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G & M PHILIPPINES, INC.,


Petitioner,

G.R. No. 162308

Present:

- versus -

ROMIL V. CUAMBOT,
Respondent.

PANGANIBAN, C.J., Chairperson,


YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ.

Promulgated:

November 22, 2006


x------------------------------------ --------------x
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari under Rule 45 of the Rules of
Court assailing the Decision[1] of the Court of Appeals (CA) in CA-G.R. SP No.
64744, as well as the Resolution[2] dated February 20, 2004 denying the motion
for reconsideration thereof.

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On November 7, 1994, respondent Romil V. Cuambot applied for


deployment to Saudi Arabia as a car body builder with petitioner G &
M Philippines, Inc., a duly licensed placement and recruitment agency.
Respondents application was duly processed and he later signed a two-year
employment
contract
to
work
at
the
Al Waha Workshop
in Unaizah City, Gassim, Kingdom of Saudi Arabia. He left the country
on January 5, 1995. However, respondent did not finish his contract and
returned to the Philippinesbarely six months later, on July 24, 1995. On July 26,
1995, he filed before the National Labor Relations Commission (NLRC) a
complaint for unpaid wages, withheld salaries, refund of plane ticket and
repatriation bond, later amended to include illegal dismissal, claim for the
unexpired portion of his employment contract, actual, exemplary and moral
damages, and attorneys fees. The complaint was docketed as NLRC-NCR Case
No. 00-07-05252-95.

The antecedent facts are as follows:

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Respondent narrated that he began working for Mohd Al Motairi,[3] the


President and General Manager of the Al WahaWorkshop, on January 8, 1995.
Along with his Filipino co-workers, he was subjected to inhuman and
unbearable working conditions, to wit:
1. [He] was required to work from 7:00 oclock in the morning to 10:00
oclock in the evening everyday, except Friday, or six (6) hours overtime
work daily from the usual eight (8) working hours per day.
2. [He] was never paid x x x his monthly basic salary of 1,200 [Riyals]
including his overtime pay for the six (6) hours overtime work he rendered
every working day during his work in Saudi Arabia except for the amount
of 100 [Riyals] given every month for his meal allowance;
3. [He] was subjected to serious insult by respondent Muthiri everytime he
asked or demanded for his salary; and,
4. [S]ome of complainants letters that were sent by his family were not
given by respondent Muthiri and/or his staff x x x.[4]

When respondent asked Motairi for his salary, he was told that since a
huge sum had been paid to the agency for his recruitment and deployment, he
would only be paid after the said amount had already been recovered. He was
also told that his salary was only 800 Saudi Riyals (SAR) per month, in contrast
to the SAR1200 that was promised him under the contract. Motairiwarned that
he would be sent home the next time he demanded for his salary. Due to his
familys incessant letters asking for financial support, however, respondent
mustered the courage to again demand for his salaries during the second week
of July 1996. True to his word, Motairi ordered him to pack up and leave. He
was able to purchase his plane ticket only through the contributions of his
fellow Filipinos. Motairi even accompanied him to the airport when he bought
his plane ticket. In the meantime, his wife had been making inquiries about him.

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To corroborate his claims, respondent submitted the following


documents: an undated letter[5] he had written addressed to the Philippine Labor
Attach in Riyadh, with Arabic translation;[6] his wifes letter[7] dated June 28,
1995 addressed to the Gulangco Monteverde Agency, Manila Head Office,
asking for a favor to help [her] husband to come home as early as possible; a
fax message[8] dated July 17, 1995 from a representative of the Land Bank of
the
Philippines
(LBP)
to
a
[9]
counterpart in Riyadh, asking for assistance to locate respondent; and the

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reply[10] from the Riyadh LBP representative requesting for contact numbers to
facilitate communication with respondent.
Respondent further claimed that his employers actuations violated
Articles 83 and 103 of the Labor Code. While he was entitled to terminate his
employment in accordance with Article 285 (b) due to the treatment he
received, he did not exercise this right. He was nevertheless illegally dismissed
by his employer when he tried to collect the salaries due him. Respondent
further claimed that the reduction of his monthly salary from SAR1,200 to
SAR800 and petitioners failure to furnish him a copy of the employment
contract before his departure amounted to prohibited practices under Article 34
(i) and (k) of the Labor Code.
Respondent prayed for the following relief:

Ordering the respondents to pay, jointly and severally,


complainant the unpaid salaries and overtime pay in the
amounts of P61,560.00 and P66,484.80, respectively,
including interests, until the same will be fully paid;

(2)

Ordering the respondents to pay, jointly and severally,


complainant[s] salary for the unexpired portion of the
contract in the amount of P184,680.00, including interests,
until the same will be fully paid;

(3)

Ordering the respondents to pay, jointly and severally,


complainant[s] actual expenses which he incurred in
applying for the job, including expenses in leaving for the
job, including expenses in leaving for Saudi Arabia and
plane ticket, as well as repatriation bond and incidental
expenses in going home to the Philippines in the amounts
of P49,000.00 andP20,000.00, respectively, including
interests, until the same will be fully paid;

(4)

Ordering the respondents to pay, jointly and severally,


complainant moral damages in the amount of P150,000.00
and exemplary damages in the amount of P150,000.00,
including interests, until the same will be fully paid;

(5)

Ordering the respondents to pay, jointly and severally,


complainant for and as attorneys fees in the amount
ofP68,172.48 or the amount equivalent to 10% of the total

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(1)

WHEREFORE, premises considered, complainant most respectfully


prays unto this Honorable Office that the instant complaint be given due
course and that a decision be rendered in his favor and against
respondents
G
&
M
(Phils.),
Inc., Alwaha (sic) Workshop
and/or Muhamd (sic) Muthiri, as follows:

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amount of the foregoing claims and damages that may be


awarded by the Honorable Office to the complainant.[11]

In its position paper, petitioner alleged that respondent was deployed for
overseas work as car body builder for its Principal Golden Wings Est. for
General Services and Recruitment in Saudi Arabia for an employment period of
24 months, with a monthly salary of US$400.00.[12] It insisted that respondent
was religiously paid his salaries as they fell due. After working for a little over
seven months, respondent pleaded with his employer to be allowed to return
home since there were family problems he had to settle personally. Respondent
even submitted a resignation letter[13] dated July 23, 1995.
To support its claim that respondent had been paid his salaries as they fell
due, petitioner submitted in evidence copies of seven payslip[14] authenticated
by the Philippine Labor Attach in Riyadh, Saudi Arabia. Petitioner asserted
that since respondent only worked for a little over seven months and did not
finish his contract, he should pay the cost of the plane ticket. It pointed out that
according to the standard employment contract, the employer would provide the
employee with a free plane ticket for the flight home only if the worker finishes
his contract.
Respondent countered that his signatures in the purported payslips were
forged. He denied having received his salaries for the said period, except only
for the SAR100 as monthly allowance. He pointed out that the authentication of
the alleged pay slips and resignation letter before the labor attach in Riyadh is
immaterial, since the documents themselves were falsified.

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To counter the allegation of forgery, petitioner claimed that there was a


great possibility that respondent had changed his signature while abroad so that
he could file a complaint for illegal dismissal upon his return. The argument that
the stroke and handwriting on the payslip was written by one and the same
person is mere conjecture, as respondent could have requested someone, i.e., the

Respondent further claimed that petitioner required him to pay


a P10,000.00 placement fee and that he had to borrowP2,000.00 from a relative.
He was then told that the amount would be considered as an advance payment
and that the balance would be deducted from his salary. He was not, however,
given any receipt. He insisted that the employment contract which he signed
indicated that he was supposed to receive a monthly salary of SAR1,200 for
working eight hours a day, excluding overtime pay. He was repeatedly
promised to be furnished a copy of the contract and was later told that it would
be given to his wife, Minda. However, she was also given the run-around and
was told that the contract had already been given to her husband.

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cashier, to prepare the resignation letter for him. While it is the employer who
fills up the pay slip, respondent could have asked another employee to prepare
the resignation letter, particularly if he (respondent) did not know how to phrase
it himself. Moreover, it could not be presumed that the payslip and resignation
letter were prepared by one and the same person, as respondent is not a
handwriting expert. Petitioner further pointed out that respondent has different
signatures, not only in the pleadings submitted before the Labor Arbiter, but
also in respondents personal documents.
On January 30, 1997, Labor Arbiter Jose De Vera ruled in favor of
respondent on the following ratiocination:
What convinced this Arbitration Branch about the unreliability of the
complainants signature in the payslip is the close semblance of the
handwritings in the payslips and the handwritings in the purported handwritten
resignation of the complainant. It unmistakably appears to this Arbitration
Branch that the payslips as well as the handwritten letter-resignation were
prepared by one and the same person. If it were true that the handwritten
letter-resignation was prepared by the complainant, it follows that he also
prepared the payslips because the handwritings in both documents are exactly
the same and identical. But [this] is quite unbelievable that complainant
himself as the payee prepared the payslips with the corresponding entries
therein in his own handwriting. Under the circumstances, the only logical
conclusion is that both the payslips and the handwritten letter-resignation were
prepared and signed by one and the same person definitely not the
complainant.
With the foregoing findings and conclusions, this Arbitration Branch is
of the well-considered view that complainant was not paid his salaries
from January 5, 1995 up to July 23, 1995 and that he was unjustifiably
dismissed from his employment when he repeatedly demanded for his unpaid
salaries. Respondents are, therefore, liable to pay the complainant his salaries
from January 5, 1995 up to July 23, 1995 which amount to US$2,640.00
(US$400 x 6.6 mos). Further, respondents are also liable to the complainant
for the latters salaries for the unexpired portion of his contract up to the
maximum of three (3) months pursuant to Section 10 of RA 8042, which
amount to US$1,200.00. Respondents must also refund complainants plane
fare for his return flight. And finally, being compelled to litigate his claims, it
is but just and x x x that complainant must be awarded attorneys fees at the
rate of ten percent (10%) of the judgment award.

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WHEREFORE, all the foregoing premises considered, judgment is


hereby rendered ordering the respondents to pay complainant the aggregate
sum of US$3,840.00 or its equivalent in Philippine Currency at the exchange
rate prevailing at the time of payment, and to refund complainants plane fare
for his return flight. Further, respondents are ordered to pay complainant
attorneys fees at the rate of Ten percent (10%) of the foregoing judgment
award.[15]

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Petitioner appealed the Decision of the Labor Arbiter to the NLRC,


alleging that the Labor Arbiter, not being a handwriting expert, committed
grave abuse of discretion amounting to lack of jurisdiction in finding for
respondent. In its Decision[16] datedDecember 9, 1997, the NLRC upheld this
contention and remanded the case to the Arbitration Branch of origin for
referral to the government agency concerned for calligraphy examination of the
questioned documents.[17]
The case was then re-raffled to Labor Arbiter Enrico Angelo Portillo.
On September 11, 1998, the parties agreed to a resetting to enable petitioner to
secure the original copies of documents from its foreign principal. However,
on December 9, 1998, the parties agreed to submit the case for resolution based
on the pleadings and on the evidence on record.
This time, the complaint was dismissed for lack of merit. According to
Labor Arbiter Portillo, aside from respondents bare allegations, he failed to
substantiate his claim of poor working conditions and long hours of
employment. The fact that he executed a handwritten resignation letter is
enough evidence of the fact that he voluntarily resigned from work. Moreover,
respondent failed to submit any evidence to refute the pay slips duly signed and
authenticated by the labor attach in Saudi Arabia, inasmuch as their probative
value cannot be impugned by mere self-serving allegations. The Labor Arbiter
concluded that as between the oral allegations of workers that they were not
paid monetary benefits and the documentary evidence presented by employer,
the latter should prevail. [18]

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The NLRC dismissed the appeal for lack of merit in a


Resolution[19] dated December 27, 2000. It held that the questioned documents
could not be endorsed to the agency concerned since mere photocopies had been
submitted in evidence. The records also revealed that petitioner had
communicated to the foreign employer abroad, who sent the original copies, but
there was no response from respondent. It also stressed that during the
December 9, 1998 hearing, the parties agreed to submit the case for resolution
on the basis of the pleadings and the evidence on record; if respondent had
wanted to have the documents endorsed to the NBI or the PNP, he should have

Respondent appealed the decision before the NLRC, alleging that the
Labor Arbiter failed to consider the genuineness of the signature which appears
in the purported resignation letter dated July 23, 1995, as well as those that
appear in the seven pay slips. He insisted that these documents should have
been endorsed to the National Bureau of Investigation Questioned Documents
Division or the Philippine National Police Crime Laboratory for calligraphy
examination.

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insisted that the documents be examined by a handwriting expert of the


government. Thus, respondent wasestopped from assailing the Labor Arbiters
ruling.
Unsatisfied, respondent elevated the matter to the CA via petition
for certiorari. He pointed out that he merely acceded to the submission of the
case for resolution due to the inordinate delays in the case. Moreover, the
questioned documents were within petitioners control, and it was petitioner that
repeatedly failed to produce the original copies.
The CA reversed the ruling of the NLRC. According to the appellate
court, a visual examination of the questioned signatures would instantly reveal
significant differences in the handwriting movement, stroke, and structure, as
well as the quality of lines of the signatures; Labor Arbiter Portillo committed
patent error in examining the signatures, and it is the decision of Labor Arbiter
De Vera which must be upheld. The CA also pointed out the initial ruling of the
NLRC (Second Division) dated December 9, 1997 which set aside the earlier
decision of Labor Arbiter De Vera included a special directive to the Arbitration
Branch of origin to endorse the questioned documents for calligraphy
examination. However, respondent Cuambot failed to produce original copies of
the documents; hence, Labor Arbiter Portillo proceeded with the case and ruled
in favor of petitioner G.M.Phils. The dispositiveportion of the CA ruling reads:
IN VIEW OF ALL THE FOREGOING, the instant petition is
hereby GRANTED. Accordingly, the assailed Resolutions dated27 December
2000 and 12 February 2001, respectively, of the NLRC Second Division are
hereby SET ASIDE and the Decision dated 20 February 1997 rendered by
Labor Arbiter Jose De Vera is hereby REINSTATED.[20]

Petitioner filed a motion for reconsideration, which the CA denied for


lack of merit in its Resolution[21] dated February 20, 2004.
Hence, the present petition, where petitioner claims that

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Petitioner points out that most of the signatures which Labor Arbiter De
Vera used as standards for comparison with the signatures appearing on the
questioned documents were those in the pleadings filed by the respondent long

THE COURT OF APPEALS GRAVELY ERRED ON A MATTER OF LAW


IN HOLDING THAT LABOR ARBITER ENRICO PORTILLO GRAVELY
ABUSED HIS DISCRETION WHEN HE HELD THAT THE SIGNATURES
APPEARING ON THE QUESTIONED DOCUMENTS ARE THOSE OF
THE PETITIONER.[22]

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after the questioned documents had been supposedly signed by him. It claims
that respondent affixed his signatures on the pleadings in question and
intentionally made them different from his true signature so that he could later
on conveniently impugn their authenticity. Petitioner claims that had Labor
Arbiter De Vera taken pains in considering these circumstances, he could have
determined that respondent may have actually intentionally given a different
name and slightly changed his signature in his application, which name and
signature he used when he signed the questioned letter of resignation
and payslips, only to conveniently disown the same when he came back to the
country to file the present case.[23] Thus, according to petitioner, the CA clearly
committed a palpable error of law when it reversed the ruling of the NLRC,
which in turn affirmed Labor Arbiter Portillos decision.
For his part, respondent contends that petitioners arguments were already
raised in the pleadings filed before Labor Arbiter De Vera which had already
been passed upon squarely in the Labor Arbiters Decision of January 30, 1997.
The determinative issues in this case are essentially factual in nature - (a)
whether the signatures of respondent in the payslipsare mere forgeries, and (b)
whether respondent executed the resignation letter. Generally, it is not our
function to review findings of fact. However, in case of a divergence in the
findings and conclusions of the NLRC on the one hand, and those of the Labor
Arbiter and the CA on the other, the Court may examine the evidence presented
by the parties to determine whether or not the employee was illegally dismissed
or voluntarily resigned from employment.[24] The instant case thus falls within
the exception.

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In its Decision[25] dated December 9, 1997, the NLRC had ordered the
case remanded to the Labor Arbiter precisely so that the questioned documents
purportedly signed/executed by respondent could be subjected to calligraphy
examination by experts. It is precisely where a judgment or ruling fails to make
findings of fact that the case may be remanded to the lower tribunal to enable it
to determine them.[26] However, instead of referring the questioned documents
to the NBI or the PNP as mandated by the Commissions ruling, Labor Arbiter
Portillo proceeded to rule in favor of petitioner, concluding that respondents
signatures were not forged, and as such, respondents separation from
employment was purely voluntary. In fine, then, the Labor Arbiter gravely
abused his discretion when he ruled in favor of petitioner without abiding by the
Commissions directive.

We have carefully examined the evidence on record and find that the
petition must fail.

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We note, however, that a remand of the case at this juncture would only
result in unnecessary delay, especially considering that this case has been
pending since 1995. Indeed, it is this Courts duty to settle, whenever possible,
the entire controversy in a single proceeding, leaving no root or branch to bear
the seeds of future litigation.[27] Hence, the case shall be fully resolved on its
merits.

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Moreover, as correctly noted by the CA, the opinions of handwriting


experts, although helpful in the examination of forged documents because of the
technical procedure involved in the analysis, are not binding upon the
courts.[31] As such, resort to these experts is not mandatory or indispensable to
the examination or the comparison of handwriting. A finding of forgery does
not depend entirely on the testimonies of handwriting experts, because the judge
must conduct an independent examination of the questioned signature in order
to arrive at a reasonable conclusion as to its authenticity.[32] No less than Section
22, Rule 132 of the Rules of Court explicitly authorizes the court, by itself, to
make a comparison of the disputed handwriting with writings admitted or
treated as genuine by the party against whom the evidence is offered or proved
to be genuine to the satisfaction of the judge. Indeed, the authenticity of
signatures is not a highly technical issue in the same sense that questions
concerning, e.g., quantum physics or topology, or molecular biology, would
constitute matters of a highly technical nature. The opinion of a handwriting
expert on the genuineness of a questioned signature is certainly much less
compelling upon a judge than an opinion rendered by a specialist on a highly
technical issue.[33]

We find that petitioners failure to submit the original copies of the pay
slips and the resignation letter raises doubts as to the veracity of its claim that
they were actually signed/penned by respondent. The failure of a party to
produce the original copy of the document which is in issue has been taken
against such party, and has even been considered as a mere bargaining chip, a
dilatory tactic so that such party would be granted the opportunity to
adduce controverting evidence.[28] In fact, petitioner did not even present in
evidence the original copy of the employment contract, much less a machine
copy, giving credence to respondents claim that he was not at all given a copy
of the employment contract after he signed it. What petitioner presented was a
mere photocopy of the OCW Info Sheet[29] issued by the Philippine Overseas
Employment Administration as well as the Personal Data Sheet[30]which
respondent filled up. It bears stressing that the original copies of all these
documents, including the employment contract, were in the possession of
petitioner, or, at the very least, petitioners principal.

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Even a cursory perusal of the resignation letter[34] and the handwritten pay
slips will readily show that they were written by only one person. A mere
layman will immediately notice that the strokes and letters in the documents are
very similar, if not identical, to one another. It is also quite apparent from a
comparison of the signatures in the pay slips that they are inconsistent, irregular,
with uneven and faltering strokes.
We also find it unbelievable that after having waited for so long to be
deployed to Saudi Arabia and with the hopes of opportunity to earn a better
living within his reach, respondent would just suddenly decide to abandon his
work and go home due to family problems. At the very least, respondent
could have at least specified the reason or elaborated on the details of such an
urgent matter so as not to jeopardize future employment opportunities.
That respondent also filed the complaint immediately gives more
credence to his claim that he was illegally dismissed. He arrived in
the Philippines on July 24, 1995, and immediately filed his complaint for illegal
dismissal two days later, on July 26, 1995.
We are not impervious of petitioners claim that respondent could have
asked another person to execute the resignation letter for him. However,
petitioner failed to present even an affidavit from a representative of its foreign
principal in order to support this allegation.
Indeed, the rule is that all doubts in the implementation and the
interpretation of the Labor Code shall be resolved in favor of labor,[35] in order
to give effect to the 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, and to
assure the rights of workers to self-organization, collective bargaining, security
of tenure, and just and humane conditions of work.[36] We reiterate the
following pronouncement in Nicario v. National Labor Relations
Commission:[37]

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It is a well-settled doctrine, that if doubts exist between the


evidence presented by the employer and the employee, the scales of justice
must be tilted in favor of the latter. It is a time-honored rule that in
controversies between a laborer and his master, doubts reasonably
arising from the evidence, or in the interpretation of agreements and
writing should be resolved in the formers favor. The policy is to extend
the doctrine to a greater number of employees who can avail of the
benefits under the law, which is in consonance with the avowed policy of
the State to give maximum aid and protection of labor.

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Moreover, one who pleads payment has the burden of proving it. The
reason for the rule is that the pertinent personnel files, payrolls, records,
remittances and other similar documents which will show that overtime,
differentials, service incentive leave, and other claims of workers have been
paid are not in the possession of the worker but in the custody and absolute
control of the employer. Thus, the burden of showing with legal certainty that
the obligation has been discharged with payment falls on the debtor, in
accordance with the rule that one who pleads payment has the burden of
proving it.[38] Only when the debtor introduces evidence that the obligation has
been extinguished does the burden shift to the creditor, who is then under a duty
of producing evidence to show why payment does not extinguish the
obligation.[39] In this case, petitioner was unable to present ample evidence to
prove its claim that respondent had received all his salaries and benefits in full.
IN LIGHT OF ALL THE FOREGOING, the Petition is DENIED for
lack of merit. The Decision of the Court of Appeals in CA-G.R. SP No. 64744
is AFFIRMED. Costs against the petitioners.
SO ORDERED.

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11

ROMEO J. CALLEJO, SR.


Associate Justice

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BENJAMIN L. SAROCAM,G.R. No. 167813
Petitioner,
Present:
PANGANIBAN, C.J., Chairperson,
YNARES-SANTIAGO,
- versus -AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ.
cralaw

INTERORIENT MARITIME cralawPromulgated:


ENT., INC., and DEMACO
UNITED LTD.,
Respondents.cralawJune 27, 2006
x------------------------------------------------- -x
DECISION

CALLEJO, SR., J.:

cralawBefore

the Court is a Petition for Review on certiorari under Rule 45


of the Rules of Court of the Decision[1] of the Court of Appeals (CA) in
CA-G.R. SP No. 84883, which affirmed the February 19, 2004[2] and
April 27, 2004[3] Resolutions of the National Labor Relations
Commission (NLRC) in NCR Case No. 01-11-2492-00.
The Antecedents
cralawOn

June 27, 2000 petitioner Benjamin L. Sarocam was hired by


Interorient Maritime Ent., Inc. and Demaco United Ltd., for a twelvemonth contract as 'bosun on board M/V Despina. His basic monthly
salary was US$450.00 on a 48-hour work week, with a fixed overtime
pay of US$180.00 per month for 105 hours, supplementary wage of
US$70.00, and vacation leave with pay of 2.5 days.[4]
cralawWhile

the vessel was navigating to China, petitioner suffered


lumbar sprain when he accidentally fell from a ladder.[5] On November

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recommended the signing off and hospitalization of petitioner.[6] His


employers agreed to repatriate him on November 30, 2000.

12

15, 2000, he was examined and found to have neuromyositis with the
waist and diabetes. The examining physician prescribed medicine and

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cralawOn

December 5, 2000, petitioner was referred to the companydesignated physician, Dr. Teodoro F. Pidlaoan, Medical Director of the
Our Lady of Fatima Medical Clinic. The x-ray of his lumbosacral spine
revealed normal results and his Fasting Blood Sugar test revealed 9.1
(NV 4.1-6.1 umol/l). Petitioner was given Alaxan tablet for his back
pain and Euglocon for his elevated blood sugar. He was also advised to
return for follow-up evaluation. On December 13, 2000, he returned to
the clinic with no more complaints of back pains. His sugar examination
likewise revealed normal results. Petitioner was then declared 'fit for
duty effective on that day.[7]
cralawOn

March 20, 2001, or barely three months from being pronounced


fit to work, petitioner executed a release and quitclaim[8] in favor of his
employers where he acknowledged the receipt of US$405.00 as his
sickwages and freed his employers from further liability.

cralawHowever,

on November 27, 2001, petitioner filed a complaint with


the labor arbitration branch of the NLRC for disability benefit, illness
allowance/reimbursement
of
medical
expenses,
damages
and
attorney's fees.[9] To support his claim, he presented the following: (1)
a medical certificate[10] dated July 25, 2001 issued by Dr. Rimando C.
Saguin recommending a Grade VIII disability under the POEA schedule
of disability grading; (2) a medical certificate[11] dated July 27, 2001
issued by Dr. Antonio A. Pobre, recommending the same Grade VIII
disability; and (3) a medical certificate[12] dated August 2, 2001 issued
by Dr. Efren R. Vicaldo recommending a Grade VI disability.
cralawOn

July 11, 2003, Labor Arbiter Antonio R. Macam rendered a


Decision[13] dismissing the complaint, holding that petitioner was not
entitled to disability benefits because he was declared 'fit for duty. The
Labor Arbiter noted that petitioner had previously executed a release
and quitclaim in favor of his employers and already received his
sickness allowance. Thus, he could not claim for reimbursement for
medical expenses due to lack of pertinent substantiation. Petitioner's
claim for moral damages and attorney's fees were, likewise, not
awarded on the Labor Arbiter's ruling that there was no evidence of bad
faith and malice on the part of the employers.

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The fallo of the Labor Arbiter's decision reads:

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cralawWHEREFORE,

all the foregoing premises considered,


judgment is hereby rendered dismissing the complaint for
lack of merit.
cralaw

SO ORDERED.[14]chanroblesvirtuallawlibrary

cralawPetitioner appealed the Decision[15] to the NLRC onJuly 31,


2003 which issued its Resolution[16] dated February 19, 2004, affirming
the decision of the Labor Arbiter, with the modification that petitioner
was entitled to US$1,350.00 or its peso equivalent, representing his
salary for three (3) months. The NLRC ruled that petitioner should have
been reinstated by respondents considering that when the former was
declared 'fit for duty, his employment contract had not yet expired.
Thus, respondents were liable for his salary corresponding to the
unexpired portion of the employment contract or three months' salary
for every year of the unexpired term whichever is less, pursuant to
Section 10 of Republic Act No. 8042. The fallo of the Resolution reads:
cralaw

cralawWHEREFORE,

premises considered, the Appeal is


DENIED. However, for reasons stated above, the Decision
dated 11
July
2003 is
hereby
MODIFIED,
ordering
respondents-appellees to indemnify complainant-appellant
in the amount of US$1,350.00 or its peso equivalent at time
of payment.
cralawSO

ORDERED.[17]chanroblesvirtuallawlibrary

cralawPetitioner

filed a Motion for Reconsideration which the NLRC denied


on April
27,
2004.[18] He
forthwith
filed
a
Petition
for Certiorari[19] with the CA, assailing the ruling of the labor tribunal.
cralawOn

January 25, 2005, the CA rendered judgment dismissing the

petition.The appellate court declared that the issues raised by petitioner


relating to the credibility and probative weight of the evidence
presented were factual in nature, hence, proscribed under Rule 65 of
the Rules of Court. The CA noted that petitioner did not even contest the
due execution, voluntariness and veracity of his own handwritten
quitclaim. Thus, he was estopped from assailing the Deed of Release
and Quitclaim he executed after receiving US$405.00 from
respondents.Considering that petitioner was examined by the companydesignated physician and did not protest the findings thereon and later
received sickwages, the appellate court concluded that the NLRC was

14

correct in its ruling. The dispositive portion of the CA decision states:


VIEW OF ALL THE FOREGOING, the instant petition is
orderedDISMISSED. No pronouncements as to costs.

Page

cralawIN

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LLB II A BULSU LAW 1314
cralawSO

ORDERED.[20]chanroblesvirtuallawlibrary

cralaw
cralawPetitioner's

motion for reconsideration was denied by the CA in its


Resolution[21] datedApril 19, 2005.
Petitioner thus filed the instant petition, raising the following issues:
cralaw

I.
IN LIGHT OF THE DECISION OF THIS HONORABLE COURT IN
'GERMAN MARINE AGENCIES, INC. VS. NLRC, ET AL., 350
SCRA 629, CAN THE RESPONDENTS' COMPANY-DESIGNATED
DOCTOR BE CONSIDERED COMPETENT AND RELIABLE
ENOUGH TO DECLARE PETITIONER AS FIT TO WORK
CONTRARY TO THE DECLARATIONS OF THREE (3)
INDEPENDENT PHYSICIANS SIMILARLY FINDING HIM
OTHERWISE?
II.
DOES THE EXECUTION BY PETITIONER OF A RELEASE AND
QUITCLAIM ESTOP HIM FROM CLAIMING DISABILITY
BENEFITS UNDER THE POEA STANDARD EMPLOYMENT
CONTRACT?[22]

The Court's Ruling


cralawAs

in the CA, the issues raised by the petitioner are factual.He


maintains that the diagnosis of his three (3) personal doctors declaring
him unfit to work is more accurate and reliable than that of Dr. Pidlaoan,
the company-designated physician. These three physicians, two of
whom are orthopedic surgeons, are likewise in a better position to
determine his fitness or unfitness for work, unlike Dr. Pidlaoan whose
expertise cannot be ascertained from the medical certificate he issued.
Petitioner thus assails the competence of Dr. Pidlaoan to assess his
fitness to work.
Petitioner avers that the quitclaim he executed is invalid, as the amount
he received as consideration therefor was much lower than what he
should have received under the POEA Standard Employment Contract.
He went on to argue that quitclaims are frowned upon by this Court as

Page

15

they are contrary to public policy.cralaw

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LLB II A BULSU LAW 1314
cralawIt

must be stressed that in a petition for review on certiorari under


Rule 45 of the Rules of Court, only questions of law may be
raised.[23] The Court is not a trier of facts and is not to reassess the
credibility and probative weight of the evidence of the parties and the
findings and conclusions of the Labor Arbiter and the NLRC as affirmed
by the appellate court. Moreover, the factual findings of the Labor
Arbiter and the NLRC are accorded respect and finality when supported
by substantial evidence, which means suchevidence as that which a
reasonable mind might accept as adequate to support a conclusion. The
Court does not substitute its own judgment for that of the tribunal in
determining where the weight of evidence lies or what evidence is
credible.[24]
In the instant case, the CA, the NLRC and the Labor Arbiter are one in
their findings that based on the evidence on record, petitioner is not
entitled to disability benefits.
cralawPrescinding

from the foregoing, the Court finds and so rules that


under the Standard Terms and Conditions Governing the Employment of
Filipino Seafarers On-Board Ocean-Going Vessel or the POEA Standard
Employment Contract issued pursuant to DOLE Department Order No. 4,
and POEA Memorandum Circular No. 9, both Series of 2000, petitioner is
not entitled to disability benefits. Section 20-B, paragraph 2 of the POEA
Standard Employment Contract provides:
SECTION 20. COMPENSATION AND BENEFITS
xxxx
B. COMPENSATION AND BENEFITS FOR INJURY OR ILLNESS
cralawThe

liabilities of the employer when the seafarer suffers


work-related injury or illness during the term of his contract
are as follows:
xxxx

16

2. cralawIf the injury or illness requires medical and/or


dental treatment in acralawforeign port, the employer shall
be liable for the full cost of such cralawmedical, serious
dental, surgical and hospital treatment as well
as cralawboard and lodging until the seafarer is declared fit
to work or to be cralawrepatriated.

Page

However, if after repatriation, the seafarer still


requires medical attention arising from said injury or
illness, he shall be so cralawprovided at cost to the
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LLB II A BULSU LAW 1314
employer until such time he is declared fit cralawor the
degree of his disability has been established by
the cralawcompany-designated physician.

In the instant case, Dr. Pidlaoan diagnosed petitioner as 'fit for duty as
gleaned from hisDecember 13, 2000 Medical Report, to wit:
xxxx
Referred and consulted our medical clinic on December 05,
2000 still complaining of on-and-off low back pain
aggravated by movements. X-ray of the lumbosacral spine
revealed normal findings, Fasting Blood Sugar revealed 9.1
(NV 4.1 - 6.1 umol/l). Patient was given Alaxan tablet 2-3x
a day for his back pain and Eugoclon 1 tablet daily for his
elevated blood sugar and advised to come back regularly for
repeat blood sugar and for follow-up evaluation on his back
pain.
Today, December 13, 2000, he came back with no more
complaints of back pain and repeat sugar examination
revealed already normal results.
DIAGNOSIS: Lumbar Strain
Diabetes Mellitus
RECOMMENDATION: Fit for duty effective today, December
13, 2000.
xxxx
cralawSince

he was declared fit for work, petitioner has no more right to

claim disability benefits under the contractual provisions of the POEA


Standard Employment Contract.
cralawUnder

Section 20-B, paragraph 3 of the said contract, petitioner is

obliged to submit himself to a post-employment medical examination by


a company-designated physician within three working days upon his
return, except when he is physically incapacitated to do so, in which
case, a written notice to the agency within the same period is deemed

jointly between the employer and the seafarer whose decision shall be
final and binding on both parties.

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Page

benefits.It is likewise provided that if a doctor appointed by the


seafarer disagrees with the assessment, a third doctor may be agreed

17

as compliance. Failure to comply with this mandatory reporting


requirement shall result in forfeiture of the right to claim the above

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LLB II A BULSU LAW 1314

Petitioner did not question the findings of Dr. Pidlaoan and his
recommendation.He questioned the doctor's competency and the
correctness of his findings only when he filed the complaint against
respondents before the Labor Arbiter, roughly 11 months after
petitioner was examined by the doctor. Petitioner consulted his
personal doctors only in July and August 2001, long after he had been
examined by the company-designated physician.
cralawPetitioner's

invocation of this Court's ruling in German Marine


Agencies v. NLRC[25]militates against his claim for disability benefits.
As explicitly laid in the said case, it is the company-designated physician
who should determine the degree of disability of the seaman or his
fitness to work, thus:
cralawx

x x In order to claim disability benefits under the


Standard Employment Contract, it is the companydesignated physician who must proclaim that the seaman
suffered a permanent disability, whether total or partial, due
to either injury or illness, during the term of the latter's
employment. x x x It is a cardinal rule in the interpretation
of contracts that if the terms of a contract are clear and
leave no doubt upon the intention of the contracting parties,
the literal meaning of its stipulation shall control.There is no
Employment Contract ' the only qualification prescribed for
the physician entrusted with the task of assessing the
seaman's disability is that he be company-designated.[26]

Page

Pidlaoan examined and treated petitioner from the time he was


repatriated up to his recovery and subsequent assessment as fit for duty
on December 13, 2000. As in theGerman Marine case, the extensive
medical attention extended by Dr. Pidlaoan enabled the latter to acquire
familiarity, if not detailed knowledge, of petitioner's medical condition.
No doubt such specialized knowledge enabled Dr. Pidlaoan to arrive at a
much more accurate appraisal of petitioner's condition, as compared to
another physician not privy to petitioner's case from the very
beginning.[27] Indeed, the assessment of the three other personal
doctors of petitioner could not have been that reliable considering that
they based their conclusions on the prior findings of Dr. Pidlaoan;
moreover, they examined petitioner 7 or 8 months after he was
assessed as fit to work and treated him for only one day.

18

cralawDr.

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LLB II A BULSU LAW 1314
The only requirement stated in the POEA Standard Employment
Contract, as explained in the German Marine case, is that the doctor be
company-designated, and no other. Though it is prudent and advisable
to have a doctor specialized in his field to examine the seafarer's
condition ordegree of illness, the contractual provisions of the parties
only require that the doctor be 'company-designated. When the
language of the contract is explicit, as in the case at bar, leaving no
doubt as to the intention of the drafters thereof, the courts may not
read into it any other intention that would contradict its plain
import.[28]
cralaw

Furthermore and most importantly, petitioner did not question the


competency of Dr. Pidlaoan and his assessment when the latter declared
him as fit for duty or fit to work.
cralawAdditionally,

petitioner, instead of questioning the assessment of


the company-designated doctor, executed a release and quitclaim in
favor ofrespondents, around three months after the assessment. In
executing the said document, petitioner thus impliedly admitted the
correctness of the assessment of the company-designated physician,
and acknowledged that he could no longer claim for disability benefits.
cralawWhile

petitioner may be correct in stating that quitclaims are


frowned upon for being contrary to public policy, the Court has,
likewise, recognized legitimate waivers that represent a voluntary and
reasonable settlement of a worker's claim which should be respected as
the law between the parties. Where the person making the waiver has
done so voluntarily, with a full understanding thereof, and the
consideration for
transaction must
undertaking.[29]

the quitclaim is credible and reasonable, the


be recognized as being a valid and binding

cralawIn

the instant case, petitioner, by his own hand, wrote the following
in the March 20, 2001 release and quitclaim:
cralawThat

I have read this paper from beginning to and [sic]


and understand the contents thereof.
cralawThat

I know this paper that I am signing.

Page

19

That I know that signing this paper settles and ends


every right or claim I have for all damages including but not
limited to loss of earning capacity [sic] of past and future

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LLB II A BULSU LAW 1314
maintenance. [sic] support [sic] suffering [sic] mental
anguish. [sic] serious anxiety and similar injury.
cralawThat

I have received the amount of US$405 or P18,630.

cralawThat

I know that upon receipt of the above amount I


waive all claims I may have for damage against the vessel's
owners and her agents, insurers, charterers, operators [sic]
underwriters, p.i. clube [sic], shipper and all other persons
in interest therein or thereon, under all and all other
countries.[30]chanroblesvirtuallawlibrary
cralawFrom

the document itself, the element of voluntariness in its


execution is evident. Petitioner also appears to have fully understood
the contents of the document he was signing, as the important provision
thereof had been relayed to him in Filipino. Thus, the document also
states:
cralawNa

alam ko na pagkatanggap ko nang halagang ito ay


pinawawalang bisa at iniuurong ko nang lahat [ng] aking
interes, karapatan, at anumang reklamo o damyos laban sa
barko, may-ari nito, mga ahente, seguro at lahat-lahat ng
may kinalaman sa barkong ito maging dito sa Pilipinas o
anumang bansa.[31]chanroblesvirtuallawlibrary
cralawLikewise,

the US$405.00 which he received in consideration of the


quitclaim is a credible and reasonable amount. He was truly entitled
thereto, no more and no less, given that he was sick for only less than a
month or from November 15, 2000 to December 13, 2000. The same
would not, therefore, invalidate the said quitclaim. As we held
inPeriquet v. National Labor Relations Commission:[32]
all waivers and quitclaims are invalid as against
public policy. If the agreement was voluntarily entered into
and represents a reasonable settlement, it is binding on the
parties and may not later be disowned simply because of a
change of mind. It is only where there is clear proof that
the waiver was wangled from an unsuspecting or gullible
person, or the terms of settlement are unconscionable on its
face, that the law will step in to annul the questionable
transaction. But where it is shown that the person making
the waiver did so voluntarily, with full understanding of
what he was doing, and the consideration for the quitclaim
is credible and reasonable, the transaction must be
recognized
as
a
valid
and
binding
undertaking.[33]chanroblesvirtuallawlibrary

Page

20

cralawNot

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LLB II A BULSU LAW 1314
cralawAs

a final note, let it be emphasized that the constitutional policy to


provide full protection to labor is not meant to be a sword to oppress
employers. The commitment of this Court to the cause of labor does not
prevent us from sustaining the employer when it is in the right.[34]
cralawWHEREFORE,

premises considered, the petition is hereby DENIED


for lack of merit. The Decision and Resolution of the Court of Appeals in
CA-G.R. SP No. 84883 are AFFIRMED.Costs against the petitioner.
SO ORDERED.
ROMEO J. CALLEJO, SR.
Associate Justice
WE CONCUR:

Page

21

ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson

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G.R. No. 85985 August 13, 1993


PHILIPPINE AIRLINES, INC. (PAL), petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER
ISABEL P. ORTIGUERRA and PHILIPPINE AIRLINES EMPLOYEES
ASSOCIATION (PALEA), respondents.
Solon Garcia for petitioner.
Adolpho M. Guerzon for respondent PALEA.

MELO, J.:
In the instant petition for certiorari, the Court is presented the issue of
whether or not the formulation of a Code of Discipline among employees
is a shared responsibility of the employer and the employees.
On March 15, 1985, the Philippine Airlines, Inc. (PAL) completely revised
its 1966 Code of Discipline. The Code was circulated among the
employees and was immediately implemented, and some employees were
forthwith subjected to the disciplinary measures embodied therein.

22

Thus, on August 20, 1985, the Philippine Airlines Employees Association


(PALEA) filed a complaint before the National Labor Relations Commission
(NLRC) for unfair labor practice (Case No. NCR-7-2051-85) with the
following remarks: "ULP with arbitrary implementation of PAL's Code of
Discipline without notice and prior discussion with Union by Management"
(Rollo, p. 41). In its position paper, PALEA contended that PAL, by its
unilateral implementation of the Code, was guilty of unfair labor practice,
specifically Paragraphs E and G of Article 249 and Article 253 of the Labor
Code. PALEA alleged that copies of the Code had been circulated in limited
numbers; that being penal in nature the Code must conform with the
requirements of sufficient publication, and that the Code was arbitrary,
oppressive, and prejudicial to the rights of the employees. It prayed that
implementation of the Code be held in abeyance; that PAL should discuss
the substance of the Code with PALEA; that employees dismissed under
the Code be reinstated and their cases subjected to further hearing; and
that PAL be declared guilty of unfair labor practice and be ordered to pay
damages (pp. 7-14, Record.)

Page

PAL filed a motion to dismiss the complaint, asserting its prerogative as


an employer to prescibe rules and regulations regarding employess'
conduct in carrying out their duties and functions, and alleging that by
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LLB II A BULSU LAW 1314

implementing the Code, it had not violated the collective bargaining


agreement (CBA) or any provision of the Labor Code. Assailing the
complaint as unsupported by evidence, PAL maintained that Article 253 of
the Labor Code cited by PALEA reffered to the requirements for
negotiating a CBA which was inapplicable as indeed the current CBA had
been negotiated.
In its reply to PAL's position paper, PALEA maintained that Article 249 (E)
of the Labor Code was violated when PAL unilaterally implemented the
Code, and cited provisions of Articles IV and I of Chapter II of the Code as
defective for, respectively, running counter to the construction of penal
laws and making punishable any offense within PAL's contemplation.
These provisions are the following:
Sec. 2. Non-exclusivity. This Code does not contain the
entirety of the rules and regulations of the company. Every
employee is bound to comply with all applicable rules,
regulations, policies, procedures and standards, including
standards of quality, productivity and behaviour, as issued
and promulgated by the company through its duly authorized
officials. Any violations thereof shall be punishable with a
penalty to be determined by the gravity and/or frequency of
the offense.

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Page

Labor Arbiter Isabel P. Ortiguerra handling the case called the parties to a
conference but they failed to appear at the scheduled date. Interpreting
such failure as a waiver of the parties' right to present evidence, the labor
arbiter considered the case submitted for decision. On November 7, 1986,
a decision was rendered finding no bad faith on the part of PAL in
adopting the Code and ruling that no unfair labor practice had been
committed. However, the arbiter held that PAL was "not totally fault free"
considering that while the issuance of rules and regulations governing the

23

Sec. 7. Cumulative Record. An employee's record of


offenses shall be cumulative. The penalty for an offense shall
be determined on the basis of his past record of offenses of
any nature or the absence thereof. The more habitual an
offender has been, the greater shall be the penalty for the
latest offense. Thus, an employee may be dismissed if the
number of his past offenses warrants such penalty in the
judgment of management even if each offense considered
separately may not warrant dismissal. Habitual offenders or
recidivists have no place in PAL. On the other hand, due
regard shall be given to the length of time between
commission of individual offenses to determine whether the
employee's conduct may indicate occasional lapses (which
may nevertheless require sterner disciplinary action) or a
pattern of incorrigibility.

Labor Relations- full text cases


LLB II A BULSU LAW 1314

conduct of employees is a "legitimate management prerogative" such


rules and regulations must meet the test of "reasonableness, propriety
and fairness." She found Section 1 of the Code aforequoted as "an all
embracing and all encompassing provision that makes punishable any
offense one can think of in the company"; while Section 7, likewise
quoted above, is "objectionable for it violates the rule against double
jeopardy thereby ushering in two or more punishment for the same
misdemeanor." (pp. 38-39, Rollo.)
The labor arbiter also found that PAL "failed to prove that the new Code
was amply circulated." Noting that PAL's assertion that it had furnished all
its employees copies of the Code is unsupported by documentary
evidence, she stated that such "failure" on the part of PAL resulted in the
imposition of penalties on employees who thought all the while that the
1966 Code was still being followed. Thus, the arbiter concluded that
"(t)he phrase ignorance of the law excuses no one from compliance . . .
finds application only after it has been conclusively shown that the law
was circulated to all the parties concerned and efforts to disseminate
information regarding the new law have been exerted. (p. 39, Rollo.) She
thereupon disposed:
WHEREFORE, premises considered, respondent PAL is hereby
ordered as follows:
1. Furnish all employees with the new Code of Discipline;
2. Reconsider the cases of employees meted with penalties
under the New Code of Discipline and remand the same for
further hearing; and
3. Discuss with PALEA the objectionable provisions specifically
tackled in the body of the decision.
All other claims of the complainant union (is) [are] hereby,
dismissed for lack of merit.
SO ORDERED. (p. 40, Rollo.)

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Page

Indeed, failure of management to discuss the provisions of a


contemplated code of discipline which shall govern the
conduct of its employees would result in the erosion and
deterioration of an otherwise harmonious and smooth

24

PAL appealed to the NLRC. On August 19, 1988, the NLRC through
Commissioner Encarnacion, with Presiding Commissioner Bonto-Perez and
Commissioner Maglaya concurring, found no evidence of unfair labor
practice committed by PAL and affirmed the dismissal of PALEA's charge.
Nonetheless, the NLRC made the following observations:

Labor Relations- full text cases


LLB II A BULSU LAW 1314

relationship between them as did happen in the instant case.


There is no dispute that adoption of rules of conduct or
discipline is a prerogative of management and is imperative
and essential if an industry, has to survive in a competitive
world. But labor climate has progressed, too. In the Philippine
scene, at no time in our contemporary history is the need for
a cooperative, supportive and smooth relationship between
labor and management more keenly felt if we are to survive
economically. Management can no longer exclude labor in the
deliberation and adoption of rules and regulations that will
affect them.
The complainant union in this case has the right to feel
isolated in the adoption of the New Code of Discipline. The
Code of Discipline involves security of tenure and loss of
employment a property right! It is time that management
realizes that to attain effectiveness in its conduct rules, there
should be candidness and openness by Management and
participation by the union, representing its members. In fact,
our Constitution has recognized the principle of "shared
responsibility" between employers and workers and has
likewise recognized the right of workers to participate in
"policy and decision-making process affecting their rights . . ."
The latter provision was interpreted by the Constitutional
Commissioners to mean participation in "management"'
(Record of the Constitutional Commission, Vol. II).
In a sense, participation by the union in the adoption of the
code if conduct could have accelerated and enhanced their
feelings of belonging and would have resulted in cooperation
rather than resistance to the Code. In fact, labormanagement cooperation is now "the thing." (pp. 3-4, NLRC
Decision ff. p. 149, Original Record.)

WHEREFORE, premises considered, we modify the appealed


decision in the sense that the New Code of Discipline should
be reviewed and discussed with complainant union,
particularly the disputed provisions [.] (T)hereafter,
respondent is directed to furnish each employee with a copy
of the appealed Code of Discipline. The pending cases
adverted to in the appealed decision if still in the arbitral
level, should be reconsidered by the respondent Philippine Air
Lines. Other dispositions of the Labor Arbiter are sustained.

Page

SO ORDERED. (p. 5, NLRC Decision.)

25

Respondent Commission thereupon disposed:

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PAL then filed the instant petition for certiorari charging public
respondents with grave abuse of discretion in: (a) directing PAL "to share
its management prerogative of formulating a Code of Discipline"; (b)
engaging in quasi-judicial legislation in ordering PAL to share said
prerogative with the union; (c) deciding beyond the issue of unfair labor
practice, and (d) requiring PAL to reconsider pending cases still in the
arbitral level (p. 7, Petition; p. 8, Rollo.)
As stated above, the Principal issue submitted for resolution in the instant
petition is whether management may be compelled to share with the
union or its employees its prerogative of formulating a code of discipline.
PAL asserts that when it revised its Code on March 15, 1985, there was
no law which mandated the sharing of responsibility therefor between
employer and employee.
Indeed, it was only on March 2, 1989, with the approval of Republic Act
No. 6715, amending Article 211 of the Labor Code, that the law explicitly
considered it a State policy "(t)o ensure the participation of workers in
decision and policy-making processes affecting the rights, duties and
welfare." However, even in the absence of said clear provision of law, the
exercise of management prerogatives was never considered boundless.
Thus, in Cruz vs. Medina (177 SCRA 565 [1989]) it was held that
management's prerogatives must be without abuse of discretion.
In San Miguel Brewery Sales Force Union (PTGWO) vs. Ople (170 SCRA
25 [1989]), we upheld the company's right to implement a new system of
distributing its products, but gave the following caveat:
So long as a company's management prerogatives are
exercised in good faith for the advancement of the employer's
interest and not for the purpose of defeating or circumventing
the rights of the employees under special laws or under valid
agreements, this Court will uphold them.
(at p. 28.)

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Page

A close scrutiny of the objectionable provisions of the Code reveals that


they are not purely business-oriented nor do they concern the
management aspect of the business of the company as in the San
Miguel case. The provisions of the Code clearly have repercusions on the

26

All this points to the conclusion that the exercise of managerial


prerogatives is not unlimited. It is circumscribed by limitations found in
law, a collective bargaining agreement, or the general principles of fair
play and justice (University of Sto. Tomas vs. NLRC, 190 SCRA 758
[1990]). Moreover, as enunciated in Abbott Laboratories (Phil.), vs.
NLRC (154 713 [1987]), it must be duly established that the prerogative
being invoked is clearly a managerial one.

Labor Relations- full text cases


LLB II A BULSU LAW 1314

employee's right to security of tenure. The implementation of the


provisions may result in the deprivation of an employee's means of
livelihood which, as correctly pointed out by the NLRC, is a property right
(Callanta, vs Carnation Philippines, Inc., 145 SCRA 268 [1986]). In view
of these aspects of the case which border on infringement of
constitutional rights, we must uphold the constitutional requirements for
the protection of labor and the promotion of social justice, for these
factors, according to Justice Isagani Cruz, tilt "the scales of justice when
there is doubt, in favor of the worker" (Employees Association of the
Philippine American Life Insurance Company vs. NLRC, 199 SCRA 628
[1991] 635).
Verily, a line must be drawn between management prerogatives regarding
business operations per se and those which affect the rights of the
employees. In treating the latter, management should see to it that its
employees are at least properly informed of its decisions or modes action.
PAL asserts that all its employees have been furnished copies of the Code.
Public respondents found to the contrary, which finding, to say the least is
entitled to great respect.
PAL posits the view that by signing the 1989-1991 collective bargaining
agreement, on June 27, 1990, PALEA in effect, recognized PAL's
"exclusive right to make and enforce company rules and regulations to
carry out the functions of management without having to discuss the
same with PALEA and much less, obtain the latter'sconformity thereto"
(pp. 11-12, Petitioner's Memorandum; pp 180-181, Rollo.) Petitioner's
view is based on the following provision of the agreement:
The Association recognizes the right of the Company to
determine matters of management it policy and Company
operations and to direct its manpower. Management of the
Company includes the right to organize, plan, direct and
control operations, to hire, assign employees to work, transfer
employees from one department, to another, to promote,
demote, discipline, suspend or discharge employees for just
cause; to lay-off employees for valid and legal causes, to
introduce new or improved methods or facilities or to change
existing methods or facilities and the right to make and
enforce Company rules and regulations to carry out the
functions of management.

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Page

Such provision in the collective bargaining agreement may not be


interpreted as cession of employees' rights to participate in the
deliberation of matters which may affect their rights and the formulation

27

The exercise by management of its prerogative shall be done


in a just reasonable, humane and/or lawful manner.

Labor Relations- full text cases


LLB II A BULSU LAW 1314

of policies relative thereto. And one such mater is the formulation of a


code of discipline.
Indeed, industrial peace cannot be achieved if the employees are denied
their just participation in the discussion of matters affecting their rights.
Thus, even before Article 211 of the labor Code (P.D. 442) was amended
by Republic Act No. 6715, it was already declared a policy of the State,
"(d) To promote the enlightenment of workers concerning their rights and
obligations . . . as employees." This was, of course, amplified by Republic
Act No 6715 when it decreed the "participation of workers in decision and
policy making processes affecting their rights, duties and welfare." PAL's
position that it cannot be saddled with the "obligation" of sharing
management prerogatives as during the formulation of the Code, Republic
Act No. 6715 had not yet been enacted (Petitioner's Memorandum, p.
44; Rollo, p. 212), cannot thus be sustained. While such "obligation" was
not yet founded in law when the Code was formulated, the attainment of
a harmonious labor-management relationship and the then already
existing state policy of enlightening workers concerning their rights as
employees demand no less than the observance of transparency in
managerial moves affecting employees' rights.
Petitioner's assertion that it needed the implementation of a new Code of
Discipline considering the nature of its business cannot be
overemphasized. In fact, its being a local monopoly in the business
demands the most stringent of measures to attain safe travel for its
patrons. Nonetheless, whatever disciplinary measures are adopted cannot
be properly implemented in the absence of full cooperation of the
employees. Such cooperation cannot be attained if the employees are
restive on account, of their being left out in the determination of cardinal
and fundamental matters affecting their employment.
WHEREFORE, the petition is DISMISSED and the questioned decision
AFFIRMED. No special pronouncement is made as to costs.
SO ORDERED.

Page

28

Feliciano, Bidin, Romero and Vitug, JJ., concur.

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G.R. No. 167614

March 24, 2009

ANTONIO M. SERRANO, Petitioner,


vs.
Gallant MARITIME SERVICES, INC. and MARLOW NAVIGATION
CO., INC., Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
For decades, the toil of solitary migrants has helped lift entire families and
communities out of poverty. Their earnings have built houses, provided
health care, equipped schools and planted the seeds of businesses. They
have woven together the world by transmitting ideas and knowledge from
country to country. They have provided the dynamic human link between
cultures, societies and economies. Yet, only recently have we begun to
understand not only how much international migration impacts
development, but how smart public policies can magnify this effect.
United Nations Secretary-General Ban Ki-Moon
Global Forum on Migration and Development
Brussels, July 10, 20071
For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the
5th paragraph of Section 10, Republic Act (R.A.) No. 8042,2 to wit:
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, the workers shall be entitled to the full reimbursement of his
placement fee with interest of twelve percent (12%) per annum, plus his
salaries for the unexpired portion of his employment contract or for
three (3) months for every year of the unexpired term, whichever
is less.

does not magnify the contributions of overseas Filipino workers (OFWs) to


national development, but exacerbates the hardships borne by them by
unduly limiting their entitlement in case of illegal dismissal to their lumpsum salary either for the unexpired portion of their employment contract
"or for three months for every year of the unexpired term, whichever is
less" (subject clause). Petitioner claims that the last clause violates the
OFWs' constitutional rights in that it impairs the terms of their contract,
deprives them of equal protection and denies them due process.

Page

By way of Petition for Review under Rule 45 of the Rules of Court,


petitioner assails the December 8, 2004 Decision3 and April 1, 2005

29

x x x x (Emphasis and underscoring supplied)

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Resolution4 of the Court of Appeals (CA), which applied the subject


clause, entreating this Court to declare the subject clause
unconstitutional.
Petitioner was hired by Gallant Maritime Services, Inc. and Marlow
Navigation Co., Ltd. (respondents) under a Philippine Overseas
Employment Administration (POEA)-approved Contract of Employment
with the following terms and conditions:
Duration of contract

12 months

Position

Chief Officer

Basic monthly salary

US$1,400.00

Hours of work

48.0 hours per week

Overtime

US$700.00 per month

Vacation leave with pay 7.00 days per month5


On March 19, 1998, the date of his departure, petitioner was constrained
to accept a downgraded employment contract for the position of Second
Officer with a monthly salary of US$1,000.00, upon the assurance and
representation of respondents that he would be made Chief Officer by the
end of April 1998.6
Respondents did not deliver on their promise to make petitioner Chief
Officer.7 Hence, petitioner refused to stay on as Second Officer and was
repatriated to the Philippines on May 26, 1998.8
Petitioner's employment contract was for a period of 12 months or from
March 19, 1998 up to March 19, 1999, but at the time of his repatriation
on May 26, 1998, he had served only two (2) months and seven (7) days
of his contract, leaving an unexpired portion of nine (9) months and
twenty-three (23) days.
Petitioner filed with the Labor Arbiter (LA) a Complaint9 against
respondents for constructive dismissal and for payment of his money
claims in the total amount of US$26,442.73, broken down as follows:

Page

30

May
US$ 413.90
27/31,
1998
(5
days)
incl.
Leave

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pay
June
2,590.00
01/30,
1998
July
2,590.00
01/31,
1998
August 2,590.00
01/31,
1998
Sept.
2,590.00
01/30,
1998
Oct.
2,590.00
01/31,
1998
Nov.
2,590.00
01/30,
1998
Dec.
2,590.00
01/31,
1998
Jan.
2,590.00
01/31,
1999
Feb.
2,590.00
01/28,
1999
Mar.
1/19,
1999
(19
days)
incl.
leave
pay

1,640.00

31

------------------------------------------------------------------------------25,382.23

Page

Amoun

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t
adjust
ed to
chief
mate's
salary
(March 1,060.5010
19/31,
1998
to
April
1/30,
1998)
+
--------------------------------------------------------------------------------------------TOTAL US$ 26,442.7311
CLAIM
as well as moral and exemplary damages and attorney's fees.
The LA rendered a Decision dated July 15, 1999, declaring the
dismissal of petitioner illegal and awarding him monetary benefits,
to wit:

Page

The respondents are likewise ordered to pay the complainant


[petitioner], jointly and severally, in Philippine Currency, based on
the rate of exchange prevailing at the time of payment, the amount
of FORTY FIVE U.S. DOLLARS (US$ 45.00),12 representing the
complainants claim for a salary differential. In addition, the
respondents are hereby ordered to pay the complainant, jointly and
severally, in Philippine Currency, at the exchange rate prevailing at
the time of payment, the complainants (petitioner's) claim for

32

WHEREFORE, premises considered, judgment is hereby rendered


declaring that the dismissal of the complainant (petitioner) by the
respondents in the above-entitled case was illegal and the
respondents are hereby ordered to pay the complainant
[petitioner], jointly and severally, in Philippine Currency, based on
the rate of exchange prevailing at the time of payment, the amount
of EIGHT THOUSAND SEVEN HUNDRED SEVENTY U.S.
DOLLARS (US $8,770.00), representing the complainants
salary for three (3) months of the unexpired portion of the
aforesaid contract of employment.1avvphi1

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attorneys fees equivalent to ten percent (10%) of the total amount


awarded to the aforesaid employee under this Decision.
The claims of the complainant for moral and exemplary damages
are hereby DISMISSED for lack of merit.
All other claims are hereby DISMISSED.
SO ORDERED.13 (Emphasis supplied)
In awarding petitioner a lump-sum salary of US$8,770.00, the LA
based his computation on the salary period of three months only -rather than the entire unexpired portion of nine months and 23
days of petitioner's employment contract - applying the subject
clause. However, the LA applied the salary rate of US$2,590.00,
consisting of petitioner's "[b]asic salary, US$1,400.00/month +
US$700.00/month, fixed overtime pay, + US$490.00/month,
vacation leave pay = US$2,590.00/compensation per month."14
Respondents appealed15 to the National Labor Relations Commission
(NLRC) to question the finding of the LA that petitioner was illegally
dismissed.
Petitioner also appealed16 to the NLRC on the sole issue that the LA
erred in not applying the ruling of the Court in Triple Integrated
Services, Inc. v. National Labor Relations Commission17 that in case
of illegal dismissal, OFWs are entitled to their salaries for the
unexpired portion of their contracts.18
In a Decision dated June 15, 2000, the NLRC modified the LA
Decision, to wit:
WHEREFORE, the Decision dated 15 July 1999 is MODIFIED.
Respondents are hereby ordered to pay complainant, jointly and
severally, in Philippine currency, at the prevailing rate of exchange
at the time of payment the following:
1. Three (3) months salary
$1,400 x 3 US$4,200.00
2. Salary differential

45.00

US$4,245.00
424.50

33

3. 10% Attorneys fees

Page

TOTAL US$4,669.50

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The other findings are affirmed.


SO ORDERED.19
The NLRC corrected the LA's computation of the lump-sum salary
awarded to petitioner by reducing the applicable salary rate from
US$2,590.00 to US$1,400.00 because R.A. No. 8042 "does not provide
for the award of overtime pay, which should be proven to have been
actually performed, and for vacation leave pay."20
Petitioner filed a Motion for Partial Reconsideration, but this time he
questioned the constitutionality of the subject clause.21 The NLRC denied
the motion.22
Petitioner filed a Petition for Certiorari23 with the CA, reiterating the
constitutional challenge against the subject clause.24 After initially
dismissing the petition on a technicality, the CA eventually gave due
course to it, as directed by this Court in its Resolution dated August 7,
2003 which granted the petition for certiorari, docketed as G.R. No.
151833, filed by petitioner.
In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling
on the reduction of the applicable salary rate; however, the CA skirted the
constitutional issue raised by petitioner.25
His Motion for Reconsideration26 having been denied by the
CA,27 petitioner brings his cause to this Court on the following grounds:
I
The Court of Appeals and the labor tribunals have decided the case in a
way not in accord with applicable decision of the Supreme Court involving
similar issue of granting unto the migrant worker back wages equal to the
unexpired portion of his contract of employment instead of limiting it to
three (3) months

Page

In the alternative that the Court of Appeals and the Labor Tribunals were
merely applying their interpretation of Section 10 of Republic Act No.
8042, it is submitted that the Court of Appeals gravely erred in law when
it failed to discharge its judicial duty to decide questions of substance not
theretofore determined by the Honorable Supreme Court, particularly, the
constitutional issues raised by the petitioner on the constitutionality of
said law, which unreasonably, unfairly and arbitrarily limits payment of
the award for back wages of overseas workers to three (3) months.

34

II

III
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Even without considering the constitutional limitations [of] Sec. 10 of


Republic Act No. 8042, the Court of Appeals gravely erred in law in
excluding from petitioners award the overtime pay and vacation pay
provided in his contract since under the contract they form part of his
salary.28
On February 26, 2008, petitioner wrote the Court to withdraw his petition
as he is already old and sickly, and he intends to make use of the
monetary award for his medical treatment and medication.29 Required to
comment, counsel for petitioner filed a motion, urging the court to allow
partial execution of the undisputed monetary award and, at the same
time, praying that the constitutional question be resolved.30
Considering that the parties have filed their respective memoranda, the
Court now takes up the full merit of the petition mindful of the extreme
importance of the constitutional question raised therein.
On the first and second issues
The unanimous finding of the LA, NLRC and CA that the dismissal of
petitioner was illegal is not disputed. Likewise not disputed is the salary
differential of US$45.00 awarded to petitioner in all three fora. What
remains disputed is only the computation of the lump-sum salary to be
awarded to petitioner by reason of his illegal dismissal.
Applying the subject clause, the NLRC and the CA computed the lumpsum salary of petitioner at the monthly rate of US$1,400.00 covering the
period of three months out of the unexpired portion of nine months and
23 days of his employment contract or a total of US$4,200.00.
Impugning the constitutionality of the subject clause, petitioner contends
that, in addition to the US$4,200.00 awarded by the NLRC and the CA, he
is entitled to US$21,182.23 more or a total of US$25,382.23, equivalent
to his salaries for the entire nine months and 23 days left of his
employment contract, computed at the monthly rate of US$2,590.00.31

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Petitioner contends that the subject clause is unconstitutional because it


unduly impairs the freedom of OFWs to negotiate for and stipulate in their
overseas employment contracts a determinate employment period and a
fixed salary package.32 It also impinges on the equal protection clause, for
it treats OFWs differently from local Filipino workers (local workers) by
putting a cap on the amount of lump-sum salary to which OFWs are
entitled in case of illegal dismissal, while setting no limit to the same
monetary award for local workers when their dismissal is declared illegal;
that the disparate treatment is not reasonable as there is no substantial
distinction between the two groups;33and that it defeats Section

35

The Arguments of Petitioner

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18,34 Article II of the Constitution which guarantees the protection of the


rights and welfare of all Filipino workers, whether deployed locally or
overseas.35
Moreover, petitioner argues that the decisions of the CA and the labor
tribunals are not in line with existing jurisprudence on the issue of money
claims of illegally dismissed OFWs. Though there are conflicting rulings on
this, petitioner urges the Court to sort them out for the guidance of
affected OFWs.36
Petitioner further underscores that the insertion of the subject clause into
R.A. No. 8042 serves no other purpose but to benefit local placement
agencies. He marks the statement made by the Solicitor General in his
Memorandum,viz.:
Often, placement agencies, their liability being solidary, shoulder the
payment of money claims in the event that jurisdiction over the foreign
employer is not acquired by the court or if the foreign employer reneges
on its obligation. Hence, placement agencies that are in good faith and
which fulfill their obligations are unnecessarily penalized for the acts of
the foreign employer. To protect them and to promote their continued
helpful contribution in deploying Filipino migrant workers, liability for
money claims was reduced under Section 10 of R.A. No.
8042. 37 (Emphasis supplied)
Petitioner argues that in mitigating the solidary liability of placement
agencies, the subject clause sacrifices the well-being of OFWs. Not only
that, the provision makes foreign employers better off than local
employers because in cases involving the illegal dismissal of employees,
foreign employers are liable for salaries covering a maximum of only
three months of the unexpired employment contract while local employers
are liable for the full lump-sum salaries of their employees. As petitioner
puts it:
In terms of practical application, the local employers are not limited to the
amount of backwages they have to give their employees they have
illegally dismissed, following well-entrenched and unequivocal
jurisprudence on the matter. On the other hand, foreign employers will
only be limited to giving the illegally dismissed migrant workers the
maximum of three (3) months unpaid salaries notwithstanding the
unexpired term of the contract that can be more than three (3) months.38

36

Lastly, petitioner claims that the subject clause violates the due process
clause, for it deprives him of the salaries and other emoluments he is
entitled to under his fixed-period employment contract.39

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The Arguments of Respondents

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In their Comment and Memorandum, respondents contend that the


constitutional issue should not be entertained, for this was belatedly
interposed by petitioner in his appeal before the CA, and not at the
earliest opportunity, which was when he filed an appeal before the
NLRC.40
The Arguments of the Solicitor General
The Solicitor General (OSG)41 points out that as R.A. No. 8042 took effect
on July 15, 1995, its provisions could not have impaired petitioner's 1998
employment contract. Rather, R.A. No. 8042 having preceded petitioner's
contract, the provisions thereof are deemed part of the minimum terms of
petitioner's employment, especially on the matter of money claims, as
this was not stipulated upon by the parties.42
Moreover, the OSG emphasizes that OFWs and local workers differ in
terms of the nature of their employment, such that their rights to
monetary benefits must necessarily be treated differently. The OSG
enumerates the essential elements that distinguish OFWs from local
workers: first, while local workers perform their jobs within Philippine
territory, OFWs perform their jobs for foreign employers, over whom it is
difficult for our courts to acquire jurisdiction, or against whom it is almost
impossible to enforce judgment; and second, as held in Coyoca v.
National Labor Relations Commission43 and Millares v. National Labor
Relations Commission,44 OFWs are contractual employees who can never
acquire regular employment status, unlike local workers who are or can
become regular employees. Hence, the OSG posits that there are rights
and privileges exclusive to local workers, but not available to OFWs; that
these peculiarities make for a reasonable and valid basis for the
differentiated treatment under the subject clause of the money claims of
OFWs who are illegally dismissed. Thus, the provision does not violate the
equal protection clause nor Section 18, Article II of the Constitution.45
Lastly, the OSG defends the rationale behind the subject clause as a
police power measure adopted to mitigate the solidary liability of
placement agencies for this "redounds to the benefit of the migrant
workers whose welfare the government seeks to promote. The survival of
legitimate placement agencies helps [assure] the government that
migrant workers are properly deployed and are employed under decent
and humane conditions."46
The Court's Ruling

37

The Court sustains petitioner on the first and second issues.

Page

When the Court is called upon to exercise its power of judicial review of
the acts of its co-equals, such as the Congress, it does so only when
these conditions obtain: (1) that there is an actual case or controversy
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involving a conflict of rights susceptible of judicial determination;47 (2)


that the constitutional question is raised by a proper party48 and at the
earliest opportunity;49 and (3) that the constitutional question is the very
lis mota of the case,50otherwise the Court will dismiss the case or decide
the same on some other ground.51
Without a doubt, there exists in this case an actual controversy directly
involving petitioner who is personally aggrieved that the labor tribunals
and the CA computed his monetary award based on the salary period of
three months only as provided under the subject clause.
The constitutional challenge is also timely. It should be borne in mind that
the requirement that a constitutional issue be raised at the earliest
opportunity entails the interposition of the issue in the pleadings before
a competent court, such that, if the issue is not raised in the pleadings
before that competent court, it cannot be considered at the trial and, if
not considered in the trial, it cannot be considered on appeal.52 Records
disclose that the issue on the constitutionality of the subject clause was
first raised, not in petitioner's appeal with the NLRC, but in his Motion for
Partial Reconsideration with said labor tribunal,53 and reiterated in his
Petition for Certiorari before the CA.54Nonetheless, the issue is deemed
seasonably raised because it is not the NLRC but the CA which has the
competence to resolve the constitutional issue. The NLRC is a labor
tribunal that merely performs a quasi-judicial function its function in the
present case is limited to determining questions of fact to which the
legislative policy of R.A. No. 8042 is to be applied and to resolving such
questions in accordance with the standards laid down by the law
itself;55 thus, its foremost function is to administer and enforce R.A. No.
8042, and not to inquire into the validity of its provisions. The CA, on the
other hand, is vested with the power of judicial review or the power to
declare unconstitutional a law or a provision thereof, such as the subject
clause.56 Petitioner's interposition of the constitutional issue before the CA
was undoubtedly seasonable. The CA was therefore remiss in failing to
take up the issue in its decision.
The third condition that the constitutional issue be critical to the
resolution of the case likewise obtains because the monetary claim of
petitioner to his lump-sum salary for the entire unexpired portion of his
12-month employment contract, and not just for a period of three
months, strikes at the very core of the subject clause.
Thus, the stage is all set for the determination of the constitutionality of
the subject clause.

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38

Does the subject clause violate Section 10,


Article III of the Constitution on non-impairment
of contracts?

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The answer is in the negative.


Petitioner's claim that the subject clause unduly interferes with the
stipulations in his contract on the term of his employment and the fixed
salary package he will receive57 is not tenable.
Section 10, Article III of the Constitution provides:
No law impairing the obligation of contracts shall be passed.
The prohibition is aligned with the general principle that laws newly
enacted have only a prospective operation,58and cannot affect acts or
contracts already perfected;59 however, as to laws already in existence,
their provisions are read into contracts and deemed a part
thereof.60 Thus, the non-impairment clause under Section 10, Article II is
limited in application to laws about to be enacted that would in any way
derogate from existing acts or contracts by enlarging, abridging or in any
manner changing the intention of the parties thereto.
As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995
preceded the execution of the employment contract between petitioner
and respondents in 1998. Hence, it cannot be argued that R.A. No. 8042,
particularly the subject clause, impaired the employment contract of the
parties. Rather, when the parties executed their 1998 employment
contract, they were deemed to have incorporated into it all the provisions
of R.A. No. 8042.
But even if the Court were to disregard the timeline, the subject clause
may not be declared unconstitutional on the ground that it impinges on
the impairment clause, for the law was enacted in the exercise of the
police power of the State to regulate a business, profession or calling,
particularly the recruitment and deployment of OFWs, with the noble end
in view of ensuring respect for the dignity and well-being of OFWs
wherever they may be employed.61Police power legislations adopted by
the State to promote the health, morals, peace, education, good order,
safety, and general welfare of the people are generally applicable not only
to future contracts but even to those already in existence, for all private
contracts must yield to the superior and legitimate measures taken by the
State to promote public welfare.62

39

Does the subject clause violate Section 1,


Article III of the Constitution, and Section 18,
Article II and Section 3, Article XIII on labor
as a protected sector?

Page

The answer is in the affirmative.


Section 1, Article III of the Constitution guarantees:
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No person shall be deprived of life, liberty, or property without due


process of law nor shall any person be denied the equal protection of the
law.
Section 18,63 Article II and Section 3,64 Article XIII accord all members of
the labor sector, without distinction as to place of deployment, full
protection of their rights and welfare.
To Filipino workers, the rights guaranteed under the foregoing
constitutional provisions translate to economic security and parity: all
monetary benefits should be equally enjoyed by workers of similar
category, while all monetary obligations should be borne by them in equal
degree; none should be denied the protection of the laws which is
enjoyed by, or spared the burden imposed on, others in like
circumstances.65
Such rights are not absolute but subject to the inherent power of
Congress to incorporate, when it sees fit, a system of classification into its
legislation; however, to be valid, the classification must comply with these
requirements: 1) it is based on substantial distinctions; 2) it is germane
to the purposes of the law; 3) it is not limited to existing conditions only;
and 4) it applies equally to all members of the class.66
There are three levels of scrutiny at which the Court reviews the
constitutionality of a classification embodied in a law: a) the deferential or
rational basis scrutiny in which the challenged classification needs only be
shown to be rationally related to serving a legitimate state interest;67 b)
the middle-tier or intermediate scrutiny in which the government must
show that the challenged classification serves an important state interest
and that the classification is at least substantially related to serving that
interest;68 and c) strict judicial scrutiny69 in which a legislative
classification which impermissibly interferes with the exercise of a
fundamental right70 or operates to the peculiar disadvantage of a suspect
class71 is presumed unconstitutional, and the burden is upon the
government to prove that the classification is necessary to achieve
a compelling state interest and that it is the least restrictive
means to protect such interest.72

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It is different in the Philippine setting. In Central Bank (now Bangko


Sentral ng Pilipinas) Employee Association, Inc. v. Bangko Sentral ng
Pilipinas,77 the constitutionality of a provision in the charter of the Bangko
Sentral ng Pilipinas(BSP), a government financial institution (GFI), was
challenged for maintaining its rank-and-file employees under the Salary
Standardization Law (SSL), even when the rank-and-file employees of

40

Under American jurisprudence, strict judicial scrutiny is triggered by


suspect classifications73 based on race74 or gender75 but not when the
classification is drawn along income categories.76

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other GFIs had been exempted from the SSL by their respective charters.
Finding that the disputed provision contained a suspect classification
based on salary grade, the Court deliberately employed the standard of
strict judicial scrutiny in its review of the constitutionality of said
provision. More significantly, it was in this case that the Court revealed
the broad outlines of its judicial philosophy, to wit:
Congress retains its wide discretion in providing for a valid classification,
and its policies should be accorded recognition and respect by the courts
of justice except when they run afoul of the Constitution. The deference
stops where the classification violates a fundamental right, or prejudices
persons accorded special protection by the Constitution. When
these violations arise, this Court must discharge its primary role as the
vanguard of constitutional guaranties, and require a stricter and more
exacting adherence to constitutional limitations. Rational basis should not
suffice.
Admittedly, the view that prejudice to persons accorded special protection
by the Constitution requires a stricter judicial scrutiny finds no support in
American or English jurisprudence. Nevertheless, these foreign decisions
and authorities are not per se controlling in this jurisdiction. At best, they
are persuasive and have been used to support many of our decisions. We
should not place undue and fawning reliance upon them and regard them
as indispensable mental crutches without which we cannot come to our
own decisions through the employment of our own endowments. We live
in a different ambience and must decide our own problems in the light of
our own interests and needs, and of our qualities and even idiosyncrasies
as a people, and always with our own concept of law and justice. Our laws
must be construed in accordance with the intention of our own lawmakers
and such intent may be deduced from the language of each law and the
context of other local legislation related thereto. More importantly, they
must be construed to serve our own public interest which is the be-all and
the end-all of all our laws. And it need not be stressed that our public
interest is distinct and different from others.
xxxx

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Equality is one ideal which cries out for bold attention and action in the
Constitution. The Preamble proclaims "equality" as an ideal precisely in
protest against crushing inequities in Philippine society. The command to
promote social justice in Article II, Section 10, in "all phases of national
development," further explicitated in Article XIII, are clear commands to
the State to take affirmative action in the direction of greater equality. x x
x [T]here is thus in the Philippine Constitution no lack of doctrinal support

41

Further, the quest for a better and more "equal" world calls for the use of
equal protection as a tool of effective judicial intervention.

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for a more vigorous state effort towards achieving a reasonable measure


of equality.
Our present Constitution has gone further in guaranteeing vital social and
economic rights to marginalized groups of society, including labor. Under
the policy of social justice, the law bends over backward to accommodate
the interests of the working class on the humane justification that those
with less privilege in life should have more in law. And the obligation to
afford protection to labor is incumbent not only on the legislative and
executive branches but also on the judiciary to translate this pledge into a
living reality. Social justice calls for the humanization of laws and the
equalization of social and economic forces by the State so that justice in
its rational and objectively secular conception may at least be
approximated.
xxxx
Under most circumstances, the Court will exercise judicial restraint in
deciding questions of constitutionality, recognizing the broad discretion
given to Congress in exercising its legislative power. Judicial scrutiny
would be based on the "rational basis" test, and the legislative discretion
would be given deferential treatment.
But if the challenge to the statute is premised on the denial of a
fundamental right, or the perpetuation of prejudice against persons
favored by the Constitution with special protection, judicial
scrutiny ought to be more strict. A weak and watered down view
would call for the abdication of this Courts solemn duty to strike down
any law repugnant to the Constitution and the rights it enshrines. This is
true whether the actor committing the unconstitutional act is a private
person or the government itself or one of its instrumentalities. Oppressive
acts will be struck down regardless of the character or nature of the actor.

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In the case at bar, the challenged proviso operates on the basis of the
salary grade or officer-employee status. It is akin to a distinction based
on economic class and status, with the higher grades as recipients of a
benefit specifically withheld from the lower grades. Officers of the BSP
now receive higher compensation packages that are competitive with the
industry, while the poorer, low-salaried employees are limited to the rates
prescribed by the SSL. The implications are quite disturbing: BSP rankand-file employees are paid the strictly regimented rates of the SSL while
employees higher in rank - possessing higher and better education and
opportunities for career advancement - are given higher compensation
packages to entice them to stay. Considering that majority, if not all, the
rank-and-file employees consist of people whose status and rank in life
are less and limited, especially in terms of job marketability, it is they -

42

xxxx

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and not the officers - who have the real economic and financial need for
the adjustment . This is in accord with the policy of the Constitution "to
free the people from poverty, provide adequate social services, extend to
them a decent standard of living, and improve the quality of life for all."
Any act of Congress that runs counter to this constitutional desideratum
deserves strict scrutiny by this Court before it can pass muster.
(Emphasis supplied)
Imbued with the same sense of "obligation to afford protection to labor,"
the Court in the present case also employs the standard of strict judicial
scrutiny, for it perceives in the subject clause a suspect classification
prejudicial to OFWs.
Upon cursory reading, the subject clause appears facially neutral, for it
applies to all OFWs. However, a closer examination reveals that the
subject clause has a discriminatory intent against, and an invidious
impact on, OFWs at two levels:
First, OFWs with employment contracts of less than one year vis-vis OFWs with employment contracts ofone year or more;
Second, among OFWs with employment contracts of more than one
year; and
Third, OFWs vis--vis local workers with fixed-period employment;
OFWs with employment contracts of less than one year vis-vis OFWs with employment contracts of one year or more

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A plain reading of Sec. 10 clearly reveals that the choice of which


amount to award an illegally dismissed overseas contract worker,
i.e., whether his salaries for the unexpired portion of his
employment contract or three (3) months salary for every year of
the unexpired term, whichever is less, comes into play only when
the employment contract concerned has a term of at least one (1)
year or more. This is evident from the words "for every year of the
unexpired term" which follows the words "salaries x x x for three
months." To follow petitioners thinking that private respondent is
entitled to three (3) months salary only simply because it is the lesser
amount is to completely disregard and overlook some words used in the
statute while giving effect to some. This is contrary to the wellestablished rule in legal hermeneutics that in interpreting a statute, care
should be taken that every part or word thereof be given effect since the

43

As pointed out by petitioner,78 it was in Marsaman Manning Agency, Inc.


v. National Labor Relations Commission79(Second Division, 1999) that the
Court laid down the following rules on the application of the periods
prescribed under Section 10(5) of R.A. No. 804, to wit:

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law-making body is presumed to know the meaning of the words


employed in the statue and to have used them advisedly. Ut res magis
valeat quam pereat.80 (Emphasis supplied)
In Marsaman, the OFW involved was illegally dismissed two months into
his 10-month contract, but was awarded his salaries for the remaining 8
months and 6 days of his contract.
Prior to Marsaman, however, there were two cases in which the Court
made conflicting rulings on Section 10(5). One was Asian Center for
Career and Employment System and Services v. National Labor Relations
Commission(Second Division, October 1998),81 which involved an OFW
who was awarded a two-year employment contract, but was dismissed
after working for one year and two months. The LA declared his dismissal
illegal and awarded him SR13,600.00 as lump-sum salary covering eight
months, the unexpired portion of his contract. On appeal, the Court
reduced the award to SR3,600.00 equivalent to his three months salary,
this being the lesser value, to wit:
Under Section 10 of R.A. No. 8042, a worker dismissed from overseas
employment without just, valid or authorized cause is entitled to his
salary for the unexpired portion of his employment contract or for three
(3) months for every year of the unexpired term, whichever is less.
In the case at bar, the unexpired portion of private respondents
employment contract is eight (8) months. Private respondent should
therefore be paid his basic salary corresponding to three (3) months or a
total of SR3,600.82
Another was Triple-Eight Integrated Services, Inc. v. National Labor
Relations Commission (Third Division, December 1998),83 which involved
an OFW (therein respondent Erlinda Osdana) who was originally granted a
12-month contract, which was deemed renewed for another 12 months.
After serving for one year and seven-and-a-half months, respondent
Osdana was illegally dismissed, and the Court awarded her salaries for
the entire unexpired portion of four and one-half months of her contract.
The Marsaman interpretation of Section 10(5) has since been adopted in
the following cases:
Unexpired
Period

Period
Applied in
the
Computation
of the
Monetary
Award

44

Contract Period of
Period
Service

Page

Case Title

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6 months

2 months

4 months

4 months

Bahia
Shipping v.
Reynaldo
Chua 85

9 months

8 months

4 months

4 months

Centennial 9 months
Transmarine
v. dela Cruz
l86

4 months

5 months

5 months

Talidano v.
Falcon87

12
months

3 months

9 months

3 months

Univan v.
CA 88

12
months

3 months

9 months

3 months

Oriental v.
CA89

12
months

more than
2 months

10 months

3 months

PCL v.
NLRC90

12
months

more than
2 months

more or less
9 months

3 months

Olarte v.
Nayona91

12
months

21 days

11 months
and 9 days

3 months

JSS
v.Ferrer92

12
months

16 days

11 months
and 24 days

3 months

9 months
and 7
days

2 months
and 23 days

2 months and
23 days

Pentagon v.
Adelantar93

12
months

Phil. Employ
v. Paramio,
et al.94

12
months

10
months

2 months

Unexpired
portion

Flourish
Maritime v.
Almanzor 95

2 years

26 days

23 months
and 4 days

6 months or 3
months for
each year of
contract

Athenna
Manpower
v.
Villanos 96

1 year,
10
months
and 28
days

1 month

1 year, 9
months and
28 days

6 months or 3
months for
each year of
contract

Page

Skippers v.
Maguad84

45

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As the foregoing matrix readily shows, the subject clause classifies OFWs
into two categories. The first category includes OFWs with fixed-period
employment contracts of less than one year; in case of illegal dismissal,
they are entitled to their salaries for the entire unexpired portion of their
contract. The second category consists of OFWs with fixed-period
employment contracts of one year or more; in case of illegal dismissal,
they are entitled to monetary award equivalent to only 3 months of the
unexpired portion of their contracts.
The disparity in the treatment of these two groups cannot be discounted.
In Skippers, the respondent OFW worked for only 2 months out of his 6month contract, but was awarded his salaries for the remaining 4 months.
In contrast, the respondent OFWs in Oriental and PCL who had also
worked for about 2 months out of their 12-month contracts were awarded
their salaries for only 3 months of the unexpired portion of their
contracts. Even the OFWs involved inTalidano and Univan who
had worked for a longer period of 3 months out of their 12-month
contracts before being illegally dismissed were awarded their salaries for
only 3 months.
To illustrate the disparity even more vividly, the Court assumes a
hypothetical OFW-A with an employment contract of 10 months at a
monthly salary rate of US$1,000.00 and a hypothetical OFW-B with an
employment contract of 15 months with the same monthly salary rate of
US$1,000.00. Both commenced work on the same day and under the
same employer, and were illegally dismissed after one month of work.
Under the subject clause, OFW-A will be entitled to US$9,000.00,
equivalent to his salaries for the remaining 9 months of his contract,
whereas OFW-B will be entitled to only US$3,000.00, equivalent to his
salaries for 3 months of the unexpired portion of his contract, instead of
US$14,000.00 for the unexpired portion of 14 months of his contract, as
the US$3,000.00 is the lesser amount.

Contract
Period

Period
of
Service

Unexpired
Period

Period Applied
in the
Computation of
the Monetary
Award

ATCI v. CA,

2 years

22 months

22 months

Page

Case Title

46

The disparity becomes more aggravating when the Court takes into
account jurisprudence that, prior to the effectivity of R.A. No. 8042
on July 14, 1995,97 illegally dismissed OFWs, no matter how long the
period of their employment contracts, were entitled to their salaries for
the entire unexpired portions of their contracts. The matrix below speaks
for itself:

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et al.98

months

Phil.
Integrated
v. NLRC99

2 years

7 days

23 months
and 23
days

23 months and
23 days

JGB v.
NLC100

2 years

9 months

15 months

15 months

Agoy v.
NLRC101

2 years

2 months

22 months

22 months

EDI v.
NLRC, et
al.102

2 years

5 months

19 months

19 months

Barros v.
NLRC, et
al.103

12
months

4 months

8 months

8 months

Philippine
Transmarine
v. Carilla104

12
months

6 months
and 22
days

5 months
and 18
days

5 months and 18
days

It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract
periods or the unexpired portions thereof, were treated alike in terms of
the computation of their monetary benefits in case of illegal dismissal.
Their claims were subjected to a uniform rule of computation: their basic
salaries multiplied by the entire unexpired portion of their employment
contracts.
The enactment of the subject clause in R.A. No. 8042 introduced a
differentiated rule of computation of the money claims of illegally
dismissed OFWs based on their employment periods, in the
process singling out one category whose contracts have an unexpired
portion of one year or more and subjecting them to the peculiar
disadvantage of having their monetary awards limited to their salaries for
3 months or for the unexpired portion thereof, whichever is less, but all
the while sparing the other category from such prejudice, simply because
the latter's unexpired contracts fall short of one year.
Among OFWs With Employment Contracts of More Than One Year

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The Court notes that the subject clause "or for three (3) months for every
year of the unexpired term, whichever is less" contains the qualifying

47

Upon closer examination of the terminology employed in the subject


clause, the Court now has misgivings on the accuracy of
the Marsaman interpretation.

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phrases "every year" and "unexpired term." By its ordinary meaning, the
word "term" means a limited or definite extent of time.105 Corollarily, that
"every year" is but part of an "unexpired term" is significant in many
ways: first, the unexpired term must be at least one year, for if it were
any shorter, there would be no occasion for such unexpired term to be
measured by every year; and second, the original term must be more
than one year, for otherwise, whatever would be the unexpired term
thereof will not reach even a year. Consequently, the more decisive factor
in the determination of when the subject clause "for three (3) months
forevery year of the unexpired term, whichever is less" shall apply is not
the length of the original contract period as held in Marsaman,106 but the
length of the unexpired portion of the contract period -- the subject
clause applies in cases when the unexpired portion of the contract period
is at least one year, which arithmetically requires that the original
contract period be more than one year.
Viewed in that light, the subject clause creates a sub-layer of
discrimination among OFWs whose contract periods are for more than one
year: those who are illegally dismissed with less than one year left in their
contracts shall be entitled to their salaries for the entire unexpired portion
thereof, while those who are illegally dismissed with one year or more
remaining in their contracts shall be covered by the subject clause, and
their monetary benefits limited to their salaries for three months only.
To concretely illustrate the application of the foregoing interpretation of
the subject clause, the Court assumes hypothetical OFW-C and OFW-D,
who each have a 24-month contract at a salary rate of US$1,000.00 per
month. OFW-C is illegally dismissed on the 12th month, and OFW-D, on
the 13th month. Considering that there is at least 12 months remaining in
the contract period of OFW-C, the subject clause applies to the
computation of the latter's monetary benefits. Thus, OFW-C will be
entitled, not to US$12,000,00 or the latter's total salaries for the 12
months unexpired portion of the contract, but to the lesser amount of
US$3,000.00 or the latter's salaries for 3 months out of the 12-month
unexpired term of the contract. On the other hand, OFW-D is spared from
the effects of the subject clause, for there are only 11 months left in the
latter's contract period. Thus, OFW-D will be entitled to US$11,000.00,
which is equivalent to his/her total salaries for the entire 11-month
unexpired portion.
OFWs vis--vis Local Workers
With Fixed-Period Employment

Page

48

As discussed earlier, prior to R.A. No. 8042, a uniform system of


computation of the monetary awards of illegally dismissed OFWs was in
place. This uniform system was applicable even to local workers with
fixed-term employment.107

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The earliest rule prescribing a uniform system of computation was


actually Article 299 of the Code of Commerce (1888),108 to wit:
Article 299. If the contracts between the merchants and their shop clerks
and employees should have been made of a fixed period, none of the
contracting parties, without the consent of the other, may withdraw from
the fulfillment of said contract until the termination of the period agreed
upon.
Persons violating this clause shall be subject to indemnify the loss and
damage suffered, with the exception of the provisions contained in the
following articles.
In Reyes v. The Compaia Maritima,109 the Court applied the foregoing
provision to determine the liability of a shipping company for the illegal
discharge of its managers prior to the expiration of their fixed-term
employment. The Court therein held the shipping company liable for the
salaries of its managers for the remainder of their fixed-term
employment.
There is a more specific rule as far as seafarers are concerned: Article
605 of the Code of Commerce which provides:
Article 605. If the contracts of the captain and members of the crew with
the agent should be for a definite period or voyage, they cannot be
discharged until the fulfillment of their contracts, except for reasons of
insubordination in serious matters, robbery, theft, habitual drunkenness,
and damage caused to the vessel or to its cargo by malice or manifest or
proven negligence.
Article 605 was applied to Madrigal Shipping Company, Inc. v.
Ogilvie,110 in
which the Court held the shipping company liable for the salaries and
subsistence allowance of its illegally dismissed employees for
the entire unexpired portion of their employment contracts.

Citing Manresa, the Court in Lemoine v. Alkan112 read the disjunctive "or"
in Article 1586 as a conjunctive "and" so as to apply the provision to local
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Article 1586. Field hands, mechanics, artisans, and other laborers hired
for a certain time and for a certain work cannot leave or be dismissed
without sufficient cause, before the fulfillment of the contract. (Emphasis
supplied.)

49

While Article 605 has remained good law up to the present,111 Article 299
of the Code of Commerce was replaced by Art. 1586 of the Civil Code of
1889, to wit:

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workers who are employed for a time certain although for no particular
skill. This interpretation of Article 1586 was reiterated in Garcia Palomar
v. Hotel de France Company.113 And in both Lemoine and Palomar, the
Court adopted the general principle that in actions for wrongful discharge
founded on Article 1586, local workers are entitled to recover damages to
the extent of the amount stipulated to be paid to them by the terms of
their contract. On the computation of the amount of such damages, the
Court in Aldaz v. Gay114held:
The doctrine is well-established in American jurisprudence, and nothing
has been brought to our attention to the contrary under Spanish
jurisprudence, that when an employee is wrongfully discharged it is his
duty to seek other employment of the same kind in the same community,
for the purpose of reducing the damages resulting from such wrongful
discharge. However, while this is the general rule, the burden of showing
that he failed to make an effort to secure other employment of a like
nature, and that other employment of a like nature was obtainable, is
upon the defendant. When an employee is wrongfully discharged under a
contract of employment his prima facie damage is the amount which he
would be entitled to had he continued in such employment until the
termination of the period. (Howard vs. Daly, 61 N. Y., 362; Allen vs.
Whitlark, 99 Mich., 492; Farrell vs. School District No. 2, 98 Mich.,
43.)115(Emphasis supplied)

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More significantly, the same principles were applied to cases involving


overseas Filipino workers whose fixed-term employment contracts were
illegally terminated, such as in First Asian Trans & Shipping Agency, Inc.
v. Ople,119involving seafarers who were illegally discharged. In Teknika
Skills and Trade Services, Inc. v. National Labor Relations
Commission,120 an OFW who was illegally dismissed prior to the expiration
of her fixed-period employment contract as a baby sitter, was awarded
salaries corresponding to the unexpired portion of her contract. The Court
arrived at the same ruling in Anderson v. National Labor Relations
Commission,121 which involved a foreman hired in 1988 in Saudi Arabia

50

On August 30, 1950, the New Civil Code took effect with new provisions
on fixed-term employment: Section 2 (Obligations with a Period), Chapter
3, Title I, and Sections 2 (Contract of Labor) and 3 (Contract for a Piece
of Work), Chapter 3, Title VIII, Book IV.116 Much like Article 1586 of the
Civil Code of 1889, the new provisions of the Civil Code do not expressly
provide for the remedies available to a fixed-term worker who is illegally
discharged. However, it is noted that in Mackay Radio & Telegraph Co.,
Inc. v. Rich,117 the Court carried over the principles on the payment of
damages underlying Article 1586 of the Civil Code of 1889 and applied the
same to a case involving the illegal discharge of a local worker whose
fixed-period employment contract was entered into in 1952, when the
new Civil Code was already in effect.118

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for a fixed term of two years, but who was illegally dismissed after only
nine months on the job -- the Court awarded him salaries corresponding
to 15 months, the unexpired portion of his contract. In Asia World
Recruitment, Inc. v. National Labor Relations Commission,122 a Filipino
working as a security officer in 1989 in Angola was awarded his salaries
for the remaining period of his 12-month contract after he was wrongfully
discharged. Finally, in Vinta Maritime Co., Inc. v. National Labor Relations
Commission,123 an OFW whose 12-month contract was illegally cut short
in the second month was declared entitled to his salaries for the
remaining 10 months of his contract.
In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term
employment who were illegally discharged were treated alike in terms of
the computation of their money claims: they were uniformly entitled to
their salaries for the entire unexpired portions of their contracts. But with
the enactment of R.A. No. 8042, specifically the adoption of the subject
clause, illegally dismissed OFWs with an unexpired portion of one year or
more in their employment contract have since been differently treated in
that their money claims are subject to a 3-month cap, whereas no such
limitation is imposed on local workers with fixed-term employment.
The Court concludes that the subject clause contains a suspect
classification in that, in the computation of the monetary benefits
of fixed-term employees who are illegally discharged, it imposes a
3-month cap on the claim of OFWs with an unexpired portion of
one year or more in their contracts, but none on the claims of
other OFWs or local workers with fixed-term employment. The
subject clause singles out one classification of OFWs and burdens
it with a peculiar disadvantage.
There being a suspect classification involving a vulnerable sector
protected by the Constitution, the Court now subjects the classification to
a strict judicial scrutiny, and determines whether it serves a compelling
state interest through the least restrictive means.
What constitutes compelling state interest is measured by the scale of
rights and powers arrayed in the Constitution and calibrated by
history.124 It is akin to the paramount interest of the state125 for which
some individual liberties must give way, such as the public interest in
safeguarding health or maintaining medical standards,126 or in
maintaining access to information on matters of public concern.127

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The OSG defends the subject clause as a police power measure "designed
to protect the employment of Filipino seafarers overseas x x x. By limiting
the liability to three months [sic], Filipino seafarers have better chance of

51

In the present case, the Court dug deep into the records but found no
compelling state interest that the subject clause may possibly serve.

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getting hired by foreign employers." The limitation also protects the


interest of local placement agencies, which otherwise may be made to
shoulder millions of pesos in "termination pay."128
The OSG explained further:
Often, placement agencies, their liability being solidary, shoulder the
payment of money claims in the event that jurisdiction over the foreign
employer is not acquired by the court or if the foreign employer reneges
on its obligation. Hence, placement agencies that are in good faith and
which fulfill their obligations are unnecessarily penalized for the acts of
the foreign employer. To protect them and to promote their continued
helpful contribution in deploying Filipino migrant workers, liability for
money are reduced under Section 10 of RA 8042.
This measure redounds to the benefit of the migrant workers whose
welfare the government seeks to promote. The survival of legitimate
placement agencies helps [assure] the government that migrant workers
are properly deployed and are employed under decent and humane
conditions.129 (Emphasis supplied)
However, nowhere in the Comment or Memorandum does the OSG cite
the source of its perception of the state interest sought to be served by
the subject clause.
The OSG locates the purpose of R.A. No. 8042 in the speech of Rep.
Bonifacio Gallego in sponsorship of House Bill No. 14314 (HB 14314),
from which the law originated;130 but the speech makes no reference to
the underlying reason for the adoption of the subject clause. That is only
natural for none of the 29 provisions in HB 14314 resembles the subject
clause.
On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision
on money claims, to wit:

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The liability of the principal and the recruitment/placement agency or any


and all claims under this Section shall be joint and several.

52

Sec. 10. Money Claims. - Notwithstanding any provision of law to the


contrary, the Labor Arbiters of the National Labor Relations Commission
(NLRC) shall have the original and exclusive jurisdiction to hear and
decide, within ninety (90) calendar days after the filing of the complaint,
the claims arising out of an employer-employee relationship or by virtue
of the complaint, the claim arising out of an employer-employee
relationship or by virtue of any law or contract involving Filipino workers
for overseas employment including claims for actual, moral, exemplary
and other forms of damages.

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Any compromise/amicable settlement or voluntary agreement on any


money claims exclusive of damages under this Section shall not be less
than fifty percent (50%) of such money claims: Provided, That any
installment payments, if applicable, to satisfy any such compromise or
voluntary settlement shall not be more than two (2) months. Any
compromise/voluntary agreement in violation of this paragraph shall be
null and void.
Non-compliance with the mandatory period for resolutions of cases
provided under this Section shall subject the responsible officials to any or
all of the following penalties:
(1) The salary of any such official who fails to render his decision or
resolution within the prescribed period shall be, or caused to be,
withheld until the said official complies therewith;
(2) Suspension for not more than ninety (90) days; or
(3) Dismissal from the service with disqualification to hold any
appointive public office for five (5) years.
Provided, however, That the penalties herein provided shall be without
prejudice to any liability which any such official may have incurred under
other existing laws or rules and regulations as a consequence of violating
the provisions of this paragraph.
But significantly, Section 10 of SB 2077 does not provide for any rule on
the computation of money claims.
A rule on the computation of money claims containing the subject clause
was inserted and eventually adopted as the 5th paragraph of Section 10
of R.A. No. 8042. The Court examined the rationale of the subject clause
in the transcripts of the "Bicameral Conference Committee (Conference
Committee) Meetings on the Magna Carta on OCWs (Disagreeing
Provisions of Senate Bill No. 2077 and House Bill No. 14314)." However,
the Court finds no discernible state interest, let alone a compelling one,
that is sought to be protected or advanced by the adoption of the subject
clause.
In fine, the Government has failed to discharge its burden of proving the
existence of a compelling state interest that would justify the
perpetuation of the discrimination against OFWs under the subject clause.

Page

53

Assuming that, as advanced by the OSG, the purpose of the subject


clause is to protect the employment of OFWs by mitigating the solidary
liability of placement agencies, such callous and cavalier rationale will
have to be rejected. There can never be a justification for any form of
government action that alleviates the burden of one sector, but imposes
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the same burden on another sector, especially when the favored sector is
composed of private businesses such as placement agencies, while the
disadvantaged sector is composed of OFWs whose protection no less than
the Constitution commands. The idea that private business interest can
be elevated to the level of a compelling state interest is odious.
Moreover, even if the purpose of the subject clause is to lessen the
solidary liability of placement agencies vis-a-vistheir foreign principals,
there are mechanisms already in place that can be employed to achieve
that purpose without infringing on the constitutional rights of OFWs.
The POEA Rules and Regulations Governing the Recruitment and
Employment of Land-Based Overseas Workers, dated February 4, 2002,
imposes administrative disciplinary measures on erring foreign employers
who default on their contractual obligations to migrant workers and/or
their Philippine agents. These disciplinary measures range from
temporary disqualification to preventive suspension. The POEA Rules and
Regulations Governing the Recruitment and Employment of Seafarers,
dated May 23, 2003, contains similar administrative disciplinary measures
against erring foreign employers.
Resort to these administrative measures is undoubtedly the less
restrictive means of aiding local placement agencies in enforcing the
solidary liability of their foreign principals.
Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No.
8042 is violative of the right of petitioner and other OFWs to equal
protection.1avvphi1
Further, there would be certain misgivings if one is to approach the
declaration of the unconstitutionality of the subject clause from the lone
perspective that the clause directly violates state policy on labor under
Section 3,131Article XIII of the Constitution.

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Thus, the constitutional mandates of protection to labor and security of


tenure may be deemed as self-executing in the sense that these are
automatically acknowledged and observed without need for any enabling
legislation. However, to declare that the constitutional provisions are
enough to guarantee the full exercise of the rights embodied therein, and
the realization of ideals therein expressed, would be impractical, if not
unrealistic. The espousal of such view presents the dangerous tendency of
being overbroad and exaggerated. The guarantees of "full protection to

54

While all the provisions of the 1987 Constitution are presumed selfexecuting,132 there are some which this Court has declared not judicially
enforceable, Article XIII being one,133 particularly Section 3 thereof, the
nature of which, this Court, in Agabon v. National Labor Relations
Commission,134 has described to be not self-actuating:

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labor" and "security of tenure", when examined in isolation, are facially


unqualified, and the broadest interpretation possible suggests a blanket
shield in favor of labor against any form of removal regardless of
circumstance. This interpretation implies an unimpeachable right to
continued employment-a utopian notion, doubtless-but still hardly within
the contemplation of the framers. Subsequent legislation is still needed to
define the parameters of these guaranteed rights to ensure the protection
and promotion, not only the rights of the labor sector, but of the
employers' as well. Without specific and pertinent legislation, judicial
bodies will be at a loss, formulating their own conclusion to approximate
at least the aims of the Constitution.
Ultimately, therefore, Section 3 of Article XIII cannot, on its own,
be a source of a positive enforceable rightto stave off the dismissal
of an employee for just cause owing to the failure to serve proper notice
or hearing. As manifested by several framers of the 1987 Constitution,
the provisions on social justice require legislative enactments for their
enforceability.135 (Emphasis added)
Thus, Section 3, Article XIII cannot be treated as a principal source of
direct enforceable rights, for the violation of which the questioned clause
may be declared unconstitutional. It may unwittingly risk opening the
floodgates of litigation to every worker or union over every conceivable
violation of so broad a concept as social justice for labor.

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The view that the concepts of suspect classification and strict judicial
scrutiny formulated in Central Bank Employee Association exaggerate the
significance of Section 3, Article XIII is a groundless
apprehension. Central Bank applied Article XIII in conjunction with the
equal protection clause. Article XIII, by itself, without the application of
the equal protection clause, has no life or force of its own as elucidated
in Agabon.

55

It must be stressed that Section 3, Article XIII does not directly bestow
on the working class any actual enforceable right, but merely clothes it
with the status of a sector for whom the Constitution urges protection
through executive or legislative action and judicial recognition. Its
utility is best limited to being an impetus not just for the executive and
legislative departments, but for the judiciary as well, to protect the
welfare of the working class. And it was in fact consistent with that
constitutional agenda that the Court in Central Bank (now Bangko Sentral
ng Pilipinas) Employee Association, Inc. v. Bangko Sentral ng
Pilipinas, penned by then Associate Justice now Chief Justice Reynato S.
Puno, formulated the judicial precept that when the challenge to a statute
is premised on the perpetuation of prejudice against persons favored by
the Constitution with special protection -- such as the working class or a
section thereof -- the Court may recognize the existence of a suspect
classification and subject the same to strict judicial scrutiny.

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Along the same line of reasoning, the Court further holds that the subject
clause violates petitioner's right to substantive due process, for it deprives
him of property, consisting of monetary benefits, without any existing
valid governmental purpose.136
The argument of the Solicitor General, that the actual purpose of the
subject clause of limiting the entitlement of OFWs to their three-month
salary in case of illegal dismissal, is to give them a better chance of
getting hired by foreign employers. This is plain speculation. As earlier
discussed, there is nothing in the text of the law or the records of the
deliberations leading to its enactment or the pleadings of respondent that
would indicate that there is an existing governmental purpose for the
subject clause, or even just a pretext of one.
The subject clause does not state or imply any definitive governmental
purpose; and it is for that precise reason that the clause violates not just
petitioner's right to equal protection, but also her right to substantive due
process under Section 1,137 Article III of the Constitution.
The subject clause being unconstitutional, petitioner is entitled to his
salaries for the entire unexpired period of nine months and 23 days of his
employment contract, pursuant to law and jurisprudence prior to the
enactment of R.A. No. 8042.
On the Third Issue
Petitioner contends that his overtime and leave pay should form part of
the salary basis in the computation of his monetary award, because these
are fixed benefits that have been stipulated into his contract.
Petitioner is mistaken.

Page

By the foregoing definition alone, there is no basis for the automatic


inclusion of overtime and holiday pay in the computation of petitioner's
monetary award, unless there is evidence that he performed work during
those periods. As the Court held in Centennial Transmarine, Inc. v. Dela
Cruz,138

56

The word salaries in Section 10(5) does not include overtime and leave
pay. For seafarers like petitioner, DOLE Department Order No. 33, series
1996, provides a Standard Employment Contract of Seafarers, in which
salary is understood as the basic wage, exclusive of overtime, leave pay
and other bonuses; whereas overtime pay is compensation for all work
"performed" in excess of the regular eight hours, and holiday pay is
compensation for any work "performed" on designated rest days and
holidays.

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However, the payment of overtime pay and leave pay should be


disallowed in light of our ruling in Cagampan v. National Labor Relations
Commission, to wit:
The rendition of overtime work and the submission of sufficient proof that
said was actually performed are conditions to be satisfied before a
seaman could be entitled to overtime pay which should be computed on
the basis of 30% of the basic monthly salary. In short, the contract
provision guarantees the right to overtime pay but the entitlement to
such benefit must first be established.
In the same vein, the claim for the day's leave pay for the unexpired
portion of the contract is unwarranted since the same is given during the
actual service of the seamen.
WHEREFORE, the Court GRANTS the Petition. The subject clause "or for
three months for every year of the unexpired term, whichever is less" in
the 5th paragraph of Section 10 of Republic Act No. 8042
is DECLAREDUNCONSTITUTIONAL; and the December 8, 2004
Decision and April 1, 2005 Resolution of the Court of Appeals
are MODIFIED to the effect that petitioner is AWARDED his salaries for
the entire unexpired portion of his employment contract consisting of nine
months and 23 days computed at the rate of US$1,400.00 per month.
No costs.

Page

57

SO ORDERED.

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G.R. No. 170139, August 05, 2014


SAMEER OVERSEAS PLACEMENT AGENCY, INC., Petitioner, v. JOY C.
CABILES, Respondent.
DECISION
LEONEN, J.:
This case involves an overseas Filipino worker with shattered dreams. It is
our duty, given the facts and the law, to approximate justice for her.
We are asked to decide a petition for review1 on certiorari assailing the
Court of Appeals decision2 dated June 27, 2005. This decision partially
affirmed the National Labor Relations Commissions resolution dated
March 31, 2004,3 declaring respondents dismissal illegal, directing
petitioner to pay respondents three-month salary equivalent to New
Taiwan Dollar (NT$) 46,080.00, and ordering it to reimburse the
NT$3,000.00 withheld from respondent, and pay her NT$300.00
attorneys fees.4cralawred
Petitioner, Sameer Overseas Placement Agency, Inc., is a recruitment and
placement agency.5Responding to an ad it published, respondent, Joy C.
Cabiles, submitted her application for a quality control job in
Taiwan.6cralawred
Joys application was accepted.7 Joy was later asked to sign a one-year
employment contract for a monthly salary of NT$15,360.00.8 She alleged
that Sameer Overseas Agency required her to pay a placement fee of
P70,000.00 when she signed the employment contract.9cralawred
Joy was deployed to work for Taiwan Wacoal, Co. Ltd. (Wacoal) on June
26, 1997.10 She alleged that in her employment contract, she agreed to
work as quality control for one year.11 In Taiwan, she was asked to work
as a cutter.12cralawred

Joy claims that she was told that from June 26 to July 14, 1997, she only
earned a total of NT$9,000.15According to her, Wacoal deducted
NT$3,000 to cover her plane ticket to Manila.16cralawred

Page

On October 15, 1997, Joy filed a complaint17 with the National Labor
Relations Commission against petitioner and Wacoal. She claimed that

58

Sameer Overseas Placement Agency claims that on July 14, 1997, a


certain Mr. Huwang from Wacoal informed Joy, without prior notice, that
she was terminated and that she should immediately report to their
office to get her salary and passport.13 She was asked to prepare for
immediate repatriation.14cralawred

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she was illegally dismissed.18 She asked for the return of her placement
fee, the withheld amount for repatriation costs, payment of her salary for
23 months as well as moral and exemplary damages.19 She identified
Wacoal as Sameer Overseas Placement Agencys foreign
principal.20cralawred
Sameer Overseas Placement Agency alleged that respondent's
termination was due to her inefficiency, negligence in her duties, and her
failure to comply with the work requirements [of] her foreign
[employer].21 The agency also claimed that it did not ask for a placement
fee of ?70,000.00.22 As evidence, it showed Official Receipt No. 14860
dated June 10, 1997, bearing the amount of ?20,360.00.23 Petitioner
added that Wacoal's accreditation with petitioner had already been
transferred to the Pacific Manpower & Management Services, Inc. (Pacific)
as of August 6, 1997.24 Thus, petitioner asserts that it was already
substituted by Pacific Manpower.25cralawred
Pacific Manpower moved for the dismissal of petitioners claims against
it.26 It alleged that there was no employer-employee relationship between
them.27 Therefore, the claims against it were outside the jurisdiction of
the Labor Arbiter.28 Pacific Manpower argued that the employment
contract should first be presented so that the employers contractual
obligations might be identified.29 It further denied that it assumed liability
for petitioners illegal acts.30cralawred
On July 29, 1998, the Labor Arbiter dismissed Joys complaint.31 Acting
Executive Labor Arbiter Pedro C. Ramos ruled that her complaint was
based on mere allegations.32 The Labor Arbiter found that there was no
excess payment of placement fees, based on the official receipt presented
by petitioner.33 The Labor Arbiter found unnecessary a discussion on
petitioners transfer of obligations to Pacific34 and considered the matter
immaterial in view of the dismissal of respondents complaint.35cralawred
Joy appealed36 to the National Labor Relations Commission.

59

In a resolution37 dated March 31, 2004, the National Labor Relations


Commission declared that Joy was illegally dismissed.38 It reiterated the
doctrine that the burden of proof to show that the dismissal was based on
a just or valid cause belongs to the employer.39 It found that Sameer
Overseas Placement Agency failed to prove that there were just causes
for termination.40 There was no sufficient proof to show that respondent
was inefficient in her work and that she failed to comply with company
requirements.41Furthermore, procedural due process was not observed in
terminating respondent.42cralawred

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The National Labor Relations Commission did not rule on the issue of
reimbursement of placement fees for lack of jurisdiction.43 It refused to

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entertain the issue of the alleged transfer of obligations to Pacific.44 It did


not acquire jurisdiction over that issue because Sameer Overseas
Placement Agency failed to appeal the Labor Arbiters decision not to rule
on the matter.45cralawred
The National Labor Relations Commission awarded respondent only three
(3) months worth of salary in the amount of NT$46,080, the
reimbursement of the NT$3,000 withheld from her, and attorneys fees of
NT$300.46cralawred
The Commission denied the agencys motion for reconsideration47 dated
May 12, 2004 through a resolution48 dated July 2, 2004.
Aggrieved by the ruling, Sameer Overseas Placement Agency caused the
filing of a petition49 for certiorari with the Court of Appeals assailing the
National Labor Relations Commissions resolutions dated March 31, 2004
and July 2, 2004.
The Court of Appeals50 affirmed the decision of the National Labor
Relations Commission with respect to the finding of illegal dismissal, Joys
entitlement to the equivalent of three months worth of salary,
reimbursement of withheld repatriation expense, and attorneys
fees.51 The Court of Appeals remanded the case to the National Labor
Relations Commission to address the validity of petitioner's allegations
against Pacific.52 The Court of Appeals held,
thus:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, the assailed Resolutions are hereby


partly AFFIRMEDin accordance with the foregoing discussion, but subject
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But we do find it necessary to remand the instant case to the public


respondent for further proceedings, for the purpose of addressing the
validity or propriety of petitioners third-party complaint against the
transferee agent or the Pacific Manpower & Management Services, Inc.
and Lea G. Manabat. We should emphasize that as far as the decision of
the NLRC on the claims of Joy Cabiles, is concerned, the same is hereby
affirmed with finality, and we hold petitioner liable thereon, but without
prejudice to further hearings on its third party complaint against Pacific
for reimbursement.

60

Although the public respondent found the dismissal of the complainantrespondent illegal, we should point out that the NLRC merely awarded her
three (3) months backwages or the amount of NT$46,080.00, which was
based upon its finding that she was dismissed without due process, a
finding that we uphold, given petitioners lack of worthwhile discussion
upon the same in the proceedings below or before us. Likewise we sustain
NLRCs finding in regard to the reimbursement of her fare, which is
squarely based on the law; as well as the award of attorneys fees.

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to the caveat embodied in the last sentence. No costs.


SO ORDERED.53
Dissatisfied, Sameer Overseas Placement Agency filed this
petition.54cralawred
We are asked to determine whether the Court of Appeals erred when it
affirmed the ruling of the National Labor Relations Commission finding
respondent illegally dismissed and awarding her three months worth of
salary, the reimbursement of the cost of her repatriation, and attorneys
fees despite the alleged existence of just causes of termination.
Petitioner reiterates that there was just cause for termination because
there was a finding of Wacoal that respondent was inefficient in her
work.55 Therefore, it claims that respondents dismissal was
valid.56cralawred
Petitioner also reiterates that since Wacoals accreditation was validly
transferred to Pacific at the time respondent filed her complaint, it should
be Pacific that should now assume responsibility for Wacoals contractual
obligations to the workers originally recruited by petitioner.57cralawred
Sameer Overseas Placement Agencys petition is without merit. We find
for respondent.
I
Sameer Overseas Placement Agency failed to show that there was just
cause for causing Joys dismissal. The employer, Wacoal, also failed to
accord her due process of law.

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This prerogative, however, should not be abused. It is tempered with the


employees right to security of tenure.63 Workers are entitled to
substantive and procedural due process before termination. They may not
be removed from employment without a valid or just cause as determined
by law and without going through the proper procedure.

61

Indeed, employers have the prerogative to impose productivity and


quality standards at work.58 They may also impose reasonable rules to
ensure that the employees comply with these standards.59 Failure to
comply may be a just cause for their dismissal.60 Certainly, employers
cannot be compelled to retain the services of an employee who is guilty of
acts that are inimical to the interest of the employer.61 While the law
acknowledges the plight and vulnerability of workers, it does not
authorize the oppression or self-destruction of the
employer.62 Management prerogative is recognized in law and in our
jurisprudence.

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Security of tenure for labor is guaranteed by our Constitution.64cralawred


Employees are not stripped of their security of tenure when they move to
work in a different jurisdiction. With respect to the rights of overseas
Filipino workers, we follow the principle of lex loci contractus.
Thus, in Triple Eight Integrated Services, Inc. v. NLRC,65 this court
noted:chanRoblesvirtualLawlibrary
Petitioner likewise attempts to sidestep the medical certificate
requirement by contending that since Osdana was working in Saudi
Arabia, her employment was subject to the laws of the host country.
Apparently, petitioner hopes to make it appear that the labor laws of
Saudi Arabia do not require any certification by a competent public health
authority in the dismissal of employees due to illness.
Again, petitioners argument is without merit.
First, established is the rule that lex loci contractus (the law of the
place where the contract is made) governs in this jurisdiction.
There is no question that the contract of employment in this case
was perfected here in the Philippines. Therefore, the Labor Code,
its implementing rules and regulations, and other laws affecting
labor apply in this case. Furthermore, settled is the rule that the courts
of the forum will not enforce any foreign claim obnoxious to the forums
public policy. Here in the Philippines, employment agreements are more
than contractual in nature. The Constitution itself, in Article XIII, Section
3, guarantees the special protection of workers, to
wit:chanRoblesvirtualLawlibrary
The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of
employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective
bargaining and negotiations, and peaceful concerted activities, including
the right to strike in accordance with law. They shall be entitled to
security of tenure, humane conditions of work, and a living wage. They
shall also participate in policy and decision-making processes affecting
their rights and benefits as may be provided by law.
. . . .chanrobleslaw

Page

62

This public policy should be borne in mind in this case because to allow
foreign employers to determine for and by themselves whether an
overseas contract worker may be dismissed on the ground of illness

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would encourage illegal or arbitrary pre-termination of employment


contracts.66 (Emphasis supplied, citation omitted)
Even with respect to fundamental procedural rights, this court
emphasized in PCL Shipping Philippines, Inc. v. NLRC,67 to
wit:chanRoblesvirtualLawlibrary
Petitioners admit that they did not inform private respondent in writing of
the charges against him and that they failed to conduct a formal
investigation to give him opportunity to air his side. However, petitioners
contend that the twin requirements of notice and hearing applies strictly
only when the employment is within the Philippines and that these need
not be strictly observed in cases of international maritime or overseas
employment.
The Court does not agree. The provisions of the Constitution as well
as the Labor Code which afford protection to labor apply to
Filipino employees whether working within the Philippines or
abroad. Moreover, the principle of lex loci contractus (the law of
the place where the contract is made) governs in this jurisdiction.
In the present case, it is not disputed that the Contract of Employment
entered into by and between petitioners and private respondent was
executed here in the Philippines with the approval of the Philippine
Overseas Employment Administration (POEA). Hence, the Labor Code
together with its implementing rules and regulations and other laws
affecting labor apply in this case.68 (Emphasis supplied, citations omitted)
By our laws, overseas Filipino workers (OFWs) may only be terminated for
a just or authorized cause and after compliance with procedural due
process requirements.
Article 282 of the Labor Code enumerates the just causes of termination
by the employer. Thus:chanRoblesvirtualLawlibrary
Art. 282. Termination by employer. An employer may terminate an
employment for any of the following causes:cralawlawlibrary
(a) Serious misconduct or willful disobedience by the employee of the
lawful orders of his employer or representative in connection with his
work;chanroblesvirtuallawlibrary

(d) Commission of a crime or offense by the employee against the person


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

63

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


duties;chanroblesvirtuallawlibrary

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of his employer or any immediate member of his family or his duly


authorized representatives; andChanRoblesVirtualawlibrary
(e) Other causes analogous to the foregoing.
Petitioners allegation that respondent was inefficient in her work and
negligent in her duties69 may, therefore, constitute a just cause for
termination under Article 282(b), but only if petitioner was able to prove
it.
The burden of proving that there is just cause for termination is on the
employer. The employer must affirmatively show rationally adequate
evidence that the dismissal was for a justifiable cause.70 Failure to show
that there was valid or just cause for termination would necessarily mean
that the dismissal was illegal.71cralawred
To show that dismissal resulting from inefficiency in work is valid, it must
be shown that: 1) the employer has set standards of conduct and
workmanship against which the employee will be judged; 2) the
standards of conduct and workmanship must have been communicated to
the employee; and 3) the communication was made at a reasonable time
prior to the employees performance assessment.
This is similar to the law and jurisprudence on probationary employees,
which allow termination of the employee only when there is just cause or
when [the probationary employee] fails to qualify as a regular employee
in accordance with reasonable standards made known by the employer to
the employee at the time of his [or her] engagement.72cralawred
However, we do not see why the application of that ruling should be
limited to probationary employment. That rule is basic to the idea of
security of tenure and due process, which are guaranteed to all
employees, whether their employment is probationary or regular.
The pre-determined standards that the employer sets are the bases for
determining the probationary employees fitness, propriety, efficiency,
and qualifications as a regular employee. Due process requires that the
probationary employee be informed of such standards at the time of his
or her engagement so he or she can adjust his or her character or
workmanship accordingly. Proper adjustment to fit the standards upon
which the employees qualifications will be evaluated will increase ones
chances of being positively assessed for regularization by his or her
employer.

Page

64

Assessing an employees work performance does not stop after


regularization. The employer, on a regular basis, determines if an
employee is still qualified and efficient, based on work standards. Based

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on that determination, and after complying with the due process


requirements of notice and hearing, the employer may exercise its
management prerogative of terminating the employee found unqualified.
The regular employee must constantly attempt to prove to his or her
employer that he or she meets all the standards for employment. This
time, however, the standards to be met are set for the purpose of
retaining employment or promotion. The employee cannot be expected to
meet any standard of character or workmanship if such standards were
not communicated to him or her. Courts should remain vigilant on
allegations of the employers failure to communicate work standards that
would govern ones employment if [these are] to discharge in good faith
[their] duty to adjudicate.73cralawred
In this case, petitioner merely alleged that respondent failed to comply
with her foreign employers work requirements and was inefficient in her
work.74No evidence was shown to support such allegations. Petitioner did
not even bother to specify what requirements were not met, what
efficiency standards were violated, or what particular acts of respondent
constituted inefficiency.
There was also no showing that respondent was sufficiently informed of
the standards against which her work efficiency and performance were
judged. The parties conflict as to the position held by respondent
showed that even the matter as basic as the job title was not
clear.
The bare allegations of petitioner are not sufficient to support a claim that
there is just cause for termination. There is no proof that respondent was
legally terminated.
Petitioner failed to comply with
the due process requirements

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A valid dismissal requires both a valid cause and adherence to the valid
procedure of dismissal.75 The employer is required to give the charged
employee at least two written notices before termination.76 One of the
written notices must inform the employee of the particular acts that may
cause his or her dismissal.77 The other notice must [inform] the
employee of the employers decision.78 Aside from the notice
requirement, the employee must also be given an opportunity to be

65

Respondents dismissal less than one year from hiring and her
repatriation on the same day show not only failure on the part of
petitioner to comply with the requirement of the existence of just cause
for termination. They patently show that the employers did not comply
with the due process requirement.

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heard.79cralawred
Petitioner failed to comply with the twin notices and hearing
requirements. Respondent started working on June 26, 1997. She was
told that she was terminated on July 14, 1997 effective on the same day
and barely a month from her first workday. She was also repatriated on
the same day that she was informed of her termination. The abruptness
of the termination negated any finding that she was properly notified and
given the opportunity to be heard. Her constitutional right to due process
of law was violated.
II
Respondent Joy Cabiles, having been illegally dismissed, is entitled to her
salary for the unexpired portion of the employment contract that was
violated together with attorneys fees and reimbursement of amounts
withheld from her salary.
Section 10 of Republic Act No. 8042, otherwise known as the Migrant
Workers and Overseas Filipinos Act of 1995, states that overseas workers
who were terminated without just, valid, or authorized cause shall be
entitled to the full reimbursement of his placement fee with interest of
twelve (12%) per annum, plus his salaries for the unexpired portion of his
employment contract or for three (3) months for every year of the
unexpired term, whichever is less.

Page

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


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

66

Sec. 10. MONEY CLAIMS. Notwithstanding any provision of law to the


contrary, the Labor Arbiters of the National Labor Relations Commission
(NLRC) shall have the original and exclusive jurisdiction to hear and
decide, within ninety (90) calendar days after filing of the complaint, the
claims arising out of an employer-employee relationship or by virtue of
any law or contract involving Filipino workers for overseas deployment
including claims for actual, moral, exemplary and other forms of
damages.

Such liabilities shall continue during the entire period or duration of the
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employment contract and shall not be affected by any substitution,


amendment or modification made locally or in a foreign country of the
said contract.
Any compromise/amicable settlement or voluntary agreement on money
claims inclusive of damages under this section shall be paid within four
(4) months from the approval of the settlement by the appropriate
authority.
In case of termination of overseas employment without just, valid or
authorized cause as defined by law or contract, the workers shall be
entitled to the full reimbursement of his placement fee with interest of
twelve (12%) per annum, plus his salaries for the unexpired portion of his
employment contract or for three (3) months for every year of the
unexpired term, whichever is less.
....
(Emphasis supplied)chanrobleslaw
Section 15 of Republic Act No. 8042 states that repatriation of the
worker and the transport of his [or her] personal belongings shall be the
primary responsibility of the agency which recruited or deployed the
worker overseas. The exception is when termination of employment is
due solely to the fault of the worker,80 which as we have established, is
not the case. It reads:chanRoblesvirtualLawlibrary
SEC. 15. REPATRIATION OF WORKERS; EMERGENCY REPATRIATION
FUND. The repatriation of the worker and the transport of his personal
belongings shall be the primary responsibility of the agency which
recruited or deployed the worker overseas. All costs attendant to
repatriation shall be borne by or charged to the agency concerned and/or
its principal. Likewise, the repatriation of remains and transport of the
personal belongings of a deceased worker and all costs attendant thereto
shall be borne by the principal and/or local agency. However, in cases
where the termination of employment is due solely to the fault of the
worker, the principal/employer or agency shall not in any manner be
responsible for the repatriation of the former and/or his belongings.
....

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The Court of Appeals affirmed the National Labor Relations Commissions


decision to award respondent NT$46,080.00 or the three-month
equivalent of her salary, attorneys fees of NT$300.00, and the
reimbursement of the withheld NT$3,000.00 salary, which answered for

67

The Labor Code81 also entitles the employee to 10% of the amount of
withheld wages as attorneys fees when the withholding is unlawful.

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her repatriation.
We uphold the finding that respondent is entitled to all of these
awards. The award of the three-month equivalent of respondents
salary should, however, be increased to the amount equivalent to
the unexpired term of the employment contract.
In Serrano v. Gallant Maritime Services, Inc. and Marlow Navigation Co.,
Inc.,82 this court ruled that the clause or for three (3) months for every
year of the unexpired term, whichever is less83 is unconstitutional for
violating the equal protection clause and substantive due
process.84cralawred
A statute or provision which was declared unconstitutional is not a law. It
confers no rights; it imposes no duties; it affords no protection; it
creates no office; it is inoperative as if it has not been passed at
all.85cralawred
We are aware that the clause or for three (3) months for every year of
the unexpired term, whichever is less was reinstated in Republic Act No.
8042 upon promulgation of Republic Act No. 10022 in 2010. Section 7 of
Republic Act No. 10022 provides:chanRoblesvirtualLawlibrary
Section 7. Section 10 of Republic Act No. 8042, as amended, is hereby
amended to read as follows:chanRoblesvirtualLawlibrary

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


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

68

SEC. 10. Money Claims. Notwithstanding any provision of law to the


contrary, the Labor Arbiters of the National Labor Relations Commission
(NLRC) shall have the original and exclusive jurisdiction to hear and
decide, within ninety (90) calendar days after the filing of the complaint,
the claims arising out of an employer-employee relationship or by virtue
of any law or contract involving Filipino workers for overseas deployment
including claims for actual, moral, exemplary and other forms of damage.
Consistent with this mandate, the NLRC shall endeavor to update and
keep abreast with the developments in the global services industry.

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Such liabilities shall continue during the entire period or duration of the
employment contract and shall not be affected by any substitution,
amendment or modification made locally or in a foreign country of the
said contract.
Any compromise/amicable settlement or voluntary agreement on money
claims inclusive of damages under this section shall be paid within thirty
(30) days from approval of the settlement by the appropriate authority.
In case of termination of overseas employment without just, valid or
authorized cause as defined by law or contract, or any unauthorized
deductions from the migrant workers salary, the worker shall be entitled
to the full reimbursement if [sic] his placement fee and the deductions
made with interest at twelve percent (12%) per annum, plus his salaries
for the unexpired portion of his employment contract or for three (3)
months for every year of the unexpired term, whichever is less.
In case of a final and executory judgement against a foreign
employer/principal, it shall be automatically disqualified, without further
proceedings, from participating in the Philippine Overseas Employment
Program and from recruiting and hiring Filipino workers until and unless it
fully satisfies the judgement award.
Noncompliance with the mandatory periods for resolutions of case
provided under this section shall subject the responsible officials to any or
all of the following penalties:cralawlawlibrary
(a) The salary of any such official who fails to render his decision or
resolution within the prescribed period shall be, or caused to be, withheld
until the said official complies therewith;chanroblesvirtuallawlibrary
(b) Suspension for not more than ninety (90) days; or
(c) Dismissal from the service with disqualification to hold any appointive
public office for five (5) years.

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Republic Act No. 10022 was promulgated on March 8, 2010. This means
that the reinstatement of the clause in Republic Act No. 8042 was not yet
in effect at the time of respondents termination from work in
1997.86 Republic Act No. 8042 before it was amended by Republic Act No.
10022 governs this case.

69

Provided, however, That the penalties herein provided shall be without


prejudice to any liability which any such official may have incured [sic]
under other existing laws or rules and regulations as a consequence of
violating the provisions of this paragraph. (Emphasis supplied)

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When a law is passed, this court awaits an actual case that clearly raises
adversarial positions in their proper context before considering a prayer to
declare it as unconstitutional.
However, we are confronted with a unique situation. The law passed
incorporates the exact clause already declared as unconstitutional,
without any perceived substantial change in the circumstances.
This may cause confusion on the part of the National Labor Relations
Commission and the Court of Appeals. At minimum, the existence of
Republic Act No. 10022 may delay the execution of the judgment in this
case, further frustrating remedies to assuage the wrong done to
petitioner. Hence, there is a necessity to decide this constitutional issue.
Moreover, this court is possessed with the constitutional duty to
[p]romulgate rules concerning the protection and enforcement of
constitutional rights.87 When cases become moot and academic, we do
not hesitate to provide for guidance to bench and bar in situations where
the same violations are capable of repetition but will evade review. This is
analogous to cases where there are millions of Filipinos working abroad
who are bound to suffer from the lack of protection because of the
restoration of an identical clause in a provision previously declared as
unconstitutional.
In the hierarchy of laws, the Constitution is supreme. No branch or office
of the government may exercise its powers in any manner inconsistent
with the Constitution, regardless of the existence of any law that supports
such exercise. The Constitution cannot be trumped by any other law. All
laws must be read in light of the Constitution. Any law that is inconsistent
with it is a nullity.
Thus, when a law or a provision of law is null because it is inconsistent
with the Constitution, the nullity cannot be cured by reincorporation or
reenactment of the same or a similar law or provision. A law or provision
of law that was already declared unconstitutional remains as such unless
circumstances have so changed as to warrant a reverse conclusion.
We are not convinced by the pleadings submitted by the parties that the
situation has so changed so as to cause us to reverse binding precedent.

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The new law puts our overseas workers in the same vulnerable position
as they were prior to Serrano. Failure to reiterate the very ratio decidendi
of that case will result in the same untold economic hardships that our
reading of the Constitution intended to avoid. Obviously, we cannot

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Likewise, there are special reasons of judicial efficiency and economy that
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countenance added expenses for further litigation that will reduce their
hard-earned wages as well as add to the indignity of having been
deprived of the protection of our laws simply because our precedents
have not been followed. There is no constitutional doctrine that causes
injustice in the face of empty procedural niceties. Constitutional
interpretation is complex, but it is never unreasonable.
Thus, in a resolution88 dated October 22, 2013, we ordered the parties
and the Office of the Solicitor General to comment on the constitutionality
of the reinstated clause in Republic Act No. 10022.
In its comment,89 petitioner argued that the clause was
constitutional.90 The legislators intended a balance between the
employers and the employees rights by not unduly burdening the local
recruitment agency.91 Petitioner is also of the view that the clause was
already declared as constitutional inSerrano.92cralawred
The Office of the Solicitor General also argued that the clause was valid
and constitutional.93 However, since the parties never raised the issue of
the constitutionality of the clause as reinstated in Republic Act No. 10022,
its contention is that it is beyond judicial review.94cralawred
On the other hand, respondent argued that the clause was
unconstitutional because it infringed on workers right to
contract.95cralawred
We observe that the reinstated clause, this time as provided in Republic
Act. No. 10022, violates the constitutional rights to equal protection and
due process.96 Petitioner as well as the Solicitor General have failed to
show any compelling change in the circumstances that would warrant us
to revisit the precedent.
We reiterate our finding in Serrano v. Gallant Maritime that
limiting wages that should be recovered by an illegally dismissed
overseas worker to three months is both a violation of due
process and the equal protection clauses of the Constitution.

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In creating laws, the legislature has the power to make distinctions and
classifications.99 In exercising such power, it has a wide
discretion.100cralawred

71

Equal protection of the law is a guarantee that persons under like


circumstances and falling within the same class are treated alike, in terms
of privileges conferred and liabilities enforced.97 It is a guarantee
against undue favor and individual or class privilege, as well as hostile
discrimination or the oppression of inequality.98cralawred

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The equal protection clause does not infringe on this legislative


power.101 A law is void on this basis, only if classifications are made
arbitrarily.102 There is no violation of the equal protection clause if the law
applies equally to persons within the same class and if there are
reasonable grounds for distinguishing between those falling within the
class and those who do not fall within the class.103 A law that does not
violate the equal protection clause prescribes a reasonable
classification.104cralawred
A reasonable classification (1) must rest on substantial distinctions; (2)
must be germane to the purposes of the law; (3) must not be limited to
existing conditions only; and (4) must apply equally to all members of the
same class.105cralawred
The reinstated clause does not satisfy the requirement of reasonable
classification.
In Serrano, we identified the classifications made by the reinstated
clause. It distinguished between fixed-period overseas workers and fixedperiod local workers.106 It also distinguished between overseas workers
with employment contracts of less than one year and overseas workers
with employment contracts of at least one year.107 Within the class of
overseas workers with at least one-year employment contracts, there was
a distinction between those with at least a year left in their contracts and
those with less than a year left in their contracts when they were illegally
dismissed.108cralawred
The Congress classification may be subjected to judicial review. In
Serrano, there is a legislative classification which impermissibly
interferes with the exercise of a fundamental right or operates to the
peculiar disadvantage of a suspect class.109cralawred

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We also noted in Serrano that before the passage of Republic Act No.
8042, the money claims of illegally terminated overseas and local workers
with fixed-term employment were computed in the same manner.112 Their
money claims were computed based on the unexpired portions of their
contracts.113The adoption of the reinstated clause in Republic Act No.
8042 subjected the money claims of illegally dismissed overseas workers
with an unexpired term of at least a year to a cap of three months worth
of their salary.114 There was no such limitation on the money claims of
illegally terminated local workers with fixed-term

72

Under the Constitution, labor is afforded special protection.110 Thus, this


court in Serrano, [i]mbued with the same sense of obligation to afford
protection to labor, . . . employ[ed] the standard of strict judicial
scrutiny, for it perceive[d] in the subject clause a suspect classification
prejudicial to OFWs.111cralawred

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employment.115cralawred
We observed that illegally dismissed overseas workers whose employment
contracts had a term of less than one year were granted the amount
equivalent to the unexpired portion of their employment
contracts.116 Meanwhile, illegally dismissed overseas workers with
employment terms of at least a year were granted a cap equivalent to
three months of their salary for the unexpired portions of their
contracts.117cralawred
Observing the terminologies used in the clause, we also found that the
subject clause creates a sub-layer of discrimination among OFWs whose
contract periods are for more than one year: those who are illegally
dismissed with less than one year left in their contracts shall be entitled
to their salaries for the entire unexpired portion thereof, while those who
are illegally dismissed with one year or more remaining in their contracts
shall be covered by the reinstated clause, and their monetary benefits
limited to their salaries for three months only.118cralawred
We do not need strict scrutiny to conclude that these classifications do not
rest on any real or substantial distinctions that would justify different
treatments in terms of the computation of money claims resulting from
illegal termination.
Overseas workers regardless of their classifications are entitled to security
of tenure, at least for the period agreed upon in their contracts. This
means that they cannot be dismissed before the end of their contract
terms without due process. If they were illegally dismissed, the workers
right to security of tenure is violated.
The rights violated when, say, a fixed-period local worker is illegally
terminated are neither greater than nor less than the rights violated when
a fixed-period overseas worker is illegally terminated. It is state policy to
protect the rights of workers without qualification as to the place of
employment.119 In both cases, the workers are deprived of their expected
salary, which they could have earned had they not been illegally
dismissed. For both workers, this deprivation translates to economic
insecurity and disparity.120The same is true for the distinctions between
overseas workers with an employment contract of less than one year and
overseas workers with at least one year of employment contract, and
between overseas workers with at least a year left in their contracts and
overseas workers with less than a year left in their contracts when they
were illegally dismissed.

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73

For this reason, we cannot subscribe to the argument that [overseas


workers] are contractual employees who can never acquire regular
employment status, unlike local workers121 because it already justifies

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differentiated treatment in terms of the computation of money


claims.122cralawred
Likewise, the jurisdictional and enforcement issues on overseas workers
money claims do not justify a differentiated treatment in the computation
of their money claims.123 If anything, these issues justify an equal, if not
greater protection and assistance to overseas workers who generally are
more prone to exploitation given their physical distance from our
government.
We also find that the classifications are not relevant to the purpose of the
law, which is to establish a higher standard of protection and promotion
of the welfare of migrant workers, their families and overseas Filipinos in
distress, and for other purposes.124 Further, we find specious the
argument that reducing the liability of placement agencies redounds to
the benefit of the [overseas] workers.125cralawred
Putting a cap on the money claims of certain overseas workers does not
increase the standard of protection afforded to them. On the other hand,
foreign employers are more incentivized by the reinstated clause to enter
into contracts of at least a year because it gives them more flexibility to
violate our overseas workers rights. Their liability for arbitrarily
terminating overseas workers is decreased at the expense of the workers
whose rights they violated. Meanwhile, these overseas workers who are
impressed with an expectation of a stable job overseas for the longer
contract period disregard other opportunities only to be terminated
earlier. They are left with claims that are less than what others in the
same situation would receive. The reinstated clause, therefore, creates a
situation where the law meant to protect them makes violation of rights
easier and simply benign to the violator.

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Section 10 of R.A. No. 8042 affects these well-laid rules and measures,
and in fact provides a hidden twist affecting the principal/employers
liability. While intended as an incentive accruing to recruitment/manning
agencies, the law, as worded, simply limits the OFWs recovery in
wrongful dismissal situations. Thus, it redounds to the benefit of whoever
may be liable, including the principal/employer the direct employer
primarily liable for the wrongful dismissal. In this sense, Section 10
read as a grant of incentives to recruitment/manning agencies
oversteps what it aims to do by effectively limiting what is otherwise the
full liability of the foreign principals/employers. Section 10, in short, really
operates to benefit the wrong party and allows that party, without
justifiable reason, to mitigate its liability for wrongful dismissals. Because
of this hidden twist, the limitation of liability under Section 10 cannot be
an appropriate incentive, to borrow the term that R.A. No. 8042 itself

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As Justice Brion said in his concurring opinion in


Serrano:chanRoblesvirtualLawlibrary

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uses to describe the incentive it envisions under its purpose clause.


What worsens the situation is the chosen mode of granting the incentive:
instead of a grant that, to encourage greater efforts at recruitment, is
directly related to extra efforts undertaken, the law simply limits their
liability for the wrongful dismissals of already deployed OFWs. This is
effectively a legally-imposed partial condonation of their liability to OFWs,
justified solely by the laws intent to encourage greater deployment
efforts. Thus, the incentive, from a more practical and realistic view, is
really part of a scheme to sell Filipino overseas labor at a bargain for
purposes solely of attracting the market. . . .
The so-called incentive is rendered particularly odious by its effect on the
OFWs the benefits accruing to the recruitment/manning agencies and
their principals are taken from the pockets of the OFWs to whom the full
salaries for the unexpired portion of the contract rightfully belong. Thus,
the principals/employers and the recruitment/manning agencies even
profit from their violation of the security of tenure that an employment
contract embodies. Conversely, lesser protection is afforded the OFW, not
only because of the lessened recovery afforded him or her by operation of
law, but also because this same lessened recovery renders a wrongful
dismissal easier and less onerous to undertake; the lesser cost of
dismissing a Filipino will always be a consideration a foreign employer will
take into account in termination of employment decisions. . . .126
Further, [t]here can never be a justification for any form of government
action that alleviates the burden of one sector, but imposes the same
burden on another sector, especially when the favored sector is composed
of private businesses such as placement agencies, while the
disadvantaged sector is composed of OFWs whose protection no less than
the Constitution commands. The idea that private business interest can
be elevated to the level of a compelling state interest is
odious.127cralawred

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Respondent Joy Cabiles is entitled to her salary for the unexpired portion
of her contract, in accordance with Section 10 of Republic Act No. 8042.
The award of the three-month equivalence of respondents salary must be
modified accordingly. Since she started working on June 26, 1997 and
was terminated on July 14, 1997, respondent is entitled to her salary
from July 15, 1997 to June 25, 1998. To rule otherwise would be
iniquitous to petitioner and other OFWs, and would, in effect, send a
wrong signal that principals/employers and recruitment/manning agencies
may violate an OFWs security of tenure which an employment contract

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Along the same line, we held that the reinstated clause violates due
process rights. It is arbitrary as it deprives overseas workers of their
monetary claims without any discernable valid purpose.128cralawred

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embodies and actually profit from such violation based on an


unconstitutional provision of law.129cralawred
III
On the interest rate, the Bangko Sentral ng Pilipinas Circular No. 799 of
June 21, 2013, which revised the interest rate for loan or forbearance
from 12% to 6% in the absence of stipulation, applies in this case. The
pertinent portions of Circular No. 799, Series of 2013,
read:chanRoblesvirtualLawlibrary
The Monetary Board, in its Resolution No. 796 dated 16 May 2013,
approved the following revisions governing the rate of interest in the
absence of stipulation in loan contracts, thereby amending Section 2 of
Circular No. 905, Series of 1982:cralawlawlibrary
Section 1. The rate of interest for the loan or forbearance of any money,
goods or credits and the rate allowed in judgments, in the absence of an
express contract as to such rate of interest, shall be six percent (6%) per
annum.
Section 2. In view of the above, Subsection X305.1 of the Manual of
Regulations for Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of the
Manual of Regulations for Non-Bank Financial Institutions are hereby
amended accordingly.
This Circular shall take effect on 1 July 2013.
Through the able ponencia of Justice Diosdado Peralta, we laid down the
guidelines in computing legal interest in Nacar v. Gallery
Frames:130cralawred
II. With regard particularly to an award of interest in the concept of actual
and compensatory damages, the rate of interest, as well as the accrual
thereof, is imposed, as follows:chanRoblesvirtualLawlibrary
1. When the obligation is breached, and it consists in the payment of a
sum of money, i.e., a loan or forbearance of money, the interest
due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from
the time it is judicially demanded. In the absence of stipulation, the
rate of interest shall be 6% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under and subject
to the provisions of Article 1169 of the Civil Code.

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76

2. When an obligation, not constituting a loan or forbearance of


money, is breached, an interest on the amount of damages
awarded may be imposed at the discretion of the court at the rate

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of 6% per annum. No interest, however, shall be adjudged on


unliquidated claims or damages, except when or until the demand
can be established with reasonable certainty. Accordingly, where
the demand is established with reasonable certainty, the interest
shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code), but when such certainty
cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of
damages may be deemed to have been reasonably ascertained).
The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes
final and executory, the rate of legal interest, whether the case falls
under paragraph 1 or paragraph 2, above, shall be 6% per
annumfrom such finality until its satisfaction, this interim period
being deemed to be by then an equivalent to a forbearance of
credit.
And, in addition to the above, judgments that have become final and
executory prior to July 1, 2013, shall not be disturbed and shall continue
to be implemented applying the rate of interest fixed therein.131
Circular No. 799 is applicable only in loans and forbearance of money,
goods, or credits, and in judgments when there is no stipulation on the
applicable interest rate. Further, it is only applicable if the judgment did
not become final and executory before July 1, 2013.132cralawred

For example, Section 10 of Republic Act No. 8042 provides that unlawfully
terminated overseas workers are entitled to the reimbursement of his or
her placement fee with an interest of 12% per annum. Since Bangko
Sentral ng Pilipinas circulars cannot repeal Republic Act No. 8042, the
issuance of Circular No. 799 does not have the effect of changing the
interest on awards for reimbursement of placement fees from 12% to 6%.
This is despite Section 1 of Circular No. 799, which provides that the 6%
interest rate applies even to judgments.

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Moreover, laws are deemed incorporated in contracts. The contracting


parties need not repeat them. They do not even have to be referred to.

77

We add that Circular No. 799 is not applicable when there is a law that
states otherwise. While the Bangko Sentral ng Pilipinas has the power to
set or limit interest rates,133 these interest rates do not apply when the
law provides that a different interest rate shall be applied. [A] Central
Bank Circular cannot repeal a law. Only a law can repeal another
law.134cralawred

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Every contract, thus, contains not only what has been explicitly
stipulated, but the statutory provisions that have any bearing on the
matter.135 There is, therefore, an implied stipulation in contracts between
the placement agency and the overseas worker that in case the overseas
worker is adjudged as entitled to reimbursement of his or her placement
fees, the amount shall be subject to a 12% interest per annum. This
implied stipulation has the effect of removing awards for reimbursement
of placement fees from Circular No. 799s coverage.
The same cannot be said for awards of salary for the unexpired portion of
the employment contract under Republic Act No. 8042. These awards are
covered by Circular No. 799 because the law does not provide for a
specific interest rate that should apply.
In sum, if judgment did not become final and executory before July 1,
2013 and there was no stipulation in the contract providing for a different
interest rate, other money claims under Section 10 of Republic Act No.
8042 shall be subject to the 6% interest per annum in accordance with
Circular No. 799.
This means that respondent is also entitled to an interest of 6% per
annum on her money claims from the finality of this judgment.
IV
Finally, we clarify the liabilities of Wacoal as principal and petitioner as the
employment agency that facilitated respondents overseas employment.
Section 10 of the Migrant Workers and Overseas Filipinos Act of 1995
provides that the foreign employer and the local employment agency are
jointly and severally liable for money claims including claims arising out of
an employer-employee relationship and/or damages. This section also
provides that the performance bond filed by the local agency shall be
answerable for such money claims or damages if they were awarded to
the employee.

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In overseas employment, the filing of money claims against the foreign


employer is attended by practical and legal complications. The distance of
the foreign employer alone makes it difficult for an overseas worker to
reach it and make it liable for violations of the Labor Code. There are also
possible conflict of laws, jurisdictional issues, and procedural rules that
may be raised to frustrate an overseas workers attempt to advance his or
her claims.

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This provision is in line with the states policy of affording protection to


labor and alleviating workers plight.136cralawred

It may be argued, for instance, that the foreign employer must be


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impleaded in the complaint as an indispensable party without which no


final determination can be had of an action.137cralawred
The provision on joint and several liability in the Migrant Workers and
Overseas Filipinos Act of 1995 assures overseas workers that their rights
will not be frustrated with these complications.
The fundamental effect of joint and several liability is that each of the
debtors is liable for the entire obligation.138 A final determination may,
therefore, be achieved even if only one of the joint and several debtors
are impleaded in an action. Hence, in the case of overseas employment,
either the local agency or the foreign employer may be sued for all claims
arising from the foreign employers labor law violations. This way, the
overseas workers are assured that someone the foreign employers
local agent may be made to answer for violations that the foreign
employer may have committed.
The Migrant Workers and Overseas Filipinos Act of 1995 ensures that
overseas workers have recourse in law despite the circumstances of their
employment. By providing that the liability of the foreign employer may
be enforced to the full extent139 against the local agent, the overseas
worker is assured of immediate and sufficient payment of what is due
them.140cralawred
Corollary to the assurance of immediate recourse in law, the provision on
joint and several liability in the Migrant Workers and Overseas Filipinos
Act of 1995 shifts the burden of going after the foreign employer from the
overseas worker to the local employment agency. However, it must be
emphasized that the local agency that is held to answer for the overseas
workers money claims is not left without remedy. The law does not
preclude it from going after the foreign employer for reimbursement of
whatever payment it has made to the employee to answer for the money
claims against the foreign employer.

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With the present state of the pleadings, it is not possible to determine


whether there was indeed a transfer of obligations from petitioner to
Pacific. This should not be an obstacle for the respondent overseas worker
to proceed with the enforcement of this judgment. Petitioner is possessed

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A further implication of making local agencies jointly and severally liable


with the foreign employer is that an additional layer of protection is
afforded to overseas workers. Local agencies, which are businesses by
nature, are inoculated with interest in being always on the lookout against
foreign employers that tend to violate labor law. Lest they risk their
reputation or finances, local agencies must already have mechanisms for
guarding against unscrupulous foreign employers even at the level prior
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with the resources to determine the proper legal remedies to enforce its
rights against Pacific, if any.
V
Many times, this court has spoken on what Filipinos may encounter as
they travel into the farthest and most difficult reaches of our planet to
provide for their families. In Prieto v. NLRC:141cralawred
The Court is not unaware of the many abuses suffered by our overseas
workers in the foreign land where they have ventured, usually with heavy
hearts, in pursuit of a more fulfilling future. Breach of contract,
maltreatment, rape, insufficient nourishment, sub-human lodgings, insults
and other forms of debasement, are only a few of the inhumane acts to
which they are subjected by their foreign employers, who probably feel
they can do as they please in their own country. While these workers may
indeed have relatively little defense against exploitation while they are
abroad, that disadvantage must not continue to burden them when they
return to their own territory to voice their muted complaint. There is no
reason why, in their very own land, the protection of our own laws cannot
be extended to them in full measure for the redress of their
grievances.142chanrobleslaw
But it seems that we have not said enough.
We face a diaspora of Filipinos. Their travails and their heroism can be
told a million times over; each of their stories as real as any other.
Overseas Filipino workers brave alien cultures and the heartbreak of
families left behind daily. They would count the minutes, hours, days,
months, and years yearning to see their sons and daughters. We all know
of the joy and sadness when they come home to see them all grown up
and, being so, they remember what their work has cost them. Twitter
accounts, Facetime, and many other gadgets and online applications will
never substitute for their lost physical presence.

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This government loses its soul if we fail to ensure decent treatment for all
Filipinos. We default by limiting the contractual wages that should be paid
to our workers when their contracts are breached by the foreign
employers. While we sit, this court will ensure that our laws will reward
our overseas workers with what they deserve: their dignity.

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Unknown to them, they keep our economy afloat through the ebb and
flow of political and economic crises. They are our true diplomats, they
who show the world the resilience, patience, and creativity of our people.
Indeed, we are a people who contribute much to the provision of material
creations of this world.

Inevitably, their dignity is ours as well.


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WHEREFORE, the petition is DENIED. The decision of the Court of


Appeals is AFFIRMED with modification. Petitioner Sameer Overseas
Placement Agency is ORDERED to pay respondent Joy C. Cabiles the
amount equivalent to her salary for the unexpired portion of her
employment contract at an interest of 6% per annum from the finality of
this judgment. Petitioner is also ORDERED to reimburse respondent the
withheld NT$3,000.00 salary and pay respondent attorneys fees of
NT$300.00 at an interest of 6% per annum from the finality of this
judgment.
The clause, or for three (3) months for every year of the unexpired term,
whichever is less in Section 7 of Republic Act No. 10022 amending
Section 10 of Republic Act No. 8042 is declared unconstitutional and,
therefore, null and void.

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SO ORDERED.

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


RUBEN SERRANO, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and ISETANN DEPARTMENT STORE, respondents.
DECISION
MENDOZA, J.:
This is a petition seeking review of the resolutions, dated March 30, 1994 and
August 26, 1994, of the National Labor Relations Commission (NLRC) which
reversed the decision of the Labor Arbiter and dismissed petitioner Ruben
Serranos complaint for illegal dismissal and denied his motion for reconsideration.
The facts are as follows:
Petitioner was hired by private respondent Isetann Department Store as a security
checker to apprehend shoplifters and prevent pilferage of merchandise. Initially
hired on October 4, 1984 on contractual basis, petitioner eventually became a
regular employee on April 4, 1985. In 1988, he became head of the Security
Checkers Section of private respondent.
[1]

[2]

Sometime in 1991, as a cost-cutting measure, private respondent decided to phase


out its entire security section and engage the services of an independent security
agency. For this reason, it wrote petitioner the following memorandum:
[3]

October 11, 1991


MR. RUBEN SERRANO
PRESENT
Dear Mr. Serrano,
......In view of the retrenchment program of the company, we hereby
reiterate our verbal notice to you of your termination as Security
Section Head effective October 11, 1991.
......Please secure your clearance from this office.
Very truly yours,

[4]

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The loss of his employment prompted petitioner to file a complaint on December


3, 1991 for illegal dismissal, illegal layoff, unfair labor practice, underpayment of
wages, and nonpayment of salary and overtime pay.

82

[Sgd.] TERESITA A. VILLANUEVA


Human Resources Division Manager

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

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


complainant.
Whether or not complainant is entitled to his monetary claims for
underpayment of wages, nonpayment of salaries, 13th month pay for
1991 and overtime pay.
Whether or not Respondent is guilty of unfair labor practice.
Thereafter, the case was heard. On April 30, 1993, the Labor Arbiter rendered a
decision finding petitioner to have been illegally dismissed. He ruled that private
respondent failed to establish that it had retrenched its security section to prevent
or minimize losses to its business; that private respondent failed to accord due
process to petitioner; that private respondent failed to use reasonable standards in
selecting employees whose employment would be terminated; that private
respondent had not shown that petitioner and other employees in the security
section were so inefficient so as to justify their replacement by a security agency,
or that "cost-saving devices [such as] secret video cameras (to monitor and prevent
shoplifting) and secret code tags on the merchandise" could not have been
employed; instead, the day after petitioners dismissal, private respondent
employed a safety and security supervisor with duties and functions similar to
those of petitioner.
Accordingly, the Labor Arbiter ordered:

[6]

WHEREFORE, above premises considered, judgment is hereby


decreed:

Page

(b)......Ordering the Respondent to immediately reinstate


the complainant to his former position as security
section head or to a reasonably equivalent supervisorial
position in charges of security without loss of seniority

83

(a)......Finding the dismissal of the complainant to be


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

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rights, privileges and benefits. This order is immediately


executory even pending appeal;
(c)......Ordering the Respondent to pay complainant
unpaid wages in the amount of P2,020.73 and
proportionate 13th month pay in the amount
of P3,198.30;
(d)......Ordering the Respondent to pay complainant the
amount of P7,995.91, representing 10% attorneys fees
based on the total judgment award of P79,959.12.
All other claims of the complainant whether monetary
or otherwise is hereby dismissed for lack of merit.
SO ORDERED.
Private respondent appealed to the NLRC which, in its resolution of March 30,
1994, reversed the decision of the Labor Arbiter and ordered petitioner to be given
separation pay equivalent to one month pay for every year of service, unpaid
salary, and proportionate 13th month pay. Petitioner filed a motion for
reconsideration, but his motion was denied.
The NLRC held that the phase-out of private respondents security section and the
hiring of an independent security agency constituted an exercise by private
respondent of "[a] legitimate business decision whose wisdom we do not intend to
inquire into and for which we cannot substitute our judgment"; that the distinction
made by the Labor Arbiter between "retrenchment" and the employment of "costsaving devices" under Art. 283 of the Labor Code was insignificant because the
company official who wrote the dismissal letter apparently used the term
"retrenchment" in its "plain and ordinary sense: to layoff or remove from ones job,
regardless of the reason therefor"; that the rule of "reasonable criteria" in the
selection of the employees to be retrenched did not apply because all positions in
the security section had been abolished; and that the appointment of a safety and
security supervisor referred to by petitioner to prove bad faith on private
respondents part was of no moment because the position had long been in
existence and was separate from petitioners position as head of the Security
Checkers Section.

Page

IS THE HIRING OF AN INDEPENDENT SECURITY AGENCY


BY THE PRIVATE RESPONDENT TO REPLACE ITS CURRENT
SECURITY SECTION A VALID GROUND FOR THE

84

Hence this petition. Petitioner raises the following issue:

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DISMISSAL OF THE EMPLOYEES CLASSED UNDER THE


LATTER?
[7]

Petitioner contends that abolition of private respondents Security Checkers


Section and the employment of an independent security agency do not fall under
any of the authorized causes for dismissal under Art. 283 of the Labor Code.
Petitioner Laid Off for Cause
Petitioners contention has no merit. Art. 283 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.
In De Ocampo v. National Labor Relations Commission, this Court upheld the
termination of employment of three mechanics in a transportation company and
their replacement by a company rendering maintenance and repair services. It held:
[8]

In contracting the services of Gemac Machineries, as part of the


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

85

[9]

In Asian Alcohol Corporation v. National Labor Relations Commission, the


Court likewise upheld the termination of employment of water pump tenders and

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[10]

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their replacement by independent contractors. It ruled that an employers good


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

[12]

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

[14]

[15]

Accordingly, we hold that the termination of petitioners services was for an


authorized cause, i.e., redundancy. Hence, pursuant to Art. 283 of the Labor Code,
petitioner should be given separation pay at the rate of one month pay for every
year of service.
Sanctions for Violations of the Notice Requirement
Art. 283 also provides that to terminate the employment of an employee for any of
the authorized causes the employer must serve "a written notice on the workers and
the Department of Labor and Employment at least one (1) month before the
intended date thereof." In the case at bar, petitioner was given a notice of
termination on October 11, 1991. On the same day, his services were terminated.
He was thus denied his right to be given written notice before the termination of
his employment, and the question is the appropriate sanction for the violation of
petitioners right.

86

To be sure, this is not the first time this question has arisen. In Sebuguero v.
NLRC, workers in a garment factory were temporarily laid off due to the
cancellation of orders and a garment embargo. The Labor Arbiter found that the

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[16]

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workers had been illegally dismissed and ordered the company to pay separation
pay and backwages. The NLRC, on the other hand, found that this was a case of
retrenchment due to business losses and ordered the payment of separation pay
without backwages. This Court sustained the NLRCs finding. However, as the
company did not comply with the 30-day written notice in Art. 283 of the Labor
Code, the Court ordered the employer to pay the workers P2,000.00 each as
indemnity.
The decision followed the ruling in several cases involving dismissals which,
although based on any of the just causes under Art. 282, were effected without
notice and hearing to the employee as required by the implementing rules. As this
Court said: "It is now settled that where the dismissal of one employee is in fact for
a just and valid cause and is so proven to be but he is not accorded his right to due
process, i.e., he was not furnished the twin requirements of notice and opportunity
to be heard, the dismissal shall be upheld but the employer must be sanctioned for
non-compliance with the requirements of, or for failure to observe, due process."
[17]

[18]

[19]

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

[21]

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

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However, the petitioner must nevertheless be held to account for


failure to extend to private respondent his right to an investigation
before causing his dismissal. The rule is explicit as above discussed.
The dismissal of an employee must be for just or authorized cause
and after due process. Petitioner committed an infraction of the
second requirement. Thus, it must be imposed a sanction for its

87

....

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failure to give a formal notice and conduct an investigation as


required by law before dismissing petitioner from employment.
Considering the circumstances of this case petitioner must indemnify
the private respondent the amount of P1,000.00. The measure of this
award depends on the facts of each case and the gravity of the
omission committed by the employer.
The fines imposed for violations of the notice requirement have varied
from P1,000.00 to P2,000.00 to P5,000.00 to P10,000.00.
[22]

[23]

[24]

[25]

Need for Reexamining the Wenphil Doctrine


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

Page

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

88

Validity of Petitioners Layoff Not Affected by Lack of Notice

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The need is for a rule which, while recognizing the employees right to notice
before he is dismissed or laid off, at the same time acknowledges the right of the
employer to dismiss for any of the just causes enumerated in Art. 282 or to
terminate employment for any of the authorized causes mentioned in Arts. 283284. If the Wenphil rule imposing a fine on an employer who is found to have
dismissed an employee for cause without prior notice is deemed ineffective in
deterring employer violations of the notice requirement, the remedy is not to
declare the dismissal void if there are just or valid grounds for such dismissal or if
the termination is for an authorized cause. That would be to uphold the right of the
employee but deny the right of the employer to dismiss for cause. Rather, the
remedy is to order the payment to the employee of full backwages from the time of
his dismissal until the court finds that the dismissal was for a just cause. But,
otherwise, his dismissal must be upheld and he should not be reinstated. This is
because his dismissal is ineffectual.
For the same reason, if an employee is laid off for any of the causes in Arts. 283284, i.e., installation of a labor-saving device, but the employer did not give him
and the DOLE a 30-day written notice of termination in advance, then the
termination of his employment should be considered ineffectual and he should be
paid backwages. However, the termination of his employment should not be
considered void but he should simply be paid separation pay as provided in Art.
283 in addition to backwages.
Justice Puno argues that an employers failure to comply with the notice
requirement constitutes a denial of the employees right to due process.
Prescinding from this premise, he quotes the statement of Chief Justice
Concepcion in Vda. de Cuaycong v. Vda. de Sengbengco that "acts of Congress,
as well as of the Executive, can deny due process only under the pain of nullity,
and judicial proceedings suffering from the same flaw are subject to the same
sanction, any statutory provision to the contrary notwithstanding." Justice Puno
concludes that the dismissal of an employee without notice and hearing, even if for
a just cause, as provided in Art. 282, or for an authorized cause, as provided in
Arts. 283-284, is a nullity. Hence, even if just or authorized causes exist, the
employee should be reinstated with full back pay. On the other hand, Justice
Panganiban quotes from the statement in People v. Bocar that "[w]here the denial
of the fundamental right of due process is apparent, a decision rendered in
disregard of that right is void for lack of jurisdiction."
[26]

[27]

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

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Violation of Notice Requirement Not a Denial of Due Process

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The first is that the Due Process Clause of the Constitution is a limitation on
governmental powers. It does not apply to the exercise of private power, such as
the termination of employment under the Labor Code. This is plain from the text of
Art. III, 1 of the Constitution, viz.: "No person shall be deprived of life, liberty, or
property without due process of law. . . ." The reason is simple: Only the State has
authority to take the life, liberty, or property of the individual. The purpose of the
Due Process Clause is to ensure that the exercise of this power is consistent with
what are considered civilized methods.
The second reason is that notice and hearing are required under the Due Process
Clause before the power of organized society are brought to bear upon the
individual. This is obviously not the case of termination of employment under Art.
283. Here the employee is not faced with an aspect of the adversary system. The
purpose for requiring a 30-day written notice before an employee is laid off is not
to afford him an opportunity to be heard on any charge against him, for there is
none. The purpose rather is to give him time to prepare for the eventual loss of his
job and the DOLE an opportunity to determine whether economic causes do exist
justifying the termination of his employment.
Even in cases of dismissal under Art. 282, the purpose for the requirement of
notice and hearing is not to comply with Due Process Clause of the Constitution.
The time for notice and hearing is at the trial stage. Then that is the time we speak
of notice and hearing as the essence of procedural due process. Thus, compliance
by the employer with the notice requirement before he dismisses an employee does
not foreclose the right of the latter to question the legality of his dismissal. As Art.
277(b) provides, "Any decision taken by the employer shall be without prejudice to
the right of the worker to contest the validity or legality of his dismissal by filing a
complaint with the regional branch of the National Labor Relations Commission."
Indeed, to contend that the notice requirement in the Labor Code is an aspect of
due process is to overlook the fact that Art. 283 had its origin in Art. 302 of the
Spanish Code of Commerce of 1882 which gave either party to the employeremployee relationship the right to terminate their relationship by giving notice to
the other one month in advance. In lieu of notice, an employee could be laid off by
paying him a mesada equivalent to his salary for one month. This provision was
repealed by Art. 2270 of the Civil Code, which took effect on August 30, 1950.
But on June 12, 1954, R.A. No. 1052, otherwise known as the Termination Pay
Law, was enacted reviving the mesada. On June 21, 1957, the law was amended by
R.A. No. 1787 providing for the giving of advance notice or the payment of
compensation at the rate of one-half month for every year of service.
[28]

[29]

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90

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

The third reason why the notice requirement under Art. 283 can not be considered
a requirement of the Due Process Clause is that the employer cannot really be
expected to be entirely an impartial judge of his own cause. This is also the case in
termination of employment for a just cause under Art. 282 (i.e., serious misconduct
or willful disobedience by the employee of the lawful orders of the employer, gross
and habitual neglect of duties, fraud or willful breach of trust of the employer,
commission of crime against the employer or the latters immediate family or duly
authorized representatives, or other analogous cases).
Justice Puno disputes this. He says that "statistics in the DOLE will prove that
many cases have been won by employees before the grievance committees manned
by impartial judges of the company." The grievance machinery is, however,
different because it is established by agreement of the employer and the employees
and composed of representatives from both sides. That is why, in Batangas Laguna
Tayabas Bus Co. v. Court of Appeals, which Justice Puno cites, it was held that
"Since the right of [an employee] to his labor is in itself a property and that the
labor agreement between him and [his employer] is the law between the parties, his
summary and arbitrary dismissal amounted to deprivation of his property without
due process of law." But here we are dealing with dismissals and layoffs by
employers alone, without the intervention of any grievance machinery.
Accordingly in Montemayor v. Araneta University Foundation, although a
professor was dismissed without a hearing by his university, his dismissal for
having made homosexual advances on a student was sustained, it appearing that in
the NLRC, the employee was fully heard in his defense.
[31]

[32]

Lack of Notice Only Makes Termination Ineffectual


Not all notice requirements are requirements of due process. Some are simply part
of a procedure to be followed before a right granted to a party can be exercised.
Others are simply an application of the Justinian precept, embodied in the Civil
Code, to act with justice, give everyone his due, and observe honesty and good
faith toward ones fellowmen. Such is the notice requirement in Arts. 282-283. The
consequence of the failure either of the employer or the employee to live up to this
precept is to make him liable in damages, not to render his act (dismissal or
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[33]

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resignation, as the case may be) void. The measure of damages is the amount of
wages the employee should have received were it not for the termination of his
employment without prior notice. If warranted, nominal and moral damages may
also be awarded.
We hold, therefore, that, with respect to Art. 283 of the Labor Code, the
employers failure to comply with the notice requirement does not constitute a
denial of due process but a mere failure to observe a procedure for the termination
of employment which makes the termination of employment merely ineffectual. It
is similar to the failure to observe the provisions of Art. 1592, in relation to Art.
1191, of the Civil Code in rescinding a contract for the sale of immovable
property. Under these provisions, while the power of a party to rescind a contract is
implied in reciprocal obligations, nonetheless, in cases involving the sale of
immovable property, the vendor cannot exercise this power even though the
vendee defaults in the payment of the price, except by bringing an action in court
or giving notice of rescission by means of a notarial demand. Consequently, a
notice of rescission given in the letter of an attorney has no legal effect, and the
vendee can make payment even after the due date since no valid notice of
rescission has been given.
[34]

[35]

[36]

Indeed, under the Labor Code, only the absence of a just cause for the termination
of employment can make the dismissal of an employee illegal. This is clear from
Art. 279 which provides:
Security of Tenure. In cases of regular employment, the employer
shall not terminate the services of an employee except for a just
causeor when authorized by this Title. An employee who is unjustly
dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement.

[38]

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

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[37]

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"he who has less in life should have more in law." That would be a misapplication
of this noble phrase originally from Professor Thomas Reed Powell of the Harvard
Law School.
Justice Panganiban cites Pepsi-Cola Bottling Co. v. NLRC, in support of his view
that an illegal dismissal results not only from want of legal cause but also from the
failure to observe "due process." The Pepsi-Cola case actually involved a dismissal
for an alleged loss of trust and confidence which, as found by the Court, was not
proven. The dismissal was, therefore, illegal, not because there was a denial of due
process, but because the dismissal was without cause. The statement that the
failure of management to comply with the notice requirement "taints the dismissal
with illegality" was merely a dictum thrown in as additional grounds for holding
the dismissal to be illegal.
[39]

Given the nature of the violation, therefore, the appropriate sanction for the failure
to give notice is the payment of backwages for the period when the employee is
considered not to have been effectively dismissed or his employment terminated.
The sanction is not the payment alone of nominal damages as Justice Vitug
contends.
Unjust Results of Considering Dismissals/Layoffs Without Prior Notice As
Illegal
The refusal to look beyond the validity of the initial action taken by the employer
to terminate employment either for an authorized or just cause can result in an
injustice to the employer. For not giving notice and hearing before dismissing an
employee, who is otherwise guilty of, say, theft, or even of an attempt against the
life of the employer, an employer will be forced to keep in his employ such guilty
employee. This is unjust.
It is true the Constitution regards labor as "a primary social economic force." But
so does it declare that it "recognizes the indispensable role of the private sector,
encourages private enterprise, and provides incentives to needed
investment." The Constitution bids the State to "afford full protection to
labor." But it is equally true that "the law, in protecting the rights of the laborer,
authorizes neither oppression nor self-destruction of the employer." And it is
oppression to compel the employer to continue in employment one who is guilty or
to force the employer to remain in operation when it is not economically in his
interest to do so.
[40]

[41]

[42]

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

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[43]

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In case of termination due to the installation of labor-saving devices


or redundancy, the worker affected thereby shall be entitled to a
separation pay equivalent to at least his one (1) month pay or to at
least one month for every year of service, whichever is higher. In case
of retrenchment to prevent losses and in cases of closures or cessation
of operations of establishment or undertaking not due to serious
business losses or financial reverses, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2) month pay
for every year of service, whichever is higher. A fraction of at least
six months shall be considered one (1) whole year.
If the employees separation is without cause, instead of being given separation
pay, he should be reinstated. In either case, whether he is reinstated or only granted
separation pay, he should be paid full backwages if he has been laid off without
written notice at least 30 days in advance.
On the other hand, with respect to dismissals for cause under Art. 282, if it is
shown that the employee was dismissed for any of the just causes mentioned in
said Art. 282, then, in accordance with that article, he should not be reinstated.
However, he must be paid backwages from the time his employment was
terminated until it is determined that the termination of employment is for a just
cause because the failure to hear him before he is dismissed renders the termination
of his employment without legal effect.
WHEREFORE, the petition is GRANTED and the resolution of the National
Labor Relations Commission is MODIFIED by ordering private respondent
Isetann Department Store, Inc. to pay petitioner separation pay equivalent to one
(1) month pay for every year of service, his unpaid salary, and his proportionate
13th month pay and, in addition, full backwages from the time his employment
was terminated on October 11, 1991 up to the time the decision herein becomes
final. For this purpose, this case is REMANDED to the Labor Arbiter for
computation of the separation pay, backwages, and other monetary awards to
petitioner.

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SO ORDERED.

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JENNY M. AGABON and


VIRGILIO C. AGABON,
Petitioners,

G.R. No. 158693


Present:

Davide, Jr., C.J.,


Puno,
Panganiban,
Quisumbing,
Ynares-Santiago,
Sandoval-Gutierrez,
- versus -

Carpio,
Austria-Martinez,
Corona,
Carpio-Morales,
Callejo, Sr.,
Azcuna,
Tinga,
Chico-Nazario, and
Garcia, JJ.

NATIONAL LABOR RELATIONS


COMMISSION (NLRC), RIVIERA
HOME IMPROVEMENTS, INC.

Promulgated:

November 17, 2004

Page

Respondents.

95

and VICENTE ANGELES,

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x ---------------------------------------------------------------------------------------- x

DECISION
YNARES-SANTIAGO, J.:
This petition for review seeks to reverse the decision[1] of the Court of
Appeals dated January 23, 2003, in CA-G.R. SP No. 63017, modifying the
decision of National Labor Relations Commission (NLRC) in NLRC-NCR Case No.
023442-00.

Private respondent Riviera Home Improvements, Inc. is engaged in the


business of selling and installing ornamental and construction materials. It
employed petitioners Virgilio Agabon and Jenny Agabon as gypsum board and
cornice installers on January 2, 1992[2] until February 23, 1999 when they were
dismissed for abandonment of work.

Petitioners then filed a complaint for illegal dismissal and payment of


money claims[3] and on December 28, 1999, the Labor Arbiter rendered a
decision declaring the dismissals illegal and ordered private respondent to pay
the monetary claims. The dispositive portion of the decision states:
WHEREFORE, premises considered, We find the termination
of the complainants illegal. Accordingly, respondent is hereby
ordered to pay them their backwages up to November 29, 1999 in
the sum of:
1.
2.

Jenny M. Agabon
Virgilio C. Agabon

P56, 231.93
56, 231.93

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96

and, in lieu of reinstatement to pay them their separation pay of one


(1) month for every year of service from date of hiring up to
November 29, 1999.

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Respondent is further ordered to pay the complainants their


holiday pay and service incentive leave pay for the years 1996, 1997
and 1998 as well as their premium pay for holidays and rest days and
Virgilio Agabons 13th month pay differential amounting to TWO
THOUSAND ONE HUNDRED FIFTY (P2,150.00) Pesos, or the
aggregate amount of ONE HUNDRED TWENTY ONE THOUSAND SIX
HUNDRED SEVENTY EIGHT & 93/100 (P121,678.93) Pesos for Jenny
Agabon, and ONE HUNDRED TWENTY THREE THOUSAND EIGHT
HUNDRED TWENTY EIGHT & 93/100 (P123,828.93) Pesos for Virgilio
Agabon, as per attached computation of Julieta C. Nicolas, OIC,
Research and Computation Unit, NCR.
SO ORDERED.[4]

On appeal, the NLRC reversed the Labor Arbiter because it found that the
petitioners had abandoned their work, and were not entitled to backwages
and separation pay. The other money claims awarded by the Labor Arbiter
were also denied for lack of evidence.[5]
Upon denial of their motion for reconsideration, petitioners filed a
petition for certiorari with the Court of Appeals.
The Court of Appeals in turn ruled that the dismissal of the petitioners
was not illegal because they had abandoned their employment but ordered
the payment of money claims. The dispositive portion of the decision reads:

97

WHEREFORE, the decision of the National Labor Relations


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

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SO ORDERED.[6]

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Hence, this petition for review on the sole issue of whether petitioners
were illegally dismissed.[7]
Petitioners assert that they were dismissed because the private
respondent refused to give them assignments unless they agreed to work on
a pakyaw basis when they reported for duty on February 23, 1999. They did
not agree on this arrangement because it would mean losing benefits as Social
Security System (SSS) members. Petitioners also claim that private respondent
did not comply with the twin requirements of notice and hearing.[8]
Private respondent, on the other hand, maintained that petitioners were
not dismissed but had abandoned their work.[9] In fact, private respondent
sent two letters to the last known addresses of the petitioners advising them
to report for work. Private respondents manager even talked to petitioner
Virgilio Agabon by telephone sometime in June 1999 to tell him about the new
assignment at Pacific Plaza Towers involving 40,000 square meters of cornice
installation work. However, petitioners did not report for work because they
had subcontracted to perform installation work for another company.
Petitioners also demanded for an increase in their wage to P280.00 per day.
When this was not granted, petitioners stopped reporting for work and filed
the illegal dismissal case.[10]
It is well-settled that findings of fact of quasi-judicial agencies like the
NLRC are accorded not only respect but even finality if the findings are
supported by substantial evidence. This is especially so when such findings
were affirmed by the Court of Appeals.[11] However, if the factual findings of
the NLRC and the Labor Arbiter are conflicting, as in this case, the reviewing
court may delve into the records and examine for itself the questioned
findings.[12]

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To dismiss an employee, the law requires not only the existence of a just
and valid cause but also enjoins the employer to give the employee the
opportunity to be heard and to defend himself.[13] Article 282 of the Labor
Code enumerates the just causes for termination by the employer: (a) serious

98

Accordingly, the Court of Appeals, after a careful review of the facts,


ruled that petitioners dismissal was for a just cause. They had abandoned
their employment and were already working for another employer.

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misconduct or willful disobedience by the employee of the lawful orders of his


employer or the latters representative in connection with the employees
work; (b) gross and habitual neglect by the employee of his duties; (c) fraud or
willful breach by the employee of the trust reposed in him by his employer or
his duly authorized representative; (d) commission of a crime or offense by the
employee against the person of his employer or any immediate member of his
family or his duly authorized representative; and (e) other causes analogous to
the foregoing.
Abandonment is the deliberate and unjustified refusal of an employee to
resume his employment.[14] It is a form of neglect of duty, hence, a just cause
for termination of employment by the employer.[15] For a valid finding of
abandonment, these two factors should be present: (1) the failure to report
for work or absence without valid or justifiable reason; and (2) a clear intention
to sever employer-employee relationship, with the second as the more
determinative factor which is manifested by overt acts from which it may be
deduced that the employees has no more intention to work. The intent to
discontinue the employment must be shown by clear proof that it was
deliberate and unjustified.[16]

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In Sandoval Shipyard v. Clave,[18] we held that an employee who


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

99

In February 1999, petitioners were frequently absent having


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

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The law imposes many obligations on the employer such as providing just
compensation to workers, observance of the procedural requirements of
notice and hearing in the termination of employment. On the other hand, the
law also recognizes the right of the employer to expect from its workers not
only good performance, adequate work and diligence, but also good
conduct[19] and loyalty. The employer may not be compelled to continue to
employ such persons whose continuance in the service will patently be inimical
to his interests.[20]
After establishing that the terminations were for a just and valid cause,
we now determine if the procedures for dismissal were observed.
The procedure for terminating an employee is found in Book VI, Rule I,
Section 2(d) of the Omnibus Rules Implementing the Labor Code:
Standards of due process: requirements of notice. In all
cases of termination of employment, the following standards of due
process shall be substantially observed:
I.
For termination of employment based on just causes as
defined in Article 282 of the Code:
(a)
A written notice served on the employee specifying the
ground or grounds for termination, and giving to said employee
reasonable opportunity within which to explain his side;
(b)
A hearing or conference during which the employee
concerned, with the assistance of counsel if the employee so desires,
is given opportunity to respond to the charge, present his evidence
or rebut the evidence presented against him; and

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100

(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.

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In case of termination, the foregoing notices shall be served


on the employees last known address.

Dismissals based on just causes contemplate acts or omissions


attributable to the employee while dismissals based on authorized causes
involve grounds under the Labor Code which allow the employer to terminate
employees. A termination for an authorized cause requires payment of
separation pay. When the termination of employment is declared illegal,
reinstatement and full backwages are mandated under Article 279. If
reinstatement is no longer possible where the dismissal was unjust, separation
pay may be granted.
Procedurally, (1) if the dismissal is based on a just cause under Article
282, the employer must give the employee two written notices and a hearing
or opportunity to be heard if requested by the employee before terminating
the employment: a notice specifying the grounds for which dismissal is sought
a hearing or an opportunity to be heard and after hearing or opportunity to be
heard, a notice of the decision to dismiss; and (2) if the dismissal is based on
authorized causes under Articles 283 and 284, the employer must give the
employee and the Department of Labor and Employment written notices 30
days prior to the effectivity of his separation.
From the foregoing rules four possible situations may be derived: (1) the
dismissal is for a just cause under Article 282 of the Labor Code, for an
authorized cause under Article 283, or for health reasons under Article 284,
and due process was observed; (2) the dismissal is without just or authorized
cause but due process was observed; (3) the dismissal is without just or
authorized cause and there was no due process; and (4) the dismissal is for just
or authorized cause but due process was not observed.

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In the second and third situations where the dismissals are illegal, Article
279 mandates that the employee is entitled to reinstatement without loss of
seniority rights and other privileges and full backwages, inclusive of
allowances, and other benefits or their monetary equivalent computed from

101

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

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the time the compensation was not paid up to the time of actual
reinstatement.
In the fourth situation, the dismissal should be upheld. While the
procedural infirmity cannot be cured, it should not invalidate the dismissal.
However, the employer should be held liable for non-compliance with the
procedural requirements of due process.
The present case squarely falls under the fourth situation. The dismissal
should be upheld because it was established that the petitioners abandoned
their jobs to work for another company. Private respondent, however, did not
follow the notice requirements and instead argued that sending notices to the
last known addresses would have been useless because they did not reside
there anymore. Unfortunately for the private respondent, this is not a valid
excuse because the law mandates the twin notice requirements to the
employees last known address.[21] Thus, it should be held liable for noncompliance with the procedural requirements of due process.
A review and re-examination of the relevant legal principles is
appropriate and timely to clarify the various rulings on employment
termination in the light of Serrano v. National Labor Relations Commission.[22]
Prior to 1989, the rule was that a dismissal or termination is illegal if the
employee was not given any notice. In the 1989 case of Wenphil Corp. v.
National Labor Relations Commission,[23] we reversed this long-standing rule
and held that the dismissed employee, although not given any notice and
hearing, was not entitled to reinstatement and backwages because the
dismissal was for grave misconduct and insubordination, a just ground for
termination under Article 282. The employee had a violent temper and caused
trouble during office hours, defying superiors who tried to pacify him. We
concluded that reinstating the employee and awarding backwages may
encourage him to do even worse and will render a mockery of the rules of
discipline that employees are required to observe.[24] We further held that:

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102

Under the circumstances, the dismissal of the private


respondent for just cause should be maintained. He has no right to
return to his former employment.

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However, the petitioner must nevertheless be held to account


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

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

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

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103

The rationale for the re-examination of the Wenphil doctrine


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

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Serrano was confronting the practice of employers to dismiss now and


pay later by imposing full backwages.

We believe, however, that the ruling in Serrano did not consider the full
meaning of Article 279 of the Labor Code which states:
ART. 279. Security of Tenure. In cases of regular
employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title.
An employee who is unjustly dismissed from work shall be entitled
to reinstatement without loss of seniority rights and other privileges
and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual
reinstatement.

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

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To be sure, the Due Process Clause in Article III, Section 1 of the


Constitution embodies a system of rights based on moral principles so deeply
imbedded in the traditions and feelings of our people as to be deemed
fundamental to a civilized society as conceived by our entire history. Due
process is that which comports with the deepest notions of what is fair and
right and just.[26] It is a constitutional restraint on the legislative as well as on
the executive and judicial powers of the government provided by the Bill of
Rights.

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

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

Constitutional due process protects the individual from the government


and assures him of his rights in criminal, civil or administrative proceedings;
while statutory due process found in the Labor Code and Implementing Rules
protects employees from being unjustly terminated without just cause after
notice and hearing.

In Sebuguero v. National Labor Relations Commission,[28] the dismissal


was for a just and valid cause but the employee was not accorded due
process. The dismissal was upheld by the Court but the employer was
sanctioned. The sanction should be in the nature of indemnification or
penalty, and depends on the facts of each case and the gravity of the omission
committed by the employer.

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Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services,
Inc. v. National Labor Relations Commission,[30]which opinion he reiterated
in Serrano, stated:

105

In Nath v. National Labor Relations Commission,[29] it was ruled that even


if the employee was not given due process, the failure did not operate to
eradicate the just causes for dismissal. The dismissal being for just
cause, albeit without due process, did not entitle the employee to
reinstatement, backwages, damages and attorneys fees.

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C.
Where there is just cause for dismissal but due process has not been
properly observed by an employer, it would not be right to order either the
reinstatement of the dismissed employee or the payment of backwages to him. In
failing, however, to comply with the procedure prescribed by law in terminating the
services of the employee, the employer must be deemed to have opted or, in any
case, should be made liable, for the payment of separation pay. It might be pointed
out that the notice to be given and the hearing to be conducted generally constitute
the two-part due process requirement of law to be accorded to the employee by the
employer. Nevertheless, peculiar circumstances might obtain in certain situations
where to undertake the above steps would be no more than a useless formality and
where, accordingly, it would not be imprudent to apply the res ipsa loquitur rule and
award, in lieu of separation pay, nominal damages to the employee. x x x.[31]

After carefully analyzing the consequences of the divergent doctrines in


the law on employment termination, we believe that in cases involving
dismissals for cause but without observance of the twin requirements of notice
and hearing, the better rule is to abandon the Serrano doctrine and to
follow Wenphil by holding that the dismissal was for just cause but imposing
sanctions on the employer. Such sanctions, however, must be stiffer than that
imposed in Wenphil. By doing so, this Court would be able to achieve a fair
result by dispensing justice not just to employees, but to employers as well.

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This would encourage frivolous suits, where even the most notorious
violators of company policy are rewarded by invoking due process. This also
creates absurd situations where there is a just or authorized cause for
dismissal but a procedural infirmity invalidates the termination. Let us take for
example a case where the employee is caught stealing or threatens the lives of
his co-employees or has become a criminal, who has fled and cannot be found,
or where serious business losses demand that operations be ceased in less
than a month. Invalidating the dismissal would not serve public interest. It
could also discourage investments that can generate employment in the local
economy.

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The unfairness of declaring illegal or ineffectual dismissals for valid or


authorized causes but not complying with statutory due process may have farreaching consequences.

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The constitutional policy to provide full protection to labor is not meant


to be a sword to oppress employers. The commitment of this Court to the
cause of labor does not prevent us from sustaining the employer when it is in
the right, as in this case.[32] Certainly, an employer should not be compelled to
pay employees for work not actually performed and in fact abandoned.
The employer should not be compelled to continue employing a person
who is admittedly guilty of misfeasance or malfeasance and whose continued
employment is patently inimical to the employer. The law protecting the rights
of the laborer authorizes neither oppression nor self-destruction of the
employer.[33]

It must be stressed that in the present case, the petitioners committed a


grave offense, i.e., abandonment, which, if the requirements of due process
were complied with, would undoubtedly result in a valid dismissal.

An employee who is clearly guilty of conduct violative of Article 282


should not be protected by the Social Justice Clause of the Constitution. Social
justice, as the term suggests, should be used only to correct an injustice. As the
eminent Justice Jose P. Laurel observed, social justice must be founded on
the recognition of the necessity of interdependence among diverse units of a
society and of the protection that should be equally and evenly extended to
all groups as a combined force in our social and economic life, consistent with
the fundamental and paramount objective of the state of promoting the
health, comfort, and quiet of all persons, and of bringing about the greatest
good to the greatest number.[34]

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Justice Isagani Cruz strongly asserts the need to apply a balanced


approach to labor-management relations and dispense justice with an even
hand in every case:

107

This is not to say that the Court was wrong when it ruled the way it did
in Wenphil, Serrano and related cases. Social justice is not based on rigid
formulas set in stone. It has to allow for changing times and circumstances.

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We have repeatedly stressed that social justice or any


justice for that matter is for the deserving, whether he be a
millionaire in his mansion or a pauper in his hovel. It is true that, in
case of reasonable doubt, we are to tilt the balance in favor of the
poor to whom the Constitution fittingly extends its sympathy and
compassion. But never is it justified to give preference to the poor
simply because they are poor, or reject the rich simply because they
are rich, for justice must always be served for the poor and the rich
alike, according to the mandate of the law.[35]

Justice in every case should only be for the deserving party. It should not
be presumed that every case of illegal dismissal would automatically be
decided in favor of labor, as management has rights that should be fully
respected and enforced by this Court. As interdependent and indispensable
partners in nation-building, labor and management need each other to foster
productivity and economic growth; hence, the need to weigh and balance the
rights and welfare of both the employee and employer.

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Under the Civil Code, nominal damages is adjudicated in order that a


right of the plaintiff, which has been violated or invaded by the defendant, may
be vindicated or recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered by him.[37]

108

Where the dismissal is for a just cause, as in the instant case, the lack of
statutory due process should not nullify the dismissal, or render it illegal, or
ineffectual. However, the employer should indemnify the employee for the
violation of his statutory rights, as ruled in Reta v. National Labor Relations
Commission.[36] The indemnity to be imposed should be stiffer to discourage
the abhorrent practice of dismiss now, pay later, which we sought to deter in
the Serrano ruling. The sanction should be in the nature of indemnification or
penalty and should depend on the facts of each case, taking into special
consideration the gravity of the due process violation of the employer.

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As enunciated by this Court in Viernes v. National Labor Relations


Commissions,[38] an employer is liable to pay indemnity in the form of nominal
damages to an employee who has been dismissed if, in effecting such
dismissal, the employer fails to comply with the requirements of due process.
The Court, after considering the circumstances therein, fixed the indemnity at
P2,590.50, which was equivalent to the employees one month salary. This
indemnity is intended not to penalize the employer but to vindicate or
recognize the employees right to statutory due process which was violated by
the employer.[39]

The violation of the petitioners right to statutory due process by the


private respondent warrants the payment of indemnity in the form of nominal
damages. The amount of such damages is addressed to the sound discretion
of the court, taking into account the relevant circumstances.[40] Considering
the prevailing circumstances in the case at bar, we deem it proper to fix it at
P30,000.00. We believe this form of damages would serve to deter employers
from future violations of the statutory due process rights of employees. At the
very least, it provides a vindication or recognition of this fundamental right
granted to the latter under the Labor Code and its Implementing Rules.

Private respondent claims that the Court of Appeals erred in holding that
it failed to pay petitioners holiday pay, service incentive leave pay and
13th month pay.

We are not persuaded.

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As a general rule, one who pleads payment has the burden of proving it.
Even where the employee must allege non-payment, the general rule is that
the burden rests on the employer to prove payment, rather than on the
employee to prove non-payment. The reason for the rule is that the pertinent

109

We affirm the ruling of the appellate court on petitioners money


claims. Private respondent is liable for petitioners holiday pay, service
incentive leave pay and 13th month pay without deductions.

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personnel files, payrolls, records, remittances and other similar documents


which will show that overtime, differentials, service incentive leave and other
claims of workers have been paid are not in the possession of the worker but
in the custody and absolute control of the employer.[41]

In the case at bar, if private respondent indeed paid petitioners holiday


pay and service incentive leave pay, it could have easily presented
documentary proofs of such monetary benefits to disprove the claims of the
petitioners. But it did not, except with respect to the 13th month pay wherein
it presented cash vouchers showing payments of the benefit in the years
disputed.[42] Allegations by private respondent that it does not operate during
holidays and that it allows its employees 10 days leave with pay, other than
being self-serving, do not constitute proof of payment. Consequently, it failed
to discharge the onus probandi thereby making it liable for such claims to the
petitioners.

Anent the deduction of SSS loan and the value of the shoes from
petitioner Virgilio Agabons 13th month pay, we find the same to be
unauthorized. The evident intention of Presidential Decree No. 851 is to grant
an additional income in the form of the 13th month pay to employees not
already receiving the same[43] so as to further protect the level of real wages
from the ravages of world-wide inflation.[44] Clearly, as additional income, the
13th month pay is included in the definition of wage under Article 97(f) of the
Labor Code, to wit:

(f)

Wage paid to any employee shall mean the remuneration or

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from which an employer is prohibited under Article 113[45] of the same Code
from making any deductions without the employees knowledge and consent.

110

earnings, however designated, capable of being expressed in terms of money


whether fixed or ascertained on a time, task, piece , or commission basis, or other
method of calculating the same, which is payable by an employer to an employee
under a written or unwritten contract of employment for work done or to be done,
or for services rendered or to be rendered and includes the fair and reasonable
value, as determined by the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee

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In the instant case, private respondent failed to show that the deduction of the
SSS loan and the value of the shoes from petitioner Virgilio Agabons
13th month pay was authorized by the latter. The lack of authority to deduct is
further bolstered by the fact that petitioner Virgilio Agabon included the same
as one of his money claims against private respondent.

The Court of Appeals properly reinstated the monetary claims awarded


by the Labor Arbiter ordering the private respondent to pay each of the
petitioners holiday pay for four regular holidays from 1996 to 1998, in the
amount of P6,520.00, service incentive leave pay for the same period in the
amount of P3,255.00 and the balance of Virgilio Agabons thirteenth month
pay for 1998 in the amount of P2,150.00.

WHEREFORE, in view of the foregoing, the petition is DENIED. The


decision of the Court of Appeals dated January 23, 2003, in CA-G.R. SP No.
63017, finding that petitioners Jenny and Virgilio Agabon abandoned their
work, and ordering private respondent to pay each of the petitioners holiday
pay for four regular holidays from 1996 to 1998, in the amount of P6,520.00,
service incentive leave pay for the same period in the amount of P3,255.00 and
the balance of Virgilio Agabons thirteenth month pay for 1998 in the amount
of P2,150.00 is AFFIRMED with the MODIFICATION that private respondent
Riviera Home Improvements, Inc. is further ORDERED to pay each of the
petitioners the amount of P30,000.00 as nominal damages for non-compliance
with statutory due process.

No costs.

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SO ORDERED.

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G.R. No. 192571

April 22, 2014

ABBOTT LABORATORIES, PHILIPPINES, CECILLE A. TERRIBLE,


EDWIN D. FEIST, MARIA OLIVIA T. YABUT-MISA, TERESITA C.
BERNARDO, AND ALLAN G. ALMAZAR, Petitioners,
vs.
PEARLIE ANN F. ALCARAZ, Respondent.
DISSENTING OPINION
BRION, J.:
Before the Court are respondent Pearlie Ann Alcaraz's motion for
reconsideration of the Court's July 23, 2013 Decision, and petitioners
Abbott Laboratories, Phils. (Abbott), Cecille Te1Tible, Edwin Feist, Maria
Olivia Yabut-Misa, Teresita Bernardo, and Allan Almazar's comment
thereon. I submit this Dissenting Opinion to grant the present motion for
reconsideration and to maintain my view that the petitioners' earlier
petition for review lacked merit and should have been denied by the
Court.
THE MOTION F'OR RECONSIDERATION
In her motion for reconsideration, Alcaraz alleges that the Court
engaged in judicial legislation when it equated Alcaraz's job description
and, in the process, enumerated the circumstances showing when and
how the petitioners conveyed Alcaraz's duties and responsibilities to her
to the reasonable standards for regularization required by the Labor
Code. She argues that "one's job description cannot by itself be
considered the standard for regularization"1because a "standard denotes
a measure of quantity or quality."2

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Alcaraz further claims that the Court erred in considering her dismissal
on the third month of her probationary employment to be a mere due
process violation that only warrants an award of nominal damages. In
support, Alcaraz cites Abbott's own rules under which Abbott must
evaluate Alcaraz's performance on the third and fifth months of the
probationary period; if Abbott finds Alcaraz to be underperforming on the
third month, Abbott should come up with a performance improvement
plan (PEP). Only upon her failure to meet this PEP that Abbott may end
her probationary employment.

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In so doing, the Court acted contrary to the principles of social justice


and protection to labor.

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Alcaraz also points out that Abbott failed to abide by its own rules and
immediately dismissed Alcaraz, without any just cause under Article 281
of the Labor Code to support its action. Without a just cause, the
dismissal is illegal and entitles her to reinstatement and backwages.
Lastly, even assuming that Abbott can terminate Alcaraz at any time for
failure to qualify for regularization, it is clear that Abbott "merely feigned
its dissatisfaction"3 of Alcarazs job performance as shown by the highhanded manner Abbott used in implementing her dismissal.
THE COMMENT
In their Comment, the petitioners maintained the correctness of the
Courts ruling on both procedural and substantive grounds.
Abbott argues that the Court correctly proceeded as it did in evaluating
the facts and evidence in deciding the case. While the Court does not
normally embark on the re-examination of the evidence presented by the
parties, it may do so when, among others: (i) the findings are grounded
entirely on speculation, surmises or conjectures; (ii) the judgment is
based on misapprehension of facts; (iii) the findings of fact are
conflicting; (iv) when the findings are contrary to the trial court; and (v)
the Court of Appeals (CA) manifestly overlooked certain relevant facts
not disputed by the parties which, if properly considered, would justify a
different conclusion. In the present case, all these instances are present.
The probationary nature of Alcarazs employment is clear from the
evidence and should be respected. In fact, in her reply-letter to Abbott,
Alcaraz even asked that the probationary period of six months be
reduced to three months since "Abbott can already determine if [she] is
fit for the position."4 Her statement does not only show her knowledge of
the nature of her employment but proves her acknowledgment that there
were standards to be met and that the company will evaluate her
compliance with these standards.

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Probationary Performance Standards Evaluation (PPSE) (based on the


duties and responsibilities of her position, i.e., her job description) to
document her performance during the probationary period and to serve
as basis in recommending her regularization or termination.

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The petitioners posit that this same statement belies Alcarazs claim that
she was not informed of these standards.5In fact, Alcaraz herself
admitted that "Abbott has only one evaluation system for all types of
employees in the organization."6 She knew that she had to undergo the

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The petitioners also note that in signing her appointment paper, Alcaraz
agreed "to abide by all existing policies, rules and regulations of the
company, as well as those, which may hereinafter be promulgated."7 All
these taken together comply with the legal requirement that the
probationary employee be informed of the reasonable standards at the
time of her engagement.
Citing Alcira v. NLRC,8 the petitioners claim that they "substantially
complied" with the notification requirement since they informed Alcaraz
of the PPSE; it is only natural that the evaluation should be made vis-vis the performance standards for the job.
DISCUSSION
A. Procedural Objection
I shall first address the petitioners claim that the Court can normally
undertake a review of the facts and evidence under a Rule 45 petition,
citing the numerous exceptions to what is otherwise claimed as the
general rule. In doing so, I reiterate my position in my earlier Dissent,
with added arguments to specifically address the petitioners claim and
the ponencias present explanation.
A1. The Rule 65 petition and Montoya v. Transmed

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Once the CA decision reaches the Court under a Rule 45 petition for
review on certiorari, from what prism does the Court examine the CA
decision? Note that Rule 45 of the Rules of Court limits the scope of the
petition to "pure questions of law."9 This review is not a matter of right
but of sound judicial discretion. Obviously, the sound judicial discretion
requirement is meant to limit what could otherwise be an unlimited
exercise of discretion by the Highest Court to lay open and review the
whole case, both as to fact and law.

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When a labor case reaches the judicial system, courts must proceed
based on two basic premises: first, the ruling of the National Labor
Relations Commission (NLRC) is declared by law to be a final ruling that
is no longer appealable; and second, the only remedy left to set aside or
modify this ruling is through a Rule 65 review by the CA that is narrowly
grounded on jurisdictional errors i.e., whether the NLRC acted without
or in excess of its jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction.

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Montoya v. Transmed Manila Corporation10 instructs us that in a Rule 45


review (of the CA decision rendered under Rule 65), the question of law
that confronts the Court is the legal correctness of the CA decision i.e.,
whether the CA correctly determined the presence or absence of grave
abuse of discretion in the NLRC decision before it, and not on the basis
of whether the NLRC decision on the merits of the case was correct. As
applied in the present case, the Court should simply determine the legal
correctness of the CAs finding that the NLRC ruling had basis in fact
and law, not the question of whether it was or was not correct. I clearly
stated these in my Dissenting Opinion, as follows:
Specifically, in reviewing a CA labor ruling under Rule 45 of the Rules of
Court, the Courts review is limited to:
(1) Ascertaining the correctness of the CAs decision in finding the
presence or absence of a grave abuse of discretion. This is done
by examining, on the basis of the parties presentations, whether
the CA correctly determined that at the NLRC level, all the
adduced pieces of evidence were considered; no evidence which
should not have been considered was considered; and the
evidence presented supports the NLRC findings; and
(2) Deciding any other jurisdictional error that attended the CAs
interpretation or application of the law.11
While these two questions should sufficiently delimit the narrow scope of
review under Rule 65, nonetheless, the petitioners submit that factual
review is appropriate under the numerous exceptions cited in a case
where the decisions of the trial court and the appellate court were
brought on appeal to the Supreme Court. Notably, jurisprudence has
even extended the application of these numerous exceptions to the
decisions rendered by the labor tribunals and the CA.
In other words, based on these exceptions, the existence of a conflict in
the factual findings and/or conclusions at any stage of the case, from the
labor arbiter (LA) to the CA, renders it open for the Court to conduct a
factual review that is deemed necessary in deciding the case.

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115

This approach obviously considers the Rule 65 petition route to the CA


(instead of this Court) only in light of the doctrine of hierarchy of courts
and disregards the final and unappealable character of the NLRC
decision. If a courts certiorari jurisdiction has a limited scope and
breadth, the Court, under a Rule 45 petition for review (of the CA
decision), could not have a more expanded jurisdiction than what Rule
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45 expressly provides, i.e., that the issue is limited to pure questions of


law.
Too, this approach has resulted in turning the rule (that factual findings
of labor tribunals are binding on the Court) into an exception - the Court
effectively becomes a trier of facts and vice versa. Notably, when one
traces in jurisprudence the justification for the exception, it will invariably
point to cases where the Supreme Court departed from the rule that
the jurisdiction of the Court in cases brought to it from the CA is limited
to the review of errors of law, as the factual findings of the lower courts
are deemed conclusive when, among others, the findings of facts by
the trial court and the appellate court are conflicting.12
The indiscriminate adoption of this remedial law principle into labor
cases stands on shaky legal grounds. To begin with, certiorari is
different from appeal. In an appellate proceeding, the original suit is
continued on appeal.1awp++i1 In a certiorari proceeding, the certiorari
petition is an original and independent action that was not part of the trial
that had resulted in the rendition of the judgment or order complained of.
"[T]he higher court uses its original jurisdiction in accordance with its
power of control and supervision over the proceedings of lower courts."13
Put more bluntly, when the Court undertakes a review of the factual
findings made by the lower courts, it does so on the premise that the
recourse to the CA is part of the appellate process authorized by law.
Hence, when the trier of facts at the trial and appellate level reach
divergent factual findings, even if the same pieces of evidence are
before them, the Court, in the exercise of its sound discretion, sets aside
the rule that only questions of law may be raised under a Rule 45
petition in order to arrive at a correct and just decision. The same
situation does not apply in labor cases because statutory law does not
provide for an appellate process beyond the NLRC, and thus, the mere
existence of a conflict in the factual findings at any stage of the
proceedings does not by itself warrant the Court to undertake an
independent review.

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116

A2. The question of how a probationary


employee "is deemed to have been
informed of the standards of his
regularization" may be a question of law,
but not from the prism of a decision
rendered under Rule 65

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According to the ponencia, the Court may consider "other questions of


law aside from the CAs finding on the NLRCs grave abuse of
discretion." In the present case, this other question of law or "ancillary
issue" is the "question of how a probationary employee is deemed to
have been informed of the standards of regularization." To the ponencia,
this consideration is necessary "if only to determine if the concepts and
principles of labor law were correctly applied or misapplied by the NLRC
in its decision."
I strongly disagree with the ponencias reasoning for two reasons:
First, the ponencia unmistakably validates the very objection I raised in
my earlier Dissenting Opinion that there were in fact no communication
standards expressly communicated to Alcaraz; the Court, through the
Decision under review, simply attempted to supply this fatal omission via
an assumption and disjointed implication. I reiterate the following points
in my earlier Dissent:
The ponencias reasoning, however, is badly flawed.
1st. The law and the rules require that these performance standards be
communicated at the time of engagement to the probationary employee.
The performance standards to be met are the employers specific
expectations of how the probationary employee should perform. The
ponencia impliedly admits that no performance standards were
expressly given but argues that because [Alcaraz] had been informed of
her duties and responsibilities (a fact that was and is not disputed), she
should be deemed to know what was expected of her for purposes of
regularization. This is a major flaw that the ponencia satisfies only via an
assumption. The ponencia apparently forgets that knowledge of duties
and responsibilities is different from the measure of how these duties
and responsibilities should be delivered. They are separate elements
and the latter element is missing in the present case.

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4th. The ponencia also forgets that these "performance standards" or


measures cannot simply be assumed because they are critically
important in this case, or for that matter, in any case involving jobs
whose duties and responsibilities are not simple or self-descriptive. If
[Alcaraz] had been evaluated or assessed in the manner that the
companys internal rules require, these standards would have been the
basis for her performance or lack of it. Last but not the least, [Alcarazs]
services were terminated on the basis of the performance standards

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that, by law, the employer set or prescribed at the time of the employees
engagement. If none had been prescribed in the first place, under what
basis could the employee then be assessed for purposes of termination
or regularization?
Second, in considering the "ancillary issue" as a proper subject of a Rule
45 petition for review on certiorari of a ruling rendered under a Rule 65
petition, the ponencia apparently fails to distinguish the difference
between errors of law and errors of jurisdiction in an attempt to justify its
decision that is based solely on assumptions.
Error of jurisdiction is one where the act complained of was issued by
the court without or in excess of jurisdiction. This is the province of the
writ of certiorari. The writ of certiorari will not be issued to cure errors in
the appreciation of the evidence of the parties, and its conclusions
anchored on the said findings and its conclusions of law. If the CA finds
that the NLRC committed no error of jurisdiction, the Courts task is to
only determine the legal correctness of this CA finding and not to
supplant the NLRC and the CAs conclusion with what the Court thinks
should be the correct interpretation of the law, in utter disregard of the
different levels of review the case underwent. If the Court will undertake
a review of the "ancillary issues" suggested by the ponencia, the Court
will in effect create a right of appeal from the NLRC ruling when the law
confers none.
Too, a Rule 65 petition requires the presence of grave abuse of
discretion and not mere abuse of discretion before courts may issue
the corrective writ of certiorari in labor cases not only because the ruling
under review is already final; but, more importantly, because the
appreciation of the evidence and its legal effects carries with it discretion
within the bounds of the law. The discretion granted to the NLRC to
affirm or reverse the LA, on one hand, and the discretion granted to the
CA to determine whether grave abuse of discretion attended the NLRCs
ruling, on the other hand, are discretions within legal bounds that the
Court cannot supplant at will, much less via mere assumption.

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1. Abbott failed to specify the reasonable standards by which


Alcaraz alleged poor performance was evaluated, much less to
prove that such standards were made known to her at the time of
her recruitment.

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In sum, these are what the NLRC and the CA found as matters of fact
and law:

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2. The employment contract does not show that Alcaraz had been
apprised of the requirements to become a regular employee.
3. The Labor Arbiters reasoning that a top level pharmaceutical
corporation would not be remiss in leaving its standards of
continued employment undisclosed to its employees is simply non
sequitur.
4. Alcaraz receipt of Abbotts Code of Good Corporate Conduct,
Probationary Performance Standards and Evaluation and
Performance Excellence Orientation Modules for the Hospira
ALSU Staff cannot be equated with being actually informed of the
performance standards.
Notably, what Alcaraz received was the Probationary Performance
Standards for the Hospira ALSU Staff.
5. Alcaraz received these various documents not at the time of her
engagement but only on March 3, 2005 or a month after her
engagement.
6. Abbotts claim on Alcaraz poor performance (on account of her
tardiness, poor time management, failure to build effective rapport,
non-completion of training and poor time management skills) [was]
not supported by evidence.
7. There is also no evidence to show that Abbott conveyed to or
confronted Alcaraz with her alleged inefficiencies or incompetence
at any time during her tenure with Abbott.
8. While Abbott has a standard operating procedure in evaluating
probationary employees, there is no evidence that Alcaraz
underwent this procedure.

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Based on these findings, the CA correctly determined that the NLRC did
not commit grave abuse of discretion in reversing the LAs ruling.
Consider the following: first, the LAs ruling that Alcaraz was apprised of
the reasonable standards (to qualify as regular employee) was merely
based on Alcarazs factual narrations in her position paper narrations

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9. What makes [Alcarazs] dismissal for alleged dismal


performance even more highly suspicious is that she was even
complimented by no less than Ms. Kelly Walsh in her electronic
mail dated 25 April 2005.14

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that by themselves do not at all speak of any reasonable performance


standards. This is not even disputed by the ponencia; second, Alcaraz
received the documents that purportedly contain the performance
standards only on March 3, 2005 or a month after her engagement
contrary to what the law requires on when the reasonable standards
must be communicated; and third, the LA himself is not convinced that
these documents would suffice to prove the existence of performance
standards that he had to rely on a baseless assumption that a top level
pharmaceutical corporation would not be remiss in leaving its standards
of continued employment undisclosed to its employees. In reversing the
CAs ruling that no grave abuse of discretion existed, the Court itself
might have crossed into prohibited territory through its own grave abuse
of discretion.
B. Substantive Objections
I. The constitutional guarantee of
security of tenure
The Constitution decrees that all workers are entitled to security of
tenure. This means that an employer cannot terminate his employees
employment (whether actual or constructive) or otherwise suspend him
without any just or authorized cause and without complying with the due
process requirements mandated by law. This constitutional and statutory
guarantee seeks, in the ultimate, to prevent the capricious exercise by
the employer of his power to dismiss.15
Aside from the just and authorized causes provided by law, the law also
allows the employer to dismiss a probationary employee if he "fails to
qualify as a regular employee in accordance with reasonable standards
made known by the employer to the employee at the time of his
engagement." The inclusion of this phrase in Article 281 of the Labor
Code and the manner by which it is phrased indicate that: first, a
probationary employment is not a default mode of an employment
contract; and second, inadequate performance of ones duties and
failure to comply with reasonable standards cannot actually mean the
same thing.

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Regardless of the kind of employment arrangement between the parties,


an employer has the right to put a newly-hired employee under a
probationary period or it may choose not to do so, as part and parcel of

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1. Probationary employment is not a


default mode of employment contract

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its power to hire. If the employer opts for the latter, however, he may not
easily sever the relationship without proving the existence of a just or
authorized cause and without complying with procedural due process. If
the employer opts to hire an employee on a probationary basis, valid
severance of the employer-employee relationship - outside of the just
and authorized causes - presupposes that the employer had
accomplished the following things:
1. The employer must communicate to the employee that he is
being hired on a probationary basis;
2. The employer must convey to the probationary employee the
reasonable standards to qualify for regularization;
3. The probationary status of the newly-hired employee must be
communicated to him prior to the commencement of his
employment;
4. The employer must convey these reasonable standards at the
time of the probationary employees engagement;
5. The employer must evaluate the performance of the
probationary employee vis the duly communicated reasonable
standards; and
6. The employee fails to comply with these reasonable standards
before the completion of the probationary period.
These cumulative requirements are demanded from the employer itself
and cannot be supplied for him by law. These requirements, too, should
serve to dispel the wrong notion that a probationary employee enjoys
lesser rights than a regular employee under the Labor Code. Since a
probationary employment is not an "employment at will" situation as that
phrase is understood in American jurisprudence, the only way by which
the constitutional guarantee of security of tenure may be enforced is to
ensure that the employer sufficiently discharges its burden of proving
compliance with these requirements in the same manner that it is
burdened to prove the existence of a valid cause in dismissing an
employee.16

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121

2. "Inadequate performance of ones


duties" and "failure to comply with
reasonable standards" cannot actually
mean the same thing
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The ponencia reiterates that adequate performance of ones duties and


responsibilities constitutes the inherent and implied standard for
regularization. In short, "if the probationary employee had been fully
apprised by his employer of these duties and responsibilities, then basic
knowledge and common sense dictate that he must adequately perform
the same."17 Otherwise, he may be terminated on the ground that his
performance during the probationary period is "inadequate."
If this is the case, then the law could have simply stated that a
probationary employee can be dismissed "if he fails to adequately
perform his duties and responsibilities" if it actually meant the "adequate
performance of ones duties" and "reasonable standards" to mean the
same thing.
In employing its present terms, Article 281 of the Labor Code merely
proceeded from the premise that security of tenure is not merely a
statutory but a constitutionally guaranteed right. To consider an
employees regularization on the overly broad basis of "adequacy of
performance" alone would practically negate the constitutional
guarantee. Rather, the law employed a qualitative and quantitative
measurement of ones performance by requiring a probationary
employees performance to be measured on the basis of reasonable
standards. These standards or measurement of performance serve as a
statutory limitation to the employers prerogative to dismiss an
employee, consistent with the constitutional right to security of tenure.

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In the same manner that the probationary period of employment (or trial
period) is meant to serve the interests of both the employer and the
employee, the requirement of reasonable standards seeks to protect the
rights of both the employer (to his management prerogative) and the
employee (since his employment is in a sense a property right).

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The reason for requiring the existence of reasonable standards that are
duly communicated to the employee is not hard to discern. The
probationary period of employment is not exclusively for the benefit of
the employer but of both the employer and the employee: on one hand,
the employer observes the fitness, propriety and efficiency of a
probationary employee to ascertain whether she is qualified for
permanent employment; the probationary employee, on the other hand,
seeks to prove to the employer that she has the qualifications to meet
the reasonable standards duly communicated by the employer for
permanent employment.

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In the context of the present case, an employer who duly communicates


to a probationary employee these reasonable standards for
regularization can reasonably expect that his exercise of management
prerogative (whether to hire or fire) will be respected by the State
(through its labor tribunals and eventually the courts). Similarly, a
probationary employee who has been duly informed cannot be heard to
cry foul later should she fail in these performance standards of which
she has notice.
II. Elements of valid probationary
employment
Based on Article 281 of the Labor Code and Section 6(d) of the
Implementing Rules of Book VI, Rule I of the Labor Code, a valid
probationary employment presupposes the concurrence of two
requirements: First, the employer shall make known to the employee the
reasonable standard (performance standard) that the probationary
employee must comply with to qualify as a regular employee. Second,
the employer shall inform the employee of the applicable performance
standard at the time of his/her engagement. Failing in one or both, the
employee, even if initially hired as a probationary employee, should be
considered a regular employee.
Both these elements are sorely wanting in this case.
1. The rule and the exception in jurisprudence

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In Aberdeen Court, Inc. v. Agustin, Jr.,18 the Court made a qualification


to the rule that failure to comply with the two requirements for valid
probationary employment would make the employment a regular
employment. Where the employee acted "in a manner contrary to basic
knowledge and common sense, in regard to which there is no need to
spell out a policy or standard to be met,"19 then his termination on this
ground will be upheld by the Court.

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For emphasis, performance standards are the specific expectations of


the employer on how the probationary employee should perform. These
specific expectations cannot be equated with the duties and
responsibilities attached to the position. While the "specific expectations"
inhere in an employer and, accordingly, vary from one employer to
another, the duties and responsibilities inhere in the peculiarities of the
particular job itself. Due to the difference between the two, proof of the
existence of one does not necessarily prove the existence of the other
and vice versa.

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In Robinsons Galleria/Robinsons Supermarket Corporation v.


Ranchez,20 the Court stated that a probationary employee shall be
deemed a regular employee where no standards are made known to him
at the time of his engagement "unless the job is self-descriptive, like
maid, cook, driver, or messenger."
Under these two instances, the very nature of the duty or duties to be
performed by the employee or of what he failed to perform (showing lack
of basic knowledge and common sense) is necessarily equated with the
performance standard or specific expectations of the employer as
required by law. Notably, what these cases instruct finds its logic in the
law itself: failure to meet a performance standard that is rooted on "basic
knowledge and common sense" can be a valid ground to terminate a
probationary employee without the need of an express prior
communication of the performance standard to the probationary
employee. Basic knowledge and common sense should be possessed
by anyone desiring to find a regular employment.
Additionally, if the very nature of the job no longer permits the employer
from specifying his expectations that would constitute performance
standards beyond what the job itself entails, the law likewise cannot
demand something more from the employer. The law, however, does not
bar the employer from expressly laying down his terms, even with the
simplicity of the job, before a probationary employee can qualify for
regularization.

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In the present case, while the ponencia did not and could not
expressly claim that the petitioners case falls within the exceptions it
oddly leaned on the exceptions to stretch its reading of the general rule.

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While all jobs, regardless of their nature, would necessitate a description


of what they entail, not all jobs would legally require the employers to set
and communicate a performance standard applicable to them, as
enunciated under the exceptions. The legal requirement for the
employer to lay down and communicate the performance standards to
the employee at the time of his engagement arises from the nature of
the probationary employment as a trial period. A trial period
presupposes the existence of a standard against which the probationary
employees performance would be tried and measured. Accordingly, the
communication of a performance standard is a requirement imposed by
law - on top of the practical requirement of describing the job and
communicating, expressly or impliedly, this description to the employee unless the nature of the job falls within the exceptions.

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This legal maneuvering is most unwarranted for going against the basic
principle in dismissal-of-employees cases, i.e., the burden of proof rests
upon the employer to show that the dismissal is for a just cause and
failure to do so would necessarily mean that the dismissal is not
justified.21
These observations lead to the conclusion that the laws demand for
compliance with the two requirements (for a valid probationary
employment to exist) becomes greater as the complexity of the job
increases since the same complex nature of the job results in varying
needs and specific expectations from different employers that are
engaged in the same line of industry. Hence, it is highly inappropriate to
cite Alcarazs "extensive training and background" to effectively make up
for Abbotts own failure to comply with the requirements of the law.
In other words, the more complex the job is (like that of managerial
employee) the more it becomes necessary to specify what the
employers specific expectations are vis--vis the duties and
responsibilities that the job entails. In this manner, compliance with the
twin requirements of a valid probationary employment may require the
employer to lay down a quantitative or qualitative standard (or both) in
measuring the performance of a probationary employee.
In the present case, none of the petitioners evidence shows what these
quantitative and/or qualitative standards are.

Interestingly, even if these documents were not given to Alcaraz for the
purpose of communicating the performance standards that apply to her,
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The pre-employment orientation the petitioners conducted for Alcaraz


and the office policies communicated to her cannot be equated with the
performance standards required by law. The pre-employment orientation
pertains to Alcarazs duty to implement Abbotts Code of Conduct and
office policies as they relate to the staff she has to manage and
supervise. The other pieces of documentary evidence Abbott presented
- Code of Conduct, PPSE and Performance Excellence Orientation
Modules - were likewise in line with its purpose of acquainting and
assisting Alcaraz in her duty in supervising and evaluating the
employees assigned to her department.

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2. Abbotts pre-employment orientation


and other documentary evidence
cannot amount to performance
standards

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Abbott claims that since it has only one evaluation system for all its
employees, Alcaraz very well knew that the contents of these documents
would be the same measure in evaluating Alcarazs performance.
However, the facts, as found by the ponencia itself, tell otherwise, i.e.,
that Alcaraz was actually subjected to a different work performance
evaluation:
On April 20, 2005, Alcaraz had a meeting with petitioner Cecille Terrible
(Terrible), Abbotts former HR Director, to discuss certain issues
regarding staff performance standards. In the course x x x thereof,
Alcaraz accidentally saw a printed copy of an e-mail sent by Walsh to
some staff members which essentially contained queries regarding the
formers job performance. Alcaraz asked if Walshs action was the
normal process of evaluation. Terrible said that it was not.22 (emphasis
ours)
This is a uniform, undisputed finding of fact of the LA, the NLRC and the
CA. Given the difference in treatment by Abbott in Alcarazs case, Abbott
cannot avoid the conclusion that it may only legally be allowed to divert
from the usual procedure on the ground that Alcaraz is actually bound by
a different set of specific expectations by her employer because of the
nature of the duties and responsibilities that a managerial employee like
her has to discharge. If she is bound by a different set of expectations,
then Abbott must prove what these expectations are in order to comply
with the requiredperformance standards.

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Abbotts own admission that it had only one evaluation system for all of
its employees actually backfires against it for being inconsistent with its
own conduct (when it subjected Alcaraz to a different evaluation
process) and omission (when it failed to communicate to Alcaraz the
performance standards that are actually applicable to her). By itself, its
admission proves the utter lack of evidence to show Abbotts compliance
with the first (and, much less the second) requirement of a valid
probationary employee. If Abbott would insist on the uniformity of its
performance standard, one can be tempted to ask whether Abbott can
assess its Regulatory Affairs Manager, like Alcaraz, who has an initial
salary of P110,000.00 on the same standard Abbott applies to its office

126

As the NLRC and the CA found however, there is no evidence on record


to show what these standards really were and that they were duly
communicated. Much less was there evidence that Alcaraz was actually
evaluated on the basis of the required duly communicated standards.

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receptionist or clerk and objectively consider the application compliant


with the law.
To be sure, Abbott cannot answer this question affirmatively without, at
the same time, suggesting the superfluity of the two requirements in
Article 281 of Labor Code for a valid probationary employment to exist.
The law precisely required the performance standards to be
"reasonable" since the performance standard applicable to only one type
of employee (e.g., managerial) cannot reasonably be applied to a
different type of employee (e.g., clerical).
Abbott likewise cannot answer in the negative without contradicting its
own admission on record and without emphasizing what the NLRC and
the CA have found all along the absence of an applicable performance
standard duly communicated to Alcaraz.
Since the validity of Alcarazs dismissal hinges on whether Abbott
complied with the twin requirements under Article 281 of the Labor
Code, then proof of its compliance with these requirements must be
substantiated by the evidence and not merely assumed from or
impelled by something that, in the first place, the NLRC and the CA did
not find existing.
3. The case of Aliling v. Feliciano
On this point, I submit that Alcira v. NLRC,23 far from advancing Abbotts
position, in fact, supports this Dissent in the same manner that the case
of Armando Aliling v. Jose B. Feliciano, et al.,24 cited by Alcaraz, does.

Page

First, the labor tribunals and the CA uniformly found the lack of
performance standards duly communicated to the employee. In the
present case, the fact that the LA arrived at a conclusion different from
those reached by the NLRC and the CA does not authorize the Court to
simply brush aside the factual findings at these two levels of review
because the Courts jurisdiction under a Rule 45 petition is limited. More
importantly, the LAs ruling itself was legally and factually baseless, thus
warranting its reversal on appeal.

127

In Aliling, there were three grounds cited, each of which can


independently support the Courts ruling, in finding that the probationary
employee was actually a regular employee, for failure to comply with the
requirements of the law on probationary employment.

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At the risk of being repetitive, what the CA reviews under a Rule 65


petition is a ruling that under the law is already final. To warrant the
issuance of the writ of certiorari, the CA should find the existence of
grave abuse of discretion. Should it find none, as in the present case,
the Court, under a Rule 45 petition, is confined to the determination of
the legal correctness of the CAs finding that the NLRC ruling of illegal
dismissal had basis in fact and in law (i.e., was not attended by grave
abuse of discretion).
Second, the probationary employee was "assigned to GX trucking sales,
an activity entirely different from the Seafreight Sales he was originally
hired and trained for."25 The difference in assignment led the Court to
conclude that "at the time of his engagement, the standards relative to
his assignment with GX sales could not have plausibly been
communicated to him as he was under Seafreight Sales."26
This circumstance is admittedly absent in the present case.
Nonetheless, the third ground cited by the Court requires an extended
discussion since it touches on the quantitative and qualitative
assessment of probationary employees now advanced by the ponencia.
a. The quantitative and qualitative
assessment of probationary employees

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While the specific expectations of an employer may cut across the


details of ones job description, the Court must not confuse one with the
other. In the case of a salesperson (account executive), specific
expectations may translate into the minimum quota that a probationary
employee must reach to be entitled to regularization. In the present
case, there is absolutely nothing in the petitioners evidence that would
have given the NLRC and the CA and this Court - a hint as to what the
petitioners expectations would translate into. The ponencias reasoning
that it is the adequacy of the performance of these duties and
responsibilities, which constitutes as the "implied and inherent"

128

In Aliling, the letter-offer to the probationary employee states that the


regularization standards or the performance norms to be used are still to
be agreed upon by the probationary employee and his supervisor i.e.,
the two would "jointly define [their] objectives compared with the job
requirements of the position"27 without the employer proving that an
agreement has, in fact, been reached. While there was evidence that the
supervisor reminded the probationary employee of the sales quota he
must reach for continued employment, this standard was communicated
belatedly or one month after the employees engagement.

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reasonable standards for regularization, begs the question. On what


basis is the "adequacy" legally gauged? To this argument, the ponencia
offers an explanation.
The determination of "adequate performance" is not, in all case,
measurable by quantitative specification, such as that of a sales quota
It also hinged on the qualitative assessment of the employees work; by
its nature, this largely rests on the reasonable exercise of the employers
management prerogative. While in some instances the standards used
in measuring the quality of work may be conveyed xxx not all standards
of quality measurement may be reducible to hard figures or are readily
articulable in specific pre-engagement descriptions. A good example
would be the case of probationary employees whose tasks involve the
application of discretion and intellect, such as xxx lawyers, artists and
journalist. In these kinds of jobs, the best that the employer can do at the
time of engagement is to inform the probationary employee of his duties
and responsibilities and to orient him on how to properly proceed with
the same. The employer cannot bear out in exacting detail at the
beginning of the engagement what he deems as "quality work"
especially since the employee has yet to submit the required output. In
the ultimate analysis, the communication of performance standards
should be perceived within the context of the nature of probationary
employees duties and responsibilities.28
The fundamental flaw in the ponencias explanation is that it contradicts
the evidence on record. Applying the ponencias reasoning, Abbott itself
may have recognized that the standards for measuring the quality
(instead of quantity) of Alcarazs work are not "reducible to hard
figures."29 To be able to comply with the law, Abbott devised its own
system of evaluation to measure the "adequacy of Alcarazs
performance." Since the "adequacy of performance" cannot entirely be
left to the whims and caprices of Abbott, the Court can rightfully consider
Abbotts PPSE as its legal compliance with Article 281 of the Labor
Code on the twin requirements of probationary employment. Abbotts
PPSE requires:

Page

129

a. Performance standards must be discussed in detail with the


employee within the first two weeks on the job. This means the
leader should have already identified the Core Job
Responsibilities, goals, and competency expectations prior to
discussion with the probationary employee.

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b. A signed copy of the Probationary Performance Standards and


Evaluations (PPSE) must be submitted to HRD within employees
1st two weeks on the job.
c. The completed PPSE will serve as documentation of the
employees performance during his/her probationary period, and
will serve as basis for recommending confirmation or termination of
employment with Abbott. To be submitted to HRD on the
probationary employees 5th month on the job.30
In short, based on Abbotts own manner of legal compliance with the
laws requirement on performance standards, Abbott prescribes the
procedure for making the evaluation and it is only through compliance
with this procedure that Abbotts determination of the adequacy of
performance can be shown. Since not all probationary standards of
quality measurement are "reducible to hard figures or are readily
articulable in specific pre-engagement descriptions,"31 Abbotts PPSE is
its own solution, as far as practicable, to be able to "map into technical
indicators or convey in precise detail the quality standards"32 by which
Alcarazs probationary employment would be assessed. The truism that
the substance of the law can be found in the interstices of the procedure
cannot be more applicable than in the present case.

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On this point and contrary to the ponencias view, Abbotts noncompliance with the terms of the PPSE cannot be regarded as a mere
matter of procedural lapse. In reality, one cannot divorce the
requirement of reasonable standards and of duly communicating it to the
probationary employee, on one hand, and the requirement that the
employee, in fact, failed to comply with these standards in the manner
that the employer himself had contractually determined if only to give life
to the constitutional guarantee of security of tenure to all workers, on the

130

Abbotts failure to comply with its own prescribed manner of determining


a probationary employees performance goes into and against the very
nature of the employers legal obligation to evaluate the probationary
employees performance and to determine that she actually failed to
comply with the reasonable standards required by the law itself. In the
ponencias words, this reasonable standard is the adequacy of
performance of her duties and responsibilities. Abbotts failure to comply
with its own procedure in evaluating Alcarazs performance and in
actually deviating therefrom is itself a palpable proof that there were no
duly communicated performance standards in the present case to begin
with, both in point of fact and law.

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other hand. For this reason, the ponencia cannot insist that the noncompliance with the PPSE is only a formal defect and yet claim that
adequacy of performance is not reducible to figures. Abbott cannot have
its cake and eat it too.
Notably, prior to or at the time of Alcarazs engagement, Abbotts
communications to Alcaraz comprised only of: (i) her job description; (ii)
the duties and responsibilities attached to the position; (iii) the conditions
of her employment, i.e., the position title, the assigned department, the
status of employment, and the period of employment; (iv) Abbotts
organizational structure; and (v) what she had to implement, i.e.,
Abbotts Code of Conduct, office policies on human resources and
finance, and to whom she would be reporting to.
Even if we go by the ponencias reasoning, these communications by
themselves do not establish the legal gauge of "adequacy" of
performance by which Alcarazs probationary performance would be
measured. To emphasize, Abbotts PPSE serves as a legal gauge to
measure the adequacy of Alcarazs performance. Unfortunately, the
silence of the ponencia and the dearth of evidence on why this legal
gauge was not applied to Alcaraz would keep this aspect of the case in
mystery. To make matters worse, the PPSE (together with the
Performance Excellence Orientation Modules) was given to Alcaraz
almost a month after her engagement.
In other words, even the "totality of circumstances" approach by the
ponencia is fractured from the very start. The 2nd requirement for a valid
probationary employment under the Labor Code is, in fact, an offshoot of
the first requirement of a reasonable standard: a standard is reasonable
not only because it lays down the employers specific expectations
applicable to a particular type of employee vis the attendant duties and
responsibilities but also because it is duly communicated to the
employee. A belated communication of what the reasonable standard is
deprives the standard of the character of reasonableness.

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The employee in Aliling, a sales executive, was belatedly informed of his


quota requirement. Thus, considering the nature of his position, the fact
the he was not informed of his sales quota at the time of his engagement

131

Still, Abbott attempts to show the inadequacy of Alcarazs performance


although deviating from the prescribed procedure by presenting its
May 19, 2005 letter addressed to Alcaraz, noting her "NA (Not Achieved)
ratings in the area of Core Job Competencies."33 The ponencia
unqualifiedly bought this claim in this manner -

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changed the complexion of his employment. Contrarily the nature of


respondents duties and responsibilities as Regulatory Affairs Manager
negates the application of the foregoing. Records show that respondent
was terminated because she xxx. Due to the nature of these tasks, the
performance standards for measuring the same were hardly articulable
at the time of her engagement unlike those in Aliling which were already
conveyable. Hence, since the reasonableness of respondents
assessment clearly appears from the records, her termination was
justified.34
The ponencias statements require some serious reflection from the
Court. First, are we, in effect, saying that the reasonable standards
required by the law may be communicated at a point beyond the time of
the employees engagement? To put it bluntly, is the Court not engaging
in clear judicial legislation? Article 281 of the Labor Code is pointedly
clear.
Art. 281. Probationary employment. - Probationary employment shall not
exceed six (6) months from the date the employee started working,
unless it is covered by an apprenticeship agreement stipulating a longer
period. The services of an employee who has been engaged on a
probationary basis may be terminated for a just cause or when he fails to
qualify as a regular employee in accordance with reasonable standards
made known by the employer to the employee at the time of his
engagement. An employee who is allowed to work after a probationary
period shall be considered a regular employee. [italics supplied;
emphasis and underscore ours]

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Third, the ponencia wrote too early in claiming that it did not undertake a
"factual appellate review" of the case. Yet, it weighed in on the supposed
"reasonableness of [the petitioners] assessment" of Alcarazs
performance because it "clearly appears on the record."35 As the NLRC

132

Second, the ponencia makes the qualitative assessment (in contrast


with a quantitative assessment) of a probationary employee far more
esoteric in business application than it actually is. As may be implied
from my earlier discussion, had Abbott discussed the PPSE with Alcaraz
vis--vis her duties and responsibilities, Abbott could have easily
communicated to Alcaraz, at least substantially, the specific
expectations that translate into the reasonable standards required of it
by law. Not only did Abbott fail in this regard, Abbott, in fact, belatedly
gave the PPSE to Alcaraz, in patent violation of Article 281 of the Labor
Code.

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and the CA found however, the factual accuracy of Abbotts assessment


of Alcaraz is not supported by evidence.
b. Rubbing it in: extension of the Agabon
and Jaka rulings does not cure a fatal flaw
In an apparent attempt to belittle Abbotts non-compliance with its
internal procedure, the Court for the first time extends the application
of its rulings in Agabon v. NLRC36 and Jaka Food Processing
Corporation v. Pacot37 to the present case. In these cases, the Court
ruled that when a valid cause for termination exists, the employers noncompliance with the procedural requirements warrants the payment of
nominal damages.
In these cases, however, the procedural requirements do not have a
bearing on the validity of the dismissal since the existence of a just or
authorized cause can be proved by independent and objective evidence.
In the present case, what the ponencia advances as ground for
termination of a probationary employee is the inadequacy of her
probationary performance. At the risk of raising a rhetorical question,
what is the legal gauge of this basis of adequacy that is consistent with
the constitutionally guaranteed right of security of tenure? In other
words, where the validity of the cause of dismissal adequacy of
performance - cannot be resolved without undergoing the very process
prescribed by the employer for measuring the adequacy, there is no
reason to extend the Agabon and Jaka rulings in the present case.
On this score, it is highly inapt to equate Abbotts internal procedure of
evaluating a probationary employee with the notice requirements under
the law even as a consoling gesture on the part of the Court. The
inextricable link between the procedure devised by Abbott for evaluating
Alcaraz (as a means to qualitatively specify Abbotts specific
expectations vis-a-vis the duties and responsibilities of Alcaraz position
and to evidence its qualitative assessment of Alcaraz), on one hand, and
the end that this procedure seeks to achieve, on the other hand, suffices
to distinguish Abbotts internal procedure and the statutory procedural
requirements.

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As stated in my earlier Dissent, the performance standard contemplated


in law may be proven by evidence of how the employees performance
was intended to be or was, in fact, measured by the employer. The
performance standard may be in the form of a clear set of the

133

c. Evidence of performance standards

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employers expectations, or by a system of feedbacks (e.g., comment


cards) and document evaluation or performance evaluation and
appraisals conducted by the employer.
To this, again the ponencia offers an explanation:
[T]he performance standard contemplated by law should not, in all
cases, be contained in a specialized system of feedbacks or evaluation.
The Court takes judicial notice of the fact that not all employers, such as
simple businesses or small-scale enterprises, have a sophisticated form
of human resource management, so much so that the adoption of
technical indicators as utilized through "comment cards" or "appraisal"
tools should not be treated as a prerequisite for every case of
probationary engagement.38
The problem with the ponencias explanation is that it veers away from
the problem at hand in the same manner that it did when it claimed
that actual communication of specific standards might not be necessary
"when the job is self-descriptive in nature, for instance, in the case of
maids, cooks, drivers, or messengers" even if Alcaraz was, in the first
place, never a maid, cook, driver or a messenger. Abbott is not engaged
in a simple business nor is it a small-scale enterprise. Abbott is a
multinational corporation, with branches and different facilities located all
over the world. As such, it is most unfortunate that the specialized
system it actually has in place as a legal gauge to measure the
"adequacy of performance" of Alcaraz, i.e., the PPSE was never
observed, not to mention, not duly communicated.39
III. Consequence of non-compliance
with Article 281 of the Labor Code

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In addition, the abrupt and oppressive manner by which the petitioners


dismissed Alcaraz from her employment justified the award of moral and
exemplary damages and attorney's fees. To reiterate my earlier Dissent:

134

Since Abbott failed to comply with the requisites for valid probationary
employment, then Alcaraz should be deemed a regular employee who
can be removed only with just or authorized causes. In the present case,
the petitioners failed to show that Alcaraz's dismissal was for a valid
cause. The petitioners also failed to comply with the two-written notice
requirement under Section 2, Rule XXIII, Book V of the Omnibus Rules
Implementing the Labor Code, in violation of Alcaraz's procedural due
process rights under the law.

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The narration of facts of the Labor Arbiter, the NLRC and the CA shows,
among others, that: ( 1) the individual petitioners did not follow the
petitioner's prescribed procedure performance evaluation as, in fact, the
respondent's work was not evaluated; (2) the individual petitioners,
through their concerted actions, ganged up on the respondent in forcing
her to resign from employment; (3) the individual petitioners pressured
the respondent to resign by announcing her resignation to the office
staff, thereby subjecting her to unwarranted humiliation; and (4) they
blackmailed the respondent by withholding her personal possessions
until she resigned from employment.
Bad faith can also be inferred from the lack of fairness and
underhandedness employed by the individual petitioners on how they
informed the respondent of the termination of her employment. The
records disclose that the respondent was lured into a meeting on the
pretext that her work performance was to be evaluated; she was caught
off-guard when she was info1med that her employment had been
terminated. Aside from the abrupt notification, bad faith can also be
deduced from the fact that the termination was made immediately
effective; the respondent was immediately banned from the petitioner's
premises after she was informed that her employment had been
terminated.
In these lights, I vote to grant the motion for reconsideration.

Page

135

ARTURO D. BRION
Associate Justice

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G.R. No. 152396

November 20, 2007

EX-BATAAN VETERANS SECURITY AGENCY, INC., petitioner,


vs.
THE SECRETARY OF LABOR BIENVENIDO E. LAGUESMA, REGIONAL
DIRECTOR BRENDA A. VILLAFUERTE, ALEXANDER POCDING, FIDEL
BALANGAY, BUAGEN CLYDE, DENNIS EPI, DAVID MENDOZA, JR., GABRIEL
TAMULONG, ANTON PEDRO, FRANCISCO PINEDA, GASTON DUYAO,
HULLARUB, NOLI DIONEDA, ATONG CENON, JR., TOMMY BAUCAS, WILLIAM
PAPSONGAY, RICKY DORIA, GEOFREY MINO, ORLANDO RILLASE,
SIMPLICIO TELLO, M. G. NOCES, R. D. ALEJO, and P. C. DINTAN,respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review1 with prayer for the issuance of a temporary restraining
order or writ of preliminary injunction of the 29 May 2001 Decision2 and the 26
February 2002 Resolution3 of the Court of Appeals in CA-G.R. SP No. 57653. The
29 May 2001 Decision of the Court of Appeals affirmed the 4 October 1999 Order of
the Secretary of Labor in OS-LS-04-4-097-280. The 26 February 2002 Resolution
denied the motion for reconsideration.
The Facts
Ex-Bataan Veterans Security Agency, Inc. (EBVSAI) is in the business of providing
security services while private respondents are EBVSAI's employees assigned to the
National Power Corporation at Ambuklao Hydro Electric Plant, Bokod, Benguet
(Ambuklao Plant).

On 19 August 1996, the Director of the Regional Office (Regional Director) issued an
Order, the dispositive portion of which reads:

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On 7 March 1996, the Regional Office conducted a complaint inspection at the


Ambuklao Plant where the following violations were noted: (1) non-presentation of
records; (2) non-payment of holiday pay; (3) non-payment of rest day premium; (4)
underpayment of night shift differential pay; (5) non-payment of service incentive
leave; (6) underpayment of 13th month pay; (7) no registration; (8) no annual medical
report; (9) no annual work accidental report; (10) no safety committee; and (11) no
trained first aider.5 On the same date, the Regional Office issued a notice of
hearing6 requiring EBVSAI and private respondents to attend the hearing on 22
March 1996. Other hearings were set for 8 May 1996, 27 May 1996 and 10 June
1996.

136

On 20 February 1996, private respondents led by Alexander Pocding (Pocding)


instituted a complaint4 for underpayment of wages against EBVSAI before the
Regional Office of the Department of Labor and Employment (DOLE).

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WHEREFORE, premises considered, respondent EX-BATAAN VETERANS


SECURITY AGENCY is herebyORDERED to pay the computed deficiencies
owing to the affected employees in the total amount of SEVEN HUNDRED
SIXTY THREE THOUSAND NINE HUNDRED NINETY SEVEN PESOS and
85/PESOS within ten (10) calendar days upon receipt hereof. Otherwise, a
Writ of Execution shall be issued to enforce compliance of this Order.
NAME

DEFICIENCY

1. ALEXANDER POCDING

P 36,380.85

2. FIDEL BALANGAY

36,380.85

3. BUAGEN CLYDE

36,380.85

4. DENNIS EPI

36,380.85

5. DAVID MENDOZA, JR.

36,380.85

6. GABRIEL TAMULONG

36,380.85

7. ANTON PEDRO

36,380.85

8. FRANCISCO PINEDA

36,380.85

9. GASTON DUYAO

36,380.85

10. HULLARUB

36,380.85

11. NOLI D[EO]NIDA

36,380.85

12. ATONG CENON, JR.

36,380.85

13. TOMMY BAUCAS

36,380.85

14. WILIAM PAPSONGAY

36,380.85

15. RICKY DORIA

36,380.85

16. GEOFREY MINO

36,380.85

17. ORLANDO R[IL]LASE

36,380.85

18. SIMPLICO TELLO

36,380.85

19. NOCES, M.G.

36,380.85

20. ALEJO, R.D.

36,380.85

21. D[I]NTAN, P.C.

36,380.85
TOTAL

P 763,997.85

xxxx
SO ORDERED.7

Page

137

EBVSAI filed a motion for reconsideration8 and alleged that the Regional Director
does not have jurisdiction over the subject matter of the case because the money
claim of each private respondent exceeded P5,000. EBVSAI pointed out that the
Regional Director should have endorsed the case to the Labor Arbiter.

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In a supplemental motion for reconsideration,9 EBVSAI questioned the Regional


Director's basis for the computation of the deficiencies due to each private
respondent.
In an Order10 dated 16 January 1997, the Regional Director denied EBVSAI's motion
for reconsideration and supplemental motion for reconsideration. The Regional
Director stated that, pursuant to Republic Act No. 7730 (RA 7730),11 the limitations
under Articles 12912 and 217(6)13 of the Labor Code no longer apply to the Secretary
of Labor's visitorial and enforcement powers under Article 128(b).14 The Secretary of
Labor or his duly authorized representatives are now empowered to hear and
decide, in a summary proceeding, any matter involving the recovery of any amount
of wages and other monetary claims arising out of employer-employee relations at
the time of the inspection.
EBVSAI appealed to the Secretary of Labor.
The Ruling of the Secretary of Labor
In an Order15 dated 4 October 1999, the Secretary of Labor affirmed with
modification the Regional Director's 19 August 1996 Order. The Secretary of Labor
ordered that the P1,000 received by private respondents Romeo Alejo, Atong
Cenon, Jr., Geofrey Mino, Dennis Epi, and Ricky Doria be deducted from their
respective claims. The Secretary of Labor ruled that, pursuant to RA 7730, the
Court's decision in the Servando16 case is no longer controlling insofar as the
restrictive effect of Article 129 on the visitorial and enforcement power of the
Secretary of Labor is concerned.
The Secretary of Labor also stated that there was no denial of due process because
EBVSAI was accorded several opportunities to present its side but EBVSAI failed to
present any evidence to controvert the findings of the Regional Director. Moreover,
the Secretary of Labor doubted the veracity and authenticity of EBVSAI's
documentary evidence. The Secretary of Labor noted that these documents were not
presented at the initial stage of the hearing and that the payroll documents did not
indicate the periods covered by EBVSAI's alleged payments.
EVBSAI filed a motion for reconsideration which was denied by the Secretary of
Labor in his 3 January 2000 Order.17
EBVSAI filed a petition for certiorari before the Court of Appeals.

In its 29 May 2001 Decision, the Court of Appeals dismissed the petition and
affirmed the Secretary of Labor's decision. The Court of Appeals adopted the
Secretary of Labor's ruling that RA 7730 repealed the jurisdictional limitation
imposed by Article 129 on Article 128 of the Labor Code. The Court of Appeals also
agreed with the Secretary of Labor's finding that EBVSAI was accorded due process.

Page

The Court of Appeals also denied EBVSAI's motion for reconsideration in its 26
February 2002 Resolution.

138

The Ruling of the Court of Appeals

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Hence, this petition.


The Issues
This case raises the following issues:
1. Whether the Secretary of Labor or his duly authorized representatives
acquired jurisdiction over EBVSAI; and
2. Whether the Secretary of Labor or his duly authorized representatives have
jurisdiction over the money claims of private respondents which
exceed P5,000.
The Ruling of the Court
The petition has no merit.
On the Regional Director's Jurisdiction over EBVSAI
EBVSAI claims that the Regional Director did not acquire jurisdiction over EBVSAI
because he failed to comply with Section 11, Rule 14 of the 1997 Rules of Civil
Procedure.18 EBVSAI points out that the notice of hearing was served at the
Ambuklao Plant, not at EBVSAI's main office in Makati, and that it was addressed to
Leonardo Castro, Jr., EBVSAI's Vice-President.
The Rules on the Disposition of Labor Standards Cases in the Regional
Offices19 (rules) specifically state that notices and copies of orders shall be served
on the parties or their duly authorized representatives at their last known address or,
if they are represented by counsel, through the latter.20 The rules shall be liberally
construed21and only in the absence of any applicable provision will the Rules of
Court apply in a suppletory character.22

EBVSAI maintains that under Articles 129 and 217(6) of the Labor Code, the Labor
Arbiter, not the Regional Director, has exclusive and original jurisdiction over the
case because the individual monetary claim of private respondents exceeds P5,000.

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On the Regional Director's Jurisdiction over the Money Claims

139

In this case, EBVSAI does not deny having received the notices of hearing. In fact,
on 29 March and 13 June 1996, Danilo Burgos and Edwina Manao, detachment
commander and bookkeeper of EBVSAI, respectively, appeared before the Regional
Director. They claimed that the 22 March 1996 notice of hearing was received late
and manifested that the notices should be sent to the Manila office. Thereafter, the
notices of hearing were sent to the Manila office. They were also informed of
EBVSAI's violations and were asked to present the employment records of the
private respondents for verification. They were, moreover, asked to submit, within 10
days, proof of compliance or their position paper. The Regional Director validly
acquired jurisdiction over EBVSAI. EBVSAI can no longer question the jurisdiction of
the Regional Director after receiving the notices of hearing and after appearing
before the Regional Director.

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EBVSAI also argues that the case falls under the exception clause in Article 128(b)
of the Labor Code. EBVSAI asserts that the Regional Director should have certified
the case to the Arbitration Branch of the National Labor Relations Commission
(NLRC) for a full-blown hearing on the merits.
In Allied Investigation Bureau, Inc. v. Sec. of Labor, we ruled that:
While it is true that under Articles 129 and 217 of the Labor Code, the Labor
Arbiter has jurisdiction to hear and decide cases where the aggregate money
claims of each employee exceeds P5,000.00, said provisions of law do not
contemplate nor cover the visitorial and enforcement powers of the Secretary
of Labor or his duly authorized representatives.
Rather, said powers are defined and set forth in Article 128 of the Labor Code
(as amended by R.A. No. 7730) thus:
Art. 128 Visitorial and enforcement power. --- x x x
(b) Notwithstanding the provisions of Article[s] 129 and 217 of this
Code to the contrary, and in cases where the relationship of employeremployee still exists, the Secretary of Labor and Employment or his
duly authorized representatives shall have the power to issue
compliance orders to give effect to [the labor standards provisions of
this Code and other] labor legislation based on the findings of labor
employment and enforcement officers or industrial safety engineers
made in the course of inspection.The Secretary or his duly authorized
representatives shall issue writs of execution to the appropriate
authority for the enforcement of their orders, except in cases where the
employer contests the findings of the labor employment and
enforcement officer and raises issues supported by documentary
proofs which were not considered in the course of inspection.
xxxx

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This was further affirmed in our ruling in Cirineo Bowling Plaza, Inc. v.
Sensing,24 where we sustained the jurisdiction of the DOLE Regional Director and
held that "the visitorial and enforcement powers of the DOLE Regional Director
to order and enforce compliance with labor standard laws can be exercised
even where the individual claim exceeds P5,000."

140

The aforequoted provision explicitly excludes from its coverage Articles 129
and 217 of the Labor Code by the phrase "(N)otwithstanding the provisions of
Articles 129 and 217of this Code to the contrary x x x" thereby retaining and
further strengthening the power of the Secretary of Labor or his duly
authorized representatives to issue compliance orders to give effect to the
labor standards provisions of said Code and other labor legislation based on
the findings of labor employment and enforcement officer or industrial safety
engineer made in the course of inspection.23 (Italics in the original)

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However, if the labor standards case is covered by the exception clause in Article
128(b) of the Labor Code, then the Regional Director will have to endorse the case
to the appropriate Arbitration Branch of the NLRC. In order to divest the Regional
Director or his representatives of jurisdiction, the following elements must be
present: (a) that the employer contests the findings of the labor regulations officer
and raises issues thereon; (b) that in order to resolve such issues, there is a need to
examine evidentiary matters; and (c) that such matters are not verifiable in the
normal course of inspection.25 The rules also provide that the employer shall raise
such objections during the hearing of the case or at any time after receipt of the
notice of inspection results.26
In this case, the Regional Director validly assumed jurisdiction over the money
claims of private respondents even if the claims exceeded P5,000 because such
jurisdiction was exercised in accordance with Article 128(b) of the Labor Code and
the case does not fall under the exception clause.
The Court notes that EBVSAI did not contest the findings of the labor regulations
officer during the hearing or after receipt of the notice of inspection results. It was
only in its supplemental motion for reconsideration before the Regional Director that
EBVSAI questioned the findings of the labor regulations officer and presented
documentary evidence to controvert the claims of private respondents. But even if
this was the case, the Regional Director and the Secretary of Labor still looked into
and considered EBVSAI's documentary evidence and found that such did not
warrant the reversal of the Regional Director's order. The Secretary of Labor also
doubted the veracity and authenticity of EBVSAI's documentary evidence. Moreover,
the pieces of evidence presented by EBVSAI were verifiable in the normal course of
inspection because all employment records of the employees should be kept and
maintained in or about the premises of the workplace, which in this case is in
Ambuklao Plant, the establishment where private respondents were regularly
assigned.27
WHEREFORE, we DENY the petition. We AFFIRM the 29 May 2001 Decision and
the 26 February 2002 Resolution of the Court of Appeals in CA-G.R. SP No. 57653.

Page

141

SO ORDERED.

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x-----------------------------------------------------------------------------------------x
RESOLUTION
PEOPLES BROADCASTING
SERVICE (BOMBO RADYO
PHILS., INC.),
Petitioner,

- versus -

THE SECRETARY OF THE


DEPARTMENT OF LABOR
AND EMPLOYMENT, THE
REGIONAL DIRECTOR,
DOLE REGION VII, and
JANDELEON JUEZAN,
Respondents.

G.R. No. 179652


Present:
CORONA, C.J.,
CARPIO,
VELASCO, JR.,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,*
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA,
SERENO,
REYES, and
PERLAS-BERNABE, JJ.
Promulgated:
March 6, 2012

VELASCO, JR., J.:

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Private respondent Jandeleon Juezan filed a complaint against petitioner


with the Department of Labor and Employment (DOLE) Regional Office No.
VII, Cebu City, for illegal deduction, nonpayment of service incentive leave,
13th month pay, premium pay for holiday and rest day and illegal diminution of
benefits, delayed payment of wages and noncoverage of SSS, PAG-IBIG and
Philhealth.[1] After the conduct of summary investigations, and after the parties

142

In a Petition for Certiorari under Rule 65, petitioner Peoples


Broadcasting Service, Inc. (Bombo Radyo Phils., Inc.) questioned the Decision
and Resolution of the Court of Appeals (CA) dated October 26, 2006 and June
26, 2007, respectively, in C.A. G.R. CEB-SP No. 00855.

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submitted their position papers, the DOLE Regional Director found that private
respondent was an employee of petitioner, and was entitled to his money
claims.[2] Petitioner sought reconsideration of the Directors Order, but failed.
The Acting DOLE Secretary dismissed petitioners appeal on the ground that
petitioner submitted a Deed of Assignment of Bank Deposit instead of posting a
cash or surety bond. When the matter was brought before the CA, where
petitioner claimed that it had been denied due process, it was held that petitioner
was accorded due process as it had been given the opportunity to be heard, and
that the DOLE Secretary had jurisdiction over the matter, as the jurisdictional
limitation imposed by Article 129 of the Labor Code on the power of the DOLE
Secretary under Art. 128(b) of the Code had been repealed by Republic Act No.
(RA) 7730.[3]
In the Decision of this Court, the CA Decision was reversed and set aside,
and the complaint against petitioner was dismissed. The dispositive portion of
the Decision reads as follows:
WHEREFORE, the petition is GRANTED. The Decision
dated 26 October 2006 and the Resolution dated 26 June 2007 of the
Court of Appeals in C.A. G.R. CEB-SP No. 00855
are REVERSED and SET ASIDE. The Order of the then Acting
Secretary of the Department of Labor and Employment dated 27
January 2005 denying petitioners appeal, and the Orders of the
Director, DOLE Regional Office No. VII, dated 24 May 2004 and 27
February 2004, respectively, are ANNULLED. The complaint
against petitioner isDISMISSED.[4]

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From this Decision, the Public Attorneys Office (PAO) filed a Motion
for Clarification of Decision (with Leave of Court). The PAO sought to clarify
as to when the visitorial and enforcement power of the DOLE be not considered

143

The Court found that there was no employer-employee relationship


between petitioner and private respondent. It was held that while the DOLE
may make a determination of the existence of an employer-employee
relationship, this function could not be co-extensive with the visitorial and
enforcement power provided in Art. 128(b) of the Labor Code, as amended by
RA 7730. The National Labor Relations Commission (NLRC) was held to be
the primary agency in determining the existence of an employer-employee
relationship. This was the interpretation of the Court of the clause in cases
where the relationship of employer-employee still exists in Art. 128(b).[5]

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as co-extensive with the power to determine the existence of an employeremployee relationship.[6] In its Comment,[7] the DOLE sought clarification as
well, as to the extent of its visitorial and enforcement power under the Labor
Code, as amended.
The Court treated the Motion for Clarification as a second motion for
reconsideration, granting said motion and reinstating the petition.[8] It is
apparent that there is a need to delineate the jurisdiction of the DOLE Secretary
vis--vis that of the NLRC.
Under Art. 129 of the Labor Code, the power of the DOLE and its duly
authorized hearing officers to hear and decide any matter involving the recovery
of wages and other monetary claims and benefits was qualified by the proviso
that the complaint not include a claim for reinstatement, or that the aggregate
money claims not exceed PhP 5,000. RA 7730, or an Act Further Strengthening
the Visitorial and Enforcement Powers of the Secretary of Labor, did away with
the PhP 5,000 limitation, allowing the DOLE Secretary to exercise its visitorial
and enforcement power for claims beyond PhP 5,000. The only qualification to
this expanded power of the DOLE was only that there still be an existing
employer-employee relationship.

144

It is conceded that if there is no employer-employee relationship, whether


it has been terminated or it has not existed from the start, the DOLE has no
jurisdiction. Under Art. 128(b) of the Labor Code, as amended by RA 7730, the
first sentence reads, Notwithstanding the provisions of Articles 129 and 217 of
this Code to the contrary, and in cases where the relationship of employeremployee still exists, the Secretary of Labor and Employment or his duly
authorized representatives shall have the power to issue compliance orders to
give effect to the labor standards provisions of this Code and other labor
legislation based on the findings of labor employment and enforcement officers
or industrial safety engineers made in the course of inspection. It is clear and
beyond debate that an employer-employee relationship must exist for the
exercise of the visitorial and enforcement power of the DOLE. The question
now arises, may the DOLE make a determination of whether or not an
employer-employee relationship exists, and if so, to what extent?

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The first portion of the question must be answered in the affirmative.

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The prior decision of this Court in the present case accepts such answer,
but places a limitation upon the power of the DOLE, that is, the determination
of the existence of an employer-employee relationship cannot be co-extensive
with the visitorial and enforcement power of the DOLE. But even in conceding
the power of the DOLE to determine the existence of an employer-employee
relationship, the Court held that the determination of the existence of an
employer-employee relationship is still primarily within the power of the
NLRC, that any finding by the DOLE is merely preliminary.
This conclusion must be revisited.
No limitation in the law was placed upon the power of the DOLE to
determine the existence of an employer-employee relationship. No procedure
was laid down where the DOLE would only make a preliminary finding, that
the power was primarily held by the NLRC. The law did not say that the DOLE
would first seek the NLRCs determination of the existence of an employeremployee relationship, or that should the existence of the employer-employee
relationship be disputed, the DOLE would refer the matter to the NLRC. The
DOLE must have the power to determine whether or not an employer-employee
relationship exists, and from there to decide whether or not to issue compliance
orders in accordance with Art. 128(b) of the Labor Code, as amended by RA
7730.

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The determination of the existence of an employer-employee relationship


by the DOLE must be respected. The expanded visitorial and enforcement
power of the DOLE granted by RA 7730 would be rendered nugatory if the
alleged employer could, by the simple expedient of disputing the employeremployee relationship, force the referral of the matter to the NLRC. The Court
issued the declaration that at least a prima facie showing of the absence of an

145

The DOLE, in determining the existence of an employer-employee


relationship, has a ready set of guidelines to follow, the same guide the courts
themselves use. The elements to determine the existence of an employment
relationship are: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; (4) the employers power to
control the employees conduct.[9] The use of this test is not solely limited to
the NLRC. The DOLE Secretary, or his or her representatives, can utilize the
same test, even in the course of inspection, making use of the same evidence
that would have been presented before the NLRC.

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employer-employee relationship be made to oust the DOLE of jurisdiction. But


it is precisely the DOLE that will be faced with that evidence, and it is the
DOLE that will weigh it, to see if the same does successfully refute the
existence of an employer-employee relationship.
If the DOLE makes a finding that there is an existing employer-employee
relationship, it takes cognizance of the matter, to the exclusion of the
NLRC. The DOLE would have no jurisdiction only if the employer-employee
relationship has already been terminated, or it appears, upon review, that no
employer-employee relationship existed in the first place.
The Court, in limiting the power of the DOLE, gave the rationale that
such limitation would eliminate the prospect of competing conclusions between
the DOLE and the NLRC. The prospect of competing conclusions could just as
well have been eliminated by according respect to the DOLE findings, to the
exclusion of the NLRC, and this We believe is the more prudent course of
action to take.
This is not to say that the determination by the DOLE is beyond question
or review. Suffice it to say, there are judicial remedies such as a petition for
certiorari under Rule 65 that may be availed of, should a party wish to dispute
the findings of the DOLE.
It must also be remembered that the power of the DOLE to determine the
existence of an employer-employee relationship need not necessarily result in
an affirmative finding. The DOLE may well make the determination that no
employer-employee relationship exists, thus divesting itself of jurisdiction over
the case. It must not be precluded from being able to reach its own conclusions,
not by the parties, and certainly not by this Court.

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There is a view that despite Art. 128(b) of the Labor Code, as amended
by RA 7730, there is still a threshold amount set by Arts. 129 and 217 of the
Labor Code when money claims are involved, i.e., that if it is for PhP 5,000 and

146

Under Art. 128(b) of the Labor Code, as amended by RA 7730, the


DOLE is fully empowered to make a determination as to the existence of an
employer-employee relationship in the exercise of its visitorial and enforcement
power, subject to judicial review, not review by the NLRC.

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below, the jurisdiction is with the regional director of the DOLE, under Art.
129, and if the amount involved exceeds PhP 5,000, the jurisdiction is with the
labor arbiter, under Art. 217. The view states that despite the wording of Art.
128(b), this would only apply in the course of regular inspections undertaken by
the DOLE, as differentiated from cases under Arts. 129 and 217, which
originate from complaints. There are several cases, however, where the Court
has ruled that Art. 128(b) has been amended to expand the powers of the DOLE
Secretary and his duly authorized representatives by RA 7730. In these cases,
the Court resolved that the DOLE had the jurisdiction, despite the amount of the
money claims involved. Furthermore, in these cases, the inspection held by the
DOLE regional director was prompted specifically by a complaint. Therefore,
the initiation of a case through a complaint does not divest the DOLE Secretary
or his duly authorized representative of jurisdiction under Art. 128(b).

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In the present case, the finding of the DOLE Regional Director that there
was an employer-employee relationship has been subjected to review by this
Court, with the finding being that there was no employer-employee relationship
between petitioner and private respondent, based on the evidence
presented. Private respondent presented self-serving allegations as well as selfdefeating evidence.[10] The findings of the Regional Director were not based on
substantial evidence, and private respondent failed to prove the existence of an
employer-employee relationship. The DOLE had no jurisdiction over the case,

147

To recapitulate, if a complaint is brought before the DOLE to give effect


to the labor standards provisions of the Labor Code or other labor legislation,
and there is a finding by the DOLE that there is an existing employer-employee
relationship, the DOLE exercises jurisdiction to the exclusion of the NLRC. If
the DOLE finds that there is no employer-employee relationship, the
jurisdiction is properly with the NLRC. If a complaint is filed with the DOLE,
and it is accompanied by a claim for reinstatement, the jurisdiction is properly
with the Labor Arbiter, under Art. 217(3) of the Labor Code, which provides
that the Labor Arbiter has original and exclusive jurisdiction over those cases
involving wages, rates of pay, hours of work, and other terms and conditions of
employment, if accompanied by a claim for reinstatement. If a complaint is
filed with the NLRC, and there is still an existing employer-employee
relationship, the jurisdiction is properly with the DOLE. The findings of the
DOLE, however, may still be questioned through a petition for certiorari under
Rule 65 of the Rules of Court.

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as there was no employer-employee relationship present. Thus, the dismissal of


the complaint against petitioner is proper.
WHEREFORE, the Decision of this Court in G.R. No. 179652 is
hereby AFFIRMED, with the MODIFICATION that in the exercise of the
DOLEs visitorial and enforcement power, the Labor Secretary or the latters
authorized representative shall have the power to determine the existence of an
employer-employee relationship, to the exclusion of the NLRC.
SO ORDERED.

PRESBITERO J. VELASCO, JR.


Associate Justice

Page

148

______________________________________________________________

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[G.R. No. 138938. October 24, 2000]

CELESTINO VIVIERO, petitioner, vs. COURT OF APPEALS,


HAMMONIA MARINE SERVICES, and HANSEATIC SHIPPING
CO., LTD. respondents.
DECISION
BELLOSILLO, J.:

CELESTINO VIVERO, in this petition for review, seeks the reversal of the
Decision of the Court of Appeals of 26 May 1999 setting aside the Decision of the
National Labor Relations Commission of 28 May 1998 as well as its Resolution of 23
July 1998 denying his motion for its reconsideration, and reinstating the decision of
the Labor Arbiter of 21 January 1997.
Petitioner Vivero, a licensed seaman, is a member of the Associated Marine
Officers and Seamen's Union of the Philippines (AMOSUP). The Collective
Bargaining Agreement entered into by AMOSUP and private respondents provides,
among others -

ARTICLE XII
GRIEVANCE PROCEDURE
xxxx

Sec. 3. A dispute or grievance arising in connection with the terms and provisions
of this Agreement shall be adjusted in accordance with the following procedure:
1. Any seaman who feels that he has been unjustly treated or even subjected to an
unfair consideration shall endeavor to have said grievance adjusted by the
designated representative of the unlicensed department abroad the vessel in the
following manner:
A. Presentation of the complaint to his immediate superior.
B. Appeal to the head of the department in which the seaman involved shall be
employed.
C. Appeal directly to the Master.

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149

Sec. 4. If the grievance cannnot be resolved under the provision of Section 3, the
decision of the Master shall govern at sea x x x x in foreign ports and until the
vessel arrives at a port where the Master shall refer such dispute to either the
COMPANY or the UNION in order to resolve such dispute. It is understood,

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however, if the dispute could not be resolved then both parties shall avail of the
grievance procedure.
Sec. 5. In furtherance of the foregoing principle, there is hereby created a
GRIEVANCE COMMITTEE to be composed of two COMPANY
REPRESENTATIVES to be designated by the COMPANY and two LABOR
REPRESENTATIVES to be designated by the UNION.
Sec. 6. Any grievance, dispute or misunderstanding concerning any ruling,
practice, wages or working conditions in the COMPANY, or any breach of the
Employment Contract, or any dispute arising from the meaning or the application
of the provision of this Agreement or a claim of violation thereof or any complaint
that any such crewmembers may have against the COMPANY, as well as
complaint which the COMPANY may have against such crewmembers shall be
brought to the attention of the GRIEVANCE COMMITTEE before either party
takes any action, legal or otherwise.
Sec. 7. The COMMITTEE shall resolve any dispute within seven (7) days from
and after the same is submitted to it for resolution and if the same cannot be settled
by the COMMITTEE or if the COMMITTEE fails to act on the dispute within the
7-day period herein provided, the same shall be referred to a VOLUNTARY
ARBITRATION COMMITTEE.
An "impartial arbitrator" will be appointed by mutual choice and consent of the
UNION and the COMPANY who shall hear and decide the dispute or issue
presented to him and his decision shall be final and unappealable x x x x[1]
As found by the Labor Arbiter -

Complainant was hired by respondent as Chief Officer of the vessel "M.V. Sunny
Prince" on 10 June 1994 under the terms and conditions, to wit:
Duration of Contract - - - - 10 months
Basic Monthly Salary - - - - US $1,100.00
Hours of Work - - - - 44 hrs./week
Overtime - - - - 495 lump O.T.

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On grounds of very poor performance and conduct, refusal to perform his job,
refusal to report to the Captain or the vessels Engineers or cooperate with other
ship officers about the problem in cleaning the cargo holds or of the shipping pump

150

Vacation leave with pay - - - - US $220.00/mo.

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and his dismal relations with the Captain of the vessel, complainant was repatriated
on 15 July 1994.
On 01 August 1994, complainant filed a complaint for illegal dismissal at
Associated Marine Officers and Seamans Union of the Philippines (AMOSUP)
of which complainant was a member. Pursuant to Article XII of the Collective
Bargaining Agreement, grievance proceedings were conducted; however, parties
failed to reach and settle the dispute amicably, thus, on 28 November 1994,
complainant filed [a] complaint with the Philippine Overseas Employment
Administration (POEA).[2]
The law in force at the time petitioner filed his Complaint with the POEA was EO No.
247.[3]
While the case was pending before the POEA, private respondents filed
a Motion to Dismiss on the ground that the POEA had nojurisdiction over the case
considering petitioner Vivero's failure to refer it to a Voluntary Arbitration Committee
in accordance with the CBA between the parties. Upon the enactment of RA 8042,
the Migrant Workers and Overseas Filipinos Act of 1995, the case was transferred to
the Adjudication Branch of the National Labor Relations Commission.
On 21 January 1997 Labor Arbiter Jovencio Ll. Mayor Jr., on the basis of the
pleadings and documents available on record, rendered a decision dismissing
the Complaint for want of jurisdiction.[4] According to the Labor Arbiter, since the CBA
of the parties provided for the referral to a Voluntary Arbitration Committee should
the Grievance Committee fail to settle the dispute, and considering the mandate of
Art. 261 of the Labor Code on the original and exclusive jurisdiction of Voluntary
Arbitrators, the Labor Arbiter clearly had no jurisdiction over the case.[5]

Thus, private respondents raised the case to the Court of Appeals contending
that the provision in the CBA requiring a dispute which remained unresolved by the
Grievance Committee to be referred to a Voluntary Arbitration Committee, was

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The NLRC then remanded the case to the Labor Arbiter for further
proceedings. On 3 July 1998 respondents filed a Motion for Reconsideration which
was denied by the NLRC on 23 July 1998.

151

Petitioner (complainant before the Labor Arbiter) appealed the dismissal of his
petition to the NLRC. On 28 May 1998 the NLRC set aside the decision of the Labor
Arbiter on the ground that the record was clear that petitioner had exhausted his
remedy by submitting his case to the Grievance Committee of
AMOSUP. Considering however that he could not obtain any settlement he had to
ventilate his case before the proper forum, i.e., the Philippine Overseas Employment
Administration.[6] The NLRC further held that the contested portion in the CBA
providing for the intercession of a Voluntary Arbitrator was not binding upon
petitioner since both petitioner and private respondents had to agree voluntarily to
submit the case before a Voluntary Arbitrator or Panel of Voluntary Arbitrators. This
would entail expenses as the Voluntary Arbitrator chosen by the parties had to be
paid. Inasmuch however as petitioner chose to file his Complaint originally with
POEA, then the Labor Arbiter to whom the case was transferred would have to take
cognizance of the case.[7]

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mandatory in character in view of the CBA between the parties. They stressed that
"since it is a policy of the state to promote voluntary arbitration as a mode of settling
labor disputes, it is clear that the public respondent gravely abused its discretion in
taking cognizance of a case which was still within the mantle of the Voluntary
Arbitration Commitees jurisdiction."[8]
On the other hand, petitioner argued -

(A)s strongly suggested by its very title, referral of cases of this nature to the
Voluntary Arbitration Committee is voluntary in nature. Otherwise, the committee
would not have been called Voluntary Arbitration Committee but rather, a
Compulsory Arbitration Committee. Moreover, if the referral of cases of similar
nature to the Voluntary Arbitration Committee would be deemed mandatory by
virtue of the provisions in the CBA, the [NLRC] would then be effectively
deprived of its jurisdiction to try, hear and decide termination disputes, as provided
for under Article 217 of the Labor Code. Lastly, [respondents] ought to be deemed
to have waived their right to question the procedure followed by [petitioner],
considering that they have already filed their Position Paper before belatedly
filing a Motion to Dismiss x x x x [9]
But the Court of Appeals ruled in favor of private respondents. It held that the
CBA "is the law between the parties and compliance therewith is mandated by the
express policy of the law."[10] Hence, petitioner should have followed the provision in
the CBA requiring the submission of the dispute to the Voluntary Arbitration
Committee
once
the
Grievance
Committee
failed
to settle
the
[11]
controversy. According to the Court of Appeals, the parties did not have the choice
to "volunteer" to refer the dispute to the Voluntary Arbitrator or a Panel of Arbitrators
when there was already an agreement requiring them to do so. "Voluntary
Arbitration" means that it is binding because of a prior agreement or contract, while
"Compulsory Arbitration" is when the law declares the dispute subject to arbitration,
regardless of the consent or desire of the parties.[12]

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Finally, the appellate court ruled that a case falling under the jurisdiction of the
Labor Arbiter as provided under Art. 217 of the Labor Code may be lodged instead
with a Voluntary Arbitrator because the law prefers, or gives primacy, to voluntary
arbitration instead ofcompulsory arbitration.[15] Consequently, the contention that the
NLRC would be deprived of its jurisdiction to try, hear and decide termination
disputes under Art. 217 of the Labor Code, should the instant dispute be referred to
the Voluntary Arbitration Committee, is clearly bereft of merit. [16] Besides, the
Voluntary Arbitrator, whether acting solely or in a panel, enjoys in law the status of a

152

The Court of Appeals further held that the Labor Code itself enumerates the
original and exclusive jurisdiction of the Voluntary Arbitrator or Panel of Voluntary
Arbitrators, and prohibits the NLRC and the Regional Directors of the Department of
Labor and Employment (DOLE) from entertaining cases falling under the
same.[13] Thus, the fact that private respondents filed their Position Paper first before
filing theirMotion to Dismiss was immaterial and did not operate to confer jurisdiction
upon the Labor Arbiter, following the well-settled rule that jurisdiction is determined
by law and not by consent or agreement of the parties or by estoppel.[14]

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quasi-judicial agency independent of, and apart from, the NLRC since his decisions
are not appealable to the latter.[17]
Celestino Vivero, in his petition for review assailing the Decision of the Court of
Appeals, alleges that the appellate court committed grave abuse of discretion in
holding that a Voluntary Arbitrator or Panel of Voluntary Arbitrators, and not the
Adjudication
Branch
of
the
NLRC,
has
jurisdiction
over
his
complaint for illegal dismissal. He claims that his complaint for illegal dismissal was
undeniably a termination dispute and did not, in any way, involve an "interpretation or
implementation of collective bargaining agreement" or "interpretation" or
"enforcement" of company personnel policies. Thus, it should fall within the original
and exclusive jurisdiction of the NLRC and its Labor Arbiter, and not with a Voluntary
Arbitrator, in accordance with Art. 217 of the Labor Code.
Private respondents, on the other hand, allege that the case is clearly one
"involving
the
proper interpretation and implementation of
theGrievance
Procedure found in the Collective Bargaining Agreement (CBA) between the
parties"[18] because of petitioners allegation in his claim/assistance request form
submitted to the Union, to wit:

NATURE OF COMPLAINT
3. Illegal Dismissal - Reason: (1) That in this case it was the master of M.V.
SUNNY PRINCE Capt. Andersen who created the trouble with physical injury and
stating false allegation; (2) That there was no proper procedure of grievance; (3)
No proper notice of dismissal.
Is there a Notice of dismissal? _x_ Yes or ____ No
What date? 11 July 1994
Is there a Grievance Procedure observed? ____ Yes or _x_ No[19]
Private respondents further allege that the fact that petitioner sought the
assistance of his Union evidently shows that he himself was convinced that
his Complaint was within the ambit of the jurisdiction of the grievance machinery and
subsequently by a Panel of Voluntary Arbitrators as provided for in their CBA, and as
explicitly mandated by Art. 261 of the Labor Code.[20]

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On the original and exclusive jurisdiction of Labor Arbiters, Art. 217 of the Labor
Code provides -

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Thus, the issue is whether the NLRC is deprived of jurisdiction over illegal
dismissal cases whenever a CBA provides for grievance machinery and voluntary
arbitration proceedings. Or, phrased in another way, does the dismissal of an
employee constitute a "grievance between the parties," as defined under the
provisions of the CBA, and consequently, within the exclusive original jurisdiction of
the Voluntary Arbitrators, thereby rendering the NLRC without jurisdiction to decide
the case?

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Art. 217. Jurisdiction of Labor Arbiters and the Commission. - (a) Except as
otherwise provided under this Code, the Labor Arbiters shall have original and
exclusive jurisdiction to hear and decide within thirty (30) calendar days after the
submission of the case by the parties for decision without extension, even in the
absence of stenographic notes, the following cases involving all workers, whether
agricultural or non-agricultural: (1) Unfair labor practice cases; (2) Termination
disputes; (3) If accompanied with a claim for reinstatement, those cases that
workers may file involving wages, rates of pay, hours of work and other terms and
conditions of employment; (4) Claims for actual, moral, exemplary and other
forms of damages arising from the employer-employee relations; (5) Cases arising
from any violation of Article 264 of this Code, including questions involving the
legality of strikes and lockouts; and, (6) Except claims for Employees
Compensation, Social Security, Medicare and maternity benefits, all other claims
arising from employer-employee relations, including those of persons in domestic
or household service, involving an amount exceeding five thousand pesos
(P5,000.00) regardless of whether accompanied with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all cases
decided by Labor Arbiters.
(c) Cases arising from the interpretation of collective bargaining agreements and
those arising from the interpretation or enforcement of company personnel policies
shall be disposed of by the Labor Arbiter by referring the same to the grievance
machinery and voluntary arbitration as may be provided in said agreements
(emphasis supplied).
However, any or all of these cases may, by agreement of the parties, be
submitted to a Voluntary Arbitrator or Panel of Voluntary Arbitrators for
adjudication. Articles 261 and 262 of the Labor Code provide -

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The Commission, its Regional Offices and the Regional Directors of the
Department of Labor and Employment shall not entertain disputes, grievances or
matters under the exclusive and original jurisdiction of the Voluntary Arbitrator or

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Art. 261. Jurisdiction of Voluntary Arbitrators or Panel of Voluntary Arbitrators. The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have original and
exclusive jurisdiction to hear and decide all unresolved grievances arising from the
interpretation or implementation of the Collective Bargaining Agreement and those
arising from the interpretation or enforcement of company personnel policies
referred to in the immediately preceding article. Accordingly, violations of a
Collective Bargaining Agreement, except those which are gross in character, shall
no longer be treated as unfair labor practice and shall be resolved as grievances
under the Collective Bargaining Agreement. For purposes of this article, gross
violations of Collective Bargaining Agreement shall mean flagrant and/or
malicious refusal to comply with the economic provisions of such agreement.

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panel of Voluntary Arbitrators and shall immediately dispose and refer the same to
the Grievance Machinery or Voluntary Arbitration provided in the Collective
Bargaining Agreement.
Art. 262. Jurisdiction Over Other Labor Disputes. - The Voluntary Arbitrator or
panel of Voluntary Arbitrators, upon agreement of the parties, shall also hear and
decide all other labor disputes including unfair labor practices and bargaining
deadlocks (emphasis supplied).
Private respondents attempt to justify the conferment of jurisdiction over the case
on the Voluntary Arbitrator on the ground that the issue involves the proper
interpretation and implementation of the Grievance Procedure found in the
CBA. They point out that when petitioner sought the assistance of his Union to avail
of the grievance machinery, he in effect submitted himself to the procedure set forth
in the CBA regarding submission of unresolved grievances to a Voluntary Arbitrator.
The argument is untenable. The case is primarily a termination dispute. It is clear
from the claim/assistance request form submitted by petitioner to AMOSUP that he
was challenging the legality of his dismissal for lack of cause and lack of due
process. The issue of whether there was proper interpretation and implementation of
the CBA provisions comes into play only because the grievance procedure provided
for in the CBA was not observed after he sought his Unions assistance in contesting
his termination. Thus, the question to be resolved necessarily springs from the
primary issue of whether there was a valid termination; without this, then there would
be no reason to invoke the need to interpret and implement the CBA provisions
properly.

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In this case, however, while the parties did agree to make termination disputes
the proper subject of voluntary arbitration, such submission remains discretionary
upon the parties. A perusal of the CBA provisions shows that Sec. 6, Art. XII
(Grievance Procedure) of the CBA is the general agreement of the parties to refer
grievances, disputes or misunderstandings to a grievance committee, and

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In San Miguel Corp. v. National Labor Relations Commission[21] this Court held
that the phrase "all other labor disputes" may include termination disputes provided
that the agreement between the Union and the Company states "in unequivocal
language that [the parties] conform to the submission of termination disputes and
unfair labor practices to voluntary arbitration."[22] Ergo, it is not sufficient to merely say
that parties to the CBA agree on the principle that "all disputes" should first be
submitted to a Voluntary Arbitrator. There is a need for an express stipulation in the
CBA that illegal termination disputes should be resolved by a Voluntary Arbitrator or
Panel of Voluntary Arbitrators, since the same fall within a special class of disputes
that are generally within the exclusive original jurisdiction of Labor Arbiters by
express provision of law. Absent such express stipulation, the phrase "all disputes"
should be construed as limited to the areas of conflict traditionally within the
jurisdiction of Voluntary Arbitrators, i.e., disputes relating to contract-interpretation,
contract-implementation, or interpretation or enforcement of company personnel
policies. Illegal termination disputes - not falling within any of these categories should then be considered as a special area of interest governed by a specific
provision of law.

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henceforth, to a voluntary arbitration committee. The requirement of specificity is


fulfilled by Art. XVII (Job Security) where the parties agreed -

Sec. 1. Promotion, demotion, suspension, dismissal or disciplinary action of the


seaman shall be left to the discretion of the Master, upon consultation with the
Company and notification to the Union. This notwithstanding, any and all
disciplinary action taken on board the vessel shall be provided for in Appendix B
of this Agreement x x x x [23]
Sec. 4. x x x x Transfer, lay-off or discipline of seamen for incompetence,
inefficiency, neglect of work, bad behavior, perpetration of crime, drunkenness,
insubordination, desertion, violation of x x x regulations of any port touched by the
Companys vessel/s and other just and proper causes shall be at Masters discretion
x x x in the high seas or foreign ports. The Master shall refer the case/dispute upon
reaching port and if not satisfactorily settled, the case/dispute may be referred to
the grievance machinery or procedure hereinafter provided (emphasis supplied).[24]
The use of the word "may" shows the intention of the parties to reserve the right
to submit the illegal termination dispute to the jurisdiction of the Labor Arbiter, rather
than to a Voluntary Arbitrator. Petitioner validly exercised his option to submit his
case to a Labor Arbiter when he filed his Complaint before the proper government
agency.

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The CBA clarifies the proper procedure to be followed in situations where the
parties expressly stipulate to submit termination disputes to the jurisdiction of a
Voluntary Arbitrator or Panel of Voluntary Arbitrators. For when the parties have
validly agreed on a procedure for resolving grievances and to submit a dispute to
voluntary arbitration then that procedure should be strictly observed. Non-

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Private respondents invoke Navarro III v. Damasco[25] wherein the Court held that
"it is the policy of the state to promote voluntary arbitration as a mode of
settling disputes."[26] It should be noted, however, that in Navarro III all the parties
voluntarily submitted to the jurisdiction of the Voluntary Arbitrator when they filed
their respective position papers and submitted documentary evidence before
him.Furthermore, they manifested during the initial conference that they were not
questioning the authority of the Voluntary Arbitrator.[27] In the case at bar, the dispute
was never brought to a Voluntary Arbitrator for resolution; in fact, petitioner precisely
requested the Court to recognize the jurisdiction of the Labor Arbiter over the
case. The Court had held in San Miguel Corp. v. NLRC[28] that neither officials nor
tribunals can assume jurisdiction in the absence of an express legal conferment. In
the same manner, petitioner cannot arrogate into the powers of Voluntary Arbitrators
the original and exclusive jurisdiction of Labor Arbiters over unfair labor practices,
termination disputes, and claims for damages, in the absence of an express
agreement between the parties in order for Art. 262 of the Labor Code to apply in the
case at bar. In other words, the Court of Appeals is correct in holding that Voluntary
Arbitration is mandatory in character if there is a specific agreement between the
parties to that effect. It must be stressed however that, in the case at bar, the use of
the word "may" shows the intention of the parties to reserve the right of recourse to
Labor Arbiters.

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compliance therewith cannot be excused, as petitioner suggests, by the fact that he


is not well-versed with the "fine prints" of the CBA. It was his responsibility to find
out, through his Union, what the provisions of the CBA were and how they
could affect his rights. As provided in Art. 241, par. (p), of the Labor Code -

(p) It shall be the duty of any labor organization and its officers to inform its
members on the provisions of its constitution and by-laws, collective bargaining
agreement, the prevailing labor relations system and all their rights and obligations
under existing labor laws.
In fact, any violation of the rights and conditions of union membership is a
"ground for cancellation of union registration or expulsion of officer from office,
whichever is appropriate. At least thirty percent (30%) of all the members of a union
or any member or members especially concerned may report such violation to the
Bureau [of Labor Relations] x x x x"[29]
It may be observed that under Policy Instruction No. 56 of the Secretary of
Labor, dated 6 April 1993, "Clarifying the Jurisdiction Between Voluntary Arbitrators
and Labor Arbiters Over Termination Cases and Providing Guidelines for the
Referral of Said Cases Originally Filed with the NLRC to the NCMB," termination
cases arising in or resulting from the interpretation and implementation of collective
bargaining agreements and interpretation and enforcement of company personnel
policies which were initially processed at the various steps of the plant-level
Grievance Procedures under the parties' collective bargaining agreements fall within
the original and exclusive jurisdiction of the voluntary arbitrator pursuant to Art. 217
(c) and Art. 261 of the Labor Code; and, if filed before the Labor Arbiter, these cases
shall be dismissed by the Labor Arbiter for lack of jurisdiction and referred to the
concerned NCMB Regional Branch for appropriate action towards an expeditious
selection by the parties of a Voluntary Arbitrator or Panel of Arbitrators based on the
procedures agreed upon in the CBA.

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After the grievance proceedings have failed to bring about a resolution,


AMOSUP, as agent of petitioner, should have informed him of his option to settle the
case through voluntary arbitration. Private respondents, on their part, should have
timely invoked the provision oftheir CBA requiring the referral of their unresolved
disputes to a Voluntary Arbitrator once it became apparent that the grievance
machinery failed to resolve it prior to the filing of the case before the proper
tribunal. The private respondents should not have waited for nine (9) months from

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As earlier stated, the instant case is a termination dispute falling under the
original and exclusive jurisdiction of the Labor Arbiter, and does not specifically
involve the application, implementation or enforcement of company personnel
policies contemplated in Policy Instruction No. 56. Consequently, Policy Instruction
No. 56 does not apply in the case at bar. In any case, private respondents never
invoked the application of Policy Instruction No. 56 in their Position Papers, neither
did they raise the question in their Motion to Dismisswhich they filed nine (9) months
after the filing of their Position Papers. At this late stage of the proceedings, it would
not serve the ends of justice if this case is referred back to a Voluntary Arbitrator
considering that both the AMOSUP and private respondents have submitted to the
jurisdiction of the Labor Arbiter by filing their respective Position Papers and ignoring
the grievance procedure set forth in their CBA.

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the filing of their Position Paper with the POEA before it moved to dismiss the case
purportedly for lack of jurisdiction. As it is, private respondents are deemed to have
waived their right to question the procedure followed by petitioner, assuming that
they have the right to do so. Under their CBA, both Union and respondent
companies are responsible for selecting an impartial arbitrator or for convening an
arbitration committee;[30] yet, it is apparent that neither made a move towards this
end. Consequently, petitioner should not be deprived of his legitimate recourse
because of the refusal of both Union and respondent companies to follow the
grievance procedure.
WHEREFORE, the Decision of the Court of Appeals is SET ASIDE and the case
is remanded to the Labor Arbiter to dispose of the case with dispatch until terminated
considering the undue delay already incurred.
SO ORDERED.

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Mendoza, Quisumbing, Buena, and De Leon, Jr., JJ., concur.

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