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Labor Relation Cases 1st Batch

Commissioner Velasco


Gonzalez vs. NLRC

Capitol Med Center vs. Meris
PAL vs NLRC, 225 SCRA 301 (1993)
Fair Shipping Corp. vs Medel 679 SCRA 360, Aug. 29, 2012, GR 177907
Brewmaster Intl., Inc. vs NFL 271SCRA 275 (1997)
Mabeza vs NLRC, 271 SCRA 679, 1997
Reynaldo Moya of First Solid Rubber Industries, GR 184011, Sept. 18, 2013
Fuentes et al vs NLRC et al., 266 SCRA 24 (1997)
Capili vs NLRC 270 SCRA 488 (1997)
Garcia vs NLRC 234 SCRA 632 (1994)
Jamer vs NLRC 278 SCRA 632 (1997)
Gandara Mill Supply vs NLRC, 300 SCRA 702 (1998)
BPI vs BPI EU GR 175678, Aug. 22, 2012
PLDT vs NLRC 276 SCRA 1 (1997)
Price et al vs Innodata, GR 178505, Sept. 30, 2008
Penaflor vs Outdoor Clothing Mfg. Corp. GR 177114, Jan. 2, 2010
ONCC vs NLRC 277 SCRA 91
Alex Gurango vs Best Chemicals & Plastics, Inc., GR 174593, Aug. 25, 2010
Lilia Laboradan vs Forest Hills Academy, GR 172295, Dec. 23, 2008
LVN Pictures vs LVN Musicians Guild, 1 SCRA 132

G.R. No. 125735

August 26, 1999

LORLENE A. GONZALES, petitioner,

By way of certiorari under Rule 65 of the Rules of Court petitioner seeks the nullification of the
Decision of public respondent National Labor Relations Commission, Fifth Division, which reversed
and set aside that of Executive Labor Arbiter Conchita J. Martinez.
LORLENE GONZALES, petitioner, has been a schoolteacher in the Elementary Department of
private respondent Ateneo de Davao UNIVERSITY (hereafter ATENEO) since 1974 assigned to
teach Reading, Mathematics, Language and Pilipino in the Grade VI class, while ATENEO is an
educational institution, a corporation duly organized under the laws of the Philippines, with principal
address at Jacinto St., Davao City.1wphi1.nt
Sometime in 1991 Fr. Oscar Millar, S.J., Ateneo Grade School Headmaster, sent a letter dated 11
April 1991 informing petitioner Lorlene A. Gonzales of the complaints of two (2) parents for
alleged use of corporal punishment on her students. Petitioner claimed that she was not
informed of the identity of the parents who allegedly complained of the corporal punishment she
purportedly inflicted in school-year 1990-1991. She likewise claimed that she was not confronted
about it by private respondent ATENEO in 1991 and that it was only two (2) years after the
complaints were made that she discovered, through her students and their parents, that ATENEO
was soliciting complainants to lodge written complaints against her.
On 31 March 1993 she wrote a letter to Fr. Oscar Millar, S.J., demanding that she be formally
informed of the complaint and be duly investigated.
On 9 June 1993 petitioner was informed of the composition of an investigative committee organized
by Fr. Oscar Millar, S.J., to look into the alleged use of corporal punishment by petitioner in
disciplining her students. It can be gleaned from the records that she was duly furnished with the
rules of procedure, informed of the schedule of the hearings, and given copies of the affidavits
executed by the students who testified against her.
Petitioner refused to take part in the investigation unless the rules of procedure laid down by the
Committee be revised, contending that the same were violative of her right to due process.
Petitioner specifically objected to the provision which stated: . . . 3) Counsel for Ms. Lorlene
Gonzales shall not directly participate in the investigation but will merely advise Ms. Gonzales . . .
(par. 3).1
But the Committee was steadfast in its resolve to adopt the aforementioned rules. In its letter dated 9
August 1993, private respondent informed petitioner that the rules of procedure to be applied were
"substantially the same rules that were used in the investigation of a former Ateneo employee and
therefore we are under legal advice not to change these rules."2 Over the objection of petitioner the
Committee commenced with its investigation without petitioners participation. Out of the twenty-two
(22) invitations sent out by ATENEO to petitioners students and their parents to shed light on the
matter of corporal punishment allegedly "administered" by her, eleven (11) appeared and testified
before the committee. The eleven (11) witnesses also executed written statements denominated as

On 10 November 1993 private respondent served a Notice of Termination on petitioner pursuant

to the findings and recommendation of the Committee. Thereafter, petitioner received a letter from
the president of ATENEO demanding her voluntary resignation a week from receipt of the letter,
otherwise, she would be considered resigned from the service.
On 29 November 1993 petitioner filed a complaint before the Labor Arbiter for illegal dismissal.
After trial, Executive Labor Arbiter Conchita J. Martinez found her dismissal illegal for lack of
factual basis and ordered ATENEO to award petitioner separation pay, back wages and 13th month
pay. In her decision, the Executive Labor Arbiter opined that although petitioner was afforded
procedural due process respondent institution "failed to establish substantial evidence as to
the guilt of the complainant of the offense charged"3 thus
. . . the complainant was afforded procedural due process. There is convincing and sufficient
evidence . . . showing respondent complied with the notice and hearing requirement. . . . .4
After considering the evidence, arguments and counter-arguments of the parties, this office
finds that the respondent failed to establish substantial evidence as to the guilt of
complainant of the offense charged. . . .5
Complainant has sufficiently established that she is a very good teacher. She is equipped
with the appropriate educational qualifications, trainings, seminars and work experiences.
Such fact was affirmed by her present and former students, their parents, colleagues and the
former headmaster of the grade school. . . .6
As a matter of fact, six (6) out of the nine (9) students and their parents/guardians have
retracted and withdrawn their statements. . . .7
Both parties appealed to the NLRC which on 25 March 1996 reversed the decision of the
Executive Labor Arbiter by declaring petitioners dismissal valid and legal but added that since
ATENEO offered petitioner her retirement benefits it was but proper that she be extended said
benefits. Petitioner now seeks the reversal of the decision; hence, this petition.
The crux of the controversy is whether the NLRC committed grave abuse of discretion in sustaining
as valid and legal the dismissal of petitioner by private respondent ATENEO.
The NLRC, in our view, appears to have skirted several important issues raised by petitioner
foremost of which is the absence of due process. Upon being notified of her termination, she has the
right to demand compliance with the basic requirements of due process. Compliance entails the twin
requirements of procedural and substantial due process. Ample opportunity must be afforded the
employee to defend herself either personally and/or with assistance of a representative; to know the
nature of her offense; and, to cross examine and confront face to face the witnesses against her.
Likewise, due process requires that the decision must be based on established facts and on a sound
legal foundation.
It is precisely to demand compliance with these requirements that petitioner at the very onset of the
investigation demanded the revision of the rules laid down by the Investigative Committee. The
adamant refusal of the Committee to accede to this demand resulted in her failure to confront and
cross-examine her accusers. This is not "harping at technicalities" as wrongfully pointed out by the
NLRC but a serious violation of petitioner's statutory and constitutional right to due process that
ultimately vitiated the investigation.

Moreover, the failure of ATENEO to refute the contention of petitioner that the joint affidavits
executed by the students and parents were "pre-prepared" raises serious doubts as to the
probative value of this evidence. As correctly pointed out by the Executive Labor Arbiter, "there is
more reason to disregard it especially where the same was challenged and has remained
unexplained." Hearsay evidence, in the strict sense, has no probative value whether objected to or
In the instant case, ATENEO failed to prove by substantial evidence that petitioner had inflicted
corporal punishment on her students. In Ang Tibay v. CIR, the Court set the measure of evidence
to be presented in an administrative investigation when it said, "substantial evidence is more
than mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate
to support a conclusion." The evidence of private respondent did not measure up to this standard. It
relied solely on the witnesses' affidavits with questionable veracity. Moreover, the affidavit of
recantation executed by some students and their parents all the more weakened the case of private
respondent. Failure in this regard negates the very existence of the ground for dismissal.
On the other hand, petitioner adequately proved, by means of affidavits, letters of petition and
manifesto made by her students and co-teachers, that she was a competent and dedicated teacher
having spent seventeen (17) years of her life in the service of the very institution which is now
seeking her dismissal.
In view of the foregoing, the conclusion of the NLRC is unwarranted. Employment is not merely a
contractual relationship; it has assumed the nature of property right. It may spell the difference
whether or not a family will have food on their table, roof over their heads and education for their
children. It is for this reason that the State has taken up measures to protect employees from
unjustified dismissals. It is also because of this that the right to security of tenure is not only a
statutory right but, more so, a constitutional right.
WHEREFORE, the assailed Decision of public respondent National Labor Relations Commission
dated 25 March 1996 is REVERSED and SET ASIDE, and the decision of Executive Labor Arbiter
Conchita J. Martinez "declaring the dismissal of complainant Lorlene A. Gonzales illegal for lack of
factual basis and ordering respondent Ateneo de Davao University to pay complainant separation
pay, back wages and 13th month pay in the total amount of TWO HUNDRED SIXTEEN THOUSAND
NINE HUNDRED THIRTY-EIGHT and 70/100 PESOS (P216,938.70) . . . [f]urther, ordering
respondent to pay 10% of the total monetary award as attorney's fees to counsel for complainant . . .
[d]ismissing all other claims for lack of merit," is REINSTATED, AFFIRMED and ADOPTED herein
as the decision in the instant case.1wphi1.nt

G.R. No. 155098 September 16, 2005

DR. CESAR E. MERIS, Respondent.
Subject of the present appeal is the Court of Appeals Decision1 dated February 15, 2002 reversing
the NLRC Resolution2 dated January 19, 1999 and Labor Arbiter Decision3 dated April 28, 1998
which both held that the closure of the Industrial Service Unit of the
Capitol Medical Center, Inc., resulting to the termination of the services of herein respondent Dr.
Cesar Meris as Chief thereof, was valid.
On January 16, 1974, PETITIONER Capitol Medical Center, Inc. (Capitol) hired Dr. Cesar Meris (Dr.
Meris),4 one of its stockholders,5 as in charge of its Industrial Service Unit (ISU) at a monthly salary
of P10,270.00.
Until the closure of the ISU on April 30, 1992,6 Dr. MERIS b 500 employees and health workers as
well as to employees and workers of companies having retainer contracts with it.7
On March 31, 1992, Dr. Meris received from Capitols president and chairman of the board, Dr.
Thelma Navarette-Clemente (Dr. Clemente), a notice advising him of the managements decision to
close or abolish the ISU and the consequent termination of his services as Chief thereof,
effective April 30, 1992.8 The notice reads as follows:
March 31, 1992
Dr. Cesar E. Meris
Chief, Industrial Service Unit
Capitol Medical Center
Dear Dr. Meris:
Please be formally advised that the hospital management has decided to abolish CMCs Industrial
Service Unit as of April 30, 1992 in view of the almost extinct demand for direct medical
services by the private and semi-government corporations in providing health care for their
employees. Such a decision was arrived at, after considering the existing trend of industrial
companies allocating their health care requirements to Health Maintenance Organizations
(HMOs) or thru a tripartite arrangement with medical insurance carriers and designated
As a consequence thereof, all positions in the unit will be decommissioned at the same time
industrial services [are] deactivated. In that event, you shall be entitled to return to your private

practice as a consultant staff of the institution and will become eligible to receive your retirement
benefits as a former hospital employee. Miss Jane Telan on the other hand will be transferred back
to Nursing Service for reassignment at the CSR.
We wish to thank you for your long and faithful service to the institution and hope that our
partnership in health care delivery to our people will continue throughout the future. Best regards.
Very truly yours,
(SGD.) DR. THELMA NAVARETTE-CLEMENTE9 (Emphasis and underscoring supplied)
Dr. Meris, doubting the reason behind the managements decision to close the ISU and believing
that the ISU was not in fact abolished as it continued to operate and offer services to the client
companies with Dr. Clemente as its head and the notice of closure was a mere ploy for his ouster in
view of his refusal to retire despite Dr. Clementes previous prodding for him to do so,10 sought his
reinstatement but it was unheeded.
Dr. Meris thus filed on September 7, 1992 a complaint against Capitol and Dr. Clemente for illegal
dismissal and reinstatement with claims for backwages, moral and exemplary damages, plus
attorneys fees.11
Finding for Capitol and Dr. Clemente, the Labor Arbiter held that the abolition of the ISU was a
valid and lawful exercise of management prerogatives and there was convincing evidence to
show that ISU was being operated at a loss.12 The decretal text of the decision reads:
WHEREFORE, judgment is hereby rendered dismissing the complaint. Respondents are however
ordered to pay complainant all sums due him under the hospital retirement plan.
SO ORDERED.13 (Emphasis supplied)
On appeal by Dr. Meris, the National Labor Relations Commission (NLRC) modified the Labor
Arbiters decision. It held that in the exercise of Capitols management prerogatives, it had the right
to close the ISU even if it was not suffering business losses in light of Article 283 of the Labor Code
and jurisprudence.14
And the NLRC set aside the Labor Arbiters directive for the payment of retirement benefits to Dr.
Meris because he did not retire. Instead, it ordered the payment of separation pay as provided under
Article 283 as he was discharged due to closure of ISU, to be charged against the retirement fund.15
Undaunted, Dr. Meris elevated the case to the Court of Appeals via petition for review16 which, in
the interest of substantial justice, was treated as one for certiorari.17
Discrediting Capitols assertion that the ISU was operating at a loss as the evidence showed a
continuous trend of increase in its revenue for three years immediately preceding Dr. Meriss
dismissal on April 30, 1992,18 and finding that the ISUs "Analysis of Income and Expenses" which
was prepared long after Dr. Meriss dismissal, hence, not yet available, on or before April 1992, was
tainted with irregular entries, the appellate court held that Capitols evidence failed to meet the
standard of a sufficient and adequate proof of loss necessary to justify the abolition of the

The appellate court went on to hold that the ISU was not in fact abolished, its operation and
management having merely changed hands from Dr. Meris to Dr. Clemente; and that there was a
procedural lapse in terminating the services of Dr. Meris, no written notice to the Department of
Labor and Employment (DOLE) of the ISU abolition having been made, thereby violating the
requirement embodied in Article 283.20
The appellate court, concluding that Capitol failed to strictly comply with both procedural and
substantive due process, a condition sine qua non for the validity of a case of termination,21 held
that Dr. Meris was illegally dismissed. It accordingly reversed the NLRC Resolution and disposed
as follows:
IN VIEW OF ALL THE FOREGOING, the assailed resolutions of the NLRC are hereby set aside,
and another one entered
1 declaring illegal the dismissal of petitioner as Chief of the Industrial Service Unit of respondent
Medical Center;
2 ordering respondents to pay petitioner
a) backwages from the date of his separation in April 1992 until this decision has attained finality;
b) separation pay in lieu of reinstatement computed at the rate of one (1) month salary for every year
of service with a fraction of at least six (6) months being considered as one year;
c) other benefits due him or their money equivalent;
d) moral damages in the sum of P50,000.00;
e) exemplary damages in the sum of P50,000.00; and
f) attorneys fees of 10% of the total monetary award payable to petitioner.
Hence, the present petition for review assigning to the appellate court the following errors:


Capitol questions the appellate courts deciding of the petition of Dr. Meris on the merits, instead of
merely determining whether the administrative bodies acted with grave abuse of discretion
amounting to lack or excess of jurisdiction.
The province of a special civil action for certiorari under Rule 65, no doubt the appropriate mode of
review by the Court of Appeals of the NLRC decision,24 is limited only to correct errors of jurisdiction
or grave abuse of discretion amounting to lack or excess of jurisdiction.25 In light of the merits of Dr.
Meris claim, however, the relaxation by the appellate court of procedural technicality to give way to
a substantive determination of a case, as this Court has held in several cases,26 to subserve the
interest of justice, is in order.
Capitol argues that the factual findings of the NLRC, particularly when they coincide with those of
the Labor Arbiter, as in the present case, should be accorded respect, even finality.27
For factual findings of the NLRC which affirm those of the Labor Arbiter to be accorded respect, if
not finality, however, the same must be sufficiently supported by evidence on record.28 Where there
is a showing that such findings are devoid of support, or that the judgment is based on a
misapprehension of facts,29 the lower tribunals factual findings will not be upheld.
As will be reflected in the following discussions, this Court finds that the Labor Arbiter and the
NLRC overlooked some material facts decisive of the instant controversy.
Capitol further argues that the appellate courts conclusion that the ISU was not incurring losses is
arbitrary as it was based solely on the supposed increase in revenues of the unit from 1989-1991,
without taking into account the "Analysis of Income and Expenses" of ISU from July 1, 1990 to July
1, 1991 which shows that the unit operated at a loss;30 and that the demand for the services of ISU
became almost extinct in view of the affiliation of industrial establishments with HMOs such as
Fortunecare, Maxicare, Health Maintenance, Inc. and Philamcare and of tripartite arrangements with
medical insurance carriers and designated hospitals,31 and the trend resulted in losses in the
operation of the ISU.
Besides, Capitol stresses, the health care needs of the hospital employees had been taken over by
other units without added expense to it;32 the appellate courts decision is at best an undue
interference with, and curtailment of, the exercise by an employer of its management
prerogatives;33 at the time of the closure of the ISU, Dr. Meris was already eligible for retirement
under the Capitols retirement plan; and the appellate court adverted to the alleged lack of notice to
the DOLE regarding Dr. Meriss dismissal but the latter never raised such issue in his appeal to the
NLRC or even in his petition for review before the Court of Appeals, hence, the latter did not have
authority to pass on the matter.34
Work is a necessity that has economic significance deserving legal protection. The social justice and
protection to labor provisions in the Constitution dictate so.

Employers are also accorded rights and privileges to assure their self-determination and
independence and reasonable return of capital. This mass of privileges comprises the so-called
MANAGEMENT PREROGATIVES. Although they may be broad and unlimited in scope, the State
has the right to determine whether an employers privilege is exercised in a manner that complies
with the legal requirements and does not offend the protected rights of labor. One of the rights
accorded an employer is the right to close an establishment or undertaking.
The right to close the operation of an establishment or undertaking is explicitly recognized under
the Labor Code as one of the authorized causes in terminating employment of workers, the only
limitation being that the closure must not be for the purpose of circumventing the provisions on
termination of employment embodied in the Labor Code.
ART. 283. Closure of establishment and reduction of personnel. The employer may also terminate
the employment of any employee due to the installation of labor saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the provisions of this
Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least
one (1) month before the intended date thereof. In case of termination due to the installation of
labor saving devices or redundancy, the worker affected shall be entitled to a separation pay
equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service,
whichever is higher. In case retrenchment to prevent losses and in cases of closures or
cessation of
operations of establishment or undertaking not due to serious business losses or financial
reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year. (Emphasis and underscoring supplied)
The phrase "closures or cessation of operations of establishment or undertaking" includes a partial
or total closure or cessation.35
x x x Ordinarily, the closing of a warehouse facility and the termination of the services of employees
there assigned is a matter that is left to the determination of the employer in the good faith exercise
of its management prerogatives. The applicable law in such a case is Article 283 of the Labor
Code which permits closure or cessation of operation of an establishment or undertaking not due to
serious business losses or financial reverses, which, in our reading includes both the complete
cessation of operations and the cessation of only part of a companys business. (Emphasis
And the phrase "closures or cessation x x x not due to serious business losses or financial
reverses" recognizes the right of the employer to close or cease his business operations or
undertaking even if he is not suffering from serious business losses or financial reverses, as
long as he pays his employees their termination pay in the amount corresponding to their length of
It would indeed be stretching the intent and spirit of the law if a court were to unjustly interfere in
managements prerogative to close or cease its business operations just because said business
operation or undertaking is not suffering from any loss.37 As long as the companys exercise of the
same is in good faith to advance its interest and not for the purpose of defeating or
circumventing the rights of employees under the law or a valid agreement, such exercise will
be upheld.38

Clearly then, the right to close an establishment or undertaking may be justified on grounds other
than business losses but it cannot be an unbridled prerogative to suit the whims of the employer.
The ultimate test of the validity of closure or cessation of establishment or undertaking is that it must
be bona fidein character.39 And the burden of proving such falls upon the employer.40
In the case at bar, Capitol failed to sufficiently prove its good faith in closing the ISU.
From the letter of Dr. Clemente to Dr. Meris, it is gathered that the abolition of the ISU was due to
the "almost extinct demand for
direct medical service by the private and semi-government corporations in providing health care for
their employees;" and that such extinct demand was brought about by "the existing trend of industrial
companies allocating their health care requirements to Health Maintenance Organizations (HMOs)
or thru a tripartite arrangement with medical insurance carriers and designated hospitals."
The records of the case, however, fail to impress that there was indeed extinct demand for the
medical services rendered by the ISU. The ISUs Annual Report for the fiscal years 1986 to 1991,
submitted by Dr. Meris to Dr. Clemente, and uncontroverted by Capitol, shows the following:
Fiscal Year No. of Industrial No of No. of Capitol
Patients Companies Employees
1986-1987 466 11 1445
1987-1988 580 17 1707
1988-1989 676 14 1888
1989-1990 571 16 2731
1990-1991 759 18 232041
If there was extinct demand for the ISU medical services as what Capitol and Dr. Clemente purport
to convey, why the number of client companies of the ISU increased from 11 to 18 from 1986 to
1991, as well as the number of patients from both industrial corporations and Capitol employees,
they did not explain.
The "Analysis of Income and Expenses" adduced by Capitol showing that the ISU incurred losses
from July 1990 to February 1992, to wit:
July 1, 1990 to July 1, 1991 to
June 30, 1991 February 29, 1992
INCOME P16, 772.00 P35, 236.00
TOTAL EXPENSES P225, 583.70 P169,244.34
NET LOSS P(208,811.70) P(134,008.34),42

was prepared by its internal auditor Vicenta Fernandez,43 a relative of Dr. Clemente, and not by
an independent external auditor, hence, not beyond doubt. It is the financial statements audited by
independent external auditors which constitute the normal method of proof of the profit and loss
performance of a company.44
At all events, the claimed losses are contradicted by the accounting records of Capitol itself which
show that ISU had increasing revenue from 1989 to 1991.
Year In-Patient Out-Patient Total Income
1989 P230,316.38 P 79,477.50 P309,793.88
1990 P278,438.10 P124,256.65 P402,694.75
1991 P305,126.35 P152,920.15 P458,046.5045
The foregoing disquisition notwithstanding, as reflected above, the existence of business losses
is not required to justify the closure or cessation of establishment or undertaking as a ground to
terminate employment of employees. Even if the ISU were not incurring losses, its abolition or
closure could be justified on other grounds like that proffered by Capitol extinct demand. Capitol
failed, however, to present sufficient and convincing evidence to support such claim of extinct
demand. In fact, the employees of Capitol submitted a petition46 dated April 21, 1992 addressed to
Dr. Clemente opposing the abolition of the ISU.
The closure of ISU then surfaces to be contrary to the provisions of the Labor Code on termination of
The termination of the services of Dr. Meris not having been premised on a just or authorized cause,
he is entitled to either reinstatement or separation pay if reinstatement is no longer viable, and to
Reinstatement, however, is not feasible in case of a strained employer-employee relationship or
when the work or position formerly held by the dismissed employee no longer exists, as in the
instant case.47 Dr. Meris is thus entitled to payment of separation pay at the rate of one (1) month
salary for every year of his employment, with a fraction of at least six (6) months being considered
as one(1) year,48 and full backwages from the time of his dismissal from April 30, 1992 until the
expiration of his term as Chief of ISU or his mandatory retirement, whichever comes first.
The award by the appellate court of moral damages,49 however, cannot be sustained, solely upon
the premise that the employer fired his employee without just cause or due process. Additional facts
must be pleaded and proven to warrant the grant of moral damages under the Civil Code, such as
that the act of dismissal was attended by bad faith or fraud, or was oppressive to labor, or done in a
manner contrary to morals, good customs, or public policy; and of course, that social humiliation,
wounded feelings, grave anxiety, etc., resulted therefrom.50Such circumstances, however, do not
obtain in the instant case. More specifically on bad faith, lack of it is mirrored in Dr. Clementes offer
to Dr. Meris to be a consultant of Capitol, despite the abolition of the ISU.
There being no moral damages, the award of exemplary damages does not lie.51
The award for attorneys fees, however, remains.52

WHEREFORE, the decision of the Court of Appeals dated February 15, 2002 is
hereby AFFIRMED withMODIFICATION. As modified, judgment is hereby rendered ordering Capitol
Medical Center, Inc. to pay Dr. Cesar Meris separation pay at the rate of One (1) Month salary for
every year of his employment, with a fraction of at least Six (6) Months being considered as One (1)
Year, full backwages from the time of his dismissal from April 30, 1992 until the expiration of his term
as Chief of the ISU or his mandatory retirement, whichever comes first; other benefits due him or
their money equivalent; and attorneys fees.
Costs against petitioners.

G.R. No. 85985 August 13, 1993

Solon Garcia for petitioner.
Adolpho M. Guerzon for respondent PALEA.

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
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.
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-72051-85) 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,
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 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

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.
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 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 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. 3839, 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.)

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:
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 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, labor-management
cooperation is now "the thing." (pp. 3-4, NLRC Decision ff. p. 149, Original Record.)
Respondent Commission thereupon disposed:
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.
SO ORDERED. (p. 5, NLRC Decision.)
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
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.)
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.
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 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]
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.
The exercise by management of its prerogative shall be done in a just reasonable,
humane and/or lawful manner.
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 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.

G.R. No. 177907

August 29, 2012


JOSELITO T. MEDEL, Respondent.
In this Petition for Review on Certiorari1 under Rule 45, the Court is asked to reverse and set aside
the Decision2and Resolution3 of the Court of Appeals in CA-G.R. SP No. 75893 dated November 20,
2006 and May 15, 2007, respectively. In the assailed Decision, the Court of Appeals held that the
Second Division of the National Labor Relations Commission (NLRC) committed grave abuse of
discretion amounting to lack or excess of jurisdiction in issuing the Decision4 dated July 31, 2002 in
NLRC OFW (M) 99-09-01462 (CA No. 029790-01). In the assailed resolution, the Court of Appeals
denied for lack of merit the Motion for Reconsideration5 of herein petitioners Fair Shipping
Corporation and Kohyu Marine Co., Ltd. and the Partial Motion for Reconsideration filed by herein
respondent Joselito T. Medel.
From the records of the case, we culled the following material facts:
On November 23, 1998, Medel was hired by Fair Shipping Corporation, for and in behalf of its
foreign principal Kohyu Marine Co., Ltd. Under the Contract of Employment6 signed by Medel, the
latter was employed as an Able Seaman of the vessel M/V Optima for a period of 12 months with a
basic monthly salary of US$335.00, plus fixed overtime pay of US$136.00 and vacation leave with
pay of two and a half (2.5) days per month. The contract expressly stated that the terms and
conditions of the revised Employment Contract governing the employment of all seafarers, as
approved per Department Order No. 33 and Memorandum Circular No. 55, both series of 1996 the
1996 POEA SEC,7 were to be strictly and faithfully observed by the parties.
Medel boarded the M/V Optima on November 27, 1998 and commenced the performance of his
duties therein.8On March 1, 1999, while the M/V Optima was docked at the Port of Vungtao in Ho
Chi Minh City, Vietnam, Medel figured in an unfortunate accident. During the conduct of emergency
drills aboard the vessel, one of Medels co-workers lost control of the manual handle of a lifeboat,
causing the same to turn uncontrollably; and it struck Medel in the forehead. Medel was given first
aid treatment and immediately brought to the Choray Hospital in Ho Chi Minh City on said date.9
After undergoing surgical procedure to treat his fractured skull, Medel was discharged from the
hospital on March 13, 1999. Medels Discharge Summary disclosed that he underwent the following
1/ Surgical procedure: An open wound, 5 cm long, in the left frontal region. Extend [of] the wound up
to 10 cm. The underlying frontal bone is found completely shattered. The frontal sinus is broken. The
fracture in the frontal bone extends beyond the midline to the right parietal bone. The fractured skull
is depressed 1 cm. Frontal sinus is cleansed, its mucosa is cauterized. A Gelfoam is packed into the
frontal sinus. The broken fragments of the frontal bone are removed. The remaining depressed
frontal bone is elevated to normal position. The fractured fronto-parietal bone is gouged out. A
rubber tube drain is placed into the wound. Skin is closed in 2 layers.

Post-op is uneventful. Left palpebral ptosis and dimmed vision are recorded. Eye examination shows
scattered retinal hemorrhages. Surgical incision heals well. Left palpebral ptosis recovers nearly
completely. Retinal hemorrhage is markedly reduced, however, left vision is not yet fully recovered.10
Medels attending physician then recommended his "[r]epatriation for further treatment (at the
patients request)" and that he should "see a neurosurgeon and an ophthalmologist in the
Medel was repatriated to the Philippines on March 13, 1999 and was admitted to the Metropolitan
Hospital on the said date. In a letter dated March 16, 1999, Dr. Robert D. Lim, the companydesignated physician and Medical Coordinator of the Metropolitan Hospital, informed petitioners that
Medel was seen by a neurologist, an ENT specialist, and an ophthalmologist.12 Medel subsequently
underwent a cranial CT scan and an ultrasound on his left eye, which was also injured during the
accident.13 On April 22, 1999, a posterior vitrectomy was performed on Medels left eye;14 and on
July 14 and July 19, 1999, Medels left eye was likewise subjected to two sessions of argon laser
retinopexy.15 Dr. Lim then reported to petitioners that Medels condition was re-evaluated on July 22,
1999 and, after consulting with the neurosurgeon at the Metropolitan Hospital, Medel was advised to
undergo cranioplasty to treat the bony defect in his skull.16 On October 20, 1999, Medel was
admitted to the hospital and underwent the said surgical procedure.17 On October 25, 1999, Dr.
Daniel L. Ong, a neurologist at the Metropolitan Hospital, sent a report to Dr. Lim stating thus:
Months after, in a letter dated February 15, 2000, Dr. Lim informed petitioners of Medels condition,
the relevant portion of which states:

In the interregnum, before Medel actually underwent the procedure of cranioplasty, he claimed from
petitioners the payment of permanent total disability benefits. Petitioners, however, refused to grant
the same.20Consequently, on September 7, 1999, Medel filed before the Arbitration Branch of the
NLRC a complaint21against petitioners for disability benefits in the amount of US$60,000.00, medical
expenses, loss of earning capacity, damages and attorneys fees. The case was docketed as NLRC
OFW (M) No. 99-09-01462. Medel claimed entitlement to permanent total disability benefits as more
than 120 days had passed since he was repatriated for medical treatment but he was yet to be
declared fit to work or the degree of his disability determined by the company-designated physician.
On July 30, 2001, the Labor Arbiter issued a Decision22 in favor of Medel, holding that:
Upon the records, this Office is more than convinced that Medel is entitled to a [sic] disability
benefits which is equivalent to 120% of US$50,000.00 or US$60,000.00 or its peso equivalent at the
exchange rate prevailing at the time of its payment.
As held by petitioners to be an undisputed fact, Medel suffered injury that was sustained by him
during the effectivity of his shipboard employment contract and while engaged in the performance of
his contracted duties.
Upon Medels arrival, petitioners referred him to the company designated physician at Metropolitan
Hospital on March 13, 1999, with impression, "Head Injury with Open Fracture of the Left Frontal
Bone: S/P Open Reduction & Internal Fixation of Frontal Bone and Sinus; Cerebral Concussion;
Vitreous Hemorrhage, left eye secondary to trauma." Suggested procedure was Ultrasound of the
left eye. Subsequently, Medel was referred to a neuro-surgeon. His cranial CT scan showed
"Minimal Pneumocephalus; Inferior Frontal Region;
Comminuted Fracture, Frontal Bone; Post craniotomy Defect, Left Frontal Bone; changed within the
Sphenoid which may relate to previous hemorrhage and Negative for Mass effect nor Intracranial
Intracerebral Hemorrhage." His ultrasound of the left eye confirmed the presence of Vitreous
Hemorrhage. Suggestion was Vitrectomy, Left eye. On June 28, 1999, Medel was re-evaluated,
however, the ophthalmologist suggested Argon Laser Retinopexy since he was noted to have
Wrinkled Macula and Areas of weakness in the Retina secondary to Trauma. He was then seen July
14, 1999 when he underwent first session of Argon Laser Retinopexy and for re-evaluation on July
19, 1999 for second session. On July 23, 1999, he was seen by the neurosurgeon who advised him
to undergo the procedure of cranioplasty to cover the bony defect of the skull to be done in October
With the foregoing, we are persuaded by Medels arguments that the claim for disability benefits is
not solely premised on the extent of his injury but also on the consequences of the same to his
profession as a seafarer which was his only means of livelihood. We could imagine the nature of
these undertakings of seafarers where manual and strenuous activities are part of the days work.
Moreso, with the position of Medel being an ordinary seaman which primarily comprises the vessel
manpower and labor. Thus, to us, we are convinced that Medel is entitled to the benefits under

Section 20 B of the POEA Memorandum Circular No. 55 and Section 30 A thereof which was
deemed incorporated to his POEA approved employment contract.
Further, the claim for attorneys fees is justified considering the above discussed circumstances
which in effect has constrained Medel to hire the services of a legal counsel to protect his interest.23
The Labor Arbiter decreed as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered finding petitioners jointly and
severally liable to:
1) To pay Medel the amount of US$60,000.00 or its peso equivalent at the prevailing
exchange rate at the time of payment, representing permanent and total disability; and
2) To pay Medel the equivalent amount of ten (10%) percent of the total judgment award, as
and for attorneys fees;
All other claims are hereby dismissed for lack of merit.24
Petitioners filed a Memorandum of Appeal25 before the NLRC, which was docketed as NLRC CA No.
029790-01. In their appeal, petitioners alleged that the disability compensation granted to Medel was
improper because the same was not based on a disability assessment issued by the companydesignated physician. As Medel was not disabled, they argued that he was not entitled to any
compensation, including attorneys fees.
In its Decision dated July 31, 2002, the Second Division of the NLRC found merit in the petitioners
appeal and disposed of the same thus:
WHEREFORE, the appealed decision is SET ASIDE and a new one entered by ordering
Medels claim DISMISSED for lack of merit.26
The NLRC ruled that under Section 20(B)(2) of the 1996 POEA SEC, the disability of a seafarer
should be assessed by the company-designated physician. The employer shall be liable for the
seafarers medical treatment until the latter is declared fit to work or his disability is assessed.
Should the seafarer recover, the NLRC posited that the contractual obligation of the employer should
cease. However, if the seafarer is found to be incapacitated, the employers contractual obligation
shall terminate only after the latter pays the seafarers disability benefits. Furthermore, the NLRC
stated that the 120 days referred to in Section 20(B)(3) of the POEA SEC27 pertained to "the
maximum number of days to which a seafarer who signed-off from the vessel for medical treatment
is entitled to sickness wages."28 The NLRC ruled that there was no evidence to prove that Medel
was disabled, other than his contention that his treatment had gone beyond 120 days. Medel was
even declared fit to resume sea duty. Thus, the NLRC held that Medel had no basis for his claim of
disability benefits.
Medel filed a Motion for Reconsideration29 of the above NLRC Decision but the same was denied in
the NLRC Resolution30 dated November 21, 2002.
Medel, thus, filed a Petition for Certiorari31 before the Court of Appeals, which sought the reversal of
the NLRC rulings for having been allegedly issued with grave abuse of discretion amounting to lack
or excess of jurisdiction. Medels petition was docketed as CA-G.R. SP No. 75893.

On November 20, 2006, the Court of Appeals rendered the assailed decision, the dispositive portion
of which provides:
WHEREFORE, in view of the foregoing, the NLRC Decision dated July 31, 2002 is
herebyREVERSED and SET ASIDE. The decision of the Labor Arbiter dated July 30, 2001 is
herebyREINSTATED with respect only to the award of disability benefits. The award of attorneys
fees in the Labor Arbiters decision is deleted.32
Citing the Courts ruling in Crystal Shipping, Inc. v. Natividad,33 the Court of Appeals stated that an
award of permanent total disability benefits is proper when an employee is unable to perform his
customary work for more than 120 days. Since Medels accident rendered him incapable of
performing his usual or customary work for more than 120 days, the Court of Appeals concluded that
he was entitled to permanent total disability benefits. The Court of Appeals also refused to accept
the veracity of the medical certificate attesting to Medels fitness to resume sea duties as the same
was issued by Dr. Lim, a physician who the appellate court deemed as not privy to Medels
condition. The Court of Appeals did not, however, heed Medels claims for moral and exemplary
damages since petitioners neither abandoned him during his period of disability, nor were they
negligent in providing for his medical treatment. Lastly, the Court of Appeals deleted the award of
attorneys fees.
Medel filed a Partial Motion for Reconsideration34 of the above decision as regards the award of
attorneys fees. On the other hand, petitioners filed their Motion for Reconsideration,35 arguing that
the provisions alone of the POEA SEC should apply in determining what constitutes permanent total
disability, to the exclusion of the Labor Code provisions on disability compensation. In the assailed
Resolution dated May 15, 2007, the Court of Appeals denied for lack of merit the respective motions
of the parties.
Hence, petitioners instituted this petition, citing the following issues:
Petitioners argue that Medels claims for disability benefits should be resolved by applying
exclusively the provisions of the POEA SEC and the relevant jurisprudence interpreting the same,
without resorting to the provisions of the Labor Code on disability benefits. Moreover, petitioners
aver that the 1996 POEA SEC does not state that the mere lapse of 120 days automatically makes a
seafarer permanently and totally disabled. In spite of the lapse of 120 days, petitioners posit that the
entitlement to disability benefits would only come as a matter of course after the degree of the

seafarers disability had been established, which assessment shall be made after the seafarer no
longer responds to any medication or treatment. Thus, a seafarer is entitled to receive permanent
total disability benefits only if the seafarer was declared by the company-designated physician to be
suffering from a Grade 1 impediment.
In the present case, petitioners insist that there was no disability assessment from the companydesignated physician. On the contrary, Medel was even assessed to be physically fit to resume
work. Petitioners then faulted the Court of Appeals for rejecting the certification of Dr. Ong that
Medel was fit to resume sea duties. Petitioners insist that said doctor had personal knowledge of
Medels condition, as he was a member of a team of physicians tasked to treat Medel. Petitioners
maintain that Medel did not present evidence to prove his incapacity, which would entitle him to the
disability benefits that he sought.
After thoroughly reviewing the records of this case, the Court concludes and so declares that the
instant petition lacks merit.
The Applicable Law and Jurisprudence
in the Award of Disability Benefits of Seafarers
The application of the provisions of the Labor Code to the contracts of seafarers had long been
settled by this Court. In Remigio v. National Labor Relations Commission,37 we emphatically
declared that:
The standard employment contract for seafarers was formulated by the POEA pursuant to its
mandate under E.O. No. 247 to "secure the best terms and conditions of employment of Filipino
contract workers and ensure compliance therewith" and to "promote and protect the well-being of
Filipino workers overseas." Section 29 of the 1996 POEA SEC itself provides that "all rights and
obligations of the parties to the Contract, including the annexes thereof, shall be governed by the
laws of the Republic of the Philippines, international conventions, treaties and covenants where the
Philippines is a signatory." Even without this provision, a contract of labor is so impressed with public
interest that the New Civil Code expressly subjects it to "the special laws on labor unions, collective
bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and similar
Thus, the Court has applied the Labor Code concept of permanent total disability to the case of
seafarers. x x x.38
The Labor Code defines permanent total disability under Article 192(c)(1), which states:
(c) The following disabilities shall be deemed total and permanent:
(1) Temporary total disability lasting continuously for more than one hundred twenty days, except as
otherwise provided in the Rules. (Emphasis ours.)
This concept of permanent total disability is further explained in Section 2(b), Rule VII of the
Implementing Rules of Book IV of the Labor Code (Amended Rules on Employees Compensation)
as follows:

SEC. 2. Disability. x x x
(b) A disability is total and permanent if as a result of the injury or sickness the employee is unable to
perform any gainful occupation for a continuous period exceeding 120 days, except as otherwise
provided for in Rule X of these Rules. (Emphasis ours.)
The exception in Rule X of the Implementing Rules of Book IV (Amended Rules on Employees
Compensation) as mentioned above, on the other hand, pertains to an employees entitlement to
temporary total disability benefits under Section 2 of the aforesaid Rule X, to wit:
SEC. 2. Period of entitlement. (a) The income benefit shall be paid beginning on the first day of
such disability. If caused by an injury or sickness it shall not be paid longer than 120 consecutive
days except where injury or sickness still requires medical attendance beyond 120 days but not to
exceed 240 days from onset of disability in which case benefit for temporary total disability shall be
paid. However, the System may declare the total and permanent status at any time after 120 days of
continuous temporary total disability as may be warranted by the degree of actual loss or impairment
of physical or mental functions as determined by the System. (Emphasis ours.)
In Vergara v. Hammonia Maritime Services, Inc.,39 the Court discussed how the above-mentioned
provisions of the Labor Code and its implementing rules should be read in conjunction with the first
paragraph of Section 20(B)(3) of the 2000 POEA SEC, which states:
3. Upon sign-off from the vessel for medical treatment, the seafarer is entitled to sickness allowance
equivalent to his basic wage until he is declared fit to work or the degree of permanent disability has
been assessed by the company-designated physician but in no case shall this period exceed one
hundred twenty (120) days.
Correlating the aforementioned provision of the POEA SEC with the pertinent labor laws and rules,
Vergara teaches that:
As these provisions operate, the seafarer, upon sign-off from his vessel, must report to the
company-designated physician within three (3) days from arrival for diagnosis and treatment. For the
duration of the treatment but in no case to exceed 120 days, the seaman is on temporary total
disability as he is totally unable to work. He receives his basic wage during this period until he is
declared fit to work or his temporary disability is acknowledged by the company to be permanent,
either partially or totally, as his condition is defined under the POEA Standard Employment Contract
and by applicable Philippine laws. If the 120 days initial period is exceeded and no such declaration
is made because the seafarer requires further medical attention, then the temporary total disability
period may be extended up to a maximum of 240 days, subject to the right of the employer to
declare within this period that a permanent partial or total disability already exists. The seaman may
of course also be declared fit to work at any time such declaration is justified by his medical
As we outlined above, a temporary total disability only becomes permanent when so declared by the
company physician within the periods he is allowed to do so, or upon the expiration of the maximum
240-day medical treatment period without a declaration of either fitness to work or the existence of a
permanent disability. x x x.40 (Emphases ours.)
Incidentally, although the contract involved in Vergara was the 2000 POEA SEC, the Court applied
the ruling therein to the case of Magsaysay Maritime Corporation v. Lobusta,41 which involved the

1996 POEA SEC. As noted in Lobusta, the first paragraph of Section 20(B)(3) of the 2000 POEA
SEC was copied verbatim from the first paragraph of Section 20(B)(3) of the 1996 POEA SEC.
From the foregoing exposition, Medels entitlement to permanent total disability benefits becomes
clear.1wphi1 Medel was accidentally injured on board the M/V Optima on March 1, 1999, where he
sustained an open depressed fracture on the left frontal side of his forehead, as well as damage to
his left eye and frontal sinus. Since his repatriation to the Philippines on March 13, 1999, Medel
underwent medical treatment for his condition under the supervision of Dr. Lim, the companydesignated physician, at the Metropolitan Hospital. He was initially given medications to manage his
condition and he went through surgical procedures to repair the damage to his left eye on April 22,
1999, July 14, 1999 and July 19, 1999. Medels condition was continuously evaluated by the
hospitals ophthalmologist and neurologist. On October 20, 1999, Medel went through the procedure
of cranioplasty to repair his fractured skull.42 According to Dr. Lim, Medel was seen by the hospital
neurologist and neurosurgeon on February 11, 2000, on which date he was pronounced fit to
resume sea duties.
Unmistakably, from the time Medel signed off from the vessel on March 13, 1999 up to the time his
fitness to work was declared on February 11, 2000, more than eleven (11) months, or approximately
335 days, have lapsed. During this period, Medel was totally unable to pursue his occupation as a
seafarer. Following the guidelines laid down in Vergara, it is evident that the maximum 240-day
medical treatment period expired in this case without a declaration of Medels fitness to work or the
existence of his permanent disability determined. Accordingly, Medels temporary total disability
should be deemed permanent and thus, he is entitled to permanent total disability benefits.
With respect to the alleged earlier pronouncement of Dr. Ong as to the fitness of Medel for sea
duties, the Court is not thereby persuaded. To recall, the said pronouncement was made on October
25, 1999 in a letter addressed to Dr. Lim after the cranioplasty of Medel was undertaken on October
20, 1999. After explaining the delay in the conduct of the said procedure, Dr. Ong stated that he
"think[s] patient can resume sea duties without any disability."43 The statement of Dr. Ong, however,
was not a categorical attestation as to the actual fitness of Medel to resume his occupation as a
seafarer. Plainly, after Medel underwent cranioplasty to repair the fracture in his skull, it is not
farfetched to assume that he still needed additional time for his wound to heal and to recuperate in
order to restore himself to his former state of health. In their Memorandum, petitioners even
acknowledged that despite the above opinion of Dr. Ong, Medel continued to avail of further medical
treatment and rehabilitation.44Medel also had to be evaluated by specialists to assess his condition.
In their Memorandum, petitioners related that "ultimately, the company-designated physicians
declared that petitioner was 'fit to resume sea duties' by Medical Certificate dated 15 February
2000."45 The certificate signed by Dr. Lim petiinently stated that "MedeiJ was seen by om
neurologist and neuro-surgeon. His wound is healed. His perimetry result was given to our
neurologist and he opines that patient is now fit to work." 46 The same certificate declared that
"Medel was pronounced fit to resume sea duties as of February 11, 2000." 47 To our mind, the
medical certificate of Dr. Lim dated February 15, 2000 is the definitive declaration on the physical
condition of Medel. Unfmiunately for petitioners, however, this declaration was issued beyond the
240-day period as mandated in Vergara. Consequently, we find no reason to overturn the Court of
Appeals' conclusion regarding Medel's right to disability benefits, albeit on different legal grounds.
WHEREFORE, the instant Petition for Review on Certiorari is DENIED. Petitioners Fair Shipping
Corporation and Kohyu Marine Co., Ltd. are held jointly and severally liable to pay Joselito T. Medel
permanent total disability benefits of US$60,000.00, to be paid in Philippine Peso at the exchange
rate prevailing at the time of actual payment. Costs against petitioners.

G.R. No. 119243 April 17, 1997



This is a special civil action for certiorari seeking the reversal of the 7 October 1994 decision 1 of the
National Labor Relations Commission (NLRC) in NLRC Case No. 00-06-04136-93 (CA No. L007370-94), which modified the 11 July 1994 decision 2 of the Labor Arbiter by directing there
instatement of private respondent Antonio D. Estrada, the complainant, without loss of seniority
rights and benefits.
Private respondent National Federation of Labor Unions (NAFLU), a co-complainant in the labor
case, is a labor union of which complainant is a member.
The factual and procedural antecedents are summarized in the decision of the Labor Arbiter which
we quote verbatim:
Complainant was first employed by respondent on 16 September 1991 as route
helper with the latest daily wage of P119.00. From 19 April 1993 up to 19 May 1993,
for a period of one (1) month, complainant went on absent without permission
(AWOP). On 20 May 1993, respondent thru Mr. Rodolfo Valentin, sent a Memo to
complainant, to wit:
"Please explain in writing within 24 hours of your receipt of this memo
why no disciplinary action should be taken against you for the
following offense:
You were absent since April 19, 1993 up to May 19, 1993.
For your strict compliance."
In answer to the aforesaid memo, complainant explained:
"Sa dahilan po na ako ay hindi nakapagpaalam sainyo (sic) dahil
inuwi ko ang mga anak ko sa Samar dahil ang asawa ko ay lumayas
at walang mag-aalaga sa mga anak ko. Kaya naman hindi ako naka
long distance or telegrama dahil wala akong pera at ibinili ko ng
gamot ay puro utang pa.
Finding said explanation unsatisfactory, on 16 June 1993, respondent thru its Sales
Manager, Mr. Henry A. Chongco issued a Notice of Termination which reads:
"We received your letter of explanation dated May 21, 1993 but we
regret to inform you that we do not consider it valid. You are aware of
the company Rules and Regulations that absence without permission

for six (6) consecutive working days is considered abandonment of

In view of the foregoing, the company has decided to terminate your
employment effective June 17, 1993 for abandonment of work.
Hence, this complaint.
Complainants contend that individual complainant's dismissal was done without just
cause; that if was not sufficiently established that individual complainant's absence
from April 19, 1993 to June 16, 1993 are unjustified; that the penalty of dismissal for
such violation is too severe; that in imposing such. penalty, respondent should have
taken into consideration complainant's length of service and as a first offender, a
penalty less punitive will suffice such as suspension for a define period, (Position
Paper, complainants).
Upon the other hand, respondent contends that individual complainant was
dismissed for cause allowed by the company Rules and Regulations and the Labor
Code; that the act of complainant in absenting from work for one (1) month without
official leave is deleterious to the business of respondent; that it will result to
stoppage of production which will not only destructive to respondent's interests but
also to the interest of its employees in general; that the dissmisal of complainant from
the service is legal, (Position Paper, respondent). 3
The Labor. Arbiter dismissed the complaint for lack of merit, citing the principle of managerial
control, which recognizes the employer's prerogative to prescribe reasonable rules and regulations
to govern the conduct of his employees. The principle allows the imposition of disciplinary measures
which are necessary for the efficiency of both the employer and the employees. In complainant's
case, he persisted in not reporting for work until 16 June 1993 notwithstanding his receipt of the
memorandum requiring him to explain his absence without approval. The Labor Arbiter, relying
on Sheomart, Inc. vs. NLRC, 4 thus concluded:
Verily, it is crystal clear that individual complainant has indeed abandoned his work.
The filing of the complaint on 25 June 1993 or almost two (2) months from the date
complainant failed to report for work affirms the findings of this Office and therefore,
under the law and jurisprudence which upholds the right of an employer to discharge
an employee who incurs frequent, prolonged and unexplained absences as being
grossly remiss in his duties to the employer and is therefore, dismissed for cause,
(Shoemart, Inc. vs. NLRC, 176 SCRA 385). An employee is deemed to have
abandoned his position or to have resigned from the same, whenever he has been
absent therefrom without previous permission of the employer for three consecutive
days or more. This justification is the obvious harm to employer's interest, resulting
from [sic] the non-availability of the worker's services, (Supra). (Emphasis supplied) 5
and ruled that complainant's termination from his employment was "legal, the same with just
or authorized cause and due process." 6
Complainant appealed to the NLRC, alleging that the immediate filing of a complaint for illegal
dismissal verily indicated that he never intended to abandon his work, then cited Policarpio v.
Vicente Dy Sun, Jr., 7 where the NLRC ruled that prolonged, absence does not, by itself, necessarily
mean abandonment. Accordingly, there must be a concurrence of intention and overt acts from
which it can be inferred that the employee is no longer interested in working. Complainant likewise

invoked compassion in the application of sanctions, as dismissal from employment brings untold
hardship and sorrows on the dependents of the wage earners. In his case, a penalty less punitive
than dismissal could have sufficed.
In the assailed decision 8 of 7 October 1994, the NLRC modified the Labor Arbiter's decision and
held that complainant's dismissal was invalid for the following reasons:
Complainant appellant's prolonged absences, although unauthorized, may not
amount to gross neglect or abandonment of work to warrant outright termination of
employment. Dismissal is too severe a penalty. For one, the mere fact that
complainant-appellant is a first offender must be considered in his favor. Besides, it
is generally impossible for an employee to anticipate when he would be ill or
compelled to attend to some family problems or emergency like in the case at bar.
Reliance on the ruling enunciated in the cited case of Shoemart Inc. vs. National
Labor Relations, 176 SCRA 385, is quite misplaced because of the obvious
dissimilarities of the attendant circumstances in the said case vis-a-vis those
obtaining in the case at bar. Unlike in the aforecited Shoemart Case, herein
complainant-appellant was not dismissed for unauthorized absences and eventually
reinstated anterior to his second dismissal for the same offense nor was he given a
second chance which he could have ignored.
Otherwise stated, the difference between the two cases greatly lies [in] the fact that
complainant in the Shoemart Case in the language of the Supreme Court was "an
inveterate absentee who does not deserve reinstatement" compared to herein
complainant-appellant who is a first offender 9
The NLRC then decreed as follows:
PREMISES CONSIDERED, and [sic] the Decision of the Labor Arbiter, dated 11 July
1994 is hereby MODIFIED, by directing the reinstatement of complainant-appellant to
his former position without loss of seniority rights and other benefits, but without
backwages. The other findings in tile appealed decision stand AFFIRMED. 10
Petitioner's motion for the reconsideration 11 was denied by the NLRC in its 7 December 1994
resolution. 12 Petitioner thus filed this special civil action contending that the NLRC committed grave
abuse of discretion in ordering complainant's reinstatement, which in effect countenances the
reinstatement of an employee who is found guilty of "excessive" absences without pior approval. It
further argued that the NLRC failed to consider the rationale behind petitioner's Rules and
Regulations; that it was deprived of its prerogative to enforce them; and that complainant's
reinstatement would adversely affect its business and send the wrong signals to its employees.
In its comment 13 for public respondent NLRC, the Office of the Solicitor General maintained that
dismissal from employment was too severe a penalty for a first time offender like complainant.
Although he violated petitioner's rules and regulations, his absences were justified: he had to bring
his children to Samar, his home province, as his wife deserted him. While that by itself might not
excuse the failure to seek permission, the Office of the Solicitor General submitted, however, that "it
would be at [sic] the height of callousness if one, considering his plight under the circumstance[s],
would not give due consideration to [complainant's] explanation. There has to be an exception." 14
Applying Itogon-Suyoc Mines, Inc. v. NLRC, 15 the Office of the Solicitor General recommended
complainant's reinstatement, which would be more harmonious to the dictates of social justice and

equity. It further emphasized that the reinstatement should not be considered a condonation of
complainant's irresponsible behavior, rather, it must be viewed as a mitigation of the severity of the
penalty of dismissal. Accordingly, it prays that this petition be dismissed.
In its reply, 16 petitioner disputed the application of Itogon-Suyoc because: (1) the employee involved
therein had been in the service for twenty-three years while complainant herein had served petitioner
for only two years; and (2) the offense inItogon-Suyoc was limited to a single act of high grading
while complainant herein committed a series of unexcused absences.
We gave due course to the petition and dispensed with complainant's comment.
The sole issue to be resolved is whether the NLRC committed grave abuse of discretion in modifying
the, decision of the Labor Arbiter.
The answer must be in the negative.
A scrutiny of the facts discloses that complainant's absence was precipitated by grave family
problem as his wife unexpectedly deserted him and abandoned the family. Considering that he had
a full-time job, there was no one to whom to the could entrust the children and he was thus
compelled to bring them to the province. It would have been extremely difficult for him to have been
husband and wife/father and mother at the same time to the children in the metropolis. He was then
under emotional, psychological, spiritual and physical stress and strain. The reason for his absence
is, under these circumstances, justified. While his failure to inform and seek petitioner's approval was
an omission which must be corrected and chastised, he did not merit the severest penalty of
dismissal from the service.
Petitioner's finding that complainant was guilty of abandonment is misplaced. Abandonment as a just
and valid ground for dismissal requires the deliberate, unjustified refusal of the employee to resume
his employment. Two elements must then be satisfied: (1) the failure to report for work or absence
without valid or justifiable reason; and (2) a clear intention to sever the employer-employee relation.
The second element is the more determinative factor and must be evinced by overt acts. 17 Likewise,
the burden of proof is on the employer to show the employee's clear and deliberate intent to
discontinue his employment without any intention of returning, 18 mere absence is not
sufficient. 19 These elements are not present here. First, as held above, complainant's absence was
justified under the circumstances. As to the second requisite, we are not convinced that complainant
ever intended to sever the employer-employee relationship. Complainant immediately complied with
the memo requiring him to explain his absence, and upon knowledge of his termination, immediately
sued for illegal dismissal. These plainly refuted any claim that he was no longer interested in
returning to work. 20 Without doubt, the intention is lacking.
Moreover, petitioner failed to discharge the burden of proof that complainant was guilty of
abandonment. No evidence other than complainant's letter explaining his absence was presented.
Needless to state, the letter did not indicate, in the least, that complainant was no longer interested
in returning to work. On the contrary, complainant sought petitioner's understanding. In declaring him
guilty of abandonment, petitioner merely relied on its Rules and Regulations which limited its
application to a six-day continuous absence, contrary to the purpose of the law. While the employer
is not precluded from prescribing rules and regulations to govern the conduct of his employees,
these rules and their implementation must be fair, just and reasonable. It must be underscored that
no less than our Constitution looks with compassion on the workingman and protects his rights not
only under a general statement of a state policy, 21 but under the Article on Social Justice and
Human Rights, 22 thus placing labor contracts on a higher plane and with greater safeguards. Verily,

relations between capital and labor are not merely contractual. They are impressed with public
interest and labor contracts must, perforce, yield to the common good. 23
We then conclude that complainant's "prolonged" absence without approval does not fall within the
definition of abandonment and that his dismissal was unjustified. While we do not decide here the
validity of petitioner's Rules and Regulations on continuous, unauthorized absences, what is plain is
that it was wielded with undue haste resulting in a deprivation of due process, thus not allowing for a
determination of just cause or abandonment. In this light, petitioner's dismissal was illegal. This is
not to say that his absence should go unpunished, as impliedly noted by the NLRC in declining to
award back wages. In the absence of the appropriate offense which defines complainant's infraction
in the company's Rules and Regulations, equity dictates that a penalty commensurate to the
infraction be imposed.
WHEREFORE, the petition is hereby DISMISSED and the decision of the National Labor Relations
Commission in NLRC Case No. 06-04136-93 is hereby AFFIRMED. No pronouncement as to costs.

G.R. No. 118506 April 18, 1997

NORMA MABEZA, petitioner,

This petition seeking the nullification of a resolution of public respondent National Labor Relations
Commission dated April 28, 1994 vividly illustrates why courts should be ever vigilant in the
preservation of the constitutionally enshrined rights of the working class. Without the protection
accorded by our laws and the tempering of courts, the natural and historical inclination of capital to
ride roughshod over the rights of labor would run unabated.
The facts of the case at bar, culled from the conflicting versions of petitioner and private respondent,
are illustrative.
PETITIONER Norma Mabeza contends that around the first week of May, 1991, she and her coemployees at the Hotel Supreme in Baguio City were asked by the hotel's management to sign an
instrument attesting to the latter's compliance with minimum wage and other labor standard
provisions of law. 1 The instrument provides: 2
DIZON, all of legal ages (sic), Filipinos and residents of Baguio City, under oath,
depose and say:
1. That we are employees of Mr. Peter L. Ng of his Hotel Supreme situated at No.
416 Magsaysay Ave., Baguio City.
2. That the said Hotel is separately operated from the Ivy's Grill and Restaurant;
3. That we are all (8) employees in the hotel and assigned in each respective shifts;
4. That we have no complaints against the management of the Hotel Supreme as we
are paid accordingly and that we are treated well.
5. That we are executing this affidavit voluntarily without any force or intimidation and
for the purpose of informing the authorities concerned and to dispute the alleged
report of the Labor Inspector of the Department of Labor and Employment conducted
on the said establishment on February 2, 1991.
IN WITNESS WHEREOF, we have hereunto set our hands this 7th day of May, 1991
at Baguio City, Philippines.
(Sgd.) (Sgd.) (Sgd.)

(Sgd.) (Sgd.) (Sgd.)

(Sgd.) (Sgd.)
SUBSCRIBED AND SWORN to before me this 7th day of May, 1991, at Baguio City, Philippines.
Asst. City Prosecutor
Petitioner signed the affidavit but refused to go to the City Prosecutor's Office to swear to the
veracity and contents of the affidavit as instructed by management. The affidavit was nevertheless
submitted on the same day to the Regional Office of the Department of Labor and Employment in
Baguio City.
As gleaned from the affidavit, the same was drawn by management for the sole purpose of refuting
findings of the Labor Inspector of DOLE (in an inspection of respondent's establishment on February
2, 1991) apparently adverse to the private respondent. 3
After she refused to proceed to the City Prosecutor's Office on the same day the affidavit was
submitted to the Cordillera Regional Office of DOLE petitioner avers that she was ordered by the
hotel management to turn over the keys to her living quarters and to remove her belongings from the
premises. 4 According to her, respondent strongly chided her for refusing to proceed to the City
Prosecutor's Office to attest to the affidavit. 5 She thereafter reluctantly filed a leave of absence from
her job which was denied by management. When she attempted to return to work on May 10, 1991,
the hotel's cashier, Margarita Choy, informed her that she should not report to work and, instead,
continue with her unofficial leave of absence. Consequently, on May 13, 1991, three days after her
attempt to return to work, petitioner filed a complaint for illegal dismissal before the Arbitration
Branch of the National Labor Relations Commission CAR Baguio City. In addition to her
complaint for illegal dismissal, she alleged underpayment of wages, non-payment of holiday pay,
service incentive leave pay, 13th month pay, night differential and other benefits. The complaint was
docketed as NLRC Case No. RAB-CAR-05-0198-91 and assigned to Labor Arbiter Felipe P. Pati.
Responding to the allegations made in support of petitioner's complaint for illegal dismissal, private
respondent Peter Ng alleged before Labor Arbiter Pati that petitioner "surreptitiously left (her job)
without notice to the management" 6 and that she actually abandoned her work. He maintained that
there was no basis for the money claims for underpayment and other benefits as these were paid in
the form of facilities to petitioner and the hotel's other employee. 7Pointing to the Affidavit of May 7,
1991, the private respondent asserted that his employees actually have no problems with
management. In a supplemental answer submitted eleven (11) months after the original complaint
for illegal dismissal was filed, private respondent raised a new ground, loss of confidence, which
was supported by a criminal complaint for Qualified Theft he filed before the prosecutor's office of
the City of Baguio against petitioner on July 4, 1991. 8
On May 14, 1993, Labor Arbiter Pati rendered a decision dismissing petitioner's complaint on the
ground of loss of confidence. His disquisitions in support of his conclusion read as follows:
It appears from the evidence of respondent that complainant carted away or stole
one (1) blanket, 1 piece bedsheet, 1 piece thermos, 2 pieces towel (Exhibits "9", "9A," "9-B," "9-C" and "10" pages 12-14 TSN, December 1, 1992).

In fact, this was the reason why respondent Peter Ng lodged a criminal complaint
against complainant for qualified theft and perjury. The fiscal's office finding a prima
facie evidence that complainant committed the crime of qualified theft issued a
resolution for its filing in court but dismissing the charge of perjury (Exhibit "4" for
respondent and Exhibit "B-7" for complainant). As a consequence, complainant was
charged in court for the said crime (Exhibit "5" for respondent and Exhibit "B-6" for
the complainant).
With these pieces of evidence, complainant committed serious misconduct against
her employer which is one of the just and valid grounds for an employer to terminate
an employee (Article 282 of the Labor Code as amended). 9
On April 28, 1994, respondent NLRC promulgated its assailed
Resolution 10 affirming the Labor Arbiter's decision. The resolution substantially incorporated
the findings of the Labor Arbiter. 11 Unsatisfied, petitioner instituted the instant special civil action
for certiorari under Rule 65 of the Rules of Court on the following grounds: 12
The Solicitor General, in a Manifestation in lieu of Comment dated August 8, 1995 rejects private
respondent's principal claims and defenses and urges this Court to set aside the public
respondent's assailed resolution. 13
We agree.
It is settled that in termination cases the employer bears the burden of proof to show that the
dismissal is for just cause, the failure of which would mean that the dismissal is not justified and
the employee is entitled to reinstatement. 14
In the case at bar, the private respondent initially claimed that petitioner abandoned her job when
she failed to return to work on May 8, 1991. Additionally, in order to strengthen his contention that

there existed sufficient cause for the termination of petitioner, he belatedly included a complaint for
loss of confidence, supporting this with charges that petitioner had stolen a blanket, a bedsheet and
two towels from the hotel. 15 Appended to his last complaint was a suit for qualified theft filed with the
Baguio City prosecutor's office.
From the evidence on record, it is crystal clear that the circumstances upon which private
respondent anchored his claim that petitioner "abandoned" her job were not enough to constitute
just cause to sanction the termination of her services under Article 283 of the Labor Code. For
abandonment to arise, there must be concurrence of two things:
1) lack of intention to work; 16 and
2) the presence of overt acts signifying the employee's intention not to work.17
In the instant case, respondent does not dispute the fact that petitioner tried to file a leave of
absence when she learned that the hotel management was displeased with her refusal to attest to
the affidavit. The fact that she made this attempt clearly indicates not an intention to abandon
but an intention to return to work after the period of her leave of absence, had it been granted, shall
have expired.
Furthermore, while absence from work for a prolonged period may suggest abandonment in certain
instances, mere absence of one or two days would not be enough to sustain such a claim. The
overt act (absence) ought to unerringly point to the fact that the employee has no intention to
return to work, 18 which is patently not the case here. In fact, several days after she had been
advised to take an informal leave, petitioner tried to resume working with the hotel, to no avail. It was
only after she had been repeatedly rebuffed that she filed a case for illegal dismissal. These acts
militate against the private respondent's claim that petitioner abandoned her job. As the Solicitor
General in his manifestation observed:
Petitioner's absence on that day should not be construed as abandonment of her job.
She did not report because the cashier told her not to report anymore, and that
private respondent Ng did not want to see her in the hotel premises. But two days
later or on the 10th of May, after realizing that she had to clarify her employment
status, she again reported for work. However, she was prevented from working by
private respondents. 19
We now come to the second cause raised by private respondent to support his contention that
petitioner was validly dismissed from her job.
Loss of confidence as a just cause for dismissal was never intended to provide employers with a
blank check for terminating their employees. Such a vague, all-encompassing pretext as loss of
confidence, if unqualifiedly given the seal of approval by this Court, could readily reduce to barren
form the words of the constitutional guarantee of security of tenure. Having this in mind, loss of
confidence should ideally apply only to cases involving employees occupying positions of
trust and confidence or to those situations where the employee is routinely charged with the
care and custody of the employer's money or property. To the first class belong managerial
employees, i.e., those vested with the powers or prerogatives to lay down management policies
and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees or
effectively recommend such managerial actions; and to the second class belong cashiers,
auditors, property custodians, etc., or those who, in the normal and routine exercise of their
functions, regularly handle significant amounts of money or property. Evidently, an ordinary
chambermaid who has to sign out for linen and other hotel property from the property custodian

each day and who has to account for each and every towel or bedsheet utilized by the hotel's guests
at the end of her shift would not fall under any of these two classes of employees for which loss
of confidence, if ably supported by evidence, would normally apply. Illustrating this distinction, this
Court in Marina Port Services, Inc. vs. NLRC, 20has stated that:
To be sure, every employee must enjoy some degree of trust and confidence from
the employer as that is one reason why he was employed in the first place. One
certainly does not employ a person he distrusts. Indeed, even the lowly janitor must
enjoy that trust and confidence in some measure if only because he is the one who
opens the office in the morning and closes it at night and in this sense is entrusted
with the care or protection of the employer's property. The keys he holds are the
symbol of that trust and confidence.
By the same token, the security guard must also be considered as enjoying the trust
and confidence of his employer, whose property he is safeguarding. Like the janitor,
he has access to this property. He too, is charged with its care and protection.
Notably, however, and like the janitor again, he is entrusted only with
the physical task of protecting that property. The employer's trust and
confidence in him is limited to that ministerial function. He is not entrusted, in
the Labor Arbiter's words, with the duties of safekeeping and safeguarding company
policies, management instructions, and company secrets such as operation devices.
He is not privy to these confidential matters, which are shared only in the higher
echelons of management. It is the persons on such levels who, because they
discharge these sensitive duties, may be considered holding positions of trust and
confidence. The security guard does not belong in such category. 21
More importantly, we have repeatedly held that loss of confidence should not be simulated in
order to justify what would otherwise be, under the provisions of law, an illegal dismissal. "It should
not be used as a subterfuge for causes which are illegal, improper and unjustified. It must be
genuine, not a mere afterthought to justify an earlier action taken in bad faith." 22
In the case at bar, the suspicious delay in private respondent's filing of qualified theft charges
against petitioner long after the latter exposed the hotel's scheme (to avoid its obligations as
employer under the Labor Code) by her act of filing illegal dismissal charges against the private
respondent would hardly warrant serious consideration of loss of confidence as a valid ground for
dismissal. Notably, the Solicitor General has himself taken a position opposite the public respondent
and has observed that:
If petitioner had really committed the acts charged against her by private
respondents (stealing supplies of respondent hotel), private respondents should have
confronted her before dismissing her on that ground. Private respondents did not do
so. In fact, private respondent Ng did not raise the matter when petitioner went to see
him on May 9, 1991, and handed him her application for leave. It took private
respondents 52 days or up to July 4, 1991 before finally deciding to file a criminal
complaint against petitioner, in an obvious attempt to build a case against her.
The manipulations of private respondents should not be countenanced. 23
Clearly, the efforts to justify petitioner's dismissal on top of the private respondent's scheme of
inducing his employees to sign an affidavit absolving him from possible violations of the Labor Code

taints with evident bad faith and deliberate malice petitioner's summary termination from
Having said this, we turn to the important question of whether or not the dismissal by the private
respondent of petitioner constitutes an unfair labor practice.
The answer in this case must inevitably be in the affirmative.
The pivotal question in any case where unfair labor practice on the part of the employer is alleged is
whether or not the employer has exerted pressure, in the form of restraint, interference or
coercion, against his employee's right to institute concerted action for better terms and
conditions of employment. Without doubt, the act of compelling employees to sign an instrument
indicating that the employer observed labor standards provisions of law when he might have
not, together with the act of terminating or coercing those who refuse to cooperate with the
employer's scheme constitutes unfair labor practice. The first act clearly preempts the right of the
hotel's workers to seek better terms and conditions of employment through concerted action.
We agree with the Solicitor General's observation in his manifestation that "[t]his actuation . . . is
analogous to the situation envisaged in paragraph (f) of Article 248 of the Labor Code" 24 which
distinctly makes it an unfair labor practice "to dismiss, discharge or otherwise prejudice or
discriminate against an employee for having given or being about to give testimony" 25 under the
Labor Code. For in not giving positive testimony in favor of her employer, petitioner had reserved not
only her right to dispute the claim and proffer evidence in support thereof but also to work for better
terms and conditions of employment.
For refusing to cooperate with the private respondent's scheme, petitioner was obviously held up as
an example to all of the hotel's employees, that they could only cause trouble to management at
great personal inconvenience. Implicit in the act of petitioner's termination and the subsequent filing
of charges against her was the warning that they would not only be deprived of their means of
livelihood, but also possibly, their personal liberty.
This Court does not normally overturn findings and conclusions of quasi-judicial agencies when the
same are ably supported by the evidence on record. However, where such conclusions are based
on a misperception of facts or where they patently fly in the face of reason and logic, we will not
hesitate to set aside those conclusions. Going into the issue of petitioner's money claims, we find
one more salient reason in this case to set things right: the labor arbiter's evaluation of the money
claims in this case incredibly ignores existing law and jurisprudence on the matter. Its blatant onesidedness simply raises the suspicion that something more than the facts, the law and jurisprudence
may have influenced the decision at the level of the Arbiter.
Labor Arbiter Pati accepted hook, line and sinker the private respondent's bare claim that the reason
the monetary benefits received by petitioner between 1981 to 1987 were less than minimum wage
was because petitioner did not factor in the meals, lodging, electric consumption and water she
received during the period in her computations. 26 Granting that meals and lodging were provided
and indeed constituted facilities, such facilities could not be deducted without the employer
complying first with certain legal requirements. Without satisfying these requirements, the employer
simply cannot deduct the value from the employee's ages. First, proof must be shown that such
facilities are customarily furnished by the trade. Second, the provision of deductible facilities must be
voluntarily accepted in writing by the employee. Finally, facilities must be charged at fair and
reasonable value. 27

These requirements were not met in the instant case. Private respondent "failed to present any
company policy or guideline to show that the meal and lodging . . . (are) part of the salary;" 28 he
failed to provide proof of the employee's written authorization; and, he failed to show how he arrived
at the valuations. 29
Curiously, in the case at bench, the only valuations relied upon by the labor arbiter in his decision
were figures furnished by the private respondent's own accountant, without corroborative evidence.
On the pretext that records prior to the July 16, 1990 earthquake were lost or destroyed, respondent
failed to produce payroll records, receipts and other relevant documents, where he could have, as
has been pointed out in the Solicitor General's manifestation, "secured certified copies thereof from
the nearest regional office of the Department of Labor, the SSS or the BIR." 30
More significantly, the food and lodging, or the electricity and water consumed by the petitioner were
not facilities but supplements. A benefit or privilege granted to an employee for the convenience of
the employer is not a facility. The criterion in making a distinction between the two not so much lies
in the kind (food, lodging) but the purpose. 31 Considering, therefore, that hotel workers are required
to work different shifts and are expected to be available at various odd hours, their ready availability
is a necessary matter in the operations of a small hotel, such as the private respondent's hotel.
It is therefore evident that petitioner is entitled to the payment of the deficiency in her wages
equivalent to the fullwage applicable from May 13, 1988 up to the date of her illegal dismissal.
Additionally, petitioner is entitled to payment of service incentive leave pay, emergency cost of living
allowance, night differential pay, and 13th month pay for the periods alleged by the petitioner as the
private respondent has never been able to adduce proof that petitioner was paid the aforestated
However, the claims covering the period of October 1987 up to the time of filing the case on May 13,
1988 are barred by prescription as P.D. 442 (as amended) and its implementing rules limit all money
claims arising out of employer-employee relationship to three (3) years from the time the cause of
action accrues. 32
We depart from the settled rule that an employee who is unjustly dismissed from work normally
should be reinstated without loss of seniority rights and other privileges. Owing to the strained
relations between petitioner and private respondent, allowing the former to return to her job would
only subject her to possible harassment and future embarrassment. In the instant case, separation
pay equivalent to one month's salary for every year of continuous service with the private respondent
would be proper, starting with her job at the Belfront Hotel.
In addition to separation pay, backwages are in order. Pursuant to R.A. 6715 and our decision
in Osmalik Bustamante, et al. vs. National Labor Relations Commission, 33 petitioner is entitled to full
backwages from the time of her illegal dismissal up to the date of promulgation of this decision
without qualification or deduction.
Finally, in dismissal cases, the law requires that the employer must furnish the employee sought to
be terminated from employment with two written notices before the same may be legally effected.
The first is a written notice containing a statement of the cause(s) for dismissal; the second is a
notice informing the employee of the employer's decision to terminate him stating the basis of the
dismissal. During the process leading to the second notice, the employer must give the employee
ample opportunity to be heard and defend himself, with the assistance of counsel if he so desires.

Given the seriousness of the second cause (qualified theft) of the petitioner's dismissal, it is
noteworthy that the private respondent never even bothered to inform petitioner of the charges
against her. Neither was petitioner given the opportunity to explain the loss of the articles. It was only
almost two months after petitioner had filed a complaint for illegal dismissal, as an afterthought, that
the loss was reported to the police and added as a supplemental answer to petitioner's complaint.
Clearly, the dismissal of petitioner without the benefit of notice and hearing prior to her termination
violated her constitutional right to due process. Under the circumstance an award of One Thousand
Pesos (P1,000.00) on top of payment of the deficiency in wages and benefits for the period
aforestated would be proper.
WHEREFORE, premises considered, the RESOLUTION of the National Labor Relations
Commission dated April 24, 1994 is REVERSED and SET ASIDE, with costs. For clarity, the
economic benefits due the petitioner are hereby summarized as follows:
1) Deficiency wages and the applicable ECOLA from May 13, 1988 up to the date of petitioner's
illegal dismissal;
2) Service incentive leave pay; night differential pay and 13th month pay for the same period;
3) Separation pay equal to one month's salary for every year of petitioner's continuous service with
the private respondent starting with her job at the Belfront Hotel;
4) Full backwages, without qualification or deduction, from the date of petitioner's illegal dismissal up
to the date of promulgation of this decision pursuant to our ruling in Bustamante vs. NLRC. 34
5) P1,000.00.

G.R. No. 184011

September 18, 2013


Before the Court is a Petition for Review on Certiorari1 from the Decision2 of the Special Third
Division of the Court of Appeals in CA-G.R. SP No. 99500 dated 30 April 2008, modifying the
Decision of the National Labor Relations Commission (NLRC) by deleting the award of separation
pay in favor of Reynaldo Hayan Moya (Moya). The dispositive portion of the assailed decision reads:
WHEREFORE, premises considered, the petition is hereby GRANTED. The Resolutions dated
January 31, 2007 and April 24, 2007 of the National Labor Relations Commission in NLRC NCR CA
No. 048653-06 (NLRC NCR Case No. 00-11-12626 2004) affirming the Decision dated February 28,
2006 of the Labor Arbiter Pablo C. Espiritu, Jr. is MODIFIED by deleting the award for separation
pay in favor of private respondent Reynaldo Hayan Moya.3
The facts as gathered by this Court follow:
On 25 January 2005, Moya filed before the NLRC-National Capital Region a complaint for illegal
dismissal against First Solid Rubber Industries, Inc. (First Solid) and its President Edward Lee
Sumulong. In his complaint-affidavit,4Moya alleged that:
1. Sometime in May 1993, he was hired by the company First Solid, a business engaged in
manufacturing of tires and rubbers, as a machine operator;
2. Through years of dedication to his job, he was promoted as head of the Tire Curing
Department of the company;
3. On October 15, 2004, he reported an incident about an under curing of tires within his
department which led to the damage of five tires;
4. The company conducted an investigation of the incident and he was later required to
5. In his explanation, he stated that the damage was caused by machine failure and the
incident was without any fault of the operator;
6. Despite his explanation of what transpired, he was terminated by the company through a
letter dated November 9, 2004.
From the foregoing, he prayed that payment of backwages, separation pay, moral damages and
exemplary damages be adjudged in his favor due to the illegal dismissal he suffered from the
Moya, through his Reply,5 added that his termination fell short of any of the just causes of serious
misconduct, gross and habitual neglect of duties and willful breach of trust. He pointed out that the

company failed to prove that his act fell within the purview of improper or wrong misconduct, and that
a single act of negligence as compared to eleven (11) years of service of good record with the
company will not justify his dismissal.
First Solid, in its Position Paper,6 Reply7 and Memorandum,8 admitted that Moya was a former
employee of the company and was holding the position of Officer-in-Charge of the Tire Curing
Department until his valid dismissal. However, it denied that it illegally dismissed Moya and
maintained that his severance from the company was due to a valid exercise of management
prerogative.9 The company insisted on its right to validly dismiss an employee in good faith if it has a
reasonable ground to believe that its employee is responsible of misconduct, and the nature of his
participation therein renders him absolutely unworthy of the trust and confidence demanded by his
Opposing the story of Moya, the company countered that Moya, who was exercising supervision and
control over the employees as a department head, failed to exercise the diligence required of him to
see to it that the machine operator, Melandro Autor, properly operated the machine. This act is
considered as a gross and habitual neglect of duty which caused actual losses to the company.11
During the initial investigation, Moya, in his Explanation Letter12 dated 15 October 2004, insisted that
the cause of the damage of five (5) tires was due to premature hauling of the tires below curing time.
Unsatisfied with the explanation, the company sent Moya a Letter13 dated 26 October 2004 stating
that he failed to explain what really transpired in the under curing of tires. The company informed
Moya that the damage was caused by the operators unlawful setting of the timer from manual to
automatic without Moyas permission. To make the matter worse, Moya failed to disclose the real
situation that the operator was at fault.
Moya was given twenty-four (24) hours to defend himself and explain the matter. In response, Moya
admitted in a letter dated 29 October 2004 his mistake of not disclosing the true incident and
explained that he found it more considerate to just let the operator be suspended and be fined for
the damage committed. He denied any willful intention to conceal the truth or cover up the mistake of
his employee. Finally, he asked for the companys forgiveness for the fault he had committed.14 In a
letter dated 3 November 2004, Moya reiterated his plea for forgiveness and asked for another
chance to continue his employment with the company.15
Procedural due process, through issuance of twin notices, was also complied with by the company.
Moya was informed of the charges against him through a memorandum16 indicating his violation and
was given an opportunity to answer or rebut the charges. After giving his explanation through
several letters to the company, a notice was sent informing him of the managements decision of his
dismissal and termination from services on9 November 2004 based on serious misconduct, gross
and habitual neglect of duty and willful breach of trust reposed upon him by the company.17
On 28 February 2006, Labor Arbiter Pablo C. Espiritu, Jr. rendered a judgment18 finding sufficient
and valid grounds to dismiss Moya for concealing and lying to First Solid about the factual
circumstances leading to the damage of five (5) tires on 15 October 2004. However, it ruled that the
dismissal from service of the complainant was too harsh as a penalty since it was a first offense and
there was no willful and malicious intention on his part to cause damage. The dispositive portion
WHEREFORE, judgment is hereby rendered ordering Respondents First Solid Rubber Industrial,
Inc. and Edward Lee Sumulong to jointly and severally pay complainant separation pay in lieu of
reinstatement the amount of P63, 654.00.

All other claims whether monetary or otherwise are hereby DISMISSED for lack of merit.19
In justifying his decision, the Labor Arbiter explained that the length of time during which the
complainant was deprived of employment was sufficient penalty for the act he had committed
against the company. As a result, his reinstatement without backwages to his former position was in
order. However, since the employment was already strained and Moya was no longer seeking to be
reinstated, he decided that it was for the best interest of both parties to award instead a separation
pay of one (1) month salary for every year of credited service less the total of cash advances of the
complainant amounting to P19,000.00.20
Not in total accord with the outcome of the decision, First Solid filed its partial appeal before the
NLRC on 13 April 2006. The company assailed as error on the part of the Labor Arbiter the grant of
separation pay in favor of Moya despite the finding that there was a just cause for the employees
dismissal from service. It was submitted that the complainants length of service to the company
cannot be invoked to justify the award. It was argued that Moya was dismissed for just causes;
hence, to award separation pay would be tantamount to giving a prize for disloyalty and breach of
On 31 January 2007, the NLRC affirmed the Decision of the Labor Arbiter in its entirety.22
The NLRC affirmed the finding of the Labor Arbiter that a separation pay should be given to Moya in
lieu of reinstatement citing primarily his length of service and years of contribution to the profitable
business operation of the company. It also noted that this transgression was the first mistake of
Moya in the performance of his functions. Finally, it cited as justification the Courts ruling in St.
Michaels Institute v. Santos,23 wherein the Court held that "even when an employee is found to have
transgressed the employers rules, in the actual imposition of penalties upon the erring employee,
due consideration must still be given to his length of service and the number of violations committed
during his employment."24
In its Motion for Reconsideration,25 First Solid insisted that length of service cannot mitigate breach
of trust which is penalized with dismissal.
On 24 April 2007, the NLRC denied the motion of First Solid as it found no compelling justification to
overturn its findings.26
In its Petition for Certiorari before the Court of Appeals, the company reiterated its previous
arguments that separation pay cannot be awarded to validly dismissed employees and that length of
service was not a ground to reduce the penalty of dismissal due to breach of trust.27
In his Comment28 and Memorandum,29 Moya capitalized on the pronouncement of the Labor Arbiter
that his alleged infraction does not merit a penalty of dismissal from service given his length of
service to the company as well as the failure of the company to prove that he acted maliciously and
with the intention to cause damage.
First Solid, in its Reply30 and Memorandum,31 argued that Moya, being a supervisor, the company
reposed on him its trust and confidence. He was expected to remain loyal and trustworthy and
promote the best interest of the company. His act of concealing, by making a fraudulent report to the
company regarding the transgression of the machine operator under him, is a valid basis for
dismissal based on breach of trust and confidence. The company further contended that the award
of separation pay made by the labor tribunals was contrary to law and jurisprudence.

In its Decision,32 the Court of Appeals ruled in favor of the company and reversed the decisions of
the labor tribunals. The dispositive portions reads:
WHEREFORE, premises considered, the petition is GRANTED. The Resolutions dated January 31,
2007 and April 24, 2007 of the National Labor Relations Commission in NLRC NCR CA No. 04865306(NLRC NCR Case No. 00-11-12626-2004) affirming the Decision dated February 28, 2006 of the
Labor Arbiter Pablo C. Espiritu, Jr. is MODIFIED by deleting the award for separation pay in favor of
private respondent Reynaldo Hayan Moya.33
The appellate court ruled that an employee found to be guilty of serious misconduct or other acts
reflecting his moral character is not entitled to separation pay. Moya who held a supervisory position
as the Head of the Curing Department breached the trust reposed upon him when he did not
disclose what was actually done by the machine operator which eventually caused the damage. It
was only when the company discovered that the report was not in accordance with what really
transpired that Moya admitted its mistake. In sum, the appellate court agreed that First Solid
presented substantial proof to consider Moya as dishonest and disloyal to the company.
It took the position that instead of being a basis for the award of separation pay, Moyas length of
service should have been taken against him. The reason for his dismissal was his lack of integrity
and loyalty to the company reflecting upon his moral character.
The appellate court emphasized that while the law is considerate to the welfare of the employees
whenever there is a labor conflict, it also protects the right of an employer to exercise its
management prerogative in good faith.
The Courts Ruling
That there is a valid ground for the dismissal of Moya based on breach and loss of trust and
confidence is no longer at issue. The Labor Arbiter, NLRC and the appellate court were unanimous
in their rulings on this matter. The remaining question is whether or not petitioner employee is
entitled to separation pay based on his length of service.
Petitioner is not entitled to separation pay. Payment of separation pay cannot be justified by his
length of service.
It must be stressed that Moya was not an ordinary rank-and-file employee. He was holding a
supervisory rank being an Officer-in-Charge of the Tire Curing Department. The position, naturally
one of trust, required of him abiding honesty as compared to ordinary rank-and-file employees.
When he made a false report attributing the damage of five tires to machine failure, he breached the
trust and confidence reposed upon him by the company.
In a number of cases,34 this Court put emphasis on the right of an employer to exercise its
management prerogative in dealing with its companys affairs including its right to dismiss its erring
employees. We recognized the right of the employer to regulate all aspects of employment, such as
the freedom to prescribe work assignments, working methods, processes to be followed, regulation
regarding transfer of employees, supervision of their work, lay-off and discipline, and dismissal and
recall of workers.35 It is a general principle of labor law to discourage interference with an employers
judgment in the conduct of his business. As already noted, even as the law is solicitous of the
welfare of the employees, it also recognizes employers exercise of management prerogatives. As
long as the companys exercise of judgment is in good faith to advance its interest and not for the
purpose of defeating or circumventing the rights of employees under the laws or valid agreements,
such exercise will be upheld.36

Following the ruling in The Coca-Cola Export Corporation v. Gacayan,37 the employers have a right
to impose a penalty of dismissal on employees by reason of loss of trust and confidence. More so, in
the case of supervisors or personnel occupying positions of responsibility, does loss of trust justify
termination. Loss of confidence as a just cause for termination of employment is premised on the
fact that an employee concerned holds a position of trust and confidence. This situation holds where
a person is entrusted with confidence on delicate matters, such as the custody, handling, or care
and protection of the employers property. But, in order to constitute a just cause for dismissal, the
act complained of must be "work-related" such as would show the employee concerned to be unfit to
continue working for the employer.38
The foregoing as viewpoint, the right of First Solid to handle its own affairs in managing its business
must be respected. The clear consequence is the denial of the grant of separation pay in favor of
As pronounced in the recent case of Unilever Philippines, Inc., v. Rivera,39 an employee who has
been dismissed for any of the just causes enumerated under Article 28240 of the Labor Code,
including breach of trust, is not entitled to separation pay.41 This is further bolstered by Section
7,Rule I, Book VI of the Omnibus Rules Implementing the Labor Code which provides that:
Sec. 7. Termination of employment by employer. The just causes for terminating the services of
an employee shall be those provided in Article 282 of the Code. The separation from work of an
employee for a just cause does not entitle him to the termination pay provided in the Code, without
prejudice, however, to whatever rights, benefits and privileges he may have under the applicable
individual or collective agreement with the employer or voluntary employer policy or
However, this Court also provides exceptions to the rule based on "social justice" or on "equitable
grounds" following the ruling in Philippine Long Distance Telephone Co. v. NLRC,42 stating that
separation pay shall be allowed as a measure of social justice only in those instances where the
employee is validly dismissed for causes other than serious misconduct or those reflecting on his
moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an
offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the
employer may not be required to give the dismissed employee separation pay, or financial
assistance, or whatever other name it is called, on the ground of social justice.43
The PLDT case further elucidates why an erring employee could not benefit under the cloak of social
justice in the award of separation pay, we quote:
The policy of social justice is not intended to countenance wrongdoing simply because it is
committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone
the offense. Compassion for the poor is an imperative of every humane society but only when the
recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be
refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty.
Those who invoke social justice may do so only if their hands are clean and their motives blameless
and not simply because they happen to be poor. This great policy of our Constitution is not meant for
the protection of those who have proved they are not worthy of it, like the workers who have tainted
the cause of labor with the blemishes of their own character.44
Moyas dismissal is based on one of the grounds under Art. 282 of the Labor Code which is willful
breach by the employee of the trust reposed in him by his employer. Also, he is outside the
protective mantle of the principle of social justice as his act of concealing the truth from the company
is clear disloyalty to the company which has long employed him.1wphi1

Indeed, as found below, Moyas length of service should be taken against him. The pronouncement
in Reno Foods, Inc. v. Nagkakaisang Lakas ng Manggagawa (NLM) Katipunan45 is instructive on the
x x x Length of service is not a bargaining chip that can simply be stacked against the employer.
After all, an employer-employee relationship is symbiotic where both parties benefit from mutual
loyalty and dedicated service. If an employer had treated his employee well, has accorded him
fairness and adequate compensation as determined by law, it is only fair to expect a long-time
employee to return such fairness with at least some respect and honesty. Thus, it may be said that
betrayal by a long-time employee is more insulting and odious for a fair employer.46 (Emphasis
WHEREFORE, we DENY the petition for review on certiorari. The Decision dated 30 April 2008 and
Resolution dated 1 August 2008 of the Special Third Division of the Court of Appeals in CA-G.R. SP
No. 99500 are hereby AFFIRMED.

G.R. No. 75955 October 28, 1988

and JOSE LAUREL IV, as its President, respondents.
Pedro S. Ravelo for petitioner.
The Solicitor General for public respondent.
Laurel Law Offices for private respondents.

Petitioner Maria Linda Fuentes seeks to set aside the resolution dated November 28, 1985 of the
National Labor Relations Commission (NLRC for brevity) affirming the Labor Arbiter's dismissal of
her complaint for illegal dismissal against private respondent Philippine Banking Corporation
(Philbanking for brevity).
Petitioner was employed as a teller at the Philbanking's office at Ayala Avenue, Makati, Metro
Manila. On May 28, 1982, at about 10:30 a.m., petitioner, who was acting as an overnight teller,
received a cash deposit of P200,000.00. She counted the money with the assistance of a co-teller,
finishing the task at 10:40 a.m. or ten (10) minutes after her closing time. Before she could start
balancing her transactions, the Chief Teller handed her several payroll checks for validation. Finding
the checks to be incomplete, petitioner left her cage to get other checks, without, however, bothering
to put the P200,000.00 cash on her counter inside her drawer. When she returned to her cubicle
after three (3) to five (5) minutes, she found that the checks for validation were still lacking, so she
went out of her cubicle again to get the rest of the checks. On her way to a co-teller's cubicle, she
noticed that the P200,000.00 pile on her counter had been re-arranged. She thus returned to her
cage, counted the money and discovered that one (1) big bundle worth P50,000.00 was missing
therefrom. She immediately asked her co-teller about it and getting a negative reply, she reported
the matter to the Chief Teller. A search for the P50,000.00 having proved unavailing, petitioner was
asked to explain why she should not be held liable for the loss. She submitted her explanation on
June 24, 1982.
Subsequently, on June 3, 1983, petitioner was dismissed for gross negligence. On June 21, 1983,
she filed a complaint for illegal dismissal with reinstatement and backwages.
Private respondent bank seasonably filed an answer with counterclaim that petitioner be ordered to
restitute the amount of P50,000.
On January 31, 1984, Labor Arbiter Bienvenido Hermogenes rendered a decision dismissing the
complaint as well as the counterclaim but without prejudice as to the latter. 1 Petitioner's appeal to
the NLRC was dismissed for lack of merit 2 and her motion for reconsideration was denied. 3 Hence,
this petition.
The issue in this case is whether petitioner's dismissal on the ground of gross negligence was
justified under Art. 282 of the Labor Code.

Upon a thorough consideration of the facts of this case, the Court finds no cogent reason for
reversing the conclusion of the Labor Arbiter and the NLRC that petitioner was grossly negligent in
the performance of her duties as a teller, which negligence resulted in the loss of P50,000.00.
Applying the test of negligence, we ask: did the petitioner in doing the alleged negligent act use
reasonable care and caution which an ordinarily prudent person would have used in the same
situation? If not, she is guilty of negligence.
The circumstances surrounding the loss in question lend us no sympathy for the petitioner. It was
established that petitioner simply left the pile of money within the easy reach of the crowd milling in
front of her cage, instead of putting it in her drawer as required under the private respondent bank's
General Memorandum No. 211 (Teller's Manual of Operations) which she was expected to know by
heart. 4 Moreover, she left the P200,000.00 on two occasions. 5
Her irresponsibility is nowhere made apparent than in her response to the following question:
Q Noong lumabas ka sa iyong cage para pumunta sa iyong Chief
Teller, hindi ba ipinagbilin itong pera sa iyong kasamahan?
A Hindi ko na ho ipinagbilin kasi masyadong maraming tao noon, at
iyong aking teller's counter ay nilagyan ko ng sign na nakasulat ng
'next teller please' na ang ibig sabihin ay kung meron mang mga
cliente doon sa akin ay doon muna sila maki-pagtransact ng negosyo
sa kabilang teller o kung sino man ang bakante kasi busy ako. 6
As a teller, petitioner must realize that the amount of care demanded by reasonable conduct is that
proportionate to the apparent risk. Since it was payday and depositors were milling around,
petitioner should have been extra cautious. At no time than the occasion under consideration was
the need to be extra careful more obvious. It was certainly not the time to breach the standard
operating procedure of keeping one's cash in the drawer as a precautionary and security measure.
"A teller's relationship with the bank is necessarily one of trust and confidence. The teller as a trustee
is expected to possess a high degree of fidelity to trust and must exercise utmost diligence and care
in handling cash. A teller cannot afford to relax vigilance in the performance of his duties." 7
Petitioner argues that there was contributor negligence on the part of private respondent bank
consisting in its failure to conduct an investigation minutes after the loss. We do not agree with
petitioner. The failure of private respondent bank to conduct an investigation minutes after the loss
was totally distinct and independent of, as well as remotely related to the fact of loss itself.
Petitioner Fuentes cannot invoke private respondent's alleged contributory negligence as there was
no direct causal connection between the negligence of the bank in not conducting the investigation
and the loss complained of. In a legal sense, negligence is contributory only when it contributes
proximately to the injury, and not simply a condition for its occurrence.
In the case at bar, the bank's inaction merely created a condition under which the loss was
sustained. Regardless of whether there was a failure to investigate, the fact is that the money was
lost in the first place due to petitioner's gross negligence. Such gross negligence was the immediate
and determining factor in the loss.

Besides, the petitioner's position is anathema to banking operations. By conducting an instant

search on its depositors for every loss that occurs, management holds suspect each depositor within
its premises. Considering that currency in the form of money bills bears no distinct earmarks which
would distinguish it from other similar bills of similar denominations except as to its serial numbers,
any innocent depositor with P50,000 in his possession would be a likely suspect. Such act would do
violence to the fiduciary relationship between a bank and its depositors. Ultimately it will result in the
loss of valued depositors.
Petitioner argues further that the NLRC failed to consider that petitioner left her cage at the instance
of the Chief Teller. Again we are not persuaded. The findings of the NLRC are clear. Petitioner left at
her own volition to approach her Chief Teller to ask for the remaining checks to ascertain their
authenticity and completeness. Besides, irrespective of who summoned her, her responsibility over
the cash entrusted to her remained.
Although petitioner's infraction was not habitual, we took into account the substantial amount lost.
Since the deposit slip for P200,000.00 had already been validated prior to the loss, the act of
depositing had already been complete and from thereon, the bank had already assumed the deposit
as a liability to its depositors. Cash deposits are not assets to banks but are recognized as current
liabilities in its balance sheet.
It would be most unfair to compel the bank to continue employing petitioner. In Galsim v. PNB, 8 we
upheld the dismissal of a bank teller who was found to have given money to a co-employee in
violation of bank rules and regulations. Said act, which caused prejudice to the bank, was a
justifiable basis for the bank to lose confidence in the employee.
Similarly, in the case at bar, petitioner, as aforesaid, violated private respondent bank's General
Memorandum, No. 211 (Teller's Manual of Operations) which strictly says:
Cash should never be left exposed. The coins and currencies should be kept in
drawers where they are not accessible to someone through the windows with the aid
of a stick or other devices. 9
An employer cannot legally be compelled to continue with the employment of a person admittedly
guilty of gross negligence in the performance of his duties and whose continuance in his office is
patently inimical to the employer's interest. "For the law in protecting the rights of the
employee/laborer authorizes neither oppression nor self-destruction of the employer. 10
WHEREFORE, the instant petition is hereby DISMISSED. The assailed decision dated November
28,1985 of the National Labor Relations Commission is affirmed in toto.

G.R. No. 117378 March 26, 1997

NATIONAL LABOR RELATIONS COMMISSION, National Capital Region (First Division),

Respondents Benigno Santos, Delfin Yuson, Luisito Santos, Ursino Basister, Ricardo Reyes,
Joselito Santos, Jorge Binuya and Nicolas Mulingbayan are licensed drivers of public utility jeepneys
plying the Libertad-Sta. Cruz route in Manila. The jeepneys were formerly owned by petitioner Gil
Capili. For the use of the jeepney for twelve hours a driver would pay rent or so-called "boundary" of
P280.00 and earn a net profit of P200.00 per day.
On 7 May 1991, at a time when petitioner Ricardo Capili jointly with his wife had assumed ownership
and operation of the jeepneys driven by private respondents, the latter and the other drivers similarly
situated were required by the jeepney operators to sign individually contracts of lease of the
jeepneys to formalize their lessor-lessee relationship. However, having gathered the impression that
the signing of the contracts of lease was a condition precedent before they could continue driving for
petitioners, all the drivers stopped plying their assigned routes beginning 7 May 1991.
A week later or on 14 May 1991 the drivers, numbering twenty-two (22), filed a complaint for illegal
dismissal before the Labor Arbiter praying not for reinstatement but for separation pay. 1
In the interim, fourteen (14) of the complainants desisted and resumed plying their routes. The
remaining eight (8) complainants with their reckoning dates of employment follow: (a) Benigno
Santos, 1972; (b) Jorge Binuya, 1965; (c) Luisito Santos, 1982; (d) Delfin Yuson, 1983; (e) Ursino
Basister, 1980; (f) Ricardo Reyes, 1985; (g) Joselito Santos, 1989; and, (h) Nicolas Mulingbayan,
Petitioners opposed the claim of private respondents before the Labor Arbiter alleging that the latter
voluntarily abandoned their respective jobs without any valid cause and thereafter refused and still
continue to refuse to return to work despite repeated demands and/or notices given to them to return
to work.
In resolving the dispute, the Labor Arbiter ruled
On the issue of dismissal versus abandonment, we are inclined to believe that the
latter scenario happened. It is not sound business practice to dismiss many
employees at the same time since it would cripple the operations.
What was more likely was that the drivers, all 22 of them . . . boycotted respondents
on May 7, 1991 by not reporting for work on that day.
xxx xxx xxx

From the viewpoint of complainants, their signing of the lease contract was a
condition sine qua nonto the continuous driving of their respective drivers
(jeepneys?). But from the point of view of respondent Capili and as shown in the
aforequoted paragraph 5 of his affidavit, and as further shown in the notices (Exhibits
"3-B" and "3-B-1") which merely asked complainants to return to work without
mentioning any condition like the signing of the contract, the signing of the lease
contract by the drivers was merely intended as a confirmation of the original concept
of a no employer-employee relationship, and to streamline the operation by indicating
the amount of the boundary per driver, depending on the number of hours they drive
and their obligation to check on the motor/engine, oil, tires, brakes and other
routinary requirements in order to insure the vehicles' roadworthiness. It was never
meant to be that if a driver refuses to sign the contract, he would not be allowed to
continue driving.
To our mind, both parties misappreciated the situation. Respondents' erroneous
insistence of a no employer-employee relationship even in the face of a wellestablished contrary doctrine as postulated in the Dinglasan case 2 (98 Phil. 649) and
complainants' erroneous apprehension of the loss of such employer-employee
relationship if they sign the lease contract propelled the complainants to file the
instant complaint.
In short, this is merely a simple case of misunderstanding.
To remedy the situation, we feel that the most prudent approach would be to let the
parties return to the relationship that existed between them prior to May 7, 1991. 3
The Labor Arbiter thus concluded
WHEREFORE, decision is hereby rendered declaring the breakage (sic), of
relationship between respondent Ricardo Capili and complainants Benigno T.
Santos, Delfin Yuson, Luisito Santos, Ursino Basister, Ricardo Reyes, Joselito
Santos, Jorge Binuya and Nicholas Mulingbayan, as a product of misunderstanding
and misappreciation of the situation by both parties and, therefore, respondents are
hereby directed to reinstate them to their former position without loss of seniority
rights and other benefits, but without back wages (p. 7, Annex "F", emphasis
supplied). 4
Private respondents appealed to the National Labor Relations Commission. They reiterated their
prayer for separation pay equivalent to one (1) month salary for every year of service and, in
addition, three (3) years back wages.
Respondent NLRC upheld the finding of the Labor Arbiter that the case arose due to simple
misunderstanding between the complaining drivers on one hand and their employers on the other.
However, it took exception to the relief granted to private respondents and modified the appealed
decision accordingly by holding that
Since there was misunderstanding between the parties and this misunderstanding
resulted in animosity and strained relationship between them, we deem it proper and
most prudent approach to maintain industrial peace for respondents to pay the
complainants their separation pay of one half (1/2) month for every year of service,
based on their daily earnings of P200.00. 5

The petitioners moved to have the above disquisition of respondent NLRC reconsidered but the
latter denied the motion. They now come to us arguing that since there was a clear finding of
abandonment by the Labor Arbiter consisting in the failure of private respondents to report for work
without justifiable reason, the award of separation pay could not be warranted.
The NLRC brushed aside the arguments of petitioners. It emphasized that if it were the finding of the
Labor Arbiter that private respondents were guilty of abandonment he would not have ordered
reinstatement but dismissal of the case. Thus on 9 August 1994 NLRC denied reconsideration.
Petitioners impute grave abuse of discretion on the part of respondent NLRC in awarding separation
pay to private respondents.
We agree with petitioners. The legal basis for the award of separation pay is clearly provided by Art.
279 of the Labor Code which states that the remedy for illegal dismissal is reinstatement without loss
of seniority rights plus back wages computed from the time compensation was withheld up to
reinstatement. However there may be instances where reinstatement is not a viable remedy as
where the relations between employer and employee have been so severely strained that it is no
longer advisable to order reinstatement or where the employee decides not to be reinstated. In such
events, the employer will instead be ordered to pay separation pay. 6
A reading of Art. 279 in relation to Art. 282 of the Labor Code reveals that an employee who is
dismissed for cause after appropriate proceedings in compliance with the due process requirements
is not entitled to an award of separation pay. Under Arts. 283 and 284 of the same Code, separation
pay is authorized only in cases of dismissals due to any of these reasons: (a) installation of labor
saving devices; (b) redundancy; (c) retrenchment; (d) cessation of the employer's business, and, (e)
when the employee is suffering from a disease and his continued employment is prohibited by law or
is prejudicial to his health and to the health of his co-employees. 7However, separation pay shall be
allowed as a measure of social justice in those cases where the employee is validly dismissed for
causes other than serious misconduct or those reflecting on his moral character, but only when he
was illegally dismissed.
The common denominator of those instances where payment of separation pay is warranted is that
the employeewas dismissed by the employer. In the instant case there was no dismissal at all.
Respondent NLRC affirmed the factual findings of the Labor Arbiter that there was only
a misunderstanding between petitioners and private respondents which caused the latter to stop
reporting for work. If the Labor Arbiter ordered reinstatement it should not be construed as relief
proceeding from illegal dismissal; instead, it should be considered as a declaration or affirmation that
private respondents may return to work because they were not dismissed in the first place, and they
should be happy that their employers are accepting them back. This could be the reason why
complainants asked only for separation pay not for reinstatement in their complaint before the
Labor Arbiter.
The award of separation pay cannot be justified solely because of the existence of "strained
relations" between the employer and the employee. It must be given to the employee only as an
alternative to reinstatement emanating from illegal dismissal. When there is no illegal dismissal,
even if the relations are strained, separation pay has no legal basis. Besides, the doctrine on
"strained relations" cannot be applied indiscriminately since every labor dispute almost invariably
results in "strained relations;" otherwise, reinstatement can never be possible simply because some
hostility is engendered between the parties as a result of their disagreement. That is human nature. 8

The constitutional policy of providing full protection to labor is not intended to oppress or destroy
management. 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. 9
When respondents filed their complaint, and taking account of the allegations therein, they
foreclosed reinstatement as a relief, since they prayed only for an award of separation pay. This is
confirmed in their appeal to the NLRC where they prayed for a modification of the decision of the
Labor Arbiter, from reinstatement without back wages to payment of three (3) years back wages and
separation pay equivalent to one (1) month salary for every year of service. 10 It is therefore clear
that respondents never desired to be reinstated. This being so, the Court cannot order them to return
to work. 11 If private respondents voluntarily chose not to return to work anymore they must be
considered as having resigned from their employment. This is without prejudice however to the
willingness of both parties to continue with their former contract of employment or enter into a new
one whenever they so desire.
WHEREFORE, the petition is GRANTED and the employer-employee relationship between
petitioners on one hand and each private respondent on the other is deemed voluntarily terminated.
Consequently, the decision of respondent National Labor Relations Commission dated 28 February

G.R. No. 110518 August 1, 1994

TAGULAM, and EDITHA R. JUAN, petitioners,
CORPORATION, respondents.
Samson S. Alcantara for petitioners.
Vidal Corpus & Associates for private respondent.

The main issue before the Court in this petition for certiorari is the validity of the retrenchment of the
fifty-one petitioners by private respondent National Service Corporation (NASECO) as upheld by the
Labor Arbiter and later by the National Labor Relations Commission.
NASECO is a government-owned or controlled corporation engaged in providing manpower services
such as security guards, radio operators, janitors and clerks, principally for the Philippine National
The petitioners were its employees who were either members of the NASECO Employees Union
(NASECO-EU) or of the Alliance of Concerned Workers of NASECO (ACW-NASECO). On
November 19, 1988, they were among those who staged a strike and picketed the premises of the
On November 21, 1988, the PNB filed a complaint for damages with preliminary injunction against
the labor unions with the Regional Trial Court of Manila. It was docketed as Civil Case No. 88-46938
in Branch 22. On December 5, 1988, the court granted the application for a preliminary injunction
and issued the writ ordering the lifting of the picket.
NASECO also filed on November 21, 1988, a petition with the National Labor Relations Commission
to declare the strike illegal. This was docketed as NLRC Case No. 00-11-04766-88. On February 17,
1989, the NLRC rendered its decision sustaining NASECO. 1 The union officers who knowingly and
actively participated in the strike, as well as the members of the respondent union who committed
illegal acts in the course of the strike, were deemed to have legally lost their employment status.

The rest of the striking members, including the herein fifty-one petitioners, were ordered to report for
work immediately.
The complaint of the labor union against the PNB for unfair labor practice and illegal lockout was
dismissed on the ground that there was no employer-employee relationship between the PNB and
the labor unions. 2
On March 1, 1989, the petitioners reported for work at the NASECO office but they could not be
given assignments because the PNB had meanwhile contracted with another company to fill the
positions formerly held by the petitioners.
NASECO inquired from the PNB whether or not the petitioners could still be accepted to their former
positions in light of the Service Agreement between NASECO and the PNB giving the latter the right
to reject or replace any and all of NASECO's employees assigned to it, for inefficiency or other valid
In reply, the PNB manifested that it was no longer accepting the petitioners back to their former
positions as these were no longer vacant.
NASECO then sought new assignments for the petitioners with its other clients, but the petitioners
insisted on their reassignment to the PNB. In the meantime, starting April 1, 1989, NASECO paid the
salaries and other benefits of the petitioners although they were not actually working. 3
On October 13, 1989, the petitioners received notice of separation from NASECO, effective thirty
days thereafter. The reason given was the financial losses NASECO was incurring at that time due
mainly to the salaries being paid to the employees who could not be posted despite efforts to place
them. 4
Conformably to Art. 283 of the Labor Code, the Department of Labor and Employment was likewise
given a 30-day notice of the intended retrenchment.
The management of NASECO even offered a better separation package equivalent to three-fourths
of the estimated new basic monthly salary for every year of service, compared to the statutory
requirement of only 1/2 month pay for every year of service. 5
The petitioners refused to acknowledge receipt of the notice and instead, on October 26, 1989, filed
with NLRC a complaint against NASECO for unfair labor practice, illegal dismissal, non-payment of
wages and damages. 6
On November 13, 1989, NASECO sent notice to the petitioners that their termination from the
service would take effect not on November 16, 1989, but on November 30, 1989, for humanitarian
considerations. The effective date was again extended to December 15, 1989, and finally to
December 31, 1989.
On June 22, 1990, Labor Arbiter Potenciano Canizares Jr. rendered a decision finding that the
petitioners had been "fairly discharged by the respondent (NASECO) in a valid act of simple
retrenchment." 7
On July 11, 1990, the petitioners appealed to the NLRC. On September 11, 1992, they filed a
manifestation that the private respondent had been hiring new personnel, but no proof was offered to
support the charge.

On December 21, 1992, the NLRC issued a resolution affirming the decision of the labor arbiter. 8 A
motion for reconsideration filed by the petitioners on January 15, 1993, was denied by the NLRC on
February 10, 1993. 9
It is now asserted in this petition that the NLRC gravely abused its discretion in holding that the
petitioners were validly dismissed on the ground of retrenchment; that NASECO is not guilty of unfair
labor practice; and that their monetary claims for increases under Republic Acts 6640 and 6727, as
well as for moral and exemplary damages and attorney's fees, should be denied.
On the first two issues, the petitioners fault the NLRC for completely disregarding the requisites of a
valid retrenchment as laid down in Lopez Sugar Corporation vs. Federation of Free Workers. 10
The requisites are: 1) the losses expected should be substantial and not merely de minimis in extent;
2) the substantial losses apprehended must be reasonably imminent; 3) the retrenchment must be
reasonably necessary and likely to effectively prevent the expected losses; and 4) the alleged
losses, if already incurred, and the expected imminent losses sought to be forestalled, must be
proved by sufficient and convincing evidence.
The petitioners assert that NASECO failed to show with convincing evidence that the incurred
losses, if any, were substantial. The claimed losses were belied by the fact that NASECO hired new
personnel before and after the dismissal of the petitioners. NASECO also failed to pursue other
measures to forestall losses, short of dismissing the petitioners. It did not follow the "first in, last out"
rule that in cases of retrenchment, employees with long years of service with the company, like the
petitioners, should not be the first to be retrenched. They attribute their dismissal to their
participation in the strike of November 19, 1988. Thus, their dismissal was an act of unfair labor
practice for being discriminatory and violative of their rights to self-organization and to engage in
concerted activities.
We have to disagree.
The losses incurred by NASECO for the year 1989 amounted to P1,457,700.42 and were
adequately proved by it.11 These losses were directly caused by the salaries and other benefits paid
to the petitioners during the period from April 1 to December 31, 1989. The amount of these
payments is not insubstantial in light of the economic difficulties of the country during that year when
several coups d' etat adversely affected the nation's economic growth.
It is also not true that respondent NASECO did not look for other measures to cut back on its losses.
NASECO had in fact tried to place the petitioners with its other clients but it was the petitioners
themselves who refused reassignment.
The particular facts of this case preclude application of the "first in, last out" rule in the retrenchment
of employees. There was no discrimination against the petitioners. NASECO could not compel the
PNB to take the petitioners back to their former positions in view of its contractual right to reject any
employee of NASECO for inefficiency and other valid reasons. The PNB had already filled the
vacated positions of the petitioners during the strike, to ensure the continued operation of its
The monetary claim under RA 6640 and RA 6727 is another matter. RA 6640, which took effect on
December 14, 1987, and RA 6727, which took effect on July 1, 1989, provide for P10.00 and a
P25.00 increases respectively in the minimum wage of laborers. The NLRC denied this claim on the
ground that the petitioners had failed to include it in their basic complaint. This contention is not
acceptable because the claim was clearly included and prayed for in their position paper.

The Revised Rules of the NLRC provide under Sec. 3, Rule V, that parties should not be allowed to
allege facts not referred to or included in the complaint, or position paper, affidavits and other
documents. This would mean that although not contained in the complaint, any claim can still be
averred in the position paper, as was done by the petitioners, or in an affidavit or other documents.
We also hold that the increases in the petitioners' minimum wage under RA 6640 and RA 6720
should be granted since they became effective before the petitioners' retrenchment. Said increases
should be considered in the computation of their separation pay in accordance with Art. 283 of the
Labor Code.
Moral damages are recoverable only where the dismissal of the employee was attended by bad faith
or fraud or constituted an act oppressive to labor or was done in a manner contrary to morals, good
customs or public policy.12 Exemplary damages may be awarded only if the dismissal was effected
in a wanton, oppressive or malevolent manner.13 None of these grounds has been proven. However,
the Court will grant the claim for attorney's fees in an amount equivalent to 10% of the total amount
awarded to the petitioner as authorized by the Labor Code. 14
The constitutional policy of providing full protection to labor is not intended to oppress or destroy
management. The employer cannot be compelled to retain employees it no longer needs, to be paid
for work unreasonably refused and not actually performed. NASECO bent over backward and
exerted every effort to help the petitioners look for other work, postponed the effective date of their
separation, and offered them a generous termination pay package. The unflagging commitment of
this Court to the cause of labor will not prevent us from sustaining the employer when it is in the
right, as in this case.
WHEREFORE, the decision of the Labor Arbiter dated June 22, 1990, and the resolutions of the
NLRC dated December 21, 1992, and February 10, 1993, are AFFIRMED, with the modification that
the monetary claim under RA 6640 and RA 6720, and for attorney's fees, should be and is hereby
granted. The award of moral and exemplary damages is disallowed.

G.R. No. 112630 September 5, 1997



The decision 1 of public respondent National Labor Relations Commission (NLRC) 2 in NLRC NCR
CA 002074-91, 3promulgated on November 12, 1993, is herein sought to be annulled for having
been rendered with grave abuse of discretion, it having reversed and set aside the decision 4 of
Labor Arbiter Pablo C. Espiritu, Jr. by dismissing the petitioners' complaint for illegal dismissal
against private respondent Isetann Department Store (Isetann, for brevity). The decretal part of the
NLRC decision reads:
WHEREFORE, premises considered, the appealed decision is hereby set aside and
new one promulgated declaring that the dismissal from the service of complainants
Corazon Jamer and Cristina Amortizado was valid and for cause. Consequently, the
order of reinstatement with backwages and attorney's fees are likewise vacated and
set aside. 5
Although the Labor Arbiter 6 and the NLRC reached contrary conclusions, both agree on the
following facts:
Complainant, Corazon Jamer was employed on February 10, 1976 as a Cashier at
"Joy Mart," a sister company of Isetann. After two (2) years, she was later on
promoted to the position of counter supervisor. She was transferred to Isetann,
Carriedo Branch, as a money changer. In 1982 she was transferred to the Cubao
Branch of Isetann, as a money changer, till her dismissal on August 31, 1990.
Complainant Cristina Amortizado, on the other hand, was employed also at "Joy
Mart" in May, 1977 as a sales clerk. In 1980 she was promoted to the position as
counter cashier. Thereafter, she was transferred to "Young Un Department Store" as
an assistant to the money changer. Later on, or in 1985, she was transferred to
Isetann, Cubao Branch where she worked as a Store Cashier till her dismissal on
August 31, 1990.
Both complainants were receiving a salary of P4,182.00 for eight (8) hours work at
the time of their dismissal.
Respondent Isetann Department Store on the other hand, is a corporation duly
organized and existing under the laws of the Philippines and is engaged in retail
trade and the department store business. Individual respondent, John Go is the
President/General (Manager) of respondent Department Store.
This complaint arose from the dismissal of the complainants by the respondents.
They were both dismissed on August 31, 1990 on the alleged ground of dishonesty
in their work as Store Cashiers.

Complainant's (sic) function as Store Cashiers is to accumulate, at the end of daily

operations, the cash sales receipts of the selling floor cash register clerks. At the
close of business hours, all the cash sales of the floor cash register clerks are turned
over by them to the Store Cashiers, complainants herein, together with the tally
sheets prepared by the cash register clerks. Thereafter, complainants will reconcile
the cash sales with the tally sheets to determine shortages or coverages (sic) and
deposit the same with the bank depositor(sic) of respondent's company. Thereafter,
the recorded transactions are forwarded to the main branch of respondent's company
at Carriedo for counter-checking.
On July 16, 1990, complainants discovered a shortage of P15,353.78. It was
complainant Corazon Jamer who first discovered the shortage. In fact at first, she
thought that it was merely a P1,000.00 shortage but when she reconciled the cash
receipts, from the cash register counters, with the tally sheets and the actual money
on hand, the shortage amounted to P15,353.78. She informed her co-store cashier,
complainant Cristina Amortizado, about the shortage. Cristina Amortizado also
reconciled and re-counted the sale previous to July 16, 1990 and she also confirmed
that there was a discrepancy or a shortage of P15,353.78. They did not, (sic)
immediately report the shortage to management hoping to find the cause of the
shortage but to no avail they failed to reconcile the same. Hence, they had no other
alternative but to report the same to the management on July 17, 1990.
Complainants, together with another Store Cashier, Lutgarda Inducta, were asked to
explain and they submitted their respective written explanations for the shortage of
P15,353.78 and the P450.00 under deposit last July 14, 1990.
Respondents placed both complainants and their co-store cashier Lutgarda Inducta
under preventive suspension for the alleged shortages. Thereafter, respondents
conducted an administrative investigation. Finding the explanation of the
complainants to be unsatisfactory, respondent dismissed the complainants from the
service on August 31, 1990. Aggrieved and not satisfied with the decision of
management terminating their services, complainants instituted this present action
on September 26, 1990 for illegal dismissal praying for reinstatement with payment
of backwages and other benefits. 7
In justifying complainants' dismissal from their employment, respondents alleged:
When the transactions for July 15, 1990 were being reconciled, a
shortage of P15,353.78 was discovered. Also uncovered was an
under-deposit of P450.00 of cash receipts for July 14, 1990.
Considering that the foregoing deficits were attributable to herein
appellees and to another store cashier, Mrs. Lutgarda Inducta, who
were the ones on duty those days respondent Isetann's Human
Resources Division Manager, Teresita A. Villanueva, issued letters
(Exhs. "1" and "5") individually addressed to herein appellees and
Mrs. Inducta requiring them to submit written explanations in regard
to their above malfeasance within 48 hours from receipt thereof.
Pursuant to said letters, they were likewise placed under preventive

Thereafter, the Committee on Discipline of appellant Isetann

conducted a series of investigations probing appellees' and Mrs.
Inducta's aforestated shortages. In addition to the shortage of
P15,738.58 (sic) and underdeposit of P450.00, said investigation also
included the following sums which appellees failed to turnover or
account for:
a) P1,000.00 amount borrowed by
Inducta from Corazon Jamer;
b) P70.00 over replenishment of
petty cash
expenses incurred by Cristina
After the administrative investigation, the Committee on Discipline
rendered its decision (Exhs, "3," "3-A," to "3-D") dated August 23,
1990 duly approved by the General Manager of respondent Isetann,
finding the appellees and Mrs. Inducta responsible for said shortages
and consequently requiring them to restitute the same to respondent
Isetann. This Decision and the notices of termination were seat by
respondent Isetann to the appellees, and which the latter admittedly
On the other hand, the complainants account of the factual antecedents that let (sic)
to their dismissal is as follows:
Aside from the foregoing persons, Alex Mejia had and was allowed by
management to have uncontrolled access to the said room including
the vault. Ostensibly, the purpose was to assist in the bringing in or
taking out of coin bags, monies, etc.
There were therefore, at a minimum at least six (6) persons who
could have had access to the company funds. To ascribe liability to
the store cashiers alone, in the absence of a clear proof of any
wrongdoing is not only unfair and discriminatory but is likewise illegal.
Parenthetically, and within the parameters of their assigned tasks,
herein complainants could not be faulted in any way for the said
shortage as there is no showing that the loss occurred at the time
they were in control of the funds concerned.
Complainants do not dispute the fact that there appeared to be a
shortage of P15,373.78 (sic) for the July 15, 1990 (a Sunday) sales
and which were tallied and the loss discovered on the following day,
July 16, 1990. They however vehemently deny any culpability or
participation in any kind, directly or indirectly, in regard to the said
loss or shortage. Given the kind of trust reposed upon them by
respondents for fourteen and thirteen years respectively they were
not about, although they could have done so before given the

negligence and laxity of management in regard to the control and

handling of funds of the store, to break said trust.
At the time the persons who had access either to the vault the money
and/or the keys aside from herein complainants, were: 1) Lutgarda
Inducta, also a store cashier on duty at the time; 2) the SOM Mrs.
Samonte, the supervisor in charge; 3) Alex Mejia, an employee
assigned as utility man; and 4) Boy Cabatuando.
There where(sic) three (3) keys to the money changer's room, and
these keys were assigned and distributed to: a) master key is or was
with the SOM's (Mrs. Samonte) room at the 3rd floor of the building;
b) another key is or was in the possession of the keeper of the
keys, i.e. Boy Cabatuando; and c) the third and last key is any of the
store cashiers depending on who is on duty at the time.
Likewise, there were four (4) persons who were aware and knew of
the vault combination. These were the three store cashiers, i.e.
herein complainants, Lutgarda Inducta and their SOM, Mrs.
Samonte. 8
On July 23, 1991, Labor Arbiter Nieves V. de Castro, to whom the instant controversy was originally
assigned, rendered a decision 9 in favor of herein petitioners, finding that petitioners had been
illegally dismissed, the dispositive portion of which reads:
WHEREFORE, respondents are hereby directed to reinstate complainants to service
effective August 1, 1991 with full backwages and without loss of seniority rights.
Expectedly, respondents Isetann and John Go appealed the aforesaid decision to the NLRC. On
January 31, 1992, the NLRC issued a resolution 11 remanding this case to the NLRC National
Capital Region Arbitration Branch for further proceedings in the following manner:
WHEREFORE, premises considered, the challenged decision is hereby SET ASIDE
The entire records of this case is hereby remanded to the NLRC National Capital
Regional Arbitration Branch for further proceedings.
Considering that the Labor Arbiter a quo rendered a decision in this case and in
order to dispel any suspicion of pre-judgment of this case, the Executive Labor
Arbiter is hereby directed to have this case re-raffled to another Labor Arbiter.
Consequently, the present case was then re-raffled to Labor Arbiter Pablo C. Espiritu, Jr. After a fullblown trial, the said Labor Arbiter found for the petitioners and declared that there was no
justification, whether in fact or in law, for their dismissal. The decretal part of the decision 13 dated
March 31, 1993, states:

WHEREFORE, above premises considered, judgement (sic) is hereby rendered

finding the dismissal of complainants, Cristina Amortizado and Corazon Jamer to be
illegal and concomitantly, (r)espondents are hereby ordered to pay complainants,
Corazon Jamer the amount of P125,460.00 and Cristina Amortizado the amount of
P125,460.00, representing full backwages from the time of their dismissal (August
31, 1990) till actual or payroll reinstatement at the option of the respondent
(computed until promulgation only). Respondents are also hereby further ordered to
reinstate the complainants to their former position as Store Cashiers without loss of
seniority rights, privileges and benefits, failure to do so backwages shall continue to
run but in no case to exceed three (3) years.
Respondents are also ordered to pay complainants the amount of P25,092.00
representing 10% attorney's fees based in the total judgement (sic) award of
Dissatisfied over the decision of the Labor Arbiter which struck private respondents as grossly
contrary to the evidence presented, the herein private respondents once again appealed to the
NLRC. And, as earlier stated, the NLRC rendered the challenged decision 15 on November 12, 1993,
vacating the decision of the Labor Arbiter and entering a new one dismissing the petitioners'
Hence, this petition wherein the main issue to be resolved is whether NLRC committed grave abuse
of discretion in finding that petitioners were validly dismissed on the ground of loss of trust and
At the outset, the Court notes petitioners inexcusable failure to move for the reconsideration of
respondent NLRC's decision. Thus, the present petition suffers from a procedural defect that
warrants its outright dismissal. While in some exceptional cases we allowed the immediate recourse
to this Court, we find nothing herein that could warrant an exceptional treatment to this petition which
will justify the omission. This premature action of petitioners constitutes a fatal infirmity as ruled in a
long line of decisions, 16 most recently in the case of Building Care Corporation vs. National Labor
Relations Commission, et al.: 17
The filing of such a motion is intended to afford public respondent an opportunity to
correct any actual or fancied error attributed to it by way of a re-examination of the
legal and factual aspects of the case. Petitioner's inaction or negligence under the
circumstances is tantamount to a deprivation of the right and opportunity of the
respondent Commission to cleanse itself of an error unwittingly committed or to
vindicate itself of an act unfairly imputed. . . .
. . . And for failure to avail of the correct remedy expressly provided by law, petitioner
has permitted the subject Resolution to become final and executory after the lapse of
the ten day period within which to file such motion for reconsideration.
Likewise, a motion for reconsideration is an adequate remedy; hence certiorari proceedings,
as in this case, will not prosper. 18 Rule 65, Section 1 of the Rules of Civil Procedure, as
amended, clearly provides that:
When any tribunal, board or officer exercising judicial or quasi-judicial functions has
acted without or in excess of its or his jurisdiction, or with grave abuse of discretion

amounting to lack or excess of jurisdiction, and there is no appeal, or any plain,

speedy, and adequate remedy in the ordinary course of law, a person aggrieved
thereby may file a verified petition in the proper court, alleging the facts with certainty
and praying that judgment be rendered annulling or modifying the proceedings of
such tribunal, board or officer, . . .
The unquestioned rule in this jurisdiction is that certiorari will lie only if there is no appeal or any
other plain, speedy and adequate remedy in the ordinary course of law against the acts of
respondent. 19 In the case at bench, the plain and adequate remedy referred to in Rule 65, Section
1, is a motion for reconsideration of the challenged decision and the resolution thereof, which was
expected to provide an adequate and a more speedy remedy than the present petition for certiorari.
Petitioners asseverate that respondent NLRC committed a grave abuse of discretion when it
reversed the findings of facts of the Labor Arbiter.
We find said submissions untenable.
In asserting that there was grave abuse of discretion, petitioners advert to alleged variances in the
factual findings of the Labor Arbiter and the respondent NLRC. This is inept and erroneous. Firstly,
errors of judgment, as distinguished from errors of jurisdiction, are not within the province of a
special civil action for certiorari. 20Secondly, a careful reading of the records of this case would
readily show that if there is any error by public respondent in its analysis of the facts and its
evaluation of the evidence, it is not of such a degree as may be stigmatized as a grave abuse of
discretion. Grave abuse of discretion is committed when the judgment is rendered in a capricious,
whimsical, arbitrary or despotic manner. An abuse of discretion does not necessarily follow just
because there is a reversal by the NLRC of the decision of the Labor Arbiter. Neither does the mere
variance in the evidentiary assessment of the NLRC and that of the Labor Arbiter would, as a matter
of course, so warrant another full review of the facts. The NLRC's decision, so long as it is not bereft
of support from the records, deserves respect from the Court. 21
We must once more reiterate our much repeated but not well-heeded rule that the special civil action
for certiorariis a remedy designed for the correction of errors of jurisdiction and not errors of
judgment. The rationale for this rule is simple. When a court exercises its jurisdiction an error
committed while so engaged does not deprive it of the jurisdiction being exercised when the error is
committed. If it did, every error committed by a court would deprive it of its jurisdiction and every
erroneous judgment would be a void judgment. This cannot be allowed. The administration of justice
would not countenance such a rule. Consequently, an error of judgment that the court may commit in
the exercise of its jurisdiction is not correctible through the original special civil action of certiorari.22
On the merits, we find and so hold that substantial evidence exists to warrant the finding that
petitioners were validly dismissed for just cause and after observance of due process.
Under the Labor Code, as amended, the requirements for the lawful dismissal of an employee by his
employer are two-fold: the substantive and the procedural. Not only must the dismissal be for a valid
or authorized cause as provided by law (Articles 282, 283 and 284, of the Labor Code, as amended),
but the rudimentary requirements of due process, basic of which are the opportunity to be heard and
to defend himself, must be observed before an employee may be dismissed. 23
With respect to the first requisite, Article 282 of the Labor Code, as amended, provides:
Art. 282. Termination by Employer. An employer may terminate an employment
for any of the followings causes:

(a) Serious misconduct or willful disobedience by the employee of the

lawful orders of his employer or representative in connection with his
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him
by his employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the
person of his employer or any immediate member of his family or his
duly authorized representative; and
(e) Other causes analogous to the foregoing. (Emphasis supplied).
In the instant case, we find no difficulty in agreeing with the findings of the public respondent that the
herein petitioners were guilty of acts of dishonesty by incurring several occurrences of shortages in
the amounts of P15,353.78, P1,000.00, P450.00 and P70.00 which they failed to turnover and
account for/and in behalf of respondent Isetann. Fittingly, the findings of the NLRC are worth
stressing at this point, to wit:
With regard to the several occurrences of shortages of the amounts of P15,353.78,
P1,000.00 and P70.00, the Labor Arbiter has failed to consider the fact that
complainants-appellees were accorded the chance to explain their side as to the
shortages and that they have utterly failed to do so providing basis for their valid
dismissal. This fact has been established by the respondents-appellants in the
findings of the Committee on Discipline on Exhibits "3", 3-A" to "3-D", as follows:
a) On the Shortage of P15,353.78:
The 3 respondents, Lutgarda Inducta, Cristy Amortizado and Corazon
Jamer denied any involvement in the loss of P15,353.78. Although
the money is under their responsibility, not one of them gave any
explanation about the shortage or loss.
b) On the amount of P1,000.00 borrowed by Inducta from Jamer:
On July 18, 1990, Lutgarda Inducta borrowed money from
respondents (sic) Jamer amounting to P1,000.00 to cover her
Ms. Jamer said that Ms. Inducta paid the amount on that day. But
Ms. Jamer did not report the shortage.
c) On the Underdeposit of Cash = P450.00.
The computation of Ms. Amortizado's sales collections last July 14,
1990 resulted to an overage of P350.00. Amortizado turned over the
amount of P350.00, to cover up a shortage incurred by her and Mrs.

Jamer used the money given to her by Amortizado (P350.00), and

borrowed (P150.00) from the change fund to cover the total shortage
amounting to P500.00 which she had then.
Jamer cannot trace how the shortage came about. Inducta and Jamer
shouldered the total shortage amounting to P500.00, P330.00 for
Jamer and P200.00 for Inducta. Jamer claimed that she returned the
P350.00 in the box. However, the claim of respondent was further
verified from the payroll section which revealed that a value slipwas
issued last July 1990. Jamer and Inducta were charged for P200.00
each. A value slip was issued last August 10, 1990 charging P100.00
to Amortizado.
Jamer admitted that she failed to inform the Audit Staff regarding the
350.00 overage which she received from Amortizado. A(s) per report
of Ms. Agnes Gonzales dated 26 July 1990, there was a total under
deposit of cash amounting to P450.00.
Total cash admitted P65,428.05
(cash in drawer)
Total cash remitted 64,978.05
(per tally sheet)
Overage P450.00
d) On the P70.00 Over Replenishment of Petty Cash Expenses:
During the 3rd Administrative hearing, the Committee informed Mrs.
Amortizado regarding the over replenishment of petty cash expenses
as revealed by the Finance Manager last August 10, 1990.
Mrs. Amortizado readily admitted and explained that she forgot to
inform Mrs. Inducta regarding the P70.00. She admitted her failure to
correct the amount from P100.00 to P30.00 (total expenses spent for
the taxi fair).
She added the she previously incurred a shortage amounting to
P100.00. Then she used the P70.00 to cover for the shortage. The
remaining balance of P30.00 was paid by Amortizado.
Amortizado informed the Committee that she is willing to refund the
P70.00 shortage. (Emphasis supplied). 24
From the foregoing premises, it is crystal clear that the failure of petitioners to report the aforequoted
shortages and overages to management as soon as they arose resulted in the breach of the
fiduciary trust reposed in them by respondent company, thereby causing the latter to lose confidence
in them. This warrants their dismissal. Moreover, it must be pointed out that herein petitioners have
in fact admitted the underpayment of P450.00 not only in their "Sinumpaang Salaysay" but also
during the hearing conducted before Labor Arbiter Pablo C. Espirutu. 25 And, the record shows that
the petitioners in fact made a last ditch effort to conceal the same. Were it not for its timely discovery

by private respondents' trusted employees, the incident could not have been discovered at all.
Furthermore, it is worth stressing at this juncture that the petitioners have also expressly admitted
the shortage of P15,353.78 a substantial amount in their respective sworn statements, and
they were not able to satisfactorily explain such shortage. 26 The Court is convinced that these
particular acts or omissions provided Isetann with enough basis to forfeit its trust and confidence
over herein petitioners.
The NLRC, therefore, did not act with grave abuse of discretion in declaring that petitioners were
legally dismissed from employment. The failure of petitioners to report to management the
aforementioned irregularities constitute "fraud or willful breach of the trust reposed in them by their
employer or duly authorized representative" one of the just causes in terminating employment as
provided for by paragraph (c), Article 282 of the Labor Code, as amended.
In other words, petitioners' admissions in their sworn statements, together with the other
documentary evidences on record, constituted breach of trust on their part which justifies their
dismissal. Private respondents Isetann Department Store and Mr. John Go cannot be compelled to
retain employees who are clearly guilty of malfeasance as their continued employment will be
prejudicial to the formers' best interest. 27 The law, in protecting the rights of the employees,
authorizes neither oppression nor self-destruction of the employer. 28
The cause of social justice is not served by upholding the interest of petitioners in disregard of the
right of private respondents. Social justice ceases to be an effective instrument for the "equalization
of the social and economic forces" by the State when it is used to shield wrongdoing. 29 While it is
true that compassion and human consideration should guide the disposition of cases involving
termination of employment since it affects one's source or means of livelihood, it should not be
overlooked that the benefits accorded to labor do not include compelling an employer to retain the
services of an employee who has been shown to be a gross liability to the employer. It should be
made clear that when the law tilts the scale of justice in favor of labor, it is but a recognition of the
inherent economic inequality between labor and management. The intent is to balance the scale of
justice; to put the two parties on relatively equal positions. There may be cases where the
circumstances warrant favoring labor over the interests of management but never should the scale
be so tilted if the result is an injustice to the employer, Justicia remini regarda est (Justice is to be
denied to none). 30
Thus, this Court has held time and again, in a number of decisions, 31 that:
Loss of confidence is a valid ground for dismissing an employee and proof beyond
reasonable doubt of the employee's misconduct is not required to dismiss him on this
charge. It is sufficient if there is "some basis" for such loss of confidence or if the
employer has reasonable ground to believe or to entertain the moral conviction that
the employee concerned is responsible for the misconduct and that the nature of his
participation therein rendered him absolutely unworthy of the trust and confidence
demanded by his position. 32
Parenthetically, the fact that petitioners Jamer and Amortizado had worked for respondent company
for fourteen (14) and thirteen (13) years, respectively, should be taken against them. The infractions
that they committed, notwithstanding their long years of service with the company, reflects a
regrettable lack of loyalty loyalty that they should have strengthened instead of betrayed. If the
petitioners' length of service is to be regarded as a justifying circumstance in moderating the
dismissal, it will actually become a prize for disloyalty, perverting the meaning of social justice and
undermining the efforts of labor to cleanse its ranks of all undesirables. 33

Petitioners also maintain that the NLRC acted with grave abuse of discretion when it failed to
consider the fact that, other than petitioners themselves, there were four (4) other persons who had
access to the company vaults, and hence, could have been responsible for the aforesaid cash
shortages imputed to them. They aver therefore, that there was a serious flaw and laxity in the
supervision and handling of company funds by respondent Isetann.34
We also find this contention devoid of merit.
First, it must be pointed out that the petitioners' remark that there was laxity in the accounting
procedures of the company is a matter addressed to the respondent employer. However, this does
not excuse dishonesty of employees and should not in any case hamper the right of the employer to
terminate the employment of petitioners on the ground of loss of confidence or breach of trust.
Precisely, the accounting procedure which called for improvements was based primarily on trust and
confidence. 35
Secondly, it must be noted that the herein petitioners were store cashiers and as such, a special and
unique employment relationship exists between them and the respondent company. More than most
key positions, that of cashier calls for the utmost trust and confidence because their primary function
involves basically the handling of a highly essential property of the respondent employer the sales
and revenues of the store. Employers are consequently given wider latitude of discretion in
terminating the employment of managerial employees or other personnel occupying positions of
responsibility, such as in the instant case, than in the case of ordinary rank-and-file employees,
whose termination on the basis of these same grounds requires proof of involvement in the
malfeasance in question. Mere uncorroborated assertions and accusations by the employer will not
suffice. 36 In that respect, we quote with approval the observations of the NLRC:
To expound further, for the position of a cashier, the honesty and integrity of the
persons assuming said position are the primary considerations for the nature of her
work requires that her actuation's should be beyond suspicion as they are accorded
the responsibility of handling money and whatever they would do to such property of
the employer largely depend on their trustworthiness. Hence, the right of the
employer to dismiss a cashier guilty of breach of trust and confidence should be
recognized. In a case decided by the Supreme Court it has been ruled that:
Honesty and integrity are the primary considerations in petitioner's
position. The nature of his work requires that the actuations should be
beyond suspicion. Our empathy with the cause of labor should not
blind us to the rights of management. As we have held, this Court
should help stamp out, rather than tolerate, the commission of
irregular acts whenever these are noted. Malpractices should not be
allowed to continue but should be rebuked. (Del Carmen vs. NLRC,
203 SCRA 245) 37
Finally, we are convinced that the NLRC did not commit grave abuse of discretion in evaluating the
evidence. Petitioners merely denied the charges against them. Denials are weak forms of defenses,
particularly when they are not substantiated by clear and convincing evidence. 38 The petitioners'
failure to satisfactorily explain the cash shortages, for which sums they are responsible, given their
respective positions in respondent company, is enough reason to warrant their dismissal on the
ground of loss of confidence. They cannot place the burden on somebody else given the factual
circumstances of this case. As succinctly put by the NLRC:

That there were other persons who had access to the vaults of the appellant
company implying that these other persons could have been responsible for the loss
of the P15,353.78 is of no moment inasmuch as the appellees were the ones who
took first custody of the possession of said collections. As store cashiers, it is
expected of them to exercise ordinary prudence to count the collection and record
the same in the tally sheet before depositing to said vault to avoid a slightest
suspicion of having pocketed part of it should a shortage arise. They did not exert
efforts to exercise such prudence demanded of their positions hence, appellants
should not be blamed when they were called for an investigation when said shortage
was discovered.
xxx xxx xxx
That the occurrence of shortages is merely an isolated one and therefore should not
be taken against the complainant-appellees as a ground for loss of trust and
confidence that would cause their termination cannot be given any credence. The
shortages having been established and admitted has provided the employer
sufficient basis for loss of confidence and whether such occurrence is merely an
isolated one or has been repeatedly committed is no longer material. The bone of
contention here is whether there is "some basis" for such loss of trust and confidence
and if the employer has reasonable ground to believe or to entertain the moral
conviction that the employee concerned is responsible for the misconduct which in
the instant case has been established. 39
We reiterate the rule that in cases of dismissal for breach of trust and confidence, proof beyond
doubt of the employees' misconduct is not required. It is sufficient that the employer had reasonable
ground to believe that the employees are responsible for the misconduct which renders him
unworthy of the trust and confidence demanded by their position. 40 In the case at hand, it cannot be
doubted that respondents succeeded in discharging its burden of proof.
As regards to the second requisite, the law requires that the employer must furnish the worker
sought to be dismissed with two (2) written notices before termination may be validly effected: first, a
notice apprising the employee of the particular acts or omission for which his dismissal is sought
and, second, a subsequent notice informing the employee of the decision to dismiss him. 41
In accordance with this requirement, petitioners were given the required notices, on August 2, 1990
and then on August 23, 1990. The Court finds that petitioners were accorded due process before
they were dismissed on August 31, 1990. It is a well-established rule that the essence of due
process is simply an opportunity to be heard, or as applied to administrative proceedings, an
opportunity to explain one's side or an opportunity to seek a reconsideration of the action or ruling
complained of. 42 It is evident from the records, that herein petitioners were given all the
opportunities to defend themselves and air their side before the Committee on Discipline, having
been notified by respondent Isetann's Human Resources Division Manager, Teresita A. Villanueva,
on August 2, 1990 through letters individually sent to them. However, when the petitioners were
confronted with reports of the anomalies, they offered no explanation or theory which could account
for money lost in their possession. Hence, the company had no other alternative but to terminate
their employment. As we elucidated in the case of Philippine Savings Bank vs. National Labor
Relations Commission, 43 to wit:
. . . the requirement of due process is satisfied when a fair and reasonable
opportunity to explain his side of the controversy is afforded the party. A formal or

trial-type hearing is not at all times and in all circumstances essential, especially
when the employee chooses not to speak.
WHEREFORE, the assailed decision of the National Labor Relations Commission in NLRC NCR CA
002074-91 is hereby AFFIRMED. The petition is DISMISSED for lack of merit.
G.R. No. 126703 December 29, 1998

At bar is a special civil action for Certiorari under Rule 65 of the Revised Rules of Court, assailing
the Resolution 1 of the National Labor Relations Commission 2 (NLRC) promulgated on May 22,
1996, and NLRC Resolution 3 dated July 23, 1996, denying petitioner's motion for reconsideration in
NLRC NCR 00-02-1653-94.
From the records on hand, it appears that.
Milagros Sy, owner of Gandara Mill Supply, at No. 708 Gandara St. Binondo, Manila, was the
respondent in NLRC Case No. 02-01653-94 instituted by Silvestre Germano (now the private
On February 6, 1995, the private respondent, without notifying his employer, Milagros Sy, did not
report for work until February 11, 1995. Like any expectant father, he chose to be near his wife who
was then about to deliver. The wife gave birth on February 12, 1995. Upon private respondent's
request, Milagros Sy extended some financial assistance to the Germano couple.
The petition avers inter alia that Gandara Mill Supply is a small business enterprise with only two (2)
employees, including the herein private respondent, to do manual work. With inadequate manpower,
the absence of just one worker can spell untold difficulties in its operations. Matters became even
worse when private respondent, without informing his employer, was absent for a long time, so much
so that the former incurred the ire of the latter. Two (2) weeks after, private respondent returned to
duty, and to his surprise, he was met by his employer to personally tell him that someone had been
hired to take his place. He was advised, however, that he was to be re-admitted in June 1996.
On February 27, 1995, a case of illegal dismissal was commenced by the private respondent with
the Department of Labor and Employment.
To buy peace, petitioner offered P5,000.00 but to no avail. The offer was flatly rejected by private
respondent. When conciliation efforts proved futile, the Labor Arbiter directed the parties to submit
their position papers on or before April 28, 1995, which deadline was extended to May 5, 1995. In
his Order of May 9, 1995, Labor Arbiter Facundo L. Leda gave petitioner a "last opportunity to
file/submit their (sic) Position Paper within seven (7) days from receipt hereof otherwise their (sic)
right to be heard are (sic) deemed waived and this case will be decided on the basis of the
documents on file." 4

Despite receipt of the aforesaid Order, however, petitioner still failed to comply therewith, prompting
the Labor Arbiter to hand down a decision on January 29, 1996, disposing, thus:
WHEREFORE, decision is hereby rendered ordering respondent/s Gandara Mill
Supply and/or Milagros Sy to complainant Silvestre Germano the sum of SIXTY FIVE
representing separation pay, backwages, SLIP and attorney's fee as discussed and
computed abore.
On March 4, 1996, petitioner appealed said decision to the NLRC. To the appeal, an Opposition was
interposed on March 15, 1996.
On May 22, 1996, the NLRC dismissed petitioner's appeal for failure to post a cash or surety bond.
The appeal was predicated on the submission that petitioner's business is small, on which invoked
ground petitioner sought exemption from posting a bond. Should its prayer for exemption of a bond
be denied, petitioner asked for at least twenty (20) days to put up such bond.
The petition attacks the July 23, 1996 Resolution of public respondent, affirming the decision of the
Labor Arbiter dated January 29, 1996. On August 14, 1996, a Motion for Execution was presented
by private respondent. NLRC entered its judgment on August 26, 1996.
On September 6, 1996, private respondent sent in an Ex-parte Motion for Execution, which was
granted. The corresponding Writ of Execution issued on September 13, 1996.
The issues posited for resolution:
FIRST, did the public respondent act with grave abuse of discretion in dismissing petitioner's appeal
and in not giving petitioner a chance to prove that the private respondent was not illegally dismissed
but was merely suspended for abandoning his job?: and
SECOND, did the public respondent act with grave abuse of discretion in awarding to the private
(P65,685.90), which amount petitioner assails as excessive?
To be sure, the petitioner was afforded a chance to show that the private respondent was not
illegally dismissed. Unfortunately, petitioner failed to discharge its burden of proof.
In a long line of cases, the Court has consistently ruled that, findings of fact by quasijudicial agencies like the NLRC are conclusive upon the court in the absence of proof of grave error
in the appreciation of facts. Petitioner's bare allegation that it was denied the right to be heard is
negated by the Labor Arbiter's extension of much leniency to petitioner by allowing the latter to
submit a position paper on April 28, 1995, then on May 5, 1995, and finally, seven (7) days from
receipt of the Order dated May 9, 1995. Generally, reglementary periods are strictly observed to the
end that orderly administration of justice be safeguarded. In the case under consideration, the public
respondent had been quite liberal in observing and enforcing the rules. Consequently, petitioner's
protestation of denial of opportunity to be heard is barren of any factual basis. The principle
of laches finds a wide room for application here.Laches, in a general sense, is failure or neglect for
an unreasonable length of time to do that which by exercising due diligence could or should have
been done earlier; it is negligence or omission to assert a right within a reasonable time warranting a
presumption that the party entitled to assert it has either abandoned or declined to raise it. The

doctrine of laches or "stale demands" is based upon grounds of public policy which require for the
peace of society, discouragement of stale claims. And unlike the statute of limitations, it is not a
mere question of time but is principally a question of inequity or unfairness or permitting a right or
claim to be enforced or asserted. (Tijam v. Sibonghanoy, 23 SCRA 29). So also, in the Order, dated
May 9, 1995, respondent Commission declared in clear and unequivocal terms that "failure to file a
position paper is deemed a waiver of the right to be heard and that decisions will be based on the
position paper submitted." Evidently, for making good his said Order, the Labor Arbiter cannot be
faulted for acting arbitrarily.
Neither can grave error be ascribed to respondent NLRC for handing down its decision without
petitioner's Position Paper. By its inaction, petitioner was properly considered to have waived or
forfeited the right to refute private respondent's stance. Indeed, petitioner cannot now be permitted to
belatedly complain of a denial of due process.
That petitioner was not represented by a lawyer in all the aforesaid proceedings was solely
attributable to its own negligence or inattention to the case. While the court has held that
representation by a lawyer is a fundamental right of litigants, petitioner has nobody to blame but
itself for its failure to secure the services of counsel resulting to the dismissal of its case. In the case
under scrutiny, petitioner was represented by a non-lawyer, Ramon Flores, who was present from
the beginning of the case but failed to efficiently follow-up the case until the promulgation of
judgment. While the right to due process is available to all the parties, it does not countenance selfserving excuses devised to undermine orderly administration of justice.
After a careful study, and a thorough examination of the pleadings and supporting documents, it
appears decisively clear that private respondent Silvestre Germane was illegally dismissed. While a
prolonged absence without leave may constitute as a just cause of dismissal, its illegality stems from
the non-observance of due process. Applying the WenPhil Doctrine by analogy, where dismissal
was not preceded by the twin requirement of notice and hearing, the legality of the dismissal in
question, is under heavy clouds and therefore illegal. While it cannot be deduced unerringly from the
records on hand that private respondent was really dismissed, there is no clear indication that the
latter was to be reinstated. In fact, since the inception of the case, what petitioner merely
endeavored was to compromise for a measly sum of P5,000.00, and no mention of taking
respondent back to his job was ever offered as part of the deal to end the controversy. What can be
surmised from petitioners's offer to re-admit the private respondent, was nothing but a polite gesture
couched in words intended to make the impact of his so-called suspension less severe. Invoking the
plight of a working man, where "no work, no pay" is the rule of thumb, the court cannot sanction an
over extended suspension. The Labor Code explicitly provides, that:
No preventive suspension shall last longer than thirty (30) days. The employer shall
thereafter reinstate the worker to his former or substantially equivalent position or the
employer may extend the period of suspension provided that during the period of
extension, he pays the wages and other benefits due to the worker. In such case, the
worker shall not be bound to reimburse the amount paid to him during the extension
if the employer decides after completion of the hearing to dismiss the worker. 5
In this case, the supposed suspension was expected to last for more than the period allowed by law,
thus making the suspension constitutive of an illegal dismissal. Therefore, the Labor Arbiter's
contention is upheld by the Court.
Granting arguendo that private respondent's absence engendered undue difficulty to the smooth
operations of petitioner's business, considering the predicament of respondent Silvestre Germane,
his dismissal is unwarranted. In holding the constitutional mandate of protection to labor, the rigid

rules of procedure may sometimes be dispensed with to give room for compassion. The doctrine of
"compassionate justice" is applicable under the premises, private respondent being the breadwinner
of his family. "The Social Justice policy mandates a compassionate attitude toward the working class
in its relation to management. In calling for the protection to labor, the Constitution does not condone
wrongdoing by the employee, it nevertheless urges a moderation of the sanctions that may be
applied to him in the light of the many disadvantages that weigh heavily on him like an albatross on
his neck. 6
The timeliness of petitioner's appeal is an issue which this court endeavors to pass upon. While the
rule governing the instant Petition does not fix a period within which to file an appeal, "the yardstick
to measure the seasonableness of a Petition for Certiorari is the reasonableness of the duration of
time that expired from the commission of the act complained of, to the institution of the proceedings
to annul the same. 7 The court had the occasion to hold that where no law can be applied, resort to
the fundamental law can be had. The Constitution provides that:
All persons shall have the right to a speedy disposition of their cases before all
judicial,guasi-judicial and administrative bodies. 8
Taking into account the interval of time that elapsed from the receipt of the assailed Resolution by
petitioner, to the time the court received the present petition, an interregnum of almost three (3)
months, the irresistible conclusion is that the Petition was not filed on time.
All things studiedly considered, we are of the view that public respondent NLRC did not act with
grave abuse of discretion in awarding to private respondent the amount of P65,685.90 which is not
at all excessive under the facts and circumstances of the case. Time and again, the court held that
factual findings by the Labor Arbiter are to treated as final absent any showing that he erred in his
evaluation. The familiarity with the parties, circumstances and opportunity to observe their demeanor
is something the court did not have the privilege to witness.
Untenable is petitioner's contention that the said amount awarded, representing backwages,
separation pay and attorney's fee is excessive and tantamount to a deprivation of petitioner's
property without due process of law. Once a finding of illegal dismissal is established, an award of
separation pay and backwages is in order and binding upon the court, unless the contrary is proved.
The court shares the Labor Arbiter's observation and ratiocination that the amount of the questioned
award is not excessive in light of prevailing economic conditions.
WHEREFORE, the Petition for Certiorari under consideration is hereby DISMISSED on the grounds,
that: (1) It was filed out of time; (2) It is devoid of merit; and (3) it was interposed for purposes of
Accordingly, the NLRC Resolution of July 23, 1996 is AFFIRMED in toto; the writ of execution issued
on September 13, 1996 upheld; and petitioner's prayer for a restraining order DENIED.
No pronouncement as to costs.

G.R. No. 175678, August 22, 2012

For resolution of this Court is the Petition for Review under Rule 45 of the Revised Rules of Court, dated January
20, 2007, of petitioner Bank of the Philippine Islands (BPI) which seeks to reverse and set aside the Court of
Appeals' (CA) Decision[1] and Resolution,[2] dated June 8, 2006 and November 29, 2006, respectively, in CA-G.R.
SP No. 83387.
The antecedent facts follow.
Respondent Bank of the Philippine Islands Employees Union-Metro Manila (BPIEU-MM), a legitimate labor
organization and the sole and exclusive bargaining representative of all the regular rank-and-file employees of
petitioner BPI in Metro Manila and petitioner BPI have an existing Collective Bargaining Agreement
(CBA)[3] which took effect on April 1, 2001. The CBA provides for loan benefits and relatively low interest rates.
The said provisions state:
Article VIII - Fringe Benefits
Section 14. Multi-Purpose Loan, Real Estate Secured Housing Loan and Car Loan. - The Bank agrees to continue and
maintain its present policy and practice, embodied in its Collective Bargaining Agreement with the Union which
expired on 31 March 2001, extending to qualified regular employees the multi-purpose and real estate secured
housing loans, subject to the increased limits and provisions hereinbelow, to wit:
(a) Multi-Purpose Loan not exceeding FORTY THOUSAND PESOS (P40,000.00), payable within the period not
exceeding three (3) years via semi-monthly salary deductions, with interest at the rate of eight percent (8%) per
annum computed on the diminishing balance.
(b) Real Estate-Secured Housing Loan not exceeding FOUR HUNDRED FIFTY THOUSAND " PESOS
(P450,000.00), payable over a period not exceeding fifteen (15) years via semi-monthly salary deductions, with
interest at the rate of nine percent (9%) per annum computed on the diminishing balance.
The rate of interest on real estate secured loans, however, may be reduced to six percent (6%) per annum, subject
to the following conditions:

1. If the loan is accepted for coverage by the Home Insurance and Guaranty Corporation (HIGC).
2. The HIGC premium shall be paid by the borrower.
3. The borrower procures a Mortgage Redemption Insurance coverage from an insurance company selected by the
4. The BANK may increase the six percent (6%) interest if the HIGC or the Government imposes new conditions
or restrictions necessitating a higher interest in order to maintain the BANK'S position before such conditions or
restrictions were imposed.
5. Such other terms or conditions imposed or which may be imposed by the HIGC.
6. It is distinctly understood that the rate of interest shall automatically revert to nine percent (9%) per annum
upon cancellation of the HIGC coverage for any cause.
The BANK shall make strong representations with the Bangko Sentral ng Pilipinas for a second upgrade and/or
availment under the Housing Loan Program.
(c) Car Loan. - The BANK shall submit a revised plan for the approval of the Bangko Sentral ng Pilipinas which
shall incorporate a car loan program in its existing Housing Loan Program. The said car loan shall be a sub-limit
under the program such that any availment thereof shall operate to decrease the available housing loan limit.
Therefore, the combined amount of both housing and car loans that may be availed of shall not exceed FOUR
HUNDRED FIFTY THOUSAND PESOS (P450,000.00). This supplemental revision of the loan program shall
be subject to the rules and regulations {e.g., amount of sub-limit, credit ratio, type and age of vehicle, interest rate,
etc.) which the BANK may promulgate, and to the terms of the approval of the Bangko Sentral ng Pilipinas.
The multi-purpose and housing loans stated in the next preceding paragraphs, as well as the car loan which shall be
incorporated in the housing loan program, shall be subject further to the applicable provisions, guidelines and
restrictions set forth in the Central Bank Circular No. 561, as amended by Central Bank Circular No. 689, and to
the rules, regulations and policies of the BANK on such loans insofar as they do not violate the provisions,
guidelines and restrictions set forth in said Central Bank Circular No. 561, as amended.
Section 15. Emergency Loans. - The BANK agrees to increase the amount of emergency loans assistance, upon
approval by the Central Bank of the Philippines, from a maximum amount of Ten Thousand Pesos (PI 0,000.00)
to a maximum amount of Fifteen Thousand Pesos (P15,000.00) to qualified employees intended to cover
emergencies only, i.e., expenses incurred but could not be foreseen such as those arising from natural calamities,
emergency medical treatment and/or hospitalization of an employee and/or his immediate family and other
genuine emergency cases of serious hardship as the BANK may determine. Hospital expenses for caesarian
delivery of a female employee or an employee's wife not covered by the Group Hospitalization Insurance Plan
shall qualify for the emergency loan.

Emergency loans shall be playable in twenty-four (24) months via semi-monthly salary deductions and shall be
charged interest at the minimal rate of Seven percent (7%) per annum for the first P10,000.00 and Nine percent
(9%) for the additional P5.000.00 computed on the diminishing balance. The emergency loan assistance program
shall be governed by the rules, regulations and policies of the BANK and such amendments or modifications
thereof which the BANK may issue from time to time.[4]
Thereafter, petitioner issued a "no negative data bank policy"[5] for the implementation/availment of the
manpower loans which the respondent objected to, thus, resulting into labor-management dialogues. Unsatisfied
with the result of those dialogues, respondent brought the matter to the grievance machinery and afterwards, the
issue, not having been resolved, the parties raised it to the Voluntary Arbitrator.
In his decision, the Voluntary Arbitrator found merit in the respondent's cause. Hence, the dispositive portion of
the said decision reads as follows:
WHEREFORE, viewed in the light of the foregoing circumstances, this Arbitrator hereby rules:
1. That the imposition of the NO NEGATIVE DATA BANK as a new condition for the implementation and
availment of the manpower loan benefits by the employees evidently violates the CBA;
2. That all employees who were not allowed or deprived of the manpower loan benefits due to the NO
NEGATIVE DATA BANK POLICY be immediately granted in accordance with their respective loan benefits
applied for;
3. That the respondent herein is ordered likewise to pay ten percent (10%) of the total amount of all loans to be
granted to all employees concerned as Attorney's Fees; and
4. That the parties herein are directed to report compliance with the above directives within ten (10) days from
receipt of this ORDER.
Aggrieved, petitioner appealed the case to the CA via Rule 43, but the latter affirmed the decision of the Voluntary
Arbitrator with the modification that the award of attorney's fees be deleted. The dispositive portion states:
WHEREFORE, premises considered, the Voluntary Arbitrator's Decision dated April 5, 2004 is hereby
AFFIRMED with the MODIFICATION that the award of attorney's fees is hereby deleted.
Petitioner filed a motion for reconsideration, but it was denied in a Resolution[8] dated November 29, 2006.
Hence, the present petition.

Petitioner raises the following arguments:

A. The "No NDB policy" is a valid and reasonable requirement that is consistent with sound banking practice and
is meant to inculcate among officers and employees of the petitioner the need for fiscal responsibility and
discipline, especially in an industry where the element of trust is paramount.
B. The "No NDB policy" does not violate the parties' Collective Bargaining Agreement.
C. The "No NDB policy" conforms to existing BSP regulations and circulars, and to safe and sound banking
Respondent, on the other hand, claims that the petition did not comply with Section 4, Rule 45 of the Revised
Rules of Court and must be dismissed outright in accordance with Section 5 of the same rule; that the CA did not
commit any reversible error in the questioned judgment to warrant the exercise of its discretionary appellate
jurisdiction; and that the Voluntary Arbitrator and the CA duly passed upon the same issues raised in the instant
petition and their decisions are based on substantial evidence and are in accordance with law and jurisprudence.[10]
Tn its Reply[11] dated September 21, 2007, petitioner reiterates the issues it presented in its petition. It also argues
that the present petition must not be dismissed based on mere technicality.
Subsequently, the parties submitted their respective memoranda.
Petitioner's arguments are mere rehash of those it raised in the CA. It insists that the rationale behind the use of
the "no negative data bank policy" aims to encourage employees of a banking institution to exercise the highest
standards of conduct, considering the bank's fiduciary relationship with its depositors and clients. It likewise
contends that a scrutiny of the CBA reveals an express conformity to petitioner's prerogative to issue policies that
would guide the parties in the availment of manpower loans under the CBA.
Furthermore, petitioner avers that the subject policy does not only conform to the provisions of the parties' CBA,
but it is also in harmony with the circulars and regulations of the Bangko Sentral ng Pilipinas.
The petition lacks merit.
In a petition for review on certiorari, this Court's jurisdiction is limited to reviewing errors of law in the absence of
any showing that the factual findings complained of are devoid of support in the records or are glaringly
erroneous.[13] Firm is the doctrine that this Court is not a trier of facts, and this applies with greater force in labor
cases.[14] The issues presented by the petitioner are factual in nature. Nevertheless, the CA committed no error in
its questioned decision and resolution.
A CBA refers to the negotiated contract between a legitimate labor organization and the employer concerning
wages, hours of work and all other terms and conditions of employment in a bargaining unit, including mandatory

provisions for grievances and arbitration machineries.[15] As in all other contracts, there must be clear indications
that the parties reached a meeting of the minds.[16] Therefore, the terms and conditions of a CBA constitute the
law between the parties.[17]
The CBA in this case contains no provision on the "no negative data bank policy" as a prerequisite in the
entitlement of the benefits it set forth for the employees. In fact, a close reading of the CBA would show that the
terms and conditions contained therein relative to the availment of the loans are plain and clear, thus, all they need
is the proper implementation in order to reach their objective. The CA was, therefore, correct when it ruled that,
although it can be said that petitioner is authorized to issue rules and regulations pertinent to the availment and
administration of the loans under the CBA, the additional rules and regulations, however, must not impose new
conditions which are not contemplated in the CBA and should be within the realm of reasonableness. The "no
negative data bank policy" is a new condition which is never contemplated in the CBA and at some points,
unreasonable to the employees because it provides that before an employee or his/her spouse can avail of the loan
benefits under the CBA, the said employee or his/her spouse must not be listed in the negative data bank, or if
previously listed therein, must obtain a clearance at least one year or six months as the case may be, prior to a loan
It must be remembered that negotiations between an employer and a union transpire before they agree on the
terms and conditions contained in the CBA. If the petitioner, indeed, intended to include a "no negative data bank
policy" in the CBA, it should have presented such proposal to the union during the negotiations. To include such
policy after the effectivity of the CBA is deceptive and goes beyond the original agreement between the contracting
This Court also notes petitioner's argument that the "no negative data bank policy" is intended to exact a high
standard of conduct from its employees. However, the terms and conditions of the CBA must prevail. Petitioner
can propose the inclusion of the said policy upon the expiration of the CBA, during the negotiations for a new
CBA, but in the meantime, it has to honor the provisions of the existing CBA.
Article 1702 of the New Civil Code provides that, in case of doubt, all labor legislation and all labor contracts shall
be construed in favor of the safety and decent living of the laborer. Thus, this Court has ruled that any doubt or
ambiguity in the contract between management and the union members should be resolved in favor of the
latter.[18] Therefore, there is no doubt, in this case, that the welfare of the laborers stands supreme.
WHEREFORE, the Petition for Review under Rule 45 of the Revised Rules of Court, dated January 20, 2007, of
petitioner Bank of the Philippine Islands, is hereby DENIED and the Court of Appeals' Decision and Resolution,
dated June 8, 2006 and November 29, 2006, respectively, are hereby AFFIRMED.

G.R. No. 80609 August 23, 1988

Nicanor G. Nuevas for petitioner.

The only issue presented in the case at bar is the legality of the award of financial assistance to an
employee who had been dismissed for cause as found by the public respondent.
Marilyn Abucay, a traffic operator of the Philippine Long Distance Telephone Company, was
accused by two complainants of having demanded and received from them the total amount of
P3,800.00 in consideration of her promise to facilitate approval of their applications for telephone
installation. 1 Investigated and heard, she was found guilty as charged and accordingly separated
from the service. 2 She went to the Ministry of Labor and Employment claiming she had been illegally
removed. After consideration of the evidence and arguments of the parties, the company was
sustained and the complaint was dismissed for lack of merit. Nevertheless, the dispositive portion of
labor arbiter's decision declared:
WHEREFORE, the instant complaint is dismissed for lack of merit.
Considering that Dr. Helen Bangayan and Mrs. Consolacion Martinez are not totally
blameless in the light of the fact that the deal happened outhide the premises of
respondent company and that their act of giving P3,800.00 without any receipt is
tantamount to corruption of public officers, complainant must be given one month pay
for every year of service as financial assistance. 3
Both the petitioner and the private respondent appealed to the National Labor Relations Board,
which upheld the said decision in toto and dismissed the appeals. 4 The private respondent took no
further action, thereby impliedly accepting the validity of her dismissal. The petitioner, however, is
now before us to question the affirmance of the above- quoted award as having been made with
grave abuse of discretion.
In its challenged resolution of September 22, 1987, the NLRC said:
... Anent the award of separation pay as financial assistance in complainant's favor,
We find the same to be equitable, taking into consideration her long years of service
to the company whereby she had undoubtedly contributed to the success of
respondent. While we do not in any way approve of complainants (private
respondent) mal feasance, for which she is to suffer the penalty of dismissal, it is for
reasons of equity and compassion that we resolve to uphold the award of financial
assistance in her favor. 5
The position of the petitioner is simply stated: It is conceded that an employee illegally dismissed is
entitled to reinstatement and backwages as required by the labor laws. However, an employee
dismissed for cause is entitled to neither reinstatement nor backwages and is not allowed any relief

at all because his dismissal is in accordance with law. In the case of the private respondent, she has
been awarded financial assistance equivalent to ten months pay corresponding to her 10 year
service in the company despite her removal for cause. She is, therefore, in effect rewarded rather
than punished for her dishonesty, and without any legal authorization or justification. The award is
made on the ground of equity and compassion, which cannot be a substitute for law. Moreover, such
award puts a premium on dishonesty and encourages instead of deterring corruption.
For its part, the public respondent claims that the employee is sufficiently punished with her
dismissal. The grant of financial assistance is not intended as a reward for her offense but merely to
help her for the loss of her employment after working faithfully with the company for ten years. In
support of this position, the Solicitor General cites the cases of Firestone Tire and Rubber Company
of the Philippines v. Lariosa 6 and Soco v. Mercantile Corporation of Davao, 7 where the employees
were dismissed for cause but were nevertheless allowed separation pay on grounds of social and
compassionate justice. As the Court put it in the Firestone case:
In view of the foregoing, We rule that Firestone had valid grounds to dispense with
the services of Lariosa and that the NLRC acted with grave abuse of discretion in
ordering his reinstatement. However, considering that Lariosa had worked with the
company for eleven years with no known previous bad record, the ends of social and
compassionate justice would be served if he is paid full separation pay but not
reinstatement without backwages by the NLRC.
In the said case, the employee was validly dismissed for theft but the NLRC nevertheless awarded
him full separation pay for his 11 years of service with the company. In Soco, the employee was also
legally separated for unauthorized use of a company vehicle and refusal to attend the grievance
proceedings but he was just the same granted one-half month separation pay for every year of his
18-year service.
Similar action was taken in Filipro, Inc. v. NLRC, 8 where the employee was validly dismissed for
preferring certain dealers in violation of company policy but was allowed separation pay for his 2
years of service. In Metro Drug Corporation v. NLRC, 9 the employee was validly removed for loss of
confidence because of her failure to account for certain funds but she was awarded separation pay
equivalent to one-half month's salary for every year of her service of 15 years. In Engineering
Equipment, Inc. v. NLRC, 10 the dismissal of the employee was justified because he had instigated
labor unrest among the workers and had serious differences with them, among other grounds, but
he was still granted three months separation pay corresponding to his 3-year service. In New
Frontier Mines, Inc. v. NLRC, 11 the employee's 3- year service was held validly terminated for lack
of confidence and abandonment of work but he was nonetheless granted three months separation
pay. And in San Miguel Corporation v. Deputy Minister of Labor and Employment, et al ., 12 full
separation pay for 6, 10, and 16 years service, respectively, was also allowed three employees who
had been dismissed after they were found guilty of misappropriating company funds.
The rule embodied in the Labor Code is that a person dismissed for cause as defined therein is not
entitled to separation pay. 13 The cases above cited constitute the exception, based upon
considerations of equity. Equity has been defined as justice outside law, 14 being ethical rather than
jural and belonging to the sphere of morals than of law. 15 It is grounded on the precepts of
conscience and not on any sanction of positive law. 16 Hence, it cannot prevail against the expressed
provision of the labor laws allowing dismissal of employees for cause and without any provision for
separation pay.
Strictly speaking, however, it is not correct to say that there is no express justification for the grant of
separation pay to lawfully dismissed employees other than the abstract consideration of equity. The

reason is that our Constitution is replete with positive commands for the promotion of social justice,
and particularly the protection of the rights of the workers. The enhancement of their welfare is one
of the primary concerns of the present charter. In fact, instead of confining itself to the general
commitment to the cause of labor in Article II on the Declaration of Principles of State Policies, the
new Constitution contains a separate article devoted to the promotion of social justice and human
rights with a separate sub- topic for labor. Article XIII expressly recognizes the vital role of labor,
hand in hand with management, in the advancement of the national economy and the welfare of the
people in general. The categorical mandates in the Constitution for the improvement of the lot of the
workers are more than sufficient basis to justify the award of separation pay in proper cases even if
the dismissal be for cause.
The Court notes, however, that where the exception has been applied, the decisions have not been
consistent as to the justification for the grant of separation pay and the amount or rate of such
award. Thus, the employees dismissed for theft in the Firestone case and for animosities with fellow
workers in the Engineering Equipment case were both awarded separation pay notnvithstanding that
the first cause was certainly more serious than the second. No less curiously, the employee in the
Soco case was allowed only one-half month pay for every year of his 18 years of service, but in
Filipro the award was two months separation pay for 2 years service. In Firestone, the emplovee
was allowed full separation pay corresponding to his 11 years of service, but in Metro, the employee
was granted only one-half month separation pay for every year of her 15year service. It would seem
then that length of service is not necessarily a criterion for the grant of separation pay and neither
apparently is the reason for the dismissal.
The Court feels that distinctions are in order. We note that heretofore the separation pay, when it
was considered warranted, was required regardless of the nature or degree of the ground proved, be
it mere inefficiency or something graver like immorality or dishonesty. The benediction of
compassion was made to cover a multitude of sins, as it were, and to justify the helping hand to the
validly dismissed employee whatever the reason for his dismissal. This policy should be reexamined. It is time we rationalized the exception, to make it fair to both labor and management,
especially to labor.
There should be no question that where it comes to such valid but not iniquitous causes as failure to
comply with work standards, the grant of separation pay to the dismissed employee may be both just
and compassionate, particularly if he has worked for some time with the company. For example, a
subordinate who has irreconcilable policy or personal differences with his employer may be validly
dismissed for demonstrated loss of confidence, which is an allowable ground. A working mother who
has to be frequently absent because she has also to take care of her child may also be removed
because of her poor attendance, this being another authorized ground. It is not the employee's fault
if he does not have the necessary aptitude for his work but on the other hand the company cannot
be required to maintain him just the same at the expense of the efficiency of its operations. He too
may be validly replaced. Under these and similar circumstances, however, the award to the
employee of separation pay would be sustainable under the social justice policy even if the
separation is for cause.
But where the cause of the separation is more serious than mere inefficiency, the generosity of the
law must be more discerning. There is no doubt it is compassionate to give separation pay to a
salesman if he is dismissed for his inability to fill his quota but surely he does not deserve such
generosity if his offense is misappropriation of the receipts of his sales. This is no longer mere
incompetence but clear dishonesty. A security guard found sleeping on the job is doubtless subject
to dismissal but may be allowed separation pay since his conduct, while inept, is not depraved. But if
he was in fact not really sleeping but sleeping with a prostitute during his tour of duty and in the
company premises, the situation is changed completely. This is not only inefficiency but immorality
and the grant of separation pay would be entirely unjustified.

We hold that henceforth separation pay shall be allowed as a measure of social justice only in those
instances where the employee is validly dismissed for causes other than serious misconduct or
those reflecting on his moral character. Where the reason for the valid dismissal is, for example,
habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a
fellow worker, the employer may not be required to give the dismissed employee separation pay, or
financial assistance, or whatever other name it is called, on the ground of social justice.
A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than
punishing the erring employee for his offense. And we do not agree that the punishment is his
dismissal only and that the separation pay has nothing to do with the wrong he has committed. Of
course it has. Indeed, if the employee who steals from the company is granted separation pay even
as he is validly dismissed, it is not unlikely that he will commit a similar offense in his next
employment because he thinks he can expect a like leniency if he is again found out. This kind of
misplaced compassion is not going to do labor in general any good as it will encourage the
infiltration of its ranks by those who do not deserve the protection and concern of the Constitution.
The policy of social justice is not intended to countenance wrongdoing simply because it is
committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone
the offense. Compassion for the poor is an imperative of every humane society but only when the
recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be
refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty.
Those who invoke social justice may do so only if their hands are clean and their motives blameless
and not simply because they happen to be poor. This great policy of our Constitution is not meant for
the protection of those who have proved they are not worthy of it, like the workers who have tainted
the cause of labor with the blemishes of their own character.
Applying the above considerations, we hold that the grant of separation pay in the case at bar is
unjustified. The private respondent has been dismissed for dishonesty, as found by the labor arbiter
and affirmed by the NLRC and as she herself has impliedly admitted. The fact that she has worked
with the PLDT for more than a decade, if it is to be considered at all, should be taken against her as
it reflects a regrettable lack of loyalty that she should have strengthened instead of betraying during
all of her 10 years of service with the company. If regarded as a justification for moderating the
penalty of dismissal, it will actually become a prize for disloyalty, perverting the meaning of social
justice and undermining the efforts of labor to cleanse its ranks of all undesirables.
The Court also rules that the separation pay, if found due under the circumstances of each case,
should be computed at the rate of one month salary for every year of service, assuming the length of
such service is deemed material. This is without prejudice to the application of special agreements
between the employer and the employee stipulating a higher rate of computation and providing for
more benefits to the discharged employee. 17
WHEREFORE, the petition is GRANTED. The challenged resolution of September 22,1987, is
AFFIRMED in totoexcept for the grant of separation pay in the form of financial assistance, which is
hereby DISALLOWED. The temporary restraining order dated March 23, 1988, is LIFTED. It is so



G.R. No. 178505





NAVARETTE, Respondents.

September 30, 2008

This Petition for Review on Certiorari under Rule 45 of the Rules of Court assails the Decision1 dated
25 September 2006 and Resolution2 dated 15 June 2007 of the Court of Appeals in CA-G.R. SP No.
72795, which affirmed the Decision dated 14 December 2001 of the National Labor Relations
Commission (NLRC) in NLRC NCR Case No. 30-03-01274-2000 finding that petitioners were not
illegally dismissed by respondents.
The factual antecedents of the case are as follows:
Respondent Innodata Philippines, Inc./Innodata Corporation (INNODATA) was a domestic
corporation engaged in the data encoding and data conversion business. It employed encoders,
indexers, formatters, programmers, quality/quantity staff, and others, to maintain its business and
accomplish the job orders of its clients. Respondent Leo Rabang was its Human Resources and
Development (HRAD) Manager, while respondent Jane Navarette was its Project Manager.
INNODATA had since ceased operations due to business losses in June 2002.
Petitioners Cherry J. Price, Stephanie G. Domingo, and Lolita Arbilera were employed as formatters
by INNODATA. The parties executed an employment contract denominated as a "Contract of
Employment for a Fixed Period," stipulating that the contract shall be for a period of one year,3 to wit:
WHEREAS, the EMPLOYEE has applied for the position of FORMATTER and in the course thereof
and represented himself/herself to be fully qualified and skilled for the said position;

WHEREAS, the EMPLOYER, by reason of the aforesaid representations, is desirous of engaging

that the (sic) services of the EMPLOYEE for a fixed period;
NOW, THEREFORE, for and in consideration of the foregoing premises, the parties have mutually
agreed as follows:
The EMPLOYER hereby employs, engages and hires the EMPLOYEE and the EMPLOYEE hereby
accepts such appointment as FORMATTER effective FEB. 16, 1999 to FEB. 16, 2000 a period of
6.1 In the event that EMPLOYER shall discontinue operating its business, this CONTRACT shall
also ipso facto terminate on the last day of the month on which the EMPLOYER ceases operations
with the same force and effect as is such last day of the month were originally set as the termination
date of this Contract. Further should the Company have no more need for the EMPLOYEEs
services on account of completion of the project, lack of work (sic) business losses, introduction of
new production processes and techniques, which will negate the need for personnel, and/or
overstaffing, this contract maybe pre-terminated by the EMPLOYER upon giving of three (3) days
notice to the employee.
6.2 In the event period stipulated in item 1.2 occurs first vis--vis the completion of the project, this
contract shall automatically terminate.
6.3 COMPANYs Policy on monthly productivity shall also apply to the EMPLOYEE.
6.4 The EMPLOYEE or the EMPLOYER may pre-terminate this CONTRACT, with or without cause,
by giving at least Fifteen (15) notice to that effect. Provided, that such pre-termination shall be
effective only upon issuance of the appropriate clearance in favor of the said EMPLOYEE.
6.5 Either of the parties may terminate this Contract by reason of the breach or violation of the terms
and conditions hereof by giving at least Fifteen (15) days written notice. Termination with cause
under this paragraph shall be effective without need of judicial action or approval.4
During their employment as formatters, petitioners were assigned to handle jobs for various clients
of INNODATA, among which were CAS, Retro, Meridian, Adobe, Netlib, PSM, and Earthweb. Once
they finished the job for one client, they were immediately assigned to do a new job for another
On 16 February 2000, the HRAD Manager of INNODATA wrote petitioners informing them of their
last day of work. The letter reads:
RE: End of Contract
Date: February 16, 2000

Please be informed that your employment ceases effective at the end of the close of business hours
on February 16, 2000.5
According to INNODATA, petitioners employment already ceased due to the end of their contract.
On 22 May 2000, petitioners filed a Complaint6 for illegal dismissal and damages against
respondents. Petitioners claimed that they should be considered regular employees since their
positions as formatters were necessary and desirable to the usual business of INNODATA as an
encoding, conversion and data processing company. Petitioners also averred that the decisions in
Villanueva v. National Labor Relations Commission7 and Servidad v. National Labor Relations
Commission,8 in which the Court already purportedly ruled "that the nature of employment at
Innodata Phils., Inc. is regular,"9 constituted stare decisis to the present case. Petitioners finally
argued that they could not be considered project employees considering that their employment was
not coterminous with any project or undertaking, the termination of which was predetermined.
On the other hand, respondents explained that INNODATA was engaged in the business of data
processing, typesetting, indexing, and abstracting for its foreign clients. The bulk of the work was
data processing, which involved data encoding. Data encoding, or the typing of data into the
computer, included pre-encoding, encoding 1 and 2, editing, proofreading, and scanning. Almost half
of the employees of INNODATA did data encoding work, while the other half monitored quality
control. Due to the wide range of services rendered to its clients, INNODATA was constrained to hire
new employees for a fixed period of not more than one year. Respondents asserted that petitioners
were not illegally dismissed, for their employment was terminated due to the expiration of their terms
of employment. Petitioners contracts of employment with INNODATA were for a limited period only,
commencing on 6 September 1999 and ending on 16 February 2000.10 Respondents further argued
that petitioners were estopped from asserting a position contrary to the contracts which they had
knowingly, voluntarily, and willfully agreed to or entered into. There being no illegal dismissal,
respondents likewise maintained that petitioners were not entitled to reinstatement and backwages.
On 17 October 2000, the Labor Arbiter11 issued its Decision12 finding petitioners complaint for illegal
dismissal and damages meritorious. The Labor Arbiter held that as formatters, petitioners occupied
jobs that were necessary, desirable, and indispensable to the data processing and encoding
business of INNODATA. By the very nature of their work as formatters, petitioners should be
considered regular employees of INNODATA, who were entitled to security of tenure. Thus, their
termination for no just or authorized cause was illegal. In the end, the Labor Arbiter decreed:
FOREGOING PREMISES CONSIDERED, judgment is hereby rendered declaring complainants
dismissal illegal and ordering respondent INNODATA PHILS. INC./INNODATA CORPORATION to
reinstate them to their former or equivalent position without loss of seniority rights and benefits.
Respondent company is further ordered to pay complainants their full backwages plus ten percent
(10%) of the totality thereof as attorneys fees. The monetary awards due the complainants as of the
date of this decision are as follows:
A. Backwages
1. Cherry J. Price
2/17/2000 10/17/2000 at 223.50/day
P5,811.00/mo/ x 8 mos. P46,488.00
2. Stephanie Domingo 46,488.00

(same computation)
3. Lolita Arbilera 46,488.00
(same computation)
Total Backwages P139,464.00
B. Attorneys fees (10% of total award) 13,946.40
Total Award P153,410.40
Respondent INNODATA appealed the Labor Arbiters Decision to the NLRC. The NLRC, in its
Decision dated 14 December 2001, reversed the Labor Arbiters Decision dated 17 October 2000,
and absolved INNODATA of the charge of illegal dismissal.
The NLRC found that petitioners were not regular employees, but were fixed-term employees as
stipulated in their respective contracts of employment. The NLRC applied Brent School, Inc. v.
Zamora13 and St. Theresas School of Novaliches Foundation v. National Labor Relations
Commission,14 in which this Court upheld the validity of fixed-term contracts. The determining factor
of such contracts is not the duty of the employee but the day certain agreed upon by the parties for
the commencement and termination of the employment relationship. The NLRC observed that the
petitioners freely and voluntarily entered into the fixed-term employment contracts with INNODATA.
Hence, INNODATA was not guilty of illegal dismissal when it terminated petitioners employment
upon the expiration of their contracts on 16 February 2000.
The dispositive portion of the NLRC Decision thus reads:
WHEREFORE, premises considered, the decision appealed from is hereby REVERSED and SET
ASIDE and a new one entered DISMISSING the instant complaint for lack of merit.15
The NLRC denied petitioners Motion for Reconsideration in a Resolution dated 28 June 2002.16
In a Petition for Certiorari under Rule 65 of the Rules of Court filed before the Court of Appeals,
petitioners prayed for the annulment, reversal, modification, or setting aside of the Decision dated 14
December 2001 and Resolution dated 28 June 2002 of the
On 25 September 2006, the Court of Appeals promulgated its Decision sustaining the ruling of the
NLRC that petitioners were not illegally dismissed.
The Court of Appeals ratiocinated that although this Court declared in Villanueva and Servidad that
the employees of INNODATA working as data encoders and abstractors were regular, and not
contractual, petitioners admitted entering into contracts of employment with INNODATA for a term of
only one year and for a project called Earthweb. According to the Court of Appeals, there was no
showing that petitioners entered into the fixed-term contracts unknowingly and involuntarily, or
because INNODATA applied force, duress or improper pressure on them. The appellate court also
observed that INNODATA and petitioners dealt with each other on more or less equal terms, with no
moral dominance exercised by the former on latter. Petitioners were therefore bound by the
stipulations in their contracts terminating their employment after the lapse of the fixed term.

The Court of Appeals further expounded that in fixed-term contracts, the stipulated period of
employment is governing and not the nature thereof. Consequently, even though petitioners were
performing functions that are necessary or desirable in the usual business or trade of the employer,
petitioners did not become regular employees because their employment was for a fixed term, which
began on 16 February 1999 and was predetermined to end on 16 February 2000.
The appellate court concluded that the periods in petitioners contracts of employment were not
imposed to preclude petitioners from acquiring security of tenure; and, applying the ruling of this
Court in Brent, declared that petitioners fixed-term employment contracts were valid. INNODATA did
not commit illegal dismissal for terminating petitioners employment upon the expiration of their
The Court of Appeals adjudged:
WHEREFORE, the instant petition is hereby DENIED and the Resolution dated December 14, 2001
of the National Labor Relations Commission declaring petitioners were not illegally dismissed is
The petitioners filed a Motion for Reconsideration of the afore-mentioned Decision of the Court of
Appeals, which was denied by the same court in a Resolution dated 15 June 2007.
Petitioners are now before this Court via the present Petition for Review on Certiorari, based on the
following assignment of errors:
The issue of whether petitioners were illegally dismissed by respondents is ultimately dependent on
the question of whether petitioners were hired by INNODATA under valid fixed-term employment

After a painstaking review of the arguments and evidences of the parties, the Court finds merit in the
present Petition. There were no valid fixed-term contracts and petitioners were regular employees of
the INNODATA who could not be dismissed except for just or authorized cause.
The employment status of a person is defined and prescribed by law and not by what the parties say
it should be.19 Equally important to consider is that a contract of employment is impressed with
public interest such that labor contracts must yield to the common good.20 Thus, provisions of
applicable statutes are deemed written into the contract, and the parties are not at liberty to insulate
themselves and their relationships from the impact of labor laws and regulations by simply
contracting with each other.21
Regular employment has been defined by Article 280 of the Labor Code, as amended, which reads:
Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be
deemed to be regular where the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer, except where the employment
has been fixed for a specific project or undertaking the completion or termination of which has been
determined at the time of engagement of the employee or where the work or services to be
performed is seasonal in nature and employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph.
Provided, That, any employee who has rendered at least one year of service, whether such service
is continuous or broken, shall be considered a regular employee with respect to the activity in which
he is employed and his employment shall continue while such activity exists. (Underscoring ours).
Based on the afore-quoted provision, the following employees are accorded regular status: (1) those
who are engaged to perform activities which are necessary or desirable in the usual business or
trade of the employer, regardless of the length of their employment; and (2) those who were initially
hired as casual employees, but have rendered at least one year of service, whether continuous or
broken, with respect to the activity in which they are employed.
Undoubtedly, petitioners belong to the first type of regular employees.
Under Article 280 of the Labor Code, the applicable test to determine whether an employment
should be considered regular or non-regular is the reasonable connection between the particular
activity performed by the employee in relation to the usual business or trade of the employer.22
In the case at bar, petitioners were employed by INNODATA on 17 February 1999 as formatters.
The primary business of INNODATA is data encoding, and the formatting of the data entered into the
computers is an essential part of the process of data encoding. Formatting organizes the data
encoded, making it easier to understand for the clients and/or the intended end users thereof.
Undeniably, the work performed by petitioners was necessary or desirable in the business or trade
However, it is also true that while certain forms of employment require the performance of usual or
desirable functions and exceed one year, these do not necessarily result in regular employment
under Article 280 of the Labor Code.23 Under the Civil Code, fixed-term employment contracts are
not limited, as they are under the present Labor Code, to those by nature seasonal or for specific
projects with predetermined dates of completion; they also include those to which the parties by free
choice have assigned a specific date of termination.24

The decisive determinant in term employment is the day certain agreed upon by the parties for the
commencement and termination of their employment relationship, a day certain being understood to
be that which must necessarily come, although it may not be known when. Seasonal employment
and employment for a particular project are instances of employment in which a period, where not
expressly set down, is necessarily implied.25
Respondents maintain that the contracts of employment entered into by petitioners with INNDOATA
were valid fixed-term employment contracts which were automatically terminated at the expiry of the
period stipulated therein, i.e., 16 February 2000.
The Court disagrees.
While this Court has recognized the validity of fixed-term employment contracts, it has consistently
held that this is the exception rather than the general rule. More importantly, a fixed-term
employment is valid only under certain circumstances. In Brent, the very same case invoked by
respondents, the Court identified several circumstances wherein a fixed-term is an essential and
natural appurtenance, to wit:
Some familiar examples may be cited of employment contracts which may be neither for seasonal
work nor for specific projects, but to which a fixed term is an essential and natural appurtenance:
overseas employment contracts, for one, to which, whatever the nature of the engagement, the
concept of regular employment with all that it implies does not appear ever to have been applied,
Article 280 of the Labor Code notwithstanding; also appointments to the positions of dean, assistant
dean, college secretary, principal, and other administrative offices in educational institutions, which
are by practice or tradition rotated among the faculty members, and where fixed terms are a
necessity without which no reasonable rotation would be possible. Similarly, despite the provisions
of Article 280, Policy Instructions No. 8 of the Minister of Labor implicitly recognize that certain
company officials may be elected for what would amount to fixed periods, at the expiration of which
they would have to stand down, in providing that these officials, "x x may lose their jobs as president,
executive vice-president or vice president, etc. because the stockholders or the board of directors for
one reason or another did not reelect them."26
As a matter of fact, the Court, in its oft-quoted decision in Brent, also issued a stern admonition that
where, from the circumstances, it is apparent that the period was imposed to preclude the
acquisition of tenurial security by the employee, then it should be struck down as being contrary to
law, morals, good customs, public order and public policy.27
After considering petitioners contracts in their entirety, as well as the circumstances surrounding
petitioners employment at INNODATA, the Court is convinced that the terms fixed therein were
meant only to circumvent petitioners right to security of tenure and are, therefore, invalid.
The contracts of employment submitted by respondents are highly suspect for not only being
ambiguous, but also for appearing to be tampered with.
Petitioners alleged that their employment contracts with INNODATA became effective 16 February
1999, and the first day they reported for work was on 17 February 1999. The Certificate of
Employment issued by the HRAD Manager of INNODATA also indicated that petitioners Price and
Domingo were employed by INNODATA on 17 February 1999.
However, respondents asserted before the Labor Arbiter that petitioners employment contracts were
effective only on 6 September 1999. They later on admitted in their Memorandum filed with this
Court that petitioners were originally hired on 16 February 1999 but the project for which they were

employed was completed before the expiration of one year. Petitioners were merely rehired on 6
September 1999 for a new project. While respondents submitted employment contracts with 6
September 1999 as beginning date of effectivity, it is obvious that in one of them, the original
beginning date of effectivity, 16 February 1999, was merely crossed out and replaced with 6
September 1999. The copies of the employment contracts submitted by petitioners bore similar
The Court notes that the attempt to change the beginning date of effectivity of petitioners contracts
was very crudely done. The alterations are very obvious, and they have not been initialed by the
petitioners to indicate their assent to the same. If the contracts were truly fixed-term contracts, then a
change in the term or period agreed upon is material and would already constitute a novation of the
original contract.
Such modification and denial by respondents as to the real beginning date of petitioners
employment contracts render the said contracts ambiguous. The contracts themselves state that
they would be effective until 16 February 2000 for a period of one year. If the contracts took effect
only on 6 September 1999, then its period of effectivity would obviously be less than one year, or for
a period of only about five months.
Obviously, respondents wanted to make it appear that petitioners worked for INNODATA for a period
of less than one year. The only reason the Court can discern from such a move on respondents part
is so that they can preclude petitioners from acquiring regular status based on their employment for
one year. Nonetheless, the Court emphasizes that it has already found that petitioners should be
considered regular employees of INNODATA by the nature of the work they performed as
formatters, which was necessary in the business or trade of INNODATA. Hence, the total period of
their employment becomes irrelevant.
Even assuming that petitioners length of employment is material, given respondents muddled
assertions, this Court adheres to its pronouncement in Villanueva v. National Labor Relations
Commission,28 to the effect that where a contract of employment, being a contract of adhesion, is
ambiguous, any ambiguity therein should be construed strictly against the party who prepared it. The
Court is, thus, compelled to conclude that petitioners contracts of employment became effective on
16 February 1999, and that they were already working continuously for INNODATA for a year.
Further attempting to exonerate itself from any liability for illegal dismissal, INNODATA contends that
petitioners were project employees whose employment ceased at the end of a specific project or
undertaking. This contention is specious and devoid of merit.
In Philex Mining Corp. v. National Labor Relations Commission,29 the Court defined "project
employees" as those workers hired (1) for a specific project or undertaking, and wherein (2) the
completion or termination of such project has been determined at the time of the engagement of the
Scrutinizing petitioners employment contracts with INNODATA, however, failed to reveal any
mention therein of what specific project or undertaking petitioners were hired for. Although the
contracts made general references to a "project," such project was neither named nor described at
all therein. The conclusion by the Court of Appeals that petitioners were hired for the Earthweb
project is not supported by any evidence on record. The one-year period for which petitioners were
hired was simply fixed in the employment contracts without reference or connection to the period
required for the completion of a project. More importantly, there is also a dearth of evidence that
such project or undertaking had already been completed or terminated to justify the dismissal of
petitioners. In fact, petitioners alleged - and respondents failed to dispute that petitioners did not

work on just one project, but continuously worked for a series of projects for various clients of
In Magcalas v. National Labor Relations Commission,30 the Court struck down a similar claim by the
employer therein that the dismissed employees were fixed-term and project employees. The Court
here reiterates the rule that all doubts, uncertainties, ambiguities and insufficiencies should be
resolved in favor of labor. It is a well-entrenched doctrine that in illegal dismissal cases, the employer
has the burden of proof. This burden was not discharged in the present case.
As a final observation, the Court also takes note of several other provisions in petitioners
employment contracts that display utter disregard for their security of tenure. Despite fixing a period
or term of employment, i.e., one year, INNODATA reserved the right to pre-terminate petitioners
employment under the following circumstances:
6.1 x x x Further should the Company have no more need for the EMPLOYEEs services on account
of completion of the project, lack of work (sic) business losses, introduction of new production
processes and techniques, which will negate the need for personnel, and/or overstaffing, this
contract maybe pre-terminated by the EMPLOYER upon giving of three (3) days notice to the
6.4 The EMPLOYEE or the EMPLOYER may pre-terminate this CONTRACT, with or without cause,
by giving at least Fifteen (15) [day] notice to that effect. Provided, that such pre-termination shall
be effective only upon issuance of the appropriate clearance in favor of the said EMPLOYEE.
(Emphasis ours.)
Pursuant to the afore-quoted provisions, petitioners have no right at all to expect security of tenure,
even for the supposedly one-year period of employment provided in their contracts, because they
can still be pre-terminated (1) upon the completion of an unspecified project; or (2) with or without
cause, for as long as they are given a three-day notice. Such contract provisions are repugnant to
the basic tenet in labor law that no employee may be terminated except for just or authorized cause.
Under Section 3, Article XVI of the Constitution, it is the policy of the State to assure the workers of
security of tenure and free them from the bondage of uncertainty of tenure woven by some
employers into their contracts of employment. This was exactly the purpose of the legislators in
drafting Article 280 of the Labor Code to prevent the circumvention by unscrupulous employers of
the employees right to be secure in his tenure by indiscriminately and completely ruling out all
written and oral agreements inconsistent with the concept of regular employment.
In all, respondents insistence that it can legally dismiss petitioners on the ground that their term of
employment has expired is untenable. To reiterate, petitioners, being regular employees of
INNODATA, are entitled to security of tenure. In the words of Article 279 of the Labor Code:
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.

By virtue of the foregoing, an illegally dismissed employee is entitled to reinstatement without loss of
seniority rights and other privileges, with full back wages computed from the time of dismissal up to
the time of actual reinstatement.
Considering that reinstatement is no longer possible on the ground that INNODATA had ceased its
operations in June 2002 due to business losses, the proper award is separation pay equivalent to
one month pay31 for every year of service, to be computed from the commencement of their
employment up to the closure of INNODATA.
The amount of back wages awarded to petitioners must be computed from the time petitioners were
illegally dismissed until the time INNODATA ceased its operations in June 2002.32
Petitioners are further entitled to attorneys fees equivalent to 10% of the total monetary award
herein, for having been forced to litigate and incur expenses to protect their rights and interests
Finally, unless they have exceeded their authority, corporate officers are, as a general rule, not
personally liable for their official acts, because a corporation, by legal fiction, has a personality
separate and distinct from its officers, stockholders and members. Although as an exception,
corporate directors and officers are solidarily held liable with the corporation, where terminations of
employment are done with malice or in bad faith,33 in the absence of evidence that they acted with
malice or bad faith herein, the Court exempts the individual respondents, Leo Rabang and Jane
Navarette, from any personal liability for the illegal dismissal of petitioners.
WHEREFORE, the Petition for Review on Certiorari is GRANTED. The Decision dated 25
September 2006 and Resolution dated 15 June 2007 of the Court of Appeals in CA-G.R. SP No.
72795are hereby REVERSED and SET ASIDE. RespondentInnodata Philippines, Inc./Innodata
Corporation isORDERED to pay petitioners Cherry J. Price, Stephanie G. Domingo, and Lolita
Arbilera: (a) separation pay, in lieu of reinstatement, equivalent to one month pay for every year of
service, to be computed from the commencement of their employment up to the date respondent
Innodata Philippines, Inc./Innodata Corporation ceased operations; (b) full backwages, computed
from the time petitioners compensation was withheld from them up to the time respondent Innodata
Philippines, Inc./Innodata Corporation ceased operations; and (3) 10% of the total monetary award
as attorneys fees. Costs against respondent Innodata Philippines, Inc./Innodata Corporation.

G.R. No. 177114

January 21, 2010

MANOLO A. PEAFLOR, Petitioner,

MEDYLENE M. DEMOGENA, Finance Manager, and PAUL U. LEE, Chairman, Respondents.
PETITIONER Manolo A. Peaflor (Peaflor) seeks the reversal of the Court of Appeals (CA)
decision1 dated December 29, 2006 and its resolution2 dated March 14, 2007, through the present
petition for review on certiorari filed under Rule 45 of the Rules of Court. The assailed CA decision
affirmed the September 24, 2002 decision3 of the National Labor Relations Commission (NLRC) that
in turn reversed the August 15, 2001 decision4 of the Labor Arbiter.5
Peaflor was hired on September 2, 1999 as probationary Human Resource Department (HRD)
Manager of RESPONDENT Outdoor Clothing Manufacturing Corporation (Outdoor Clothing or
the company). As HRD head, Peaflor was expected to (1) secure and maintain the right quality and
quantity of people needed by the company; (2) maintain the harmonious relationship between the
employees and management in a role that supports organizational goals and individual aspirations;
and (3) represent the company in labor cases or proceedings. Two staff members were assigned to
work with him to assist him in undertaking these functions.
Peaflor claimed that his relationship with Outdoor Clothing went well during the first few months of
his employment; he designed and created the companys Policy Manual, Personnel Handbook, Job
Expectations, and Organizational Set-Up during this period. His woes began when the companys
Vice President for Operations, Edgar Lee (Lee), left the company after a big fight between Lee and
Chief Corporate Officer Nathaniel Syfu (Syfu). Because of his close association with Lee, Peaflor
claimed that he was among those who bore Syfus ire.
When Outdoor Clothing began undertaking its alleged downsizing program due to negative
business returns, Peaflor alleged that his department had been singled out. On the pretext of
retrenchment, Peaflors two staff members were dismissed, leaving him as the only member of
Outdoor Clothings HRD and compelling him to perform all personnel-related work. He worked as a
one-man department, carrying out all clerical, administrative and liaison work; he personally went to
various government offices to process the companys papers.
When an Outdoor Clothing employee, Lynn Padilla (Padilla), suffered injuries in a bombing incident,
the company required Peaflor to attend to her hospitalization needs; he had to work outside
office premises to undertake this task. As he was acting on the companys orders, Peaflor
considered himself to be on official business, but was surprised when the company deducted six
days salary corresponding to the time he assisted Padilla. According to Finance Manager
Medylene Demogena (Demogena), he failed to submit his trip ticket, but Peaflor belied this
claim as a trip ticket was required only when a company vehicle was used and he did not use
any company vehicle when he attended to his off-premises work.6
After Peaflor returned from his field work on March 13, 2000, his officemates informed him that
while he was away, Syfu had appointed Nathaniel Buenaobra (Buenaobra) as the new HRD
Manager. This information was confirmed by Syfus memorandum of March 10, 2000 to the entire
office stating that Buenaobra was the concurrent HRD and Accounting Manager.7 Peaflor was

surprised by the news; he also felt betrayed and discouraged. He tried to talk to Syfu to clarify the
matter, but was unable to do so. Peaflor claimed that under these circumstances, he had no
option but to resign. He submitted a letter to Syfu declaring his irrevocable resignation from his
employment with Outdoor Clothing effective at the close of office hours on March 15, 2000.8
Peaflor then filed a complaint for illegal dismissal with the labor arbiter, claiming that he had
been constructively dismissed. He included in his complaint a prayer for reinstatement and
payment of backwages, illegally deducted salaries, damages, attorneys fees, and other monetary
Outdoor Clothing denied Peaflors allegation of constructive dismissal. It posited instead that
Peaflor had voluntarily resigned from his work. Contrary to Peaflors statement that he had been
dismissed from employment upon Syfus appointment of Buenaobra as the new HRD Manager on
March 10, 2000, Peaflor had in fact continued working for the company until his resignation on
March 15, 2000. The company cited as evidence the security report that Peaflor himself prepared
and signed on March 13, 2000.9
Outdoor Clothing disclaimed liability for any of Peaflors monetary claims. Since Peaflor had
voluntarily resigned, Outdoor Clothing alleged that he was not entitled to any backwages and
damages. The company likewise denied making any illegal deduction from Peaflors salary; while
deductions were made, they were due to Peaflors failure to report for work during the dates the
company questioned. As a probationary employee, he was not yet entitled to any leave credit that
would offset his absences.
In his August 15, 2001 decision, the labor arbiter found that Peaflor had been illegally
dismissed.10 Outdoor Clothing was consequently ordered to reinstate Peaflor to his former or to an
equivalent position, and to pay him his illegally deducted salary for six days, proportionate 13th
month pay, attorneys fees, moral and exemplary damages.
Outdoor Clothing appealed the labor arbiters decision with the NLRC. It insisted that Peaflor had
not been constructively dismissed, claiming that Peaflor tendered his resignation on March 1, 2000
because he saw no future with the corporation due to its dire financial standing. Syfu alleged that he
was compelled to appoint Buenaobra as concurrent HRD Manager through a memorandum dated
March 1, 2000 to cover the position that Peaflor would soon vacate.11 The appointment was also
made to address the personnel matters that had to be taken cared of while Peaflor was on
unauthorized leave. Incidentally, Outdoor Clothing alleged that Peaflor had already been given
two notices, on March 6 and 11, 2000 (absence without official leave memoranda or the AWOL
memoranda), for his unauthorized absences. In a memorandum dated March 3, 2000 addressed to
Syfu, Buenaobra accepted the appointment.12
Peaflor contested Syfus March 1, 2000 memorandum, Buenaobras March 3, 2000
memorandum, and the AWOL memoranda, claiming these pieces of evidence were fabricated and
were never presented before the labor arbiter. He pointed out that nothing in this resignation letter
indicated that it was submitted to and received by Syfu on March 1, 2000. He claimed that it was
submitted on March 15, 2000, the same date he made his resignation effective. The AWOL
memoranda could not be relied on, as he was never furnished copies of these. Moreover, he could
not be on prolonged absence without official leave, as his residence was just a few meters away
from the office.
The NLRC apparently found Outdoor Clothings submitted memoranda sufficient to overturn the
labor arbiters decision.13 It characterized Peaflors resignation as a response, not to the allegedly
degrading and hostile treatment that he was subjected to by Syfu, but to Outdoor Clothings

downward financial spiral. Buenaobras appointment was made only after Peaflor had submitted
his resignation letter, and this was made to cover the vacancy Peaflors resignation would create.
Thus, Peaflor was not eased out from his position as HRD manager. No malice likewise was
present in the companys decision to dismiss Peaflors two staff members; the company simply
exercised its management prerogative to address the financial problems it faced. Peaflor, in fact,
drafted the dismissal letters of his staff members. In the absence of any illegal dismissal, no basis
existed for the monetary awards the labor arbiter granted.
Peaflor anchored his certiorari petition with the CA on the claim that the NLRC decision was tainted
with grave abuse of discretion, although he essentially adopted the same arguments he presented
before the labor arbiter and the NLRC.
In a decision dated December 29, 2006,14 the CA affirmed the NLRCs decision, stating that
Peaflor failed to present sufficient evidence supporting his claim that he had been constructively
dismissed. The CA ruled that Peaflors resignation was knowingly and voluntarily made.
Accordingly, it dismissed Peaflors certiorari petition. It likewise denied the motion for
reconsideration that Peaflor subsequently filed.15 Faced with these CA actions, Peaflor filed with
us the present petition for review on certiorari.
Peaflor insists that, contrary to the findings of the NLRC and the CA, he had been constructively
dismissed from his employment with Outdoor Clothing. He alleges that the dismissal of his two staff
members, the demeaning liaison work he had to perform as HRD Manager, the salary deduction for
his alleged unauthorized absences, and the appointment of Buenaobra as the new HRD manager
even before he tendered his resignation, were clear acts of discrimination that made his continued
employment with the Outdoor Clothing unbearable. He was thus forced to resign.
Outdoor Clothing claims that Peaflor voluntarily resigned from his work and his contrary allegations
were all unsubstantiated. The HRD was not singled out for retrenchment, but was simply the first to
lose its staff members because the company had to downsize. Thus, all HRD work had to be
performed by Peaflor. Instead of being grateful that he was not among those immediately
dismissed due to the companys retrenchment program, Peaflor unreasonably felt humiliated in
performing work that logically fell under his department; insisted on having a full staff complement;
absented himself from work without official leave; and demanded payment for his unauthorized
The Court finds the petition meritorious.
A preliminary contentious issue is Outdoor Clothings argument that we should dismiss the petition
outright because it raises questions of facts, not the legal questions that should be raised in a Rule
45 petition.16
We see no merit in this argument as the rule that a Rule 45 petition deals only with legal issues is
not an absolute rule; it admits of exceptions. In the labor law setting, we wade into factual issues
when conflict of factual findings exists among the labor arbiter, the NLRC, and the CA. This is the
exact situation that obtains in the present case since the labor arbiter found facts supporting the
conclusion that there had been constructive dismissal, while the NLRCs and the CAs factual
findings contradicted the labor arbiters findings.17 Under this situation, the conflicting factual findings

below are not binding on us, and we retain the authority to pass on the evidence presented and draw
conclusions therefrom.18
The petition turns on the question of whether Peaflors undisputed resignation was a voluntary or a
forced one, in the latter case making it a constructive dismissal equivalent to an illegal dismissal. A
critical fact necessary in resolving this issue is whether Peaflor filed his letter of resignation before
or after the appointment of Buenaobra as the new/concurrent HRD manager. This question also
gives rise to the side issue of when Buenaobras appointment was made. If the resignation letter was
submitted before Syfus appointment of Buenaobra as new HRD manager, little support exists for
Peaflors allegation that he had been forced to resign due to the prevailing abusive and hostile
working environment. Buenaobras appointment would then be simply intended to cover the vacancy
created by Peaflors resignation. On the other hand, if the resignation letter was submitted after the
appointment of Buenaobra, then factual basis exists indicating that Peaflor had been constructively
dismissed as his resignation was a response to the unacceptable appointment of another person to
a position he still occupied.
The question of when Peaflor submitted his resignation letter arises because this letter
undisputably made was undated. Despite Peaflors claim of having impressive intellectual and
academic credentials,19 his resignation letter, for some reason, was undated. Thus, the parties have
directly opposing claims on the matter. Peaflor claims that he wrote and filed the letter on the
same date he made his resignation effective March 15, 2000. Outdoor Clothing, on the other
hand, contends that the letter was submitted on March 1, 2000, for which reason Syfu issued a
memorandum of the same date appointing Buenaobra as the concurrent HRD manager; Syfus
memorandum cited Peaflors intention to resign so he could devote his time to teaching. The
company further cites in support of its case Buenaobras March 3, 2000 memorandum accepting his
appointment. Another piece of evidence is the Syfu memorandum of March 10, 2000, which
informed the office of the appointment of Buenaobra as the concurrent Head of HRD the position
that Peaflor occupied. Two other memoranda are alleged to exist, namely, the AWOL memoranda
of March 6 and 11, 2000, allegedly sent to Penaflor.
Several reasons arising directly from these pieces of evidence lead us to conclude that Peaflor did
indeed submit his resignation letter on March, 15, 2000, i.e., on the same day that it was
First, we regard the Syfu memorandum of March 1, 2000 and the memorandum of Buenaobra of
March 3, 2000 accepting the position of HRD Head to be highly suspect. In our view, these
memoranda, while dated, do not constitute conclusive evidence of their dates of preparation
and communication. Surprisingly, Peaflor was never informed about these memoranda when they
directly concerned him, particularly the turnover of responsibilities to Buenaobra if indeed Peaflor
had resigned on March 1, 2000 and a smooth turnover to Buenaobra was intended. Even the
recipients of these communications do not appear to have signed for and dated their receipt. The
AWOL memoranda, to be sure, should have been presented with proof of service if they were to
have any binding effect on Peaflor.
Second,we find it surprising that these pieces of evidence pointing to a March 1, 2000 resignation
specifically, Syfus March 1, 2000 memorandum to Buenaobra about Penaflors resignation and
Buenaobras own acknowledgment and acceptance were only presented to the NLRC on
appeal, not before the labor arbiter. The matter was not even mentioned in the companys position
paper filed with the labor arbiter.20 While the presentation of evidence at the NLRC level on appeal is
not unheard of in labor cases,21 still sufficient explanation must be adduced to explain why this
irregular practice should be allowed. In the present case, Outdoor Clothing totally failed to explain

the reason for its omission. This failure, to us, is significant, as these were the clinching pieces of
evidence that allowed the NLRC to justify the reversal of the labor arbiters decision.
Third, the circumstances and other evidence surrounding Peaflors resignation support his claim
that he was practically compelled to resign from the company.
Foremost among these is the memorandum of March 10, 2000 signed by Syfu informing the whole
office ("To: All concerned") about the designation of Buenaobra as concurrent Accounting and
HRD Manager. In contrast with the suspect memoranda we discussed above, this memorandum
properly bore signatures acknowledging receipt and dates of receipt by at least five company
officials, among them the readable signature of Demogene and one Agbayani; three of them
acknowledged receipt on March 13, 2000, showing that indeed it was only on that day that the
appointment of Buenaobra to the HRD position was disclosed. This evidence is fully consistent
with Peaflors position that it was only in the afternoon of March 13, 2000 that he was told,
informally at that, that Buenaobra had taken over his position. It explains as well why as late as
March 13, 2000, Peaflor still prepared and signed a security report,22 and is fully consistent with his
position that on that day he was still working on the excuse letter of certain sales personnel of the
We note that the company only belatedly questioned the motivation that Peaflor cited for his
discriminatory treatment, i.e., that he was caught in the bitter fight between Syfu and Lee, then Vice
President for Operations, that led the latter to leave the company.24 After Lee left, Peaflor alleged
that those identified with Lee were singled out for adverse treatment, citing in this regard the
downsizing of HRD that occurred on or about this time and which resulted in his one-man HRD
operation. We say this downsizing was only "alleged" as the company totally failed despite
Penaflors claim of discriminatory practice to adduce evidence showing that there had indeed been
a legitimate downsizing. Other than its bare claim that it was facing severe financial problems,
Outdoor Clothing never presented any evidence to prove both the reasons for its alleged
downsizing and the fact of such downsizing. No evidence was ever offered to rebut Peaflors claim
that his staff members were dismissed to make his life as HRD Head difficult. To be sure, Peaflors
participation in the termination of his staff members employment cannot be used against him, as the
termination of employment was a management decision that Peaflor, at his level, could not have
effectively contested without putting his own job on the line.
Peaflors own service with the company deserves close scrutiny. He started working for the
company on September 2, 1999 so that by March 1, 2000, his probationary period would have
ended and he would have become a regular employee. We find it highly unlikely that Peaflor
would resign on March 1, 2000 and would then simply leave given his undisputed record of having
successfully worked within his probationary period on the companys Policy Manual, Personnel
Handbook, Job Expectations, and Organizational Set-up. It does not appear sound and logical to us
that an employee would tender his resignation on the very same day he was entitled by law to be
considered a regular employee, especially when a downsizing was taking place and he could have
availed of its benefits if he would be separated from the service as a regular employee. It was
strange, too, that he would submit his resignation on March 1, 2000 and keep completely quiet about
this development until its effective date on March 15, 2000. In the usual course, the turnover alone of
responsibilities and work loads to the successor in a small company would have prevented the
matter from being completely under wraps for 10 days before any announcement was ever made.
That Peaflor was caught by surprise by the turnover of his post to Buenaobra is in fact indicated by
the companys own evidence that Peaflor still submitted a security report on March 13, 2000. On
the whole, Peaflors record with the company is not that of a company official who would simply and
voluntarily tender a precipitate resignation on the excuse that he would devote his time to teaching
a lame excuse at best considering that March is the month the semester usually ends and is two or
three months away from the start of another school year.

In our view, it is more consistent with human experience that Peaflor indeed learned of the
appointment of Buenaobra only on March 13, 2000 and reacted to this development through his
resignation letter after realizing that he would only face hostility and frustration in his working
environment. Three very basic labor law principles support this conclusion and militate against
the companys case.
The FIRST is the settled rule that in employee termination disputes, the employer bears the burden
of proving that the employees dismissal was for just and valid cause.25 That Peaflor did indeed
file a letter of resignation does not help the companys case as, other than the fact of resignation, the
company must still prove that the employee voluntarily resigned.26 There can be no valid resignation
where the act was made under compulsion or under circumstances approximating compulsion, such
as when an employees act of handing in his resignation was a reaction to circumstances leaving
him no alternative but to resign.27 In sum, the evidence does not support the existence of
voluntariness in Peaflors resignation.1 a vv p h i 1
SECOND basic principle is that expressed in Article 4 of the Labor Code that all doubts in the
interpretation and implementation of the Labor Code should be interpreted in favor of the
workingman. This principle has been extended by jurisprudence to cover doubts in the evidence
presented by the employer and the employee.28 As shown above, Peaflor has, at very least, shown
serious doubts about the merits of the companys case, particularly in the appreciation of the
clinching evidence on which the NLRC and CA decisions were based. In such contest of evidence,
the cited Article 4 compels us to rule in Peaflors favor. Thus, we find that Peaflor was
constructively dismissed given the hostile and discriminatory working environment he found himself
in, particularly evidenced by the escalating acts of unfairness against him that culminated in the
appointment of another HRD manager without any prior notice to him. Where no less than the
companys chief corporate officer was against him, Peaflor had no alternative but to resign from his
Last but not the least, we have repeatedly given significance in abandonment and constructive
dismissal cases to the employees reaction to the termination of his employment and have asked
the question: is the complaint against the employer merely a convenient afterthought subsequent to
an abandonment or a voluntary resignation? We find from the records that Peaflor sought almost
immediate official recourse to contest his separation from service through a complaint for illegal
dismissal.30 This is not the act of one who voluntarily resigned; his immediate complaints
characterize him as one who deeply felt that he had been wronged.
WHEREFORE, we GRANT the petitioners petition for review on certiorari, and REVERSE the
decision and resolution of the Court of Appeals in CA-G.R. SP No. 87865 promulgated on December
29, 2006 and March 14, 2007, respectively. We REINSTATE the decision of the labor arbiter dated
August 15, 2001, with the MODIFICATION that, due to the strained relations between the parties,
respondents are additionally ordered to pay separation pay equivalent to the petitioners one months
Costs against the respondents.

G.R. No. 95816 October 27, 1992

RAMOS, respondents.

This is a petition for review on certiorari assailing the Resolution * dated October 19, 1990 of public
respondent National Labor Relations Commission (First Division) (hereinafter referred to as NLRC
for brevity) which affirmed the November 19, 1989 decision of Labor Arbiter Jose de Vera in NCR
Cases No. 00-04-1890-89, 00-05-02388-89, 00-06-02633-89 and 00-06-02078-89 granting
separation pay to the complainants, herein private respondents.
Petitioner Philippine National Construction Corporation (PNCC for brevity) is a government owned
and controlled corporation engaged in general construction work both in the Philippines and abroad.
Private respondents were employed by the PNCC until their retrenchment as specified hereunder:
Employee Date Nature of
Employed Employment Separated
1. Jeoffrey Gabaya 6-01-76 H.E Operator 3-15-89
2. Egmedio Arines 3-27-73 Foreman 3-18-89
3. Jaime Allapitan 3-15-72 Instrumentman 3-18-89
4. Roberto Balajadia 7-04-74 Carpenter 3-18-89
5. Luciano Lacorta 10-10-71 Carpenter Welder 3-07-89
6. Agapito Lundang 12-18-73 Survey Aide 3-18-89
7. Ponciano Pepito 9-22-72 Welder III 3-15-89
8. Remigio Maquiota 4-15-75 Loader Operator 3-15-89
9. Ernesto Venancio 7-12-74 Truck Driver 4-12-89
10. Isabelo de Castro 10-11-74 Plant Tender 6-30-89
11. Ricardo Dimanlig March/78 Mechanic 6-30-89

12. Perfecto Raymundo 9-01-75 Plant Mechanic 6-30-89

13. Alfredo Gabriel 2-14-72 Storekeeper 7-05-89
14. Alfredo Ramos 2-04-78 Truck Driver 4-03-89
(p. 65, Rollo.)
Sometime in February, 1989, PNCC embarked upon a retrenchment program and notified its
employees, including the private respondents, through individual form letters which reads in part:
As we all know, it is the declared policy of the State that whenever and wherever
possible, the government shall privatize all business enterprises owned or controlled
by it, one of which is the construction business of PNCC. This matter has been
announced by a management memorandum at a much earlier date. You will also
note that we have avoided bidding for new projects and have slowed down
operations in some areas. In view of this, we are constrained to reduce the
company's workforce gradually until the sale of the construction business shall have
been completed.
It is my painful task to advice you that your employment with PNCC will be
terminated effective 30 days from date hereof under a special separation program
which provides more benefits than what the law requires.
You will receive separation benefits according to the following formula:
1. One Hundred Percent (100%) of the Latest Monthly Basic Salary
for entitled employees with at least one (1) year but less than (10)
years of completed/credited service in the Company.
2. One Hundred Twenty-Five Percent (125%) of the Latest Monthly
Basic Salary for entitled employees with at least (10) years and
above completed/credited service in the Company.
3. For entitled employees who have completed at least one (1) full
year service, a fraction of at least six (6) months in their succeeding
months/years of the service shall be considered as one (1) year for
the purpose of computing their separation benefits entitled. (pp. 3334, Rollo.)
Believing that they had been underpaid their separation benefits (or not paid at all, as in the case of
Alfredo T. Gabriel ), the private respondent filed four (4) separate complaints in the NLRC (NCR
Cases No. 00-04-01890-89, 00-05-02388-89, 00-06-02633-89 and 00-06-02078-89) for the payment
of said benefits.
During the proceedings before the Labor Arbiter, it was established that, except for respondent
Egmedio Arines, the other respondents had been assigned to foreign projects of the company.
Under the "Agreement for Overseas Assignment," a temporary foreign assignment would not
interrupt the employees length of service in the company or in any employee who completed his
foreign assignment would be credited 1.5 years of service for every year of continuous service in

such foreign assignment. Petitioner PNCC did not deny the overseas assignments of the following
1. Jeoffrey Gabaya December 5, 1978 to December 6,
1980 August 6, 1981 to August 9,
1983 (Malaysia)
2. Jaime Allapitan March 11, 1981 to February 11, 1983
3. Roberto Balajadia October 4, 1981 to August 21, 1983
4. Luciano Lacorta June 7, 1979 to July 11, 1985
5. Agapito Lundang December 15, 1978 to June 1, 1982
(Saudi Arabia)
6. Ponciano Pepito 1979 to 1984 (Malaysia)
7. Remigio Mequiota 1978 to 1984 (Malaysia)
8. Ernesto Vanancio January 11, 1979 to August 8, 1983
(Saudi Arabia)
9. Isabelo de Castro 1981 to 1983 (Iraq)
10. Ricardo Dimanlig October 30, 1981 to September 30,
1983 (Iraq)
11. Perfecto Raymundo 1981 to 1983 (Iraq)
12. Alfredo Gabriel 1979 to 1982 (Saudi Arabia)
13. Alredo Ramos September 4, 1952 to December 15,
1983 (Iraq)
On the other, the above private respondents admitted that they had no project assignments on the
following dates:
1. Jeoffrey Gabaya August 10, 1983 to January 8, 1986
2. Egmedio Arines 1985 to 1986
3. Jaime Allapitan February 12, 1983 to March 13, 1985
4. Roberto Balajadia August 22, 1983 to February 15,

5. Luciaano Lacorta June 7, 1985 to February 4, 1987

6. Agapito Lundang June 1, 1982 to March 5, 1985
7. Ponciano Pepito October 7, 1984 to January 13, 1986
8. Remigio Mequiota November 18, 1984 to January 2,
9. Ernesto Venancio August 10, 1983 to January 2, 1985
10. Isabelo de Castro 1983 to 1986
11. Ricardo Dimanlig October, 1983 to September, 1987
12. Perfecto Raymundo 1983 to February 1988
13. Alfredo Gabriel October 24, 1985 to August 22, 1988
14. Afredo Ramos December 16, 1983 to January, 1985
Thus, based on their employment records, both local and overseas, less the period when
they had no project assignment, the Labor Arbiter credited each private respondent with the
following length of service with the PNCC.
1. Jeoffrey Gabaya 16 years, 4 months & 15 days
2. Egmedio Arines 13 years, 11 months & 19 days
3. Jaime Allapitan 17 years, 11 months & 27 days
4. Roberto Balajadia 15 years, 2 months & 10 days
5. Luciano Lacorta 24 years, 9 months & 10 days
6. Agapito Lundang 18 years, 6 months & 4 days
7. Ponciano Pepito 22 years, 8 months & 17 days
8. Remigio Mequiota 20 years, 10 months & 10 days
9. Ernesto Venancio 19 years, 4 months & 14 days
10. Isabelo de Castro 13 years, 8 months & 19 days
11. Ricardo Dimanlig 10 years & 3 months
12. Perfecto Raymundo 11 years, 9 months & 29 days
13. Alfredo Gabriel 19 years & 8 days

14. Alfredo Ramos 11 years & 7 months

In a decision dated November 19, 1989, the Labor Arbiter ruled that in providing a retrenchment
program for its employees, the PNCC expressly admitted that respondents were not project
employees. Hence, pursuant to the provision of the retrenchment program that employees with more
than (10) years of credited service shall receive separation benefits equivalent to 125% of the latest
monthly basic salary for each year of service, the Labor Arbiter ordered the payment of the
separation benefits as follows:
WHEREFORE, all the foregoing premises being considered, judgment is hereby
rendered ordering respondent company to pay complainants the latter's separation
benefits as follows:
Alfredo Gabaya P48,826.40
Egmedio Arines 58,065.00
Jaime Allapitan 59,436.00
Roberto Balajadia 41,250.00
Luciano Lacorta 66,950.00
Agapito Lundang 56,050.00
Ponciano Pepito 68,367.50
Remigio Meguiota 60,900.00
Ernesto Venancio 59,280.00
Isabelo de Castro 37,856,.00
Ricardo Dimanlig 26,520.00
Perfecto Raymundo 28,860.00
Alfredo Gabriel 46,193.75
Alfredo Ramos 34,476.00
less whatever sums of money paid by respondent to the abovenamed complainants
by way of separation pay.
Further, respondent is also ordered to pay complainants attorney's fees at the rate of
10% of whatever sum herein adjudicated in favor of the complainants in accordance
with the above disposition. (pp. 39-40, Rollo.)
On appeal to NLRC, the commission affirmed the decision of the Labor Arbiter and dismissed the
appeal for lack of merit.

Hence, this petition for review on certiorari by the PNCC which maintains that respondents are
project employees within the purview of Policy Instruction No. 20, hence, they are not entitled to
separation pay. The company hires workers only if it has an on-going project and terminate
employment once the project is completed. It has been the policy of the company to inform the
workers hired that their employment is coterminous with the particular project for which they are
hired and the continuation of their service is dependent upon the continued demand for the worker's
particular skill. When there is no project for them to work on, respondent are free to seek
employment with other contractors.
Petitioner PNCC further submits that respondent's claims against the company are already barred by
estoppel and prescription. When the services of the respondents were terminated due to the
completion of the project, they signed the quitclaim incorporated in the Personnel Action Form. Not
one of them registered his objection to his procedure which had been followed several time in the
past. For failure to object to quitclaims which they had voluntarily signed, the private respondents are
in estoppel to assert their present claims against the company.
Petitioner further alleges that while the retrenchment program of the company is intended to include
only the project employees currently employed in the project of the company, the separation pay
demanded by the private respondents pertains to their past employment in the company's project
way back in 1976 and for which they have already received the corresponding benefits.
Respondents rights of action has prescribed.
Private respondents, on the other hand, hold that they are not project employees because they are
hired continuously for a series of projects for several years. They were described as either "regular"
or "probationary" employees in their employment papers and were given separation pay only in
1989. As held in Philippine National Construction Corporation vs. NLRC (174 SCRA 191), PNCC's
practice of rehiring an employee after the completion of every project for several years, without
reporting to the nearest public employment everytime a project is completed, as required under
Policy Instruction No. 20, shows that the employee is a regular employee and not a mere project
The petition is bereft of merits.
Project employees are those whose work is coterminous with the project for which they were hired
(Sandoval Shipyards, Inc. vs. NLRC, 136 SCRA 674). As distinguished from regular or non-project
employees, they are those who are hired "for a specific project or undertaking the completion or
termination or which has been determined at the time of the engagement of the employee, or where
the work or services to be performed is seasonal in nature and the employment is for the duration of
the season." (Art. 280, Labor Code.)
However, in Philippine National Construction Corporation vs. NLRC, (supra), a case involving the
petitioner and an oiler who had worked in the company for thirteen (13) years, the court affirmed the
Labor Arbiter's ruling that since the company had rehired the oiler after the completion of every
project and this rehiring continued throughout the oiler's period of employment, the latter was
a regular employee. The same conclusion should be arrived at in his case where the private
respondents had been hired and rehired for the period of their respective employment with the
company which ranged from eleven years to more than twenty-four years.
Indeed, if the private respondents were project employees, the petitioner should have submitted a
report their termination to the nearest public employment office everytime their employment was
terminated due to the completion of the project, as required under Policy Instruction No. 20 which

Project employees are not entitled to termination pay if they are terminated as the
result of the completion of the project or any phase thereof in which they are
employed, regardless of the number of projects in which they have been employed
by a particular construction company. Moreover, the company is not required to
obtain a clearance from the Secretary of Labor in connection which such termination.
What is required of the company is a report to the nearest Public Employment Office
for the statistical purposes. (PNCC vs. NLRC, 174 SCRA 191; Magante vs. NLRC,
185 SCRA 21, 28.)
The termination letter which PNCC sent to each of the private respondents expressly promised them
separation benefits. As observed by the Labor Arbiter, this is an express admission by the petitioner
that the private respondents are not project employees for, as provided in Policy Instruction No. 20,
"project employees are not entitled to termination pay if they are terminated as a result of the
completion of the project or any phase thereof in which they are employed." (p. 13, Rollo.)
The fact that the respondent-employees signed quitclaims will not bar them for pursuing their claims
against the company for quitclaims executed by laborers are frowned upon as contrary to public
policy, and are ineffective to bar claims for the full measure of the worker's legal rights (Lopez Sugar
Corporation vs. Federation of Free Workers, 189 SCRA 179).
Petitioner's contention that the respondent's cause of action has prescribed is not well taken. The
three-year prescriptive period under Article 291 of the Labor Code is counted from the time the
cause of action accrues. Respondent's cause of action accrued only in March, 1989. The complaint
for the underpayment of separation pay was filed on April 18, 1989, barely a month after their
separation from employment. Clearly, prescription had not yet extinguished their claims.
WHEREFORE, the petition for certiorari is DENIED for lack of merit and the Resolution dated
October 19, 1990 of the NLRC is AFFIRMED.

G.R. No. 174593

August 25, 2010

ALEX GURANGO, Petitioner,

The Case
This is a petition1 for review on certiorari under Rule 45 of the Rules of Court. The petition
challenges the 20 July 2006 Decision2 and 11 September 2006 Resolution3 of the Court of Appeals
in CA-G.R. SP No. 94004. The Court of Appeals set aside the 17 October 20054 and 24 January
20065 Resolutions of the National Labor Relations Commission (NLRC) in CA No. 044428-05,
affirming the 6 July 2004 Decision6 of the Labor Arbiter in NLRC NCR Case No. 05-06181-03.
The Facts
Respondent Best Chemicals and Plastics, Inc. (BCPI) is a corporation engaged in the manufacture
of biaxially oriented polypropylene and related products. Respondent Moon Pyo Hong (Hong) is the
president and chief executive officer of BCPI.
Petitioner Alex R. Gurango (Gurango) and Romeo S. Albao (Albao) worked as boiler operator and
security guard, respectively, in BCPI. In a memorandum7 dated 2 May 2003, BCPI prohibited its
empoyees from bringing personal items to their work area. Erring employees would be suspended
for six days. BCPI stated that:
Please be reminded of the following existing rules and regulations that all employees are expected
to strictly observe and adhere to:
Bringing in to work station/area of personal belongings other than those required in the performance
of ones duty which disrupt/obstruct Companys services and operations, except those authorized by
higher authorities. This offense shall include the following items [sic]: radios, walkman, discman,
make-up kits, ladies bags, workers knapsacks and the like which must be left behind and safe kept
[sic] in the employees respective lockers. This being a Serious Offense, the penalty of which is six
(6) days suspension from work without pay.81avvphi1
Gurango and Albao presented two conflicting sets of facts as to what happened on 5 May 2003.
According to Gurango, at 4 a.m., he performed his routine check-up inside the production area. He
had in his pocket a camera without film. On his way out of the production area, he saw Albao
standing near the bundy clock. Albao pulled him, grabbed his pocket, and tried to confiscate the
camera. Gurango refused to give the camera because there was no reason to surrender it.
Albao held Gurangos arm and punched him on the face. Gurango shouted for help. Another security
guard, Rodenio I. Pablis (Pablis), arrived. Instead of pacifying Albao, Pablis joined in punching and

kicking Gurango. Albao and Pablis banged Gurangos head against the floor and provoked him to
fight back.
Gurangos co-worker, Elvin Juanitas (Juanitas), saw what happened and asked Albao and Pablis to
stop hitting Gurango. Albao and Pablis brought Gurango to the guardhouse. Officer-in-charge
Rommel M. Cordero (Cordero) locked the guardhouse, then ordered Albao and Pablis to continue
hitting Gurango. Freddie Infuerto arrived at the guardhouse and asked the security guards to stop
hitting Gurango. Gurango agreed to surrender the camera on the condition that the security guards
would prepare a document acknowledging receipt of the camera.
Albao, on the other hand, alleged that he was on duty at the main entrance of the production area
from 7 p.m. of 4 May 2003 to 7 a.m. of 5 May 2003. At 4:20 a.m., Gurango tried to enter the
production area bringing a camera. Albao told Gurango that he could not bring the camera inside the
production area. Gurango got mad and tried to grab Albaos gun. Albao and Gurango engaged in a
fistfight. Cordero, Pablis, and another security guard, Fredrick Laada, arrived and stopped the fight.
On 5 May 2003, at 8:35 a.m., Gurango went to Dr. Homer L. Aguinaldo (Dr. Aguinaldo) for
examination and treatment. Dr. Aguinaldo issued a medical report9 and advised Gurango to rest for
three days.
In a letter10 dated 5 May 2003, BCPI asked Gurango to explain in writing why no disciplinary action
should be taken against him and then placed him under preventive suspension effective 6 May
2003. On 6 May 2003, Gurango wrote a letter11 to BCPI narrating what happened. On 8 May 2003,
Gurango wrote another letter12 to BCPI stating that:
I already explained my side of the story regarding the alleged fistfight between Romeo Albao and
me. I would like to reiterate that I was never involved in any fistfight nor commit any violation of our
Companys Code of Discipline.
Another issue is the preventive suspension Im undergoing with [sic]. I would like to question the
propriety of such action. Be reminded that you are putting me under indefinite preventive
Under the law, an employee may be placed under preventive suspension only if his continued
employment poses a serious and imminent threat to the life and property of the employer or of his
co-employees. Consequently, without this kind of threat, preventive suspension is improper.13
On 9 May 2003, Juanitas wrote a letter14 to BCPI narrating what he saw. Juanitas stated that:
Noong May 5 bandang alas 4:20 ng madaling araw ako po ay lumabas ng electral [sic] shop upang
pumunta saproduction upang mag monitor. Ng sa bandang locker room pa lang ako may nakita ako
tatlong tao na nakasuot ng kulay puti na nagpaikot-ikot (sa harapan banda ng bandi [sic]
clock). Medyo madilim pa kaya hindi ko nakita siAlex Gurango kasi nakasoot sya ng kulay dark
blue na T-shirt. Ng medyo malapit na ako nakarinig ako ng boses na (tama na nasasaktan na
ako) at may sumagot na ibigay mo na masasaktan ka lang. Ng makalapit na ako sa kanila nakita ko
na iniipit na ng kanang braso ni Albao (Guard) ang leeg ni Alex. Akala ko nagbibiroan lang
sila.Tinanong ko kung ano yan pero bago ako tumanong sa kanila nakita ko na nasasaktan na
si Alex dahil sa pagkaipit sa kanyang leeg. Sagot ni Alex sa akin pre (ako) kinukuha nila ang kamera
sa akin to eh. Sabi pa niAlex hindi ko to ibibigay sa inyo kahit akoy saktan nyo, hindi ako lalaban sa
inyo. May pagbibigyan ako, ibibigay ko to sa management. Sabi ko ano ba yan nasasaktan na ang
tao. Nagtataka naman ako sa kanila ni Pables atLaada bakit hindi nila inaawat, nakatingin lang sila
at kasamahan pa nila. Ako naman natatakot akong paghiwalayin sila kasi may baril si Albao na naka

sabit sa beywang nya baka pag inawat ko baka sasabihin niAlbao na kumampi ako kay Alex dahil
parehas kaming maintenance. Sinabihan ko si Albao na bitiwan mo si Alexayusin natin to. Hindi pa
rin binitiwan ni Albao ang pagkaipit sa leeg ni Alex hanggang sa naitulak ko sila papunta
sa guardhouse. Ng sa loob na ng guardhouse hindi pa rin binitiwan ni Albao si Alex kaya hinahanap
ko ang kanilang O.I.C. Para ayusin na. Maya maya lumabas si Cordero (O.I.C.). Sabi ko awatin niya
si Albao pero hindi manlang nya inawat pati na ang kanyang mga kasama dahil nandoon pa rin sa
loob ng guardhouse sina Pables, Laada at Cordero. Lumabas ako at tinawag ko si Pong sa
kanilang shop. Bumalik ako sa guardhouse kasama siPong, ganon pa rin nakakapit pa rin ang braso
ni Albao sa leeg ni Alex. Ngayon naglakas loob na lang ako na paghiwalayin sila. Nahirapan ako
dahil malakas si Albao. Napaghiwalay ko sila pero muntik pa nga ako tamaan ng kamay ni Albao at
ng maghiwalay na pinaupo ko si Alex sa upuan sa tabi at hinarang ko si Albao dahil gusto pa nyang
lumapit kay Alex at nagsabi ako kay Pong na bantayan mo si Alex dahil tatawag ako
ng Korean osupervisor para ayusin.15
On 10 May 2003, BCPI wrote a letter to Gurango finding him guilty of engaging in a fistfight and
violating company policy by bringing a camera. On 14 May 2003, Gurango wrote a letter16 to BCPI
stating that:
I again would like to reiterate that I was never involved nor commit [sic] any violation of Companys
Code of Discipline.
For me to further explain, could you please be more specific what company policies are you referring
to when you said that bringing of camera inside the production area and refusal to surrender the
same camera constitute infractions of company policy.17
On 15 May 2003, Gurango filed with the 5th Municipal Circuit Trial Court (MCTC), Carmona, Cavite,
a criminal complaint18 against Albao, Cordero and Pablis for slight physical injury.
In a letter19 dated 19 May 2003, BCPI dismissed Gurango effective 20 May 2003. BCPI stated that:
After a thorough evaluation and intensive deliberation on the facts attendant to your case,
Management has found you to have committed the following Offenses under the Companys Code of
1. Concealing and bringing in to work station/area of personal belongings (e.g., a camera),
other than those required in the performance of ones duty which disrupt/obstruct Company
services and operations, except those authorized by higher authorities. (Table II, Serious,
No. 10 of Code of Discipline);
2. Utter disregard for or refusal to submit to reasonable inspection connected within [sic] the
Company premises by authorized Company security personnel in the conduct of their
business. (Table IV, Minor, No. 1 of Code of Discipline);
3. Starting or provoking a fight, i.e., involvement in a fist fight with a security guard last May
5, 2003. (Table I, Grave, No. 6 of Code of Discipline);
4. Attempting to inflict or inflicting bodily injury upon any Company official (e.g., security
guard who is a peacekeeping officer of the company) or employee. (Table I, Grave, No. 05 of
Code of Discipline); and

5. Intentionally causing personal injury to another person (i.e., the security guard) within the
Company premises. (Table I, Grave, No. 12 of Code of Discipline).
Based on the foregoing, and in view of the gravity of the offenses that you have committed which
constitute gross misconduct, the Company is constrained to terminate your employment for cause
effective May 20, 2003, at the close of business hours.20
On 26 May 2003, Gurango filed with the NLRC a complaint against BCPI and Hong for illegal
The Labor Arbiters Ruling
In his 6 July 2004 Decision, the Labor Arbiter found BCPI liable for illegal dismissal. The Labor
Arbiter ordered BCPI to pay Gurango backwages and separation pay. The Labor Arbiter held that:
I find that the complainant was illegally dismissed from employment.
He was dismissed from [sic] trying to bring an alleged prohibited item, a camera, inside the
Production Area but company rules did not prohibit the bringing of camera.
How can an unloaded camera be said to "disrupt/obstruct company services and operations"? It
As to the alleged fistfight between the complainant and security guard Albao, I am more inclined to
believe and find credible complainants version that he was mauled by Albao and, later, by some of
the guards.
His letter/statement was made on May 6, 2003, or only a day after the incident. The statement of
guard Albao was made on May 28, 2003, several days after the incident.
I find that complainants statement is freshly unblemished, and, therefore, very credible while Albaos
contradictory statement is the fruit of afterthought.
Moreover, I dont find the complainant was foolish enough to try to snatch the gun of Albao during
the incident. I am convinced Albao lied in his statement.
In the present case, no solid cause exists to dismiss complainant from employment as to warrant a
BCPI and Hong appealed to the NLRC.
The NLRCs Ruling
In its 17 October 2005 Resolution, the NLRC affirmed in toto the Labor Arbiters 6 July 2004
Decision. The NLRC held that:

Although fighting within company premises constitute serious misconduct, this however, does not
apply in this case. Complainant did not start nor provoke the fight. It was precipitated, instead, by
guard Albao when he tried to get the complainants camera for no valid reason. The statement of
Albao that complainant tried to snatch his service firearm is not only unbelievable but is also
exaggerated. The Labor Arbiter is correct and we concur in his finding that the complainant was not
foolish enough to try to snatch the gun of Albao. The camera is undisputably owned by complainant.
Bringing it inside his workplace is not a crime. So why would he try to snatch a gun for a very trivial
misunderstanding. What is clear is that the security guards over acted in the performance of their
x x x The prohibition against the bringing of personal belongings in to the work station/area is
qualified by a condition that such belongings will disrupt/obstruct companys services and
operations. That is why in the enumerations the following are included, radios, walkman, discman,
make-up kits, ladies bag workers knapsacks and the like. An unloaded camera is not listed and we
cannot imagine how such camera could "disrupt or obstruct company services and operations.
Moreover, even if we assume that the complainant indeed violated this Inter-Office Memorandum,
still, this will not justify complainants dismissal because the penalty provided therein is only six (6)
days suspension from work without pay, not dismissal.22
BCPI and Hong filed a motion for reconsideration, which the NLRC denied. BCPI and Hong filed with
the Court of Appeals a petition for certiorari under Rule 65 of the Rules of Court.
The Court of Appeals Ruling
In its 20 July 2006 Decision, the Court of Appeals set aside the 17 October 2005 and 24 January
2006 Resolutions of the NLRC. The Court of Appeals held that "private respondent engaged himself
in a fistfight with the security guard"23 and that engaging in a fistfight constituted serious misconduct.
Gurango filed a motion24 for reconsideration, which the Court of Appeals denied in its 11 September
2006 Resolution. Hence, the present petition.
The Issue
Gurango raises as issue that the Court of Appeals erred in ruling that he was legally dismissed.
BCPI failed to prove that he engaged in a fistfight and that there was just cause for his dismissal.
The Courts Ruling
The petition is meritorious.
As a general rule, only questions of law may be raised in petitions for certiorari under Rule 45 of the
Rules of Court. Section 1 of Rule 45 states that, "The petition shall raise only questions of law."
In Triumph International (Phils.), Inc. v. Apostol,25 the Court enumerated exceptions to the rule.
Among the exceptions are when the findings of fact are conflicting and when the findings are
conclusions without citation of specific evidence on which they are based.26

In the present case, the findings of fact of the Court of Appeals conflict with the findings of fact of the
NLRC and the Labor Arbiter. Also, the finding of the Court of Appeals that Gurango engaged in a
fistfight is a conclusion without citation of specific evidence on which it is based.
In termination cases, the employer has the burden of proving, by substantial evidence, that the
dismissal is for just cause. If the employer fails to discharge the burden of proof, the dismissal is
deemed illegal. In AMA Computer College East Rizal v. Ignacio,27 the Court held that:
In termination cases, the burden of proof rests on the employer to show that the dismissal is for just
cause. When there is no showing of a clear, valid and legal cause for the termination of employment,
the law considers the matter a case of illegal dismissal and the burden is on the employer to prove
that the termination was for a valid or authorized cause.1avvphi1 And the quantum of proof which
the employer must discharge is substantial evidence. An employees dismissal due to serious
misconduct must be supported by substantial evidence. Substantial evidence is that amount of
relevant evidence as a reasonable mind might accept as adequate to support a conclusion, even if
other minds, equally reasonable, might conceivably opine otherwise.28
In the present case, aside from Albaos statement, BCPI did not present any evidence to show that
Gurango engaged in a fistfight. Moreover, there is no showing that Gurangos actions were
performed with wrongful intent. In AMA Computer College East Rizal, the Court held that:
The Labor Code provides that an employer may terminate the services of an employee for a just
cause.1wphi1 Among the just causes in the Labor Code is serious misconduct. Misconduct is
improper or wrong conduct. It is the transgression of some established and definite rule of action, a
forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error
in judgment. The misconduct to be serious within the meaning of the Labor Code must be of such a
grave and aggravated character and not merely trivial or unimportant. x x x
In National Labor Relations Commission v. Salgarino, the Court stressed that "[i]n order to
constitute serious misconduct which will warrant the dismissal of an employee under
paragraph (a) of Article 282 of the Labor Code, it is not sufficient that the act or conduct
complained of has violated some established rules or policies. It is equally important and
required that the act or conduct must have been performed with wrongful intent."
After a thorough examination of the records of the case, however, the Court finds that petitioner
AMACCI miserably failed to prove by substantial evidence its charges against respondent. There is
no showing at all that respondents actions were motivated by a perverse and wrongful intent, as
required by Article 282(a) of the Labor Code.29 (Emphasis supplied)
The surrounding circumstances show that Gurango did not engage in a fistfight: (1) in his 9 May
2003 letter to BCPI, Juanitas corroborated Gurangos version of the facts; (2) nobody corroborated
Albaos version of the facts; (3) in his medical report, Dr. Aguinaldo found that Gurango suffered
physical injuries; (4) Gurango filed with the MCTC a complaint against Albao, Cordero and Pablis for
slight physical injury; (5) the Labor Arbiter found Gurangos statement credible and unblemished; (6)
the Labor Arbiter found Albaos statement contradictory; (7) the Labor Arbiter stated, "I am
convinced Albao lied in his statement"; (8) the NLRC found that Gurango did not start a fight; (9) the
NLRC found Albaos statement unbelievable and exaggerated; and (10) the Court of Appeals
reversal of the findings of fact of the Labor Arbiter and the NLRC is baseless.
In Triumph International (Phils.), Inc., the Court held that factual findings of labor officials, who are
deemed to have acquired expertise in matters within their jurisdiction, are accorded not only respect
but finality when supported by susbstantial evidence.30

WHEREFORE, we GRANT the petition. We SET ASIDE the 20 July 2006 Decision and 11
September 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 94004 and REINSTATE the
17 October 2005 and 24 January 2006 Resolutions of the NLRC in CA No. 044428-05.

G.R. No. 172295

December 23, 2008

LILIA P. LABADAN, petitioner,

CAGAYAN, respondents.
Lilian L. Labadan (petitioner) was hired by private respondent Forest Hills Mission Academy (Forest
Hills) in July 1989 as an elementary school teacher. From 1990 up to 2002, petitioner was registrar
and secondary school teacher.
On August 18, 2003, petitioner filed a complaint1 against respondent Forest Hills and its
administrator respondent Naomi Cabaluna for illegal dismissal, non-payment of overtime pay,
holiday pay, allowances, 13th month pay, service incentive leave, illegal deductions, and damages.
In her Position Paper,2 petitioner alleged that she was allowed to go on leave from Forest Hills, and
albeit she had exceeded her approved leave period, its extension was impliedly approved by the
school principal because she received no warning or reprimand and was in fact retained in the
payroll up to 2002.3
Petitioner further alleged that since 1990, tithes to the Seventh Day Adventist church have been
illegally deducted from her salary; and she was not paid overtime pay for overtime service,
13th month pay, five days service incentive leave pay, and holiday pay; and that her SSS
contributions have not been remitted.
Claiming that strained relations between her and Forest Hill have rendered reinstatement not
feasible, petitioner prayed for separation pay in lieu of reinstatement.
In its Position Paper,4 Forest Hills claimed as follows: In July 2001, petitioner was permitted to go on
leave for two weeks but did not return for work after the expiration of the period. Despite petitioners
undertaking to report "soon," she never did even until the end of School Year 2001-2002. It thus
hired a temporary employee to accomplish the needed reports. When she finally returned for work,
classes for the School Year 2002-2003 were already on-going.
To belie petitioners claim that she was dismissed, Forest Hills submitted a list of faculty members
and staff from School Year 1998-1999 up to School Year 2001 to 2002 which included her name.5
With regard to the charge for illegal deduction, Forest Hills claimed that the Seventh Day Adventist
Church requires its members to pay tithes equivalent to 10% of their salaries, and petitioner was
hired on account of her being a member thereof, and petitioner never questioned the deduction of
the tithe from her salary.
With regard to the charge for non-payment of overtime pay, holiday pay, and allowances, Forest
Hills noted that petitioner proffered no evidence to support the same.
The Labor Arbiter decided in favor of petitioner, disposing as follows:

WHEREFORE, judgment is hereby rendered:

1. Finding respondents Forest Hills Academy and/or Naomi Cabaluna guilty of illegally
dismissing the complainant;
2. Directing respondent to pay complainant Lilia P. Labadan the total amount of P152,501.02
representing her monetary award x x x.
Complainants other claim[s] are hereby dismissed for lack of merit and/or failure to
The National Labor Relations Commission (NLRC), finding the Labor Arbiter to have misappreciated
the facts of the case, reversed and set aside his decision and dismissed petitioners complaint by
Resolution of June 30, 2005.7
On petitioners Petition for Certiorari,8 the Court of Appeals, by Resolution9 of December 15, 2005,
dismissed the petition for deficient amount of appellate docket fee, non-attachment of Affidavit of
Service, absence of written explanation why the petition was filed through registered mail instead of
through personal service, and non-attachment of copies of the Complaint and the Answer filed
before the Labor Arbiter. Petitioners Motion for Reconsideration having been denied,10 she filed the
present Petition for Review on Certiorari,11 faulting the Court of Appeals
emphasis in the original)
Non-payment of docket fee at the time of the filing of a petition does not automatically call for its
dismissal as long as the fee is paid within the applicable prescriptive or reglementary period.13 While
petitioner paid the P30 deficient amount of the docket fee on February 7, 2006,14 it was beyond the
60-day period for filing the petition for certiorari. Nevertheless, the Court, in the interest of substantial
justice, brushes aside this and the other technicalities cited by the Court of Appeals in its Resolution
of December 15, 200515 and, instead of remanding the case to the appellate court, now hereby
decides the case on the merits.

While in cases of illegal dismissal, the employer bears the burden of proving that the dismissal is for
a valid or authorized cause, the employee must first establish by substantial evidence the fact of
The records do not show that petitioner was dismissed from the service. They in fact show that
despite petitioners absence from July 2001 to March 2002 which, by her own admission, exceeded
her approved leave,17 she was still considered a member of the Forest Hills faculty18 which retained
her in its payroll.19
Petitioner argues, however, that she was constructively dismissed when Forest Hills merged her
class with another "so much that when she reported back to work, she has no more claims to hold
and no more work to do."20
Petitioner, however, failed to refute Forest Hills claim that when she expressed her intention to
resume teaching, classes were already ongoing for School Year 2002-2003. It bears noting that
petitioner simultaneously held the positions of secondary school teacher and registrar and, as the
NLRC noted, she could have resumed her work as registrar had she really wanted to continue
working with Forest Hills.21
Petitioners affidavit and those of her former colleagues,22 which she attached to her Position Paper,
merely attested that she was dismissed from her job without valid cause, but gave no particulars on
when and how she was dismissed.
There being no substantial proof that petitioner was dismissed, she is not entitled to separation pay
or backwages.
Respecting petitioners claim for holiday pay, Forest Hills contends that petitioner failed to prove that
she actually worked during specific holidays. Article 94 of the Labor Code provides, however, that
(a) Every worker shall be paid his regular daily wage during regular holidays, except in retail
and service establishments regularly employing less than ten (10) workers;
(b) The employer may require an employee to work on any holiday but such employee shall
be paid a compensation equivalent to twice his regular rate[.]
The provision that a worker is entitled to twice his regular rate if he is required to work on a holiday
implies that the provision entitling a worker to his regular rate on holidays applies even if he does not
The petitioner is likewise entitled to service incentive leave under Article 95 of the Labor Code which
provides that
(a) Every employee who has rendered at least one year of service shall be entitled to a
yearly service incentive leave of five days with pay.
(b) This provision shall not apply to those who are already enjoying the benefit herein
provided, those enjoying vacation leave with pay of at least five days and those employed in
establishments regularly employing less than ten employees or in establishment exempted
from granting this benefit by the Secretary of Labor after considering the viability or financial
condition of such establishment.

x x x x,
and to 13th month pay under Presidential Decree No. 851.23
As for petitioners claims for overtime pay, it must be denied, for other than the uncorroborated
affidavits of her colleagues, there is no concrete proof that she is entitled thereto.24 And so must her
claim for allowances, no proof to her entitlement thereto having been presented
On the deduction of 10% tithe, Article 113 of the Labor Code instructs:
ART. 113. No employer, in his own behalf or in behalf of any person, shall make any
deduction from the wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer, and the
deduction is to recompense the employer for the amount paid by him as premium on
the insurance;
(b) For union dues, in cases where the right of the worker or his union to check-off
has been recognized by the employer or authorized in writing by the individual
worker concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the
Secretary of Labor,
as does Rule VIII, Section 10 of the Rules Implementing Book III of the Labor Code reading:
SEC. 10. Deductions from the wages of the employees may be made by the employer in any
of the following cases:
(a) When the deductions are authorized by law, including deductions for the
insurance premiums advanced by the employer in behalf of the employee as well as
union dues where the right to check-off has been recognized by the employer or
authorized in writing by the individual employee himself;
(b) When the deductions are with the written authorization of the employees for
payment to a third person and the employer agrees to do so, provided that the latter
does not receive any pecuniary benefit, directly or indirectly, from the transaction.
(Emphasis and underscoring supplied)
In the absence then of petitioners written conformity to the deduction of the 10% tithe from her
salary, the deduction made by Forest Hills was illegal.
Finally, on petitioners claim that Forest Hills did not remit her SSS contributions, Villar v. National
Labor Relations Commission25 enlightens:
x x x [T]he burden of proving payment of monetary claims rests on the employer. x x x
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.26 (Underscoring supplied)
Forest Hills having glossed over this claim, the same must be granted.
Finally, insofar as petitioner was compelled to litigate her money claims, an award of attorneys fees
equivalent to 10% of the final judgment award is in order.27
WHEREFORE, the Court of Appeals Resolution of December 15, 2005 is SET ASIDE. The petition
is GRANTEDinsofar as petitioners claims for illegal deductions, holiday pay, service incentive leave
pay, 13th month pay, and non-remittance of SSS contributions are concerned. Respondents are
accordingly ORDERED to refund to petitioner the amount of the illegal deductions from her salary; to
pay her holiday pay, service incentive leave pay, and 13th month pay; to remit her contributions to
the SSS; and to pay her attorneys fees equivalent to 10% of the final judgment award. The case is
accordingly REMANDED to the Labor Arbiter for computation of the amount of such money claims.

G.R. No. L-12582

January 28, 1961

LVN PICTURES, INC., petitioner-appellant,

G.R. No. L-12598

January 28, 1961

SAMPAGUITA PICTURES, INC., petitioner-appellant,

Nicanor S. Sison for petitioner-appellant.
Jaime E. Ilagan for respondent-appellee Court of Agrarian Relations.
Gerardo P. Cabo Chan for respondent-appellee Philippine Musicians Guild.
Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc. seek a review by certiorari of an
order of the Court of Industrial Relations in Case No. 306-MC thereof, certifying the Philippine
Musicians Guild (FFW), petitioner therein and respondent herein, as the sole and exclusive
bargaining agency of all musicians working with said companies, as well as with the Premiere
Productions, Inc., which has not appealed. The appeal of LVN Pictures, Inc., has been docketed as
G.R. No. L-12582, whereas G.R. No. L-12598 is the appeal of Sampaguita Pictures, Inc. Involving
as they do the same order, the two cases have been jointly heard in this Court, and will similarly be
disposed of.
In its petition in the lower court, the Philippine Musicians Guild (FFW), hereafter referred to as the
Guild, averred that it is a duly registered legitimate labor organization; that LVN Pictures, Inc.,
Sampaguita Pictures, Inc., and Premiere Productions, Inc. are corporations, duly organized under
the Philippine laws, engaged in the making of motion pictures and in the processing and distribution
thereof; that said companies employ musicians for the purpose of making music recordings for title
music, background music, musical numbers, finale music and other incidental music, without which a
motion picture is incomplete; that ninety-five (95%) percent of all the musicians playing for the
musical recordings of said companies are members of the Guild; and that the same has no
knowledge of the existence of any other legitimate labor organization representing musicians in said
companies. Premised upon these allegations, the Guild prayed that it be certified as the sole and
exclusive bargaining agency for all musicians working in the aforementioned companies. In their
respective answers, the latter denied that they have any musicians as employees, and alleged that
the musical numbers in the filing of the companies are furnished by independent contractors. The
lower court, however, rejected this pretense and sustained the theory of the Guild, with the result
already adverted to. A reconsideration of the order complained of having been denied by the
Court en banc, LVN Pictures, inc., and Sampaguita Pictures, Inc., filed these petitions for review
Apart from impugning the conclusion of the lower court on the status of the Guild members as
alleged employees of the film companies, the LVN Pictures, Inc., maintains that a petition for
certification cannot be entertained when the existence of employer-employee relationship between

the parties is contested. However, this claim is neither borne out by any legal provision nor
supported by any authority. So long as, after due hearing, the parties are found to bear said
relationship, as in the case at bar, it is proper to pass upon the merits of the petition for certification.
It is next urged that a certification is improper in the present case, because, "(a) the petition does not
allege and no evidence was presented that the alleged musicians-employees of the respondents
constitute a proper bargaining unit, and (b) said alleged musicians-employees represent a majority
of the other numerous employees of the film companies constituting a proper bargaining unit under
section 12 (a) of Republic Act No. 875."
The absence of an express allegation that the members of the Guild constitute a proper bargaining
unit is fatal proceeding, for the same is not a "litigation" in the sense in which this term is commonly
understood, but a mere investigation of a non-adversary, fact finding character, in which the
investigating agency plays the part of a disinterested investigator seeking merely to ascertain the
desires of employees as to the matter of their representation. In connection therewith, the court
enjoys a wide discretion in determining the procedure necessary to insure the fair and free choice of
bargaining representatives by employees.1 Moreover, it is alleged in the petition that the Guild it a
duly registered legitimate labor organization and that ninety-five (95%) percent of the musicians
playing for all the musical recordings of the film companies involved in these cases are members of
the Guild. Although, in its answer, the LVN Pictures, Inc. denied both allegations, it appears that, at
the hearing in the lower court it was merely the status of the musicians as its employees that the film
companies really contested. Besides, the substantial difference between the work performed by said
musicians and that of other persons who participate in the production of a film, and the peculiar
circumstances under which the services of that former are engaged and rendered, suffice to show
that they constitute a proper bargaining unit. At this juncture, it should be noted that the action of the
lower court in deciding upon an appropriate unit for collective bargaining purposes is discretionary
(N.L.R.B. v. May Dept. Store Co., 66 Sup. Ct. 468. 90 L. ed. 145) and that its judgment in this
respect is entitled to almost complete finality, unless its action is arbitrary or capricious (Marshall
Field & Co. v. N.L.R.B. [C.C.A. 19431, 135 F. 2d. 891), which is far from being so in the cases at
Again, the Guild seeks to be, and was, certified as the sole and exclusive bargaining agency for the
musicians working in the aforesaid film companies. It does not intend to represent the other
employees therein. Hence, it was not necessary for the Guild to allege that its members constitute a
majority of all the employees of said film companies, including those who are not musicians. The real
issue in these cases, is whether or not the musicians in question are employees of the film
companies. In this connection the lower court had the following to say:
As a normal and usual course of procedure employed by the companies when a picture is to
be made, the producer invariably chooses, from the musical directors, one who will furnish
the musical background for a film. A price is agreed upon verbally between the producer and
musical director for the cost of furnishing such musical background. Thus, the musical
director may compose his own music specially written for or adapted to the picture. He
engages his own men and pays the corresponding compensation of the musicians under
When the music is ready for recording, the musicians are summoned through 'call slips' in
the name of the film company (Exh 'D'), which show the name of the musician, his musical
instrument, and the date, time and place where he will be picked up by the truck of the film
company. The film company provides the studio for the use of the musicians for that
particular recording. The musicians are also provided transportation to and from the studio
by the company. Similarly, the company furnishes them meals at dinner time.

During the recording sessions, the motion picture director, who is an employee of the
company, supervises the recording of the musicians and tells what to do in every detail. He
solely directs the performance of the musicians before the camera as director, he supervises
the performance of all the action, including the musicians who appear in the scenes so that
in the actual performance to be shown on the screen, the musical director's intervention has
And even in the recording sessions and during the actual shooting of a scene, the
technicians, soundmen and other employees of the company assist in the operation. Hence,
the work of the musicians is an integral part of the entire motion picture since they not only
furnish the music but are also called upon to appear in the finished picture.
The question to be determined next is what legal relationship exits between the musicians
and the company in the light of the foregoing facts.
We are thus called upon to apply R.A. Act 875. which is substantially the same as and
patterned after the Wagner Act substantially the same as a Act and the Taft-Hartley Law of
the United States. Hence, reference to decisions of American Courts on these laws on the
point-at-issue is called for.
Statutes are to be construed in the light of purposes achieved and the evils sought to be
remedied. (U.S. vs. American Tracking Association, 310 U.S. 534, 84 L. ed. 1345.) .
In the case of National Labor Relations Board vs. Hearts Publication, 322 U.S. 111, the
United States Supreme Court said the Wagner Act was designed to avert the 'substantial
obstruction to the free flow of commerce which results from strikes and other forms of
industrial unrest by eliminating the causes of the unrest. Strikes and industrial unrest result
from the refusal of employers' to bargain collectively and the inability of workers to bargain
successfully for improvement in their working conditions. Hence, the purposes of the Act are
to encourage collective bargaining and to remedy the workers' inability to bargaining power,
by protecting the exercise of full freedom of association and designation of representatives of
their own choosing, for the purpose of negotiating the terms and conditions of their
The mischief at which the Act is aimed and the remedies it offers are not confined exclusively
to 'employees' within the traditional legal distinctions, separating them from 'independent
contractor'. Myriad forms of service relationship, with infinite and subtle variations in the term
of employment, blanket the nation's economy. Some are within this Act, others beyond its
coverage. Large numbers will fall clearly on one side or on the other, by whatever test may
be applied. Inequality of bargaining power in controversies of their wages, hours and working
conditions may characterize the status of one group as of the other. The former, when acting
alone may be as helpless in dealing with the employer as dependent on his daily wage and
as unable to resist arbitrary and unfair treatment as the latter.'
To eliminate the causes of labor dispute and industrial strike, Congress thought it necessary
to create a balance of forces in certain types of economic relationship. Congress recognized
those economic relationships cannot be fitted neatly into the containers designated as
'employee' and 'employer'. Employers and employees not in proximate relationship may be
drawn into common controversies by economic forces and that the very dispute sought to be
avoided might involve 'employees' who are at times brought into an economic relationship
with 'employers', who are not their 'employers'. In this light, the language of the Act's
definition of 'employee' or 'employer' should be determined broadly in doubtful situations, by

underlying economic facts rather than technically and exclusively established legal
classifications. (NLRB vs. Blount, 131 F [2d] 585.)
In other words, the scope of the term 'employee' must be understood with reference to the
purposes of the Act and the facts involved in the economic relationship. Where all the
conditions of relation require protection, protection ought to be given .
By declaring a worker an employee of the person for whom he works and by recognizing and
protecting his rights as such, we eliminate the cause of industrial unrest and consequently
we promote industrial peace, because we enable him to negotiate an agreement which will
settle disputes regarding conditions of employment, through the process of collective
The statutory definition of the word 'employee' is of wide scope. As used in the Act, the term
embraces 'any employee' that is all employees in the conventional as well in the legal sense
expect those excluded by express provision. (Connor Lumber Co., 11 NLRB 776.).
It is the purpose of the policy of Republic Act 875; (a) To eliminate the causes of industrial
unrest by protecting the exercise of their right to self-organization for the purpose of
collective bargaining. (b) To promote sound stable industrial peace and the advancement of
the general welfare, and the best interests of employers and employees by the settlement of
issues respecting terms and conditions of employment through the process of collective
bargaining between employers and representatives of their employees.
The primary consideration is whether the declared policy and purpose of the Act can be
effectuated by securing for the individual worker the rights and protection guaranteed by the
Act. The matter is not conclusively determined by a contract which purports to establish the
status of the worker, not as an employee.
The work of the musical director and musicians is a functional and integral part of the
enterprise performed at the same studio substantially under the direction and control of the
In other words, to determine whether a person who performs work for another is the latter's
employee or an independent contractor, the National Labor Relations relies on 'the right to
control' test. Under this test an employer-employee relationship exist where the person for
whom the services are performed reserves the right to control not only the end to be
achieved, but also the manner and means to be used in reaching the end. (United Insurance
Company, 108, NLRB No. 115.).
Thus, in said similar case of Connor Lumber Company, the Supreme Court said:.
'We find that the independent contractors and persons working under them are
employees' within the meaning of Section 2 (3) of its Act. However, we are of the
opinion that the independent contractors have sufficient authority over the persons
working under their immediate supervision to warrant their exclusion from the
unit. We shall include in the unit the employees working under the supervision of the
independent contractors, but exclude the contractors.'
'Notwithstanding that the employees are called independent contractors', the Board will hold
them to be employees under the Act where the extent of the employer's control over them

indicates that the relationship is in reality one of employment. (John Hancock Insurance Co.,
2375-D, 1940, Teller, Labor Dispute Collective Bargaining, Vol.).
The right of control of the film company over the musicians is shown (1) by calling the
musicians through 'call slips' in 'the name of the company; (2) by arranging schedules in its
studio for recording sessions; (3) by furnishing transportation and meals to musicians; and
(4) by supervising and directing in detail, through the motion picture director, the
performance of the musicians before the camera, in order to suit the music they are playing
to the picture which is being flashed on the screen.
Thus, in the application of Philippine statutes and pertinent decisions of the United States
Courts on the matter to the facts established in this case, we cannot but conclude that to
effectuate the policies of the Act and by virtue of the 'right of control' test, the members of the
Philippine Musicians Guild are employees of the three film companies and, therefore, entitled
to right of collective bargaining under Republic Act No. 875.
In view of the fact that the three (3) film companies did not question the union's majority, the
Philippine Musicians Guild is hereby declared as the sole collective bargaining
representative for all the musicians employed by the film companies."
We are fully in agreement with the foregoing conclusion and the reasons given in support thereof.
Both are substantially in line with the spirit of our decision in Maligaya Ship Watchmen Agency vs.
Associated Watchmen and Security Union, L-12214-17 (May 28, 1958). In fact, the contention of the
employers in the Maligaya cases, to the effect that they had dealt with independent contractors, was
stronger than that of the film companies in these cases. The third parties with whom the
management and the workers contracted in the Maligaya cases were agencies registered with the
Bureau of Commerce and duly licensed by the City of Manila to engage in the business of supplying
watchmen to steamship companies, with permits to engage in said business issued by theCity
Mayor and the Collector of Customs. In the cases at bar, the musical directors with whom the film
companies claim to have dealt with had nothing comparable to the business standing of said
watchmen agencies. In this respect, the status of said musical directors is analogous to that of the
alleged independent contractor in Caro vs. Rilloraza, L-9569 (September 30, 1957), with the
particularity that the Caro case involved the enforcement of the liability of an employer under the
Workmen's Compensation Act, whereas the cases before us are merely concerned with the right of
the Guild to represent the musicians as a collective bargaining unit. Hence, there is less reason to
be legalistic and technical in these cases, than in the Caro case.
Herein, petitioners-appellants cite, in support of their appeal, the cases of Sunripe Coconut Product
Co., Inc vs. CIR (46 Off. Gaz., 5506, 5509), Philippine Manufacturing Co. vs. Santos Vda. de
Geronimo, L-6968 (November 29, 1954), Viana vs. Al-Lagadan, L-8967 (May 31, 1956), and Josefa
Vda. de Cruz vs. The Manila Hotel Co. (53 Off. Gaz., 8540). Instead of favoring the theory of said
petitioners-appellants, the case of the Sunripe Coconut Product Co., Inc. is authority for herein
respondents-appellees. It was held that, although engaged as piece-workers, under the "pakiao"
system, the "parers" and "shellers" in the case were, not independent contractor, butemployees of
said company, because "the requirement imposed on the 'parers' to the effect that 'the nuts are
pared whole or that there is not much meat wasted,' in effect limits or controls the means or details
by which said workers are to accomplish their services" as in the cases before us.
The nature of the relation between the parties was not settled in the Viana case, the same having
been remanded to the Workmen's Compensation Commission for further evidence.

The case of the Philippine Manufacturing Co. involved a contract between said company and Eliano
Garcia, who undertook to paint a tank of the former. Garcia, in turn engaged the services of Arcadio
Geronimo, a laborer, who fell while painting the tank and died in consequence of the injuries thus
sustained by him. Inasmuch as the company was engaged in the manufacture of soap, vegetable
lard, cooking oil and margarine, it was held that the connection between its business and the
painting aforementioned was purely casual; that Eliano Garcia was an independent contractor; that
Geronimo was not an employee of the company; and that the latter was not bound, therefore, to pay
the compensation provided in the Workmen's Compensation Act. Unlike the Philippine
Manufacturing case, the relation between the business of herein petitioners-appellants and the work
of the musicians is not casual. As held in the order appealed from which, in this respect, is not
contested by herein petitioners-appellants "the work of the musicians is an integral part of the
entire motion picture." Indeed, one can hardly find modern films without music therein. Hence, in
the Caro case (supra), the owner and operator of buildings for rent was held bound to pay the
indemnity prescribed in the Workmen's Compensation Act for the injury suffered by a carpenter while
working as such in one of said buildings even though his services had been allegedly engaged by a
third party who had directly contracted with said owner. In other words, the repair work had not
merely a casual connection with the business of said owner. It was a necessary incident thereof, just
as music is in the production of motion pictures.
The case of Josefa Vda. de Cruz vs. The Manila Hotel Co., L-9110 (April 30, 1957) differs materially
from the present cases. It involved the interpretation of Republic Act No. 660, which amends the law
creating and establishing the Government Service Insurance System. No labor law was sought to be
construed in that case. In act, the same was originally heard in the Court of First Instance of Manila,
the decision of which was, on appeal, affirmed by the Supreme Court. The meaning or scope if the
term "employee," as used in the Industrial Peace Act (Republic Act No. 875), was not touched
therein. Moreover, the subject matter of said case was a contract between the management of the
Manila Hotel, on the one hand, and Tirso Cruz, on the other, whereby the latter greed to furnish the
former the services of his orchestra, consisting of 15 musicians, including Tirso Cruz, "from 7:30
p.m. to closing time daily." In the language of this court in that case, "what pieces the orchestra shall
play, and how the music shall be arranged or directed, the intervals and other details such are left
to the leader'sdiscretion."
This is not situation obtaining in the case at bar. The musical directors above referred to
have no such control over the musicians involved in the present case. Said musical directors control
neither the music to be played, nor the musicians playing it. The film companies summon the
musicians to work, through the musical directors. The film companies, through the musical directors,
fix the date, the time and the place of work. The film companies, not the musical directors, provide
the transportation to and from the studio. The film companies furnish meal at dinner time.
What is more in the language of the order appealed from "during the recording sessions, the
motion picture director who is an employee of the company" not the musical director
"supervises the recording of the musicians and tells them what to do in every detail". The motion
picture director not the musical director "solely directs and performance of the musicians
before the camera". The motion picture director "supervises the performance of all the
actors, including the musicians who appear in the scenes, so that in the actual performance to be
shown in the screen, the musical director's intervention has stopped." Or, as testified to in the lower
court, "the movie director tells the musical director what to do; tells the music to be cut or tells
additional music in this part or he eliminates the entire music he does not (want) or he may want
more drums or move violin or piano, as the case may be". The movie director "directly controls the
activities of the musicians." He "says he wants more drums and the drummer plays more" or "if he
wants more violin or he does not like that.".

It is well settled that "an employer-employee relationship exists . . .where the person for whom the
services are performed reserves a right to control not only the end to be achieved but also the
means to be used in reaching such end . . . ." (Alabama Highway Express Co., Express Co., v. Local
612, 108S. 2d. 350.) The decisive nature of said control over the "means to be used", is illustrated in
the case of Gilchrist Timber Co., et al., Local No. 2530 (73 NLRB No. 210, pp. 1197, 1199-1201), in
which, by reason of said control, the employer-employee relationship was held to exist between the
management and the workers, notwithstanding the intervention of an alleged independent
contractor, who had, and exercise, the power to hire and fire said workers. The aforementioned
control over the means to be used" in reading the desired end is possessed and exercised by the
film companies over the musicians in the cases before us.
WHEREFORE, the order appealed from is hereby affirmed, with costs against petitioners herein. It is
so ordered.