation of operation of the establishment as an authorized cause for terminating an employee. Similarly, the said provision mandates that employees who are laid off from work due to closures that are not due to business insolvency should be paid separation pay equivalent to one-month pay or to at least one-half month pay for every year of service, whichever is higher. A fraction of at least six months shall be considered one whole year. Although business reverses or losses are recognized by law as an authorized cause, it is still essential that the alleged losses in the business operations be proven convincingly; otherwise, this ground for termination of employment would be susceptible to abuse by conniving employers, who might be merely feigning business losses or reverses in their business ventures in order to ease out employees.[16] In this case, EEMI failed to establish that the main reason for its closure was business reverses. As aptly observed by the CA, the cessation of EEMIs business was not directly brought about by serious business losses or financial

reverses, but by reason of the enforcement of a judgment against it. Thus, EEMI should be required to pay separation pay to its affected employees. As to whether or not Go should be held solidarily liable with EEMI, the Court agrees with the petitioner. As a general rule, corporate officers should not be held solidarily liable with the corporation for separation pay for it is settled that a corporation is invested by law with a personality separate and distinct from those of the persons composing it as well as from that of any other legal entity to which it may be related. Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient ground for disregarding the separate corporate personality. [17] The LA was of the view that Go, as President of the corporation, actively participated in the management of EEMIs corporate obligations, and, accordingly, rendered judgment ordering EEMI and Go in solidum to pay the complainants[18] their due. He explained that [r]espondent Gos negligence in not paying the lease rental of the plant in behalf of the lessee EGO Electrical Supply, Inc., where EEMI was operating and reimburse expenses of UCPB for real estate taxes and the like, prompted the bank to file an unlawful detainer case against the lessee, EGO Electrical Supply Co. This evasion of an existing obligation, made respondent Go as liable as respondent EEMI, for complainants money awards.[19] Added the LA, being the President and the one actively representing respondent EEMI, in major contracts i.e. Real Estate Mortgage, loans, dacion en pago, respondent Go has to be liable in the case. [20] As earlier stated, the CA affirmed the LA decision citing the case of Restaurante Las Conchas v. Llego,[21] where it was held that when the employer corporation is no longer existing and unable to satisfy the judgment in favor of the employees, the officers should be held liable for acting on behalf of the corporation. [22]

A study of Restaurante Las Conchas case, however, bares that it was an application of the exception rather than the general rule. As stated in the said case, as a rule, the officers and members of a corporation are not personally liable for acts done in the performance of their duties. [23] The Court therein explained that it applied the exception because of the peculiar circumstances of the case. If the rule would be applied, the employees would end up in an empty victory because as the restaurant had been closed for lack of venue, there would be no one to pay its liability as the respondents therein claimed that the restaurant was owned by a different entity, not a party in the case. [24] In two subsequent cases, the Courts ruling in Restaurante Las

Conchas was invoked but the Court refused to consider it reasoning out that it was the exception rather than the rule. The two cases were Mandaue Dinghow Dimsum House, Co., Inc. and/or Henry Uytengsu v. National Labor Relations Commission[25] and Pantranco Employees Association (PEA-PTGWO) v. National Labor Relations Commission.[26] In Mandaue Dinghow Dimsum House, Co., Inc., the Court declined to apply the ruling in Restaurante Las Conchas because there was no evidence that the respondent therein, Henry Uytrengsu, acted in bad faith or in excess of his authority. It stressed that a corporation is invested by law with a personality separate and distinct from those of the persons composing it as well as from that of any other legal entity to which it may be related. For said reason, the doctrine of piercing the veil of corporate fiction must be exercised with caution.
[27] [28]

Citing Malayang Samahan ng mga Manggagawa sa M. Greenfield v. Ramos , the Court explained that corporate directors and officers are solidarily liable

with the corporation for the termination of employees done with malice or bad faith. It stressed that bad faith does not connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of wrong; it means breach of a known duty through some motive or interest or ill will; it partakes of the nature of fraud.

In Pantranco

Employees

Association, the

Court

also

rejected

the

invocation of Restaurante Las Conchas and refused to pierce the veil of corporate fiction. It explained: As between PNB and PNEI, petitioners want us to disregard their separate personalities, and insist that because the company, PNEI, has already ceased operations and there is no other way by which the judgment in favor of the employees can be satisfied, corporate officers can be held jointly and severally liable with the company. Petitioners rely on the pronouncement of this Court in A.C. Ransom Labor Union-CCLU v. NLRC and subsequent cases. This reliance fails to persuade. We find the aforesaid decisions inapplicable to the instant case. For one, in the said cases, the persons made liable after the companys cessation of operations were the officers and agents of the corporation. The rationale is that, since the corporation is an artificial person, it must have an officer who can be presumed to be the employer, being the person acting in the interest of the employer. The corporation, only in the technical sense, is the employer. In the instant case, what is being made liable is another corporation (PNB) which acquired the debtor corporation (PNEI). Moreover, in the recent cases Carag v. National Labor Relations Commission and McLeod v. National Labor Relations Commission, the Court explained the doctrine laid down in AC Ransom relative to the personal liability of the officers and agents of the employer for the debts of the latter. In AC Ransom, the Court imputed liability to the officers of the corporation on the strength of the definition of an employer in Article 212(c) (now Article 212[e]) of the Labor Code. Under the said provision, employer includes any person acting in the interest of an employer, directly or indirectly,

but does not include any labor organization or any of its officers or agents except when acting as employer. It was clarified in Carag and McLeod that Article 212(e) of the Labor Code, by itself, does not make a corporate officer personally liable for the debts of the corporation. It added that the governing law on personal liability of directors or officers for debts of the corporation is still Section 31 of the Corporation Code. More importantly, as aptly observed by this Court in AC Ransom, it appears that Ransom, foreseeing the possibility or probability of payment of backwages to its employees, organized Rosario to replace Ransom, with the latter to be eventually phased out if the strikers win their case. The execution could not be implemented against Ransom because of the disposition posthaste of its leviable assets evidently in order to evade its just and due obligations. Hence, the Court sustained the piercing of the corporate veil and made the officers of Ransom personally liable for the debts of the latter. Clearly, what can be inferred from the earlier cases is that the doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: 1) defeat of public convenience as when the corporate fiction is used as a vehicle for the evasion of an existing obligation; 2) fraud cases or when the corporate entity is used to justify a wrong, protect fraud, or defend a crime; or 3) alter ego cases, where a corporation is merely a farce since it is a mere alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation. In the absence of malice, bad faith, or a specific provision of law making a corporate officer liable, such corporate officer cannot be made personally liable for corporate liabilities.[29] [Emphasis supplied]

Similarly, in the case at bench, the records do not warrant an application of the exception. The rule, which requires the presence of malice or bad faith, must still prevail. In the recent case of Wensha Spa Center and/or Xu Zhi Jie v. Yung,[30] the Court absolved the corporations president from liability in the absence of bad faith or malice. In the said case, the Court stated:

In labor cases, corporate directors and officers may be held solidarily liable with the corporation for the termination of employment only if done with malice or in bad faith. [31] Bad faith does not connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of wrong; it means breach of a known duty through some motive or interest or ill will; it partakes of the nature of fraud. [32]

In the present case, Go may have acted in behalf of EEMI but the companys failure to operate cannot be equated to bad faith. Cessation of business operation is brought about by various causes like mismanagement, lack of demand, negligence, or lack of business foresight. Unless it can be shown that the closure was deliberate, malicious and in bad faith, the Court must apply the general rule that a corporation has, by law, a personality separate and distinct from that of its owners. As there is no evidence that Go, as EEMIs President, acted maliciously or in bad faith in handling their business affairs and in eventually implementing the closure of its business, he cannot be held jointly and solidarily liable with EEMI.

WHEREFORE, the petition is PARTIALLY GRANTED. The August 31, 2010 Decision of the Court of Appeals is AFFIRMED with MODIFICATION that Vicente Go is not solidarily liable with Ever Electrical Manufacturing, Inc. SO ORDERED.

JOSE CATRAL MENDOZA Associate Justice

WE CONCUR:

DIOSDADO M. PERALTA Associate Justice Acting Chairperson

ROBERTO A. ABAD Associate Justice

MARTIN S. VILLARAMA, JR. Associate Justice

ESTELA M. PERLAS-BERNABE Associate Justice

ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

DIOSDADO M. PERALTA Associate Justice Acting Chairperson, Third Division

CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO Senior Associate Justice (Per Section 12, R.A. No. 296, The Judiciary Act of 1948, as amended)

Republic SUPREME Manila FIRST DIVISION

of

the

Philippines COURT

G.R. No. 90664 February 7, 1991 SABAS vs. NATIONAL LABOR RELATIONS COMMISSION and BATANGAS, LAGUNA, TAYABAS BUS CO., respondents. B. VILLENA, petitioner,

Leo Delano C. Pascua for petitioner. Tanjuatco, Oreta, Tanjuatco, Berenguer & Sanvincente for private respondent.

GRIO-AQUINO, J.:p This petition seeks to annul the decision of the National Labor Relations Commission (NLRC) dated June 15, 1989 in NLRC NCR Case No. 06-02151-87 entitled, "Sabas Villena vs. B.L.T.B. Co., Max Potenciano and Candido Potenciano," ordering the company to pay the petitioner retirement benefits equivalent to one month basic salary for every year of service in the company as provided in the CBA. Sabas B. Villena started working with Batangas, Laguna and Tayabas Bus Company (BLTBCo.) as a bus conductor when he was only twenty-five years old. He rose from the ranks through dint it of hard work and dedicated service for thirty-two (32) years until he became the traffic operations manager in 1987 at the age of fifty seven (57), directing the traffic operations with three traffic supervisors under him, who in turn, supervised drivers, inspectors and conductors on all the bus routes covering the major provinces of the Southern Tagalog region. Villena's work required continous service on the road from dawn to dusk, hardly allowing him free time even on holidays. On April 30, 1987, at around 8:30 in the morning, he received the schock of his life when a letter was handed to him by the company, advising that he was compulsorily retired from the service effective immediately The letter reads: April 24, 1987 MR. VILLENA B. SABAS 13 NOBLE EXT.

BATANGAS CITY 438 MANAGER, TRAFFIC Dear Mr. SABAS: Sad to state, our company has been incurring big losses since 1985. In our determination to keep the company going, we have exerted the best of our efforts and talents to solve the problem but still the losses continued to grow to the extent that the whole company is now endangered. Rather than allow the company to die and deprive the families of more than 2,000 employees of then, source of livelihood, the Management has decided to take decisive measures to prevent further losses by cutting down the expenses and improving its operations at the least cost. You have been with us for more than 20 years. We have valued your services and have already considered you as a member of the BLTBCo. family. Deep within our heart, it is painful just to think of losing you from our sight even for a moment. But with our hands chained by the burdens imposed by our Collective Bargaining Agreement, our choice of solutions have been narrowed down to just a few, one of which is to avail of the compulsory retirement provisions of our CBA. We, therefore, regret that much as we wish to retain you, we are forced by the circumstances to RETIRE you from the service effective April 30, 1987. We want to emphasize that your long service with the company is engraved in the history of BLTBCo. Rest assured that after getting your retirement benefits, you are still welcome to visit us. We are still hopeful that as soon as we overcome the present economic crisis, we may again take you in so that you may be regarded for your sacrifice of these items.

Very yours, (Sgd.) Candido

truly

A.

Potenciano V-P Administratio n (Annex A, p.34, Rollo.) Villena was verbally advised to turn over his service vehicle, collect all his belongings, and leave the company premises on the same day. Hurt dejected and confused, he meekly left the company premises and waited for advice regarding the "benefits" mentioned in the letter which failed to mention how much he would receive. At the time he was "compulsorily retired," Villena was the following remunerations: Basic salary P1,750.00 Allowance (mandatory) 510.00 Company Assistance 1,490.00 P3,750.00 That amount was in addition to per diems and representation allowance. After one month had elapsed and he did not hear from the company, Villena sought legal counsel and assistance.

On May 27, 1987, Villena's lawyer wrote the company a letter demanding clarification of the terms of Villena's "retirement" from the service, and raising the following points: 1. The ground upon which you base Mr. Villena's compulsory retirement is the big and continuous losses suffered by your company. Thus, the retrenchment of personnel Under Philippine law, a company is required to give at least one (1) month notice to the employee before the intended date of termination for this ground for separation. In this particular case, the notice of termination was given to Mr. Villena only in the morning of April 30, 1987 , the very same day his termination was to take effect. 2. Mr. Villena is a managerial employee who is excluded from the bargaining unit as defined in your company's CBA. Notwithstanding said exclusion, you are using the CBA compulsory retirement provision to apply to him in this particular instance. 3. Your letter did not state the amount of separation benefits and other payments that Mr. Villena will be given due to this separation. Neither did you inform him the time within which he can expect said payment to be given. All of these amount to violation of Mr. Villena's rights as an employee. It is made worse by the fact that he has served your company with utmost dedication and loyalty for the PAST 32 YEARS. We strongly protest your company's blatant disregard of his rights as an employee and dignity as a person! (p. 35, Rollo.) BLTB Co. ignored the letter, prompting Villena to file a complaint for illegal dismissal in the NLRC. During the conciliation proceedings, the company

admitted its omission to serve the required notice of termination and offered to pay P66,370.00 computed on the basis of Villena's salary, as follows: Retirement Pay P62,620.00 (one month's basic salary for every year of service, including integration of existing wage orders to latest salary) One Month salary for the month of May, 1987 in lieu of the prior 30 day notice P3,750.00 P66,370.00 Villena claimed that the basis for computing his benefits should be his gross compensation at the time he was separated from service, including the amount reflected as "company assistance," which amounted to P3,750. Based on this computation, Villena claimed entitlement to P123,750. BLTBCo. did not agree to pay him that amount. During the last conciliation meeting before the labor arbiter, Villena requested that the amount of P66,370 admitted by BLTBCo. as its liability be released to him, without prejudice to the determination of the correct amount due him, but the company refused to do so. On November 11, 1987, the labor arbiter issued a decision, declaring that the computation of Villena's retirement benefits should be based on the company's CBA provision on compulsory retirement for rank-and-file employees, notwithstanding the fact that he was a managerial employee. The CBA provision used only an employee's basic salary as basis for the computation of retirement

pay. In addition, Villena was awarded one month pay in lieu of advance notice of termination which BLTBCo. failed to observe. Villena appealed from the labor arbiter's decision. The company opposed the appeal. On February 28, 1989, the Fourth Division of the NLRC unanimously promulgated a decision ruling in favor of Villena. The NLRC held that the main reason for Villena's compulsory retirement was retrenchment because of financial reverses which the company claimed to have suffered. However, the company was found wanting in legal compliance with the retrenchment procedures and its alleged business reverses were not identified or proven. The provisions of the company CBA for the rank-and-files were erroneously interpreted to include Villena, who was a managerial employee, to the detriment of the latter's tenurial rights. BLTBCo. filed a motion for reconsideration of the decision. On June 15, 1989, the Second Division of the NLRC rendered a decision setting aside the February 28, 1989 decision of the Fourth Division and restored that of the labor arbiter. Villena filed this petition, alleging that the respondent Second Division of the NLRC gravely abused its discretion and/or acted without or in excess of its jurisdiction: 1. in failing to rule on his dismissal; 2. in sustaining his termination in the guise of "compulsory retirement," notwithstanding the lack of evidence to prove financial losses and prior notice; 3. in declaring a provision in the CBA of the company's rank- and-file employees "beneficially" applicable to a managerial employee; and 4. in awarding him separation pay based on "basic salary" instead of his gross compensation at the time of his illegal dismissal.

Why Villena was singled out for compulsory retirement when he was only 57 years old and after having served thirty-two (32) years in the company, has not been explained. While the purpose was allegedly to carry out a retrenchment program to cut losses, the legal procedure for the retrenchment of personnel was not followed, to wit: 1) one-month prior notice to the employee as prescribed by law was not given (Art. 283, Labor Code of the Philippines, as amended Sec. 5, Rule XIV, B.P. 130); (2) no fair and reasonable criteria were used in carrying out the retrenchment program, such as (a) less-preferred status ( i.e., temporary employees), (b) efficiency rating, and (c) seniority (Asiaworld Publishing House vs. Ople, 152 SCRA 219); and (3) no proof of the alleged financial losses suffered by the company was produced (Columbia Development Corp. vs Minister of Labor & Employment, 146 SCRA 421). It appears, therefore, that the so-called "compulsory retirement" was a scheme employed by the company to terminate Villena's employment without complying with the due process requirements of the law and without regard for his right to security of tenure. While the law recognizes the right of an employer to dismiss an employee in justifiable cases, it frowns upon the arbitrary and whimsical exercise of that prerogative when the employee's right to due process is Violated (Tan, Jr. vs. NLRC, G.R. No. 85919, March 23, 1990). Business losses as a just cause for retrenchment, must be proved, for they can be feigned (Garcia vs. NLRC, 153 SCRA 639; Columbia Development Corporation vs. Minister of Labor and Employment, 146 SCRA 421). Such proof was wanting in this case. The "compulsory retirement" of Villena was in effect a dismissal in violation of law. He still had a full three years to serve the company when his employment was peremptorily terminated by his employer. Having been illegally dismissed, he is entitled to receive full compensation for the remaining three years of his work life. Upon reaching age sixty (60), he may be retired and shall be entitled to receive the normal retirement benefits under the company's applicable bona-fide retirement plan or established company policy,

or, in the absence thereof, as provided in Section 14, Book VI of the Implementing Regulations to the labor Code, which provides: Sec. 14. Retirement benefits. (a) An employee who is retired pursuant to a bona-fide retirement plan or in accordance with the applicable individual or collective agreement or established employer Policy shall be entitled to all the retirement benefits provided therein or to termination pay equivalent to at least one month salary or to one-half month salary for every year of service, whichever is higher, a fraction of at least six (6) months being considered as one whole year (b) Where both the employer and the employee contribute to the retirement plan, agreement or policy the employer's total contribution thereto shall not be less than the total termination pay to which the employee would have been entitled had there been no such retirement plan. In case the employer's contribution is less than the termination pay the employee is entitled to receive, the employer shall pay the deficiency upon the retirement of the employee. (c) This Section shall apply where the employee retires at the age of sixty (60) years or older. WHEREFORE, finding grave abuse of discretion in the decision dated June 15, 1989 of the Second Division of the National Labor Relations Commission in Case No. 06-02151-87, the questioned decision is hereby annulled and set aside and a new one is entered ordering the private respondent, Batangas, Laguna, Tayabas Bus Co., to pay the petitioner, Sabas Villena, his full backwages, allowances and other benefits for a period of three (3) years after his legal dismissal from the service on April 24, 1987. until he reached the compulsory retirement age, plus his retirement benefits equivalent to his gross monthly pay, allowances and other

benefits for every year of service up to age sixty (60), which is the normal retirement age for him. Costs against the respondent Batangas, Laguna, Tayabas Bus Co. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila

SECOND DIVISION

KING OF KINGS TRANSPORT, INC., CLAIRE DELA FUENTE, and MELISSA LIM, Petitioners,

G.R. No. 166208 Present: QUISUMBING, J., Chairperson, CARPIO, CARPIO MORALES,

- versus -

TINGA, and VELASCO, JR., JJ. Promulgated:

SANTIAGO O. MAMAC, Respondent. June 29, 2007 x-----------------------------------------------------------------------------------------x

DECISION

VELASCO, JR., J.: Is a verbal appraisal of the charges against the employee a breach of the procedural due process? This is the main issue to be resolved in this plea for review under Rule 45 of the September 16, 2004 Decision[1] of the Court of Appeals (CA) in CA-GR SP No. 81961. Said judgment affirmed the dismissal of bus conductor Santiago O. Mamac from petitioner King of Kings Transport, Inc. (KKTI), but ordered the bus company to pay full backwages for violation of the twin-notice requirement and 13th-month pay. Likewise assailed is the December 2, 2004 CA Resolution[2] rejecting KKTIs Motion for Reconsideration.

The Facts Petitioner KKTI is a corporation engaged in public transportation and managed by Claire Dela Fuente and Melissa Lim. Respondent Mamac was hired as bus conductor of Don Mariano Transit Corporation (DMTC) on April 29, 1999. The DMTC employees including respondent formed theDamayan ng mga Manggagawa, Tsuper at ConductorTransport Workers Union and registered it with the Department of Labor and Employment. Pending the holding of a certification election in DMTC, petitioner KKTI was incorporated with the Securities and Exchange Commission which acquired new buses. Many DMTC employees were subsequently transferred to KKTI and excluded from the election.

The KKTI employees later organized the Kaisahan ng mga Kawani sa King of Kings (KKKK) which was registered with DOLE. Respondent was elected KKKK president. Respondent was required to accomplish a Conductors Trip Report and submit it to the company after each trip. As a background, this report indicates the ticket opening and closing for the particular day of duty. After submission, the company audits the reports. Once an irregularity is discovered, the company issues an Irregularity Report against the employee, indicating the nature and details of the irregularity. Thereafter, the concerned employee is asked to explain the incident by making a written statement or counter-affidavit at the back of the same Irregularity Report. After considering the explanation of the employee, the company then makes a determination of whether to accept the explanation or impose upon the employee a penalty for committing an infraction. That decision shall be stated on said Irregularity Report and will be furnished to the employee. Upon audit of the October 28, 2001 Conductors Report of respondent, KKTI noted an irregularity. It discovered that respondent declared several sold tickets as returned tickets causing KKTI to lose an income of eight hundred and ninety pesos. While no irregularity report was prepared on the October 28, 2001 incident, KKTI nevertheless asked respondent to explain the discrepancy. In his letter,[3] respondent said that the erroneous declaration in his October 28, 2001 Trip Report was unintentional. He explained that during that days trip, the windshield of the bus assigned to them was smashed; and they had to cut short the trip in order to immediately report the matter to the police. As a result of the incident, he got confused in making the trip report. On November 26, 2001, respondent received a letter [4] terminating his employment effective November 29, 2001. The dismissal letter alleged that the October 28, 2001irregularity was an act of fraud against the company. KKTI

also cited as basis for respondents dismissal the other offenses he allegedly committed since 1999. On December 11, 2001, respondent filed a Complaint for illegal dismissal, illegal deductions, nonpayment of 13th-month pay, service incentive leave, and separation pay. He denied committing any infraction and alleged that his dismissal was intended to bust union activities. Moreover, he claimed that his dismissal was effected without due process. In its April 3, 2002 Position Paper,[5] KKTI contended that respondent was legally dismissed after his commission of a series of misconducts and misdeeds. It claimed that respondent had violated the trust and confidence reposed upon him by KKTI. Also, it averred that it had observed due process in dismissing respondent and maintained that respondent was not entitled to his money claims such as service incentive leave and 13th-month pay because he was paid on commission or percentage basis. On September 16, 2002, Labor Arbiter Ramon Valentin C. Reyes rendered judgment dismissing respondents Complaint for lack of merit. [6] Aggrieved, respondent appealed to the National Labor Relations Commission (NLRC). On August 29, 2003, the NLRC rendered a Decision, the dispositive portion of which reads: WHEREFORE, the decision dated 16 September 2002 is MODIFIED in that respondent King of Kings Transport Inc. is hereby ordered to indemnify complainant in the amount of ten thousand pesos (P10,000) for failure to comply with due process prior to termination. The other findings are AFFIRMED.

SO ORDERED.[7]

Respondent moved for reconsideration but it was denied through the November 14, 2003 Resolution[8] of the NLRC. Thereafter, respondent filed a Petition for Certiorari before the CA urging the nullification of the NLRC Decision and Resolution. The Ruling of the Court of Appeals Affirming the NLRC, the CA held that there was just cause for respondents dismissal. It ruled that respondents act in declaring sold tickets as returned tickets x x x constituted fraud or acts of dishonesty justifying his dismissal. [9] Also, the appellate court sustained the finding that petitioners failed to comply with the required procedural due process prior to respondents termination. However, following the doctrine in Serrano v. NLRC,[10] it modified the award of PhP 10,000 as indemnification by awarding full backwages from the time respondents employment was terminated until finality of the decision. Moreover, the CA held that respondent is entitled to the 13th-month pay benefit. Hence, we have this petition.

The Issues

Petitioner raises the following assignment of errors for our consideration:

Whether the Honorable Court of Appeals erred in awarding in favor of the complainant/private respondent, full back wages, despite the denial of his petition for certiorari. Whether the Honorable Court of Appeals erred in ruling that KKTI did not comply with the requirements of procedural due process before dismissing the services of the complainant/private respondent. Whether the Honorable Court of Appeals rendered an incorrect decision in that [sic] it awarded in favor of the complaint/private respondent, 13th month pay benefits contrary to PD 851.[11] The Courts Ruling The petition is partly meritorious. The disposition of the first assigned error depends on whether petitioner KKTI complied with the due process requirements in terminating respondents employment; thus, it shall be discussed secondly. Non-compliance with the Due Process Requirements Due process under the Labor Code involves two aspects: first, substantivethe valid and authorized causes of termination of employment under the Labor Code; and second, proceduralthe manner of dismissal. [12] In the present case, the CA affirmed the findings of the labor arbiter and the NLRC that the termination of employment of respondent was based on a just cause. This ruling is not at issue in this case. The question to be determined is whether the procedural requirements were complied with.

Art. 277 of the Labor Code provides the manner of termination of employment, thus: Art. 277. Miscellaneous Provisions.x x x (b) Subject to the constitutional right of workers to security of tenure and their right to be protected against dismissal except for a just and authorized cause without prejudice to the requirement of notice under Article 283 of this Code, the employer shall furnish the worker whose employment is sought to be terminated a written notice containing a statement of the causes for termination and shall afford the latter ample opportunity to be heard and to defend himself with the assistance of his representative if he so desires in accordance with company rules and regulations promulgated pursuant to guidelines set by the Department of Labor and Employment. Any decision taken by the employer shall be without prejudice to the right of the worker to contest the validity or legality of his dismissal by filing a complaint with the regional branch of the National Labor Relations Commission. The burden of proving that the termination was for a valid or authorized cause shall rest on the employer. Accordingly, the implementing rule of the aforesaid provision states: SEC. 2. Standards of due process; requirements of notice. In all cases of termination of employment, the following standards of due process shall be substantially observed: I. For termination of employment based on just causes as defined in Article 282 of the Code:

(a)

A written notice served on the employee

specifying the ground or grounds for termination, and giving said employee reasonable opportunity within which to explain his side. (b) A hearing or conference during which the employee concerned, with the assistance of counsel if he so desires is given opportunity to respond to the charge, present his evidence, or rebut the evidence presented against him. (c) A written notice of termination served on the

employee, indicating that upon due consideration of all the circumstances, grounds have been established to justify his termination. [13] In case of termination, the foregoing notices shall be served on the employees last known address.[14] To clarify, the following should be considered in terminating the services of employees: (1) The first written notice to be served on the employees should contain the specific causes or grounds for termination against them, and a directive that the employees are given the opportunity to submit their written explanation within a reasonable period. Reasonable opportunity under the Omnibus Rules means every kind of assistance that management must accord to the employees to enable them to prepare adequately for their defense. [15] This should be construed as a period of at least five (5) calendar days from receipt of the notice to give the employees an opportunity to study the accusation against them, consult a union

official or lawyer, gather data and evidence, and decide on the defenses they will raise against the complaint. Moreover, in order to enable the employees to intelligently prepare their explanation and defenses, the notice should contain a detailed narration of the facts and circumstances that will serve as basis for the charge against the employees. A general description of the charge will not suffice. Lastly, the notice should specifically mention which company rules, if any, are violated and/or which among the grounds under Art. 282 is being charged against the employees. (2) After serving the first notice, the employers should schedule and

conduct a hearing or conference wherein the employees will be given the opportunity to: (1) explain and clarify their defenses to the charge against them; (2) present evidence in support of their defenses; and (3) rebut the evidence presented against them by the management. During the hearing or conference, the employees are given the chance to defend themselves personally, with the assistance of a representative or counsel of their choice. Moreover, this conference or hearing could be used by the parties as an opportunity to come to an amicable settlement. (3) After determining that termination of employment is justified, the employers shall serve the employees a written notice of termination indicating that: (1) all circumstances involving the charge against the employees have been considered; and (2) grounds have been established to justify the severance of their employment. In the instant case, KKTI admits that it had failed to provide respondent with a charge sheet.[16] However, it maintains that it had substantially complied with the rules, claiming that respondent would not have issued a written explanation had he not been informed of the charges against him. [17] We are not convinced.

First, respondent was not issued a written notice charging him of committing an infraction. The law is clear on the matter. A verbal appraisal of the charges against an employee does not comply with the first notice requirement. In Pepsi Cola Bottling Co. v. NLRC ,[18] the Court held that consultations or conferences are not a substitute for the actual observance of notice and hearing. Also, in Loadstar Shipping Co., Inc. v. Mesano ,[19] the Court, sanctioning the employer for disregarding the due process requirements, held that the employees written explanation did not excuse the fact that there was a complete absence of the first notice. Second, even assuming that petitioner KKTI was able to furnish respondent an Irregularity Report notifying him of his offense, such would not comply with the requirements of the law. We observe from the irregularity reports against respondent for his other offenses that such contained merely a general description of the charges against him. The reports did not even state a company rule or policy that the employee had allegedly violated. Likewise, there is no mention of any of the grounds for termination of employment under Art. 282 of the Labor Code. Thus, KKTIs standard charge sheet is not sufficient notice to the employee. Third, no hearing was conducted. Regardless of respondents written explanation, a hearing was still necessary in order for him to clarify and present evidence in support of his defense. Moreover, respondent made the letter merely to explain the circumstances relating to the irregularity in his October 28, 2001 Conductors Trip Report. He was unaware that a dismissal proceeding was already being effected. Thus, he was surprised to receive the November 26, 2001 termination letter indicating as grounds, not only hisOctober 28, 2001 infraction, but also his previous infractions. Sanction for Non-compliance with Due Process Requirements

As stated earlier, after a finding that petitioners failed to comply with the due process requirements, the CA awarded full backwages in favor of respondent in accordance with the doctrine in Serrano v. NLRC.[20] However, the doctrine in Serrano had already been abandoned in Agabon v. NLRC by ruling that if the dismissal is done without due process, the employer should indemnify the employee with nominal damages.[21] Thus, for non-compliance with the due process requirements in the termination of respondents employment, petitioner KKTI is sanctioned to pay respondent the amount of thirty thousand pesos (PhP 30,000) as damages. Thirteenth (13th)-Month Pay Section 3 of the Rules Implementing Presidential Decree No.

851[22] provides the exceptions in the coverage of the payment of the 13th-month benefit. The provision states: SEC. 3. Employers covered.The Decree shall apply to all employers except to: xxxx e) Employers of those who are paid on purely commission, boundary, or task basis, and those who are paid a fixed amount for performing a specific work, irrespective of the time consumed in the performance thereof, except where the workers are paid on piecerate basis in which case the employer shall be covered by this issuance insofar as such workers are concerned.

Petitioner KKTI maintains that respondent was paid on purely commission basis; thus, the latter is not entitled to receive the 13th-month pay benefit. However, applying the ruling in Philippine Agricultural Commercial and Industrial Workers Union v. NLRC,[23] the CA held that respondent is entitled to the said benefit. It was erroneous for the CA to apply the case of Philippine Agricultural Commercial and Industrial Workers Union . Notably in the said case, it was established that the drivers and conductors praying for 13th- month pay were not paid purely on commission. Instead, they were receiving a commission in addition to a fixed or guaranteed wage or salary. Thus, the Court held that bus drivers and conductors who are paid a fixed or guaranteed minimum wage in case their commission be less than the statutory minimum, and commissions only in case where they are over and above the statutory minimum, are entitled to a 13th-month pay equivalent to one-twelfth of their total earnings during the calendar year. On the other hand, in his Complaint, [24] respondent admitted that he was paid on commission only. Moreover, this fact is supported by his pay slips[25] which indicated the varying amount of commissions he was receiving each trip. Thus, he was excluded from receiving the 13th-month pay benefit. WHEREFORE, the petition is PARTLY GRANTED and the September 16, 2004 Decision of the CA is MODIFIED by deleting the award of backwages and 13th-month pay. Instead, petitioner KKTI is ordered to indemnify respondent the amount of thirty thousand pesos (PhP 30,000) as nominal damages for failure to comply with the due process requirements in terminating the employment of respondent. No costs. SO ORDERED.

PRESBITERO J. VELASCO, JR. Associate Justice WE CONCUR:

LEONARDO A. QUISUMBING Associate Justice Chairperson

ANTONIO T. CARPIO

CONCHITA CARPIO MORALES Associa te Justice Associat e Justice

DANTE O. TINGA Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

LEONARDO A. QUISUMBING Associate Justice Chairperson

CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO Chief Justice Republic SUPREME Manila EN BANC G.R. No. 152048 April 7, 2009 of the Philippines COURT

FELIX vs.

B.

PEREZ

and

AMANTE

G.

DORIA, Petitioners,

PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY and JOSE LUIS SANTIAGO, Respondents. DECISION CORONA, J.: Petitioners Felix B. Perez and Amante G. Doria were employed by respondent Philippine Telegraph and Telephone Company (PT&T) as shipping clerk and supervisor, respectively, in PT&Ts Shipping Section, Materials Management Group. Acting on an alleged unsigned letter regarding anomalous transactions at the Shipping Section, respondents formed a special audit team to investigate the matter. It was discovered that the Shipping Section jacked up the value of the freight costs for goods shipped and that the duplicates of the shipping documents allegedly showed traces of tampering, alteration and superimposition. On September 3, 1993, petitioners were placed on preventive suspension for 30 days for their alleged involvement in the anomaly. 1 Their suspension was extended for 15 days twice: first on October 3, 1993 2 and second on October 18, 1993.3 On October 29, 1993, a memorandum with the following tenor was issued by respondents: In line with the recommendation of the AVP-Audit as presented in his report of October 15, 1993 (copy attached) and the subsequent filing of criminal charges against the parties mentioned therein, [Mr. Felix Perez and Mr. Amante Doria are] hereby dismissed from the service for having falsified company documents.4 (emphasis supplied)

On November 9, 1993, petitioners filed a complaint for illegal suspension and illegal dismissal.5 They alleged that they were dismissed on November 8, 1993, the date they received the above-mentioned memorandum. The labor arbiter found that the 30-day extension of petitioners suspension and their subsequent dismissal were both illegal. He ordered respondents to pay petitioners their salaries during their 30-day illegal suspension, as well as to reinstate them with backwages and 13th month pay. The National Labor Relations Commission (NLRC) reversed the decision of the labor arbiter. It ruled that petitioners were dismissed for just cause, that they were accorded due process and that they were illegally suspended for only 15 days (without stating the reason for the reduction of the period of petitioners illegal suspension).6 Petitioners appealed to the Court of Appeals (CA). In its January 29, 2002 decision,7 the CA affirmed the NLRC decision insofar as petitioners illegal suspension for 15 days and dismissal for just cause were concerned. However, it found that petitioners were dismissed without due process. Petitioners now seek a reversal of the CA decision. They contend that there was no just cause for their dismissal, that they were not accorded due process and that they were illegally suspended for 30 days. We rule in favor of petitioners. Respondents Failed to Prove Just

Cause and to Observe Due Process The CA, in upholding the NLRCs decision, reasoned that there was sufficient basis for respondents to lose their confidence in petitioners 8 for allegedly tampering with the shipping documents. Respondents emphasized the

importance of a shipping order or request, as it was the basis of their liability to a cargo forwarder.9 We disagree. Without undermining the importance of a shipping order or request, we find respondents evidence insufficient to clearly and convincingly establish the facts from which the loss of confidence resulted. 10 Other than their bare allegations and the fact that such documents came into petitioners hands at some point, respondents should have provided evidence of petitioners functions, the extent of their duties, the procedure in the handling and approval of shipping requests and the fact that no personnel other than petitioners were involved. There was, therefore, a patent paucity of proof connecting petitioners to the alleged tampering of shipping documents. The alterations on the shipping documents could not reasonably be attributed to petitioners because it was never proven that petitioners alone had control of or access to these documents. Unless duly proved or sufficiently substantiated otherwise, impartial tribunals should not rely only on the statement of the employer that it has lost confidence in its employee. 11 Willful breach by the employee of the trust reposed in him by his employer or duly authorized representative is a just cause for termination. 12 However, in General Bank and Trust Co. v. CA,13 we said: [L]oss of confidence should not be simulated. It should not be used as a subterfuge for causes which are improper, illegal or unjustified. Loss of confidence may not be arbitrarily asserted in the face of overwhelming evidence to the contrary. It must be genuine, not a mere afterthought to justify an earlier action taken in bad faith. The burden of proof rests on the employer to establish that the dismissal is for cause in view of the security of tenure that employees enjoy under the

Constitution and the Labor Code. The employers evidence must clearly and convincingly show the facts on which the loss of confidence in the employee may be fairly made to rest.14 It must be adequately proven by substantial evidence.15 Respondents failed to discharge this burden. Respondents illegal act of dismissing petitioners was aggravated by their failure to observe due process. To meet the requirements of due process in the dismissal of an employee, an employer must furnish the worker with two written notices: (1) a written notice specifying the grounds for termination and giving to said employee a reasonable opportunity to explain his side and (2) another written notice indicating that, upon due consideration of all circumstances, grounds have been established to justify the employer's decision to dismiss the employee.16 Petitioners were neither apprised of the charges against them nor given a chance to defend themselves. They were simply and arbitrarily separated from work and served notices of termination in total disregard of their rights to due process and security of tenure. The labor arbiter and the CA correctly found that respondents failed to comply with the two-notice requirement for terminating employees. Petitioners likewise contended that due process was not observed in the absence of a hearing in which they could have explained their side and refuted the evidence against them. There is no need for a hearing or conference. We note a marked difference in the standards of due process to be followed as prescribed in the Labor Code and its implementing rules. The Labor Code, on one hand, provides that an employer must provide the employee ample opportunity to be heard and to defend himself with the assistance of his representative if he so desires: ART. 277. Miscellaneous provisions. x x x

(b) Subject to the constitutional right of workers to security of tenure and their right to be protected against dismissal except for a just and authorized cause and without prejudice to the requirement of notice under Article 283 of this Code, the employer shall furnish the worker whose employment is sought to be terminated a written notice containing a statement of the causes for termination and shall afford the latter ample opportunity to be heard and to defend himself with the assistance of his representative if he so desires in accordance with company rules and regulations promulgated pursuant to guidelines set by the Department of Labor and Employment. Any decision taken by the employer shall be without prejudice to the right of the worker to contest the validity or legality of his dismissal by filing a complaint with the regional branch of the National Labor Relations Commission. The burden of proving that the termination was for a valid or authorized cause shall rest on the employer. (emphasis supplied) The omnibus rules implementing the Labor Code, on the other hand, require a hearing and conference during which the employee concerned is given the opportunity to respond to the charge, present his evidence or rebut the evidence presented against him:17 Section 2. Security of Tenure. x x x (d) In all cases of termination of employment, the following standards of due process shall be substantially observed: For termination of employment based on just causes as defined in Article 282 of the Labor Code: (i) A written notice served on the employee specifying the ground or grounds for termination, and giving said employee reasonable opportunity within which to explain his side. (ii) A hearing or conference during which the employee concerned, with the assistance of counsel if he so desires, is given opportunity

to respond to the charge, present his evidence or rebut the evidence presented against him. (iii) A written notice of termination served on the employee, indicating that upon due consideration of all the circumstances, grounds have been established to justify his termination. (emphasis supplied) Which one should be followed? Is a hearing (or conference) mandatory in cases involving the dismissal of an employee? Can the apparent conflict between the law and its IRR be reconciled? At the outset, we reaffirm the time-honored doctrine that, in case of conflict, the law prevails over the administrative regulations implementing it. 18 The authority to promulgate implementing rules proceeds from the law itself. To be valid, a rule or regulation must conform to and be consistent with the provisions of the enabling statute.19 As such, it cannot amend the law either by abridging or expanding its scope.20 Article 277(b) of the Labor Code provides that, in cases of termination for a just cause, an employee must be given "ample opportunity to be heard and to defend himself." Thus, the opportunity to be heard afforded by law to the employee is qualified by the word "ample" which ordinarily means "considerably more than adequate or sufficient."21 In this regard, the phrase "ample opportunity to be heard" can be reasonably interpreted as extensive enough to cover actual hearing or conference. To this extent, Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code is in conformity with Article 277(b). Nonetheless, Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code should not be taken to mean that holding an actual hearing or conference is a condition sine qua non for compliance with the due process requirement in termination of employment. The test for the fair procedure guaranteed under Article 277(b) cannot be whether there has been a formal pretermination confrontation between the employer and the employee. The

"ample opportunity to be heard" standard is neither synonymous nor similar to a formal hearing. To confine the employees right to be heard to a solitary form narrows down that right. It deprives him of other equally effective forms of adducing evidence in his defense. Certainly, such an exclusivist and absolutist interpretation is overly restrictive. The "very nature of due process negates any concept of inflexible procedures universally applicable to every imaginable situation."22 The standard for the hearing requirement, ample opportunity, is couched in general language revealing the legislative intent to give some degree of flexibility or adaptability to meet the peculiarities of a given situation. To confine it to a single rigid proceeding such as a formal hearing will defeat its spirit. Significantly, Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code itself provides that the so-called standards of due process outlined therein shall be observed "substantially," not strictly. This is a recognition that while a formal hearing or conference is ideal, it is not an absolute, mandatory or exclusive avenue of due process. An employees right to be heard in termination cases under Article 277(b) as implemented by Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code should be interpreted in broad strokes. It is satisfied not only by a formal face to face confrontation but by any meaningful opportunity to controvert the charges against him and to submit evidence in support thereof. A hearing means that a party should be given a chance to adduce his evidence to support his side of the case and that the evidence should be taken into account in the adjudication of the controversy. 23 "To be heard" does not mean verbal argumentation alone inasmuch as one may be heard just as effectively through written explanations, submissions or pleadings. 24 Therefore, while the phrase "ample opportunity to be heard" may in fact include an actual hearing, it is not limited to a formal hearing only. In other words, the existence of an actual,

formal "trial-type" hearing, although preferred, is not absolutely necessary to satisfy the employees right to be heard. This Court has consistently ruled that the due process requirement in cases of termination of employment does not require an actual or formal hearing. Thus, we categorically declared in Skippers United Pacific, Inc. v. Maguad:25 The Labor Code does not, of course, require a formal or trial type proceeding before an erring employee may be dismissed . (emphasis supplied) In Autobus Workers Union v. NLRC,26 we ruled: The twin requirements of notice and hearing constitute the essential elements of due process. Due process of law simply means giving opportunity to be heard before judgment is rendered. In fact, there is no violation of due process even if no hearing was conducted, where the party was given a chance to explain his side of the controversy . What is frowned upon is the denial of the opportunity to be heard. xxxxxxxxx A formal trial-type hearing is not even 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. This type of hearing is not even mandatory in cases of complaints lodged before the Labor Arbiter. (emphasis supplied) In Solid Development Corporation Workers Association v. Solid Development Corporation,27 we had the occasion to state: [W]ell-settled is the dictum that the twin requirements of notice and hearing constitute the essential elements of due process in the dismissal of employees. It

is a cardinal rule in our jurisdiction that the employer must furnish the employee with two written notices before the termination of employment can be effected: (1) the first apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the second informs the employee of the employers decision to dismiss him. The requirement of a hearing, on the other hand, is complied with as long as there was an opportunity to be heard, and not necessarily that an actual hearing was conducted. In separate infraction reports, petitioners were both apprised of the particular acts or omissions constituting the charges against them. They were also required to submit their written explanation within 12 hours from receipt of the reports. Yet, neither of them complied. Had they found the 12-hour period too short, they should have requested for an extension of time. Further, notices of termination were also sent to them informing them of the basis of their dismissal. In fine, petitioners were given due process before they were dismissed. Even if no hearing was conducted, the requirement of due process had been met since they were accorded a chance to explain their side of the controversy. (emphasis supplied) Our holding in National Semiconductor HK Distribution, Ltd. v. NLRC 28 is of similar import: That the investigations conducted by petitioner may not be

considered formal or recorded hearings or investigations is immaterial. A formal or trial type hearing is not at all times and in all instances essential to due process, the requirements of which are satisfied where the parties are afforded fair and reasonable opportunity to explain their side of the controversy. It is deemed sufficient for the employer to follow the natural sequence of notice, hearing and judgment. The above rulings are a clear recognition that the employer may provide an employee with ample opportunity to be heard and defend himself with the

assistance of a representative or counsel in ways other than a formal hearing. The employee can be fully afforded a chance to respond to the charges against him, adduce his evidence or rebut the evidence against him through a wide array of methods, verbal or written. After receiving the first notice apprising him of the charges against him, the employee may submit a written explanation (which may be in the form of a letter, memorandum, affidavit or position paper) and offer evidence in support thereof, like relevant company records (such as his 201 file and daily time records) and the sworn statements of his witnesses. For this purpose, he may prepare his explanation personally or with the assistance of a representative or counsel. He may also ask the employer to provide him copy of records material to his defense. His written explanation may also include a request that a formal hearing or conference be held. In such a case, the conduct of a formal hearing or conference becomes mandatory, just as it is where there exist substantial evidentiary disputes29 or where company rules or practice requires an actual hearing as part of employment pretermination procedure. To this extent, we refine the decisions we have rendered so far on this point of law. This interpretation of Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code reasonably implements the "ample opportunity to be heard" standard under Article 277(b) of the Labor Code without unduly restricting the language of the law or excessively burdening the employer. This not only respects the power vested in the Secretary of Labor and Employment to promulgate rules and regulations that will lay down the guidelines for the implementation of Article 277(b). More importantly, this is faithful to the mandate of Article 4 of the Labor Code that "[a]ll doubts in the implementation and interpretation of the provisions of [the Labor Code], including its implementing rules and regulations shall be resolved in favor of labor." In sum, the following are the guiding principles in connection with the hearing requirement in dismissal cases:

(a) "ample opportunity to be heard" means any meaningful opportunity (verbal or written) given to the employee to answer the charges against him and submit evidence in support of his defense, whether in a hearing, conference or some other fair, just and reasonable way. (b) a formal hearing or conference becomes mandatory only when requested by the employee in writing or substantial evidentiary disputes exist or a company rule or practice requires it, or when similar circumstances justify it. (c) the "ample opportunity to be heard" standard in the Labor Code prevails over the "hearing or conference" requirement in the implementing rules and regulations. Petitioners Suspended for 30 Days An employee may be validly suspended by the employer for just cause provided by law. Such suspension shall only be for a period of 30 days, after which the employee shall either be reinstated or paid his wages during the extended period.30 In this case, petitioners contended that they were not paid during the two 15-day extensions, or a total of 30 days, of their preventive suspension. Respondents failed to adduce evidence to the contrary. Thus, we uphold the ruling of the labor arbiter on this point. Where the dismissal was without just or authorized cause and there was no due process, Article 279 of the Labor Code, as amended, mandates that the employee is entitled to reinstatement without loss of seniority rights and other privileges and full backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from the time the compensation was not paid up to the time of actual reinstatement. 31 In this case, however, reinstatement is no Were Illegally

longer possible because of the length of time that has passed from the date of the incident to final resolution.32 Fourteen years have transpired from the time petitioners were wrongfully dismissed. To order reinstatement at this juncture will no longer serve any prudent or practical purpose. 33 WHEREFORE, the petition is hereby GRANTED. The decision of the Court of Appeals dated January 29, 2002 in CA-G.R. SP No. 50536 finding that petitioners Felix B. Perez and Amante G. Doria were not illegally dismissed but were not accorded due process and were illegally suspended for 15 days, is SET ASIDE. The decision of the labor arbiter dated December 27, 1995 in NLRC NCR CN. 11-06930-93 is hereby AFFIRMED with the MODIFICATIONthat petitioners should be paid their separation pay in lieu of reinstatement. SO ORDERED. RENATO Associate Justice WE CONCUR: REYNATO Chief Justice S. PUNO C. CORONA

Republic SUPREME Manila FIRST DIVISION

of

the

Philippines COURT

G.R. No. L-39889 November 12, 1981 UNION vs. THE SECRETARY OF LABOR and REPUBLIC BANK, respondents. OF SUPERVISORS (R.B.) NATU, petitioner,

MAKASIAR, J.: This is a petition for review on certiorari of the order dated December 6, 1974 of respondent Secretary of Labor, the dispositive portion of which reads as follows: WHEREFORE, the Commission's Decision in so far as that portion of the decision of the Arbitrator dated September 6, 1974, granting clearance to terminate the services of complainant Norberto Luna and dismissing the unfair labor practice are concerned, is hereby affirmed; whereas, that portion awarding separation pay in accordance with the Termination Pay Law is hereby modified, and in lieu thereof said complainant should be granted the sum of TEN THOUSAND PESOS P10,000.00 by way of financial assistance. (pp. 67-68, rec.) It appears that on April 2, 1974, petitioner filed with the National Labor Relations Commission a complaint against respondent Bank, charging it with unfair labor practice committed against its president Mr. Norberto Luna, for harassment, unjust suspension from his employment as Manager of respondent's San Juan branch and as member of the Board of Trustees of the RB Provident Fund, as well as his unlawful dismissal as Administrator and Secretary of the said fund, all due to his militant espousal and defense of workers' rights (p. 16, rec.). On April 15, 1974, a supplemental complaint was filed by the same petitioner with the allegation that after filing of the original complaint, the respondent Bank

followed up its harassment of Mr. Luna by terminating his employment as Branch Manager and as trustee, administrator and secretary of the RB Provident Fund purportedly due to his libelous remarks against the bank management (pp. 1819, rec.). Such termination was effected through a letter dated April 5, 1974 of the Bank President, Mr. Pablo Roman to the said Mr. Luna, citing as basis thereof (1) grave misconduct for making derogatory and libelous remarks against the bank management as a whole and against the assistant vice-president in particular, and (2) insubordination for refusal to obey the lawful order of his superior, the Chairman of the RB Provident Fund (pp. 206-207, NLRC rec.). The termination was to take effect upon receipt by the bank of the necessary clearance from the Secretary of Labor pursuant to Section 11, PD 21, and Section 25 of the Rules and Regulations of the NLRC dated October 18, 1972 (pp. 180-181, NLRC rec.). On May 20, 1974, respondent bank filed its answer, denying the allegations in both the original as well as the supplemental complaint and contending that Mr. Luna's suspension and subsequent dismissal from his various positions were for cause and had nothing to do with his alleged espousal and defense of workers' rights (pp. 20-21, rec.). On October 6, 1974, a decision (pp. 58-65, rec.) was rendered by Flavio P. Aguas, NLRC Arbitrator, with the conclusion that Luna actually made the derogatory remarks against the officers of the bank. The said decision has the following pronouncements: In the interest of justice and equity, however, complaint's dismissal should be considered as without sufficient just cause. Conformably to the foregoing, let clearance to terminate the services of Norberto Luna be granted to Republic Bank which is hereby ordered to pay the complainant separation pay in accordance with the Termination Pay Law.

The charges of unfair labor practice against the employer is hereby dismissed. From this decision, petitioner appealed to the National Labor Relations Commission, which affirmed en toto the said decision on October 17, 1974 (p. 39, rec.). On October 29, 1974, petitioner appealed to respondent Secretary of Labor (pp. 40-48, rec.), and on December 6, 1974, the latter issued an order the dispositive portion of which has been quoted above, affirming the decision insofar as it granted clearance for the termination of employment of Mr. Norberto Luna and dismissing the unfair labor practice charge, and modifying the portion granting him separation pay, and in lieu thereof, ordering the payment to him of P10,000.00 as financial assistance. The said order of the Secretary of Labor is the subject of the present petition. The antecedent facts of this case are as follows: The Republic Bank Provident Fund was established pursuant to the collective bargaining agreement between the employees and respondent bank, and became operational in 1970 for the benefit of the officers and employees of the Republic Bank. Membership therein was open to an fun-time officers and employees of the bank on a regular salary basis. The sources of its fund include contributions from members equivalent to 2% of their basic monthly salary and of the bank equivalent to 6% of the basic monthly salary of the members, annual donations of the bank, fines and penalties (please see Sections 1 and 3, Rules and Regulations of the RB Provident Fund, p. 270-A, NLRC rec.). The fund is supposed to be managed by a Board of Trustees composed of five (5) members, of which three (3), including the chairman, are supposed to be designated by the bank president, and the other two are the presidents of the Republic Bank Union of Supervisors and of the Republic Bank Employees' Union (Sec. 7, supra).

Shortly after the fund became operational, Mr. Norberto Luna, president of the petitioner union and ex-oficio member of the fund's Board of Trustees, became the fund's administrator and secretary. During the three (3) years of his incumbency as administrator, the resources of the fund grew from P278,445.27 to P1,779,159.85 (p. 5 of petition and p. 4 of respondent's brief, pages 7 and 149 of the records, respectively). In February 1974, the respondent bank decided to establish a money market department (p. 5 of petition and p. 5 of appellees' brief, supra). This was pursuant to the authority granted by the Central Bank to operate a quasi-banking operation on December 17, 1973 (p. 296, NLRC rec.). Prior to the February meeting of the Provident Fund Board of Trustees, or on January 22, 1974, Mr. Restituto C. de Vera, an assistant vice-president of respondent bank, was designated to replace Mr. Jose C. Lugod during the latter's leave of absence as member of the Board of Trustees (p. 316, NLRC rec.). On February 12, 1974, at the meeting of the Board of Trustees of the RB Provident Fund, Mr. de Vera proposed a reorganization of the fund in order to carry out the instruction of the (respondent's) Board of Directors, which wants to have control of the fund so as to tie it up with the Investment Money Market Operations of the bank (p. 296, NLRC rec.). Mr. Luna vehemently objected to this, saying that the Provident Fund does not belong to the respondent bank but to the officers and employees. A heated discussion followed. The reorganization move was carried by a 3 to 2 vote, with all management-appointed trustees voting for it. To protect the interests of the fund, Mr. Luna moved that a trust agreement be executed between the trustees on the one hand and the members of the provident fund on the other, and that the trustees should execute a bond. It was during the ensuing discussion that Mr. Luna allegedly uttered the libelous remarks as follows:

The basis of my apprehension is that if management wig run the RB I feel that the management of the RB are experts in distressing the RB and it's a known fact that for the past 10 years the RB has been in distress for which there is no reason why the RB should be controlled by management. Furthermore, the latest that Mr. de Vera is harping on is that he has good intentions. The present Board of Trustees decided against giving out a loan to Mr. de Vera who was considered a poor credit risk. Now how can we expect a person who cannot be given a loan and who will now have a say in the PF I don't think the PF will allow that. xxx xxx xxx As I have said before the personal standing of a trustee is very important so that if a man has a very poor standing and crooked (sic) at that he will be very bad for the interest of the PF. I repeat that the trustees had in the past denied a loan application of Mr. de Vera for the reason that his salary is under garnishment and for a man to be appointed as trustee when his records show that his salary was under garnishment, definitely, the intention of the RB is to appoint unscrupulous people (pp. 300-301, NLRC rec.). After more discussion, Mr. Luna's motion was ruled as without merit by the chairman who proceeded to consider the appointment of a new administrator. At this point, Mr. Luna and Mr. Antonio Canizares the trustee representing the RB Employees' Union walked out of the meeting. When they were gone, Mr. Mario Galicia, a management- appointed trustee, was unanimously elected new administrator by the three (3) remaining trustees. On February 21, 1974, Mr. Armando Abad, chairman of the RB Provident Fund, wrote a memorandum to Mr. Luna, asking him to turn over as soon as possible to

the new administrator, Mr. Galicia, all his records, papers and documents relative to the operations of the Provident Fund. Mr. Luna answered him in the following manner: To: Mr. Armando Abad Sr. Date: 2/22/74 From: Mr. Norberto Luna, Administrator Subject: TURNOVER OF RECORDS RE: PROVIDENT FUND This is with reference to your letter of February 21, 1974. You being a lawyer and therefore relies on facts, should know that I am without doubt whatsoever the Administrator of the Provident Fund. What are these facts? 1. The Rules and Regulations of the Republic Bank - Provident Fund govern the actions of the Provident Fund, its Board of Trustees and its officers and staff. Sec. 7, 3rd to the last paragraph of these "Rules and Regulations" states: "The Board of Trustees shall hold regular meetings on the second Tuesday of every month at the hour and place designated by them. If the second Tuesday falls on a holiday, the regular meeting will be held on the first working day following. Any three (3) members of the Board of Trustees shall constitute a quorum to do business, Provided, that at least one of such three (3) members is a trustee representing the Union'" 2. The transcript of stenographic notes made by Mrs. Evelyn Unson states in page I under "Other Matters"

DE VERA I would like to move that a reorganization of this Fund be effected. After this, discussion followed and then on page 3, the transcript states: ABAD Let us better put this into votation. Those who are in favor of reorganization 3 voted for and 2 against. Then on page 7 of the transcript it states: ABAD You are free to do that as a member of the Board of Trustees and as President of the Supervisor's Union, but we have to go ahead with the motion of Mr. de Vera to appoint a new Administrator. MESSRS. NORBERTO LUNA, ANTONIO CANIZARES AND FELIX VILLAFUERTE WALKED OUT AT THIS POINT. DE VERA Before I make the motion for a new administrator, I would like to move that all the personal remarks made against me be stricken off the records, my personal affairs have nothing to do as to my being a trustee. I can sue Mr. Luna for slander in court. ABAD Deleting of the remarks made by Mr. Luna demeaning Mr. de Vera be carried. DE VERA I move that a reorganization of the Provident Fund be made and a new administrator be named. I move that Mr. Mario Galicia be the new administrator.

ABAD It was moved and seconded that Mr. Galicia be elected the new administrator of the Provident Fund in lieu of Mr. Luna. Unanimous decision. GALICIA I would like to make it known that I will temporarily accept this position as administrator pending the final replacement of management's choice of a permanent trustee who will be the administrator of the Provident Fund. THE MEETING ADJOURNED AT 3:00 P.M. From the above motions and sequence of discussion you will note the following. 1. No motion was ever made to declare the position of Administrator vacant nor was there ever a motion to retire, separate, lay off, consider resigned or dismissed the administrator. Therefore I am still administrator. 2. BY the time Mr. de Vera move (sic) that a new ad- administrator be named there was no longer a quorum. Any motion or action of a group of people pretending or holding themselves out as a Board, when there actually was no quorum is illegal. Considering that the minutes of this meeting has not yet been confirmed for you to act on this matter based on your interpretation of what happened, or what you were planning to happen, or what you wished happened is rather dangerous. In view of the foregoing, it is requested: 1. That all loans or any matter that needs the action of the administrator be forwarded to me for appropriate action.

2. That you stop hindering or delaying the action of the Provident Fund and myself as administrator. In this connection I would like to reiterate my request that you as legal officer of the Provident Fund prepare a "Trust Agreement" between the members of the Provident Fund and the Trustees so this can be discussed and signed in our next meeting. I believe that any man who claims to be a trustee but who refuses to sign a trust agreement is committing moral estafa, and is preparing to commit actual estafa. ( S G D ) N O R B E R T O L U N A

Administrator On the same date (February 22, 1974) Mr. Abad caused a notice to be sent to all members of the Board of Trustees for a special meeting on February 26, 1974, to take up the following. 1) Confirmation of the election of the new administrator, 2) Loan applications; 3) Maturing Bankers' Acceptances' and 4) Other matters (p. 304, NLRC rec.). Mr. Luna failed to attend the said meeting. On February 28, 1974 Mr. Abad submitted to the Board of Directors a report on the February 12th incident and its aftermath, and recommended disciplinary action against Luna. On the same date, a memorandum was sent to Mr. Luna by Antonio P. Roman, Jr., corporate secretary, informing him of Resolution No. 26-1974 of the Board of Directors which suspends him as Branch Manager of the San Juan Branch pending the investigation of the charges contained in Mr. Abad's memorandum, and directing the Committee on Personnel to immediately convene and investigate the said charges (pp. 196197, NLRC rec.). On March 4, 1974, the Committee on Personnel headed by Sabino de Leon, Jr. sent Mr. Luna a copy of Resolution No. 261974 and of the memorandumcomplaint of Mr. Abad dated February 28, 1974, informing him of the charges against him for: 1) Dereliction of duties both as trustee of the Republic Bank Provident Fund and as an employee of the bank; and

2) Making utterly derogatory and libelous remarks against the entire management of the Republic Bank during the meeting of the Board of Trustees of the Provident Fund held on February 12, 1974 (pp. 198-199, NLRC rec.), and directing him to submit his written answer or explanation to the charges. On March 5, 1974, Mr. Luna answered Mr. de Leon's letter expressing his belief that his actuations as trustee of the Provident Fund are beyond the authority of the Republic Bank because of the following reasons: 1) The PF is a different entity from the RB having its own Rules and Regulations, its own name, its own source of income and files a separate income tax returns with the BIR; 2) His appointment as trustee was not made by the Republic Bank but by the Union of Supervisors; and 3) He receives his honoraria from the Provident Fund and not the Republic Bank. Nevertheless, he answered the charges in the following manner: However, I am concerned that if I do not answer your charges rumors may float that I am indeed guilty of the same. In order to avoid this, and also to clarify matters and soothe hurt feelings, I make the following point-by-point reply: 1. In view of the unsystematic way that the charges and its enclosures were made I have to guess what it is that I am accused of in Dereliction of duties. My guess are (1) I did not attend the special meeting caned by the Chairman (2) 1 walked out of the meeting (3) 1 did not turn over the records, papers, etc. to the new administrator.

My answer to these are (1) Mr. Armando Abad, Sr.'s claim that I was duly notified on February 24, 1974 of a special meeting is not true, because February 24 was a Sunday and I was in the province at that time. I could not have been notified on February 25, I was on union leave. I received the notification at 2:00 p.m. on February 26 by telephone from Mrs. Unson. It was then too late for me to attend if I wanted to. Besides I have the right not to attend a meeting if I so desire, just like the other trustees who have absented themselves on various dates. 2. I walked out of the meeting because I felt disgusted by the rather high-handed attitude of management trustees. Besides it is the right of a trustee to walk out of any meeting, this has been done before by Mr. Abad on the meeting of September 11, 1973. 3. I did not turn over the records, papers, etc., for reasons that I stated in my letter addressed to Mr. Abad dated February 22, received by him February 26, 1974. Since he did not pursue the matter further I concluded that he agreed to the contents of my letter. xxx xxx xxx 2. Mr. Luna objected to the motion and said "The basis of my apprehension is that if management will run the Provident Fund, I feel that the management of the RB are experts in distressing the RB and it is a known fact that for the past 10 years, the RB has been in distress for which there is no reason why the Provident Fund should be controlled by management" (t.s.n., p. 6, copy attached). On said page 6, I cannot find any such remarks and I never said that statement. What I said was "The basis of my apprehension is

that if management will run the Provident Fund, I feel that the management of the Republic Bank are not experts and it is a known fact that for the past 10 years, the Republic Bank has been in distress for which reason the Provident Fund should not be controlled by management." Let me state very clearly that Mrs. Unson is not a court stenographer. Besides, the trustees at this point were talking at the same time making it very hard for Mrs. Unson to take down everything accurately. If you will examine word for word this alleged statement I could not have possibly made such a statement because my position was that management should not run the Provident Fund while this alleged remarks gave reason why management should control it. I quote: "there is no reason why the Provident Fund should be controlled by management." To prove further that Mrs. Unson failed to take an accurate record of the discussions, I made other remarks which do not appear at all in her transcript. Messrs. Canizares and Galicia also made remarks that Cannot be found in this transcript. All the trustees can attest to this. In this transcript also, you will find many inconsistencies, hanging sentences, statements attributed to a trustee that were made by another trustee. Statements or motions of trustees that were mangled beyond recognition or understanding. The other persons attending this meeting I am sure can attest to this. In other words this transcript is not an exact account of what was said, but is merely an interpretation by Mrs. Unson of what she understood was said. In this connection I would like to point out the great disservice that Mr. Abad would be doing to management by pursuing these charges. Had Mr. Abad waited until the natural course of events had happened one of two things would happen. These are:

1. The minutes of the meeting would come out signed by me without any unbecoming remarks, as what has happened in the past when there had been heated discussion also but nothing derogatory has even come out in the minutes and therefore everybody would be happy since only Mrs. Unson and I would have seen this inaccurate transcript; or 2. The minutes would come out signed by me with derogatory remarks, in which case my goose is cooked. But unfortunately Mr. Abad jumped the gun. Now it is the transcript that is on trial as to its accuracy, and all sorts of rumors are going on in the Republic Bank that the Union President is being harassed for articulating things that everybody has all along known for the past ten years. In view of the foregoing it is requested that this investigation be terminated now and that the case against me be dropped immediately. V e r y t r u l y

y o u r s , ( S G D ) N O R B E R T O L U N A The investigation of the charges against Mr. Luna was held ex-parte on March 6, 18, 21 and 25, 1974. Meanwhile, Mr. Luna was prevented from attending the regular meeting of the PF Board of Trustees on March 12, 1974.

The Investigating Committee submitted its report of investigation (pp. 215-235, NLRC rec.) on March 27, 1974 which became the basis of Resolution No. 401974 of the Board of Directors dated March 28, 1974 (p. 186, NLRC rec.), dismissing Mr. Luna for cause, effective upon receipt of the written clearance therefor from the Secretary of Labor pursuant to Section 11 of Presidential Decree No. 21 in conjunction with Section 25 of the Rules and Regulations of the National Labor Relations Commission dated October 18, 1972. Upon the foregoing premises, it is the contention of the petitioner that: 1. The respondent Secretary of Labor erred in not considering the utterances of Norberto Luna as falling within the purview of protected labor activity; 2. Respondent Secretary of Labor erred in authorizing the dismissal of Norberto Luna despite finding that same is without sufficient just cause; 3. Respondent Secretary of Labor erred in failing to secure the employment tenure of Norberto Luna in consonance with express constitutional mandate; 4. Respondent Secretary of Labor erred in not finding respondent bank's management guilty of unfair labor practice for the unjustified harassment and dismissal of Norberto Luna on account of his union activities; and 5. Respondent Secretary of Labor erred in not ordering the reinstatement of Norberto Luna to his various posts, with full back wages from the date of his removal therefrom to the date of his actual reinstatement thereto.

The foregoing assignments of error may be consolidated into the following issues: 1. Whether or not Mr. Luna's utterances and alleged acts of insubordination constitute just cause for his dismissal; 2. Whether or not the dismissal of said Mr. Luna constitutes unfair labor practice. There are two different versions of the statement made by Mr. Luna in the meeting of the Board of Trustees of the RB Provident Fund on February 12, 1974. The management version is that which is quoted on page 4 thereof, and purportedly appearing in the stenographic notes of Mrs. Evelyn Unson, the clerk who took down notes of the meeting Mr. Luna, however, alleges that the transcript of stenographic notes was not an accurate record of the proceedings, considering that Mrs. Unson was not a court stenographer. Besides, at the time of the alleged utterances, the trustees were talking at the same time. Mr. Luna contends that what he said was the following: The basis of my apprehension is that if management will run the Providend Fund, I feel that the management of the Republic Bank are not experts, and it is a known fact that for the past 10 years the Republic Bank has been in distress for which reason the Provident Fund should not be controlled by Management (p. 202, NLRC rec.). Mr. Luna further alleges that his utterances were made in his capacity as trustee representing the Union of Supervisors. it was by reason of his presidency of the said union that he became a trustee, and is therefore supposed to guard the interests of its members. It was precisely in acting out that role that he vehemently opposed the management-inspired proposal to transfer the funds of the Provident Fund to the bank's newly-opened money market department that a heated argument ensued, in the course of which he made the supposedly

libelous statements. Luna now argues that his statement should be regarded as falling under protected labor activity and therefore privileged. There is merit in this contention. A review of the events prior to the ouster of Luna from his position as branch manager of respondent bank and as trustee, administrator and secretary of the Provident Fund will show the following: 1. February 1, 1974: Luna filed with the NLRC an unfair labor practice case against the management, docketed as Case No. LR-2673. 2. February 12, 1974. a) A meeting of the PF Board of Trustees was held, attended by Mr. Restituto de Vera, a bank Assistant Vice-President who had then just been designated to sit in the board in substitution of a trustee who was on leave. b) De Vera opened the meeting with the following statement: I received word from the Board of Directors, specifically from Mr. Pery that the Provident Fund PF is an entity of the Republic Bank because the main bulk of contributions is put up by the RB into the PF so that they would like to have control of the funds of the PF and for that matter the administration of the Fund. Along that line of instruction and in consonance with the creation of the Investment Money Market of the RB the management would like to have control

of

the

administration

so

that

the

operation of the PF could be tied up with the operation of the Investment Money Market of the RB. The Central Bank has given us an authority to operate a quasibanking operation on December 17, 1973. To effect the instruction, I would like to move that a reorganization of this board be effected" (p. 245, NLRC rec.). c) Mr. Luna, the erstwhile administrator and Secretary of the Fund, vigorously objected. d) Messrs. Armando Abad (chairman) and Mario Galicia, the two other management-appointed trustees took up the cudgels for de Vera, and forced the issue of reorganization. The same was carried by a vote of 3 to 2, with all the management appointed trustees voting for it, and the two labor representatives voting against (p. 245, LRC rec.). e) Mr. Luna moved that all the trustees execute a trust agreement and a bond in favor of the PF members to protect the interests of the PF Messrs. Abad, de Vera and Galicia counter argued against the proposal. Lina remarked. "As long as we are supported by the members of the union, RB must follow. We will fight to protect the interests of the PF If you insist, there will be labor trouble. " (p. 248, NLRC rec.).

f ) De Vera questioned Luna's apprehensions. In answer, Luna made the allegedly derogatory statements (p. 249, NLRC rec.). g) Luna's motion was declared without merit by the chairman, Mr. Abad (p. 250, NLRC rec.). h) Luna and Antonio Canizares the other labor representative walked out of the meeting. i) The remaining three [31 trustees unanimously elected Galicia as the new administrator (p. 251, NLRC rec.). 3. February 21, 1974. A memorandum was sent by Chairman Abad to Luna. Subject: Request to turn over records re Provident Fund (p. 191, NLRC rec.). 4. February 22, 1974: Reply of Luna to Abad informing of his belief that he is still the administrator because: a] the position of administrator was never declared vacant; b] Mr. Galicia's election was illegal for having been made without the requisite quorum; and c] the minutes of the February 12th meeting has not yet been confirmed (pp. 192-194, NLRC rec.). A notice of special meeting on February 26, 1974 was released on February 22, 1974, with the copy for Luna being delivered to Mr. Canizares (p. 304, NLRC rec.). 5. February 26, 1974. A special meeting of the Board of Trustees was held. Both Luna and Canizares were absent. 6. February 28, 1974:

a) Report of Mr. Abad to the respondent's Board of Directors, recommending administrative action against Luna for having uttered defamatory words against the bank management and against one of its vice-presidents; for walking out of the meeting on February 12, 1974; for refusing to turn over the records of the Provident Fund to the new administrator; and for failure to attend the special meeting for no apparent reason (pp. 236-237, NLRC rec.). b) Office Memorandum suspending Luna, per

Resolution No. 26-1974 of the Board of Directors (pp. 196- 197, NLRC rec.). 7. March 4, 1974: Letter of the Chairman, -Committee on Personnel of respondent bank, informing Luna of the charges against him for dereliction of duty and for making utterly derogatory and libelous remarks against the bank management (pp. 198-199, NLRC rec.). 8. March 5, 1974: Answer of Luna to the charges (pp. 200-203, NLRC rec.). 9. March 6, 1974: Administrative investigation of Luna, with witnesses Armando Abad PF Chairman) and Maximo Galicia (trustee) testifying (pp. 272-275, NLRC rec.). No apparent notice to Luna. 10. March 12, 1974. Regular meeting of the PF Board of Trustees, wherein Luna was prevented from attending because of his suspension.

11.

March

18,

1974.-

Continuation

of

the

administrative

investigation of Luna, with witnesses Restituto de Vera (trustee) and Evelyn Unson (stenographer) testifying (pp. 276-281, NLRC rec). No apparent notice to Luna. 12. March 19, 1974: Letter of the chairman of the investigating committee (Personnel), inviting Luna to appear if he so desires at the continuation of investigation to be held on March 20, 1974 [P. 204, NLRC rec], at 3:00 p.m. 13. March 21, 1974: Continuation of the administrative investigation of Luna, with Antonio Canizares (trustee) and Carlos Mora (PF auditor) testifying in the morning [pp. 283- 288, NLRC rec.]. As stated in his notice, Luna appeared at the investigation at 3:00 p.m. with his counsel, and it was explained to him that the purpose of inviting him was to find out if he wanted to add anything more to his written explanation (p. 289, NLRC rec.). Luna's counsel questioned the authority of the committee to conduct the investigation, which the committee noted; after which the testimony of Felix Villafuerte (credit investigator) was taken [pp. 291-293, NLRC rec.]. 14. March 27, 1974: Report of the Investigating Committee to the Board of Directors, finding Luna guilty of grave misconduct for his derogatory and libelous remarks against the bank management, and of insubordination, for his refusal to turn over the records of the PF to the new administrator. The report contains a recommendation for Luna's dismissal to take effect upon receipt of the clearance from the Secretary of Labor pursuant to PD 21 (pp. 232- 235, NLRC rec.). 15. April 15,1974:

a) Request of respondent bank for clearance to terminate Luna's services (pp. 208-214, NLRC rec.). b) Advice to Luna re termination of his employment effective upon receipt of the clearance from the Secretary of Labor (pp. 180-181, NLRC rec.). These series of events unmistakably show that respondent bank had wanted to do away with Luna even before that eventful February 12th meeting of the PF Board of Trustees, when one of its Assistant Vice-Presidents, de Vera, who had just been appointed to fill the temporary vacancy therein was instructed by the bank's Board of Directors to press for the reorganization of the PF Board of Trustees. This is evident from the words of de Vera when he said, "the management proposed a reorganization because it thinks that a new administration can serve the PF better. You have been tried. Why can we not appoint a new administrator and give us a chance to do things in our way or fashion x x x?" (p. 248, NLRC rec.). The angry reaction and statements that Luna made in the face of this became a convenient tool for the management to use in its desire for Luna's ouster - and its eventual control of PF funds. But the evidence presented in this case does not support the findings. Luna challenged the accuracy of the stenographic notes of the said meeting on the ground that Mrs. Unson was not a court stenographer and her notes do not truly reflect all that transpired during the meeting. He also stated that had the usual procedure been followed the minutes should have been submitted to him first for whatever corrections he might make before being finalized and signed by him (pp. 202-203, NLRC rec.). He further alleged that although he was given a copy of the transcribed notes, and he informed Mrs. Unson that there were errors he would like to correct, he was not able to make such corrections because Mrs. Unson did not want to take orders from him anymore (p. 291, NLRC rec.).

These allegations were never refuted. In fact, Mrs. Unson herself admitted that she was a clerk, "just a mere clerk" (p. 278, NLRC rec.) although it was part of her duties to take down stenographic notes of the discussions in board meetings; that it was likewise routinary for her to submit her transcribed notes to Luna as secretary; and that when she did the same after transcribing her notes of the February 12th meeting, Luna informed her that there were errors, but such errors were never corrected. Since there is nothing in the records to indicate that Luna has been changed as secretary, the minutes should have been signed by him before being officially released. Without such signature, neither probative value nor credibility could be accorded to such minutes; for the one who signed, Abad, is also the accuser of, and therefore biased against Luna. This leaves only the testimonial evidence to clinch the case against Luna. It appears, however, that of the seven (7) witnesses presented, namely, Abad, Galicia, de Vera, Unson, Canizares Mora and Vallesteros, only the first three (3) positively testified as to the alleged derogatory statements. This is understandable, considering that Abad is the accuser, Galicia is the successor, and de Vera was the prime mover of Luna's ouster. Thus, the weakness of the evidence for respondent bank is easily discernible. Even if it were not so, and had the alleged derogatory or libelous statements been substantially established, still the same will not justify Luna's dismissal. For one thing, his allegations were never controverted. On the contrary, the said allegations were confirmed by the takeover by the Central Bank of the distressed respondent bank which was of public knowledge. Moreover, Luna's remarks at the meeting of an official board are privileged in nature as a valid. exercise of his constitutional freedom of expression. He addressed his remarks to the body that has jurisdiction over the question of management of the assets of the Provident Fund. Luna's remarks were intended to protect the interests of the members of the Provident Fund from what he

honestly believed was a risky venture on the part of the management. His protests could even be treated as union activity by the Industrial Peace Act, which assures the employees' right "to self-organization and to form, join or assist labor organizations of their own choosing and to engage in concerted activities for the purpose of collective bargaining and other mutual aid and protection ... " (Sec. 3, Rep. Act 875). This is so because Luna's membership in the PF Board of Trustees was by virtue of his being president of the RB Union of Supervisors. The Provident Fund was itself created as a result of the union's collective bargaining agreement with the bank. Luna was therefore acting out his role as protector of his constituents when he voiced out his apprehension and protests over the plan of management. It matters not that he acted singly or individually. What is important is that he had been selected by the supervisors of respondent bank to be their president and representative in the PF Board of Trustees. His actuations as such should therefore be considered as legitimate exercise of the employees' right to self-organization and as an activity for their mutual aid and protection, aside from being privileged communication protected by the constitutional guarantee on free speech. His remarks were in defense of the interest of the Provident Fund, part of which comes from the contribution of the rank and file employees. Moreover, his remarks had factual basis. As heretofore stated, the Central Bank took over the management of the respondent Republic Bank because it became distressed due to mismanagement. And his remarks were addressed to the Board of Trustee which has jurisdiction over the matter. In Republic Savings Bank vs. C.I.R. (21 SCRA 226 [1967] cited with approval in Philippine Blooming Mills Employees Organization vs. Philippine Blooming Mills, Inc., 51 SCRA 189 [1973], involving the same bank where eight (8) union officials were dismissed for having written and published a patently libelous letter against the bank President, WE held: It will avail the Bank none to gloat over this admission of the respondents. Assuming that the latter acted in their individual

capacities when they wrote the letter-charge they were nonetheless protected for they were engaged in concerted activity, in the exercise of their right of self- organization that includes concerted activity for mutual aid and protection (Section 3 of the Industrial Peace Act ... ). This is the view of some members of this Court. For, as has been aptly stated, the joining in protests or demands, even by a small group of employees, if in furtherance of their interests as such, is a concerted activity protected by the Industrial Peace Act. It is not necessary that union activity be involved or that collective bargaining be contemplated (Annot., 6 A.L.R. 2d 416 [1949]). xxx xxx xxx Instead of stifling criticism, the Bank should have allowed the respondents to air their grievances. xxx xxx xxx The Bank defends its action by invoking its right to discipline for what it calls the respondents' libel in giving undue publicity to their letter-charge. To be sure, the right of self-organization of employees is not unlimited (Republic Aviation Corp. vs. NLRB 324 U.S. 793 [1945]), as the right of the employer to discharge for cause (Philippine Education Co. vs. Union of Philippine Education Employees, L-13773, April 29, 1960) is undenied. The Industrial Peace Act does not touch the normal exercise of the right of the employer to select his employees or to discharge them. It is directed solely against the abuse of that right by interfering with the countervailing right of self organization (Phelps Dodge Corp. vs. NLRB 313 U.S. 177 [1941]). ... . xxx xxx xxx

In the final sum and substance, this Court is in unanimity that the Bank's conduct, Identified as an interference with the employees' right of self-organization, or as a retaliatory action and/or as a refusal to bargain collectively, constituted an unfair labor practice within the meaning and intendment of section 4(e) of the Industrial Peace Act. The other basis for dismissal insubordination appears to be likewise without justifiable ground. Such charge arose out of the alleged refusal of Luna to obey the order of his superior, to turn over the records of the Provident Fund to the new administrator. The "order" referred to was not an order but a letter-request dated February 21, 1974 of Provident Fund Chairman Abad as it was in fact entitled "Request to Turn Over Records re Provident Fund" (p. 191, NLRC rec.). Upon receipt thereof, Luna immediately answered in writing (p. 192, NLRC, rec.), explaining why he feels justified to keep them. And in his answer to the charges, Luna averred that when no follow-up was made thereon, he assumed that his explanation had been satisfactory (p. 201, NLRC rec.). Indeed, the Board of Trustees, upon receipt of such written explanation, should have referred the matter to the grievance machinery under the collective bargaining agreement. But no, this was not done. Instead, management preferred as many charges as it could frame against Luna, obviously to make sure that if one charge could not suffice to bring about his ouster, the other charges might produce the desired result. Thus, even his having walked out of the meeting on February 12, 1974, and his absence from the special meeting on February 26, 1974, were included under the heading dereliction of duty". It was to the credit of the Investigating Committee that the latter charges were ruled out. All the foregoing shows that Luna's dismissal had no legal justification. In the words of the arbitrator, Flavio P. Aguas, " ... complainant's dismissal should be considered as without sufficient just cause" (p. 64, rec.).

WE therefore find the respondent then Secretary (now Minister) of Labor to have acted with grave abuse of discretion when he affirmed the grant of clearance to terminate Luna's services with respondent bank on the ground of loss of confidence, despite the fact that the charges against him were not substantiated. In the case of Bonifacio de Leon vs. NLRC, et al. (G.R. No. L-52056, October 30, 1980), WE held: While a managerial employee may be dismissed merely on the ground of loss of confidence, the matter of determining whether the cause for dismissing an employee is justified on grounds of loss of confidence cannot be kept entirely to the employer. Impartial tribunals do not rely only on the statement made by the employer that there is loss of confidence unless duly proved or sufficiently substantiated. ... . After having served the company for more than 22 years, dismissal would be too severe a penalty for petitioner who was not even afforded an opportunity to be heard. He was just a victim of the whims and malicious maneuver of private respondents. That the respondent bank tried to maneuver Luna's ouster is evident from the way the investigation was conducted by its Committee on Personnel. As shown in the above narration of events, the testimonies of witnesses who were not even under oath were taken without notice to Luna and without giving him a chance to cross-examine them. And corporate actions through the Board of Directors, such as filing of charges, suspension and termination, were taken against Luna just as soon as, and on the very same dates the reports are made. Were it not for the filing of this complaint with the NLRC Luna could have been booted out of office without due process. In the case of Central Textile Mills, Inc. vs. NLRC, et al. (L-50150, 90 SCRA 9 [1979]). Chief Justice Enrique M. Fernando, speaking for the Court, ruled:

The weakness of the petition, to repeat, is thus indisputable Petitioner, however, would try to impart a substance of plausibility by alleging that even on the assumption that no theft was committed, still there was loss of confidence, sufficient to cause his dismissal. In the Philippine Air Lines decisions referred to, the accusation that theft was committed by the employee was likewise not borne out by the evidence. To justify a dismissal, management relied on the allegation that there was breach of trust, a ground analogous to loss of confidence. The Court of Industrial Relations did not agree. Neither did this Court, Reinstatement was ordered. So it must be in this case. Such a vague, an-encompassing pretext as loss of confidence, if given the seal of approval by this Court, could easily be utilized to reduce to a barren form of words the constitutional guarantee of security of tenure. Precisely, the employee is afforded that protection so that his means of livelihood is not placed at the mercy of management. He is just as much a participant in the industrial process. He is entitled to be considered as such. Constitutional provisions protecting labor are in line with the predominant thinking all over the world safeguarding human dignity. It would then be to ignore not only a mandate of the fundamental law but also a counsel of wisdom and fair play to impart the concept of loss of confidence such a latitudinarian scope. ... The constitutional provision is not to be so easily brushed aside. If it were otherwise, there would be failure, in the language of the Philippine Air Lines' opinion 'to conform to the Ideal of the New Society, the establishment of which was so felicitously referred to by the First Lady as the compassionate Society. And in the cited case of Philippine Air Lines vs. PALEA (L-24626, 57 SCRA 489 [1974]), the Court held:

The futility of this appeal becomes even more apparent considering the express provision in the Constitution already noted, requiring the State to assure workers "security of tenure." It was not that specific in the 1935 charter. The mandate was limited to the State affording 'protection to labor, especially to working women and minors, ... . If by virtue of the above, it would not be legally justifiable to reverse the order of reinstatement, it becomes even more readily apparent that such a conclusion is even more unwarranted now. To reach it would be to show lack of fealty to a constitutional command. This is not to say that dismissal for cause is now outlawed. No such thing is intimated in this opinion. It is merely to stress that where respondent Court of Industrial Relations, in the light of all the circumstances disclosed particularly that it was a first offense after seventeen years of service, reached the conclusion neither arbitrary nor oppressive, that dismissal was too severe a penalty, this Court should not view the matter differently. That is to conform to the Ideal of the New Society, the establishment of which was so felicitously referred to by the First Lady as the Compassionate Society. In the case at bar, Luna, the complaining witness had more than 21 years of service with respondent bank, starting on April 2, 1953. The record is not clear as to what position he first held; but it is undisputed that he was the Branch Manager of respondent bank's San Juan Branch and for eleven (11) years the president of the RB Union of Supervisors. It is likewise not denied that the Union of Supervisors had, prior to this case, caused the filing of several cases against the bank with the NLRC. According to Arbitrator Aguas, some of these cases had been decided or were settled by the parties. NLRC Case No. LR-729 was decided by the compulsory arbitrator and the parties entered into an agreement as to how to implement the decision. NLRC Case No. 2673 was withdrawn by the unions and submitted the issue to voluntary arbitration (p. 60, rec.). It is evident,

therefore, that the respondent bank's predilection to oust Luna was because of his union activities. The respondent bank, however, argues that Luna's union activities had nothing to do with his dismissal, and that the same was for cause. If Luna's union activism indeed caused his separation, the bank contends, how come it never took action against Antonio Canizares the president of the RB Employee's Union, nor against Villafuerte and Mora who were likewise officers of the Union of Supervisors, and who were the credit investigator and appraiser, respectively, of the Provident Fund? To this, WE may ask the following: Why was not Caizares cited for dereliction of duty when he also walked out of the meeting on February 12, 1974; failed to attend the special meeting on February 26, 1974 despite notice; and walked out of the meeting on March 12, 1974 after Luna was physically ejected therefrom by security guards? The answers to these questions are obvious: Canizares and the other union officers were not as active and militant in their defense of union rights, much less did they pose any threat against the respondent bank's plan to control the funds of the Provident Fund which was established as a result of the collective bargaining agreement. Only Luna posed such threat. Understandably therefore, management wanted him out. Forgotten were his almost 22 years of service to the respondent bank without any showing of any irregularity in the performance of his duties during those long years. All these circumstances taken together indubitably show that Luna's discharge was discriminatory and constituted unfair labor practice under paragraph (5) Section 4 of the Industrial Peace Act. He is therefore entitled to reinstatement with back wages pursuant to the policy to decree back wages not exceeding three (3) years without requiring the parties to submit proof of compensation received from other sources at the time of illegal dismissal until actual reinstatement, in order that judgment in favor of an employee or laborer can be executed without delay (Luzon Stevedoring Corp. vs. C.I.R., 61 SCRA 162).

WHEREFORE, THE ASSAILED ORDER DATED DECEMBER 6,1974 OF RESPONDENT SECRETARY OF LABOR IS HEREBY SET ASIDE AND THE RESPONDENT REPUBLIC BANK IS HEREBY DIRECTED TO IMMEDIATELY REINSTATE COMPLAINANT NORBERTO LUNA TO HIS FORMER POSITION WITHOUT LOSS OF SENIORITY RIGHTS AND OTHER BENEFITS AND INCREASES BACK RECOGNIZED BY LAW TO OR THREE GRANTED (3) BY PRIVATE WITHOUT RESPONDENT DURING THE PERIOD OF HIS ILLEGAL DISMISSAL, WITH WAGES EQUIVALENT YEARS QUALIFICATION. THIS DECISION IS HEREBY MADE IMMEDIATELY EXECUTORY. SO ORDERED.

Republic SUPREME Manila FIRST DIVISION G.R. No. 149660 MARANAW vs.

of

the

Philippines COURT

January 20, 2009 HOTELS AND RESORT CORP., Petitioner,

COURT OF APPEALS, SHERYL OABEL AND MANILA RESOURCE DEVELOPMENT CORP., Respondents. DECISION PUNO, C.J.:

Before the Court is a petition for review on certiorari assailing a resolution issued by the Court of Appeals. The resolution denied the petition for review filed by petitioner Maranaw Hotels and Resort Corp. The present proceedings emanate from a complaint for regularization, subsequently converted into one for illegal dismissal, filed before Labor Arbiter Madjayran H. Ajan by private respondent Sheryl Oabel. It appears that private respondent Oabel was initially hired by petitioner as an extra beverage attendant on April 24, 1995. This lasted until February 7, 1997.1 Respondent worked in Century Park Hotel, an establishment owned by the petitioner. On September to 16, 1996,2 petitioner with the contracted private latter with Manila itself Resource was her as

Development transferred

Corporation.3 Subsequently, MANRED,

respondent

Oabel

deporting

employer.4 MANRED has intervened at all stages of these proceedings and has consistently claimed to be the employer of private respondent Oabel. For the duration of her employment, private respondent Oabel performed the following functions: Secretary, Department: Gift Shop Attendant: Waitress: Shop Attendant: Public Relations February 1997 April 7, 1997 April 22, 1997 May 21, 1997 10, March 1997 6,

- April 21, 1997 - May 20, 1997 July 19985 30,

On July 20, 1998, private respondent filed before the Labor Arbiter a petition for regularization of employment against the petitioner. On August 1, 1998, however, private respondent Oabel was dismissed from employment. 6Respondent converted her petition for regularization into a complaint for illegal dismissal.

Labor Arbiter Madjayran H. Ajan rendered a decision on July 13, 1999, dismissing the complaint against the petitioner. The decision held: While complainant alleged that she has been working with the respondent hotel in different department (sic) of the latter on (sic) various capacities (although not all departments are part and parcel of the hotels), complainant never disputed the fact that her work with the same were on a per function basis or on a "need basis" co-terminus with the function she was hired for.Considering that complainant job (sic) with the respondent hotel was on a per function basis or on a "need basis", complainant could not even be considered as casual employee or provisional employee. Respondent hotel consider (sic) complainant, at most, a project employee which does not ripened (sic) into regular employee (sic). 7 Private respondent appealed before the National Labor Relations Commission (NLRC). The NLRC reversed the ruling of the Labor Arbiter and held that: (1) MANRED is a labor-only contractor, and (2) private respondent was illegally dismissed. Of the first holding, the NLRC observed that under the very terms of the service contract, MANRED shall provide the petitioner not specific jobs or services but personnel and that MANRED had insufficient capitalization and was not sufficiently equipped to provide specific jobs. 8 The NLRC likewise observed that the activities performed by the private respondent were directly related to and usually necessary or desirable in the business of the petitioner. 9 With respect to the termination of private respondents employment, the NLRC held that it was not effected for a valid or just cause and was therefore illegal. The dispositive portion of the ruling reads thus: WHEREFORE, the decision appealed from is hereby REVERSED. xxxx Respondents Century Park Hotel and Manila Resource Development Corporation are hereby declared jointly and severally liable for the following awards in favor of complainant: 1) her full backwages and benefits from August

1, 1998 up to the date of her actual reinstatement; 2) her salary differentials, share in the service charges, service incentive leave pay and 13th month pay from July 20, 1995 to July 31, 1998. SO ORDERED.10 Petitioner subsequently appealed before the Court of Appeals. In a resolution, the appellate court dismissed the petition on account of the failure of the petitioner to append the board resolution authorizing the counsel for petitioner to file the petition before the Court of Appeals. The Court of Appeals held: After a careful perusal of the records of the case, We resolve to DISMISS the present petition on the ground of non-compliance with the rule on certification against forum shopping taking into account that the aforesaid certification was subscribed and verified by the Personnel Director of petitioner corporation without attaching thereto his authority to do so for and in behalf of petitioner corporation per board resolution or special power of attorney executed by the latter.11 Petitioner duly filed its motion for reconsideration which was denied by the Court of Appeals in a resolution dated August 30, 2001. 12 In the present petition for review, the petitioner invokes substantial justice as justification for a reversal of the resolution of the Court of Appeals. 13 Petitioner likewise contends that the filing of a motion for reconsideration with the certificate of non-forum shopping attached constitutes substantial compliance with the requirement.14 There is no merit to the petition. Well-settled is the rule that the certificate of non-forum shopping is a mandatory requirement. Substantial compliance applies only with respect to the contents of the certificate but not as to its presence in the pleading wherein it is required.

Petitioners contention that the filing of a motion for reconsideration with an appended certificate of non forum-shopping suffices to cure the defect in the pleading is absolutely specious. It negates the very purpose for which the certification against forum shopping is required: to inform the Court of the pendency of any other case which may present similar issues and involve similar parties as the one before it. The requirement applies to both natural and juridical persons. Petitioner relies upon this Courts ruling in Digital Microwave Corp. v. Court of Appeals15 to show that its Personnel Director has been duly authorized to sign pleadings for and in behalf of the petitioner. Petitioner, however, has taken the ruling in Digital Microwave out of context. The portion of the ruling in Digital Microwave upon which petitioner relies was in response to the issue of impossibility of compliance by juridical persons with the requirements of Circular 28-91.16 The Courts identification of duly authorized officers or directors as the proper signatories of a certificate of non forum-shopping was in response to that issue. The ruling does not, however, ipso facto clothe a corporate officer or director with authority to execute a certificate of non-forum shopping by virtue of the formers position alone. Any doubt on the matter has been resolved by the Courts ruling in BPI Leasing Corp. v. Court of Appeals 17where this Court emphasized that the lawyer acting for the corporation must be specifically authorized to sign pleadings for the corporation.18 Specific authorization, the Court held, could only come in the form of a board resolution issued by the Board of Directors that specifically authorizes the counsel to institute the petition and execute the certification, to make his actions binding on his principal, i.e., the corporation.19 This Court has not wavered in stressing the need for strict adherence to procedural requirements. The rules of procedure exist to ensure the orderly administration of justice. They are not to be trifled with lightly.

For this reason alone, the petition must already be dismissed. However, even if this grave procedural infirmity is set aside, the petition must still fail. In the interest of averting further litigation arising from the present controversy, and in light of the respective positions asserted by the parties in the pleadings and other memoranda filed before this Court, the Court now proceeds to resolve the case on the merits. Petitioner posits that it has entered into a service agreement with intervenor MANRED. The latter, in turn, maintains that private respondent Oabel is its employee and subsequently holds itself out as the employer and offers the reinstatement of private respondent. Notably, private respondents purported employment with MANRED commenced only in 1996, way after she was hired by the petitioner as extra beverage attendant on April 24, 1995. There is thus much credence in the private respondents claim that the service agreement executed between the petitioner and MANRED is a mere ploy to circumvent the law on employment, in particular that which pertains on regularization. In this regard, it has not escaped the notice of the Court that the operations of the hotel itself do not cease with the end of each event or function and that there is an ever present need for individuals to perform certain tasks necessary in the petitioners business. Thus, although the tasks themselves may vary, the need for sufficient manpower to carry them out does not. In any event, as borne out by the findings of the NLRC, the petitioner determines the nature of the tasks to be performed by the private respondent, in the process exercising control. This being so, the Court finds no difficulty in sustaining the finding of the NLRC that MANRED is a labor-only contractor. 20 Concordantly, the real employer of private respondent Oabel is the petitioner. It appears further that private respondent has already rendered more than one year of service to the petitioner, for the period 1995-1998, for which she must

already be considered a regular employee, pursuant to Article 280 of the Labor Code: Art. 280. Regular and casual employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or 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. (Emphasis supplied) IN VIEW WHEREOF, the present petition is DENIED. The resolution of the Court of Appeals dated June 15, 2001 is affirmed. Costs against petitioner. SO ORDERED. REYNATO Chief Justice WE CONCUR: ANTONIO Associate Justice T. CARPIO S. PUNO

RENATO

C.

CORONA ADOLFO

S.

AZCUNA

Associate Justice TERESITA Associate Justice CERTIFICATION J.

Associate Justice LEONARDO-DE CASTRO

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO Chief Justice S. PUNO

Republic SUPREME Manila FIRST DIVISION

of

the

Philippines COURT

G.R. No. 112206 December 11, 1995 GONZALO D. LABUDAHON, KAPATIRANG ANAK-PAWIS SA PIONEER TEXTURIZING, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, PIONEER TEXTURIZING CORPORATION, and MR. JULIANO LIM, respondents.

PADILLA, J.: Petitioner Gonzalo D. Labudahon comes to this Court to seek a reversal of the NLRC decision affirming his dismissal from employment. Petitioner Labudahon started working in private respondent Pioneer Texturizing Corporation in 1970 as supplier in its winding section. At the time of the termination of his employment, petitioner worked as a tube cleaner in respondent company's Texturizing Department. From 1985 to 1989, petitioner served as president of Kapatirang Anak-Pawis sa Pioneer Texturizing. Thereafter, he served as the union's Vice-President. On 27 April 1990, petitioner applied for a 13-day paternity leave, but respondent company allowed him only five (5) days of leave effective on 30 April 1990 and until 5 May 1990 because of lack of manpower at the Texturizing Preparatory Section. From 7 May 1990 to 12 May 1990, petitioner absented himself from work without respondent company's approval. On 11 May 1990, Venus Dy, the personnel manager of respondent company, wrote petitioner a letter directing him to report to work lest his absences be considered as abandonment of duty. On 12 May 1990, petitioner asked for two (2) weeks of vacation leave from 7 May to 20 May 1990, but the same was disapproved except for two (2) days of leave on 14 and 15 of May 1990 to enable petitioner to attend to family problems. Petitioner did not report for work from 16 to 19 of May 1990. Upon orders of respondent company, petitioner submitted a written explanation citing his wife's childbirth and family problems as reasons for his absences. Petitioner was meted five (5) days suspension for unexcused absences and for insubordination. In spite of his previous absences, petitioner, as union officer, asked for fifty-four (54) days of leave from 9 July 1990 to 31 August 1990 to prepare for CBA negotiations and union activities. The request was denied and instead the

management advised petitioner to file his leave on a weekly basis, as approval thereof was contingent on the necessity of his presence in the operations of the Texturizing Department of respondent company. Petitioner completely ignored this directive and absented himself from work starting 21 July 1990 until 16 August 1990. In a memorandum of the personnel department dated 3 August 1990, petitioner was asked to submit a written explanation for his absences. Respondent company never received any letter of explanation. In a memorandum dated 28 August 1990, the company, through its personnel manager, terminated petitioner's services to take effect on 29 August 1990 "for excessive absences, insubordination, and violation of existing company rules and regulations". The petitioner filed a complaint for illegal dismissal before the Labor Arbiter. On 17 September 1991, the Labor Arbiter dismissed the complaint for lack of merit. On 12 August 1993, the NLRC Second Division modified the decision after a finding that although there was a valid cause for dismissal, petitioner was not accorded due process. Thus, respondent NLRC ordered the payment by respondent company of P3,000.00 as indemnity to petitioner. Petitioner did not file a motion for reconsideration before the NLRC. Instead, on 29 October 1995, he filed the present petition for certiorari under Rule 65, Rules of Court, alleging grave abuse of discretion on the part of respondent NLRC in sustaining the Labor Arbiter's decision dismissing him from employment. We affirm the NLRC decision. It must be noted at the outset that petitioner failed to move for a reconsideration of respondent NLRC's decision. The filing of a motion for reconsideration of an NLRC decision is a prerequisite to the filing of a petition for certiorari before this Court. This requirement assumes real significance in cases where a petition for certiorari is conveniently resorted to in order to escape the finality of a decision of the NLRC.

The New Rules of Procedure of the National Labor Relations Commission mandate that a motion for reconsideration of any order, resolution or decision of the Commission must be filed within ten (10) calendar days from receipt of such order, resolution or decision. 1 If no motion for reconsideration is filed, the NLRC's order, resolution or decision shall become final and executory after ten (10) calendar days from receipt thereof. This Court ruled upon a similar issue in the case of Zapata vs. NLRC, 2 and recently in the case of G.A. Yupangco vs. NLRC. 3 In the Zapata case, we held The implementing rules of respondent NLRC are unequivocal in requiring that a motion for reconsideration of the order, resolution, or decision of the respondent Commission should be seasonably filed as a precondition for pursuing any further or subsequent remedy, otherwise the said order, resolution or decision shall become final and executory after ten calendar days from receipt thereof. Obviously, the rationale therefor is that the law intends to afford the NLRC an opportunity to rectify such errors or mistakes it may have lapsed into before resort to the courts of justice can be had. . . . In the case at bar, petitioner's failure to file a motion for reconsideration, for whatever reason, is a fatal procedural defect that warrants the dismissal of his present petition. Substantively, too, we find no grave abuse of discretion on the part of respondent NLRC in affirming the decision of the Labor Arbiter sustaining the legality of petitioner's termination from employment. The NLRC found that petitioner had no regard for his work. His applications for a series of leaves of absence attest to his unconcern for his duties in respondent company. On the other hand, respondent company has to protect its interests in order to have an efficient and productive enterprise. It is in this light that the law

recognizes what are clearly "management prerogatives", or the right of the employer to hire, fire, transfer, demote or promote employees. Doubtless, what respondent did in this case was a management prerogative. The need for petitioner's presence in the company's Texturizing Department cannot be denied. Therefore, the continuous and unauthorized absences of petitioner adversely affected the operations of respondent company. The petitioner left the company with no other choice but to terminate his employment. The NLRC decision to indemnify petitioner is also affirmed, as there is no evidence in the records to show that respondent company observed the twonotice requirement and hearing before dismissing petitioner. Applying the Omnibus Rules Implementing the Labor Code 4 on the requirements of notice and hearing, this Court in the case of Tiu vs. NLRC 5 ruled: It is evident from the said provisions that the employer is required to furnish an employee who is to be dismissed two (2) written notices before such termination. The first is the notice to apprise the employee of the particular acts or omissions for which his dismissal is sought. This may be loosely considered as the proper charge. The second is the notice informing the employee of the employer's decision to dismiss him. This decision, however, must come only after the employee is given a reasonable period from receipt of the first notice within which to answer the charge, and ample opportunity to be heard and defend himself with the assistance of his representative, if he so desires. In the case at bar, petitioner was given only a letter of dismissal without earlier informing him of the charges against him and without giving him the opportunity to defend himself. Non-compliance by private respondent with these requirements is a violation of the petitioner's right to due process.

WHEREFORE, the Court DISMISSES the petition and AFFIRMS the decision of public respondent NLRC in totoincluding the amount of indemnity awarded to petitioner for failure of private respondent to fully comply with the requirements of procedural due process before dismissing petitioner from employment. SO ORDERED. Davide, Jr., Bellosillo, Kapunan and Hermosisima, Jr., JJ., concur. Footnotes 1 Sec. 14, Rule VII of the New Rules of Procedure of the National Labor Relations Commission. 2 175 SCRA 56, 5 July 1989. 3 Minute Resolution dated 17 February 1992, G.R. No. 102191. 4 "Sec. 2. Notice of dismissal. Any employer who seeks to dismiss a worker shall furnish him a written notice stating the particular acts or omission constituting the grounds for his dismissal. In cases of abandonment of work, the notice shall be served at the worker's last known address. xxx xxx xxx "Sec. 5. Answer and hearing. The worker may answer the allegations stated against him in the notice of dismissal within a reasonable period from receipt of such notice. The employer shall afford the worker ample opportunity to he heard and to defend himself with the assistance of his representative, if he so desires.

"Sec. 6. Decision to dismiss. The employer shall immediately notify a worker in writing of a decision to dismiss him stating clearly the reasons therefor. 5 G.R. No. 83433, 215 SCRA 540, 12 November 1992.

Republic SUPREME Manila THIRD DIVISION

of

the

Philippines COURT

G.R. No. 77205 May 27, 1991 VALENTINO vs. VICENTE LEOGARDO, JR., in his official capacity as Deputy Minister of Labor; the HONORABLE MINISTER OF LABOR AND EMPLOYMENT; and ABERDEEN COURT, INC., respondents. F.P. Pobre & Associates for petitioner. Delos Reyes, Bonifacio, Delos Reyes for Aberdeen Court, Inc. TORILLO, petitioner,

FERNAN, C.J.:p

The main issue in this case is whether or not the award of backwages in addition to an award of separation pay to an illegally dismissed employee whose reinstatement is no longer feasible is proper. Petitioner Valentino Torillo, alias "Lady Valerie," was employed as an organist by private respondent Aberdeen Court, Inc. in October 1977 with a daily compensation of P115.00 for five hour work a day. On July 2, 1978, he invited his co-employees for a night out in his hometown in Rosario, Cavite in celebration of his birthday. Private respondent objected to such activity, requesting its employees, if possible, to refrain from attending the affair because the following day was a working day. Despite private respondent's objections, petitioner pushed through with his birthday party. Petitioner reported for work the next day, July 3. On July 4, 1978, private respondent, through its Floor Manager, informed petitioner that he was being dismissed from his employment effective that same day for having defied private respondent's order. Consequently, on October 8, 1978 petitioner filed with the Ministry of Labor & Employment, Region IV, a complaint against private respondent for illegal dismissal with prayer for reinstatement with backwages, including payment of his unpaid wages from July 1 to July 3, 1978, holiday pay and premium pay from February to July 1, 1978. Private respondent tried to justify petitioner's dismissal by claiming that the latter abandoned his work in failing to report for duty after his birthday celebration. On November 23, 1978, the Ministry of Labor, thru Director Francisco L. Estrella, ruled that private respondent's theory of abandonment of work was without factual and legal basis as petitioner reported for work on July 3, 1978 immediately following his birthday celebration; and that his dismissal was without the required prior clearance. Finding petitioner's dismissal as illegal, Director Estrella ordered private respondent Aberdeen Court, Inc. to reinstate petitioner to

his former position without loss of seniority rights and privileges with full backwages from date of dismissal on July 4, 1978 until date of actual reinstatement and to pay petitioner his holiday pay for seven (7) days plus his unpaid wages from July 1 to 3, 1978, However, petitioner's claim for premium pay was dismissed for lack of merit. 1 On December 14, 1978, private respondent Aberdeen Court, Inc. appealed to the Ministry of Labor (Rollo, pp. 20-23) alleging that there was no factual or legal basis to support the subject order and that said Director abused his discretion. Petitioner filed on January 3, 1979 his opposition alleging that the appeal was frivolous and dilatory. On February 13, 1986, or after seven (7) years, the Ministry of Labor and Employment, thru Deputy Minister Vicente Leogardo, Jr., issued an order affirming that of Director Estrella with the modification that in lieu of reinstatement, petitioner should be paid separation pay equivalent to petitioner's wages for two (2) months. 2 A motion for reconsideration dated March 21, 1986 was filed by private respondent but this was denied in an order dated April 21, 1986. 3 Undaunted, private respondent filed a motion for leave to file second motion for reconsideration attaching thereto the said second motion.
4

Meanwhile, petitioner filed an urgent motion for execution and appointment of special sheriff dated April 7, 1986 5which was opposed by private respondent. 6 Thereafter, the Ministry of Labor, National Capital Region, thru its Officer-in-Charge, Romeo A. Young, issued a writ of execution on May 13, 1986 directing the sheriff to execute the order of Deputy Minister Leogardo, Jr. 7 requiring private respondent to pay petitioner the total amount of P280,715.00 representing his backwages from July 4, 1978 to February 13, 1986, legal holiday pay for seven days, separation pay of two (2) months and unpaid wages for three (3) days.

By virtue of said writ, personal properties of private respondent were levied upon. These personal properties were to have been sold in a public auction scheduled on May 30, 1986 8 were it not for the motion to quash the writ of execution filed by private respondent on the grounds that: first, its second motion for reconsideration has not yet been acted upon, second, backwages should not be awarded to petitioner since the order of Deputy Minister Leogardo, Jr. on February 13, 1986 stated that in lieu of reinstatement, petitioner should only be paid separation pay equivalent to his wages for two (2) months, third, assuming that petitioner is entitled to backwages, the law allows the employer to deduct from his backwages his income earned elsewhere during the time he was out of work; and fourth, private respondent should be present during the computation of the monetary award. 9 Petitioner filed an opposition to this motion as well as a supplemental motion for execution citing Section 2, Rule XV of the Implementing Rules & Regulations of the New Labor Code, which states that the decision of the Secretary of Labor shall be immediately executory, pending appeal, unless stayed by the order of the President of the Philippines.
10

On May 30, 1986, Officer-in-charge Romeo A. Young of the Ministry of Labor, National Capital Region, issued a restraining order enjoining the assigned sheriff from proceeding with the auction sale of the levied properties of private respondent until further orders.
11

However, on July 23, 1986, he recalled the


12

restraining order issued and directed the sheriff to proceed with the execution.

Thereafter, private respondent appealed to the Office of the Minister of Labor praying that the July 23, 1986 Order be set aside and should private respondent be liable to pay backwages to complainant, the same be computed following the guidelines set forth by this Court.
13

On September 8, 1986, Deputy Minister Vicente Leogardo, Jr. issued an order setting aside the order dated July 23, 1986, stating therein that the February 13,

1986 Order stands with the clarification that the affirmative relief granted to complainant does not include the payment of backwages. In addition, the writ of execution dated May 13, 1986 to enforce payment of backwages in the amount of P280,715.00 was quashed.
14

On September 11, 1986, petitioner filed a motion for reconsideration of said order but the same was denied on November 12, 1986 by Minister of Labor Augusta Sanchez. 15 Hence, this recourse by petitioner. Preliminarily, it must be stressed that the illegality of petitioner's dismissal is a matter long settled in the Order dated November 23, 1978 issued by Director Estrella, which on appeal, was affirmed by then Deputy Minister Vicente Leogardo, Jr. on February 13, 1986. The finding of illegality of dismissal having thus attained finality, petitioner now questions the scope and extent of the reliefs granted to him by public respondent. The dispute in the instant case arose when Deputy Minister Leogardo, Jr. issued an Order on September 8, 1986 16 clarifying his previous Order of February 13, 1986 17 by declaring in the clarificatory order that the dispositive portion of the Order of February 13, 1986 should not be accorded the interpretation that backwages are likewise included as due the complainant (petitioner) for the affirmative relief of backwages is available only where reinstatement is ordered. We find the clarificatory order erroneous in so far as it declared that the affirmative relief of backwages is available only where reinstatement is ordered. 18 A number of cases have already been decided by this Court whereby an illegally dismissed employee is awarded both backwages and separation pay.

Article 280 (now Article 279) of the Labor Code provides that "an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages . . . ." Backwages in general are granted on grounds of equity for earnings which a worker or employee has lost due to his illegal dismissal. removed or separated. 20 Backwages and reinstatement are two reliefs given to an illegally dismissed employee. They are separate and distinct from each other. However, in the event that reinstatement is no longer possible, separation pay is awarded to the employee. Thus, the award of separation pay is in lieu of reinstatement and not of backwages. In other words, an illegally dismissed employee is entitled to (1) either reinstatement, if viable, or separation pay if reinstatement is no longer viable and (2) backwages. The distinction between separation pay and backwages has been exhaustively discussed by this Court in Santos vs. NLRC, et. al, 21 wherein we held: The normal consequences of a finding that an employee has been illegally dismissed are, firstly, that the employee becomes entitled to reinstatement to his former position without loss of seniority rights and, secondly, the payment of backwages corresponding to the period from his illegal dismissal up to actual reinstatement. The statutory intent on this matter is clearly discernible. Reinstatement restores the employee who was unjustly dismissed to the position from which he was removed, that is, to his status quo ante dismissal, while the grant of backwages allows the same employee to recover from the employer that which he had lost by way of wages as a result of his dismissal. These twin remediesreinstatement and payment of backwages make the dismissed employee whole who can then look forward to continued
19

Reinstatement, on the other

hand, means restoration to a state of condition from which one had been

employment. Thus do these two remedies give meaning and substance to the constitutional right of labor to security of tenure. The two forms of relief are distinct and separate, one from the other. Though the grant of reinstatement commonly carries with it an award of backwages, the inappropriateness or non-availability of one does not carry with it the inappropriateness or non-availability of the other. Separation pay was awarded in favor of petitioner Lydia Santos because the NLRC found that her reinstatement was no longer feasible or appropriate. As the term suggest, separation pay is the amount that an employee receives at the time of his severance from the service and, as correctly noted by the Solicitor General in Comment, is designed to provide the employee with "the wherewithal during the period that he is looking for another employment." In the instant case, the grant of separate on pay was a substitute for immediate and continued re-employment with the private respondent Bank. The grant of separation pay did not redress the injury that is intended to be relieved by the second remedy of backwages, that is, the loss of earnings that would have accrued to the dismissed employee during the period between dismissal and reinstatement. Put a little differently, payment of backwages is a form of relief that restores the income that was lost by reason of unlawful dismissal; separation pay, in contrast, is oriented towards the immediate future, the transitional period the dismissed employee must undergo before locating a replacement job. In Hernandez vs. NLRC, 22 involving an illegally dismissed employee, this Court held that "petitioner should be paid backwages not exceeding three years without deduction and separation pay in the amount of one month for every year of service." In another case, this Court stated "the public respondent's order for the private respondents' reinstatement to their former position is no longer possible

under the circumstances. An award equivalent to three years backwages plus separation pay to compensate for their illegal separation is thus proper. 23 Also in Asphalt & Cement Pavers, Inc. vs. Vicente Leogardo, Jr., 24 we held that "an illegally dismissed employee is entitled to reinstatement to his previous position without loss of seniority rights with backwages for a period of three (3) years without qualification or deduction. If reinstatement is no longer feasible, the employer may be ordered to pay, in addition to backwages, separation pay as provided by law." In the light of the above rulings of this Court, petitioner, by reason of his illegal dismissal is entitled to both separation pay and backwages. However, the amount of backwages shall be based on the Mercury Drug Rulewhich limits backwages of illegally dismissed employees to an amount equivalent to their wages for three (3) years, without qualification and deduction. The Court has adopted the practice of fixing the amount of backwages at a reasonable level without qualification and deduction so as to relieve the employees from proving their earnings during their layoffs and the employer from submitting counter proofs and thus obviate the twin evils of idleness on the part of the employees and attrition and undue delay in satisfying the award on the part of the employer. This practice has been hailed as a realistic, reasonable and mutually beneficial solution. An award of backwages equivalent to three years (where the case is not terminated sooner) serves as the base figure for such award without deduction.
25

Again, as we stated in Lepanto Consolidated Mining Company vs . Olegario, 26: "The Court serves notice on the National Labor Relations Commission (NLRC), labor arbiters and other responsible officials of the Department of Labor and Employment to take their bearings from this rule that illegally dismissed employees or laborers shall be entitled to reinstatement without loss of seniority (rights) and payment of backwages of not more than three (3) years without any qualification or deduction. Although this policy had been consistently adhered to by the Court even after the passage of the present Labor Code, there are still many instances, as in this case and other cases decided by the Court, where the

labor arbiters and/or the NLRC still awarded backwages beyond the 3-year limit set by the Court. The governing principle, which has given consistency and stability to the law, is stare decisis et no movere (follow past precedent and do not disturb what has been settled). 27 With regards to petitioner's separation pay which was awarded to him in lieu of reinstatement, he shall receive the amount equivalent to one month wage/salary for every year of service, including the three-year period in which backwages are awarded. This finds support in the case of Grolier International, Inc. vs. Amansec, 28 wherein we held: Thus, when the Court stated that private respondent was entitled to "separation pay based on the applicable law or company practice, whichever is higher, effective as of the end of the above three (3) year period," it meant only that in the computation of separation pay, the three (3) year period in respect of which backwages are awarded, must be included (although private respondent had not actually served during the last three (3) years) . . . 29 Furthermore, his actual service with private respondent for approximately nine (9) months, counted from October 1977 to July 1978 shall be considered as one (1) year, in accordance with Article 283 of the Labor Code, which provides that a fraction of at least six (6) months is considered one (1) whole year. Petitioner Valentino Torillo was illegally dismissed in 1978. This case has been pending for almost thirteen (13) years. In the interest of justice and equity as well as to avoid any further ambiguities, this Court shall fix the exact amount due petitioner. Thus, based on the records of the case,
30

we hold that the total

amount due to petitioner is P146,255.37, computed as follows: A. Backwages

P330,050.00*/2,779 days x 365 days x 3 years P130,048.48

B. Holiday Pay 1,610.00 C. Separation Pay

P330,050.00/2,779 x 30 days x 4 years 14,251.89 D. Unpaid Wages from July 1 to 3, 1978 345.00 TOTAL P146,55.37 WHEREFORE, the petition is granted. The decision in Labor Case No. R-4-STF7-4525-78 is hereby modified. Private respondent Aberdeen Court, Inc. is hereby ordered to pay petitioner Valentino Torillo, the amount of P146,255.37 representing his backwages, separation pay, holiday pay and unpaid wages by reason of his illegal dismissal. This decision is immediately executory. Costs against private respondent. SO ORDERED.

EN BANC

[G.R. No. 112546. March 13, 1996]

NORTH DAVAO MINING CORPORATION and ASSET PRIVATIZATION TRUST, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ANTONIO M. VILLANUEVA and WILFREDO GUILLEMA, respondents. DECISION PANGANIBAN, J.:

Is a company which is forced by huge business losses to close its business, legally required to pay separation benefits to its employees at the time of its closure in an amount equivalent to the separation pay paid to those who were separated when the company was still a going concern? This is the main question brought before this Court in this petition for certiorari under Rule 65 of the Revised Rules of Court, which seeks to reverse and set aside the Resolutions dated July 29, 1993 [1] and September 27, 1993[2] of the National Labor Relations Commision[3] (NLRC) in NLRC-CA No. M-001395-93. The Resolution dated July 29, 1993 affirmed in tow the decision of the Labor Arbiter in RAB-1 1-08-00672-92 and RAB- 11-08-00713-92 ordering petitioners to pay the complainants therein certain monetary claims. The Resolution dated September 27, 1993 denied the motion for reconsideration of the said July 29, 1993 Resolution.

The Facts Petitioner North Davao Mining Corporation (North Davao) was incorporated in 1974 as a 100% privately-owned company. Later, the Philippine National Bank (PNB) became part owner thereof as a result of a conversion into equity of a portion of loans obtained by North Davao from said bank. On June 30, 1986, PNB transferred all its loans to and equity in North Davao in favor of the national government which, by virtue of Proclamation No. 50 dated December 8, 1986, later turned them over to petitioner Asset Privatization Trust (APT). As of December 31, 1990 the national government held 81.8% of the common stock and 100% of the preferred stock of said company. [4] Respondent Wilfredo Guillema is one among several employees of North Davao who were separated by reason of the companys closure on May 31, 1992, and who were the complainants in the cases before the respondent labor arbiter.

On May 31, 1992, petitioner North Davao completely ceased operations due to serious business reverses. From 1988 until its closure in 1992, North Davao suffered net losses averaging three billion pesos (P3,000,000,000.00) per year, for each of the five years prior to its closure. All told, as of December 31, 1991, or five months prior to its closure, its total liabilities had exceeded its assets by 20.392 billion pesos, as shown by its financial statements audited by the Commission on Audit. When it ceased operations, its remaining employees were separated and given the equivalent of 12.5 days pay for every year of service, computed on their basic monthly pay, in addition to the commutation to cash of their unused vacation and sick leaves. However, it appears that, during the life of the petitioner corporation, from the beginning of its operations in 1981 until its closure in 1992, it had been giving separation pay equivalent to thirty (30) days pay for every year of service. Moreover, inasmuch as the region where North Davao operated was plagued by insurgency and other peace and order problems, the employees had to collect their salaries at a bank in Tagum, Davao del Norte, some 58 kilometers from their workplace and about 2 hours travel time by public transportation; this arrangement lasted from 1981 up to 1990. Subsequently, a complaint was filed with respondent labor arbiter by respondent Wilfredo Guillema and 271 other seperated employees for: (1) additional separation pay of 17.5 days for every year of service; (2) back wages equivalent to two days a month; (3) transportation allowance; (4) hazard pay; (5) housing allowance; (6) food allowance; (7) post-employment medical clearance; and (8) future medical allowance, all of which amounted to P58,022,878.31 as computed by private respondent.[5] On May 6, 1993, respondent Labor Arbiter rendered a decision ordering petitioner North Davao to pay the complainants the following: (a) Additional separation pay of 17.5 days for every year of service; (b) Backwages equivalent to two (2) days a month times the number of years of service but not to exceed three (3) years;

(c) Transportation allowance at P80 a month times the number of years of service but not to exceed three (3) years. The benefits awarded by respondent Labor Arbiter amounted to

P10,240,517.75. Attorneys fees equivalent to ten percent (10%) thereof were also granted.[6] On appeal, respondent NLRC affirmed the decision in toto. Petitioner North Davaos motion for reconsideration was likewise denied. Hence, this petition.

The Parties Submissions and the Issues In affirming the Labor Arbiters decision, respondent NLRC ruled that since (North Davao) has been paying its employees separation pay equivalent to thirty (30) days pay for every year of service, knowing fully well that the law provides for a lesser separation pay, then such company policy has ripened into an obligation, and therefore, depriving now the herein private respondent and others similarly situated of the same benefits would be discriminatory. [7] Quoting from Businessday Information Systems and Services. Inc. (BISSI) vs. NLRC.
[8]

it said that petitioners may not pay separation benefits unequally for such

discrimination breeds resentment and ill-will among those who have been treated less generously than others. It also cited Abella vs. NLRC,[9] as authority for saying that Art. 283 of the Labor Code protects workers in case of the closure of the establishment. To justify the award of two days a month in backwages and P80 per month of transportation allowance, respondent Commission ruled: As to the appellants claim that complainants-appeallees time spent in collecting their wages at Tagum, Davao is not compensable allegedly because it was on official time can not be given credence. No iota of evidence has been presented to back up said contention. The same is true with appellants assertion that the claim for transportation expenses is without basis since they were incurred by the

complainants. Appellants should have submitted the payrolls to prove that complainants-appellees were not the ones who personally collected their wages and/or the bus/jeep trip tickets or vouchers to show that the complainantsappellees were provided with free transportation as claimed. Petitioner, through the Government Corporate Counsel, raised the following grounds for the allowance of the petition: 1. The NLRC acted with grave abuse of discretion in affirming without legal basis the award of additional separation pay to private respondents who were separated due to serious business losses on the part of petitioner. 2. The NLRC acted with grave abuse of discretion in affirming without sufficient factual basis the award of backwages and transportation expenses to private respondents. 3. There is no appeal, nor any plain, speedy and adequate remedy in the ordinary course of the law. and the following issues: 1. Whether or not an employer whose business operations ceased due to serious business losses or financial reverses is obliged to pay separation pay to its employees separated by reason of such closure. 2. Whether or not time spent in collecting wages in a place other than the place of employment is compensable notwithstanding that the same is done during official time. 3. Whether or not private respondents are entitled to transportation expenses in the absence of evidence that these expenses were incurred.

The First Issue: Separation Pay

To resolve this issue, it is necessary to revisit the provision of law adverted to by the parties in their submissions, namely Art. 283 of the Labor Code, which reads as follows: Art. 283. Closure of establishment and reduction of personnel. - The employer may also terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or under-taking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half () 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. (italics supplied) The underscored portion of Art. 283 governs the grant of seperation benefits in case of closures or cessation of operation of business establishments NOT due to serious business losses or financial reverses x x x. Where, however, the closure was due to business losses - as in the instant case, in which the aggregate losses amounted to over P20 billion - the Labor Code does notimpose any obligation upon the employer to pay separation benefits, for obvious reasons. There is no need to belabor this point. Even the public respondents, in their Comment[10] filed by the Solicitor General, impliedly concede this point. However, respondents tenaciously insist on the award of separation pay, anchoring their claim solely on petitioner North Davaos long-standing policy of

giving separation pay benefits equivalent to 30- days pay, which policy had been in force in the years prior to its closure. Respondents contend that, by denying the same separation benefits to private respondent and the others similarly situated, petitioners discriminated against them. They rely on this Courts ruling in Businessday Information Systems and Services, Inc. (BISSI) vs. NLRC, (supra). In said case, petitioner BISSI, after experiencing financial reverses, decided as a retrenchment measure to lay-off some employees on May 16, 1988 and gave them separation pay equivalent to one-half () month pay for every year of service. BISSI retained some employees in an attempt to rehabilitate its business as a trading company. However, barely two and a half months later, these remaining employees were likewise discharged because the company decided to cease business operations altogether. Unlike the earlier terminated employees, the second batch received separation pay equivalent to a full months salary for every year of service, plus a mid-year bonus. This Court ruled that 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. x x x In resolving the present case, it bears keeping in mind at the outset that the factual circumstances of BISSI are quite different from the current case. The Court noted that BISSI continued to suffer losses even after the retrenchment of the first batch of employees; clearly, business did not improve despite such drastic measure. That notwithstanding, when BISSI finally shut down, it could well afford to (and actually did) pay off its remaining employees with MORE separation benefits as compared with those earlier laid off; obviously, then, there was no reason for BISSI to skimp on separation pay for the first batch of discharged employees. That it was able to pay one-month separation benefit for employees at the time of closure of its business meant that it must have been also in a position to pay the same amount to those who were separated prior to closure. That it did not do so was a wrongful exercise of management

prerogatives. That is why the Court correctly faulted it with impermissible discrimination. Clearly, it exercised its management prerogatives contrary to general principles of fair play and justice. In the instant case however, the companys practice of giving one months pay for every year of service could no longer be continued precisely because the company could not afford it anymore. It was forced to close down on account of accumulated losses of over P20 billion. This could not be said of BISSI. In the case of North Davao, it gave 30-days separation pay to its employees when it was still a going concern even if it was already losing heavily. As a going concern, its cash flow could still have sustained the payment of such separation benefits. But when a business enterprise completely ceases operations, i.e., upon its death as a going business concern, its vital lifeblood -its cashflow literally dries up. Therefore, the fact that less separation benefits were granted when the company finally met its business death cannot be characterized as discrimination. Such action was dictated not by a discriminatory management option but by its complete inability to continue its business life due to accumulated losses. Indeed, one cannot squeeze blood out of a dry stone. Nor water out of parched land. As already stated, Art. 283 of the Labor Code does not obligate an employer to pay separation benefits when the closure is due to losses. In the case before us, the basis for the claim of the additional separation benefit of 17.5 days is alleged discrimination, i.e., unequal treatment of employees, which is proscribed as an unfair labor practice by Art. 248 (e) of said Code. Under the facts and circumstances of the present case, the grant of a lesser amount of separation pay to private respondent was done, not by reason of discrimination, but rather, out of sheer financial bankruptcy - a fact that is not controlled by management prerogatives. Stated differently, the total cessation of operation due to mindboggling losses was a supervening fact that prevented the company from continuing to grant the more generous amount of separation pay. The fact that North Davao at the point of its forced closure voluntarily paid any separation

benefits at all - although not required by law - and 12.5-days worth at that, should have elicited admiration instead of condemnation. But to require it to continue being generous when it is no longer in a position to do so would certainly be unduly oppressive, unfair and most revolting to the conscience. As this Court held in Manila Trading & Supply Co. vs. Zulueta,[11] and reiterated in San Miguel Corporation vs. NLRC [12] and later, in Allied Banking Corporation vs. Castro,[13] (t)he law, in protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the employer. At this juncture, we note that the Solicitor General in his Comment challenges the petitioners assertion that North Davao, having closed down, no longer has the means to pay for the benefits. The Solicitor General stresses that North Davao was among the assets transferred by PNB to the national government, and that by virtue of Proclamation No. 50 dated December 8, 1986, the APT was constituted trustee of this government asset. He then concludes that (i)t would, therefore, be incongruous to declare that the National Government, which should always be presumed to be solvent, could not pay now private respondents money claims. Such argumentation is completely misplaced. Even if the national government owned or controlled 81.8% of the common stock and 100% of the preferred stock of North Davao, it remains only a stockholder thereof, and under existing laws and prevailing jurisprudence, a stockholder as a rule is not directly, individually and/or personally liable for the indebtedness of the corporation. The obligation of North Davao cannot be considered the obligation of the national government, hence, whether the latter be solvent or not is not material to the instant case. The respondents have not shown that this case constitutes one of the instances where the corporate veil may be pierced.[14] From another angle, the national government is not the employer of private respondent and his co-complainants, so there is no reason to expect any kind of bailout by the national government under existing law and jurisprudence.

The Second and Third Issues: Back Wages and Transportation Allowance Anent the award of back wages and transportation allowance, the issues raised in connection therewith are factual, the determination of which is best left to the respondent NLRC. It is well settled that this Court is bound by the findings of fact of the NLRC, so long as said findings are supported by substantial evidence.[15] As the Solicitor General pointed out in his comment: It is undisputed that because of security reasons, from the time of its operations, petitioner NDMC maintained its policy of paying its workers at a bank in Tagum, Davao del Norte, which usually took the workers about two and a half (2 1/2) hours of travel from the place of work and such travel time is not official. Records also show that on February 12,1992, when an inspection was conducted by the Department of Labor and Employment at the premises of petitioner NDMC at Amacan, Maco, Davao del Norte, it was found out that petitioners had violated labor standards law, one of which is the place of payment of wages (p.109, Vol. 1, Record). Section 4, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code provides that: Section 4. Place of payment. - (a) As a general rule, the place of payment shall be at or near the place of undertaking. Payment in a place other than the workplace shall be permissible only under the following circumstances: (1) When payment cannot be effected at or near the place of work by reason

of the deterioration of peace and order conditions, or by reason of actual or impending emergencies caused by fire, flood, epidemic or other calamity rendering payment thereat impossible;

(2)

When the employer provides free transportation to the employees back

and forth; and (3) Under any analogous circumstances; provided that the time spent by the

employees in collecting their wages shall be considered as compensable hours worked. (b) xxx xxx xxx.

(Italics supplied) Accordingly, in his Order dated April 14, 1992 (p. 109, Vol. 1, Record), the Regional Director, Regional Office No. XI, Department of Labor and Employment, Davao City, ordered petitioner NDMC, among others, as follows: WHEREFORE, x x x. Respondent is further ordered to pay its workers salaries at the plantsite at Amacan, New Leyte, Maco, Davao del Norte or whenever not possible, through the bank in Tagum, Davao del Norte as already been practiced subject, however to the provisions of Section 4 of Rule VIII, Book III of the rules implementing the Labor Code as amended. Thus, public respondent Labor Arbiter Antonio M. Villanueva correctly held that: From the evidence on record, we find that the hours spent by complainants in collecting salaries at a bank in Tagum, Davao del Norte shall be considered compensable hours worked. Considering further the distance between Amacan, Maco to Tagum which is 2 hours by travel and the risks in commuting all the time in collecting complainants salaries, would justify the granting of backwages equivalent to two (2) days in a month as prayed for. Corollary to the above findings, and for equitable reasons, we likewise hold respondents liable for the transportation expenses incurred by complainants at P40.00 round trip fare during pay days.

(p. 10, Decision; p. 207, Vol. 1, Record) On the contrary, it will be petitioners burden or duty to present evidence of compliance of the law on labor standards, rather than for private respondents to prove that they were not paid/provided by petitioners of their backwages and transportation expenses. Other than the bare denials of petitioners, the above findings stands uncontradicted. Indeed we are not at liberty to set aside findings of facts of the NLRC, absent any capriciousness, arbitrariness, or abuse or complete lack of basis. In Maya Farms Employees Organizations vs. NLRC,[16] we held: This Court has consistently ruled that findings of fact of administrative agencies and quasi-judicial bodies which have acquired expertise because their jurisdiction is confined to specific matters are generally accorded not only respect but even finality and are binding upon this Court unless there is a showing of grave abuse of discretion, or where it is clearly shown that they were arrived at arbitrarily or in disregard of the evidence on record. WHEREFORE, judgment is hereby rendered MODIFYING the assailed Resolution by SETTING ASIDE and deleting the award for additional separation pay of 17.5 days for every year of service, and AFFIRMING it in all other aspects. No costs. SO ORDERED.