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LABOR LAW REVIEW Atty.

Joyrich Golangco

Recruitment and Placement and OFWs

1. PEOPLE OF THE PHILIPPINES v. MELISSA CHUA


G.R. No. 184058 March 10, 2010

Doctrines:
A person convicted of illegal recruitment may, in addition, be convicted of Estafa as penalized under Article 315,
paragraph 2(a) of the Revised Penal Code, held that the elements thereof were sufficiently established, viz:
(a) that appellant deceived the complainants by assuring them of employment in Taiwan provided they pay
the required placement fee;
(b) that relying on such representation, the complainants paid appellant the amount demanded;
(c) that her representation turned out to be false because she failed to deploy them as promised; and
(d) that the complainants suffered damages when they failed to be reimbursed the amounts they paid.

ILLEGAL RECRUITMENT v. ESTAFA


Illegal recruitment is malum prohibitum, while estafa is malum in se. In the first, the criminal intent of the
accused is not necessary for conviction. In the second, such an intent is imperative. Estafa under Article 315,
paragraph 2, of the Revised Penal Code, is committed by any person who defrauds another by using fictitious
name, or falsely pretends to possess power, influence, qualifications, property, credit, agency, business or
imaginary transactions, or by means of similar deceits executed prior to or simultaneously with the commission
of fraud.

FACTS:
Sometime in 2002, accused Josie Campos (at large) and accused-appellant Chua promised to the complainants
deployment to Taiwan as factory workers. In connection with their deployment, accused-appellant Chua, who
was then a temporary cashier at Golden Gate (Recruitment Agency), collected from the complainants the
following amount as part of their placement fees:
ERIK DE GUIA TAN - P73,000.00
MARILYN D. MACARANAS - 83,000.00
NAPOLEON H. YU, JR. - 23,000.00
HARRY JAMES P. KING - 23,000.00
ROBERTO C. ANGELES - 23,000.00

Without valid reasons and without fault on the part of the said complainants, accused-appellant Chua failed to
actually deploy them and failed to reimburse expenses incurred in connection with their documentation and
processing for purposes of their deployment.

As her defense, appellant Chua maintains that Golden Gate was a licensed recruitment agency and that Josie,
who is her godmother, was an agent. Admitting having received P80,000 each from Marilyn and Tan, receipt of
which she issued but denying receiving any amount from King, she claimed that she turned over the money to
the documentation officer, one Arlene Vega, who in turn remitted the money to Marilyn Calueng whose present
whereabouts she did not know.

RTC RULING: Found CHUA GUILTY as principal of a large scale illegal recruitment and estafa three (3) counts.
She is sentenced to life imprisonment and to pay a fine of Five Hundred Thousand Pesos (P500,000.00) for
illegal recruitment. As regards Criminal Cases Nos. 04-222597 and 04-222599, both are dismissed for lack of
interest of complainants Roberto Angeles and Napoleon Yu, Jr.

CA RULING: AFFIRMED RTC

ISSUE: WON CHUA is guilty of Illegal Recruitment in a Large Scale and Estafa.

SC RULING:
YES. The recruitment activities were done at the time Golden Gates license had already expired. Further, the
illegal recruitment was made in a large scale because the following essential elements are present, to wit: (1)
the accused undertook a recruitment activity under Article 13(b) or any prohibited practice under Article 34 of the
Labor Code; (2) the accused did not have the license or the authority to lawfully engage in the recruitment and
placement of workers; and (3) the accused committed such illegal activity against three or more persons
individually or as a group.
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Even if CHUA were a mere temporary cashier of Golden Gate, that did not make her any less an employee to
be held liable for illegal recruitment as principal by direct participation, together with the employer, as it was
shown that she actively and consciously participated in the recruitment process.

Assuming arguendo that CHUA was unaware of the illegal nature of the recruitment business of Golden Gate,
that does not free her of liability either. Illegal Recruitment in Large Scale penalized under Republic Act No.
8042, or "The Migrant Workers and Overseas Filipinos Act of 1995," is a special law, a violation of which is
malum prohibitum, not malum in se. Intent is thus immaterial. And that explains why CHUA was, aside from
Estafa, convicted of such offense.

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2. PEOPLE OF THE PHILIPPINES v. RODOLFO GALLO y GADOT, FIDES PACARDO y JUNGCO and
PILAR MANTA y DUNGO
G.R. No. 184058 March 10, 2010
VELASCO, JR., J.:

Doctrine:
To commit syndicated illegal recruitment, three elements must be established: (1) the offender undertakes
either any activity within the meaning of "recruitment and placement" defined under Article 13(b), or any of the
prohibited practices enumerated under Art. 34 of the Labor Code; (2) he has no valid license or authority
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required by law to enable one to lawfully engage in recruitment and placement of workers; and (3) the illegal
recruitment is committed by a group of three (3) or more persons conspiring or confederating with one
another.When illegal recruitment is committed by a syndicate or in large scale, i.e., if it is committed against
three (3) or more persons individually or as a group, it is considered an offense involving economic sabotage.

FACTS:
The present case involves two criminal cases, one for syndicated illegal recruitment and the other for estafa,
filed by Edgardo Dela Caza against 13 persons including the accused. However, only accused-appellant Gallo,
Pacardo and Manta have proceeded to trial because the others were at large.

Sometime in May 2011, Dela Caza was briefed by Mardeolyn, president of MPM Agency (non-licensed), about
the processing of his papers for a possible job opportunity in Korea, as well as their possible salary. One Yeo
Sin Ung, a Korean national, gave a briefing about the business and what to expect from the company. Then,
here comes accused-appellant Gallo who introduced himself as Mardeolyns relative and specifically told Dela
Caza of the fact that the agency was able to send many workers abroad. Dela Caza was even showed several
workers visas who were already allegedly deployed abroad. Later on, accused-appellant Gallo signed and
issued an official receipt acknowledging the down payment of Dela Caza. After two weeks, Dela Caza went
back to MPMs office only to find out that it had transferred to another place. After successfully locating the new
office, Dela Caza made a follow-up again but the agency failed to deploy him. Later on, MPM transferred to
another location without informing Dela Caza. After two months, MPM has still failed to deploy Dela Caza and
also failed to return his money despite repeated demands. Dela Caza and other applicants decided to take
action.

As his defense, accused-appellant Gallo denied having any part in the recruitment of Dela Caza. In fact, he
testified that he also applied with MPM Agency for deployment to Korea as a factory worker. He then worked for
MPM in order for him to fully pay the placement fee. Accused-appellant Gallo further avers that he cannot be
held criminally liable for illegal recruitment because he was neither an officer nor an employee of the recruitment
agency.

RTC RULING:
Found GALLO GUILTY of syndicated illegal recruitment and estafa. He is sentenced to life imprisonment and to
pay a fine of P 1, 000,000.00 for illegal recruitment. He is ordered to return P 45, 000 to Dela Caza.

Pacardo and Manta were acquitted for lack of evidence. It was only established that Pacardo acted as the
MPMs employee who was in charge of the records of the applicants. Manta, on the other hand, was also an
employee who was tasked to deliver documents to the Korean Embassy.

CA RULING: AFFIRMED RTC with MODIFICATION


In the Criminal Case for estafa, accused-appellant Gallo is sentenced to four (4) years of prision correccional to
ten (10) years of prision mayor (previous sentence was FOUR (4) years of prision correccional as minimum to
NINE (9) years of prision mayor as maximum)

ISSUE: WON GALLO is guilty of Syndicated Illegal Recruitment and Estafa.

SC RULING:
YES. All the elements for Syndicated Illegal Recruitment are present (see case doctrine). Further, the testimony
Dela Caza showed that accused-appellant Gallo made false misrepresentations and promises in assuring them
that after they paid the placement fee, jobs in Korea as factory workers were waiting for them and that they
would be deployed soon. In fact, Dela Caza personally talked to accused-appellant Gallo and gave him the
money and saw him sign and issue an official receipt as proof of his payment. Without a doubt, accused-
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appellant Gallos actions constituted illegal recruitment.

Additionally, accused-appellant Gallo cannot argue that the trial court erred in finding that he was indeed an
employee of the recruitment agency. On the contrary, his active participation in the illegal recruitment is
unmistakable. The fact that he was the one who issued and signed the official receipt belies his profession of
innocence.

San Beda College of Law 61


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

3. CLAUDIO S. YAP v. THENAMARIS SHIP'S MANAGEMENT and INTERMARE MARITIME AGENCIES,
INC.
G.R. No. 179532 May 30, 2011
NACHURA, J.:

Doctrine:
While this case was pending before the SC, we declared as unconstitutional the clause "or for three months for
every year of the unexpired term, whichever is less" provided in the 5th paragraph of Section 10 of R.A. No.
8042. The reason for declaring such clause unconstitutional is that it gives an erring employer the option to pay
an illegally dismissed migrant worker only three months for every year of the unexpired term of his contract
whereas under the Labor Code, he is guaranteed with reinstatement with full backwages computed from the
time compensation was withheld from them up to their actual reinstatement.

FACTS:
In August 23, 2001, Yap commenced the job as an electrician of the vessel, M/T SEASCOUT, with Intermare
as his agency and Vulture Shipping Ltd., as his principal. The duration of his contract was for 12 months.
However, on November 8, 2001, the vessel was sold, so Yap effectively lost his job. Capt. Adviento of Intermare
and Thenamaris informed the crew members, including Yap, that they are given the option to be transferred to
other vessels. Yap received bonuses and was offered payment equivalent to his one-month basic wage. He
refused to accept the payment of one-month basic wage, insisting that he is entitled to the payment of the
unexpired portion of his contract since he was illegally dismissed from employment. The refusal of Intermare
and Thenamaris to pay the unexpired portion of Yaps contract and their inaction in transferring him to other
vessels have lead Yap to file a complaint for Illegal Dismissal.

LA RULING:
Yap has been CONSTRUCTIVELY AND ILLEGALLY DISMISSED by respondents. The latter was ordered to
pay Yap the amount corresponding to the unexpired portion of his contract with damages.

LA found that respondents acted in bad faith when they assured Yap of re-embarkation and required him to
produce an electrician certificate during the period of his contract, but actually he was not able to board one
despite of respondents numerous vessels.

NLRC RULING: AFFIRMED LA with MODIFICATION


The NLRC ordered the respondent to pay Yap the amount equivalent to three (3) months basic salary pursuant
the clause "or for three months for every year of the unexpired term, whichever is less" provided in the 5th
paragraph of Section 10 of R.A. No. 8042.

CA RULING: AFFIRMED NLRC

ISSUE: WON Yap is entitled to the payment of the unexpired portion of his contract.

SC RULING:
YES. During the pendency of this case before the SC, the clause "or for three months for every year of the
unexpired term, whichever is less" has been declared unconstitutional. Thus, Yap is entitled to the payment of
the unexpired portion of his contract.

The doctrine of operative fact as an exception to Article 7 of the New Civil Code is not applicable in this case
because the respondents were in bad faith in the first place. The doctrine only applies as a matter of equity and
fair play. It nullifies the effects of an unconstitutional law by recognizing that the existence of a statute prior to a
determination of unconstitutionality is an operative fact and may have consequences which cannot always be
ignored.

The SC also ruled, as raised for the first time, that the tanker allowance is part of the basic salary. It is even
encapsulated in the basic salary clause found in Yaps contract.

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LABOR LAW REVIEW Atty. Joyrich Golangco

4. PEOPLE OF THE PHILIPPINES v. HON. DOMINGO PANIS, Presiding Judge of the Court of First
Instance of Zambales & Olongapo City, Branch III and SERAPIO ABUG
G.R. Nos. L-58674-77 July 11, 1990
CRUZ, J:

Doctrine:
The proviso That any person or entity which, in any manner, offers or promises for a fee employment to two or
more persons shall be deemed engaged in recruitment and placement found in Article 13(b) of the Labor Code
merely creates a presumption that an individual or entity is engaged in recruitment and placement whenever he
or it is dealing with two or more persons to whom, in consideration of a fee, an offer or promise of employment is
made in the course of the "canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring (of)
workers. ". It does not require that there be at least two victims before the activity is to be considered as illegal
recruitment.

FACTS:
On January 9, 1981, four (4) Informations were filed against Abug charging him of Illegal Recruitment. Abug
then filed a Motion to Quash on the ground that the informations did not charge an offense because he was
accused of illegally recruiting only one person in each of the four informations. Under the proviso in Article 13(b),
he claimed, there would be illegal recruitment only "whenever two or more persons are in any manner promised
or offered any employment for a fee. " On the other hand, the prosecution argues that the requirement of two or
more persons is imposed only where the recruitment and placement consists of an offer or promise of
employment to such persons and always in consideration of a fee. The other acts mentioned in the body of the
article may involve even only one person and are not necessarily for profit.

ISSUE: WON the Labor Code requires that there be at least two victims before an activity is to be considered as
illegal recruitment.

SC RULING:
NO. The proviso merely lays down a rule of evidence that where a fee is collected in consideration of a promise
or offer of employment to two or more prospective workers, the individual or entity dealing with them shall be
deemed to be engaged in the act of recruitment and placement. The words "shall be deemed" create that
presumption.

This is not unlike the presumption in article 217 of the Revised Penal Code, for example, regarding the failure of
a public officer to produce upon lawful demand funds or property entrusted to his custody. Such failure shall be
prima facie evidence that he has put them to personal use; in other words, he shall be deemed to have
malversed such funds or property. In the instant case, the word "shall be deemed" should by the same token be
given the force of a disputable presumption or of prima facie evidence of engaging in recruitment and
placement.

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5. TRANS ACTION OVERSEAS CORPORATION v.THE HONORABLE SECRETARY OF LABOR and (33)
PRIVATE RESPONDENTS
G.R. No. 109583 September 5, 1997
ROMERO, J.:

Doctrine:
In view of the Court's disposition in the case of People v. Diaz, we rule that the power to suspend or cancel any
license or authority to recruit employees for overseas employment is concurrently vested with the POEA and the
Secretary of Labor.

FACTS:
From July 24 to September 9, 1987, Trans, a private fee-charging employment agency, scoured Iloilo City for
possible recruits for alleged job vacancies in Hongkong. Private respondents sought employment as domestic
helpers through Transs employees, Luzviminda Aragon, Ben Hur Domincil and his wife Cecille. The applicants
paid placement fees ranging from P1,000 to P14,000, but Trans failed to deploy them. Their demands for refund
proved unavailing; thus, they were constrained to institute complaints against Trans for violation of Articles 32
and 34(a) of the Labor Code, as amended. For their part, Trans claims that they have not receive the money
and that their employees had no authority to collect the same.

On April 5, 1991, Labor Usec. Nieves Confesor rendered the assailed Order cancelling the license of Trans.
According to Usec. Confesor, Trans is liable for twenty eight (28) counts of violation of Article 32 and five (5)
counts of Article 34 (a) with a corresponding suspension in the aggregate period of sixty six (66) months.
Considering however, that under the schedule of penalties, any suspension amounting to a period of 12 months
merits the imposition of the penalty of cancellation, prompting him to cancel Trans license.

Trans filed a petition under Rule 65. Trans contends that Usec. Confesor acted with grave abuse of discretion in
rendering the assailed orders on alternative grounds, viz.: (1) it is the Philippine Overseas Employment
Administration (POEA) which has the exclusive and original jurisdiction to hear and decide illegal recruitment
cases, including the authority to cancel recruitment licenses, or (2) the cancellation order based on the 1987
POEA Schedule of Penalties is not valid for non-compliance with the Revised Administrative Code of 1987
regarding its registration with the U.P. Law Center.

ISSUES:
(a) WON the DOLE, through Usec. Confesor, has the authority to cancel the license of Trans.
(b) WON the non-filing of the 1987 POEA Schedule of Penalties with the UP Law Center rendered it
ineffective.

SC RULING:
(a) YES. See Case Doctrine

(b) NO. The POEA Revised Rules on the Schedule of Penalties was issued pursuant to Article 34 of the
Labor Code, as amended. The same merely amplified and particularized the various violations of the rules and
regulations of the POEA and clarified and specified the penalties therefore. The questioned schedule of
penalties contains only a listing of offenses. It does not prescribe additional rules and regulations governing
overseas employment but only detailed the administrative sanctions imposable by this Office for some
enumerated prohibited acts.

Under the circumstances, the license of the respondent agency was cancelled on the authority of Article 35 of
the Labor Code, as amended, and not pursuant to the 1987 POEA Revised Rules on Schedule of Penalties.

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6. REPUBLIC OF THE PHILIPPINES v. PRINCIPALIA MANAGEMENT AND PERSONNEL CONSULTANTS,
INC.
G.R. No. 167639 April 19, 2006
YNARES-SANTIAGO, J.:

Doctrine:
Until such time that the appeal (as to the Order of Suspension) is resolved with finality by the DOLE, Principalia
has a clear and convincing right to operate as a recruitment agency.

FACTS:
This case stemmed from two separate complaints filed before the Philippine Overseas Employment
Administration (POEA) against Principalia Management and Personnel Consultants, Incorporated (Principalia)
for violation of the 2002 POEA Rules and Regulations.

The first complaint was filed by Ruth Yasmin Concha where she alleged that after paying P20,000.00 fee
required by Principalia which was not properly receipted, Principalia failed to deploy her for employment abroad
as caregiver or physical therapist. The Adjudication Office of the POEA found Principalia liable for violations of
the 2002 POEA Rules and Regulations.

The second complaint was filed by Rafael E. Baldoza. He alleged that Principalia assured him of employment in
Doha, Qatar as a machine operator with a monthly salary of $450.00. After paying P20,000.00 as placement
fee, he departed but when he arrived, he was made to work as welder. An alternative position as helper was
offered to him, which he refused. Thus, he was repatriated.

On November 12, 2003, Baldoza and Principalia entered into a compromise agreement with quitclaim and
release whereby the latter agreed to redeploy Baldoza for employment abroad. Principalia, however, failed to
deploy Baldoza as agreed hence, in an Order dated April 29, 2004, the POEA suspended Principalias
documentary processing. Principalia moved for reconsideration which the POEA granted on June 25, 2004. The
latter lifted its order suspending the documentary processing by Principalia after noting that it exerted efforts to
obtain overseas employment for Baldoza within the period stipulated in the settlement agreement but due to
Baldozas lack of qualification, his application was declined by its foreign principal.

Meanwhile, on June 14, 2004, or before the promulgation of POEAs order lifting the suspension, Principalia
filed a Complaint (Complaint) against Rosalinda D. Baldoz in her capacity as Administrator of POEA and Atty.
Jovencio R. Abara in his capacity as POEA Conciliator, before the RTC of Mandaluyong City for "Annulment of
Order for Suspension of Documentation Processing with Damages and Application for Issuance of a Temporary
Restraining Order and/or Writ of Preliminary Injunction, and a Writ of Preliminary Mandatory Injunction."
Principalia claimed that the suspension of its documentary processing would ruin its reputation and goodwill and
would cause the loss of its applicants, employers and principals. Thus, a writ of preliminary injunction and a writ
of mandatory injunction must be issued to prevent serious and irreparable damage to it.

On June 14, 2004, the Trial Court granted the prayer for a Temporary Restraining Order enjoining the
defendant[s] Rosalinda D. Baldoz and Atty. Jovencio R. Abara, from implementing the Orders of Suspension.

After the hearing on the preliminary injunction, the trial court held that the issue on the application for preliminary
mandatory injunction has become moot because POEA had already released the renewal of license of
Principalia. It however issue the Writ of Preliminary Prohibitory Injunction prayed for by the plaintiff, upon posting
of a bond in the amount of Php 500,000.00, stressing that the Order of Suspension dated March 15, 2004 is still
pending appeal before the Office of the Secretary of Labor and Employment, and that the said Order dated
March 15, 2004 does not categorically state that the suspension of Plaintiffs License is immediately executory
contrary to the contention of the defendants.

Counsel for POEA argued that the basis for the immediate implementation thereof is Section 5, Rule V, Part VI
of the 2002 POEA Rules and Regulation, which is quoted hereunder, as follows:

"Section 5. Stay of Execution. The decision of the Administration shall be stayed during the
pendency of the appeal; Provided that where the penalty imposed carried the maximum penalty
of twelve (12) months suspension o[r] cancellation of license, the decision shall be immediately
executory despite pendency of the appeal."
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The Order dated March 15, 2004 decreed Plaintiff as having violated Section 2 (a) (d) and (e) of Rule I, Part VI
of the POEA Rules and Regulations and the Plaintiffs was imposed the penalty of twelve (12) months
suspension of license (or in lieu, to pay fine of P120,000, it being its first offense).

Being a first offender, the plaintiff was imposed suspension of license for four (4) months for each violation or an
aggregate period of suspension for twelve (12) months for the three (3) violations.

POEA avers that the trial court gravely abused its discretion in granting the writ of preliminary prohibitory
injunction when the requirements to issue the same have not been met. It asserts that Principalia had no clear
and convincing right to the relief demanded as it had no proof of irreparable damage as required under the
Rules of Court.
ISSUE: Whether or not the trial court erred in issuing the writ of preliminary injunction?

SC RULING:
No. The trial court did not decree that the POEA, as the granting authority of Principalias license to recruit, is
not allowed to determine Principalias compliance with the conditions for the grant, as POEA would have us
believe. For all intents and purposes, POEA can determine whether the licensee has complied with the
requirements. In this instance, the trial court observed that the Order of Suspension dated March 15, 2004 was
pending appeal with the Secretary of the Department of Labor and Employment (DOLE). Thus, until such time
that the appeal is resolved with finality by the DOLE, Principalia has a clear and convincing right to
operate as a recruitment agency.

Furthermore, irreparable damage was duly proven by Principalia. Suspension of its license is not easily
quantifiable nor is it susceptible to simple mathematical computation, as alleged by POEA.
If the injunctive writ was not granted, Principalia would have been labeled as an untrustworthy
recruitment agency before there could be any final adjudication of its case by the DOLE. It would have
lost both its employer-clients and its prospective Filipino-applicants. Loss of the former due to a tarnished
reputation is not quantifiable.

Moreover, POEA would have no authority to exercise its regulatory functions over Principalia because the
matter had already been brought to the jurisdiction of the DOLE. Principalia has been granted the license to
recruit and process documents for Filipinos interested to work abroad. Thus, POEAs action of suspending
Principalias license before final adjudication by the DOLE would be premature and would amount to a
violation of the latters right to recruit and deploy workers.

San Beda College of Law 66


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LABOR LAW REVIEW Atty. Joyrich Golangco

7. SANTOSA B. DATUMAN v. FIRST COSMOPOLITAN MANPOWER AND PROMOTION SERVICES, INC.
G.R. No. 156029 November 14, 2008
LEONARDO-DE CASTRO, J.:

Doctrine:
The signing of the "substitute" contracts with the foreign employer/principal before the expiration of the POEA-
approved contract and any continuation of petitioner's employment beyond the original one-year term, against
the will of petitioner, are continuing breaches of the original POEA-approved contract.

FACTS:
Sometime in 1989, respondent First Cosmopolitan Manpower & Promotion Services, Inc. recruited petitioner
Santosa B. Datuman to work abroad under the following terms and conditions:
Site of employment - Bahrain
Employees Classification/Position/Grade - Saleslady
Basic Monthly Salary - US$370.00
Duration of Contract - One (1) year
Foreign Employer - Mohammed Sharif Abbas Ghulam Hussain

On April 17, 1989, petitioner was deployed to Bahrain after paying the required placement fee. However, her
employer Mohammed Hussain took her passport when she arrived there; and instead of working as a saleslady,
she was forced to work as a domestic helper with a salary of Forty Bahrain Dinar (BD40.00), equivalent only to
US$100.00. This was contrary to the agreed salary of US$370.00 indicated in her Contract of Employment
signed in the Philippines and approved by the POEA.

On September 1, 1989, her employer compelled her to sign another contract, transferring her to another
employer as housemaid with a salary of BD40.00 for the duration of two (2) years. She pleaded with him to give
her a release paper and to return her passport but her pleas were unheeded. She continued working against her
will. Worse, she even worked without compensation from September 1991 to April 1993 because of her
employer's continued failure and refusal to pay her salary despite demand. In May 1993, she was able to finally
return to the Philippines through the help of the Bahrain Passport and Immigration Department.

In May 1995, petitioner filed a complaint before the POEA Adjudication Office against respondent for
underpayment and non-payment of salary, vacation leave pay and refund of her plane fare. While the case was
pending, she filed the instant case before the NLRC for underpayment of salary for a period of one year and six
months, non-payment of vacation pay and reimbursement of return airfare.

LA RULING:
Labor Arbiter Jovencio Mayor, Jr. rendered a Decision finding respondent liable for violating the terms of the
Employment Contract and ordering it to pay petitioner: (a) the amount of US$4,050.00 representing her salary
differentials for fifteen (15) months; and, (b) the amount of BD 180.00 representing the refund of plane ticket.

NLRC RULING: Affirmed LA with modification. NLRC reduced the award of salary differentials from
US$4,050.00 to US$2,970.00 ratiocinating as follows:

Accordingly, we find that the claims for salary differentials accruing earlier than April of 1993 had
indeed prescribed. This is so as complainant had filed her complaint on May 31, 1995 when she
arrived from the jobsite in April 1993. Since the cause of action for salary differential accrues at
the time when it falls due, it is clear that only the claims for the months of May 1993 to April 1994
have not yet prescribed. With an approved salary rate of US$370.00 vis--vis the amount of
salary received which was $100.00, complainant is entitled to the salary differential for the said
period in the amount of $2,970.00
CA RULING: CA issued the assailed Decision granting the petition and reversing the NLRC and the Labor
Arbiter.

It ruled that the provisions in number 2, Section 10 (a), Rule V, Book I of the Omnibus Rules Implementing the
Labor Code Section 1 (f), Rule II, Book II of the 1991 POEA Rules and Regulations were not made to make the
local agency a perpetual insurer against all untoward acts that may be done by the foreign principal or the direct
employer abroad. It is only as regards the principal contract to which it is privy shall its liability extend.

San Beda College of Law 67


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ISSUE: Whether or not the CA erred in not holding respondent liable for petitioner's money claims pursuant to
their Contract of Employment.

SC RULING:
YES.

On whether respondent is solidarily liable for petitioner's monetary claims YES


Section 1 of Rule II of the POEA Rules and Regulations states that:
Section 1. Requirements for Issuance of License. - Every applicant for license to operate a
private employment agency or manning agency shall submit a written application together with
the following requirements:
xxx
f. A verified undertaking stating that the applicant:
xxx
(3) Shall assume joint and solidary liability with the employer for all claims and liabilities
which may arise in connection with the implementation of the contract; including but not
limited to payment of wages, death and disability compensation and repatriation. (emphasis
supplied).

The above provisions are clear that the private employment agency shall assume joint and solidary
liability with the employer. This Court has, time and again, ruled that private employment agencies are held
jointly and severally liable with the foreign-based employer for any violation of the recruitment agreement or
contract of employment. This joint and solidary liability imposed by law against recruitment agencies and foreign
employers is meant to assure the aggrieved worker of immediate and sufficient payment of what is due him.
This is in line with the policy of the state to protect and alleviate the plight of the working class.

We cannot agree with the view of the CA that the solidary liability of respondent extends only to the first.
The signing of the "substitute" contracts with the foreign employer/principal before the expiration of the POEA-
approved contract and any continuation of petitioner's employment beyond the original one-year term, against
the will of petitioner, are continuing breaches of the original POEA-approved contract.

To be sure, Republic Act No. 8042 explicitly prohibits the substitution or alteration to the prejudice of the
worker of employment contracts already approved and verified by the Department of Labor and Employment
(DOLE) from the time of actual signing thereof by the parties up to and including the period of the expiration of
the same without the approval of the DOLE.

In Placewell International Services Corporation v. Camote, we held that the subsequently executed side
agreement of an overseas contract worker with her foreign employer which reduced his salary below the amount
approved by the POEA is void because it is against our existing laws, morals and public policy. The said side
agreement cannot supersede the terms of the standard employment contract approved by the POEA. Hence, in
the present case, the diminution in the salary of petitioner from US$370.00 to US$100 (BD 40.00) per month is
void for violating the POEA-approved contract which set the minimum standards, terms, and conditions of her
employment. Consequently, the solidary liability of respondent with petitioner's foreign employer for petitioner's
money claims continues although she was forced to sign another contract in Bahrain. It is the terms of the
original POEA-approved employment contract that shall govern the relationship of petitioner with the respondent
recruitment agency and the foreign employer.

It is the recruitment agency's responsibility to ensure that the terms and conditions of the employment
contract, as approved by the POEA, are faithfully complied with and implemented properly by its foreign
client/principal.

On whether petitioner's claims for underpaid salaries have prescribed PARTLY Prescribed

Article 291 of the Labor Code which provides that:

Art. 291. Money Claims. - All money claims arising from employer-employee relations accruing
during the effectivity of this Code shall be filed within three years from the time that cause of
action accrued; otherwise, they shall be forever barred. (emphasis supplied)

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We do not agree with the CA when it held that the cause of action of petitioner had already prescribed
as the three-year prescriptive period should be reckoned from September 1, 1989 when petitioner was forced to
sign another contract against her will.

To determine for which months petitioner's right to claim salary differentials has not prescribed, we must
count three years prior to the filing of the complaint on May 31, 1995. Thus, only claims accruing prior to May
31, 1992 have prescribed when the complaint was filed on May 31, 1995. Petitioner is entitled to her claims for
salary differentials for the period May 31, 1992 to April 1993, or approximately eleven (11) months.

We find that the NLRC correctly computed the salary differential due to petitioner at US$2,970.00
(US$370.00 as approved salary rate - US$100.00 as salary received = US$290 as underpaid salary per month x
11 months). However, it should be for the period May 31, 1992 to April 1993 and not May 1993 to April 1994 as
erroneously stated in the NLRC's Decision.

San Beda College of Law 69


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

8. STOLT-NIELSEN TRANSPORTATION GROUP, INC. AND CHUNG GAI SHIP MANAGEMENT, vs.
SULPECIO MEDEQUILLO, JR.
G.R. No. 177498 January 18, 2012
PEREZ, J.:

Doctrine:
Even before the start of any employer-employee relationship, contemporaneous with the perfection of the
employment contract was the birth of certain rights and obligations, the breach of which may give rise to a cause
of action against the erring party.

FACTS:
On 6 March 1995, Sulpecio Madequillo (respondent) filed a complaint before the Adjudication Office of the
POEA against the petitioners for illegal dismissal under a first contract and for failure to deploy under a second
contract. In his complaint-affidavit, respondent alleged that:

1. Respondent was hired by Stolt-Nielsen Marine Services, Inc on behalf of its principal Chung-Gai Ship
Management of Panama as Third Assistant Engineer on board the vessel "Stolt Aspiration" for a
period of nine (9) for $1,212.00 per month commencing on 6 November 1991;
2. He then joined the vessel MV "Stolt Aspiration", but only after three (3) months, he was ordered by the
ships master to disembark the vessel and repatriated back to Manila for no reason or explanation;
3. Upon his return to Manila, he immediately proceeded to the petitioners office where he was
transferred employment with another vessel named MV "Stolt Pride" under the same terms and
conditions of the First Contract;
4. POEA approved the Second Contract, however, respondent was not deployed by petitioners despite the
commencement of the contract. POEA subsequently certified the Second Employment Contract without
the knowledge that petitioners failed to deploy the respondent.
5. Because of petitioners alleged non-compliance with the Second Contract, respondent Medequilla
demanded for the return of his passport and other employment documents from the petitioners. He
claimed that he was made to involuntarily sign a document in order to recover his employment papers.
Medequilla prayed for payment of damages as well as attorneys fees for his illegal dismissal and in view of
the Petitioners bad faith in not complying with the Second Contract. The case was transferred to the Labor
Arbiter of the DOLE upon the effectivity of the Migrant Workers and Overseas Filipinos Act of 1995.

LA RULING:
The LA declared the respondents guilty of constructively dismissing the complainant by not honoring the
employment contract. Accordingly, respondents are hereby ordered jointly and solidarily to pay complainant
$12,537.00 or its peso equivalent at the time of payment. The LA found the first contract entered into by and
between the complainant and the respondents to have been novated by the execution of the second
contract. In other words, respondents cannot be held liable for the first contract but are clearly and definitely
liable for the breach of the second contract. However, he ruled that there was no substantial evidence to
grant the prayer for moral and exemplary damages.

NLRC RULING: Affirmed with modification the Decision of the LA.


NLRC deleted the award of overtime pay in the total amount of US $3,636.00.

ISSUE: Whether or not petitioners have the obligation to deploy the respondent by virtue of the perfected
contract, and thus will be held liable for damages in case of non-deployment.

SC RULING:
Yes. The petitioners argue that under the POEA Contract, actual deployment of the seafarer is a suspensive
condition for the commencement of the employment. The Court agreed with petitioners on such point. However,
even without actual deployment, the perfected contract gives rise to obligations on the part of petitioners. Parties
are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping with good faith, usage and law.

Thus, even if by the standard contract employment commences only "upon actual departure of the seafarer",
this does not mean that the seafarer has no remedy in case of non-deployment without any valid reason.
The Court further made a distinction between the perfection of the employment contract and the
commencement of the employer-employee relationship. The perfection of the contract occurred when petitioner
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and respondent agreed on the object and the cause, as well as the rest of the terms and conditions therein. The
commencement of the employer-employee relationship would have taken place had petitioner been actually
deployed from the point of hire. Thus, even before the start of any employer-employee relationship,
contemporaneous with the perfection of the employment contract was the birth of certain rights and obligations,
the breach of which may give rise to a cause of action against the erring party.

Respondent is thus liable to pay petitioner actual damages in the form of the loss of nine (9) months worth of
salary as provided in the contract. This is but proper because of the non-deployment of respondent without just
cause.

San Beda College of Law 71


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

9. PEOPLE OF THE PHILIPPINES vs. CAROL M. DELA PIEDRA
G.R. No. 121777 January 24, 2001
KAPUNAN, J.:

Doctrine: ILLEGAL RECRUITMENT


Illegal recruitment is committed when two elements concur. First, the offender has no valid license or authority
required by law to enable one to lawfully engage in recruitment and placement of workers. Second, he or she
undertakes either any activity within the meaning of "recruitment and placement" defined under Article 13 (b), or
38
any prohibited practices enumerated under Article 34 of the Labor Code. In case of illegal recruitment in large
scale, a third element is added: that the accused commits said acts against three or more persons, individually
or as a group.

A conviction for large scale illegal recruitment must be based on a finding in each case of illegal recruitment
of three or more persons whether individually or as a group.

FACTS:
Carol M. dela Piedra is convicted for illegal recruitment in large scale and assails, as well, the constitutionality of
the law defining and penalizing said crime.

On January 30, 1994, at exactly 10:00 in the morning, Erlie Ramos, Attorney II of the Philippine Overseas
Employment Agency (POEA), received a telephone call from an unidentified woman inquiring about the
legitimacy of the recruitment conducted by a certain Mrs. Carol Figueroa.

Bellotindos entered the house and pretended to be an applicant; She received a bio-data form from a Carol
Fegueroa Ramos contacted a friend, Mayeth Bellotindos, so they could both go to No. 26-D, Tetuan Highway,
Sta. Cruz, Zamboanga City, where the recruitment was reportedly being undertaken.

A raiding team was planned between POEA and CIS team led by Capt. Mendoza to commence the next day
with SPO2 Fermindoza posing as a would-be-applicant. Fermindoza talked personally with Carol and as the
latter was filling up the application form, Fermindoza signaled to the raiding party waiting outside the house.
Carol Fegueroa was caught holding filled up application forms.

The CIS asked Figueroa if she had a permit to recruit. Figueroa retorted that she was not engaged in
recruitment. Capt. Mendoza nevertheless proceeded to arrest Figueroa. He took the application forms she was
holding as the raiding party seized the other papers on the table. The CIS team then brought Figueroa, a certain
Jasmine Alejandro, and the three women suspected to be applicants, to the office for investigation.

In the course of their investigation, the CIS discovered that Carol Figueroa had many aliases, among them,
Carol Llena and Carol dela Piedra. The accused was not able to present any authority to recruit when
asked by the investigators. A check by Ramos with the POEA revealed that the acused was not licensed
or authorized to conduct recruitment. A certification dated February 2, 1994 stating thus was executed by
Renegold M. Macarulay, Officer-in-Charge of the POEA.

Accused was charged before RTC of Zamboanga in an information alleging:


That on or about January 30, 1994, in the City of Zamboanga, Philippines, Carol dela
Piedra, having no POEA license or authority to engage in recruitment and overseas
placement of workers willfully, unlawfully, and feloniously, offered and promised for a
fee an employment in Singapore to: Maria Lourdes Modesto [y] Gadrino, Nancy
Araneta y Aliwanag and Jennelyn Baez y Timbol Maria Lourdes had already advanced
P2k to accused in consideration of the promised employment.

The accused denied in court that she went to Jasmine's residence to engage in recruitment. She claimed she
came to Zamboanga City to visit her friends, to whom she could confide since she and her husband were having
some problems. She denied she knew Nancy Araneta or that she brought information sheets for job placement.
She also denied instructing Jasmine to collect P2,000 from alleged applicants as processing fee.

ISSUES:
1. Whether or not sec. 13 (b) of P.D. 442, as amended, otherwise known as the illegal
recruitment law is unconstitutional as it violates the due process clause.
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2. Whether or not there is illegal recruitment? Is it in large scale?
RTC RULING:
The accused Carol dela Piedra alias Carol Llena and Carol Figueroa guilty beyond reasonable doubt of
Illegal Recruitment committed in a large scale and hereby sentences her to suffer the penalty of LIFE
IMPRISONMENT and to pay a fine of P100,000.00, and also to pay the costs. Being a detention prisoner, the
said accused is entitled to the full time of the period of her detention during the pendency of this case under the
condition set forth in Article 29 of the Revised Penal Code.

SC RULING:
1. IT IS CONSTITUTIONAL.

In the first assigned error, appellant maintains that the law defining "recruitment and placement" violates due
process. Appellant also aver, that she was denied the equal protection of the laws.

Due process requires that the terms of a penal statute must be sufficiently explicit to inform those who are
subject to it what conduct on their part will render them liable to its penalties. As a rule, a statute or act may be
said to be vague when it lacks comprehensible standards that men "of common intelligence must necessarily
guess at its meaning and differ as to its application." It is repugnant to the Constitution in two respects: (1) it
violates due process for failure to accord persons, especially the parties targeted by it, fair notice of the conduct
to avoid; and (2) it leaves law enforcers unbridled discretion in carrying out its provisions and become an
arbitrary flexing of the Government muscle.

We added, however, that:


x x x the act must be utterly vague on its face, that is to say, it cannot be clarified by either a saving
clause or by construction.

As we see it, the proviso (see ARTICLE 13(B) of the Illegal Recruitment Law) was intended neither to impose a
condition on the basic rule nor to provide an exception thereto but merely to create a presumption. The
presumption is that the individual or entity is engaged in recruitment and placement whenever he or it is dealing
with two or more persons to whom, in consideration of a fee, an offer or promise of employment is made in the
course of the "canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring (of) workers."

The number of persons dealt with is not an essential ingredient of the act of recruitment and placement
of workers. Any of the acts mentioned in the basic rule in Article 13(b) will constitute recruitment and placement
even if only one prospective worker is involved. The proviso merely lays down a rule of evidence that where a
fee is collected in consideration of a promise or offer of employment to two or more prospective workers, the
individual or entity dealing with them shall be deemed to be engaged in the act of recruitment and placement.
The words "shall be deemed" create that presumption.

2. THERE IS SIMPLE ILLEGAL RECRUITMENT

In this case, the first element of illegal recruitment is present. The certification of POEA Officer-in-Charge
Macarulay states that appellant is not licensed or authorized to engage in recruitment and placement.

The second element is also present. Appellant is presumed engaged in recruitment and placement under
Article 13 (b) of the Labor Code. Both Nancy Araneta and Lourdes Modesto testified that appellant promised
them employment for a fee. Their testimonies corroborate each other on material points: the briefing conducted
by appellant, the time and place thereof, t he fees involved.

Affirmative testimony of persons who are eyewitnesses of the fact asserted easily overrides negative testimony.

That appellant did not receive any payment for the promised or offered employment is of no moment.
From the language of the statute, the act of recruitment may be "for profit or not;" it suffices that the
accused "promises or offers for a fee employment" to warrant conviction for illegal recruitment.

Considering that the two elements of lack of license or authority and the undertaking of an activity
constituting recruitment and placement are present, appellant, at the very least, is liable for "simple"
illegal recruitment.

San Beda College of Law 73


4S: 2015 - 2016
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She is not guilty of illegal recruitment in a large scale
A conviction for large scale illegal recruitment must be based on a finding in each case of illegal
recruitment of three or more persons whether individually or as a group. In this case, only two persons,
Araneta and Modesto, were proven to have been recruited by appellant. The third person named in the
complaint as having been promised employment for a fee, Jennelyn Baez, was not presented in court to
testify.

It is true that law does not require that at least three victims testify at the trial; nevertheless, it is necessary
that there is sufficient evidence proving that the offense was committed against three or more persons. In
this case, evidence that appellant likewise promised her employment for a fee is sketchy. The only
evidence that tends to prove this fact is the testimony of Nancy Araneta, who said that she and her
friends, Baez and Sandra Aquino, came to the briefing and that they (she and her "friends") filled up
application forms.

Baez affidavit executed with Araneta cannot support Aranetas testimony. Insofar as it purports to prove
that appellant recruited Baez, therefore, the affidavit is hearsay and inadmissible.

Neither can appellant be convicted for recruiting CIS agent Eileen Fermindoza or even the other persons
present in the briefing of January 30, 1994. Appellant is accused of recruiting only the three persons
named in the information Araneta, Modesto and Baez. The information does not include Fermindoza or
the other persons present in the briefing as among those promised or offered employment for a fee.

Section 19 (1), Article III of the Constitution states: "Excessive fines shall not be imposed, nor cruel,
degrading or inhuman punishment inflicted."

The penalty of life imprisonment imposed upon appellant must be reduced. Because the prosecution was
able to prove that appellant committed recruitment and placement against two persons only, she cannot be
convicted of illegal recruitment in large scale, which requires that recruitment be committed against three or
more persons.

Appellant can only be convicted of two counts of "simple" illegal recruitment, one for that committed against
Nancy Araneta, and another count for that committed against Lourdes Modesto. Appellant is sentenced, for
each count, to suffer the penalty of four (4) to six (6) years of imprisonment and to pay a fine of P30,000.00.

WHEREFORE, the decision of the regional trial court is MODIFIED. Appellant is hereby declared guilty of illegal
recruitment on two (2) counts and is sentenced, for each count, to suffer the penalty of four (4) to six (6) years of
imprisonment and to pay a fine of P30,000.00.

San Beda College of Law 74


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

10. ESTATE OF NELSON R. DULAY, represented by his wife MERRIDY JANE P. DULAY v. ABOITIZ
JEBSEN MARITIME, INC. and GENERAL CHARTERERS, INC.,
G.R. No. 172642 June 13, 2012
PERALTA, J.

Doctrine:
With respect to disputes involving claims of Filipino seafarers wherein the parties are covered by a collective
bargaining agreement, the dispute or claim should be submitted to the jurisdiction of a voluntary arbitrator or
panel of arbitrators. It is only in the absence of a collective bargaining agreement that parties may opt to submit
the dispute to either the NLRC or to voluntary arbitration. It is elementary that rules and regulations issued by
administrative bodies to interpret the law which they are entrusted to enforce, have the force of law, and are
[8]
entitled to great respect. Such rules and regulations partake of the nature of a statute and are just as binding
[9]
as if they have been written in the statute itself. In the instant case, the Court finds no cogent reason to depart
from this rule.

FACTS:
Nelson R. Dulay was employed by General Charterers Inc. (GCI), a subsidiary of co-petitioner Aboitiz Jebsen
Maritime Inc. since 1986. He initially worked as an ordinary seaman and later as bosun on a contractual basis.
From September 3, 1999 up to July 19, 2000, Nelson was detailed in petitioners vessel, the MV Kickapoo Belle.

After the completion of his employment contract, Nelson died due to acute renal failure secondary to septicemia.
At the time of his death, Nelson was a bona fide member of the Associated Marine Officers and Seamans
Union of the Philippines (AMOSUP), GCIs collective bargaining agent.

Nelsons widow, Merridy Jane, thereafter claimed for death benefits through the grievance procedure of the
Collective Bargaining Agreement (CBA) between AMOSUP and GCI. However, the grievance procedure was
declared deadlocked as petitioners refused to grant the benefits sought by the widow. Merridy Jane filed a
complaint with the NLRC Sub-Regional Arbitration Board in General Santos City against GCI for death and
medical benefits and damages. The amount claimed by Nelsons widow is $90,000 however GCI awarded
P20,000 in favor of the deceaseds brother. Merridy claims the remaining amount less the P20,000 her brother-
in-law received.

Respondents on the other hand, asserted that the NLRC had no jurisdiction over the action on account of the
absence of employer-employee relationship between GCI and Nelson at the time of the latters death. Nelson
also had no claims against petitioners for sick leave allowance/medical benefit by reason of the completion of
his contract with GCI. They further alleged that private respondent is not entitled to death benefits because
petitioners are only liable for such in case of death of the seafarer during the term of his contract pursuant to the
POEA contract and the cause of his death is not work-related. Petitioners admitted liability only with respect to
article 20(A) 2 [of the CBA].

ISSUE: Whether or not the Labor Arbiter has jurisdiction over the case.

LA RULING: The Labor Arbiter ruled in favor of private respondent. It took cognizance of the case by virtue of
Article 217 (a), paragraph 6 of the Labor Code and the existence of a reasonable causal connection between
the employer-employee relationship and the claim asserted. It ordered the petitioner to pay P4,621,300.00, the
equivalent of US$90,000.00 less P20,000.00, at the time of judgment. The Labor Arbiter also ruled that the
proximate cause of Nelsons death was not work-related.

NLRC RULING: On appeal, [the NLRC] affirmed the Labor Arbiters decision as to the grant of death
[3]
benefits under the CBA but reversed the latters ruling as to the proximate cause of Nelsons death.

CA RULING: The CA ruled that while the suit filed by Merridy Jane is a money claim, the same basically
involves the interpretation and application of the provisions in the subject CBA. As such, jurisdiction belongs to
the voluntary arbitrator and not the labor arbiter.

SC RULING:
JURISDICTION BELONGS TO THE VOLUNTARY ARBITRATOR AND NOT THE LABOR ARBITER.

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The Court agrees with petitioner's contention that the CBA is the law or contract between the parties. Article
13.1 of the CBA entered into by and between respondent GCI and AMOSUP, the union to which petitioner
belongs, provides as follows:

The Company and the Union agree that in case of dispute or conflict in the interpretation or application
of any of the provisions of this Agreement, or enforcement of Company policies, the same shall be
settled through negotiation, conciliation or voluntary arbitration.

In the same manner, Section 29 of the prevailing Standard Terms and Conditions Governing the Employment of
Filipino Seafarers on Board Ocean Going Vessels, promulgated by the Philippine Overseas Employment
Administration (POEA), provides as follows:

Section 29. Dispute Settlement Procedures. In cases of claims and disputes


arising from this employment, the parties covered by a collective bargaining
agreement shall submit the claim or dispute to the original and exclusive
jurisdiction of the voluntary arbitrator or panel of arbitrators.

It is clear from the above that the interpretation of the DOLE, in consultation with their counterparts in the
respective committees of the Senate and the House of Representatives, as well as the DFA and the POEA is
that with respect to disputes involving claims of Filipino seafarers wherein the parties are covered by a CBA, the
dispute or claim should be submitted to the jurisdiction of a voluntary arbitrator or panel of arbitrators. It is only in
the absence of a CBA that parties may opt to submit the dispute to either the NLRC or to voluntary arbitration.

On the basis of the foregoing, the Court finds no error in the ruling of the CA that the voluntary arbitrator
has jurisdiction over the instant case.

San Beda College of Law 76


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

11. SANTIAGO vs. CF SHARP CREW MANAGEMENT INC.
G.R. No. 162419 July 10, 2007
Tinga, J.:

Doctrine:
The jurisdiction of labor arbiters is not limited to claims arising from employer-employee relationships. Under
Section 10 of R.A. No. 8042 the Labor Arbiters of the National Labor Relations Commission (NLRC) shall also
have the original and exclusive jurisdiction to hear and decide, the claims arising xxx by virtue of any law or
contract involving Filipino workers for overseas deployment including claims for actual, moral, exemplary and
other forms of damages.

FACTS:
On 3 February 1998, Paul Santiago signed a new contract of employment with CF Sharp Crew Mgmt., Inc., with
the duration of nine (9) months. He was assured of a monthly salary of US$515.00, overtime pay and other
benefits. Santiago was to be deployed on board the "MSV Seaspread" which was scheduled to leave the port of
Manila for Canada on 13 February 1998.

A week before the scheduled date of departure, Capt. Pacifico Fernandez, CF Sharps Vice President, sent a
fax to the captain of "MSV Seaspread telling the latter that he received calls from various individuals about the
possibility that Santiago may jump ship in Canada like his brother did before him. On 9 February 1998,
Santiago was thus told that he would not be leaving for Canada anymore, but he was reassured that he might
be considered for deployment at some future date.

Consequently, Santiago filed a complaint for illegal dismissal, damages, and attorney's fees against CF Sharp
and its foreign principal. In defense, CF Sharp contends that there is no employer-employee relationship
between petitioner and respondent because under the POEA Standard Contract, the employment contract shall
commence upon actual departure of the seafarer from the airport or seaport at the point of hire. In the absence
of an employer-employee relationship between the parties, the claims for illegal dismissal, actual damages, and
attorneys fees should be dismissed as the NLRC does not have jurisdiction over the same.

ISSUE: WON the failure of CF Sharp to deploy Santiago without a valid contract entitles the latter to relief
sought despite the non-commencement of the employer-employee relationship?

SC RULING:
YES. The jurisdiction of labor arbiters is not limited to claims arising from employer-employee relationships.
Section 10 of R.A. No. 8042 (Migrant Workers Act), provides that the Labor Arbiters of the National Labor
Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide, the claims
arising xxx by virtue of any law or contract involving Filipino workers for overseas deployment including claims
for actual, moral, exemplary and other forms of damages.

Here, since the present petition involves the employment contract entered into by petitioner for overseas
employment, his claims are cognizable by the labor arbiters of the NLRC.

Even before the start of any employer-employee relationship, contemporaneous with the perfection of the
employment contract was the birth of certain rights and obligations, the breach of which may give rise to a cause
of action against the erring party. Thus, if the reverse had happened, that is the seafarer failed or refused to be
deployed as agreed upon, he would be liable for damages.

San Beda College of Law 77


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12. STO. TOMAS vs. SALAC
G.R. No. 152642 November 13, 2012
Abad, J.:

Doctrine:
Sections 29 and 30 have been repealed by R.A. No. 9422, thereby putting private overseas recruitment
activities under government regulation. On the other hand, Sections 6, 7, 9 and the last sentence of par.2, Sec.
10 of R.A. No. 8042 are not unconstitutional.

FACTS:
These are consolidated cases pertaining to questions being raised on the constitutionality of certain provisions
of R.A. No. 8042 or the Migrant Workers Act.

The first case questions the constitutionality of Sections 29 and 30 deregulating the business of handling the
recruitment and migration of overseas Filipino workers and phasing out within five years the regulatory functions
of the Philippine Overseas Employment Administration (POEA).

The second, on the other hand, questioned Sections 6, 7 and 9 of the same law. The issue raised as to Sec. 6
was that that its definition of "illegal recruitment" is vague as it fails to distinguish between licensed and non-
licensed recruiter and for that reason gives undue advantage to the non-licensed recruiters in violation of the
right to equal protection of those that operate with government licenses or authorities.

As to Sec. 7, it was held by an RTC as unconstitutional on the ground that its sweeping application of the
penalties failed to make any distinction as to the seriousness of the act committed for the application of the
penalty imposed on such violation. As an example, said the trial court, the mere failure to render a report under
Section 6(h) or obstructing the inspection by the Labor Department under Section 6(g) are penalized by
imprisonment for six years and one day and a minimum fine of P200,000.00 but which could unreasonably go
even as high as life imprisonment if committed by at least three persons.

The same RTC also held invalid Sec. 9 for on the ground that allowing the offended parties to file the criminal
case in their place of residence would negate the general rule on venue of criminal cases which is the place
where the crime or any of its essential elements were committed. Venue, said the RTC, is jurisdictional in penal
laws and, allowing the filing of criminal actions at the place of residence of the offended parties violates their
right to due process.

The third and final case questions the constitutionality of the last sentence of the par.2, Sec. 10, R.A. No. 8042,
which holds the corporate directors, officers and partners jointly and solidarily liable with their company for
money claims filed by OFWs against their employers and the recruitment firms.

ISSUE: WON the assailed provisions of the law are constitutional.

SC RULING:
YES. As to the first case, the issue has been rendered moot with the passage into law of R.A. 9422 which
expressly repealed Sections 29 and 30 of R.A. 8042 and adopted the policy of close government regulation of
the recruitment and deployment of OFWs.

Coming to the second case, illegal recruitment" as defined in Section 6 is clear and unambiguous and, contrary
to the RTCs finding, actually makes a distinction between licensed and non-licensed recruiters. By its terms,
persons who engage in "canvassing, enlisting, contracting, transporting, utilizing, hiring, or procuring workers"
without the appropriate government license or authority are guilty of illegal recruitment whether or not they
commit the wrongful acts enumerated in that section. On the other hand, recruiters who engage in the
canvassing, enlisting, etc. of OFWs, although with the appropriate government license or authority, are guilty of
illegal recruitment only if they commit any of the wrongful acts enumerated in Section 6.

Neither is Sec. 7 unconstitutional as the law can impose such grave penalties upon what it believed were
specific acts that were not as condemnable as the others in the lists. But, in fixing uniform penalties for each of
the enumerated acts under Section 6, Congress was within its prerogative to determine what individual acts are
equally reprehensible, consistent with the State policy of according full protection to labor, and deserving of the
same penalties. It is not within the power of the Court to question the wisdom of this kind of choice.
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As to Sec. 9, there is nothing arbitrary or unconstitutional in Congress fixing an alternative venue for violations of
Section 6 of R.A. 8042 that differs from the venue established by the Rules on Criminal Procedure. Indeed,
Section 15(a), Rule 110 of the latter Rules allows exceptions provided by laws. Section 9 of R.A. 8042, as an
exception to the rule on venue of criminal actions is, consistent with that laws declared policy of providing a
criminal justice system that protects and serves the best interests of the victims of illegal recruitment.

On to the third case, the Court has already held that the liability of corporate directors and officers is not
automatic. To make them jointly and solidarily liable with their company, there must be a finding that they were
remiss in directing the affairs of that company, such as sponsoring or tolerating the conduct of illegal activities.

13. SAMEER OVERSEAS PLACEMENT AGENCY, INC. vs. JOY C. CABILES


G.R. No. 170139 August 5, 2014
Leonen, J.:

Doctrine:
The re-enactment of the last paragraph of Sec. 10 of R.A. No. 8042 did not erase its unconstitutionality and a
central bank circular on interest rates cannot repeal a positive provision R.A. No. 8042, as regards interest rates
on certain pecuniary awards granted to illegally dismissed OFWs.

FACTS:
Joy C. Cabiles, submitted her application for a quality control job in Taiwan via the Sameer Overseas Placement
Agency, Inc. Joys application was accepted. Joy was later asked to sign a one-year employment contract for a
monthly salary of NT$15,360.00. She alleged that Sameer Overseas Agency required her to pay a placement
fee of P70,000.00 when she signed the employment contract.

Joy was deployed to work for Taiwan Wacoal, Co. Ltd. (Wacoal) on June 26, 1997. Sameer Overseas
Placement Agency claims that on July 14, 1997, Wacoal informed Joy, without prior notice, that she was
terminated and that "she should immediately report to their office to get her salary and passport." She was
asked to "prepare for immediate repatriation."

Consequently, Joy filed a complaint with the NLRC against Sameer and Wacoal. She claimed that she was
illegally dismissed. She asked for the return of her placement fee, the withheld amount for repatriation costs,
payment of her salary for 23 months as well as moral and exemplary damages. Sameer, on the other hand,
posits among others that Petitioner Wacoal's accreditation with it had already been transferred to the Pacific
Manpower & Management Services, Inc. (Pacific) as of August 6, 1997. Thus, it asserts that it was already
substituted by Pacific Manpower.

Joy won before the NLRC and the CA who both awarded Joy a mere (3) months worth of salary,
reimbursement of withheld repatriation expense, and attorneys fees. Sameer brought a petition for review with
the SC. Brought to the fore is the issue on the constitutionality of the last paragraph of Sec. 10 of R.A. No. 8042
which has been declared unconstitutional in Serrano v. Gallant Maritime but re-enacted by legislation
subsequent to Serrano. Also brought for discussion is the proper application of the newly imposed interest rates
on the pecuniary awards given to Joy in view of Central Bank Circular No. 799.

ISSUE(S): 1. WON the award of 3-months worth of salary to Joy was legal in view of the re-enactment of the
last paragraph of Sec. 10 of R.A. No. 8042 which was previously declared as unconstitutional.

2. WON the new Central Bank circular on interest rates applies to the award of reimbursement of
placement fee and other deductions.

SC RULING:
1. NO. the reinstated clause, this time as provided in Republic Act. No. 10022, violates the constitutional rights
to equal protection and due process.Sameer as well as the Solicitor General have failed to show any compelling
change in the circumstances that would warrant us to revisit the precedent. Again, limiting wages that should be
recovered by an illegally dismissed overseas worker to three months is both a violation of due process and the
equal protection clauses of the Constitution.

The adoption of the reinstated clause in Republic Act No. 8042 subjected the money claims of illegally
dismissed overseas workers with an unexpired term of at least a year to a cap of three months worth of their
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salary. There was no such limitation on the money claims of illegally terminated local workers with fixed-term
employment.

Also, the subject clause creates a sub-layer of discrimination among OFWs whose contract periods are for more
than one year: those who are illegally dismissed with less than one year left in their contracts shall be entitled to
their salaries for the entire unexpired portion thereof, while those who are illegally dismissed with one year or
more remaining in their contracts shall be covered by the reinstated clause, and their monetary benefits limited
to their salaries for three months only

These classifications do not rest on any real or substantial distinctions that would justify different treatments in
terms of the computation of money claims resulting from illegal termination.

As such, Joy Cabiles is entitled to her salary for the unexpired portion of her contract, in accordance with
Section 10 of Republic Act No. 8042. The award of the three-month equivalence of her salary must be modified
accordingly. Since she started working on June 26, 1997 and was terminated on July 14, 1997, respondent is
entitled to her salary from July 15, 1997 to June 25, 1998.

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

However, the same cannot be said for awards of salary for the unexpired portion of the employment contract
under Republic Act No. 8042. These awards are covered by Circular No. 799 because the law does not provide
for a specific interest rate that should apply.

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14. MAERSK-FILIPINAS CREWING, INC., A.P. MOLLER SINGAPORE PTE. LIMITED, AND JESUS
AGBAYANI vs. TORIBIO C. AVESTRUZ
G.R. No. 207010 February 18, 2015

Doctrine
Except in cases of clear and existing danger to the crew or vessel, an erring seaman should be given a written
notice of the charge against him and should be afforded an opportunity to explain or defend himself. Should
sanctions be imposed, then a written notice of penalty and the reasons for it shall be furnished the erring
seafarer. In all cases, a complete report should be sent to the manning agency, supported by substantial
evidence of the findings.

FACTS:
Maersk-Filipinas Crewing, Inc. (Maersk), on behalf of its foreign principal hired Avestruz as Chief Cook on board
the vessel M/V Nedlloyd Drake for a period of six (6) months
Avestruz boarded the vessel on May 4, 2011.

On June 22, 2011, in the course of the weekly inspection of the vessels galley, Captain Charles C. Woodward
(Captain Woodward) noticed that the cover of the garbage bin in the kitchen near the washing area was oily.
Woodward called Avestruz. An altercation ensued.

On the very same day, Captain Woodward informed Avestruz that he would be dismissed from service and be
disembarked in India. On July 3, 2011, Avestruz was disembarked in Colombo, Sri Lanka and arrived in the
Philippines on July 4, 2011.

Consequently, Avestruz filed a complaint for illegal dismissal, payment for the unexpired portion of his contract,
damages, and attorneys fees against Maersk et al. and that Captain Woodward failed to observe the provisions
under Section 17 of the Philippine Overseas Employment Administration (POEA) Standard Employment
Contract (POEA-SEC) on disciplinary procedures. Maersk maintained that Avestruz was dismissed for a just
and valid cause and is, therefore, not entitled to recover his salary for the unexpired portion of his contract. They
contend that Avestruz was dismissed on the ground of insubordination, consisting of his repeated failure to
obey his superiors order to maintain cleanliness in the galley of the vessel as well as his act of insulting a
superior officer by words or deeds. In support of this contention, petitioners presented as evidence the e-mails
sent by Captain Woodward, both dated June 22, 2011, and time-stamped 10:07 a.m. and 11:40 a.m.,
respectively

The CA held for Avestruz and directed petitioners to pay him, jointly and severally, the full amount of his
placement fee and deductions made, with interest at twelve percent (12%) per annum, as well as his salaries for
the unexpired portion of his contract, and attorneys fees of ten percent (10%) of the total award. All other
money claims were denied for lack of merit.

ISSUE(S): 1. WON Avestruz dismissal was proper pursuant to the POEA-SEC.


2. WON the pecuniary awards given to Avestruz was proper.

SC RULING:
1. NO. An erring seaman is given a written notice of the charge against him and is afforded an opportunity to
explain or defend himself. Should sanctions be imposed, then a written notice of penalty and the reasons for it
shall be furnished the erring seafarer. It is only in the exceptional case of clear and existing danger to the safety
of the crew or vessel that the required notices are dispensed with; but just the same, a complete report should
be sent to the manning agency, supported by substantial evidence of the findings.

In this case, there is dearth of evidence to show that Avestruz had been given a written notice of the charge
against him, or that he was given the opportunity to explain or defend himself. The statement given by Captain
Woodward requiring him to explain in writing the events that transpired at the galley in the morning of June 22,
2011 hardly qualifies as a written notice of the charge against him, nor was it an opportunity for Avestruz to
explain or defend himself. While Captain Woodward claimed in his e-mail that he conducted a disciplinary
hearing informing Avestruz of his inefficiency, no evidence was presented to support the same. Neither was
Avestruz given a written notice of penalty and the reasons for its imposition.

2. YES. It is in consonance with Section 10 of RA 8042, as amended by RA 10022, which reads:


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Section 10. Money claims. x x x

x x x x In case of termination of overseas employment without just, valid or authorized cause as defined
by law or contract, or any unauthorized deductions from the migrant workers salary, the worker shall be
entitled to the full reimbursement of his placement fee and the deductions made with interest at twelve
percent (12%) per annum, plus his salaries for the unexpired portion of his employment contract or for
three (3) months for every year of the unexpired term, whichever is less.

Similarly, the Court affirmed the grant of attorneys fees of ten percent (10%) of the total award. All other
monetary awards were denied for lack of merit.

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15. SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC. vs. NLRC
G.R. No. 161757 January 25, 2006
Carpio-Morales, J.:

Doctrine:
The theory of imputed knowledge ascribes the knowledge of the agent to the principal not the other way around.
Also, the agency between a foreign principal and its local recruitment agent is revoked if the foreign principal
directly manages the business (hiring of employee) entrusted to the local recruitment agent, dealing directly with
third persons.

FACTS:
Sunace International Management Services (Sunace), deployed to Taiwan Divina A. Montehermozo (Divina) as
a domestic helper under a 12-month contract effective February 1, 1997. After her 12-month contract expired on
February 1, 1998, Divina continued working for her Taiwanese employer, Hang Rui Xiong, for two more years,
after which she returned to the Philippines on February 4, 2000.

Shortly after her return or on February 14, 2000, Divina filed a complaint before the National Labor Relations
Commission (NLRC) against Sunace and three others including the employer-foreign principal alleging that she
was jailed for three months and that she was underpaid.

Divina filed also claimed that under her original one-year contract and the 2-year extended contract which was
with the knowledge and consent of Sunace, amounts representing income tax and savings were deducted from
her salary and while the amounts deducted in 1997 were refunded to her, those deducted in 1998 and 1999
were not.

For its part, Sunace alleged that Divinas 2-year extension of her contract was without its knowledge and
consent, hence, it had no liability attaching to any claim arising therefrom, and Divina in fact executed a
Waiver/Quitclaim and Release of Responsibility and an Affidavit of Desistance. The CA affirmed the Labor
Arbiter and NLRCs finding that Sunace knew of and impliedly consented to the extension of Divinas 2-year
contract. It went on to state that It is undisputed that Sunace was continually communicating with Divinas
foreign employer. It thus concluded that as agent of the foreign principal, petitioner cannot profess ignorance of
such extension as obviously, the act of the principal extending complainants employment contract necessarily
bound it.

ISSUE: WON Sunace was solidarily liable with the foreign principal to Divina as to the events which transpired
during her 2-year extension in Taiwan.

SC RULING:
NO. The theory of imputed knowledge ascribes the knowledge of the agent, Sunace, to the principal, employer
Xiong, not the other way around. The knowledge of the principal-foreign employer cannot, therefore, be imputed
to its agent Sunace. Also, the agency is revoked if the principal directly manages the business entrusted to the
agent, dealing directly with third persons.

Here, there is no substantial proof that Sunace knew of and consented to be bound under the 2-year
employment contract extension, it cannot be said to be privy thereto. As such, it cannot be held solidarily liable
for any of Divinas claims arising from the 2-year employment extension. Furthermore, Sunace correctly points
out, there was an implied revocation of its agency relationship with its foreign principal when, after the
termination of the original employment contract, the foreign principal directly negotiated with Divina and entered
into a new and separate employment contract in Taiwan.

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ARTICLE 22-78

16. HON. PATRICIA A. STO.TOMAS, et al. vs. REY SALAC, et al.


G.R. No. 152642 November 13, 2012
ABAD, J.:

FACTS:
These consolidated cases pertain to the constitutionality of certain provisions of RA 8042, or the Migrant
Workers and Overseas Filipinos Act of 1995, enacted on June 7, 1995, which sets the Governments policies on
overseas employment and establishes a higher standard of protection and promotion of the welfare of migrant
workers, their families, and overseas Filipinos in distress.

*Constitutionality of Sections 29 and 30 of R.A. 8042


Sections 29 and 30 commanded the Department of Labor and Employment (DOLE) to begin deregulating within
one year of its passage the business of handling the recruitment and migration of OFWs and phase out within
five years the regulatory functions of the Philippine Overseas Employment Administration (POEA).

On January 8, 2002, Rey Salac, et al. filed a petition for certiorari, prohibition and mandamus with application for
TRO and preliminary injunction against Patricia Sto. Tomas as DOLE Secretary, et al. in RTC Quezon City.
They sought to: 1) nullify DOLE Department Order 10 and POEA Memorandum Circular 15; 2) prohibit the
DOLE, POEA, and TESDA from implementing the same and from further issuing rules and regulations that
would regulate the recruitment and placement of OFWs; and 3) also enjoin them to comply with the policy of
deregulation mandated under Sections 29 and 30 of Republic Act 8042.

On March 20, the Quezon City RTC granted Salac, et al.s petition and ordered the government agencies
mentioned to deregulate the recruitment and placement of OFWs. The RTC also annulled DOLE DO 10, POEA
MC 15, and all other orders, circulars and issuances that are inconsistent with the policy of deregulation under
R.A. 8042. Hence, the petition seeking to annul the RTCs decision and have the same enjoined pending action
on the petition.

On April 17, the Philippine Association of Service Exporters, Inc. intervened, claiming that Decision gravely
affected them since it paralyzed the deployment abroad of OFWs and performing artists. So did the
Confederated Association of Licensed Entertainment Agencies, Incorporated (CALEA). On May 23, the
Court issued a TRO, enjoining the Quezon City RTC from enforcing its decision.

In a parallel case, Asian Recruitment Council Philippine Chapter, Inc. and others (Arcophil, et al.) filed a petition
for certiorari and prohibition with application for TRO and preliminary injunction to enjoin the implementation of
the 2002 Rules and Regulations Governing the Recruitment and Employment of Overseas Workers and to
cease and desist from issuing other orders, circulars, and policies that tend to regulate the recruitment and
placement of OFWs in violation of the policy of deregulation provided in Sections 29 and 30 of R.A. 8042. It was
granted.

On December 4, 2008, however, the Republic informed the Court that on April 10, 2007 former President Gloria
Macapagal-Arroyo signed into law R.A. 9422 which expressly repealed Sections 29 and 30 of R.A. 8042 and
adopted the policy of close government regulation of the recruitment and deployment of OFWs.

The repeal of Sections 29 and 30 of R.A. 8042 renders the issues moot and academic. Hence, they should be
dismissed.

*Constitutionality of Sections 6, 7, and 9 of R.A. 8042


On August 21, 1995, PASEI filed a petition for declaratory relief and prohibition with prayer for issuance
of TRO and writ of preliminary injunction in RTC Manila, seeking to annul Sections 6, 7, and 9 of R.A. 8042 for
being unconstitutional. Section 6 defines the crime of "illegal recruitment" and enumerates the acts constituting
the same. Section 7 provides the penalties for prohibited acts. Section 9 allowed the filing of criminal actions
arising from "illegal recruitment" before the RTC of the province or city where the offense was committed or
where the offended party actually resides at the time of the commission of the offense.

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RTC Manila declared Section 6 unconstitutional on the ground that its definition of "illegal recruitment" is vague.
But "illegal recruitment" as defined in Section 6 is clear and unambiguous and, contrary to the RTCs finding,
actually makes a distinction between licensed and non-licensed recruiters.

RTC Manila also declared Section 7 unconstitutional on the ground that its sweeping application of the penalties
failed to make any distinction as to the seriousness of the act committed for the application of the penalty
imposed on such violation. But, in fixing uniform penalties for each of the enumerated acts under Section 6,
Congress was within its prerogative to determine what individual acts are equally reprehensible, consistent with
the State policy of according full protection to labor, and deserving of the same penalties. It is not within the
power of the Court to question the wisdom of this kind of choice. Notably, this legislative policy has been further
stressed in July 2010 with the enactment of R.A. 10022 which increased even more the duration of the penalties
of imprisonment and the amounts of fine for the commission of the acts listed under Section 7.

RTC Manila also invalidated Section 9 on the ground that allowing the offended parties to file the criminal case
in their place of residence would negate the general rule on venue of criminal cases which is the place where
the crime or any of its essential elements were committed. Venue, said the RTC, is jurisdictional in penal laws
and, allowing the filing of criminal actions at the place of residence of the offended parties violates their right to
due process. But there is nothing arbitrary or unconstitutional in Congress fixing an alternative venue for
violations. Section 9, as an exception to the rule on venue of criminal actions is consistent with that laws
declared policy of providing a criminal justice system that protects and serves the best interests of the victims of
illegal recruitment.

*Constitutionality of Section 10, last sentence of 2nd paragraph


Spouses Simplicio and Mila Cuaresma filed a claim for death and insurance benefits and damages against
Becmen Service Exporter and Promotion, Inc. and White Falcon Services, Inc. for the death of their daughter
Jasmin while working as staff nurse in Riyadh, Saudi Arabia.

The Labor Arbiter dismissed the claim. However, the National Labor Relations Commission found Becmen and
White Falcon jointly and severally liable for Jasmins death and ordered them to pay the Cuaresmas the amount
of US$113,000.00 as actual damages. The NLRC relied on the Cabanatuan City Health Offices autopsy finding
that Jasmin died of criminal violence and rape. CA upheld.

SC found Jasmins death not work-related or work-connected since her rape and death did not occur while she
was on duty at the hospital or doing acts incidental to her employment. The Court deleted the award of actual
damages but ruled that Becmens corporate directors and officers are solidarily liable with their company for its
failure to investigate the true nature of her death. Becmen and White Falcon abandoned their legal, moral, and
social duty to assist the Cuaresmas in obtaining justice for their daughter.

The corporate directors and officers of Becmen, namely, Eufrocina Gumabay, et al. filed a motion for leave to
Intervene. They questioned the constitutionality of the last sentence of the second paragraph of Section 10, R.A.
8042 which holds the corporate directors, officers and partners jointly and solidarily liable with their company for
money claims filed by OFWs against their employers and the recruitment firms.

The key issue that Gumabay, et al. present is whether or not the 2nd paragraph of Section 10, R.A. 8042, which
holds the corporate directors, officers, and partners of recruitment and placement agencies jointly and solidarily
liable for money claims and damages that may be adjudged against the latter agencies, is unconstitutional.

Absent sufficient proof that the corporate officers and directors of the erring company had knowledge of and
allowed the illegal recruitment, making them automatically liable would violate their right to due process of law.
The liability of corporate directors and officers is not automatic. To make them jointly and solidarily liable with
their company, there must be a finding that they were remiss in directing the affairs of that company, such as
sponsoring or tolerating the conduct of illegal activities. In the case of Becmen and White Falcon, while there is
evidence that these companies were at fault in not investigating the cause of Jasmins death, there is no
mention of any evidence in the case against them that intervenors Gumabay, et al., Becmens corporate officers
and directors, were personally involved in their companys particular actions or omissions in Jasmins case.

SC RULING:
R.A. 8042 is a police power measure intended to regulate the recruitment and deployment of OFWs. It aims to
curb, if not eliminate, the injustices and abuses suffered by numerous OFWs seeking to work abroad. The rule is
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settled that every statute has in its favor the presumption of constitutionality. The Court cannot inquire into the
wisdom or expediency of the laws enacted by the Legislative Department. Hence, in the absence of a clear and
unmistakable case that the statute is unconstitutional, the Court must uphold its validity.

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17. CENTURY CANNING CORPORATION vs. CA and GLORIA C. PALAD
G.R. No. 152894 August 17, 2007
CARPIO, J.:

FACTS:
On 15 July 1997, Century Canning Corporation hired Gloria C. Palad as fish cleaner at its tuna and sardines
factory. Palad signed an apprenticeship agreement and received an apprentice allowance of P138.75 daily. On
25 July, CCC submitted its apprenticeship program for approval to the Technical Education and Skills
Development Authority (TESDA) of the Department of Labor and Employment (DOLE). On 26 September, the
TESDA approved the same.

According to CCC, a performance evaluation was conducted on 15 November, where CCC gave Palad a rating
of N.I. or needs improvement since she scored only 27.75% based on a 100% performance indicator.
Furthermore, according to the performance evaluation, Palad incurred numerous tardiness and absences. As a
consequence, CCC issued a termination
noticehttp://sc.judiciary.gov.ph/jurisprudence/2007/august2007/152894.htm - _ftn5 dated 22 November to Palad,
informing her of her termination effective at the close of business hours of 28 November.

Palad then filed a complaint for illegal dismissal, underpayment of wages, and non-payment of pro-rated
th
13 month pay for the year 1997.

On 25 February 1999, the Labor Arbiter dismissed the complaint for lack of merit but ordered CCC to pay Palad
th
her last salary and her pro-rated 13 month pay. On appeal, the National Labor Relations Commission affirmed
with modification. Upon denial of Palads motion for reconsideration, Palad filed a special civil action
for certiorari with the CA. On 12 November 2001, CA set aside the decision of NLRC, and found that the
dismissal was illegal.

CA held that the apprenticeship agreement which Palad signed was not valid and binding because it was
executed more than two months before the TESDA approved CCCs apprenticeship program. CA also held that
CCC illegally dismissed Palad. CA ruled that CCC failed to show that Palad was properly apprised of the
required standard of performance. CA likewise held that Palad was not afforded due process because CCC did
not comply with the twin requirements of notice and hearing.

ISSUES:
1. Whether Palad was an apprentice. No
2. Whether CCC had adequately proven the existence of a valid cause in terminating the service of palad.
No

SC RULING:
The Labor Code defines an apprentice as a worker who is covered by a written apprenticeship agreement with
an employer. One of the objectives of Title II (Training and Employment of Special Workers) of the Labor Code
is to establish apprenticeship standards for the protection of apprentices. (Articles 60 and 61)

In Nitto Enterprises v. National Labor Relations Commission, the Court cited Article 61 of the Labor Code and
held that an apprenticeship program should first be approved by the DOLE before an apprentice may be hired,
otherwise the person hired will be considered a regular employee.

Based on the evidence, CCC did not comply with the requirements of the law. Prior approval by the Department
of Labor and Employment of the proposed apprenticeship program is a condition sine qua non before an
apprenticeship agreement can be validly entered into.

Hence, since the apprenticeship agreement between CCC and Palad has no force and effect in the absence of
a valid apprenticeship program duly approved by the DOLE, Palads assertion that she was hired not as an
apprentice deserves credence. She should rightly be considered as a regular employee of CCC as defined by
Article 280 of the Labor Code.

RA 7796, which created the TESDA, has transferred the authority over apprenticeship programs from the
Bureau of Local Employment of the DOLE to the TESDA. RA 7796 emphasizes TESDAs approval of the
apprenticeship program as a pre-requisite for the hiring of apprentices. Such intent is clear under Section 4.
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Clearly, the apprenticeship agreement was enforced even before the TESDA approved CCCs apprenticeship
program. Thus, the apprenticeship agreement is void because it lacked prior approval from the TESDA. The
requisite TESDA approval of the apprenticeship program prior to the hiring of apprentices was further
emphasized by the DOLE with the issuance of Department Order No. 68-04 on 18 August 2004.

Since Palad is not considered an apprentice because the apprenticeship agreement was enforced before the
TESDAs approval of CCCs apprenticeship program, Palad is deemed a regular employee performing the job of
a fish cleaner. Clearly, the job of a fish cleaner is necessary in CCCs business as a tuna and sardines factory.

No clear and sufficient evidence exist to warrant Palads dismissal as an apprentice during the agreed
period. Besides the absence of any written warnings given to Palad reminding her of poor performance, CCCs
evidence in this respect consisted of an indecipherable or unauthenticated xerox of the performance evaluation
allegedly conducted on Palad. This is of doubtful authenticity and/or credibility.

Under Article 227 of the Labor Code, the employer has the burden of proving that the termination was for a valid
or authorized cause. CCC failed to substantiate its claim that Palad was terminated for valid reasons. It was
likewise not shown that CCC ever apprised Palad of the performance standards set by the company. When the
alleged valid cause for the termination of employment is not clearly proven, as in this case, the law considers
the matter a case of illegal dismissal. Furthermore, Palad was not accorded due process. CCC failed to warn
Palad of her alleged poor performance. The records are bereft of evidence to show that petitioner ever gave
Palad the opportunity to explain and defend herself. Clearly, the two requisites for a valid dismissal are lacking
in this case. CA decision AFFIRMED.

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18. MARITES BERNARDO, et al. vs. NATIONAL LABOR RELATIONS COMMISSION & FAR EAST BANK
AND TRUST COMPANY
G.R. No. 122917; July 12, 1999
PANGANIBAN, J.:

FACTS:
Complainants Marites Bernardo, et al., numbering 43, are deaf-mutes who were hired on various periods from
1988 to 1993 by Far East Bank and Trust Co. as Money Sorters and Counters through a uniformly worded
agreement called Employment Contract for Handicapped Workers.

By the time this case arose, there were 56 deaf-mutes who were employed by FEBTC under the said
employment agreement. Disclaiming that complainants were regular employees, FEBTC maintained that
complainants who are a special class of workers - the hearing impaired employees were hired temporarily under
a special employment arrangement which was a result of overtures made by some civic and political
personalities to FEBTC; that complainants were hired due to pakiusap which must be considered in the light of
the context of FEBTCs corporate philosophy; that the idea of hiring handicapped workers was acceptable to
them only on a special arrangement basis; that it adopted the special program to help tide over a group of
handicapped workers such as deaf-mutes like the complainants who could do manual work for the Bank, among
others.

The labor arbiter and, on appeal, the NLRC ruled against the complainants petition to be deemed regular
employees under Art. 280 of the Labor Code because their task as money sorters and counters was necessary
and desirable to the business of the bank. Hence, the recourse to the Supreme Court.

NLRC said that Art. 280 is not controlling herein as complainants were hired as an accommodation to the
recommendation of civic oriented personalities and the contracts of employment were with special provisions on
duration as specified under Art. 80. The NLRC also declared that the Magna Carta for Disabled Persons was
not applicable, considering the prevailing circumstances/milieu of the case.

ISSUE: Whether the NLRC committed grave abuse of discretion in holding that the bernardo, et al. were not
regular employees.

SC RULING:
YES. The employees, who worked for more than six months and whose contracts were renewed, are deemed
regular. Hence, their dismissal from employment was illegal. The Supreme Court appreciates the nobility of
FEBTC effort to provide employment to physically impaired individuals and to make them more productive
members of society. However, SC cannot allow it to elude the legal consequences of that effort, simply because
it now deems their employment irrelevant. The facts, viewed in light of the Labor Code and the Magna Carta for
Disabled Persons, indubitably show that the Bernardo, et al., except 16 of them, should be deemed regular
employees. As such, they have acquired legal rights that SC is duty-bound to protect and uphold, not as a
matter of compassion but as a consequence of law and justice.

The stipulations in the employment contracts indubitably conform with Art. 80 of the Labor Code. Succeeding
events and the enactment of RA No. 7277, however, justify the application of Article 280. Verily, the renewal of
the contracts of the handicapped workers and the hiring of others lead to the conclusion that their tasks were
beneficial and necessary to the bank. More important, these facts show that they were qualified to perform the
responsibilities of their positions. In other words, their disability did not render them unqualified or unfit for the
tasks assigned to them.

In this light, the Magna Carta for Disabled Persons mandates that a qualified disabled employee should be
given the same terms and conditions of employment as a qualified able-bodied person. (Section 5: Equal
Opportunity for Employment)

The fact that the employees were qualified disabled persons necessarily removes the employment contracts
from the ambit of Article 80. Since the Magna Carta accords them the rights of qualified able-bodied persons,
they are thus covered by Article 280 of the Labor Code.

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Without a doubt, the task of counting and sorting bills is necessary and desirable to the business of
FEBTC. With the exception of 16 of them, Bernardo, et al. performed these tasks for more than six
months. Thus, they should be deemed regular employees.

Because FEBTC failed to show such cause, Bernardo, et al. are deemed illegally dismissed and therefore
entitled to back wages and reinstatement without loss of seniority rights and other privileges. But considering the
allegation of FEBTC that the job of money sorting is no longer available because it has been assigned back to
the tellers to whom it originally belonged, Bernardo, et al. are awarded separation pay in lieu of reinstatement.

The noble objectives of Magna Carta for Disabled Persons are not based merely on charity or accommodation,
but on justice and the equal treatment of qualified persons, disabled or not. In the present case, the handicap is
not a hindrance to their work. The eloquent proof of this statement is the repeated renewal of their employment
contracts. The Court believes, that, after showing their fitness for the work assigned to them, they should be
treated and granted the same rights like any other regular employees. Petition GRANTED.

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Art. 82 (EMPLOYER-EMPLOYEE RELATIONSHIP)

19. ANGELINA FRANCISCO vs. NATIONAL LABOR RELATIONS COMMISSION


G.R. No. 170087 August 31, 2006
YNARES-SANTIAGO, J.:

Doctrine:
When the control test is not sufficient to give a complete picture of the relationship between the parties, two-
tiered test must be applied.

The proper standard of economic dependence is whether the worker is dependent on the alleged employer for
his continued employment in that line of business.

FACTS:
In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as
Accountant and Corporate Secretary and was assigned as Liaison Officer. In 1996, petitioner was designated as
Acting Manager and was assigned to handle recruitment of all employees and perform management
administration functions; represent the company in all dealings with government agencies, especially with the
BIR, SSS and in the city government of Makati; and to administer all other matters pertaining to the operation of
Kasei Restaurant which is owned and operated by Kasei Corporation. For five years, petitioner performed the
duties of Acting Manager. Her salary was P27,500.00 plus P3,000.00 housing allowance and a 10% share in the
profit of Kasei Corporation.

In January 2001, petitioner was replaced as Manager and reduced her salary by P2,500.00 a month. On
October 15, 2001, petitioner was informed that she is no longer connected with the company.

ISSUE: Whether or not there is an employer-employee relationship between petitioner and Kasei Corp.

SC RULING:
YES, there is an employer-employee relationship between petitioner and Kasei Corporation.

There are instances when, aside from the employers power to control the employee with respect to the means
and methods by which the work is to be accomplished, economic realities of the employment relations help
provide a comprehensive analysis of the true classification of the individual, whether as employee, independent
contractor, corporate officer or some other capacity.

The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employers power to
control the employee with respect to the means and methods by which the work is to be accomplished; and (2)
the underlying economic realities of the activity or relationship.

The determination of the relationship between employer and employee depends upon the circumstances of the
whole economic activity, such as: (1) the extent to which the services performed are an integral part of the
employers business; (2) the extent of the workers investment in equipment and facilities; (3) the nature and
degree of control exercised by the employer; (4) the workers opportunity for profit and loss; (5) the amount of
initiative, skill, judgment or foresight required for the success of the claimed independent enterprise; (6) the
permanency and duration of the relationship between the worker and the employer; and (7) the degree of
dependency of the worker upon the employer for his continued employment in that line of business.

The proper standard of economic dependence is whether the worker is dependent on the alleged employer for
his continued employment in that line of business.
By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation
because she was under the direct control and supervision of Seiji Kamura, the corporations Technical
Consultant.

Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent
corporation because she had served the company for six years before her dismissal, receiving check vouchers
indicating her salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as deductions and
Social Security contributions from August 1, 1999 to December 18, 2000. It is therefore apparent that petitioner

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is economically dependent on respondent corporation for her continued employment in the latters line of
business.

Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent Kasei
Corporation. She was selected and engaged by the company for compensation, and is economically dependent
upon respondent for her continued employment in that line of business.

San Beda College of Law 92


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20. JOSE Y. SONZA vs. ABS-CBN BROADCASTING CORPORATION
G.R. No. 138051 June 10, 2004

Doctrine:
The control test is the most important test our courts apply in distinguishing an employee from an independent
contractor. This test is based on the extent of control the hirer exercises over a worker. The greater the
supervision and control the hirer exercises, the more likely the worker is deemed an employee, and the less
control the hirer exercises, the more likely the worker is considered an independent contractor.

FACTS:
In May 1994, respondent ABS-CBN signed an Agreement with the Mel and Jay Management and Development
Corporation (MJMDC). ABS-CBN was represented by its corporate officers while MJMDC was represented by
SONZA, as President and General Manager, and Tiangco, as EVP and Treasurer. Referred to in the Agreement
as AGENT, MJMDC agreed to provide SONZAs services exclusively to ABS-CBN as talent for radio and
television. ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first year and
P317,000 for the second and third year of the Agreement. ABS-CBN would pay the talent fees on the 10th and
25th days of the month.
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the DOLE. SONZA complained
that ABS-CBN did not pay his salaries, separation pay, service incentive leave pay, 13th month pay, signing
bonus, travel allowance and amounts due under the Employees Stock Option Plan (ESOP). ABS-CBN filed a
Motion to Dismiss on the ground that no employer-employee relationship existed between the parties.

ISSUE: Whether or not there is an employer-employee relationship between petitioner and ABS-CBN.

LA RULING: There is no employer-employee relationship between petitioner and ABS-CBN.

It must be noted that complainant was engaged by respondent by reason of his peculiar skills and talent as a TV
host and a radio broadcaster. Unlike an ordinary employee, he was free to perform the services he undertook to
render in accordance with his own style. The fact that per the May 1994 Agreement complainant was accorded
some benefits normally given to an employee is inconsequential. Whatever benefits complainant enjoyed arose
from specific agreement by the parties and not by reason of employer-employee relationship. The fact that
complainant was made subject to respondents Rules and Regulations, likewise, does not detract from the
absence of employer-employee relationship.

NLRC and CA RULING: There is no employer-employee relationship between petitioner and ABS-CBN.

SC RULING:
NO, there is no employer-employee relationship between petitioner and ABS-CBN.

Case law has consistently held that the elements of an employer-employee relationship are: (a) the selection
and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers
power to control the employee on the means and methods by which the work is accomplished. The last element,
the so-called control test, is the most important element.

As to the selection and engagement of the employee: ABS-CBN engaged SONZAs services to co-host its
television and radio programs because of SONZAs peculiar skills, talent and celebrity status. Independent
contractors often present themselves to possess unique skills, expertise or talent to distinguish them from
ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and
celebrity status not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an
independent contractual relationship.

As to payment of wages: All the talent fees and benefits paid to SONZA were the result of negotiations that led
to the Agreement. If SONZA were ABS-CBNs employee, there would be no need for the parties to stipulate on
th
benefits such as SSS, Medicare, x x x and 13 month pay which the law automatically incorporates into every
employer-employee contract. Whatever benefits SONZA enjoyed arose from contract and not because of an
employer-employee relationship.

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As to power of dismissal: For violation of any provision of the Agreement, either party may terminate their
relationship. SONZA failed to show that ABS-CBN could terminate his services on grounds other than breach of
contract, such as retrenchment to prevent losses as provided under labor laws.

As to power of control, which is the most important: Applying the control test to the present case, we find that
SONZA is not an employee but an independent contractor. This test is based on the extent of control the hirer
exercises over a worker. The greater the supervision and control the hirer exercises, the more likely the worker
is deemed an employee. The converse holds true as well the less control the hirer exercises, the more likely the
worker is considered an independent contractor. ABS-CBN did not assign any other work to SONZA. How
SONZA delivered his lines, appeared on television, and sounded on radio were outside ABS-CBNs
control. SONZA did not have to render eight hours of work per day. The clear implication is that SONZA had a
free hand on what to say or discuss in his shows provided he did not attack ABS-CBN or its interests.

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21. BITOY JAVIER vs. FLY ACE CORPORATION/FLORDELYN CASTILLO
G.R. No. 192558 February 15, 2012
MENDOZA, J.:

Doctrine:
Whoever claims entitlement to the benefits provided by law should establish his or her right thereto. Hence, a
person who claims to be an employee must establish such claim.

FACTS:
Javier filed a complaint before the NLRC for underpayment of salaries and other labor standard benefits. He
alleged that he was an employee of Fly Ace since September 2007, performing various tasks at the respondents
warehouse such as cleaning and arranging the canned items before their delivery to certain locations, except in
instances when he would be ordered to accompany the companys delivery vehicles, as pahinante; that he
reported for work from Monday to Saturday from 7:00 oclock in the morning to 5:00 oclock in the afternoon; that
during his employment, he was not issued an identification card and payslips by the company; that thereafter,
Javier was terminated from his employment without notice; and that he was neither given the opportunity to
refute the cause/s of his dismissal from work.

For its part, Fly Ace denied that Javier is its employee and averred that it was engaged in the business of
importation and sales of groceries. Javier was contracted by its employee, Mr. Ong, as extra helper on a
pakyaw basis. Mr. Ong contracted Javier roughly 5 to 6 times only in a month whenever the vehicle of its
contracted hauler, Milmar Hauling Services, was not available.

ISSUE: Whether or not the petitioner is a an employee of Fly Ace Corporation.

RULING IN LA: Petitioner is not an employee of Fly Ace Corporation. It ruled that Javier has no employee ID
showing his employment with the Respondent nor any document showing that he received the benefits
accorded to regular employees of the Respondents. Respondent Fly Ace is not engaged in trucking business
but in the importation and sales of groceries. Since there is a regular hauler to deliver its products, we give
credence to Respondents claim that complainant was contracted on pakiao basis.

RULING IN NLRC: The NLRC reversed the decision of the LA and ruled that the LA skirted the argument of
Javier and immediately concluded that he was not a regular employee simply because he failed to present
proof. It was of the view that a pakyaw-basis arrangement did not preclude the existence of employer-employee
relationship. Payment by result x x x is a method of compensation and does not define the essence of the
relation. It is a mere method of computing compensation, not a basis for determining the existence or absence
of an employer-employee relationship.

RULING IN CA:The CA annulled the NLRC findings that Javier was indeed a former employee of Fly Ace and
reinstated the dismissal of Javiers complaint as ordered by the LA.

SC RULING:
NO, petitioner is not an employee of Fly Ace Corporation.

No particular form of evidence is required to prove the existence of such employer-employee relationship. Any
competent and relevant evidence to prove the relationship may be admitted. The rule of thumb remains: the
onus probandi falls on petitioner to establish or substantiate such claim by the requisite quantum of evidence.
Whoever claims entitlement to the benefits provided by law should establish his or her right thereto x x x. Sadly,
Javier failed to adduce substantial evidence as basis for the grant of relief.

In this case, the LA and the CA both concluded that Javier failed to establish his employment with Fly Ace. By
way of evidence on this point, all that Javier presented were his self-serving statements purportedly showing his
activities as an employee of Fly Ace. Clearly, Javier failed to pass the substantiality requirement to support his
claim. Hence, the Court sees no reason to depart from the findings of the CA.

San Beda College of Law 95


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22. SAN MIGUEL CORPORATION EMPLOYEES UNION-PTGWO, ET AL vs. HON. JESUS G. BERSAMIRA,
IN HIS CAPACITY AS PRESIDING JUDGE OF BRANCH 166, RTC, PASIG, and SAN MIGUEL CORP.
G.R. No. 87700 June 13, 1990
MELENCIO-HERRERA, J.

Doctrine:
A labor dispute can nevertheless exist regardless of whether the disputants stand in the proximate relationship
of employer and employee. The existence of a labor dispute is not negative by the fact that the plaintiffs and
defendants do not stand in the proximate relation of employer and employee.

FACTS:
Sometime in 1983 and 1984, SanMig entered into contracts for merchandising services with Lipercon and
D'Rite. These companies are independent contractors duly licensed by the DOLE. In said contracts, it was
expressly understood and agreed that the workers employed by the contractors were to be paid by the latter and
that none of them were to be deemed employees or agents of SanMig. There was to be no employer-employee
relation between the contractors and/or its workers, on the one hand, and SanMig on the other.

Petitioner SMCEU is the duly authorized representative of the monthly paid rank-and-file employees of SanMig
with whom the latter executed a CBA.

In a letter, the Union advised SanMig that some Lipercon and D'Rite workers had signed up for union
membership and sought the regularization of their employment with SMC. The Union alleged that this group of
employees, while appearing to be contractual workers supposedly independent contractors, have been
continuously working for SanMig for a period ranging from 6 months to 15 years and that their work is neither
casual nor seasonal as they are performing work or activities necessary or desirable in the usual business or
trade of SanMig. Thus, it was contended that there exists a "labor-only" contracting situation. It was then
demanded that the employment status of these workers be regularized.

SMC filed a verified Complaint for Injunction and Damages before respondent Court. The Union filed a Motion to
Dismiss SanMig's Complaint on the ground of lack of jurisdiction over the case/nature of the action, which
motion was opposed by SanMig.

ISSUE: Whether or not there the Respondent Court has jurisdiction in issuing the injunction.

RULING IN THE RTC: The respondent Court issued injunction. The absence of employer-employee relationship
negates the existence of labor dispute. Verily, this court (RTC) has jurisdiction to take cognizance of Sanmig's
grievance.

The evidence so far presented indicates that plaintiff has contracts for services with Lipercon and D'Rite. The
application and contract for employment of the defendants' witnesses are either with Lipercon or D'Rite. What
could be discerned is that there is no employer-employee relationship between plaintiff and the contractual
workers employed by Lipercon and D'Rite. This, however, does not mean that a final determination regarding
the question of the existence of employer-employee relationship has already been made. To finally resolve this
dispute, the court must extensively consider and delve into the manner of selection and engagement of the
putative employee; the mode of payment of wages; the presence or absence of a power of dismissal; and the
Presence or absence of a power to control the putative employee's conduct.
SC RULING:
NO, the respondent Court has no jurisdiction in issuing the injunction.

A "labor dispute" as defined in Article 212 (1) of the Labor Code includes "any controversy or matter concerning
terms and conditions of employment or the association or representation of persons in negotiating, fixing,
maintaining, changing, or arranging the terms and conditions of employment, regardless of whether the
disputants stand in the proximate relation of employer and employee." A labor dispute, as defined by the law,
does exist herein is evident.

Whether or not the Union demands are valid; whether or not SanMig's contracts with Lipercon and D'Rite
constitute "labor-only" contracting and, therefore, a regular employer-employee relationship may, in fact, be said
to exist; whether or not the Union can lawfully represent the workers of Lipercon and D'Rite in their demands
against SanMig in the light of the existing CBA; whether or not the notice of strike was valid and the strike itself
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legal when it was allegedly instigated to compel the employer to hire strangers outside the working unit; those
are issues the resolution of which call for the application of labor laws, and SanMig's causes of action in the
Court below are inextricably linked with those issues.

As the case is indisputably linked with a labor dispute, jurisdiction belongs to the labor tribunals. As explicitly
provided for in Article 217 of the Labor Code, prior to its amendment by R.A. No. 6715 on 21 March 1989, since
the suit below was instituted on 6 March 1989, Labor Arbiters have original and exclusive jurisdiction to hear
and decide the following cases involving all workers.

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23. RAUL G. LOCSIN and EDDIE B. TOMAQUIN v. PHILIPPINE LONG DISTANCE TELEPHONE COMPANY
G.R. No. 185251 October 2, 2009
VELASCO, JR., J.:

Doctrine:
The power of control, in this case, has been explained as the right to control not only the end to be achieved
but also the means to be used in reaching such end. With the conclusion that respondent directed petitioners to
remain at their posts and continue with their duties, it is clear that respondent exercised the power of control
over them; thus, the existence of an employer-employee relationship.

FACTS:
Respondent PLDT and the SSCP entered into a Security Services Agreement whereby SSCP would provide
armed security guards to PLDT to be assigned to its various offices. Pursuant to such agreement, petitioners
Raul Locsin and Eddie Tomaquin, among other security guards, were posted at a PLDT office.

Then respondent issued a Letter terminating the Agreement. Despite the termination of the Agreement,
however, petitioners continued to secure the premises of their assigned office. They were allegedly directed to
remain at their post by representatives of respondent. In support of their contention, petitioners provided the
Labor Arbiter with copies of petitioner Locsins pay slips for the period after the said termination of Agreement.

Then, after a year, petitioners services were terminated. Thus, petitioners filed a complaint before the Labor
Arbiter for illegal dismissal and recovery of money claims.

ISSUE: Whether or not there is an employer-employee relationship between the petitioners and PLDT.

RULING IN LA: Petitioners were found to be employees of PLDT and not of SSCP. Such conclusion was
arrived at with the factual finding that petitioners continued to serve as guards of PLDTs offices. As such
employees, petitioners were entitled to substantive and procedural due process before termination of
employment. The Labor Arbiter held that respondent failed to observe such due process requirements.

RULING IN NLRC: The NLRC affirmed the decision of the LA.

RULING IN CA: The CA reversed the decision of LA and NLRC. The CA applied the four-fold test in order to
determine the existence of an employer-employee relationship between the parties but did not find such
relationship. It determined that SSCP was not a labor-only contractor and was an independent contractor having
substantial capital to operate and conduct its own business. The CA further bolstered its decision by citing the
Agreement whereby it was stipulated that there shall be no employer-employee relationship between the
security guards and PLDT.

SC RULING:
YES, there is employer-employee relationship between the petitioners and PLDT. From the foregoing
circumstances, reason dictates that we conclude that petitioners remained at their post under the instructions of
respondent. We can further conclude that respondent dictated upon petitioners that the latter perform their
regular duties to secure the premises during operating hours. This, to our mind and under the circumstances, is
sufficient to establish the existence of an employer-employee relationship.

To reiterate, while respondent and SSCP no longer had any legal relationship with the termination of the
Agreement, petitioners remained at their post securing the premises of respondent while receiving their salaries,
allegedly from SSCP. Clearly, such a situation makes no sense, and the denials proffered by respondent do not
shed any light to the situation. It is but reasonable to conclude that, with the behest and, presumably, directive of
respondent, petitioners continued with their services. Evidently, such are indicia of control that respondent
exercised over petitioners.

Such power of control has been explained as the right to control not only the end to be achieved but also the
means to be used in reaching such end. With the conclusion that respondent directed petitioners to remain at
their posts and continue with their duties, it is clear that respondent exercised the power of control over them;
thus, the existence of an employer-employee relationship.

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Evidently, respondent having the power of control over petitioners must be considered as petitioners employer
from the termination of the Agreement on wards as this was the only time that any evidence of control was
exhibited by respondent over petitioners.

24. PEOPLE'S BROADCASTING (BOMBO RADYO PHILS., INC.) vs. SECRETARY OF DOLE
G.R. No. 179652 May 8, 2009
TINGA, J.:

Doctrine:
The Department of Labor and Employment is fully empowered to make a determination as to the existence of an
employer-employee relationship in the exercise of its visitorial and enforcement power.

FACTS:
Private respondent Jandeleon Juezan filed a complaint against petitioner before (DOLE) Regional Office, for
illegal deduction, nonpayment of service incentive leave, 13th month pay, premium pay for holiday and rest day
and illegal diminution of benefits, delayed payment of wages and non-coverage of SSS, PAG-IBIG and
Philhealth. After summary investigation, DOLE found that private respondent was an employee of petitioner, and
was entitled to his money. Bombo Radyo appealed the decision, but the DOLE dismissed the same. The Court
of Appeals (CA) afirmed such dismissal.

When the matter reached the Supreme Court, the CA decision was reversed and set aside. The Court found
that there was no employer-employee relationship between Bombo Radyo and Juezan. It was held that while
the DOLE may make a determination of the existence of an employer-employee relationship, this function could
not be co-extensive with the visitorial and enforcement power provided in Art. 128(b) of the Labor Code, as
amended by RA 7730. The National Labor Relations Commission (NLRC) was held to be the primary agency in
determining the existence of an employer-employee relationship. From this decision, the Public Attorneys Ofice
(PAO) filed a Motion for Clariication of Decision (with Leave of Court). The PAO sought to clarify as to when the
visitorial and enforcement power of the DOLE can be considered as co-extensive with the power to determine
the existence of an employer-employee relationship. The Court treated the Motion for Clarification as a second
motion for reconsideration, granting said motion and reinstating the petition.

ISSUE: Whether or not the Department of Labor and Employment has the power to determine the existence of
employer-employee relationship in its exercise of its visitorial and its enforcement power.

RULING:
No limitation in the law was placed upon the power of the DOLE to determine the existence of an employer-
employee relationship. No procedure was laid down where the DOLE would only make a preliminary inding,
that the power was primarily held by the NLRC. The law did not say that the DOLE would first seek the NLRCs
determination of the existence of an employer-employee relationship, or that should the existence of the
employer-employee relationship be disputed, the DOLE would refer the matter to the NLRC. The DOLE must
have the power to determine whether or not an employer-employee relationship exists, and from there to decide
whether or not to issue compliance orders in accordance with Art. 128(b) of the Labor Code, as amended by RA
7730.

The determination of the existence of an employer-employee relationship by the DOLE must be respected. The
expanded visitorial and enforcement power of the DOLE granted by RA 7730 would be rendered nugatory if the
alleged employer could, by the simple expedient of disputing the employer- employee relationship, force the
referral of the matter to the NLRC. The Court issued the declaration that at least a prima facie showing of the
absence of an employer-employee relationship be made to oust the DOLE of jurisdiction. But it is precisely the
DOLE that will be faced with that evidence, and it is the DOLE that will weigh it, to see if the same does
successfully refute the existence of an employer-employee relationship.

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25. ERNESTO G. YMBONG vs. ABS-CBN BROADCASTING CORPORATION
G.R. No. 184885 March 7, 2012
VILLARAMA, JR., J.:

Doctrine:
A company is estopped from denying the existence of employer- employee relationship after applying a
company policy to all its employees including those under talent contracts.

FACTS:
Ernesto G. Ymbong worked for ABS-CBN Broadcasting Corporation (ABS-CBN at its regional station in Cebu
as a television talent which extended to radio when ABS-CBN Cebu launched its AM station DYAB where he
worked as drama and voice talent, spinner, scriptwriter and public affairs program anchor. Leandro Patalinghug
also worked for ABS-CBN Cebu as talent, director and scriptwriter for various radio programs aired over DYAB.

ABS-CBN head office issued Policy No. HR-ER-016 (Policy on Employees Seeking Public Office) requiring an
employee (1) to resign if he intends to run for a public position (2) to file a leave of absence if he intends to join a
political group/party or even with no political affiliation but who intends to openly and aggressively campaign for
a candidate or group of candidates (e.g. publicly speaking/endorsing candidate, recruiting campaign workers,
etc.) Dante Luzon, Assistant Station Manager of DYAB issued a memorandum stating that those who intend to
run shall file a leave of absent not consonance with the Policy.

Ymbong then file a leave of absence although he ran for a public office. Patalinghug filed a resignation.
Unfortunately both lost in the election. They then tried to go back to work with the ABS. However, they were only
allowed to wind up their programs. After such, they were informed of their automatic termination because of the
policy.

Ymbong filed complaint for illegal dismissal, in contrast contended that


after the expiration of his leave of absence, he reported back to work as a regular talent and in fact
continued to receive his salary;
The ground cited by ABS-CBN for his dismissal was not among those enumerated in the Labor Code, as
amended; and
The company policy violates his constitutional right to suffrage.

In their defense, complaints arguing that there is no employer-employee relationship between the
company and Ymbong and Patalinghug. ABS-CBN contended that they are not employees but talents as
evidenced by their talent contracts.

LA RULING: There exists employer-employee relationship based on the appointment letters/talent contracts
imposed conditions in the performance of their work, specifically on attendance and punctuality, which
effectively placed them under the control of ABS-CBN.
Also, the policy was not made known to them and superseded by the memo of Luzon.

NLRC RULING: The NLRC held that ABS-CBN wielded the power of control over Ymbong and Patalinghug,
thereby proving the existence of an employer-employee relationship between them. However, the two were
treated differently (1) Patalinghug was considered resigned while (2) Ymbong was not considered resigned. In
the latter, it was ruled that the memorandum of Luzon shall prevail ever the policy under the principle of social
justice.

CA RULING: The CA ruled that ABS-CBN is estopped from claiming that Ymbong was not its employee after
applying the provisions of Policy No. HR-ER-016 to him. The CA likewise held that the subject company policy is
the controlling guideline and therefore, Ymbong should be considered resigned from ABS-CBN.

ISSUES:
1)Whether or not Ymbong and Patalinghug were employees of ABS-CBN.
2)Whether or not Ymbong was terminated.

SC RULING:

1) Yes. They were employees. The Court upheld the decision of CA as to employment issue.
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2) Ymbong was not terminated. He resigned.

a) The Policy was a valid exercise of management prerogative. In the instant case, ABS-CBN validly
justified the implementation of Policy No. HR-ER-016. It is well within its rights to ensure that it
maintains its objectivity and credibility and freeing itself from any appearance of impartiality so that
the confidence of the viewing and listening public in it will not be in any way eroded.

b) Ymbongs overt act of running for councilor of Lapu-Lapu City is tantamount to resignation on his
part. He was separated from ABS-CBN not because he was dismissed but because he resigned.
Since there was no termination to speak of, the requirement of due process in dismissal cases
cannot be applied to Ymbong. Thus, ABS-CBN is not duty-bound to ask him to explain why he did
not tender his resignation before he ran for public office as mandated by the subject company
policy.

San Beda College of Law 101


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26. PROFESSIONAL SERVICES, INC. vs. COURT OF APPEALS and NATIVIDAD and ENRIQUE AGANA
G.R. No. 126297 February 11, 2008
SANDOVAL-GUTIERREZ, J.:

Doctrine:
"Consultant" physicians can be considered as employee of the hospital if there is an actual control over their
selection, hiring and termination.

FACTS:
Dr. Fuentes and Dr. Ampil performed and completed the hysterectomy upon Natividad Agana who was
suffering from "cancer of the sigmoid." However, the operation appeared to be flawed. Natividad complained of
excruciating pain in her anal region. She consulted both Dr. Ampil and Dr. Fuentes about it. They told her that
the pain was the natural consequence of the surgical operation. She then sought treatment at the Polymedic
General Hospital wherein Dr. Ramon Gutierrez detected the presence of a foreign object in her vagina -- a foul-
smelling gauze which badly infected her vaginal vault. Two surgeries were performed to remedy the infection.

Natividad and her husband filed with the RTC QC a complaint for damages against Professional Service Inc
(PSI) (owner of Medical City), Dr. Ampil and Dr. Fuentes. Pending the outcome of the above case, Natividad
died. She was duly substituted by her above-named children (the Aganas).

RTC RULING:
PSI, Dr. Ampil and Dr. Fuentes are severally liable.

CA RULING:
The court affirmed the assailed judgment with modification in the sense that the complaint against Dr. Fuentes
was dismissed.PSI, Dr. Ampil and the Aganas filed with this Court separate petitions for review on certiorari.

SUPREME COURT FIRST DIVISION:


The Court, through its First Division, rendered a Decision holding that PSI is jointly and severally liable;
1. there is an employer-employee relationship between Medical City and Dr. Ampil for purposes of
apportioning responsibility in medical negligence cases;
2. PSIs act of publicly displaying in the lobby of the Medical City the names and specializations of its
accredited physicians, including Dr. Ampil, estopped it from denying the existence of an employer-
employee relationship between them under the doctrine of ostensible agency or agency by estoppel;
3. PSIs failure to supervise Dr. Ampil and its resident physicians and nurses and to take an active step in
order to remedy their negligence rendered it directly liable under the doctrine of corporate negligence.

Arguments of PSI in the MR:


1. PSI contends that there's no employer-employee relationship between it and its consultant, Dr. Ampil.
PSI stressed that the Courts Decision in Ramos holding that "an employer-employee relationship in
effect exists between hospitals and their attending and visiting physicians for the purpose of
apportioning responsibility".
2. PSI maintains that consultants, like Dr. Ampil, are "independent contractors," not employees of the
hospital.
3.

ISSUES:
1. Whether or not there's an employee - employer relationship for solidary liability to attach.
2. Whether or not Dr. Ampil an independent contractor-physician hence liability is personal.

SC RULING:
Yes, employer-employee relationship "in effect" exists between the Medical City and Dr. Ampil. Consequently,
both are jointly and severally liable to the Aganas.

First, hospitals exercise significant control in the hiring and firing of consultants and in the conduct of
their work within the hospital premises. The applicant for "consultant" required to submit;
1. proof of completion of residency;
2. their educational qualifications;
3. generally, evidence of accreditation by the appropriate board (diplomate);
San Beda College of Law 102
4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

4. evidence of fellowship in most cases, and
5. references.

After a physician is accepted, either as a visiting or attending consultant, he is normally required to attend
clinico-pathological conferences, rounds and patient audits. In addition to these, the physicians performance as
a specialist is generally evaluated by a peer review committee on the basis of mortality and morbidity statistics,
and feedback from patients, nurses, interns and residents.
Hence, private hospitals hire, fire and exercise real control over their attending and visiting "consultant" staff.
While "consultants" are not, technically employees, a point which respondent hospital asserts in denying all
responsibility for the patients condition, the control exercised, the hiring, and the right to terminate consultants
all fulfill the important hallmarks of an employer-employee relationship, with the exception of the payment of
wages. In assessing whether such a relationship in fact exists, the control test is determining. Accordingly, on
the basis of the foregoing, we rule that for the purpose of allocating responsibility in medical negligence cases,
an employer-employee relationship in effect exists between hospitals and their attending and visiting physicians.

Second, even assuming that Dr. Ampil is not an employee of Medical City, but an independent contractor, still
the said hospital is liable to the Aganas based on the "doctrine of apparent authority." There are two factors to
consider:
1. Whether the hospital acted in a manner which would lead a reasonable person to conclude that the
individual who was alleged to be negligent was an employee or agent of the hospital; and
2. Whether the plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent with
ordinary care and prudence.

In this case, PSI is estopped from passing the blame solely to Dr. Ampil. Its act of displaying his name and
those of the other physicians in the public directory at the lobby of the hospital amounts to holding out to the
public that it offers quality medical service through the listed physicians. This justifies Atty. Aganas belief that
Dr. Ampil was a member of the hospitals staff. It must be stressed that under the doctrine of apparent authority,
the question in every case is whether the principal has by his voluntary act placed the agent in such a situation
that a person of ordinary prudence, conversant with business usages and the nature of the particular business,
is justified in presuming that such agent has authority to perform the particular act in question.

San Beda College of Law 103


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

27. SOUTH EAST INTERNATIONAL RATTAN INC. v. COMING
G.R. No. 126297 February 11, 2008
VILLARAMA, JR., J.:

Doctrine:
Payroll not conclusive proof of existence or absence of ER-EE relationship.

FACTS:
Respondent Jesus J. Coming filed a complaint for illegal dismissal, underpayment of wages, non-payment of
holiday pay, 13th month pay and service incentive leave pay, with prayer for reinstatement, back wages,
damages and attorneys fees against South East International Rattan Inc (SEIRI). He alleged that he was hired
by petitioners as Sizing Machine Operator on March 17, 1984. His work schedule is from 8:00 a.m. to 5:00 p.m.
Initially, his compensation was on "pakiao" basis but sometime in June 1984, it was fixed at P150.00 per day
which was paid weekly. In 1990, he was told not to work for two months for no reason. After two months, he
reported back to wrk only to be later on terminated because the company is not doing well financially and that
he would be called back to work only if they need his services again. Respondent waited for almost a year but
petitioners did not call him back to work. Hence, he filed a complaint before the regional arbitration branch. To
bolster his claim, respondent submitted an affidavit signed by five former co-workers stating that respondent
was one of the pioneer employees who worked in SEIRI for almost twenty years.

In their defense, petitioners denied having hired respondent. They stressed that respondent was not included in
the list of employees submitted to the Social Security System (SSS). There's also an affidavit of Comings's
brother attesting that he worked for another employer.

LA RULING: Respondent is a regular employee of SEIRI and that the termination of his employment was illegal.
Labor Arbiter Carreon found that respondents work as sizing machine operator is usually necessary and
desirable to the rattan furniture business of petitioners and their failure to include respondent in the employment
report to SSS is not conclusive proof that respondent is not their employee.

NLRC RULING: Set aside the decision of LA ruling that, complainant failed to present a single payslip, voucher
or a copy of a company payroll showing that he rendered service during the period indicated therein. The appeal
to (NLRC)-Cebu City submitted the following additional evidence:
(1) copies of SEIRIs payrolls and individual pay records of employees;
(2) affidavit15 of SEIRIs Treasurer, Angelina Agbay; and
(3) second affidavit16 of Vicente Coming.

CA RULING: Reinstated the decision of LA. The CA gave more credence to the declarations of the five former
employees of petitioners that respondent was their co-worker in SEIRI. As to the absence of respondents name
in the payroll and SSS employment report, the CA observed that the payrolls submitted were only from January
1, 1999 to December 29, 2000 and not the entire period of eighteen years when respondent claimed he worked
for SEIRI. It further noted that the names of the five affiants, whom petitioners admitted to be their former
employees, likewise do not appear in the aforesaid documents. According to the CA, it is apparent that
petitioners maintained a separate payroll for certain employees or willfully retained a portion of the payroll.

As to the control test, records show that:


(1) they required him to work within the company premises;
(2) they obliged petitioner to report every day of the week and tasked him to usually perform the same job;
(3) they enforced the observance of definite hours of work from 8 oclock in the morning to 5 oclock in the
afternoon;
(4) the mode of payment of petitioners salary was under their discretion, at first paying him on pakiao basis
and thereafter, on daily basis;
(5) they implemented company rules and regulations;
(6) [Estanislao] Agbay directly paid petitioners salaries and controlled all aspects of his employment and
(7) petitioner rendered work necessary and desirable in the business of the respondent company.

ISSUE: Whether or not an employer-employee relationship exists.

SC RULING:
Yes. The Court affirmed the ruling of the CA.
San Beda College of Law 104
4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

To ascertain the existence of an employer-employee relationship jurisprudence has invariably adhered


to the four-fold test, to wit:
(1) the selection and engagement of the employee;
(2) the payment of wages;
(3) the power of dismissal; and
(4) the power to control the employees conduct, or the so-called "control test."

[Evidence]
In resolving the issue of whether such relationship exists in a given case, substantial evidence that
amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion is
sufficient. Although no particular form of evidence is required to prove the existence of the relationship, and any
competent and relevant evidence to prove the relationship may be admitted, a finding that the relationship exists
must nonetheless rest on substantial evidence.

As to the SSS or payroll list:


The Court reiterated that in Tan v. Lagrama, the fact that a worker was not reported as an employee to the SSS
is not conclusive proof of the absence of employer-employee relationship. Otherwise, an employer would be
rewarded for his failure or even neglect to perform his obligation.

For a payroll to be utilized to disprove the employment of a person, it must contain a true and complete list of
the employee. In this case, the exhibits offered by petitioners before the NLRC consisting of copies of payrolls
and pay earnings records are only for the years 1999 and 2000; they do not cover the entire 18-year period
during which respondent supposedly worked for SEIRI.

As to the certifications issued by Mayol and Apondar asserting that respondent worked for them and
not for SEIRI:
The Court ruled that the certifications did not prove any fact that respondent was not an employee of SEIRI. The
certifications only claimed that (1) respondent worked under Mayor on his own discretion and (2) under Apondar
as his sideline but only after regular working hours and "off and on" basis. Even assuming the truth of the
foregoing statements, these do not foreclose respondents regular or full-time employment with SEIRI.

As to the affidavit of former co-workers submitted by respondent:


The petitioner claimed that the affiants were employees of their suppliers Mayol and Apondar. However, they did
not submit proof that the latter were indeed independent contractors; clearly, petitioners failed to discharge their
burden of proving their own affirmative allegation.

Hence, respondent Coming was a regular employee and unlawfully dismissed.

Decision regarding BACKWAGES and reinstatement


Respondent, whose employment was terminated without valid cause by petitioners, is entitled to reinstatement
without loss of seniority rights and other privileges and to his full back wages, inclusive of allowances and other
benefits or their monetary equivalent, computed from the time his compensation was withheld from him up to the
time of his actual reinstatement. Where reinstatement is no longer viable as an option, back wages shall be
computed from the time of the illegal termination up to the finality of the decision. Separation pay equivalent to
one month salary for every year of service should likewise be awarded as an alternative in case reinstatement in
not possible.

San Beda College of Law 105


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

28. TENAZAS ET.AL v. R. VILLEGAS TAXI TRANSPORTATION
G.R. No. 192998 April 2, 2014
REYES, J.:

Doctrine:
The employee must present evidence to establish the existence of employer-employee relationship.

FACTS:
Tenazas, Francisco and Edraca were complainants in a consolidated case for illegal dismissal against R.
Villegas Taxi Transport and Romualdo Villegas before the Labor Arbiter of. In their positions papers, they
alleged they were hired as taxi drivers on a boundary system by the respondents.
1. The taxi Tenazas was driving was sideswiped by another vehicle. When he reported the matter to the
company, he was scolded by the respondents and told to leave the garage as he was already fired.
2. Francisco alleged that he was terminated on suspicion that he was organising a labor union, hence he
was terminated without due process.
3. Isidro alleged that he was terminated when he fell short of the required boundary after he brought his
unit to an auto repair shop for an urgent repair. When he returned to the garage his drivers license was
confiscated and he was no longer allowed to drive a taxi despite his pleas.

In their defense, the company admitted Tenazas and Edraca were regular and spare drivers respectively, but
denied employing Francisco as a driver. Tenzas was never terminated by the company. He was informed that
his unit was due for overhaul and advised to wait for further notice from the company if his unit was already
fixed. Despite being informed on July 8, 2007 that his unit was ready for release, Tenazas did not return. On
Edraca, the company alleged he was a spare driver of the company from 2001, substituting whenever a driver is
not around. They could not have terminated him in 2006 since he stopped reporting for work in 2003.

LA RULING: The LA dismissed their complaint, finding no employer-employee relationship between them and
the company. The company having denied the existence thereof, it was incumbent upon complainants to prove
the existence of the employer-employee relationship.

NLRC RULING: On appeal to the NLRC, however, the commission, relying on the newly discovered evidence
submitted by the complainant Tenazas, ruled them illegally dismissed. It ordered payment of their back wages
from the time of dismissal, as well as payment of separation pay and attorneys fees.

CA RULING: On petition for certiorari with the CA, the latter affirmed the NLRC judgment but deleted the award
of separation pay and ordered their reinstatement. It also deleted the award in favour of Francisco, who, the CA
averred, failed to prove that he was an employee of the respondent. Thus, the petitioners elevated their case to
the Supreme Court to review the CA decision dismissing Franciscos complaint and deleting the award of
separation pay to the other petitioners.

ISSUE: Whether or not employer-employee relations exist between the Jaime Francisco and the company.

SC RULING:
The petition lacks merit.Pivotal to the resolution of the instant case is the determination of the existence of
employer-employee relationship and whether there was an illegal dismissal.

Unlike the other complainant, Tenazas who submitted proof of SSS contribution, affidavit of co-drivers and
pictures wearing company shirt, Francisco failed to present sufficient evidence to prove regular employment
such as company ID, SSS membership, withholding tax certificates or similar articles.

The Court ruled that in determining the presence or absence of an employer-employee relationship the following
requisites must be present;
(a) the selection and engagement of the employee;
(b) the payment of wages;
(c) the power of dismissal; and
(d) the employers power to control the employee on the means and methods by which the work is
accomplished. The last element, the so-called control test, is the most important element.

San Beda College of Law 106


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

There is no hard and fast rule designed to establish the aforesaid elements. Any competent and relevant
evidence to prove the relationship may be admitted. Identification cards, cash vouchers, social security
registration, appointment letters or employment contracts, payrolls, organization charts, and personnel lists,
serve as evidence of employee status.

In this case, however, Francisco failed to present any proof substantial enough to establish his relationship with
the respondents.
He failed to present any attendance logbook, payroll, SSS record or any personnel file that could somehow
depict his status as an employee;
He was not issued with employment records, he could have, at least, produced his social security records
which state his contributions, name and address of his employer, as his co-petitioner Tenazas did.
There's no testimonial evidence showing the respondents exercise of control over the means and methods
by which he undertakes his work.
The employment was being claimed by Emmanuel who executed an affidavit alleging that Francisco was
employed as a spare driver in his taxi garage, a fact that the latter failed to deny or question in any of the
pleadings attached to the records of this case.

In Opulencia Ice Plant and Storage v. NLRC, the Court emphasized, that there's no particular form of evidence
is required to prove the existence of an employer-employee relationship. However in this case, Francisco simply
relied on his allegation that he was an employee of the company without any other evidence supporting his
claim.

Hence, CA correctly ruled that Francisco could not be considered an employee of the respondents.

THE CASE ALSO DISCUSS THE APPLICATION OF BACKWAGES AND REINSTATEMENT.


The CAs order of reinstatement of Tenazas and Endraca, instead of the payment of separation pay, is also well
in accordance with prevailing jurisprudence. In Macasero v. Southern Industrial Gases Philippines,14 the Court
reiterated, thus:

[A]n illegally dismissed employee is entitled to two reliefs: backwages and reinstatement. The two reliefs
provided are separate and distinct. In instances where reinstatement is no longer feasible because of strained
relations between the employee and the employer, separation pay is granted. In effect, an illegally dismissed
employee is entitled to either reinstatement, if viable, or separation pay if reinstatement is no longer viable, and
backwages.

The normal consequences of respondents illegal dismissal, then, are reinstatement without loss of seniority
rights, and payment of backwages computed from the time compensation was withheld up to the date of actual
reinstatement. Where reinstatement is no longer viable as an option, separation pay equivalent to one (1)
month salary for every year of service should be awarded as an alternative. The payment of separation pay is
in addition to payment of backwages. (Emphasis supplied)

Clearly, it is only when reinstatement is no longer feasible that the payment of separation pay is ordered in lieu
thereof. For instance, if reinstatement would only exacerbate the tension and strained relations between the
parties, or where the relationship between the employer and the employee has been unduly strained by reason
of their irreconcilable differences, it would be more prudent to order payment of separation pay instead of
reinstatement.16

This doctrine of strained relations, however, should not be used recklessly or applied loosely17 nor be based
on impression alone. It bears to stress that reinstatement is the rule and, for the exception of strained relations
to apply, it should be proved that it is likely that if reinstated, an atmosphere of antipathy and antagonism
would be generated as to adversely affect the efficiency and productivity of the employee concerned.18

Moreover, the existence of strained relations, it must be emphasized, is a question of fact. In Golden Ace
Builders v. Talde, the Court underscored:

Strained relations must be demonstrated as a fact, however, to be adequately supported by evidence


substantial evidence to show that the relationship between the employer and the employee is indeed strained as
a necessary consequence of the judicial controversy (Citations omitted and emphasis ours)

San Beda College of Law 107


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

After a perusal of the NLRC decision, this Court failed to find the factual basis of the award of separation pay to
the petitioners. The NLRC decision did not state the facts which demonstrate that reinstatement is no longer a
feasible option that could have justified the alternative relief of granting separation pay instead.

The petitioners themselves likewise overlooked to allege circumstances which may have rendered their
reinstatement unlikely or unwise and even prayed for reinstatement alongside the payment of separation pay in
their position paper. A bare claim of strained relations by reason of termination is insufficient to warrant the
granting of separation pay. Likewise, the filing of the complaint by the petitioners does not necessarily translate
to strained relations between the parties. As a rule, no strained relations should arise from a valid and legal act
asserting ones right. Although litigation may also engender a certain degree of hostility, the understandable
strain in the parties relation would not necessarily rule out reinstatement which would, otherwise, become the
rule rather the exception in illegal dismissal cases. Thus, it was a prudent call for the CA to delete the award of
separation pay and order for reinstatement instead, in accordance with the general rule stated in Article 279 of
the Labor Code.

Finally, the Court finds the computation of the petitioners backwages at the rate of P800.00 daily reasonable
and just under the circumstances. The said rate is consistent with the ruling of this Court in Hyatt Taxi Services,
Inc. v. Catinoy, which dealt with the same matter.

WHEREFORE, in view of the foregoing disquisition, the petition for review on certiorari is DENIED. The
Decision dated March 11, 2010 and Resolution dated June 28, 2010 of the Court of Appeals.

San Beda College of Law 108


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

29. GREGORIO V. TONGKO, petitioner vs. THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC.
G.R. No. 167622 November 7, 2008
VELASCO, JR., J.:

Doctrines:
1. An employer-employee relationship exists where the person for whom the services are performed
reserves the right to control not only the end to be achieved but also the means to be used in reaching
such end.
2. An employer may terminate the services of an employee for just cause and this must be supported by
substantial evidence.
FACTS:
Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) is a domestic corporation engaged in life insurance
business. It executed a Career Agents Agreement with Gregorio Tongko whereby the latter agreed to be an
independent contracor for the canvass of insurance policies and other products offered by the company. Tongko
was promoted to Unit Manager in 1983 and Branch Manager in 1990. However, Tongko received a letter in
2001 from Manulife President and Chief Executive Officer, Ranato Vergel De Dios, regarding a Metro North
Sales Managers Meeting. The said letter stated that the region of Tongko is the lowest performer in terms of
recruiting and provided for measures to address such issue. Subsequently, Tongko received another letter form
De Dios terminating his Agents Contract for his failure to align his directions with the Managements avowed
agency growth policy. Tongko then filed a complaint for illegal dismissal against Manulife before the NLRC.

ISSUES
1. Whether or not an Employer-Employee relationship exist between Tongko and Manulife.
2. Whether or not Tongko was illegaly dismissed.

LA RULING: No. The LA ruled that no Employer-Employee relationship was found in applying the four-fold test.

NLRC RULING:nYes. The NLRC ruled that an Employer-Employee relationship existed because Manulife
exercised control over Tongko as evidence by a letter of De Dios, which contained various directives to Tongko.
The NLRC also held Manulife liable for illegal Dismissal.

CA RULING: No. The CA ruled that no Employer-Employee relationship existed because Manulife did not
exercise control over Tongko that would render the latter an employee of the former.

SC RULING:
1. Yes. Manulife had the power of control over Tongko. Under the Agreement executed between Tongko
and Manulife in 1977, the former must comply with the following requirements: (1) compliance with the
regulations and requirements of the company; (2) maintenance of a level of knowledge of the
companys products that is satisfactory to the company; and (3) compliance with a quota of new
businesses. Tongko was required to comply with the different codes of conduct of Manulife and he was
also tasked to perform administrative duties that established his employment.

2. Yes. Manulife fialed to cite a single iota of evidence to support its claims that there was gross and
habitual neglect of duties, inefficiency as well as willful disobedince of the lawful order of Manulife on the
part of Tongko. An employer may only terminate the services of an employee for a just cause which
must be supported by substantial evidence.

San Beda College of Law 109


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

30. TELEVISION AND PRODUCTION EXPONENTS, INC. and/or ANTONIO P. TUVIERA, petitioners, vs.
ROBERTO C. SERVAA
G.R. No. 167648 January 28, 2008
TINGA, J.:

Doctrine:
There is an employer-employee relationship when the person for whom the services are performed reserves the
right to control not only the end achieved but also the manner and means used to achieve that end.
FACTS:
TAPE is a domestic corporation engaged in the production of television programs while Antonio Tuviera serves
as its president. Roberto Servaa served as security guard for TAPE from 1987 until his services were
termitated on 3 March 2000. Servaa filed a complaint for illegal dismissal agianst TAPE.He alleged that he was
first connected with Agro-Commercial Security Agency but was later on absorbed by TAPE as a regular
company guard. His services were terminated on account of TAPEs decision to contract the services of a
professional security agency. Tape, on the other hand, alleged that Servaa was an independent contractor
falling under the talent group category and was working under a special arrangement. It alleged that it was
agreed that Servaa would render his services unitil such time that the company shall have engaged the
services of a professional security agency.

ISSUE: Whether or not there is an Employer-Employee relationship between TAPE and Servaa?

LA RULING: Yes. The Labor Arbiter ruled that Servaa was a regular employee of Tape on account of the
nature of the work of Servaa, which is securing and maintaining order in the studio, as necessary and desirable
in the usual business of TAPE. However, the Labor Aribter ruled the termination valid on the ground of
redundancy.

NLRC RULING: No. The NLRC reversed the ruling of the Labor Arbiter on the ground security services may not
be deemed necessary and desirable in the usual business of TAPE.

CA RULING: Yes. The CA ruled that that Servaa was a regular employee considering the nature and length of
his service.

SC RULING:
Yes. Jurisprudence is abound with cases that recite the factors to be considered in determining the existence of
employer-employee relationship, namely: (a) the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employer's power to control the employee with respect to the
means and method by which the work is to be accomplished.
Servaa was hired by TAPE when the latter absorbed him upon the expiration of his security agency contract
with RPN-9. The monthly salary received by Servaa is considered wages despite being designated as talent
fees by TAPE. The Memorandum informing Servaa of discontinuance of his services also proves that TAPE
had the power to dismiss him. Control is also manifested in the bundy cards submitted by Servaa. He was
required to report daily and observe definite work hours. He is also considered a regular employee by reason of
his 5 year continuous service regardless of whether or not respondent had been performing work that is
necessary or desirable to the usual business of TAPE. Thus being a regular employee, his services may not be
terminated except for a just or authorized cause. TAPE is liable for illegal dismissal for it failure to comply the 1
month requirement for termination of services as required by law.

However, with respect to the liability of petitioner Tuviera, president of TAPE, absent any showing that he acted
with malice or bad faith in terminating respondent, he cannot be held solidarily liable with TAPE.

San Beda College of Law 110


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

31. ENCYCLOPAEDIA BRITANNICA (PHILIPPINES), INC. v. NATIONAL LABOR RELATIONS
COMMISSION, HON. LABOR ARBITER TEODORICO L. ROGELIO and BENJAMIN LIMJOCO
G.R. No. 87098 November 4, 1996
TORRES, JR., J.:

Doctrine:
The mere issuance of memoranda does not establish an Employer-Employee relationship.

FACTS:
Respondent Benjami Limjoco was a Sales Division Manager of petitioner Encyclopaedia Britannica. He was in
charge of selling its products through some sales represenatives and received commisions from the products
sold by his agents. His office expenses were deducted from his commissions and he was informed by petitioner
of appointment, promotions and transfers of employees in his district. He resigned from the said office on 14
June 1974 to pursue his private business but on 30 October 1975, he filed a complaint against petitioner for
non-payment of separation pay and other benefits and also illegal deduction form his sales commision.

Petitioner alleged that respondent is not its employee but an independent dealer. He did not have any salary
and his income from petitioner is depended on the volume of sales accomplished. He also maintained his own
office and his expenses are chargeable to his commissions. Petitioner further alleges that it had no control and
supervision over the respondent. Respondent, on the other hand, alleges that he was hired by petitioner and
was assigned in the sales department with an average of Php 4,000.00 monthly as earnings. He was under the
supervision of petitioner through the issuances of memoranda, guidelines on company policies, instructions and
other orders.

ISSUE: Whether or not there is an Employer-Employee Relationship between Encyclopaedia Britannica and
Limjoco?

LA RULING:
Yes. The Labor Arbiter ruled that Limjoco was under the control of the petitioner since he was required
to make periodic reports of his sales activities to the company and all transactions were subject to the final
approval of the petitioner.

NLRC RULING:
Yes. The NLRC found no evidence supporting the allegation that Limjoco was an independent
contractor or dealer. The petitioner dictated Limjoco how and where to sell its products.

SC RULING:
No. The fact that petitioner issued memoranda to Limjoco and to other division sales managers did not prove
that petitioner had actual control over them. These were merely guidelines on company policies, which the sales
managers follow and impose on their respective agents. Independent authorized agents who did not receive
regular compensations but commissions based on the sale of products primarily conducted the sales operation.
They also financed their own expenses and maintained their own staff.

The prices of the products may have been fixed but the independent agents still had free rein in the means and
methods for conducting the marketing operations. He was free to conduct his work and he was free to engage in
other means of livelihood. In fact, he was also a director and later president of the Farmers Rural Bank while he
was connected with the petitioner.

San Beda College of Law 111


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

32. ATOK BIG WEDGE COMPANY, INC. vs. JESUS P. GISON
G.R. No. 169510 August 8, 2011
PERALTA, J.:

Doctrine:
Article 280 of the Labor Code, is not the yardstick for determining the existence of an employment relationship
because it merely distinguished two kinds of employees that is regular and casual employees.

FACTS:
Atok Big Wedge Company, Inc. through it then Asst. Vice-President and Acting Manager, Rutillo Torres
engaged Jesus Gison as part-time consultant on retainer basis. He assisted Atok with matters pertaining to the
prosecution of cases against illegal surface occupants within the area covered by the companys mineral claims.
He likewise performed liaison work with several government agencies. He was not required to report to office on
a regular basis except when requested by the management. He received Php 3,000.00 a month as retainer fee,
which was delivered to him in his residence or in a local restaurant.

Gison requested Atok to cause his registration with the SSS considering he was getting old. Atok, however,
ignored his request, which prompted him to file a complaint against Atok before the SSS. Afterwards, his
services was terminated by Atok on the ground his services were no longer necessary. This prompted Gison to
file a complaint for illegal dismissal before the NLRC against Atok.

ISSUE: Whether or not there is an Employer-Employee Relationship between Atok and Gison?

LA RULING: No. The Labor Arbiter ruled that there is no Employer-Employee relationship.

NLRC RULING: No. The NLRC affirmed the ruling of the Labor Arbiter.

CA RULING: Yes. The CA annulled and set aside the decision of the NLRC. The CA opined that applying
Article 280 of the Labor Code Gison is deemed a regular employee of the petitioner after the lapse of one year
from his employment.

SC RULING:
No. There is the absence of the element of control on the part of Atok, which results to the conclusion of an
Employer-Employee relationship. He was not required to report everyday during regular office hours and his
monthly retainer fees were paid to him either at his residence or a local restaurant. He was also assigned tasks
to perform but Atok did not control the manner and methods by which Gison performed these tasks.

Article 280 of the Labor, which was used by the CA to support its findings, is not applicable in the case at bar.
The said provision merely distinguishes between two kinds of employment, i.e., regular employees and casual
employees, for the purposes of determining the right of an employee to certain benefits. It does not apply where
the existence of an employment relationship is in dispute. Therefore, it was erroneous for the CA to rely on the
said provision in determining whether an Employer-Employee relationship exists between Atok and Gison.

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LABOR LAW REVIEW Atty. Joyrich Golangco

33. DUMPIT-MURILLO vs. COURT OF APPEALS
G.R. No. 164652 June 8, 2007
QUISUMBING, J.:

Doctrine:
The assertion that a talent contract exists does not necessarily prevent a regular employment status.

FACTS:
Associated Broadcasting Company (ABC) hired Thelma Dumpit-Murillo as a newscaster and co-anchor for
Balitang-Balita under a Talent Contract for a period of three-months. The said contract was renewed multiple
times. When the last contract expired, Dumpit-Murillo sent a letter to Jose Javire, Vice President for News and
Public Affairs of ABC, informing the latter of her interest in renewing her contract. She sent another letter stating
that she was not able to receive any reply from her previous letter. She also stated that she considered the
failure of a formal response on the part of the company as her constructive dismissal. She then sent a demand
letter requesting her reinstatement and payment of unpaid wages and other benefits. ABC replied that the
checks for her talent fees are being processed but claimed that the other claims hand no basis. Dumpit-Murillo
filed a complaint against ABC for illegal dismissal before the NLRC.

ISSUES:
1. Whether or not there is an employer-employee relationship between ABC and Dumpit-Murillo?
2. Whether or not Dumpit-Murillo is a regular employee?

LA RULING: No. The Labor Arbiter dismissed the Complaint.

NLRC RULING: Yes. The NLRC held that an employer-employee relationship existed between Dumpit-Murillo
and ABS; that the subject talent contract was void; and that she was a regular employee illegally dismissed.

CA RULING: No. The CA reversed the decision of the NLRC. It ruled that Dumpit-Murillo was a fixed-term
employee and not a regular employee and should not be allowed to renege from the stipulation she had
voluntarily and knowingly executed.

SC RULING:
1. Yes. The practice of having fixed-term contracts in the industry does not automatically make all talent
contracts valid and compliant with labor law. The assertion that a talent contract exists does not
necessarily prevent a regular employment status. The duties of Dumpit-Murillo as enumerated in her
employment contract indicate that ABC had control over the work of petitioner. Aside from control, ABC
also dictated the work assignments and payment of her wages. ABC also had the power to dismiss.

2. Yes. Dumpit-Murillos work was necessary or desirable in the usual business or trade of the employer,
which includes its participation in the governments news and public information dissemination. Her
work was continuous for a period of four years and her repeated engagement under contract of hire is
indicative of the necessity and desirability of her work in ABCs business.

There is no valid fixed-term employment between Dumpit-Murillo and ABC. Fixed-term employment will
not be considered valid where, from the circumstances, it is apparent that periods have been imposed
to preclude acquisition of tenurial security by the employee. It should satisfactorily appear that the
employer and the employee dealt with each other on more or less equal terms with no moral dominance
being exercised by the employer over the employee. Patently, Dumpit-Murillo occupied a position of
weakness vis--vis the employer. She was merely one of the numerous newscasters/broadcasters of
ABC and she was left with no choice but to affix her signature of conformity on each renewal of her
contract or risk the loss of her job.

San Beda College of Law 113


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

34. JOSE MEL BERNARTE vs. PHILIPPINE BASKETBALL ASSOCIATION (PBA), JOSE EMMANUEL M.
EALA, and PERRY MARTINEZ
G.R. No. 192084 September 14, 2011
CARPIO, J

FACTS:
Complainants Jose Mel Bernarte and Renato Guevara were referees of the PBA. They claim that they had been
made to sign contracts on a year to year basis until 2003, when Bernarte was made to sign a one and a half
month contract for the period of July 1st to August 5th 2003. In January 2004, Bernarte Received a letter
advising him that his contract would not be renewed citing his unsatisfactory performance on and off the court.
Bernarte was shocked, and felt that the dismissal was caused by his refusal to fix a game upon order of Ernie
De Leon.

Complainant Guevarra, a referee since 2001, was likewise no longer made to sign a contract beginning
February 2004. Complainants aver that they were employees of the PBA and were illegally dismissed.

Respondents PBA aver that the complainants entered into contracts of retainer with the PBA which after the
lapse of their respective periods, were not renewed. Respondents argue that complainants were not illegally
dismissed because they were not employees of the PBA, that their respective contracts were simply not
renewed, and that the PBA had the prerogative of whether or not to renew their contracts.

ISSUE: Whether or not complainants are employees of the PBA.

LA RULING: In her 31 March 2005 Decision, the Labor Arbiter declared petitioner an employee whose
dismissal by respondents was illegal. Accordingly, the Labor Arbiter ordered the reinstatement of petitioner and
the payment of backwages, moral and exemplary damages and attorney's fees.

NLRC RULING: Affirmed the decision of the LA.


CA RULING: The Court of Appeals found petitioner an independent contractor since respondents did not
exercise any form of control over the means and methods by which petitioner performed his work as a
basketball referee. The Court of Appeals held:

While the NLRC agreed that the PBA has no control over the referees acts of blowing the whistle and
making calls during basketball games, it, nevertheless, theorized that the said acts refer to the means
and methods employed by the referees in officiating basketball games for the illogical reason that said
acts refer only to the referees skills. How could a skilled referee perform his job without blowing a
whistle and making calls? Worse, how can the PBA control the performance of work of a referee without
controlling his acts of blowing the whistle and making calls?
SC RULING:
The Petition is bereft of merit. To determine the existence of an employer-employee relationship, case law has
consistently applied the four-fold test, to wit: (a) the selection and engagement of the employee; (b) the payment
of wages; (c) the power of dismissal; and (d) the employers power to control the employee on the means and
methods by which the work is accomplished. The so-called control test is the most important indicator of the
presence or absence of an employer-employee relationship.

The contractual stipulations do not pertain to, much less dictate, how and when petitioner will blow the whistle
and make calls. On the contrary, they merely serve as rules of conduct or guidelines in order to maintain the
integrity of the professional basketball league. As correctly observed by the Court of Appeals, how could a
skilled referee perform his job without blowing a whistle and making calls? x x x [H]ow can the PBA control the
performance of work of a referee without controlling his acts of blowing the whistle and making calls?

We agree with respondents that once in the playing court, the referees exercise their own independent
judgment, based on the rules of the game, as to when and how a call or decision is to be made. The referees
decide whether an infraction was committed, and the PBA cannot overrule them once the decision is made on
the playing court. The referees are the only, absolute, and final authority on the playing court. Respondents or
any of the PBA officers cannot and do not determine which calls to make or not to make and cannot
control the referee when he blows the whistle because such authority exclusively belongs to the
referees. The very nature of petitioners job of officiating a professional basketball game undoubtedly calls for
freedom of control by respondents.
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Further, unlike regular employees who ordinarily report for work eight hours per day for five days a week,
petitioner is required to report for work only when PBA games are scheduled or three times a week at two hours
per game. In addition, there are no deductions for contributions to the Social Security System, Philhealth or Pag-
Ibig, which are the usual deductions from employees salaries. These undisputed circumstances buttress the fact
that petitioner is an independent contractor, and not an employee of respondents.

In addition, the fact that PBA repeatedly hired petitioner does not by itself prove that petitioner is an employee of
the former. For a hired party to be considered an employee, the hiring party must have control over the means
and methods by which the hired party is to perform his work, which is absent in this case. The continuous
rehiring by PBA of petitioner simply signifies the renewal of the contract between PBA and petitioner, and
highlights the satisfactory services rendered by petitioner warranting such contract renewal. Conversely, if PBA
decides to discontinue petitioners services at the end of the term fixed in the contract, whether for unsatisfactory
services, or violation of the terms and conditions of the contract, or for whatever other reason, the same merely
results in the non-renewal of the contract, as in the present case. The non-renewal of the contract between the
parties does not constitute illegal dismissal of petitioner by respondents.

San Beda College of Law 115


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LABOR LAW REVIEW Atty. Joyrich Golangco

35. ANGEL JARDIN vs. NATIONAL LABOR RELATIONS COMMISSION (NLRC) and GOODMAN TAXI
(PHILJAMA INTERNATIONAL, INC.)
G.R. No. 119268 February 23, 2000
QUISUMBING, J.

FACTS:
Petitioners were drivers of private respondent, Philjama International Inc., a domestic corporation engaged in
the operation of "Goodman Taxi." Petitioners used to drive private respondent's taxicabs every other day on a
24-hour work schedule under the boundary system. Under this arrangement, the petitioners earned an average
of P400.00 daily. Nevertheless, private respondent admittedly regularly deducts from petitioners, daily earnings
the amount of P30.00 supposedly for the washing of the taxi units. Believing that the deduction is illegal,
petitioners decided to form a labor union to protect their rights and interests.

Upon learning about the plan of petitioners, private respondent refused to let petitioners drive their taxicabs
when they reported for work on August 6, 1991, and on succeeding days. Petitioners suspected that they were
singled out because they were the leaders and active members of the proposed union. Aggrieved, petitioners
filed with the labor arbiter a complaint against private respondent for unfair labor practice, illegal dismissal and
illegal deduction of washing fees.

ISSUE: Whether or not petitioners are employees of the respondent.

LA RULING: Dismissed the complaint for lack of merit.

NLRC RULING: At first, the NLRC reversed and set aside the judgment of the LA and declared that petitioners
are employees of private respondent, and as such, their dismissal must be for just cause and after due process.
However, after TWO motions for reconsideration, the NLRC ruled that it lacks jurisdiction over the case
as petitioners and private respondent have NO employer employee relationship. It held that the relationship of
the parties is leasehold which is covered by the Civil Code rather than the Labor Code.

SC RULING:
The petition is impressed with merit. The SC declared that the NLRC should not have entertained the
respondent's second motion for reconsideration, the same being a prohibited pleading under the NLRC rules.

As to the substantive issue, the SC ruled as follows:

In a number of cases decided by this Court, we ruled that the relationship between jeepney
owners/operators on one hand and jeepney drivers on the other under the boundary system is
that of employer-employee and not of lessor-lessee. We explained that in the lease of chattels,
the lessor loses complete control over the chattel leased although the lessee cannot be
reckless in the use thereof, otherwise he would be responsible for the damages to the lessor.

In the case of jeepney owners/operators and jeepney drivers, the former exercise supervision and
control over the latter. The management of the business is in the owner's hands. The owner as holder of the
certificate of public convenience must see to it that the driver follows the route prescribed by the franchising
authority and the rules promulgated as regards its operation. Now, the fact that the drivers do not receive fixed
wages but get only that in excess of the so-called "boundary" they pay to the owner/operator is not sufficient to
withdraw the relationship between them from that of employer and employee. We have applied by analogy the
abovestated doctrine to the relationships between bus owner/operator and bus conductor, auto-calesa
owner/operator and driver, and recently between taxi owners/operators and taxi drivers. Hence, petitioners are
undoubtedly employees of private respondent because as taxi drivers they perform activities which are usually
necessary or desirable in the usual business or trade of their employer.

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36. CHAVEZ v. NLRC
G.R. No. 146530 January 17, 2005
CALLEJO, SR., J.

Doctrine:
Of the four elements of the employer-employee relationship, the control test is the most important.

Compared to an employee, an independent contractor is one who carries on a distinct and independent
business and undertakes to perform the job, work, or service on its own account and under its own responsibility
according to its own manner and method, free from the control and direction of the principal in all matters
connected with the performance of the work except as to the results thereof. Hence, while an independent
contractor enjoys independence and freedom from the control and supervision of his principal, an employee is
subject to the employers power to control the means and methods by which the employees work is to be
performed and accomplished.

FACTS:
The respondent company, Supreme Packaging, Inc., is in the business of manufacturing cartons and other
packaging materials for export and distribution. On 1984, it engaged the services of the petitioner, Pedro
Chavez, as truck driver and as such, he was tasked to deliver the respondent companys products from its
factory to its various customers, mostly in Metro Manila.

Sometime in 1992, Chavez asked respondent companys plant manager his desire to avail himself of the
benefits that regular employees were receiving such as overtime pay, nightshift differential pay, and 13th month
pay, among others but the same was never given.

On 1995, Chavez filed a complaint for regularization with the Regional Arbitration Branch 3 but before the case
could be heard, respondent company terminated the services of Chavez prompting Chavez to amend the
complaint against the respondents for illegal dismissal, unfair labor practice and non-payment of overtime pay,
nightshift differential pay, 13th month pay, among others.

The respondents, for their part, denied the existence of an employer-employee relationship between the
respondent company and the petitioner. They averred that the petitioner was an independent contractor as
evidenced by the contract of service which he and the respondent company entered into.

ISSUE: Whether or not Chavez was respondent companys employee or was a private contractor.

LA RULING: The LA found Chavez to be respondent companys employee thus finding respondent guilty of
illegal dismissal. It held that the petitioner was a regular employee of the respondent company as he was
performing a service that was necessary and desirable to the latters business. Moreover, it was noted that the
petitioner had discharged his duties as truck driver for the respondent company for a continuous and
uninterrupted period of more than ten years.

NLRC RULING: The NLRC initially affirmed the LAs decision but later on reversed it decision declaring that no
employer-employee relationship existed. The NLRC stated that the respondents did not exercise control over
the means and methods by which the petitioner accomplished his delivery services. It upheld the validity of the
contract of service as it pointed out that said contract was silent as to the time by which the petitioner was to
make the deliveries and that the petitioner could hire his own helpers whose wages would be paid from his own
account.

CA RULING: Initially, the CA reversed the NLRCs decision ruling in favor of Chavez but later reconsidered the
same ruling in favor of respondent company. In reconsidering its decision, the CA explained that the extent of
control exercised by the respondents over the petitioner was only with respect to the result but not to the means
and methods used by him. The CA cited the following circumstances: (1) the respondents had no say on how
the goods were to be delivered to the customers; (2) the petitioner had the right to employ workers who would
be under his direct control; and (3) the petitioner had no working time.

The fact that the petitioner had been with the respondent company for more than ten years was, according to
the CA, of no moment because his status was determined not by the length of service but by the contract of
service. This contract, not being contrary to morals, good customs, public order or public policy, should be given
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the force and effect of law as between the respondent company and the petitioner. Consequently, the CA
reinstated the July 10, 1998 Decision of the NLRC dismissing the petitioners complaint for illegal dismissal.

SC RULING:
The court held that an employer-employee relationship existed and that Chavez was not a mere private
contractor.

Applying the four-fold test, the SC found:

First. Undeniably, it was the respondents who engaged the services of the petitioner without the
intervention of a third party.

Second. That the petitioner was paid on a per trip basis is not significant. This is merely a method of
computing compensation and not a basis for determining the existence or absence of employer-
employee relationship. One may be paid on the basis of results or time expended on the work, and may
or may not acquire an employment status, depending on whether the elements of an employer-
employee relationship are present or not. In this case, it cannot be gainsaid that the petitioner received
compensation from the respondent company for the services that he rendered to the latter.

Third. The respondents power to dismiss the petitioner was inherent in the fact that they engaged the
services of the petitioner as truck driver. They exercised this power by terminating the petitioners
services albeit in the guise of severance of contractual relation due allegedly to the latters breach of his
contractual obligation.

Fourth. As earlier opined, of the four elements of the employer-employee relationship, the control test is
the most important. Compared to an employee, an independent contractor is one who carries on a
distinct and independent business and undertakes to perform the job, work, or service on its own
account and under its own responsibility according to its own manner and method, free from the control
and direction of the principal in all matters connected with the performance of the work except as to the
results thereof. Hence, while an independent contractor enjoys independence and freedom from the
control and supervision of his principal, an employee is subject to the employers power to control the
means and methods by which the employees work is to be performed and accomplished.

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37. COCA-COLA BOTTLERS PHILS., INC. v. CLIMACO
G.R. No. 146881 February 5, 2007
AZCUNA, J.

Doctrine:
The Court, in determining the existence of an employer-employee relationship, has invariably adhered to the
four-fold test: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employees conduct, or the so-called control test, considered to be
the most important element. The issuance by the principal of guidelines does not establish control by principal.

FACTS:
Dr. Climaco is a medical doctor who was hired by the petitioner by virtue of retainer agreement. The agreement
states that there is no employer-employee relationship between the parties. The retainer agreement was
renewed annually. The last one expired on Dec. 31, 1993. Despite of the non-renewal of the agreement,
respondent continued to perform his functions as company doctor until he received a letter in March 1995
concluding their retainer agreement.

Respondent filed a complaint before the NLRC seeking recognition as a regular employee of the petitioner
company and prayed for the payment of all benefits of a regular employee.

ISSUE: Whether or not an employer-employee relationship existed between petitioner Coca-Cola Bottlers and
respondent Dr. Climaco.

LA AND NLRC RULING: The Labor Arbiter and the NLRC found that the company lacked the power of control
over Dr. Climaco, therefore no employer-employee relationship existed.

CA RULING: Court of Appeals ruled that there existed an employer-employee relationship. It held that Coca-
Colas power to control petitioner is present because the particular objectives and activities to be observed and
accomplished by the latter are fixed and set under the Comprehensive Medical Plan which was made an
integral part of the retainer agreement. Moreover, the times for accomplishing these objectives and activities are
likewise controlled and determined by the company. Petitioner is subject to definite hours of work, and due to
this, he performs his duties to Coca-Cola not at his own pleasure but according to the schedule dictated by the
company.

The CA added that Dr. Climaco should be classified as a regular employee having rendered 6 years of
service as plant physician by virtue of several renewed retainer agreements.

SC RULING:
The court held no, upholding the decisions of both the LA and the NLRC. The Court, in determining the
existence of an employer-employee relationship, has invariably adhered to the four-fold test: (1) the selection
and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employees conduct, or the so-called "control test," considered to be the most important element.

The Labor Arbiter and the NLRC correctly found that Coca Cola lacked the power of control over the
performance by respondent of his duties. The petitioner company, through the Comprehensive Medical Plan,
provided guidelines merely to ensure that the end result was achieved, but did not control the means and
methods by which respondent performed his assigned tasks.

The NLRC affirmed the findings of the Labor Arbiter and stated that it is precisely because the company lacks
the power of control that the contract provides that respondent shall be directly responsible to the employee
concerned and their dependents for any injury, harm or damage caused through professional negligence,
incompetence or other valid causes of action.

In addition, the Court finds that the schedule of work and the requirement to be on call for emergency cases do
not amount to such control, but are necessary incidents to the Retainership Agreement.

The Court agrees with the Labor Arbiter and the NLRC that there is nothing wrong with the employment of
respondent as a retained physician of petitioner company and upholds the validity of the Retainership
Agreement which clearly stated that no employer-employee relationship existed between the parties.
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38. GABRIEL v. BRILON
G.R. No. 146989 February 7, 2007
AZCUNA, J.:

Doctrine:
The relationship between jeepney owners/operators and jeepney drivers under the boundary system is that of
employer-employee and not of lessor-lessee because in the lease of chattels the lessor loses complete control
over the chattel leased although the lessee cannot be reckless in the use thereof, otherwise he would be
responsible for the damages to the lessor. In the case of jeepney owners/operators and jeepney drivers, the
former exercises supervision and control over the latter.

FACTS:
Petitioner, represented by his surviving spouse, Flordeliza V. Gabriel, was the owner-operator of a public
transport business, "Gabriel Jeepney," with a fleet of 54 jeepneys plying the Baclaran-Divisoria-Tondo route.
Petitioner had a pool of drivers, which included respondents, operating under a "boundary system" of P400 per
day.

Respondents alleged that they were regular drivers of Gabriel Jeepney under a boundary system of P400 per
day, plying Baclaran to Divisoria via Tondo, and vice versa. They added that despite the fact that there is no law
providing that the operator can require the drivers to pay police protection, deposit, washing, and garage fees,
they were forced to pay additional P55.00 per day for the following: a) P20.00 police protection; b) P20.00
washing; c) P10.00 deposit; and [d)] P5.00 garage fees. Respondents further alleged that on April 1995,
petitioner told them not to drive anymore, and when they went to the garage to report for work the next day, they
were not given a unit to drive.

Based on the foregoing, respondents filed an action for illegal dismissal, illegal deductions, and separation pay
against petitioner Gabriel with the NLRC.

ISSUE: Whether or not an employer-employee relationship existed between Gabriel and its jeepney drivers
considering that the latter worked for the former under a boundary system.

LA RULING: The Labor Arbiter ruled in favor of the respondents-jeepney drivers declaring the illegality of
respondents dismissal and ordered Melencio Gabriel to pay the respondents the sum of PHP1,034,000
representing respondents backwages and separation pay.

NLRC RULING: The NLRC Division reversed and set aside the LAs decision for lack of employer-employee
relationship.

CA RULING: The CA reversed the NLRCs decision and held that an employer-employee relationship existed
between Gabriel and the respondent-jeepney drivers. The CA iterated that the NLRCs decision is egregiously
wrong insofar as it was anchored on the absence of an employer-employee relationship. Well-settled is the rule
that the boundary system used in jeepney and (taxi) operations presupposes an employer-employee
relationship (National Labor Union v. Dinglasan, 98 Phil. 649)

SC RULING:
The SC upheld the CAs decision reiterating that the relationship between jeepney owners/operators and
jeepney drivers under the boundary system is that of employer-employee and not of lessor-lessee because in
the lease of chattels the lessor loses complete control over the chattel leased although the lessee cannot be
reckless in the use thereof, otherwise he would be responsible for the damages to the lessor. In the case of
jeepney owners/operators and jeepney drivers, the former exercises supervision and control over the latter.
The fact that the drivers do not receive fixed wages but get only that in excess of the so-called "boundary" that
they pay to the owner/operator is not sufficient to withdraw the relationship between them from that of employer
and employee. Thus, private respondents were employees because they had been engaged to perform
activities which were usually necessary or desirable in the usual business or trade of the employer.

The Court also agrees with the labor arbiter and the CA that respondents were illegally dismissed by petitioner.
Respondents were not accorded due process. Moreover, petitioner failed to show that the cause for termination
falls under any of the grounds enumerated in Article 282 of the Labor Code. Consequently, respondents are
entitled to reinstatement without loss of seniority rights and other privileges and to their full backwages
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computed from the date of dismissal up to the time of their actual reinstatement in accordance with Article 279
of the Labor Code.

The SC also awarded reinstatement if favor of the respondents ruling that Reinstatement is obtainable in this
case because it has not been shown that there is an ensuing "strained relations" between petitioner and
respondents. This is pursuant to the principle laid down in Globe-Mackay Cable and Radio Corporation v. NLRC
as quoted earlier in the CA decision.

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39. FELIX VS. BUENSANEDA
G.R. No. 109704 January 17, 1995
KAPUNAN, J.:

Doctrine:
A residency or resident physician position in a medical specialty is never a permanent one. Residency connotes
training and temporary status. It is the step taken by a physician right after post-graduate internship (and after
hurdling the Medical Licensure Examinations) prior to his recognition as a specialist or sub-specialist in a given
field.

FACTS:
Petitioner Dr. Alfredo Felix, after passing the Physician's Licensure Examinations given by the Professional
Regulation Commission in June of 1979, joined the National Center for Mental Health (then the National Mental
Hospital) on May 26, 1980 as a Resident Physician. He was later on promoted to the position of Senior Resident
Physician in a temporary capacity immediately after he and other employees of the NCMH allegedly tendered
their courtesy resignations to the Secretary of Health on January 1983 pursuant to a reorganization act, EO No.
119. He was again promoted to the position of Medical Specialist I (Temporary Status), which position was
renewed the following year on August 1988.

In the same year, 1988, the DOH subsequently issued Department Order No. 347 which required board
certification as a prerequisite for renewal of specialist positions in various medical centers, hospitals and
agencies of the said department. Petitioner was one of the hundreds of government medical specialist who was
subjected to such certification requirement for them to enable to continue to work in their present positions.

On 1991, after reviewing petitioner's service record and performance, the Medical Credentials Committee of the
National Center for Mental Health recommended non-renewal of his appointment as Medical Specialist I. He
was, however, allowed to continue in the service, and receive his salary, allowances and other benefits even
after being informed of the termination of his appointment. A subsequent meeting took place and discussed the
Dr. Felixs status. Dr. Felixs immediate supervisor, pointed out his poor performance, frequent tardiness and
inflexibility as among the factors responsible for the recommendation not to renew his appointment. With one
exception, other department heads present in the meeting expressed the same opinion, and the overwhelming
concensus was for non-renewal.

After having been issued a memorandum ordering Dr. Felix to vacate his cottage, he filed a petition with the
Merit System Protection Board (MSPB) complaining about the alleged harassment by respondents and
questioning the non-renewal of his appointment.

MSPB RULING: The MPSB dismissed Dr. Felixs complaint for lack of merit finding that as an apparent incident
of the power to appoint, the renewal of a temporary appointment upon or after its expiration is a matter largely
addressed to the sound discretion of the appointing authority. Complainant therefore, has no basis in law to
assail the non-renewal of his expired temporary appointment much less invoke the aid of this Board cannot
substitute its judgment to that of the appointing authority nor direct the latter to issue an appointment in the
complainant's favor. Dr. Felix then appealed to the Civil Service Commission.

CSC DECISION: The CSC dismissed the appeal and denied Dr. Felixs motion for reconsideration.

ISSUE: Whether or not Dr. Alfredo Felixs dismissal was illegal and violative of the constitutional provision on
security of tenure allegedly because his removal was made pursuant to an invalid reorganization.

SC DECISION:
The court held no. The court held that the patent absurdity of petitioner's posture is readily obvious.
A residency or resident physician position in a medical specialty is never a permanent one. Residency connotes
training and temporary status. It is the step taken by a physician right after post-graduate internship (and after
hurdling the Medical Licensure Examinations) prior to his recognition as a specialist or sub-specialist in a given
field.

Petitioner's insistence on being reverted back to the status quo prior to the reorganizations made pursuant to
Executive Order No. 119 would therefore be akin to a college student asking to be sent back to high school and
staying there. From the position of senior resident physician, which he held at the time of the government
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reorganization, the next logical step in the stepladder process was obviously his promotion to the rank of
Medical Specialist I, a position which he apparently accepted not only because of the increase in salary and
rank but because of the prestige and status which the promotion conferred upon him in the medical community.

Such status, however, clearly carried with it certain professional responsibilities including the responsibility of
keeping up with the minimum requirements of specialty rank, the responsibility of keeping abreast with current
knowledge in his specialty rank, the responsibility of completing board certification requirements within a
reasonable period of time. The evaluation made by the petitioner's peers and superiors clearly showed that he
was deficient in a lot of areas, in addition to the fact that at the time of his non-renewal, he was not even board-
certified.

The court also took notice of the fact that petitioner made no attempt to oppose earlier renewals of his
temporary Specialist I contracts, clearly demonstrating his acquiescence to if not his unqualified acceptance
of the promotion (albeit of a temporary nature) made in 1988. Whatever objections petitioner had against the
earlier change from the status of permanent senior resident physician to temporary senior physician were
neither pursued nor mentioned at or after his designation as Medical Specialist I (Temporary).

The court ruled then that he is therefore estopped from insisting upon a right or claim which he had plainly
abandoned when he, from all indications, enthusiastically accepted the promotion. His negligence to assert his
claim within a reasonable time, coupled with his failure to repudiate his promotion to a temporary position,
warrants a presumption, in the words of this Court in Tijam vs. Sibonghanoy, that he "either abandoned (his
claim) or declined to assert it."

San Beda College of Law 123


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40. AUTO BUS TRANSPORT SYSTEM, INC. VS. BAUTISTA
G.R. No. 156367 May 16, 2005
CHICO-NAZARIO, J.:

Doctrine:
The term field personnel is not merely concerned with the location where the employee regularly performs his
duties but also with the fact that the employees performance is unsupervised by the employer. Thus, in order to
conclude whether an employee is a field employee, it is also necessary to ascertain if actual hours of work in the
field can be determined with reasonable certainty by the employer.

FACTS:
Respondent Antonio Bautista was employed with petitioner Auto Bus Transport System, Inc. since May 24,
1995 as a driver-conductor of the latters bus. Bautista was paid on commission basis per travel on a twice a
month basis. On January 3, 2000, the bus driven by Bautista accidentally bumped another bus owned by the
respondent. As a result, Auto Bus did not allow Bautista to work until he paid the cost of the repair of the
damaged bus. Bautista failed to pay and after given the opportunity to explain his side, Auto Bus sent him a
letter for termination. Bautista then instituted a Complaint for Illegal Dismissal with Money Claims for
nonpayment of 13th month pay and service incentive leave pay (SILP) against Auto Bus.

ISSUE: Whether or not Antonio Bautista is considered a field personnel thus determinative of his service
incentive leave pay entitlement.

LA RULING: Labor Arbiter Tabingan decided on the case in favor of Auto Bus, dimissing the Complaint of
Bautista. However, the LA ordered Auto Bus to pay Bautista his 13th month pay from the date of his hiring to the
date of his dismissal and his SILP for all the years he has been in service for the former.

NLRC RULING: The NLRC affirmed with modification the LAs decision. It held that Bautista, being an
employee paid on commission basis, was not entitled for 13th month pay in accordance with Section 3 of the
Rules and Regulations Implementing PD No. 851, leaving Bautista with a claim for his SILP.

The NLRC also denied petitioners motion for reconsideration in which petitioner denied their liability to pay
Bautista of his SILP contending that that Bautista, being a field personnel, was an exception to the rule that
employees are entitled to SILP. As a legal basis, petitioner cited Section 1(d), Rule V, Book 3 of the
Implementing Rules and Regulations of the Labor Code which delimits the grant of the SIL, excluding among
others field personnel and other employees whose performance is unsupervised by the employer including
those who are engaged on task or contract basis, purely commission basis, or those who are paid in a fixed
amount for performing work irrespective of the time consumed in the performance thereof.

CA RULING: The CA affirmed the NLRCs decision.

SC RULING:
The Court held no. According to Article 82 of the Labor Code, field personnel shall refer to non-agricultural
employees who regularly perform their duties away from the principal place of business or branch office of the
employer and whose actual hours of work in the field cannot be determined with reasonable certainty. The term
field personnel is not merely concerned with the location where the employee regularly performs his duties but
also with the fact that the employees performance is unsupervised by the employer. Thus, in order to conclude
whether an employee is a field employee, it is also necessary to ascertain if actual hours of work in the field can
be determined with reasonable certainty by the employer.

In the case of Bautista, it was observed in the facts found by the LA that he must be at a specific place in a
specified time to be able to observe prompt departure and arrival from his point of origin to his point of
destination. In each and every depot, there is always a dispatcher whose function is to see to it that Bautistas
bus and its crew leave the premises at specific time and arrive at the estimated proper time. Therefore, Bautista
was under constant supervision while in the performance of his work. In conclusion, he was not a field personnel
but a regular employee who performs tasks usually necessary and desirable to the usual trade of Auto Bus.
Thus, being a regular employee, he has the right to claim service incentive leave pay under Article 95 of the
Labor Code.

San Beda College of Law 124


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LABOR LAW REVIEW Atty. Joyrich Golangco

41. ARIEL L. DAVID, doing business under the name and style "YIELS HOG DEALER vs. JOHN G.
MACASIO
G.R. No. 195466 July 2, 2014
BRION, J.:

Doctrine:
Engagement in a pakyaw or task basis does not negate the existence of employer-employee relationship.

FACTS:
Macasio filed a complaint against David, doing business under the name and style Yiels Hog Dealer, for non-
payment of overtime pay, holiday pay, 13th month pay, and SIL plus moral and exemplary damages and
attorneys fees.

Macasio alleged that he has been working as a butcher for David. Macasio claimed that David exercised control
and supervision over his work because David:
1. Set the work day, reporting time and hogs to be chopped, as well as the manner by which he was to
perform his work;
2. Daily paid his salary of P700.00;
3. Approved and disapproved his leaves; and
4. Owned the hogs delivered for chopping, as well as the work tools and implements and also rented the
workplace.
On the other hand, David claimed that he hired Macasio on pakyaw or task basis thus he is not entitled to the
benefits claimed. David pointed out that Macasios work starts at 10:00pm-2:00am depending on the volume of
hogs delivered. Macasio was paid a fixed amount regardless of the number of hogs chopped but was not
engaged to work, and accordingly not paid, when no hogs are delivered.

To support his claims, Macasio presented the Certificate of Employment (COE) issued to him by David and
likewise faulted David for not presenting as evidence the DTRs and payrolls which could have easily
established Macasios claims. David, however, insists that Macasio was not his employee, as he was engaged
in a pakyaw or task basis and that the COE was issued only for overseas employment purposes.

LA RULING: The LA dimissed the complaint banking on the argument of David that Macasio was merely
engaged in a pakyaw or task basis. Accordingly, Macasio is not entitled to the monetary awards.

NLRC RULING: Affirmed LA ruling. It ruled that Macasio was not covered by the Labor Standards on the
awards claimed because he was paid by results.

CA RULING: The CA modified the NLRC ruling. While agreeing that Macasio was paid by results, this did not
preclude the award of the benefits sought by Macasio. The CA ruled that he will only be excluded from the
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coverage of the holiday, SIL, 13 month pay only if he is a field personnel, which are lacking in Macasios case.

On appeal to the SC, David alleges, among others, engagement on a pakyaw or task basis precludes the
creation of employer-employee relationship.

ISSUE: Whether engagement on pakyaw or task basis negates the existence of employer-employee
relationship between them the parties involved.

SC RULING:
No. Engagement in pakyaw or task basis does not characterize the relationship between the parties whether
employment or independent contractorship. It only determines the manner of calculation of the wages due to the
employee which, is in this case, is the quantity or quality of work done.
Moreover, employing the control test, employer-employee relationship exists in this case as shown by the
following circumstances:
1. David engaged the services of Macasio;
2. David paid Macasios wages;
3. David had been setting the day and time when Macasio should report for work;
4. David rents the place where Macasio had been performing his tasks;
5. Macasio would leave the workplace only after he had finished chopping all of the hog meats given to
him for the days task; and
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6. David would still engage Macasios services and have him report for work even during the days when
only few hogs were delivered for butchering.
The totality of the surrounding circumstances of the present case sufficiently points to an employer-
employee relationship existing between David and Macasio.

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42. BEGINO V. ABS-CBN
G.R. No. 199166 April 20, 2015
PEREZ, J.:

Doctrine:
Exclusivity Clause and Prohibitions in talent contracts are indicative of control by the employer if it does not
concern well-known television and radio personality who can legitimately be considered as talent and
compensated as such.

FACTS:
ABS-CBN employed Begino and Del Valle sometime in 1996 as Cameramen/Editors for TV Broadcasting.
Sumayao Avila-Llorin were similarly engaged as reporters sometime in 1996 and 2002, respectively. [hereinafter
referred to as petitioners] Petitioner were engaged through Talent Contracts which, though regularly renewed
over the years, provided terms ranging from three (3) months to one (1) year. Petitioners were given Project
Assignment Forms which detailed, among other matters, the duration of a particular project as well as the
budget and the daily technical requirements thereof. In the aforesaid capacities, petitioners were tasked with
coverage of news items for subsequent daily airings in respondents TV Patrol Bicol Program.

The Talent Contract specified the absence of employer-employee relationship between the parties and
mandated compliance with the professional standards of ABS-CBN and its policies and guidelines as well as the
rules of KBP. It also prohibited the petitioners from engaging in similar work for persons or entities in direct or
indirect competition with ABS-CBN. Petitioners compensation were termed as Talent Fees and were results
oriented in nature, thus petitioners were not required to observe normal working hours.

Claiming that they were regular employees, petitioners filed a complaint against ABS-CBN before the NLRC S-
RAB Naga City. Petitioners claimed that they performed functions necessary and desirable in ABS-CBN's
business. Petitioners averred that they worked under the direct control and supervision of Villafuerte, ABS-
CBNs manager, because they were mandated to wear company IDs and the latter provided all the equipment
they needed, and, at the end of each day, were informed about the news to be covered the following day, the
routes they were to take and, whenever the subject of their news coverage is quite distant, even the start of their
workday. Moreover, noncompliance with the company policies will merit dismissal. Petitioners were constantly
evaluated and were subjected to annual competency assessment alongside other ABS-CBN employees.

As a result of their denomination as talents, they merely earned an average of P7,000.00 to P8,000.00 per
month, or decidedly lower than the P21,773.00 monthly salary ABS-CBN paid its regular rank-and-file
employees.

ABS-CBN contends that, due to the lack of manpower to produce its own programs, it is necessary to hire
independent contractors who offered their services in relation to a particular program. Due to the unpredictability
of viewer preferences, their payment usually depends on the budget allocation for a project.

It argued that its control is limited to the imposition of general guidelines on conduct and performance, simply for
the purpose of upholding the standards of the company and the strictures of the industry. There is no control or
restrictions over the means and methods by which they performed or discharged the tasks for which their
services were engaged. Petitioners were, at most, briefed whenever necessary regarding the general
requirements of the project to be executed.

LA RULING: The LA ruled that petitioners were regular employees having rendered services necessary and
related to ABS-CBNs business for more than a year. It ruled that the exclusivity and prohibitions in the contract
showed ABS-CBNs control over petitioners.

NLRC RULING: The NLRC affirmed LA decision.

CA RULING: The CA discounted the existence of an employer-employee relation between the parties upon the
following findings and conclusions: (a) petitioners, were engaged by respondents as talents for periods, work
and the program specified in the Talent Contracts and/or Project Assignment Forms concluded between them;
(b) petitioners were paid talent fees depending on the budget allocated for the program to which they were
assigned; (c) being respondents did not exercise control over the manner and method by which petitioner
accomplished their work but only ensured that they complied with the standards of the company, the KBP and
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the industry; and, (d) the existence of an employer-employee relationship is not necessarily established by the
exclusivity clause and prohibitions which are but terms and conditions on which the parties are allowed to freely
stipulate.

ISSUE: Whether an employer-employee relationship exists between petitioners and ABS-CBN.

SC RULING:
Yes. Notwithstanding the nomenclature of their Talent Contracts and/or Project Assignment Forms and the
terms and condition embodied therein, petitioners are regular employees of ABS-CBN because they perform
functions necessary and essential to ABS-CBNs business. Respondents repeated hiring of petitioners for its
long-running news program positively indicates that the latter were ABS-CBNs regular employees.

Petitioners were subject to the control and supervision of respondents which, first and foremost, provided them
with the equipments essential for the discharge of their functions. The talent contracts specifically provide that
ABS-CBN shall retain all creative, administrative, financial and legal control of the programs which were
assigned to petitioners. They were likewise required to attend and participate in all promotional or
merchandising campaigns, activities or events for the Program, and to perform their functions at such locations
and Performance/Exhibition Schedules. Such terms demonstrate the control over petitioners not only over the
results but also over the means employed to achieve the same.

While it is true that in Sonza, where similar exclusivity clause and restrictions were held not to be indicative of
control and lead to the conclusion that Sonza was an independent contractor, such cannot be applied in this
case. The said case enunciated that guidelines for the achievement of mutually desired results are not
tantamount to control. It cannot not be applied in this case because Sonza case involved a well-known television
and radio personality who was legitimately considered a talent and amply compensated as such. While
possessed of skills for which they were modestly recompensed by respondents, petitioners lay no claim to fame
and/or unique talents for which talents like actors and personalities are hired and generally compensated in the
broadcast industry.

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ARTICLE 95

43. AUTO BUS TRANSPORT SYSTEM INC. V. BAUTISTA


G.R. No. 156367 May 16, 2005
CHICO-NAZARIO, J.:

Doctrine:
The three (3)-year prescriptive period for SIL commences, not at the end of the year when the employee
becomes entitled to the commutation of his SIL, but from the time when the employer refuses to pay its
monetary equivalent after demand of commutation or upon termination of the employees services, as the case
may be.

FACTS:
Antonio Bautista has been employed by petitioner Auto Bus Transport Systems, Inc. (Autobus), as driver-
conductor and was paid on commission basis at the rate of 7% of the total gross income per travel. Bautista,
while driving petitioners bus along Sta. Fe, Nueva Vizcaya, the bus he was driving accidentally bumped the rear
portion of another bus of petitioner, as the latter vehicle suddenly stopped at a sharp curve without giving any
warning.

After a month, Bautista was terminated for failing to pay 30% of the cost of the repairs. Thus, Bautista instituted
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a complaint for Illegal dismissal with Money Claims for nonpayment of 13 month pay and service incentive
leave pay against Autobus.

Autobus, on the other hand, maintained that Bautistas employment was replete with offenses involving reckless
imprudence, gross negligence, and dishonesty. To support its claim, petitioner presented copies of letters,
memos, irregularity reports, and warrants of arrest pertaining to several incidents wherein respondent was
involved. It likewise claimed to have afforded Bautista opportunity to explain his side.
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LA RULING: The LA ruled that there was no illegal dismissal but ordered petitioner to pay Bautista his 13
month pay and SIL.
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NLRC RULING: The NLRC deleted the award of 13 month pay but retained the award of SIL.

CA RULING: The CA affirmed in toto the decision of the NLRC.

ISSUES:
1. Whether Bautista is entitled to SIL.
2. Whether 3 year prescriptive period under Art. 291 is applicable to Bautistas SIL.

SC RULING:
1. Yes. As a rule, SIL shall not apply to employees classified as field personnel. The phrase other employees
whose performance is unsupervised by the employer must not be understood as a separate classification of
employees to which service incentive leave shall not be granted. Rather, it serves as an amplification of the
interpretation of the definition of field personnel under the Labor Code as those whose actual hours of work in
the field cannot be determined with reasonable certainty.

The same is true with respect to the phrase those who are engaged on task or contract basis, purely
commission basis. Said phrase should be related with field personnel, applying the rule on ejusdem generis that
general and unlimited terms are restrained and limited by the particular terms that they follow. Hence,
employees engaged on task or contract basis or paid on purely commission basis are not automatically
exempted from the grant of service incentive leave, unless, they fall under the classification of field personnel.

Accordingly, the mere fact that Bautista is paid purely on a commission basis does not deprive him entitlement
to SIL.

Bautista cannot be considered as field personnel because the definition of field personnel is not merely
concerned with the location where the employee regularly performs his duties but also with the fact that the
employees performance is unsupervised by the employer.

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Along the routes that are plied by these bus companies, there are its inspectors assigned at strategic places
who board the bus and inspect the passengers, the punched tickets, and the conductors reports. There is also
the mandatory once-a-week car barn or shop day, where the bus is regularly checked as to its mechanical,
electrical, and hydraulic aspects, whether or not there are problems thereon as reported by the driver and/or
conductor. They too, must be at specific place as specified time, as they generally observe prompt departure
and arrival from their point of origin to their point of destination. In each and every depot, there is always the
Dispatcher whose function is precisely to see to it that the bus and its crew leave the premises at specific times
and arrive at the estimated proper time. Bautista, was therefore under constant supervision while in the
performance of this work.

2. Yes. As such, in the computation of the three-year prescriptive period, a determination must be made as to
the period when the act constituting a violation of the workers right to the benefits being claimed was
committed. In the case of service incentive leave, the employee may choose to either use his leave credits or
commute it to its monetary equivalent if not exhausted at the end of the year. Furthermore, if the employee
entitled to service incentive leave does not use or commute the same, he is entitled upon his resignation or
separation from work to the commutation of his accrued service incentive leave.

Thus, the three (3)-year prescriptive period commences, not at the end of the year when the employee becomes
entitled to the commutation of his service incentive leave, but from the time when the employer refuses to pay its
monetary equivalent after demand of commutation or upon termination of the employees services, as the case
may be.

Bautista had not made use of his service incentive leave nor demanded for its commutation until his
employment was terminated by petitioner. Neither did he compensate his accumulated service incentive leave
pay at the time of his dismissal. It was only upon his filing of a complaint for illegal dismissal, one month from
the time of his dismissal, that respondent demanded from his former employer commutation of his accumulated
leave credits. His cause of action to claim the payment of his accumulated service incentive leave thus accrued
from the time when his employer dismissed him and failed to pay his accumulated leave credits. It cannot be
denied that his cause of action did not prescribe.

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ARTICLE 97

44. SONGCO ET. AL V. NATIONAL LABOR RELATIONS COMMISSION


G.R. No. 50999-51000 March 23, 1990
MEDIALDEA J.:

Doctrines:
1. In computing the basis for paying separation pay, commissions and allowances shall be added to the
basic monthly salary.

2. The average commissions earned by a salesman during their last year of employment should be used
in computing the separation pay.

FACTS:
Petitioners are in the sales force of Zuellig. They received monthly salaries of at least P400.00. In addition, they
received commissions for every sale they made.

Zuellig filed with the DOLE an application seeking clearance to terminate the services of petitioners allegedly on
the ground of retrenchment due to financial losses. Initially, petitioners opposed the dismissal on the ground that
they are dismissed for being part of the union. Later, they agreed that the sole issue to be resolved is the basis
of the separation pay due to them.

Petitioners maintain that their earned sales commissions and allowances should be added together with their
salary to arrive at the basis for computing separation pay, citing Article 97(f) of the Labor Code. Zuellig on the
other hand argues that in the said article the term wage, commission is used only as one of the features or
designations attached to the word remuneration or earnings.

ISSUES:
1. Whether the allowances should be included in the monthly salary of petitioners for the purpose of
computation of their separation pay; and
2. Whether the sales commissions should be included in the monthly salary of petitioners for the purpose of
computation of their separation pay.

LA RULING: The basis of separation pay shall be equivalent to their one month salary (exclusive of
commissions, allowances, etc.) for every year in service that they have worked in with the company.

The appeal to the NLRC was dismissed for lack of merit.

SC RULING:
1. Yes. In computing the basis for separation pay of a dismissed employee, allowances should be included in
the monthly salary. This has been settled in the case of Santos v. NLRC, et al. (GR No. 76721. September 21,
1987) where the SC ruled that in the computation of backwages and separation pay, account must be taken not
only of the basic salary but also of her transportation and emergency living allowances.

2. Yes. Article 97(f) by itself is explicit that commission is included in the definition of the term wage. The law
speaks in clear and categorical language, there is no room for interpretation or construction. Said Article
provides:

(f) Wage paid to any employee shall mean the remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece,
or commission basis, or other method calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for wok done or to be done, or for
services rendered or to be rendered, and includes the fair and reasonable value, as determined by
the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to
the employee. Fair and reasonable value shall not include any profit to the employer or to any
person affiliated with the employer.

Granting, in grantia argumenti, that the commissions were in the form of incentives or encouragement, so that
the petitioners would be inspired to put a little more industry on the jobs particularly assigned to them, still these
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commissions are direct remunerations for services rendered which contributed to the increase of income of
Zuellig. Commission is the recompense, compensation or reward of an agent, salesman, executor, trustee,
receiver, factor, broker or bailee, when the same is calculated as a percentage on the amount of his
transactions or on the profit to the Principal. The nature of the work of a salesman and the reason for such tyoe
of remuneration for services rendered demonstrate clearly that commissions are part of petitioners wage or
salary.

In computation thereof, what should be taken into account is the average commissions earned during their last
year of employment.
45. MILLARES ET AL V. NLRC
GR No. 122827 March 29, 1999
BELLOSILLO, J.:

Doctrines:
1. In determining whether a privilege is a facility, the criterion is not so much its kind but its purpose.
2. The Sec. of Labor may from time to time fix in appropriate issuances the fair and reasonable value of
board, lodging and other facilities customarily furnished by an employer to his employees.
3. Separation pay when awarded to an illegally dismissed employee should be computed based not only on
the basic salary but also on the regular allowances that the employee had been receiving.

FACTS:
Petitioners numbering 116 occupied positions of Technical Staff, Unit Manager, Section Manager, Department
Manager, Division Manager and Vice President in the mill site of PICOP in Bislig, Surigao del Sur.

Their services were terminated when the company undertook a retrenchment program. They received
separation pay at the rate of one (1) month basic salary for every year in service.

They lodged a complaint for separation pay differentials believing that the allowances they allegedly regularly
received on a monthly basis during their employment should have been included in the computation of their
separation pay.

The allowances pertained to the following:

1. Staff/Managers Allowance

a. PICOP provides free housing facilities to supervisory and managerial employees


assigned in Bislig. The privilege includes free water and electric consumption.

b. Owing to the shortage of such facilities, PICOP was constrained to grant Staff
allowance instead to those who live in rented houses outside but near the vicinity of the
mill site. The allowance ceases whenever a vacancy occurs in the companys housing
facilities.

2. Transportation Allowance Transportation allowance is granted to key officers and Managers


assigned in the mill site who use their own vehicles in the performance of their duties. It is a
conditional grant such that when the conditions no longer obtain, the privilege is discontinued.

3. Bislig Allowance Given to Division Managers and corporate officers assigned in Bislig on
account of the hostile environment. But once the recipient is transferred elsewhere outside Bislig, the
allowance ceases.

Petitioners maintain that the said allowances are included in the definition of facilities in Art. 97, par. (f), of the
Labor Code, being necessary and indispensable for their existence and subsistence. Furthermore, they claim
that their availment of the monetary equivalent of those facilities on a monthly basis was characterized by
permanency, regularity and customariness.

ISSUES:
1. Whether the receipt of the above-mentioned allowances, on a monthly basis, ipso facto characterize it
as regular and forming part of salary; and
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2. Whether the above-mentioned can be considered as facilitites and therefore included in the
computation of separation pay as wage.

LA RULING: Yes, the allowances are to be characterized as being received regularly and forming part of salary.
It is also to be considered as facilities under Art 97, par. (f) of the Labor Code for purposes of computing
separation pay. The LA cited Santos v NLRC and Soriano v NLRC that in the computation of separation pay
account should be taken not just of the basic salary but also of the regular allowances that the employee had
been receiving.

NLRC RULING: No, the NLRC reversed the Labor Arbiter. The NLRC found that petitioners allowances were
contingency-based and thus not included in their salaries.

SC RULING:
The decision of the NLRC is affirmed. The allowances are not to be included in the computation of wage for
purposes of paying separation pay

1. The receipt of an allowance on a monthly basis does not ipso facto characterize it as regular and
forming part of salary because the nature of the grant is a factor worth considering. The subject allowances
were temporarily, not regularly, received by petitioners. Petitioners continuous enjoyment of the disputed
allowances was based on contingencies the occurrence of which wrote finis to such enjoyment.

For housing allowance, the same is discontinued once a vacancy occurs in the company-provided
housing accommodations.

Transportation allowance is given only to employees who have personal cars in the form of advances
for actual transportation expenses subject to liquidation.
Bislig allowance is- once the officer is transferred outside Bislig, the allowance stops.

2. The Staff/Managers allowance may fall under lodging but the transportation and Bislig allowances
are not embraced in facilitites on the main consideration that they are granted as well as the Staff/Managers
allowance for respondent PICOPs benefit and convenience, i.e. to insure that petitioners render quality
performance. In determining whether a privilege is a facility, the criterion is not so much its kind but its purpose.

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46. SLL INTERNATIONAL CABLES SPECIALIST AND SONNY LAGON V. NLRC
GR No. 172161. March 2, 2011
MENDOZA, J.:

Doctrines:
1. Before the value of facilities can be deducted from the employees wages, 3 requisites must concur: (1)
proof must be shown that such facilities are customarily furnished by the trade; (2) the provision of
deductible facilities must be voluntarily accepted in writing by the employee; and (3) facilities must be
charged at reasonable value.

2. Distinction between Facilities and Supplements. Supplements constitute extra remuneration or


special privileges or benefits given to or received by the laborers over and above their ordinary earnings or
wages. Facilities are items of expense necessary for the laborers and his familys existence and
subsistence so that they form part of the wage and when furnished by the employer are deductible
therefrom, since if they are not so furnished, the laborer would spend and pay for them just the same.

FACTS:
Private respondents Lopez, Canete and Zuniga were hired by petitioner, initially as trainee cable/lineman. They
were paid the full minimum wage. After their training, they were repeatedly hired by petitioner as project
employees. They were not paid the required minimum wage. In their last project with petitioner, respondents
were not allowed to render overtime work. This prompted respondents to return home and leave their work.
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They filed a complaint for illegal dismissal, non-payment of wages, holiday pay, 13 month pay and damages.

In its answer, petitioner argued that respondents are not regular employees. It also reasoned that the food
allowance, allowance for lodging house, transportation. Electricity, water and snacks should be added to their
basic pay. With these, petitioners claimed that private respondents received higher wage rate than that
prescribed in their areas of work.

ISSUE: Whether the said allowances are to be considered as facilities and are therefore deductible from the
wage of the respondent employees.

LA RULING: No. The free board and lodging, electricity, water and food enjoyed by respondents could not be
included in the computation of their wages because these were given without their written consent.

NLRC RULING: No. decision of the Labor Arbiter affirmed.

CA RULING: No. decision of the Labor Arbiter affirmed.

SC RULING:
No. Before the value of facilities can be deducted from the employees wages, 3 requisites must concur: (1)
proof must be shown that such facilities are customarily furnished by the trade; (2) the provision of deductible
facilities must be voluntarily accepted in writing by the employee; and (3) facilities must be charged at
reasonable value. These requirements have not been met in this case.

San Beda College of Law 134


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LABOR LAW REVIEW Atty. Joyrich Golangco

47. OUR HAUS REALTY DEVELOPMENT CORPORATION vs.ALEXANDER PARIAN, JAY C. ERINCO,
ALEXANDER CANLAS, BERNARD TENEDERO and JERRY SABULAO
G.R. No. 204651 August 6, 2014
BRION J.:

Doctrines:
1. To be able to deduct facilities to the wage of an employee, three requisites must concur:
a. proof must be shown that such facilities are customarily furnished by the trade;
b. the provision of deductible facilities must be voluntarily accepted in writing by the employee; and
c. The facilities must be charged at fair and reasonable value.

2. DOLE DO No. 56, series of 2005, which sets out the guidelines for the implementation of DOLE DO No.
13, mandates that the cost of the implementation of the requirements for the construction safety and
health of workers, shall be integrated to the overall project cost. The rationale behind this is to ensure
that the living accommodation of the workers is not substandard and is strictly compliant with the
DOLEs OSH criteria.

As part of the project cost that construction companies already charge to their clients, the value of the
housing of their workers cannot be charged again to their employees salaries. Our Haus cannot pass
the burden of the OSH costs of its construction projects to its employees by deducting it as facilities.
This is Our Haus obligation under the law.

3. Lastly, even if a benefit is customarily provided by the trade, it must still pass the purpose test set by
jurisprudence. Under this test, if a benefit or privilege granted to the employee is clearly for the
employers convenience, it will not be considered as a facility but a supplement. Here, careful
consideration is given to the nature of the employers business in relation to the work performed by the
employee. This test is used to address inequitable situations wherein employers consider a benefit
deductible from the wages even if the factual circumstances show that it clearly redounds to the
employers greater advantage.
FACTS:
Respondents Alexander Parian, Jay Erinco, Alexander Canlas, Jerry Sabulao and Bernardo Tenederowere all
laborers working for petitioner Our Haus Realty Development Corporation (Our Haus), a company engaged in
the construction business.

They claimed that they were not paid the required minimum wage. Petitioner argues that aside from subsidizing
their meals (3 times a day), it also gave them free lodging near the construction project they were assigned to. In
determining the total amount of the respondents daily wages, the value of these benefits should be considered,
in line with Article 97(f) of the Labor Code.

The respondents pointed out that Our Haus never presented any proof that they agreed in writing to the
inclusion of their meals value in their wages. Also, Our Haus failed to prove that the value of the facilities it
furnished was fair and reasonable. Finally, instead of deducting the maximum amount of 70% of the value of the
meals, Our Haus actually withheld its full value (which was Php290.00 per week for each employee).

ISSUE: Whether the amounts for food subsidy and lodging should be considered as part of the daily wages of a
construction worker

LA RULING: Yes. The LA ruled in favor of Our Haus. He held that if the reasonable values of the board and
lodging would be taken into account, the respondents daily wages would meet the minimum wage rate

NLRC RULING: No. The NLRC reversed the LA. Citing the case of Mayon Hotel & Restaurant v. Adana, the
NLRC noted that the respondents did not authorize Our Haus in writing to charge the values of their board and
lodging to their wages. Thus, the samecannot be credited.

CA RULING: No. The CA dismissed Our Haus certiorari petition and affirmed the NLRC rulings in toto.

SC RULING:
No. As the CA correctly ruled, the requirements for deducting the value of facilities to the wages of an
employee, as summarized in Mabeza, are the following:
San Beda College of Law 135
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a. proof must be shown that such facilities are customarily furnished by the trade;
b. the provision of deductible facilities must be voluntarily accepted in writing by the employee; and
c. The facilities must be charged at fair and reasonable value

None of these are proven to have existed by petitioner.

Our Haus could not really be expected to prove compliance with the first requirement since the living
accommodation of workers in the construction industry is not simply a matter of business practice. Peculiar to
the construction business are the occupational safety and health (OSH) services which the law itself mandates
employers to provide to their workers. This isto ensure the humane working conditions of construction
employees despite their constant exposure to hazardous working environments. Under Section 16 of DOLE
43
Department Order (DO) No. 13, series of 1998, employers engaged in the construction business are required
to providethe following welfare amenities:
16.1 Adequate supply of safe drinking water
16.2 Adequate sanitaryand washing facilities
16.3 Suitable living accommodation for workers, and as may be applicable, for their families
16.4 Separate sanitary, washing and sleeping facilitiesfor men and women workers.

Moreover, DOLE DO No. 56, series of 2005, which sets out the guidelines for the implementation ofDOLE DO
No. 13, mandates that the cost of the implementation of the requirements for the construction safety and health
44
of workers, shall be integrated to the overall project cost. The rationale behind this isto ensure that the living
accommodation of the workers is not substandard and is strictly compliant with the DOLEs OSH criteria.

As part of the project cost that construction companies already charge to their clients, the value of the housing
of their workers cannot be charged again to their employees salaries. Our Haus cannot pass the burden of the
OSH costs of its construction projects to its employees by deducting it as facilities. This is Our Haus obligation
under the law.

As to the second requirement, Our Haus belatedly submitted five kasunduans, supposedly executed by the
respondents, containing their conformity to the inclusion of the values of the meals and housing to their total
wages. Oddly, Our Haus only offered these documents when the NLRC had already ruled that respondents did
not accomplish any written authorization, to allow deduction from their wages. These five kasunduans were also
undated, making us wonder if they had reallybeen executed when respondents first assumed their jobs.

Moreover, in the earlier sinumpaang salaysay by Our Haus four employees, it was not mentioned that they also
executed a kasunduanfor their board and lodging benefits. Because of these surrounding circumstances and the
suspicious timing when the five kasunduanswere submitted as evidence, we agree withthe CA that the NLRC
committed no grave abuse of discretion in disregarding these documents for being self serving.

As to the third requirement, Our Haus never explained how it came up with the values it assigned for the
benefits it provided; it merely listed its supposed expenses without any supporting document. Since Our Haus is
using these additional expenses (cooks salary, water and LPG) to support its claim that it did not withhold the
full amount of the meals value, Our Haus is burdened to present evidence to corroborate its claim. The records
however, are bereft of any evidence to support Our Haus meal expense computation. Even the value it
assigned for the respondents living accommodations was not supported by any documentary evidence. Without
any corroborative evidence, it cannot be said that Our Haus complied with this third requisite.

San Beda College of Law 136


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

ARTICLE 100

48. AMERICAN WIRE AND CABLE DAILY RATED EMPLOYEES UNION V. AMERICAN WIRE AND CABLE
CO., INC.
GR No. 155059 April 29, 2005
CHICO-NAZARIO J.

Doctrines:
1. The granting of a bonus is a management prerogative, something given in addition to what is ordinarily
received by or strictly due the recipient. Thus, a bonus is not a demandable and enforceable obligation,
except when it is made part of the wage, salary or compensation of the employee.

2. For a bonus to be enforceable, it must have been promised by the employer and expressly agreed upon by
the parties, or it must have had a fixed amount and had been a long ad regular practice on the part of the
employer.

3. To be considered a regular practice, the giving of the bonus should have been done over a long period of
time, and must be shown to have been consistent and deliberate.

FACTS:
The American Wire and Cable Co. Inc., has been giving its employees certain benefits and entitlements. These
include the following:

a. Service Award
b. 35% premium pay of an employees basic pay for work rendered during Holy Monday, Holy
Tuesday, Holy Wednesday, Dec. 23, 26, 27, 28 and 29
c. Christmas Party
d. Promotional Increase

All the said benefits are no part of the CBA and the grant thereof was based upon the financial performance of
the company. Moreover, the grant of the 35% premium pay was only made for a period of two years with the
express condition that it is based on the financial situation of the company.

Over the years, there has been a downtrend in the giving of service awards and its amount and holding of
Christmas parties.

When the financial situation of the company worsened, the company unilaterally stopped giving the said
benefits.

The unions (petitioners), filed a complaint alleging that the company violated Article 100 of the Labor Code. It
argues that the benefits and incentives can no longer be withdrawn since it has ripened into a company practice.

The company answered by arguing that the said benefits are in the nature of bonuses which it can withdraw
unilaterally.

ISSUES:
1. Whether the said benefits are in the nature of bonuses which can be withdrawn unilaterally by respondent
company

2. If considered as bonuses, whether it can be considered as part of the wage or salary or compensation
making them enforceable obligations

LA RULING: Yes, therefore the company is not guilty of violating Art 100 of the Labor Code.

CA RULING: Yes. The decision of the VA is affirmed and upheld.

SC RULING:
San Beda College of Law 137
4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

1. Yes. A bonus is an amount granted and paid to an employee for his industry and loyalty which contributed to
the success of the employers business and made possible the realization of profits. The granting of a bonus is a
management prerogative, something given in addition to what is ordinarily received by or strictly due the
recipient. Thus, a bonus is not a demandable and enforceable obligation, except when it is made part of the
wage, salary or compensation of the employee.

All the said benefits are in excess of what the law requires each employer to give its employees. Since they are
above what is strictly due to the members of the union, the granting of the same was a management
prerogative, which, whenever management sees necessary, may be withdrawn, unless they have been made a
part of the wage or salary or compensation of the employees.

2. No. For a bonus to be enforceable, it must have been promised by the employer and expressly agreed upon
by the parties, or it must have had a fixed amount and had been a long and regular practice on the part of the
employer.

The benefits in question were never subjects of any express agreement between the parties. They were never
incorporated in the CBA. The Christmas parties and its incidental benefits and the giving of case incentive
together with the service award cannot be said to have fixed amounts, To be considered a regular practice, the
givng of the bonus should have been done over a long period of time, and must be shown to have been
consistent and deliberate. The downtrend in the grant of these two bonuses over the years demonstrate that
there is nothing consistent about it.

San Beda College of Law 138


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

49. TSPIC CORPORATION V. TSPIC EMPLOYEES UNION
GR No. 163419 February 13, 2008
VELASCO, JR., J.

Doctrines:
1. Diminution of benefits is the unilateral withdrawal by the employer of benefits already enjoyed by the
employees. There is diminution of benefits when it is shown that: (1) the grant or benefit is founded on a
policy or has ripened into a practice over a long period; (2) the practice is consistent and deliberate; (3) the
practice is not due to error in the construction or application of a doubtful or difficult question of law; and (4)
the diminution or discontinuance is done unilaterally by the employer

2. An erroneously granted benefit may be withdrawn without violating the prohibition against non-diminution of
benefits

FACTS:
Respondent Union is the registered bargaining agent of petitioner TSPIC. The two entered into a CBA for the
years 2000-2004. The CBA included a provision on yearly salary increases starting January 2000 until January
2002. Under the CBA, different rates of wage increases in the duration of the CBA, are given to different sets of
employees. The increases for the second year and third year of implementation of the CBA are deemed to be
inclusive of any Wage Increase ordered by the Wage Boards and as correction of any wage distortion that may
have been brought about by future Wage Orders (crediting provision.)

When Wage Order No. 8 was implemented increasing the minimum wage of regular employees, an error in the
automated payroll system occurred and TSPIC claims that 24 employees were overpaid. They were notified that
the overpayment would be deducted from their salaries in a staggered basis. TSPIC explained that the
correction of the erroneous computation was based on the crediting provision of the CBA.

The Union asserted that there was no error and that the deduction constituted diminution of pay. The Union
insists that the crediting provision of the CBA finds no application in the present case, since at the time the
Wage Order was issued, the probationary employees were not yet covered by the CBA, particularly by the
crediting provision.

ISSUE: Whether charging the overpayments made to the respondents through staggered deductions constitute
diminution of benefits.

LA RULING: Yes. The unilateral deduction made by TSPIC violated Art. 100 of the Labor Code

CA RULING: Yes, the decision of the VA is affirmed in toto

SC RULING:
No. Diminution of benefits is the unilateral withdrawal by the employer of benefits already enjoyed by the
employees. There is diminution of benefits when it is shown that: (1) the grant or benefit is founded on a policy
or has ripened into a practice over a long period; (2) the practice is consistent and deliberate; (3) the practice is
not due to error in the construction or application of a doubtful or difficult question of law; and (4) the diminution
or discontinuance is done unilaterally by the employer

As correctly pointed out by TSPIC, the overpayment of its employees was a result of an error. This error
was immediately rectified by TSPIC upon its discovery. We have ruled before that an erroneously granted
benefit may be withdrawn without violating the prohibition against non-diminution of benefits.

San Beda College of Law 139


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

50. LEPANTO CERAMICS, INC., V. LEPANTO CERAMICS EMPLOYEES ASSOCIATION
GR No. 180866 March 2, 2010
PEREZ, J.:

Doctrine:
A bonus that has been incorporated in the CBA becomes more than just an act of generosity on the part of the
employer but a contractual obligation it has undertaken.

FACTS:
In December 1998, petitioner gave a P3,000.00 bonus to its employees, members of the respondent
Association. In September 1999, the two entered into a CBA which provides for the grant of a Christmas gift
package/bonus to the members of the respondent Association. The Christmas bonus was one of the
enumerated existing benefit, practice of traditional rights which shall remain in full force and effect.

In 2002, the year-end cash benefit was only P600.00. The Association objected arguing that such act was a
violation of the CBA. After failure to settle, the Association filed a Notice of Strike. The case was referred to the
Voluntary Arbitrator.

The Association insisted that it has been the company practice grant members Christmas bonuses in the
amount of P3,000.00. Thus it argues that failure on the part of the company to give said amount was in violation
of the CBA.

Petitioner argues that the said amount is in the form of a bonus and is thus not demandable. It argued that the
giving of extra compensation was based on the companys available resources for a given year and the workers
are not entitled to a bonus if the company does not make profits. Petitioner avers that it is debt ridden and could
not give out the bonus.

ISSUE: Whether the amount of P3,000 Christmas gift/bonus is demandable for being included in the CBA

LA RULING: Yes. The CBA is a binding contract and constitutes the law between the parties.

CA RULING: The decision of the VA is affirmed in toto

SC RULING:
Yes. Generally, a bonus is not a demandable and enforceable obligation. For a bonus to be enforceable, it must
have been promised by the employer and expressly agreed upon by the parties. Given that the bonus in this
case is integrated in the CBA, the same partakes the nature of a demandable obligation. Verily, by virtue of its
incorporation in the CBA, the Christmas bonus due to respondent Association has become more than just an act
of generosity on the part of the petitioner but a contractual obligation it has undertaken.

San Beda College of Law 140


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

51. EASTERN TELECOMMUNICATIONS PHIL. INC. V. EASTERN TELECOMS EMPLOYEES UNION
GR No. 185665. February 8, 2012
MENDOZA, J.:

Doctrines:
1. Whether or not a bonus forms part of wages depends upon the circumstances and conditions for its
payment. If it is additional compensation which the employer promised and agreed to give without any
conditions imposed for its payment, such as success of business or greater production or output, then it is
part of the wage, But if its paid only if profits are realized or if a certain level of productivity is achieved, it
cannot be considered part of wage. Where it is not payable to all but only to some employees and only
when their labor becomes more efficient or more productive, it is only an inducement for efficiency, a prize
therefore, not a part of wage.

2. A bonus may be granted on equitable consideration when the giving of such bonus has been the
companys long and regular practice.

3. The principle of non-diminution of benefits is founded on the constitutional mandate to protect the rights of
workers and to promote their welfare and to afford labor full protection.

FACTS:
Respondent Union is the exclusive bargaining agent in the establishment of Petitioner Company. Since 1975,
th th th
the company has been giving its employees 14 , 15 and 16 month bonuses. In 2001, the two signed a side
th th th
agreement which provides that the 14 , 15 and 16 month bonuses are granted.

Due to continuing financial losses which started in 2000, the company, decided in 2003, to defer the payment of
the said bonuses. The Union opposed the said plan. The Union argues that the bonuses are now legally
demandable for being included in the CBA. Furthermore, the giving of the said bonuses has now ripened into
company practice and can no longer be withdrawn without violating Article 100 of the Labor Code.

The company argues that the said bonuses are not legally demandable. It argues that the giving of said
bonuses are dependent on the financial capability of the company. Since it has been sustaining losses since
2000, it no longer has the capacity to give such bonuses.

ISSUE: Whether the said bonuses are legally demandable

NLRC RULING: No. the payment of these bonuses are management prerogative, being an act of generosity
and munificence on the part of the company and contingent upon the realization of profits. The company may
not be obliged to pay extra compensation in view of the substantial decline in its financial condition.

CA RULING: Yes, the Side Agreement in the CBA granting the bonuses are contractual obligations on the
company without qualification or condition. Also, the grant of the said bonuses has already ripened into a
company practice and their denial would amount to diminution of the employees benefits.

SC RULING:
Yes. A bonus becomes a demandable or enforceable obligation when it is made part of the wage or salary or
compensation of the employee. It is indubitable that the company and the union agreed on the inclusion of a
provision for the grant of the bonuses in the Side Agreement. There were no conditions specified in the CBA
Side Agreement for the grant of the benefits. By its inclusion in the CBA Side Agreements, the bonuses has
become more than just an act of generosity on the part of the company but a contractual obligation it has
undertaken.

Granting arguendo that the CBA Side Agreement does not contractually bid the company, its act of granting the
same has become an established company practice such that it has virtually become part of the employees
salary or wage. A bonus may be granted on equitable consideration when the giving of such bonus has been
the companys long and regular practice.
In this case, the company has been giving the said bonuses since 1975 whether it earned profits or not.

San Beda College of Law 141


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

ARTICLE 106

52. GSIS vs. NLRC


G.R. No. 180045 November 17, 2010
NACHURA, J.:

JOINT AND SOLIDARY LIABILITY OF THE PRINCIPAL

FACTS:
Respondents were employed as security guards by DNL Security Agency. By virtue of the service contract
entered into by DNL Security and GSIS, respondents were assigned to GSIS Tacloban City office.

However, DNL Security informed respondents that its service contract with GSIS was terminated.
Notwithstanding, DNL Security instructed respondents to continue reporting for work to GSIS. Respondents
worked as instructed but without receiving their wages; after which, they were terminated from employment.
Hence, respondents filed with the LA a complaint against DNL Security and GSIS.

ISSUE: Is GSIS liable for payment of the respondents unpaid salary and other monetary benefits?

LA RULING: LA rendered a decision against DNL Security and GSIS ordering both as jointly and solidarily
liable to respondent for the unpaid salary.

NLRC RULING: NLRC treated DNL Securitys motion for reconsideration as an appeal, but dismissed the
same, as it was not legally perfected. GSIS filed a petition for certiorari before the CA.

CA RULING: CA affirmed the NLRC ruling. GSIS averred that it has no actual and direct employer-employee
relationship between it and the respondents.

SC RULING:
GSIS is jointly and severally liable with DNS Security with respect to respondents claims. When GSIS
contracted DNL Securitys services, it became an indirect employer of respondents, pursuant to Article 107 of
LC. After DNL Security failed to pay respondents the correct wages and other monetary benefits, GSIS, as
principal, became jointly and severally liable, as provided in Articles 106 and 109 of LC.

While it is true that respondents continued working for GSIS after the expiration of their contract, based on the
instruction of DNL Security, GSIS did not object to such assignment and allowed respondents to render service.
Thus, GSIS impliedly approved the extension of respondents services. Accordingly, GSIS is bound by the
provisions of the LC on indirect employment. So long as the work, task, job, or project has been performed for
its benefit or on its behalf, the liability accrues for such services. However, the solidary liability of GSIS does not
preclude the application of Article 1217 of the Civil Code on the right of reimbursement from its co-debtor, DNS
Security.

GSIS liability, however, cannot extend to the payment of separation pay. An order to pay separation pay is
invested with a punitive character, such that an indirect employer should not be made liable without a finding
that it had conspired in the illegal dismissal of the employees.

San Beda College of Law 142


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

53. ALIVIADO, et.al. vs. PROCTOR AND GAMBLE
G.R. No. 160506 June 6, 2011
DEL CASTILLO, J.:

CONTROL TEST IS MERELY ONE OF THE ELEMENTS TO DETERMINE EXISTENCE OF LABOR-ONLY


CONTRACTING

FACTS:
(The full text of the case does not include the facts since it only resolved the 2nd MR filed by P&G to SC.) On
March 9, 2010, the SC rendered a Decision holding that Promm-Gem is a legitimate independent contractor;
that Sales and Promotions Services (SAPS) is a labor-only contractor consequently its employees are
considered employees of Procter & Gamble Phils., Inc. (P&G); that Promm-Gem is guilty of illegal dismissal;
that SAPS/P&G is likewise guilty of illegal dismissal; that petitioners are entitled to reinstatement; and that the
dismissed employees of SAPS/P&G are entitled to moral damages and attorneys fees there being bad faith in
their dismissal.

P&G filed a Motion for Reconsideration but was denied by the SC. P&G filed a second MR. P&G claimed that
the SC erred in not applying the four-fold test, particularly the control test in determining whether SAPS is a
legitimate independent contractor or a labor-only contractor.

ISSUE: Whether SAPS is a labor-only contractor?

SC RULING:
The SC correctly determined SAPS as a labor-only contractor. As discussed in the March 9, 2010 SC Decision,
the applicable rules are Article 106 of the LC and Rule VIII-A, Book III of the Omnibus Rules Implementing the
LC, as amended by D.O. No. 18-06. The said DO provides that labor-only contracting exists when any of the
two elements is present: (1) the contractor or subcontractor does not have substantial capital or investment
which relates to the job, work or service to be performed and the employees recruited, supplied or placed by
such contractor or subcontractor are performing activities which are directly related to the main business of the
principal; OR (2) the contractor does not exercise the right to control over the performance of the work of the
contractual employee.

Therefore, the control test is merely one of the factors to consider. It was already established that SAPS has no
substantial capitalization and it was performing merchandising and promotional activities which are directly
related to P&G's business. Since SAPS met one of the requirements, it was enough basis for SC to hold that it
is a labor-only contractor. Consequently, its principal, P&G, is considered the employer of its employees. This is
pursuant to the ruling in Aklan v. San Miguel Corporation[27] where it was held that [a] finding that a contractor
is a labor-only contractor, as opposed to permissible job contracting, is equivalent to declaring that there is an
employer-employee relationship between the principal and the employees of the supposed contractor, and
the labor-only contractor is considered as a mere agent of the principal, the real employer.

San Beda College of Law 143


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LABOR LAW REVIEW Atty. Joyrich Golangco

54. MANDAUE GALLEON TRADE INC. vs. ANDALES et.al.
G.R. No. 159668 March 7, 2008
AUSTRIA-MARTINEZ, J.:

FACTS:
Respondent Vicente Andales filed a complaint with the Labor Arbiter (LA) against petitioners Mandaue Galleon
Trade, Inc. (MGTI) and Gamallosons Traders, Inc. (GTI) for illegal dismissal and non-payment of 13th month
pay and service incentive leave pay. Respondents alleged that MGTI hired them on various dates as weavers,
grinders, sanders and finishers but they were dismissed without notice and just cause.

Respondents further alleged that they are regular employees of MGTI because: (a) they performed their work
inside the company premises; (b) they were issued uniforms by MGTI and were told to strictly follow company
rules and regulations; (c) they were under the supervision of MGTI's foremen, quality control personnel and
checkers; (d) MGTI supplied the materials, designs, tools and equipment in the production of furniture; (e) MGTI
conducts orientations on how the work was to be done and the safe and efficient use of tools and equipment; (f)
MGTI issues memoranda regarding absences and waste of materials; and (g) MGTI exercises the power to
discipline them.

On the other hand, MGTI denied the existence of employer-employee relationship with complainants, claiming
that they are workers of independent contractors whose services were engaged temporarily and seasonally
when the demands for its products are high and could not be met by its regular workforce; the independent
contractors recruited and hired the complainants, prepared the payroll and paid their wages, supervised and
directed their work, and had authority to dismiss them.

LA RULING: LA held that the respondents are regular piece-rate employees of MGTI since they were made to
perform functions which are necessary to MGTI's rattan furniture manufacturing business. The independent
contractors were not properly identified. The absence of proof that the independent contractors have work
premises of their own, substantial capital or investment in the form of tools, equipment and machineries make
them only labor contractors.

NLRC RULING: It affirmed the decision of LA. It held that labor-only contracting and not job-contracting was
present since the alleged contractors did not have substantial capital in the form of equipment, machineries and
work premises.

CA RULING: MGTI is liable to the respondents because the alleged contractors are not independent contractors
but labor-only contractors.

ISSUE: Whether or not MGIT is a labor-only contractor?

SC RULING:
MGIT is a labor-only contractor. Based on Article 106 of the Labor Code and Sections 5 and 7 of the
Implementing Rules, labor-only contracting exists when the following criteria are present: (1) where the
contractor or subcontractor supplying workers to an employer does not have substantial capital or investment in
the form of tools, equipment, machineries, work premises, among other things; and the workers recruited and
placed by the contractor or subcontractor are performing activities which are directly related to the principal
business of such employer; or (2) where the contractor does not exercise the right to control the performance of
the work of the contractual employee.

First, respondents work as weavers, grinders, sanders and finishers is directly related to MGTI's principal
business of rattan furniture manufacturing. Where the employees are tasked to undertake activities usually
desirable or necessary in the usual business of the employer, the contractor is considered as a labor-only
contractor and such employees are considered as regular employees of the employer.

Second, MGTI was unable to present any proof that its contractors had substantial capital. There was no
evidence pertaining to the contractors' capitalization; nor to their investment in tools, equipment or implements
actually used in the performance or completion of the job, work, or service that they were contracted to render.

Thus, the contractors are labor-only contractors since they do not have substantial capital or investment which
relates to the service performed and respondents performed activities which were directly related to MGTI's
San Beda College of Law 144
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main business. MGTI, the principal employer, is solidarily liable with the labor-only contractors, for the rightful
claims of the employees. Under this set-up, labor-only contractors are deemed agents of the principal, MGTI,
and the law makes the principal responsible to the employees of the labor-only contractor as if the principal itself
directly hired or employed the employees.

San Beda College of Law 145


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

55. SPIC N SPAN SERVICES CORPORATION vs. PAJE et.al.
G.R. No. 174084 August 25, 2010
BRION, J.:

REQUIREMENTS OF LEGITIMATE CONTRACTING/SUBCONTRACTING

FACTS:
Swift Foods, Inc. (Swift) manufactures and processes meat products and other food products. Petitioner SNSs
business is to supply manpower services to its clients for a fee. Swift and SNS have a contract to promote Swift
products. Respondents worked as Deli/Promo Girls of Swift products in supermarkets. They were all dismissed
from their employment on February 28, 1998. They filed two complaints for illegal dismissal against SNS and
Swift before NLRC. Swift moved to dismiss the complaints on the ground that it entered into an independent
labor contract with SNS for the promotion of its products. It alleged that the respondents were the employees of
SNS, not of Swift.

RULING OF LA: LA found SNS to be the agent of Swift. First, the agreement between SNS and Swift shows
that the latter exercised control over the promo girls and/or merchandisers through the services of coordinators.
Second, it cannot be said that SNS has substantial capital. Third, the duties of the petitioners were directly
related, necessary and vital to the day-to-day operations of Swift. Lastly, the uniform and identification cards
used by the petitioners were subject to the approval of Swift.

RULING OF NLRC: NLRC ruled that SNS is an independent contractor. First, there is no evidence that Swift
exercised the power of control over the petitioners. Rather, it is SNS who exercised direct control and
supervision over the nature and performance of the works of herein petitioners. Second, by law, Swift and SNS
have distinct and separate juridical personality from each other.

RULING OF CA: CA dismissed the appeal. It concluded that SNS was merely an agent of Swift; thus, the latter
should not be exempt from liability.

ISSUE: Whether SNS is merely an agent of Swift?

SC RULING:
SNS is considered merely an agent of Swift which does not exempt the latter from liability. To be legitimate,
contracting or subcontracting must satisfy the following requirements: 1) The contractor or subcontractor carries
on a distinct and independent business and undertakes to perform the job, work or service on its own account
and under its own responsibility; 2) the contractor or subcontractor has substantial capital or investment; and 3)
the agreement between the principal and contractor or subcontractor assures the contractual employees
entitlement to all labor and occupational safety and health standards, free exercise of right to self-organization,
security of tenure, and social and welfare benefit.

Nowhere in the decisions of both the LA and the NLRC show that SNS had full control of the means and
methods of the performance of their work. Moreover, as found by the LA, there was no evidence that SNS has
substantial capital or investment. Lastly, there was no finding by the LA nor the NLRC that the agreement
between the principal (Swift) and contractor (SNS) assures the contractual employees entitlement to all labor
and occupational safety and health standards, free exercise of right to self-organization, security of tenure, and
social and welfare benefit.

San Beda College of Law 146


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

56. VIGILLA et.al. vs. PCCI
G.R. No. 200094 June 10, 2013
MENDOZA, JR:

A QUITCLAIM EXECUTED IN FAVOR OF THE LABOR-ONLY CONTRACTOR WILL REDOUND TO THE


BENEFIT OF THE PRINCIPAL EMPLOYER; A LABOR-ONLY CONTRACTOR IS SOLIDARILY LIABLE
WITH THE EMPLOYER

FACTS:
PCCI is a non-stock educational institution, while the petitioners were janitors, janitresses and supervisor in the
Maintenance Department of PCCI under the supervision and control of Atty. Seril, PCCIs Senior Vice President
for Administration. The petitioners, however, were made to understand, upon application with PCCI, that they
were under Metropolitan Building Services, Inc. (MBMSI), a corporation engaged in providing janitorial services
to clients. Atty. Seril is also the President and General Manager of MBMSI.

PCCI, citing the revocation of MBMSI Articles of Incorporation, terminated its relationship with MBMSI, resulting
in the dismissal of the petitioners.

In their complainants before LA, petitioners alleged that it was the school, not MBMSI, which was their real
employer because PCCI had direct control over MBMSIs operations and the selection and hiring of employees
were undertaken by PCCI.

On the other hand, PCCI contended that it could not have illegally dismissed the complainants because it was
not their direct employer; (b) MBMSI was the one who had complete and direct control over the complainants;
and (c) PCCI had a contractual agreement with MBMSI, thus, making the latter their direct employer. Also, PCCI
submitted before LA the releases, waivers and quitclaims in favor of MBMSI executed by the respondents to
prove that they were employees of MBMSI and not PCCI.

LA RULING: LA found that PCCI was the real principal employer of the complainants and that MBMSI was a
mere adjunct or alter ego/labor-only contractor. LA explained that PCCI was actually the one which exercised
control over the means and methods of the work of the petitioners, thru Atty. Seril, who was acting, throughout
the time in his capacity as Senior Vice President for Administration of PCCI, not in any way or time as the
supposed employer/general manager or president of MBMSI. However, LA did not touch on the validity and
effect of the quitclaims.

NLRC RULING: NLRC affirmed the LAs findings. Nevertheless, the respondents were excused from their
liability by virtue of the releases, waivers and quitclaims executed by the petitioners. Hence, petitioners filed an
appeal before CA.

CA RULING: CA affirmed the NLRC decision. Petitioners argue that there is no solidary liability to speak of in
case of an existence of a labor-only contractor. Petitioners contend that under Article 106 of the LC, a labor-only
contractors liability is not solidary as it is the employer who should be directly responsible to the supplied
worker. Hence, the said releases, waivers and quitclaims which they purportedly issued in favor of MBMSI and
Atty. Seril do not automatically release respondents from their liability.

ISSUES: Whether the quitclaims executed in favour of MBMSI redounded to the benefit of PCCI?

SC RULING:
The NLRC and the CA correctly ruled that the releases, waivers and quitclaims executed by petitioners in favor
of MBMSI redounded to the benefit of PCCI pursuant to Article 1217 of the New Civil Code. The reason is that
MBMSI is solidarily liable with the respondents for the valid claims of petitioners pursuant to Article 109 of the
Labor Code.

The issue of whether there is solidary liability between the labor-only contractor and the employer is crucial in
this case. If a labor-only contractor is solidarily liable with the employer, then the releases, waivers and
quitclaims in favor of MBMSI will redound to the benefit of PCCI. On the other hand, if a labor-only contractor is
not solidarily liable with the employer, the latter being directly liable, then the releases, waivers and quitclaims in
favor of MBMSI will not extinguish the liability of PCCI.

San Beda College of Law 147


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

There is solidary liability between the principal and labor-only contractor. In labor-only contracting, the statute
creates an employer-employee relationship for a comprehensive purpose: to prevent a circumvention of labor
laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the
employees of the labor-only contractor as if such employees had been directly employed by the principal
employer. The principal employer therefore becomes solidarily liable with the labor-only contractor for all the
rightful claims of the employees.

San Beda College of Law 148


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

57. BABAS, ET AL. V. LORENZO SHIPPING CORP.
GR. No. 186091 December 15, 2010
NACHURA, J.:

Doctrine:
In labor-only contracting, a prohibited act, the following elements are present: (a) the contractor or subcontractor
does not have substantial capital or investment to actually perform the job, work, or service under its own
account and responsibility; and (b) the employees recruited, supplied, or placed by such contractor or
subcontractor perform activities which are directly related to the main business of the principal.

On the other hand, permissible job contracting or subcontracting refers to an arrangement whereby a principal
agrees to put out or farm out with the contractor or subcontractor the performance or completion of a specific
job, work, or service within a definite or predetermined period, regardless of whether such job, work, or service
is to be performed or completed within or outside the premises of the principal.

FACTS:
Respondent LSC entered into a General Equipment Maintenance Repair and Management Services Agreement
(Agreement) with Best Manpower Services, Inc. (BMSI). Under the Agreement, BMSI undertook to provide
maintenance and repair services to LSCs container vans, heavy equipment, trailer chassis, and generator
sets. BMSI further undertook to provide checkers to inspect all containers received for loading to and/or
unloading from its vessels.

Simultaneous with the execution of the Agreement, LSC leased its equipment, tools, and tractors to BMSI. The
period of lease was coterminous with the Agreement.

BMSI then hired petitioners on various dates to work at LSC as checkers, welders, utility men, clerks, forklift
operators, motor pool and machine shop workers, technicians, trailer drivers, and mechanics. Six years later,
LSC entered into another contract with BMSI, this time, a service contract.

In September 2003, petitioners filed with the Labor Arbiter (LA) a complaint for regularization against LSC and
BMSI. On October 1, 2003, LSC terminated the Agreement. Consequently, petitioners lost their employment.

BMSI asserted that it is an independent contractor. It averred that it was willing to regularize petitioners;
however, some of them lacked the requisite qualifications for the job. BMSI was willing to reassign petitioners
who were willing to accept reassignment.

LSC, on the other hand, averred that petitioners were employees of BMSI and were assigned to LSC by virtue
of the Agreement. The Agreement between LSC and BMSI constituted legitimate job contracting. Thus,
petitioners were employees of BMSI and not of LSC.

LA RULING: LA found that petitioners were employees of BMSI.

NLRC RULING: Reversing the LA, the NLRC held: BMSI is not engaged in legitimate job contracting. BMSI has
no equipment, no office premises, no capital and no investments as shown in the Agreement itself. BMSI has no
independent business or activity or job to perform in respondent LSC free from the control of respondent LSC
except as to the results thereof. LSC [petitioners] performed work that was necessary and desirable to the main
business of respondent LSC. BMSI has no other client but respondent LSC.

Consequently, respondent Lorenzo Shipping Corp. is ordered to reinstate [petitioners] to their former
positions as regular employees and pay their wage differentials and benefits. If reinstatement is not
feasible, both respondents Lorenzo Shipping Corp. and Best Manpower Services are adjudged jointly
and solidarily to pay [petitioners] separation pay.

CA RULING: CA rendered the now challenged Decision, reversing the NLRC. According to the CA, the
fact that BMSI entered into a contract of lease with LSC did not ipso facto make BMSI a labor-only
contractor; on the contrary, it proved that BMSI had substantial capital. The CA was of the view that the
law only required substantial capital or investment.

ISSUE: Whether or not LSC the employer of the petitioners as BSMI is not an independent contractor.
San Beda College of Law 149
4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

SC RULING:
YES. In distinguishing between prohibited labor-only contracting and permissible job contracting, the totality of
the facts and the surrounding circumstances of the case are to be considered.

In labor-only contracting, a prohibited act, the following elements are present: (a) the contractor or subcontractor
does not have substantial capital or investment to actually perform the job, work, or service under its own
account and responsibility; and (b) the employees recruited, supplied, or placed by such contractor or
subcontractor perform activities which are directly related to the main business of the principal.

A person is considered engaged in legitimate job contracting or subcontracting if the following conditions concur:

(a) The contractor carries on a distinct and independent business and undertakes the contract work on his
account under his own responsibility according to his own manner and method, free from the control
and direction of his employer or principal in all matters connected with the performance of his work
except as to the results thereof;

(b) The contractor has substantial capital or investment; and

(c) The agreement between the principal and the contractor or subcontractor assures the contractual
employees' entitlement to all labor and occupational safety and health standards, free exercise of the
right to self-organization, security of tenure, and social welfare benefits.

The Court sustains the petitioners contention that BMSI is engaged in labor-only contracting.

First, petitioners worked at LSCs premises, and nowhere else. There was no showing that it was BMSI which
established petitioners working procedure and methods, which supervised petitioners in their work, or which
evaluated the same. There was absolute lack of evidence that BMSI exercised control over them or their work.

Second, LSC was unable to present proof that BMSI had substantial capital. What is clear was that the
equipment used by BMSI were owned by, and merely rented from, LSC.

Third, petitioners performed activities which were directly related to the main business of LSC.
Lastly, BMSI had no other client except for LSC. A Certificate of Registration issued by the Department of Labor
and Employment is not conclusive evidence of status of independent contractor. The fact of registration simply
prevents the legal presumption of being a mere labor-only contractor from arising.

Consequently, the workers that BMSI supplied to LSC became regular employees of the latter. Having gained
regular status, petitioners were entitled to security of tenure and could only be dismissed for just or authorized
causes and after they had been accorded due process.

San Beda College of Law 150


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

58. FIRST PHILIPPINE INDUSTRIAL CORPORATION v. RAQUEL M. CALIMBAS AND LUISA P. MAHILOM
G.R. No. 179256 July 10, 2013
PERALTA, J.:

Doctrine:
There is labor-only contracting where the person supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment, machineries, work premises, among others, and the
workers recruited and placed by such person are performing activities which are directly related to the principal
business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of
the employer who shall be responsible to the workers in the same manner and extent as if the latter were
directly employed by him.

FACTS:
(FPIC) is a domestic corporation primarily engaged in the transportation of petroleum products by pipeline.
[DGMS] is engaged in the business of supplying manpower to render general clerical, building and grounds
maintenance, and janitorial and utility services.

FPIC, entered into a Contract of Special Services with DGMS, wherein the latter agreed to undertake some
aspects of building and grounds maintenance at FPICs premises, offices and facilities, as well as to provide
clerical and other utility services as may be required from time to time by FPIC.

Pursuant to the said Contract, petitioner Raquel Calimbas and Luisa Mahilom were engaged by the DGMS to
render services to FPIC. Thereat, petitioner Calimbas was assigned as a department secretary at the Technical
Services Department while petitioner Mahilom served as a clerk at the Money Movement Section of the Finance
Division.

FPIC, through its Human Resources Manager, Lorna Young, informed the petitioners that their services to the
company would no longer be needed as a result of the Pace-Setting Study conducted by an outside
consultant. Accordingly, Treasurer of DGMS, formally notified both the petitioners that their respective work
assignments in FPIC were no longer available to them citing the termination of the Project Contract with FPIC as
the main reason thereof. Calimbas and Mahilom signed quitclaims, releasing and discharging DGMS from
whatever claims that they might have against it by virtue of their past employment.

Petitioners still filed a Complaint against FPIC for illegal dismissal and for the collection of monetary benefits,
alleging that they were regular employees of FPIC after serving almost five (5) years, rendering services which
were usually necessary or desirable in the usual business or trade of FPIC and that they were dismissed without
cause.

In their Position Paper, petitioners maintained that their real employer was FPIC, and that DGMS was merely its
agent for having been engaged in prohibited labor-only contracting. The petitioners averred that DGMS did not
have substantial capital.

FPIC insisted that the Labor Arbiter had no jurisdiction over the case because there was absolutely no
employer-employee relationship between it and the petitioners; and that they executed quitclaims in favor of
DGMS
4
LA RULING: Labor Arbiter rendered a Decision holding that respondents were regular employees of FPIC, and
that they were illegally dismissed.

NLRC RULING: NLRC the Labor Arbiters decision. However, in a Resolution after MR by FPIC, the NLRC
reversed its decision. The CA finds no legal basis to deem DGMS a labor-only contracting entity as maintained
by complainants. The fact that DGMS had only a capitalization of P75,000.00, without an investment in tools,
equipment, etc., does not necessarily constitute the latter as labor-only contractor. Labor Arbiter is
hereby REINSTATED.

ISSUE: Whether or not respondents are employees of FPIC.

San Beda College of Law 151


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

SC RULING:
YES. Article 106 of the Labor Code and Sections 8 and 9 of DOLE Department Order No. 10, Series of 1997 are
the standards to apply.

There is labor-only contracting where the person supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment, machineries, work premises, among others, and the
workers recruited and placed by such person are performing activities which are directly related to the principal
business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of
the employer who shall be responsible to the workers in the same manner and extent as if the latter were
directly employed by him.

Respondents are petitioners employees and that DGMS is engaged in labor-only contracting.
12
First, in Vinoya v. National Labor Relations Commission, this Court categorically stated that the actual paid-in
capital of P75,000.00 could not be considered as substantial capital. Thus, DGMSs actual paid-in capital in the
amount of P75,000.00 does not constitute substantial capital essential to carry out its business as an
independent job contractor. DGMS has no substantial equipment in the form of tools, equipment and machinery.
As a matter of fact, respondents were using office equipment and materials owned by petitioner while they were
rendering their services at its offices.

Second, FPIC exercised the power of control and supervision over the respondents. The fact that DGMS did
not assign representatives to supervise over respondents work in petitioners company tends to disprove the
independence of DGMS. Respondents were subjected to the control and supervision of petitioner while they
were performing their jobs.

Third, also worth stressing are the points highlighted by respondents: Respondents worked only at petitioners
offices for an uninterrupted period of five years, occupying the same position at the same department under the
supervision of company officials; FPICs HR Manager Lorna Young notified respondents, in a closed-door
meeting, that their services to the company would be terminated; The direct superiors of respondents were
managerial employees of petitioner, and had direct control over all the work-related activities of the latter.

All told, an employer-employee relationship exists between petitioner and respondents. And having served for
almost five years at petitioners company, respondents had already attained the status of regular employees.

In the present case, petitioners failed to show any valid or just cause under the Labor Code on which it may
justify the termination of services of respondents. Also, apart from notifying that their services had already been
terminated, petitioner failed to comply with the rudimentary requirement of notifying respondents regarding the
acts or omissions which led to the termination of their services as well as giving them an ample opportunity to
contest the legality of their dismissal. Having failed to establish compliance with the requirements of termination
of employment under the Labor Code, respondents dismissal is tainted with illegality.

San Beda College of Law 152


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

59. AVELINO S. ALILIN, ET. AL. vs. PETRON CORPORATION
G.R. No. 177592 June 9, 2014
DEL CASTILLO, J.

Doctrine:
A contractor is presumed to be a labor-only contractor, unless it proves that it has the substantial capital,
investment, tools and the like. However, where the principal is the one claiming that the contractor is a legitimate
contractor, the burden of proving the supposed status of the contractor rests on the principal.

FACTS:
Romualdo D. Gindang Contractor, started recruiting laborers for fielding to Petrons Mandaue Bulk Plant. When
Romualdo died, his son Romeo D. Gindang through Romeo D. Gindang Services(RDG), took over the business
and continued to provide manpower services to Petron. Petitioners were among those recruited by Romualdo D.
Gindang Contractor and RDG to work in the premises of the said bulk plant.
9
Petron and RDG entered into a Contract for Services for the period from June 1, 2000 to May 31, 2002,
whereby RDG undertook to provide Petron with janitorial, maintenance, tanker receiving, packaging and other
utility services in its Mandaue Bulk Plant. This contract was extended on July 31, 2002 and further extended
until September 30, 2002. Upon expiration thereof, no further renewal of the service contract was done.

Alleging that they were barred from continuing their services on October 16, 2002, petitioners filed a
Complaint for illegal dismissal, underpayment of wages, damages and attorneys fees against Petron and RDG.

Petitioners did not deny that RDG hired them and paid their salaries. They, however, claimed that the latter is a
labor-only contractor, which merely acted as an agent of Petron, their true employer. They asseverated that their
jobs, which are directly related to Petrons business, entailed them to work inside the premises of Petron using
the required equipment and tools furnished by it and that they were subject to Petrons supervision.

RDG corroborated petitioners claim that they are regular employees of Petron.

Petron, on the other hand, maintained that RDG is an independent contractor and the real employer of the
petitioners. It was RDG which hired and selected petitioners, paid their salaries and wages, and directly
supervised their work. And not being the employer, Petron cannot be held liable for petitioners claim of illegal
dismissal.

LA RULING: Labor Arbiter ruled that petitioners are regular employees of Petron; also found that Petron merely
utilized RDG in its attempt to hide the existence of employee-employer relationship between it and petitioners
and avoid liability under labor laws. The Labor Arbiter declared them to have been illegally dismissed. Petron
was thus held solidarily liable with Romeo for the payment of petitioners separation pa.

NLRC RULING: NLRC affirmed the ruling of the LA.

CA RULING: The CA found no employer-employee relationship between the parties. The CA also found RDG to
be an independent labor contractor with sufficient capitalization and investment as shown by its financial
statement for year-end 2000.

ISSUE: Whether RDG is a labor-only contractor (prohibited) as such, petitioners are regular employees of
Petron.

SC RULING: YES. The prevailing rule on labor-only contracting at the time Petron and RDG entered into the
Contract for Services in June 2000 is DOLE Department Order No. 10, series of 1997.

"Permissible job contracting or subcontracting refers to an arrangement whereby a principal


agrees to farm out with a contractor or subcontractor the performance of a specific job, work, or
service within a definite or predetermined period, regardless of whether such job, work or,
service is to be performed or completed within or outside the premises of the principal.

Labor-only contracting, on the other hand, is a prohibited act, defined as "supplying workers to an employer who
does not have substantial capital or investment in the form of tools, equipment, machineries, work premises,
San Beda College of Law 153
4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

among others, and the workers recruited and placed by such person are performing activities which are directly
45
related to the principal business of such employer." "[I]n distinguishing between prohibited labor-only
contracting and permissible job contracting, the totality of the facts and the surrounding circumstances of the
46
case shall be considered." Generally, the contractor is presumed to be a labor-only contractor, unless such
contractor overcomes the burden of proving that it has the substantial capital, investment, tools and the like.
However, where the principal is the one claiming that the contractor is a legitimate contractor, as in the present
47
case, said principal has the burden of proving that supposed status. It is thus incumbent upon Petron, and not
48
upon petitioners as Petron insists, to prove that RDG is an independent contractor.

Petron failed to discharge the burden of proving that RDG is a legitimate contractor. Hence, the presumption
that RDG is a labor-only contractor stands.

Here, the audited financial statements and other financial documents of RDG for the years 1999 to 2001
establish that it does have sufficient working capital to meet the requirements of its service contract. The
evidence adduced merely proves that RDG was financially qualified as a legitimate contractor but only with
respect to its last service contract with Petron in the year 2000.

While Petron was able to establish that RDG was financially capable as a legitimate contractor at the time of the
execution of the service contract in 2000, it nevertheless failed to establish the financial capability of RDG at the
time when petitioners actually started to work for Petron in 1968, 1979, 1981, 1987, 1990,1992 and 1993.

Petrons power of control over petitioners exists in this case.


The facts that petitioners were hired by Romeo or his father and that their salaries were paid by them do not
detract from the conclusion that there exists an employer-employee relationship between the parties due to
Petrons power of control over the petitioners. One manifestation of the power of control is the power to transfer
55
employees from one work assignment to another. Here, Petron could order petitioners to do work outside of
their regular "maintenance/utility" job. Also, petitioners were required to report for work everyday at the bulk
plant, observe an 8:00 a.m. to 5:00 p.m. daily work schedule, and wear proper uniform and safety helmets as
prescribed by the safety and security measures being implemented within the bulk plant. All these imply control.

Petitioners already attained regular status as employees of Petron.


Petitioners were given various work assignments. While the jobs performed by petitioners may be menial and
mechanical, they are nevertheless necessary and related to Petrons business operations. If not for these tasks,
Petrons products will not reach the consumers in their proper state. Indeed, petitioners roles were vital
inasmuch as they involve the preparation of the products that Petron will distribute to its consumers.
In view of these, and considering further that petitioners length of service entitles them to become regular
employees under the Labor Code, petitioners are deemed by law to have already attained the status as Petrons
regular employees. As such, Petron could not terminate their services on the pretext that the service contract it
entered with RDG has already lapsed.

Petron therefore, being the principal employer and RDG, being the labor-only contractor, are solidarily liable for
petitioners' illegal dismissal and monetary claims.

San Beda College of Law 154


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

1
60. FONTERRA BRANDS PHILS., INC. v. LEONARDO LARGADO AND TEOTIMO ESTRELLADO
G.R. No. 205300 March 18, 2015
VELASCO JR., J.

Doctrine:
A person is considered engaged in legitimate job contracting or subcontracting if the following conditions concur:
1. The contractor or subcontractor carries on a distinct and independent business and undertakes to
perform the job, work or service on its own account and under its own responsibility according to its own
manner and method, and free from the control and direction of the principal in all matters connected
with the performance of the work except as to the results thereof;
2. The contractor or subcontractor has substantial capital or investment; and
3. The agreement between the principal and contractor or subcontractor assures the contractual
employees entitlement to all labor and occupational safety and health standards, free exercise of the
right to self-organization, security of tenure, and social and welfare benefits.

FACTS:
Fonterra Brands Phils., Inc. (Fonterra) contracted the services of Zytron Marketing and Promotions Corp.
(Zytron) for the marketing and promotion of its milk and dairy products. Zytron provided Fonterra with trade
merchandising representatives (TMRs), including respondents Leonardo Largado (Largado) and Teotimo
Estrellado (Estrellado). The engagement of their services began on September 15, 2003 and May 27, 2002,
respectively.

On May 3, 2006, Fonterra sent Zytron a letter terminating its promotions contract. Fonterra then entered into an
agreement for manpower supply with A.C. Sicat Marketing and Promotional Services (A.C. Sicat). Desirous of
continuing their work as TMRs, respondents submitted their job applications with A.C. Sicat, which hired them
for a term of five (5) months.

When respondents 5-month contracts with A.C. Sicat were about to expire, they allegedly sought renewal
thereof, but were allegedly refused. This prompted respondents to file complaints for illegal dismissal,
regularization.

LA RULING: Labor Arbiter dismissed the complaint and ruled that: (1) respondents were not illegally dismissed
and (2) they were consecutively employed by Zytron and A.C. Sicat, not by Fonterra.

NLRC RULING: NLRC affirmed the Labor Arbiter.

CA RULING: The CA, found that A.C. Sicat satisfies the requirements of legitimate job contracting, but Zytron
does not. According to the CA: Zytrons paid-in capital of P250,000 cannot be considered as substantial capital;
its claim that it has the necessary tools and equipment for its business is unsubstantiated. Therefore, according
to the CA, respondents were Fonterras employees.

Additionally, the CA held that respondents were illegally dismissed since Fonterra itself failed to prove that their
dismissal is lawful. However, the illegal dismissal should be reckoned from the termination of their supposed
employment with Zytron on June 6, 2006.

ISSUE: Whether or not Zytron and A.C. Sicat are labor-only contractors, making Fonterra the employer of
herein respondents.

SC RULING:
NO. Fonterra is not the employer and respondents were not illegally dismissed. As correctly held by the Labor
Arbiter and the NLRC, the termination of respondents employment with Zytron was brought about by the
cessation of their contracts with the latter. By refusing to renew their contracts with Zytron, respondents
effectively resigned from the latter.

Respondents voluntarily terminated their employment with Zytron by refusing to renew their employment
contracts with the latter, applying with A.C. Sicat, and working as the latters employees, thereby abandoning
their previous employment with Zytron. Too, it is well to mention that for obvious reasons, resignation is
inconsistent with illegal dismissal. This being the case, Zytron cannot be said to have illegally dismissed
respondents.
San Beda College of Law 155
4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

A.C. Sicat is as a legitimate job contractor, seeing that it is consistent with the rules on job contracting and is
sufficiently supported by the evidence on record.

A person is considered engaged in legitimate job contracting or subcontracting if the following conditions concur:
1. The contractor or subcontractor carries on a distinct and independent business and undertakes to
perform the job, work or service on its own account and under its own responsibility according to its own
manner and method, and free from the control and direction of the principal in all matters connected
with the performance of the work except as to the results thereof;
2. The contractor or subcontractor has substantial capital or investment; and
3. The agreement between the principal and contractor or subcontractor assures the contractual
employees entitlement to all labor and occupational safety and health standards, free exercise of the
right to self-organization, security of tenure, and social and welfare benefits.

A.C. Sicat has substantial capital, having assets totaling P5,926,155.76 as of December 31, 2006. Too, its
Agreement with Fonterra clearly sets forth that A.C. Sicat shall be liable for the wages and salaries of its
employees or workers, including benefits, premiums, and protection due them.

We agree with the findings of the CA that the termination of respondents employment with the latter was simply
brought about by the expiration of their employment contracts.

Foremost, respondents were fixed-term employees. It is clear that respondents were employed by A.C. Sicat as
project employees. In their employment contract with the latter, it is clearly stated that [A.C. Sicat is] temporarily
employing [respondents] as TMRs.

Respondents, by accepting the conditions of the contract with A.C. Sicat, were well aware of and even acceded
to the condition that their employment thereat will end on said pre-determined date of termination. They cannot
now argue that they were illegally dismissed by the latter when it refused to renew their contracts after its
expiration.

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ARTICLE 110

61. DEVELOPMENT BANK OF THE PHILIPPINES vs. NLRC


G.R. No. 108031 March 1, 1995
BELLOSILLO, J.

Doctrine:
A declaration of bankruptcy or a judicial liquidation must be present before the worker's preference may be
enforced.

FACTS:
Leonor Ang was an employee of Tropical Philippines Wood Industries, Inc. (TPWII). DBP, as mortgagee of
TPWII, foreclosed its plant facilities and equipment. It took possession of the foreclosed properties. From then
on the company ceased its operations. As a consequence private respondent was verbally terminated from the
service. Private respondent Ang filed with Labor Arbiter a complaint for separation pay, 13th month pay,
vacation and sick leave pay, salaries and allowances against TPWII, its General Manager, and petitioner. LA
awarded Angs separation pay and vacation and sick leave pay and held DBP subsidiarily liable in the even the
company failed to satisfy the judgment. The Labor Arbiter rationalized that the right of an employee to be paid
benefits due him from the properties of his employer is superior to the right of the latter's mortgage. NLRC
affirmed the ruling of LA.

ISSUE: Whether or not the declaration of bankruptcy or judicial liquidation required before the worker's
preference may be invoked under Art. 110 of the Labor Code.

SC RULING:
Yes, a declaration of bankruptcy or a judicial liquidation must be present before the worker's preference may be
enforced. In the event of insolvency, a principal objective should be to effect an equitable distribution of the
insolvents property among his creditors. To accomplish this there must first be some proceeding where notice to
all of the insolvent's creditors may be given and where the claims of preferred creditors may be bindingly
adjudicated. A preference applies only to claims which do not attach to specific properties. A lien creates a
charge on a particular property. The right of first preference as regards unpaid wages recognized by Article 110
does not constitute a lien on the property of the insolvent debtor in favor of workers.

It is but a preference of credit in their favor, a preference in application. It is a method adopted to determine and
specify the order in which credits should be paid in the final distribution of the proceeds of the insolvent's assets.
It is a right to a first preference in the discharge of the funds of the judgment debtor. Article 110 of the Labor
Code does not purport to create a lien in favor of workers or employees for unpaid wages either upon all of the
properties or upon any particular property owned by their employer. Claims for unpaid wages do not therefore
fall at all within the category of specially preferred claims established under Articles 2241 and 2242 of the Civil
Code, except to the extent that such claims for unpaid wages are already covered by Article 2241, number 6:
"claims for laborers: wages, on the goods manufactured or the work done;" or by Article 2242, number 3, "claims
of laborers and other workers engaged in the construction reconstruction or repair of buildings, canals and other
works, upon said buildings, canals and other works . . . . To the extent that claims for unpaid wages fall outside
the scope of Article 2241, number 6, and 22421 number 3, they would come within the ambit of the category of
ordinary preferred credits under Article 2244.

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ARTICLE 113

62. SHS PERFORATED MATERIALS, INC. vs. DIAZ


G.R. No. 185814 October 13, 2010

Doctrine:
Absent a showing that the withholding of complainants wages falls under the exceptions provided in Article 113,
the withholding thereof is thus unlawful.

FACTS:
Manuel Diaz was hired by petitioner SHS as Manager for Business Development on probationary status. During
his employment in the said company, Mr. Hartmannshenn, the companys president, was often abroad and sent
instructions to respondent either by electronic mail or through telephone or mobile phone. During meetings with
respondent, Hartmannshen expressed his dissatisfaction over respondents poor performance. When
Hartmannshenn arrived in the Philippines, he notified respondent of his arrival through electronic mail
messages, which the respondent claimed he never received, but the respondent refused to respond and to meet
with him. Hartmannshenn instructed not to release respondents salary. Later that afternoon, respondent called
and inquired about his salary but he was informed that it was being withheld and that he had to immediately
communicate with Hartmannshen. The next day, respondent served a demand letter and a resignation letter. In
the evening of the same day, respondent met with Hartmannshenn in Alabang. The latter told him that he was
extremely disappointed for the following reasons: his poor work performance; his unauthorized leave and
malingering from November 16 to November 30, 2005; and failure to immediately meet Hartmannshenn upon
his arrival from Germany. Respondent, on the other hand, claimed that the meeting with Hartmannshenn took
place in the evening of December 1, 2005, at which meeting the latter insulted him and rudely demanded that he
accept P25,000.00 instead of his accrued wage and stop working for SHS, which demands he refused. Later
that same night, he sent Hartmannshenn and Schumacher an electronic mail message appealing for the release
of his salary. Respondent filed a Complaint against the petitioners for illegal dismissal; non-payment of
th
salaries/wages and 13 month pay with prayer for reinstatement and full backwages; exemplary damages, and
attorneys fees, costs of suit, and legal interest.

LA RULING: The Labor Arbiter rendered a decision declaring complainant as having been illegally dismissed
and further ordering his immediate reinstatement without loss of seniority rights and benefits. The LA found that
respondent was constructively dismissed because the withholding of his salary was contrary to Article 116 of the
Labor Code as it was not one of the exceptions for allowable wage deduction by the employer under Article 113
of the Labor Code. He had no other alternative but to resign because he could not be expected to continue
working for an employer who withheld wages without valid cause

NLRC RULING: On appeal, NLRC reversed the decision of LA. The NLRC explained that the withholding of
respondents salary was a valid exercise of management prerogative. The act was deemed justified as it was
reasonable to demand an explanation for failure to report to work and to account for his work accomplishments.
The NLRC held that the respondent voluntarily resigned as evidenced by the language used in his resignation
letter and demand letters. CA reversed NLRC resolution and held that withholding respondents salary was not a
valid exercise of management prerogative as there is no such thing as a management prerogative to withhold
wages temporarily.

ISSUE: Whether or not the temporary withholding of salary of employee by employer is a valid exercise of
management prerogative

SC RULING: No. Management prerogative refers to the right of an 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 work. Although management prerogative refers to the right to regulate all aspects of employment, it
cannot be understood to include the right to temporarily withhold salary/wages without the consent of the
employee. Any withholding of an employees wages by an employer may only be allowed in the form of wage
deductions under the circumstances provided in Article 113 of the Labor Code. As correctly pointed out by the
LA, absent a showing that the withholding of complainants wages falls under the exceptions provided in Article
113, the withholding thereof is thus unlawful.

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What made it impossible, unreasonable or unlikely for respondent to continue working for SHS was the unlawful
withholding of his salary. For said reason, he was forced to resign. It is of no moment that he served his
resignation letter on November 30, 2005, the last day of the payroll period and a non-working holiday, since his
salary was already due him on November 29, 2005, being the last working day of said period. In fact, he was
then informed that the wages of all the other SHS employees were already released, and only his was being
withheld. What is significant is that the respondent prepared and served his resignation letter right after he was
informed that his salary was being withheld. It would be absurd to require respondent to tolerate the unlawful
withholding of his salary for a longer period before his employment can be considered as so impossible,
unreasonable or unlikely as to constitute constructive dismissal. Even granting that the withholding of
respondents salary on November 30, 2005, would not constitute an unlawful act, the continued refusal to
release his salary after the payroll period was clearly unlawful. The petitioners claim that they prepared the
check ready for pick-up cannot undo the unlawful withholding.

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ARTICLE 124 Standards/Criteria for Minimum Wage Fixing

63. P.I. MANUFACTURING, INC. v. P.I. MANUFACTURING SUPERVISORS AND FOREMAN ASSOCIATION
and the NATIONAL LABORUNION
G.R. No. 167217 February 4, 2008
SANDOVAL-GUTIERREZ

DOCTRINE:
The Court adopts the policy that requires recognition and validation of wage increases given by employers
either unilaterally or as a result of collective bargaining negotiations in an effort to correct wage distortions.

FACTS:
P.I. Manufacturing, Inc. is a domestic corporation engaged in the manufacture and sale of household
appliances. P.I. Manufacturing Supervisors and Foremen Association (PIMASUFA) is an organization of
supervisors and foremen, joined in this case by its federation, the National Labor Union (NLU). In 1987, the
President signed into law RA 6640 providing, among others, an increase in the statutory minimum wage and
salary rates of employees and workers in the private sector.

Section 2 provides: The statutory minimum wage rates of workers and employees in the private sector, whether
agricultural or non-agricultural, shall be increased by ten pesos (P10.00) per day, except non-agricultural
workers and employees outside Metro Manila who shall receive an increase of eleven pesos (P11.00) per
day: Provided, That those already receiving above the minimum wage up to one hundred pesos
(P100.00) shall receive an increase of ten pesos (P10.00) per day. Excepted from the provisions of this Act are
domestic helpers and persons employed in the personal service of another.

P.I. and PIMASUFA entered into a new Collective Bargaining Agreement (1987 CBA) whereby the supervisors
were granted an increase of P625.00 per month and the foremen, P475.00 per month. The increases were
made retroactive prior to the passage of R.A. No. 6640, and every year thereafter until July 26, 1989.

In 1989, PIMASUFA and NLU filed a complaint with the Arbitration Branch of the NLRC, charging P.I. with
violation of R.A. No. 6640. Theyhttp://sc.judiciary.gov.ph/jurisprudence/2008/feb2008/167217.htm -
_ftn3 attached to their complaint a numerical illustration of wage distortion resulting from the implementation of
R.A. No. 6640.

LABOR ARBITER RULING: in favor of PIMASUFA.

NLRC RULING: affirmed the Labor Arbiters judgment.

CA RULING: affirmed the Decision of the NLRC with modification by raising the 13.5% wage increase
to 18.5%.

ISSUE: Whether the increase resulting from any wage distortion caused by the implementation of Republic Act
6640 is waivable.

SC RULING:
YES. R.A. No. 6727, otherwise known as the Wage Rationalization Act, explicitly defines wage distortion as: a
situation where an increase in prescribed wage rates results in the elimination or severe contraction of
intentional quantitative differences in wage or salary rates between and among employee groups in an
establishment as to effectively obliterate the distinctions embodied in such wage structure based on skills,
length of service, or other logical bases of differentiation.

In this case, the Court of Appeals correctly ruled that a wage distortion occurred due to the implementation of
R.A. No. 6640. Significantly, the 1987 CBA wage increases almost doubled that of the P10.00 increase under
R.A. No. 6640. Clearly, the gap between the wage rates of the supervisors and those of the foremen was
inevitably re-established. It continued to broaden through the years.

Interestingly, such gap as re-established by virtue of the CBA is more than a substantial compliance with R.A.
No. 6640. The CA erred in not taking into account the provisions of the CBA viz-a-viz the wage increase under

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the said law. To direct petitioner to grant an across-the-board increase to all of them, regardless of the amount
of wages they are already receiving, would be harsh and unfair to the former.

To compel employers simply to add on legislative increases in salaries or allowances without regard to what is
already being paid, would be to penalize employers who grant their workers more than the statutory prescribed
minimum rates of increases. Clearly, this would be counter-productive so far as securing the interests of labor is
concerned.

At this juncture, it must be stressed that a CBA constitutes the law between the
parties when freely and voluntarily entered
into.http://sc.judiciary.gov.ph/jurisprudence/2008/feb2008/167217.htm - _ftn13 Here, it has not been shown that
respondent PIMASUFA was coerced or forced to sign the 1987 CBA. All of its 13 officers signed the CBA with
the assistance of respondent NLU.

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64. BANKARD EMPLOYEES UNION-WORKERS ALLIANCE TRADE UNIONS v. NATIONAL LABOR
RELATIONS COMMISSION and BANKARD, INC.
G.R. No. 140689 February 17, 2004
CARPIO MORALES, J.:

ARTICLE 124

DOCTRINE:
The four elements of wage distortion are: (1.) An existing hierarchy of positions with corresponding salary rates;
(2) A significant change in the salary rate of a lower pay class without a concomitant increase in the salary rate
of a higher one; (3) The elimination of the distinction between the two levels; and (4) The existence of the
distortion in the same region of the country.

FACTS:
Bankard, Inc. classifies its employees by levels, to wit: Level I to V. In 1993, its Board of Directors approved a
New Salary Scale for the purpose of making its hiring rate competitive in the industrys labor market. The New
Salary Scale increased the hiring rates of new employees, to wit: Levels I and V by P1,000, and Levels II, III and
IV by P900. Accordingly, the salaries of employees who fell below the new minimum rates were also adjusted to
reach such rates under their levels.

Bankards move drew the Bankard Employees Union-WATU, the duly certified exclusive bargaining agent of the
regular rank and file employees of Bankard, to press for the increase in the salary of its old, regular employees.
Bankard took the position, however, that there was no obligation on the part of the management to grant to all
its employees the same increase in an across-the-board manner.

As the continued request remained unheeded, it filed a Notice of Strike on the ground of discrimination and
other acts of Unfair Labor Practice.

NLRC RULING: finding no wage distortion, dismissed the case for lack of merit.

CA RULING: denied the same for lack of merit. Hence, the present petition.

ISSUE: Whether the unilateral adoption by an employer of an upgraded salary scale that increased the hiring
rates of new employees without increasing the salary rates of old employees resulted in wage distortion within
the contemplation of Article 124 of the Labor Code.

SC RULING:
NO. Upon the enactment of R.A. No. 6727 (WAGE RATIONALIZATION ACT, amending, among others, Article
124 of the Labor Code) on June 9, 1989, the term wage distortion was explicitly defined as:
... a situation where an increase in prescribed wage rates results in the elimination or severe contraction of
intentional quantitative differences in wage or salary rates between and among employee groups in an
establishment as to effectively obliterate the distinctions embodied in such wage structure based on skills,
length of service, or other logical bases of differentiation.

The four elements of wage distortion are: (1.) An existing hierarchy of positions with corresponding salary rates;
(2) A significant change in the salary rate of a lower pay class without a concomitant increase in the salary rate
of a higher one; (3) The elimination of the distinction between the two levels; and (4) The existence of the
distortion in the same region of the country.

Involved in the classification of employees are various factors such as the degrees of responsibility, the skills
and knowledge required, the complexity of the job, or other logical basis of differentiation. The differing wage
rate for each of the existing classes of employees reflects this classification.

Petitioner maintains that for purposes of wage distortion, the classification is not one based on levels or ranks
but on two groups of employees, the newly hired and the old, in each and every level, and not between and
among the different levels or ranks in the salary structure.

The employees of Bankard have been historically classified into levels, i.e. I to V, and not on the basis of their
length of service. The Union cannot make a contrary classification of Bankards employees without encroaching
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upon recognized management prerogative of formulating a wage structure, in this case, one based on level. It is
thus clear that there is no hierarchy of positions between the newly hired and regular employees of Bankard,
hence, the first element of wage distortion is wanting. For purposes of determining the existence of wage
distortion, employees cannot create their own independent classification and use it as a basis to demand an
across-the-board increase in salary.

Even assuming that there is a decrease in the wage gap between the pay of the old employees and the newly
hired employees, said gap is not significant as to obliterate or result in severe contraction of the intentional
quantitative differences in the salary rates between the employee group. The classification under the wage
structure is based on the rank of an employee, not on seniority. For this reason, wage distortion does not appear
to exist.

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th
13 MONTH PAY

65. CENTRAL AZUCARERA DE TARLAC v. CENTRAL AZUCARERA DE TARLAC LABOR UNION-NLU


G.R. No. 188949 July 26, 2010
NACHURA, J.:

DOCTRINE:
The term basic salary of an employee for the purpose of computing the 13th-month pay was interpreted to
include all remuneration or earnings paid by the employer for services rendered, but does not include
allowances and monetary benefits which are not integrated as part of the regular or basic salary, such as the
cash equivalent of unused vacation and sick leave credits, overtime, premium, night differential and holiday pay,
and cost-of-living allowances. However, these salary-related benefits should be included as part of the basic
salary in the computation of the 13th-month pay if, by individual or collective agreement, company practice or
policy, the same are treated as part of the basic salary of the employees.

FACTS:
Central Azucarera de Tarlac is a domestic corporation engaged in the business of sugar manufacturing, while
Central Azucarera de Tarlac Labor Union-NLU is a legitimate labor organization which serves as the exclusive
bargaining representative of the Central's rank-and-file employees. The controversy stems from the
interpretation of the term basic pay, essential in the computation of the 13th-month pay.

In compliance with P.D. No. 851, the Central granted its employees the mandatory 13th month pay since 1975.
The formula used was: Total Basic Annual Salary divided by 12. Included in the computation of the Total Basic
Annual Salary were the following: basic monthly salary; first 8 hours overtime pay on Sunday and legal/special
holiday; night premium pay; and vacation and sick leaves for each year. Throughout the years, the Central used
this computation until 2006.

After a strike staged by the Union, the Central gave the employees their 13th-month pay based on the
employees total earnings during the year divided by 12. The latter objected to this computation. The Union filed
a complaint against for money claims based on the alleged diminution of benefits/erroneous computation of
13th-month pay before the Regional Arbitration Branch of the NLRC.

LA RULING: dismissed the complaint and declared that the Central had the right to rectify the error in the
computation of the 13th-month pay of its employees.

NLRC RULING: reversed the Labor Arbiter.

CA RULING: affirmed the decision and resolution of the NLRC. Hence, the petition.

ISSUE: Whether there was an error in the computation of the employees' 13th month pay.

SC RULING:
YES. The 13th-month pay mandated by P.D. No. 851 represents an additional income based on wage but not
part of the wage. It is equivalent to one-twelfth (1/12) of the total basic salary earned by an employee within a
calendar year. All rank-and-file employees, regardless of their designation or employment status and
irrespective of the method by which their wages are paid, are entitled to this benefit, provided that they have
worked for at least one month during the calendar year. If the employee worked for only a portion of the year,
the 13th-month pay is computed pro rata.

It is clear that there could have no erroneous interpretation or application of what is included in the term basic
salary for purposes of computing the 13th-month pay of employees. From the inception of P.D. No. 851 on
December 16, 1975, clear-cut administrative guidelines have been issued to insure uniformity in the
interpretation, application, and enforcement of the provisions of P.D. No. 851 and its implementing regulations.

As correctly ruled by the CA, the practice of the Central in giving 13th-month pay based on the employees gross
annual earnings which included the basic monthly salary, premium pay for work on rest days and special
holidays, night shift differential pay and holiday pay continued for almost thirty (30) years and has ripened into a
company policy or practice which cannot be unilaterally withdrawn.

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The argument of the Central that the grant of the benefit was not voluntary and was due to error in the
interpretation of what is included in the basic salary deserves scant consideration. No doubtful or difficult
question of law is involved in this case. The voluntariness of the grant of the benefit was manifested by the
number of years the employer had paid the benefit to its employees. The Central only changed the formula in
the computation of the 13th-month pay after almost 30 years and only after the dispute between the
management and employees erupted. This act of changing the formula at this time cannot be sanctioned, as it
indicates a badge of bad faith.

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ARTICLE 128 Visitorial and Enforcement Power

66. PEOPLES BROADCASTING SERVICE (BOMBO RADYO PHILS., INC.) vs. THE SECRETARY OF THE
DEPARTMENT OF LABOR AND EMPLOYMENT, THE REGIONAL DIRECTOR, DOLE REGION VII, and
JANDELEON JUEZAN
G.R. No. 179652 March 6, 2012
VELASCO, JR., J.:

DOCTRINE:
Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully empowered to make a
determination as to the existence of an employer-employee relationship in the exercise of its visitorial and
enforcement power, subject to judicial review, not review by the NLRC.

FACTS:
Jandeleon Juezan filed a complaint against Peoples Broadcasting Service (Bombo) with the DOLE Regional
Office No. VII, Cebu City, for illegal deduction, nonpayment of service incentive leave, 13th month pay, among
others. After the conduct of summary investigations, and after the parties submitted their position papers, the
DOLE Regional Director found that Juezan was an employee of Bombo, and was entitled to his money
claims. Bombo sought reconsideration of the Directors Order, but failed.

The Acting DOLE Secretary dismissed Bombos appeal. When the matter was brought before the CA, where
Bombo claimed that it had been denied due process, it was held that Bombo was accorded due process as it
had been given the opportunity to be heard, and that the DOLE Secretary had jurisdiction over the matter, as
the jurisdictional limitation imposed by Article 129 of the Labor Code on the power of the DOLE Secretary under
Art. 128(b) of the Code had been repealed by Republic Act No. (RA) 7730.

SC reversed the CA Decision and the complaint against Bombo was dismissed. The Court found that there was
no employer-employee relationship between Bombo and Juezan. It was held that while the DOLE may make a
determination of the existence of an employer-employee relationship, this function could not be co-extensive
with the visitorial and enforcement power provided in Art. 128(b) of the Labor Code, as amended by RA
7730. The NLRC was held to be the primary agency in determining the existence of an employer-employee
relationship. From this Decision, the Public Attorneys Office (PAO) filed a Motion for Clarification of Decision
(with Leave of Court). The PAO sought to clarify as to when the visitorial and enforcement power of the DOLE
be not considered as co-extensive with the power to determine the existence of an employer-employee
relationship. The SC revisits its former conclusion.

ISSUE: Whether DOLE can make a determination of the existence of employer-employee relationship.

SC RULING:
YES. No limitation in the law was placed upon the power of the DOLE to determine the existence of an
employer-employee relationship. No procedure was laid down where the DOLE would only make a preliminary
finding, that the power was primarily held by the NLRC. The law did not say that the DOLE would first seek the
NLRCs determination of the existence of an employer-employee relationship, or that should the existence of the
employer-employee relationship be disputed, the DOLE would refer the matter to the NLRC. The DOLE must
have the power to determine whether or not an employer-employee relationship exists, and from there to decide
whether or not to issue compliance orders in accordance with Art. 128(b) of the Labor Code, as amended by RA
7730.

The determination of the existence of an employer-employee relationship by the DOLE must be respected. The
expanded visitorial and enforcement power of the DOLE granted by RA 7730 would be rendered nugatory if the
alleged employer could, by the simple expedient of disputing the employer-employee relationship, force the
referral of the matter to the NLRC. If the DOLE makes a finding that there is an existing employer-employee
relationship, it takes cognizance of the matter, to the exclusion of the NLRC. The DOLE would have no
jurisdiction only if the employer-employee relationship has already been terminated, or it appears, upon review,
that no employer-employee relationship existed in the first place.

If a complaint is brought before the DOLE to give effect to the labor standards provisions of the Labor Code or
other labor legislation, and there is a finding by the DOLE that there is an existing employer-employee
relationship, the DOLE exercises jurisdiction to the exclusion of the NLRC. If the DOLE finds that there is no
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employer-employee relationship, the jurisdiction is properly with the NLRC. If a complaint is filed with the DOLE,
and it is accompanied by a claim for reinstatement, the jurisdiction is properly with the Labor Arbiter, under Art.
217(3) of the Labor Code. If a complaint is filed with the NLRC, and there is still an existing employer-employee
relationship, the jurisdiction is properly with the DOLE. The findings of the DOLE, however, may still be
questioned through a petition for certiorari under Rule 65 of the Rules of Court.

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67. MRS. ALBERTA YANSON v. SECRETARY OF LABOR AND EMPLOYMENT
G.R. No. 159026 February 11, 2008
AUSTRIA-MARTINEZ, J.:

ARTICLE 128

DOCTRINE:
The posting of the proper amount of the appeal bond under Article 128 (b) is mandatory for the perfection of an
appeal from a monetary award in labor standard cases.

FACTS:
In 1998, Mardy Cabigo and 40 other workers filed with DOLE Bacolod a request for payroll inspection of
Hacienda Valentin Balabag owned by Alberta Yanson. DOLE Bacolod conducted an inspection of the
establishment and issued a Notice of Inspection Report, finding Yanson liable for the following violations of labor
standard laws:

1. Underpayment of salaries and wages (workers being paid a daily rate of P90.00 since 1997 and P75.00
prior to such year);
2. Non-payment of 13th month pay for two (2) years;
3. Non-payment of Social Amelioration Bonus (SAB) for two (2) years;
4. Non-payment of employers 1/3 carabao share.

In addition, DOLE Bacolod scheduled a summary investigation. Yanson did not appear in any of the scheduled
hearings, or present any pleading or document. In a Compliance Order, DOLE Bacolod directed Yanson to pay
a total of P372,444 and to correct existing violations of occupational safety and health standards. It then issued
a Writ of Execution. Yanson filed with public respondent a Verified Appeal and posted a bond.

SECRETARY OF LABOR RULING: dismissed the appeal.

CA RULING: Petition for Certiorari was denied due course and dismissed. Hence, the present recourse.

ISSUE:
1. Whether the compliance order by DOLE Bacolod, in the exercise of its visitorial and enforcement power,
was proper. YES
2. Whether the appeal was perfected. NO.

SC RULING:
For its perfection, the appeal was subject to the requirements prescribed under Article 128 of the Labor Code,
as amended by Republic Act No. 7730, viz.:

Art. 128. Visitorial and Enforcement Power. - x x x (b) Notwithstanding the provisions of Articles 129 and
217 of this Code to the contrary, and in cases where the relationship of employer-employee still exists,
the Secretary of Labor and Employment or his duly authorized representatives shall have the power to
issue compliance orders to give effect to the labor standards provisions of this Code and other labor
legislation based on the findings of labor employment and enforcement officers or industrial safety
engineers made in the course of inspection. The Secretary or his duly authorized representatives shall
issue writs of execution to the appropriate authority for the enforcement of their orders, except in cases
where the employer contests the findings of the labor employment and enforcement officer and raises
issues supported by documentary proofs which were not considered in the course of inspection.

An order issued by the duly authorized representative of the Secretary of Labor and Employment under this
article may be appealed to the latter. In case said order involves a monetary award, an appeal by the employer
may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly
accredited by the Secretary of Labor and Employment in the amount equivalent to the monetary award in the
order appealed from.

When Yanson filed her Verified Appeal and Supplement to the Verified Appeal, Public respondent rejected said
appeal for insufficiency of the appeal bond. The posting of the proper amount of the appeal bond under Article
128 (b) is mandatory for the perfection of an appeal from a monetary award in labor standard cases. Also
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applying the Implementing Rules, there is one other reason for holding that Yanson failed to perfect her appeal.
It is of record that she received Compliance Order issued by DOLE-Bacolod. She was put on actual notice not
only of the existence of the Compliance Order but also of the summary investigation of her establishment. It
behooves her to file a timely appeal to public respondent or object to the conduct of the investigation. Yanson
did neither, opting instead to sit idle and wait until the following year to question the investigation and resultant
order, in the guise of opposing the writ of execution.

In fine, the CA was correct in holding that public respondent did not commit grave abuse of discretion in
rejecting the appeal due to the insufficiency of her appeal bond.

Even on its substance, her appeal would still not prosper. The determination made by DOLE-Bacolod on this
matter binds the Court, especially as it was not reversed by public respondent and the CA.

San Beda College of Law 169


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68. BALLADARES ET. AL. v. PEAK VENTURES CORPORATION
G.R. No. 161794 June 16, 2009
Nachura, J.:

ART. 128: VISITORIAL AND ENFORCEMENT POWERS OF THE DOLE REGIONAL DIRECTOR

DOCTRINE:
The visitorial and enforcement powers of the DOLE Regional Director to order and enforce compliance with
labor standard laws can be exercised even when the individual claim exceeds P5,000. However, if the labor
standards case is covered by the exception clause in Article 128 (b) of the Labor Code, then the Regional
Director will have to endorse the case to the appropriate Arbitration Branch of the NLRC.

FACTS:
Petitioners Nestor J. Balladares et al., were employed by respondent Peak Ventures Corp as security guards
and were assigned at the premises of respondent YMOAA. They filed a complaint for underpayment of wages
against their employer, Peak Ventures, with the DOLE. Acting on the complaint, DOLE conducted an inspection
of Peak Ventures and the following violations were noted: underpayment of the minimum wage and other
auxiliary benefits; pertinent employment records were not available at the time of inspection.

A Notice of Inspection Result was issued to Peak Ventures instructing them to effect restitution and/or file its
objections within five working days from receipt thereof. Respondent failed to correct the violations or contest
the findings as required, hence, the parties were summoned for hearing. Peak Ventures moved to implead its
client YMOAA, claiming that any underpayment of wages arose from the failure of YMOAA to pay Peak
Ventures the amount due petitioners as prescribed by various wage orders.

After the hearing, DOLE Regional Director Maximo Lim rendered judgment in favor of petitioners and ruled that
the contractor was jointly and severally liable with the principal. Lim averred that because Peak Ventures failed
to controvert the complaint and its repeated denial to give access to records, it is deemed to have waived its
constitutional right to due process. Petitioners were awarded P1,106,298. Peak Ventures filed a motion for
reconsideration, but the same was denied prompting them to appeal to the CA.

CA RULING: The CA granted the petition, ruling that the Regional Director had no jurisdiction to hear and
decide the case, because the claims of each of the petitioners exceeded P5,000.00, and the power to adjudicate
such claims belonged to the Labor Arbiter, pursuant to Servandos, Inc. v. Secretary of Labor. The appellate
court ratiocinated that this exclusive jurisdiction of the Labor Arbiters was confirmed by Article 129 of the Labor
Code, which excludes from the jurisdiction of the Regional Directors or any hearing officer of the DOLE the
power to hear and decide claims of employees arising from employer-employee relations exceeding the amount
of P5,000.00 for each employee.

ISSUE: Does DOLE Regional Director has jurisdiction to even though the claims of the complainants exceeded
P5,000?

SC RULING:
YES. Yes. The Supreme Court ruled that the visitorial and enforcement powers of the DOLE Regional Director
to order and enforce compliance with labor standard laws can be exercised even when the individual claim
exceeds P5,000. However, if the labor standards case is covered by the exception clause in Article 128 (b) of
the Labor Code, then the Regional Director will have to endorse the case to the appropriate Arbitration Branch
of the NLRC. In order to divest the Regional Director or his representatives of jurisdiction, the following
elements must be present: (a) that the employer contests the findings of the labor regulations officer and
raises issues thereon; (b) that in order to resolve such issues, there is a need to examine evidentiary matters;
and (c) that such matters are not verifiable in the normal course of inspection. The rules also provide that the
employer shall raise such objections during the hearing of the case or at any time after receipt of the notice of
inspection results.

In the case at bar, Peak Ventures did not contest the findings of the labor regulations officer during the hearing
or after receipt of notice of the inspection results. Accordingly, we find no sufficient reason to warrant the
certification of the instant case to the LA and divest the Regional Director of jurisdiction. Respondent did not
contest the findings of the labor regulations officer. Even during the hearing, respondent never denied that
petitioners were not paid correct wages and benefits.
San Beda College of Law 170
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LABOR LAW REVIEW Atty. Joyrich Golangco

69. ALLIED INVESTIGATION BUREAU, INC., v. SECRETARY OF LABOR


GR No. 122006 November 24, 1999

ART. 128 VISITORIAL AND ENFORCEMENT POWERS OF THE DOLE REGIONAL DIRECTOR

DOCTRINE:
While it is true that under Articles 129 and 217of the Labor Code, the Labor Arbiter has jurisdiction to hear and
decide cases where the aggregate money claims of each employee exceedsP5,000.00, said provisions of law
do not contemplate nor cover the visitorial and enforcement powers of the Secretary of Labor or his duly
authorized representatives. Said powers are defined and set forth in Art. 128 of the Labor Code.

FACTS:
Petitioner Allied Investigation Bureau is a security agency which entered into a security contract with Novelty
Philippines Inc (NPI). Private respondents Melvin Pelayo and Samuel Sucanel, two of the security guards
assigned by petitioner to NPI, filed a complaint with the Office of respondent Regional Director Romeo Young,
charging petitioner with non-compliance with a wage order increasing the minimum daily pay of workers.
Regional Director Young conducted inspection visits at petitioners establishment and found that Petitioner failed
to implement the wage increase. Petitioner was required to effect restitution and/or correction of the foregoing
within five calendar days, or challenge the findings within five working days. Thereafter, a series of conferences
and hearings were scheduled by the Regional Director to facilitate amicable settlement. However, despite due
notice, petitioner failed to appear in any of said hearings. As a result, the Regional Director ruled in favor of
private respondents and awarded them P807,570.

Petitioners appealed the Order to respondent Secretary of Labor, without posting a cash or surety bond, as such
the appeal was dismissed. Petitioner argues that the power to adjudicate money claims belongs to the Labor
Arbiter who has exclusive jurisdiction over employees claims where the aggregate amount of the claims of each
employee exceeds P5,000.

ISSUE: Whether or not the DOLE Regional Director acted without jurisdiction in adjudicating the private
respondents claims which were in excess of P5,000.

RULING:
Yes. While it is true that under Articles 129 and 217of the Labor Code, the Labor Arbiter has jurisdiction to hear
and decide cases where the aggregate money claims of each employee exceedsP5,000.00, said provisions of
law do not contemplate nor cover the visitorial and enforcement powers of the Secretary of Labor or his duly
authorized representatives. Said powers are defined and set forth in Art. 128 of the Labor Code.
Art. 128. Visitorial and enforcement power.
(a) The Secretary of Labor or his duly authorized representatives, including labor regulation officers, shall have
access to employers records and premises at any time of the day or night whenever work is being
undertaken therein, and the right to copy therefrom, to question any employee and investigate any fact,
condition or matter which may be necessary to determine violations or which may aid in the enforcement of
this Code and of any labor law, wage order or rules and regulations issued pursuant thereto.
(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the
relationship of employer-employee exists, the Secretary of Labor and Employment or his duly authorized
representatives shall have the power to issue compliance orders to give effect to the labor standards
provisions of this Code and other labor legislation based on the findings of labor employment and
enforcement officers or industrial safety engineers made in the course of inspection. The Secretary or his
duly authorized representatives shall issue writs of execution to the appropriate authority for the
enforcement of their orders, except in cases where the employer contests the findings of the labor
employment and enforcement officer and raises issues supported by documentary proofs which were not
considered in the course of inspection.
San Beda College of Law 171
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An order issued by the duly authorized representatives of the Secretary of Labor and Employment under this
article may be appealed to the latter. In case said order involves a monetary award, an appeal by the employer
may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly
accredited by the Secretary of Labor and Employment in the amount equivalent to the monetary award in the
order appealed from.

In the case at bar, the Office of respondent Regional Director conducted inspection visits at petitioners
establishment on February 9 and 14, 1995 in accordance with the above-mentioned provision of law. In the
course of said inspection, several violations of the labor standard provisions of the Labor Code were discovered
and reported by Senior Labor Enforcement Officer Eduvigis A. Acero in his Notice of Inspection Results. It was
on the bases of the aforesaid findings (which petitioner did not contest), that respondent Regional Director
issued the assailed Order for petitioner to pay private respondents the respective wage differentials due them.

Clearly, as the duly authorized representative of respondent Secretary of Labor, and in the lawful exercise of the
Secretarys visitorial and enforcement powers under Article 128 of the Labor Code, respondent Regional
Director had jurisdiction to issue his impugned Order.

70. URBANES v. SECRETARY OF LABOR


GR No. 122791 February 19, 2003

ART. 128 VISITORIAL AND ENFORCEMENT POWERS OF THE DOLE REGIONAL DIRECTOR

DOCTRINE:
It is well settled in law and jurisprudence that where no employer-employee relationship exists between the
parties and no issue is involved which may be resolved by reference to the Labor Code, other labor statutes or
any collective bargaining agreement, it is the Regional Trial Court that has jurisdiction. In its complaint, private
respondent is not seeking any relief under the Labor Code but seeks payment of a sum of money and damages
on account of petitioner's alleged breach of its obligation under their Guard Service Contract. The action is
within the realm of civil law hence jurisdiction over the case belongs to the regular courts. While the resolution of
the issue involves the application of labor laws, reference to the labor code was only for the determination of the
solidary liability of the petitioner to the respondent where no employer-employee relation exists.

FACTS:
Petitioner Placido O. Urbanes, Jr., doing business under the name and style of Catalina Security Agency,
entered into an agreement to provide security services to respondent Social Security System (SSS). During the
effectivity of the agreement, petitioner, by letter of May 16, 1994, requested the SSS for the upward adjustment
of their contract rate in view of Wage Order No. NCR-03. As SSS refused to comply, On June 29, 1994,
petitioner filed a complaint with the DOLE-NCR against the SSS seeking the implementation of Wage Order No.
NCR-03. In its position paper, the SSS prayed for the dismissal of the complaint on the ground that petitioner is
not the real party in interest and has no legal capacity to file the same. In any event, it argued that if it had any
obligation, it was to the security guards. On the other hand, petitioner in his position paper, citing Eagle Security
Agency, Inc. v. NLRC, contended that the security guards assigned to the SSS do not have any legal basis to
file a complaint against it for lack of contractual privity.

Finding for petitioner, the Regional Director of the DOLE-NCR issued an Order for SSS to pay petitioner P1.6
million. SSS appealed to the Secretary of Labor, claiming that the Regional Director has no jurisdiction to issue
the assailed order. The Secretary set aside the order and remanded the case. Petitioner filed the present
petition for certiorari with the Supreme Court asserting that the Secretary of Labor does not have jurisdiction to
review appeals from decisions of the Regional Directors in complaints filed under Art. 129 of the Labor Code.
They claim that appeals from orders of Regional directors should be made with the NLRC.

ISSUE: Whether or not the Secretary of Labor has jurisdiction to review appeals from decisions of the Regional
Directors in complaints filed under Art. 129.

SC RULING:
No. Neither the petitioners contention nor the SSSs is impressed with merit, rather, it is the RTC that has
jurisdiction over the subject matter of the present case. It is well settled in law and jurisprudence that where no
employer-employee relationship exists between the parties and no issue is involved which may be resolved by
San Beda College of Law 172
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reference to the Labor Code, other labor statutes or any collective bargaining agreement, it is the Regional
Trial Court that has jurisdiction. In its complaint, private respondent is not seeking any relief under the Labor
Code but seeks payment of a sum of money and damages on account of petitioner's alleged breach of its
obligation under their Guard Service Contract. The action is within the realm of civil law hence jurisdiction over
the case belongs to the regular courts. While the resolution of the issue involves the application of labor laws,
reference to the labor code was only for the determination of the solidary liability of the petitioner to the
respondent where no employer-employee relation exists.

In the case at bar, even if petitioner filed the complaint on his and also on behalf of the security guards, the relief
sought has to do with the enforcement of the contract between him and the SSS which was deemed amended
by virtue of Wage Order No. NCR-03. The controversy subject of the case at bar is thus a civil dispute, the
proper forum for the resolution of which is the civil courts.
Even if the petition was filed with the proper forum, it must still be dismissed for lack of cause of action. Under
Art. 106 of the Labor Code: In the event that the contractor or subcontractor fails to pay the wage of his
employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work performed under the contract, in the same manner
and extent that he is liable to employees directly employed by him.

It is only when [the] contractor pays the increases mandated that it can claim an adjustment from the principal to
cover the increases payable to the security guards. The conclusion that the right of the contractor (as
principal debtor) to recover from the principal (as solidary co-debtor) arises only if he has paid the
amounts for which both of them are jointly and severally liable is in line with Article 1217 of the Civil
Code.

In fine, the liability of the SSS to reimburse petitioner arises only if and when petitioner pays his employee-
security guards the increases mandated by Wage Order No. NCR-03.
ARTICLE 136 (now Art. 134) Stipulation Against Marriage

71. ZIALCITA, ET AL. v. PAL


RO4-3-398-76. February 20, 1977

FACTS:
Complainant Zialcita, an international flight stewardess of PAL, was discharged from the service on account of
her marriage. In separating Zialcita, PAL invoked its policy which stated that flight attendants must be single,
and shall be automatically separated from employment in the event they subsequently get married. They
claimed that this policy was in accordance with Article 132 of the Labor Code. On the other hand, Zialcita
questioned her termination on account of her marriage, invoking Article 136 of the same law.

ISSUE: Was Zialcita validly terminated on account of her marriage?

SC RULING:
NO. When Presidential Decree No. 148, otherwise known as the Women and Child Labor Law, was
promulgated in 13 March 1973, PALs policy had met its doom. However, since no one challenged its validity,
the said policy was able to obtain a momentary reprieve. Section 8 of PD148 is exactly the same provision
reproduced verbatim in Article 136 of the Labor Code, which was promulgated on 1 May 1974 and took effect
six months later. Although Article 132 enjoins the Secretary of Labor to establish standards that will ensure the
safety and health of women employees and in appropriate cases shall by regulation require employers
to determine appropriate minimum standards for termination in special occupations, such as those of flight
attendants, it is logical to presume that, in the absence of said standards or regulations which are yet to
be established, the policy of PAL against marriage is patently illegal.

Article 136 is not intended to apply only to women employed in ordinary occupations,
or it should have categorically expressed so. The sweepingintendment of the law, be it on special or ordinary
occupations, is reflected in the whole text and supported by Article 135 that speaks of non-discrimination on the
employment of women.

San Beda College of Law 173


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San Beda College of Law 174


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LABOR LAW REVIEW Atty. Joyrich Golangco

72. STAR PAPER CORPORATION v. SIMBOL
GR No. 164774 April 12, 2006
Puno, J.

ART. 136 OF THE LABOR CODE AND DISCRIMINATION.

DOCTRINE:
The questioned policy may not facially violate Article 136 of the Labor Code but it creates a disproportionate
effect and under the disparate impact theory, the only way it could pass judicial scrutiny is a showing that it
is reasonable despite the discriminatory, albeit disproportionate, effect. The failure of petitioners to prove a
legitimate business concern in imposing the questioned policy cannot prejudice the employees right to be free
from arbitrary discrimination based upon stereotypes of married persons working together in one company.

FACTS: Petitioner Star Paper Corporation promulgated a company policy which states:
1. New applicants will not be allowed to be hired if in case he/she has [a] relative, up to [the] 3rd degree of
relationship, already employed by the company.
2. In case of two of our employees (both singles [sic], one male and another female) developed a friendly
relationship during the course of their employment and then decided to get married, one of them should
resign to preserve the policy stated above.
Respondents Ronaldo Simbol, and Wilfreda Comia are employees of Star Paper who claim that they were
compelled to resign in view of an illegal company policy, after they married fellow co-workers. They filed a
complaint for unfair labor practice and constructive dismissal against Star Paper Corp.

Respondents submit that their dismissal violates the above provision. Petitioners allege that its policy "may
appear to be contrary to Article 136 of the Labor Code" but it assumes a new meaning if read together with the
first paragraph of the rule. The rule does not require the woman employee to resign. The employee spouses
have the right to choose who between them should resign. Further, they are free to marry persons other than
co-employees. Hence, it is not the marital status of the employee, per se, that is being discriminated. It is only
intended to carry out its no-employment-for-relatives-within-the-third-degree-policy which is within the ambit of
the prerogatives of management.

LA RULING: The LA dismissed the complaint ruling that the policy against marriage between employees was a
valid management prerogative. The ruling was affirmed by the NLRC.

CA RULING: The CA reversed the above rulings and held that the dismissal of the respondents was illegal and
ordering their reinstatement.

ISSUE: Whether or not the policy of Star Paper requiring the resignation of either spouse-employee is in
violation of Art. 136 of the Labor Code.

SC RULING:
Yes. The Supreme Court ruled that Petitioners sole contention that "the company did not just want to have two
(2) or more of its employees related between the third degree by affinity and/or consanguinity is lame. That the
second paragraph was meant to give teeth to the first paragraph of the questioned rule is evidently not the valid
reasonable business necessity required by the law.

It is significant to note that in the case at bar, respondents were hired after they were found fit for the job, but
were asked to resign when they married a co-employee. Petitioners failed to show how the marriage of Simbol,
then a Sheeting Machine Operator, to Alma Dayrit, then an employee of the Repacking Section, could be
detrimental to its business operations. Neither did petitioners explain how this detriment will happen in the case
of Wilfreda Comia, then a Production Helper in the Selecting Department, who married Howard Comia, then a
helper in the cutter-machine. The policy is premised on the mere fear that employees married to each other will
be less efficient. If we uphold the questioned rule without valid justification, the employer can create policies
based on an unproven presumption of a perceived danger at the expense of an employees right to security of
tenure.

Petitioners contend that their policy will apply only when one employee marries a co-employee, but they are free
to marry persons other than co-employees. The questioned policy may not facially violate Article 136 of the
Labor Code but it creates a disproportionate effect and under the disparate impact theory, the only way it could
San Beda College of Law 175
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pass judicial scrutiny is a showing that it is reasonable despite the discriminatory, albeit disproportionate, effect.
The failure of petitioners to prove a legitimate business concern in imposing the questioned policy cannot
prejudice the employees right to be free from arbitrary discrimination based upon stereotypes of married
persons working together in one company.

San Beda College of Law 176


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

SEXUAL HARASSMENT

73. MA. LOURDES T. DOMINGO v. ROGELIO I. RAYALA


G.R. No. 155831 February 18, 2008
NACHURA, J.:

DOCTRINES:
1. It is not necessary that the demand, request or requirement of a sexual favor be articulated in a
categorical oral or written statement to be considered as sexual harassment.
2. The Chief Executive does not have unfettered discretion to impose a penalty other than the penalty
provided by law for sexual harassment.

FACTS:
Petitioner Ma. Lourdes T. Domingo, then Stenographic Reporter III at the NLRC, filed a Compliant for sexual
harassment against Respondent, NLRC Chairman Rogelio I. Rayala before the Secretary of Labor and
Employment. She claimed that the respondent committed the following acts:
1. Holding and squeezing her shoulders;
2. Running his fingers across her neck and tickling her ear;
3. Having inappropriate conversations wither her;
4. Giving her money allegedly for school expenses with a promise of future privileges; and
5. Making statements with unmistakable sexual overtones.

A committee was created to investigate the said allegations. The said committee found the respondent guilty of
the offense charged and recommended the imposition of the minimum penalty provided under AO 250, which it
erroneously stated as suspension for 6 months. However, the Secretary of Labor and employment
recommended that the penalty should be suspension for 6 months and 1 day, in accordance with AO 250. The
Office of the President, through Executive Secretary Zamora, concurred with the findings of the Committee but
imposed the penalty of dismissal. The respondent assailed the decision claiming his acts do not constitute
sexual harassment.

CA RULING: The CA held that there was sufficient evidence on record to create moral certainty that the
Respondent committed the acts he was charged with.

ISSUE:
1. Whether or not the Respondent is guilty of sexual harassment?
2. Whether or not the Office of the President may impose the penalty of dismissal?

SC RULING:
1. Yes. If we were to test Rayalas acts strictly by the standards set in Section 3, RA 7877, he would still
be administratively liable. It is true that this provision calls for a "demand, request or requirement of a
sexual favor." But it is not necessary that the demand, request or requirement of a sexual favor be
articulated in a categorical oral or written statement. It may be discerned, with equal certitude, from the
acts of the offender. Holding and squeezing Domingos shoulders, running his fingers across her neck
and tickling her ear, having inappropriate conversations with her, giving her money allegedly for school
expenses with a promise of future privileges, and making statements with unmistakable sexual
overtones all these acts of Rayala resound with deafening clarity the unspoken request for a sexual
favor.

Likewise, contrary to Rayalas claim, it is not essential that the demand, request or requirement be
made as a condition for continued employment or for promotion to a higher position. It is enough that
the respondents acts result in creating an intimidating, hostile or offensive environment for the
employee.45 That the acts of Rayala generated an intimidating and hostile environment for Domingo is
clearly shown by the common factual finding of the Investigating Committee, the OP and the CA that
Domingo reported the matter to an officemate and, after the last incident, filed for a leave of absence
and requested transfer to another unit.
2. No. Under AO 250, the penalty for the first offense is suspension for six (6) months and one (1) day to
one (1) year, while the penalty for the second offense is dismissal.52 On the other hand, Section 22(o),
Rule XVI of the Omnibus Rules Implementing Book V of the Administrative Code of 198753 and Section
San Beda College of Law 177
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52 A(15) of the Revised Uniform Rules on Administrative Cases in the Civil Service54 both provide that
the first offense of disgraceful and immoral conduct is punishable by suspension of six (6) months and
one (1) day to one (1) year. A second offense is punishable by dismissal.

Under the Labor Code, the Chairman of the NLRC shall hold office during good behavior until he or she
reaches the age of sixty-five, unless sooner removed for cause as provided by law or becomes
incapacitated to discharge the duties of the office.55

In this case, it is the President of the Philippines, as the proper disciplining authority, who would
determine whether there is a valid cause for the removal of Rayala as NLRC Chairman. This power,
however, is qualified by the phrase "for cause as provided by law." Thus, when the President found that
Rayala was indeed guilty of disgraceful and immoral conduct, the Chief Executive did not have
unfettered discretion to impose a penalty other than the penalty provided by law for such offense. As
cited above, the imposable penalty for the first offense of either the administrative offense of sexual
harassment or for disgraceful and immoral conduct is suspension of six (6) months and one (1) day to
one (1) year. Accordingly, it was error for the Office of the President to impose upon Rayala the penalty
of dismissal from the service, a penalty, which can only be imposed upon commission of a second
offense.

San Beda College of Law 178


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74. PHILIPPINE AEOLUS AUTOMOTIVE UNITED CORPORATION and/or FRANCIS CHUA v. NATIONAL
LABOR RELATIONS COMMISSION and ROSALINDA C. CORTEZ, respondents.
G.R. No. 124617 April 28, 2000
BELLOSILLO, J.:

SEXUAL HARASSMENT

DOCTRINE:
The gravamen of the offense in sexual harassment is not the violation of the employee's sexuality but the abuse
of power by the employer.
FACTS:
Petitioner Philippine Aeolus Automotive United Corporation (PAAUC) is a corporation duly organized and
existing under Philippine laws, petitioner, Francis Chua is its President while private respondent Rosalinda C.
Cortez was a company nurse of Petitioner Corporation until her termination.

PAAUC dismissed Private Respondent from service on the ground of serious misconduct, gross habitual neglect
and fraud or willful breach of trust. Among the acts she allegedly committed is throwing a stapler at Plant
Manager William Chua, her superior and uttering invectives against him. She filed with the Labor Arbiter a
th
complaint for illegal dismissal, non-payment of annual service incentive leave, 13 month pay and damages
against PAAUC and its President Francis Chua. She claimed as a defense for the offense charged against her
that William Chua manifested a special liking for her. She claimed that William Chua would oftentimes invite her
for a date, make sexual advances touching her hands, putting his arms around her shoulders, running his
finger on her arms and telling her she looked beautiful. The special treatment and sexual advances continued
during her employment for 4 years but she never reciprocated his flirtations, until finally, she noticed that his
attitude toward her changed. He made her understand that if she would not give in to his sexual advances he
would cause her termination from the service; and he made good his threat when he started harassing her.

LA RULING:
The Labor Arbiter rendered a decision holding the termination of Cortez as valid and legal, at the same time
dismissing her claim for damages for lack of merit.

NLRC RULING:
The NLRC disbelieved the explanation proffered by private respondent on the ground she never filed a
complaint against William Chua for more than 4 years.

ISSUE:
Whether or not William Chua committed acts of sexual harassment against Cortez?

SC RULING:
Yes. The gravamen of the offense in sexual harassment is not the violation of the employee's sexuality but the
abuse of power by the employer. Any employee, male or female, may rightfully cry "foul" provided the claim is
well substantiated. Strictly speaking, there is no time period within which he or she is expected to complain
through the proper channels. The time to do so may vary depending upon the needs, circumstances, and more
importantly, the emotional threshold of the employee.
Private respondent admittedly allowed four (4) years to pass before finally coming out with her employer's
sexual impositions. Not many women, especially in this country, are made of the stuff that can endure the agony
and trauma of a public, even corporate, scandal. If petitioner corporation had not issued the third memorandum
that terminated the services of private respondent, we could only speculate how much longer she would keep
her silence. Moreover, few persons are privileged indeed to transfer from one employer to another. The dearth
of quality employment has become a daily "monster" roaming the streets that one may not be expected to give
up one's employment easily but to hang on to it, so to speak, by all tolerable means. Perhaps, to private
respondent's mind, for as long as she could outwit her employer's ploys she would continue on her job and
consider them as mere occupational hazards. This uneasiness in her place of work thrived in an atmosphere of
tolerance for four (4) years, and one could only imagine the prevailing anxiety and resentment, if not bitterness,
that beset her all that time. But William Chua faced reality soon enough. Since he had no place in private
respondent's heart, so must she have no place in his office. So, he provoked her, harassed her, and finally
dislodged her; and for finally venting her pent-up anger for years, he "found" the perfect reason to terminate her.

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ARTICLE 141 (now Art. 139) - Coverage

75. APEX MINING COMPANY, INC. v. NATIONAL LABOR RELATIONS COMMISSION and SINCLITICA
CANDIDO
G.R. No. 94951 April 22, 1991
GANCAYCO, J.:

HOUSEHELPER OR DOMESTIC SERVANT

DOCTRINE:
The definition provided by the Labor Code of the terms househelper or domestic servant cannot be
interpreted to include househelp or laundrywomen working in staffhouses of a company, like petitioner who
attends to the needs of the company's guest and other persons availing of said facilities

FACTS:
Private respondent Sinclita Candida was employed by petitioner Apex Mining Company, Inc. to perform laundry
services at its staff house. In the beginning, she was paid on a piece rate basis. However, she was then paid on
a monthly basis at Php 250.00 a month, which was ultimately increased, to Php 575.00 a month. On 18
December 1987, while she was attending to her assigned task and she was hanging her laundry, she
accidentally slipped and hit her back on a stone. As a result of which, she was not able to continue her work.
She was offered the amount of Php 2,000.00, which was eventually increased to Php 5,000.00, to persuade her
to quit her job, but she refused. The petitioner subsequently disallowed her to return to work. She filed a request
for assistance with the DOLE.

LA RULING:
th
The Labor Arbiter ordered the petitioner to pay her the following: 1) salary; 2) Emergency Living; 3) 13 Month
Pay; and 4) Separation Pay. The petitioner appealed the decision to the NLRC.

NLRC RULING:
The NLRC dismissed the appeal for lack of merit and affirmed the appealed decision. A motion for
reconsideration thereof was likewise denied.

ISSUE: Whether or not private responded should be treated as a mere househelper or domestic servant and not
as a regular employee entitled to the amounts granted by the Labor Arbiter?

SC RULING:
No. Under Rule XIII, Section l(b), Book 3 of the Labor Code, as amended, the terms "househelper" or "domestic
servant" are defined as follows:

The term "househelper" as used herein is synonymous to the term "domestic servant" and shall refer to
any person, whether male or female, who renders services in and about the employer's home and which
services are usually necessary or desirable for the maintenance and enjoyment thereof, and ministers
exclusively to the personal comfort and enjoyment of the employer's family.

The definition cannot be interpreted to include househelp or laundrywomen working in staffhouses of a


company, like petitioner who attends to the needs of the company's guest and other persons availing of said
facilities. By the same token, it cannot be considered to extend to then driver, houseboy, or gardener exclusively
working in the company, the staffhouses and its premises. They may not be considered as within the meaning of
a "househelper" or "domestic servant" as above-defined by law.

The criteria is the personal comfort and enjoyment of the family of the employer in the home of said employer.
While it may be true that the nature of the work of a househelper, domestic servant or laundrywoman in a home
or in a company staffhouse may be similar in nature, the difference in their circumstances is that in the former
instance they are actually serving the family while in the latter case, whether it is a corporation or a single
proprietorship engaged in business or industry or any other agricultural or similar pursuit, service is being
rendered in the staffhouses or within the premises of the business of the employer. In such instance, they are
employees of the company or employer in the business concerned entitled to the privileges of a regular
employee.

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BOOK IV Healt, Safety and Social Welfare Benefits

76. GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS) v. COURT OF APPEALS and HEIRS OF
ABRAHAM CATE, represented by DOROTHY CATE
G.R. No. 124208 January 28, 2008
AZCUNA, J.:

LIBERAL CONSTRUCTION OF EMPLOYEES COMPENSATION ACT

DOCTRINE:
If in the present state of science, the proof referred by law to be present by the deceased claimant was
unavailable and impossible to comply with, the condition must be deemed as not imposed.

FACTS:
On March 6, 1974, Abraham Cate joined the military service as a Rifleman of the Philippine Navy. In 1975, he
was designated as Action Clerk. On Feburary 22, 1986, he was transferred to the now defunct Philippine
Constabulary with the rank of Technical Sergeant and was later promoted to Master Sergeant. On January 2,
1991, he was absorbed in the Philippine National Police with the rank of Senior Police Officer IV.

He was diagnosed of having Osteoblastic Osteosarcoma in his left cheek. He underwent Total Maxillectomy
with Orbital Exenteration in the PGH. However, his disease recurred and he underwent debulking of the recent
tumor at PGH. The post-operative course was uneventful and he underwent radiotherapy. He was then
compulsorily retired from the PNP. He filed a claim for income benefits with the GSIS under PD No. 626 as
amended. However, his claim was denied by the GSIS on the ground Osteosarcoma is not considered an
occupational disease. After his death, his wife and 2 children appealed the decision of the GSIS to the ECC.

ECC Ruling: The ECC affirmed the decision of the GSIS and dismissed the case for lack of merit.

CA RULING: The CA reversed and set aside the decision of the ECC on the ground the Employees
Compensation Act should be liberally construed in favor of applicant.

ISSUE:
Whether or not the ailment of the late Abraham is compensable under the present law on employees
compensation?

SC RULING:
Yes. The present law on compensation allows certain diseases to be compensable if it is sufficiently proven that
the risk of contract it is increased by the working conditions. The application of the rules would mean that absent
any proof that the risk of contracting the ailment was increased by the working conditions of the late Abraham,
private respondents would not be entitled to compensation. Considering, however, that it is practically
undisputed that under the present state of science, the proof referred by the law to be presented by the
deceased private respondent claimant was unavailable and impossible to comply with, the condition must be
deemed as not imposed.
Petitioners failure to present positive evidence of a causal relation of the illness and his working conditions is
due to the pure and simple lack of available proof to be offered in evidence. Verily, to deny compensation to
osteosarcoma victims who will definitely be unable to produce a single piece of proof to that effect is unrealistic,
illogical and unfair. At the very least, on a very exceptional circumstance, the rule on compensability should be
relaxed and be allowed to apply to such situations. To disallow the benefit will even more add up to the
sufferings, this time, for the ignorance of the inability of mankind to discover the real truth about cancer.

San Beda College of Law 181


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77. DOMINGA A. SALMONE v. COMPENSATION COMMISSION and SOCIAL SECURITY SYSTEM
G.R. No. 142392 September 26, 2000
PARDO, J.:

DEGREE OF PROOF REQUIRED UNDER PD NO. 626

DOCTRINE:
The claimant must show, at least, by substantial evidence that the development of the disease is brought largely
by the conditions present in the nature of the job. What the law requires is a reasonable work-connection and
not a direct causal relation.

FACTS:
The Paul Geneve Entertainment Corporation employed petitioner Dominga A. Salmone as a sewer. She was
later promoted as the officer-in-charge and the over-all custodian in the Sewing Department. However, she
started to feel chest pains, which forced her to file a leave of absence from work because they have become
unbearable. Upon medical examination, she was diagnosed with Atherosclerotic heart disease, Atrial Fibrillation,
Cardiac Arrhythmia. Upon recommendation of her doctor, she resigned from her work hoping that with a much-
need complete rest, she will be cured. She then filed a disability claim with the SSS from the Employees
compensation fund. However, the SSS denied her claim including her motion for reconsideration. Thus she
appealed the said decision to the ECC.

ECC Ruling: The ECC dismissed her appeal for want of merit.

CA RULING: The CA dismissed the petition on the ground that the petitioners illness was not compensable
because petitioner failed to adduce substantial evidence proving any of the condition of compensability.

ISSUE: Whether or not the petitioners illness is compensable?

SC RULING:
Yes. Under the Labor Code, as amended, the law applicable to the case at bar, in order for the employee to be
entitled to sickness or death benefits, the sickness or death resulting therefrom must be or must have resulted
from either (a) any illness definitely accepted as an occupational disease listed by the Commission, or (b) any
illness caused by employment, subject to proof that the risk of contracting the same is increased by working
conditions.
In this case, petitioner has shown by uncontroverted evidence that in the course of her employment, due to work
related stress, she suffered from severe chest pains which caused her to take a rest, per physician's advice, and
ultimately to resign from her employment. She was diagnosed as suffering from "atherosclerotic heart disease,
atrial fibrillation, cardiac arrhythmia" which, as heretofore stated, is included within the term cardiovascular
diseases.
Indisputably, cardiovascular diseases, which, as herein above-stated include atherosclerotic heart disease, atrial
fibrillation, cardiac arrhythmia, are listed as compensable occupational diseases in the Rules of the Employees'
Compensation Commission, hence, no further proof of casual relation between the disease and claimant's work
is necessary.
The degree of proof required under P. D. No. 626, is merely substantial evidence, which means, "such relevant
evidence as a reasonable mind might accept as adequate to support a conclusion." The claimant must show, at
least, by substantial evidence that the development of the disease is brought largely by the conditions present in
the nature of the job. What the law requires is a reasonable work-connection and not a direct causal relation. It
is enough that the hypothesis on which the workmen's claim is based is probable. Medical opinion to the
contrary can be disregarded especially where there is some basis in the facts for inferring a work- connection.
Probability, not certainty, is the touchtone.

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78. HEIRS OF DEAUNA v. FIL STAR MARITIME CORPORATION
G.R. No. 191563 June 20, 2012
REYES, J.:

THE DEATH OF A SEAFARER IS COMPENSABLE WHEN IT OCCURS WHILE STILL IN THE EMPLOYENT
OF THE EMPLOYER.

DOCTRINE:
Article 22.1(b) considers an employment as terminated if a seafarer signs off from the vessel due to sickness,
but subject to the provisions of Article 29.

Article 29.1 of the IBF/AMOSUP/IMMAJ CBA provides that the death of a seafarer, for any cause, is
compensable when it occurs while he is in the employment of the company. Article 29.4, on the other hand,
clarifies that the seafarer shall be considered as in the employment of the company for so long as the provisions
of Articles 25 and 26 apply and provided the death is directly attributable to sickness or injury that caused the
seafarer's employment to be terminated in accordance with Article 22.1(b).

Under Article 25.3, a seafarer repatriated to the port of his engagement, unfit as a result of sickness, shall be
entitled to medical attention at the company's expense for up to a maximum period of 130 days after
repatriation, subject to the submission of satisfactory medical reports. Article 26.2 further states that a seafarer
shall likewise be entitled to sick pay at the rate equivalent to his basic wage while he remains sick up to a
maximum of 130 days. Article 26.4 allows continued entitlement to sick pay beyond the 130 day period,
reckoned from repatriation, provided satisfactory medical reports shall be submitted and endorsed where
necessary, by a company-appointed doctor.

FACTS:
Edwin boarded on August 1, 2004 for a nine-month engagement as Chief Engineer of the Sanko. He suffered
from abdominal pains and was found to have kidney stones for which he was given medication. Edwin was then
repatriated. Respondents claimed that Edwin requested for an early termination while petitioners averred that
Edwin was repatriated due to the latter's body weakness and head heaviness. Edwin was discovered to
have Glioblastoma WHO Grade 4 (GBM) . It was then noted that Edwin could have acquired the cancer as a
result of radiation or vinyl products, or had worked in the vicinity of power lines.

Respondent claimed that out of compassion and intent to avoid legal battles, they extended to Edwin an
allowance of US$6,033.36. They also offered the payment of US$60,000.00 disability benefits despite having no
obligation to do so on their part as GBM can only be considered as work-related if a person who suffers
therefrom had exposures to radiation or vinyl products, or had worked in the vicinity of power lines. The
respondents claimed that Edwin did not have such exposure while under their employ. Petitioners then asked
for disability benefits, but were denied by respondents. They then filed a complaint for disability benefits,
medical and transportation reimbursements, moral and exemplary damages and attorney's fees were filed
before the National Labor Relations Commission (NLRC). Edwin died on April 13, 2006 during the pendency of
the proceedings. He was substituted therein by the petitioners who sought the payment of death benefits under
the International Bargaining Forum/Associated Marine Officers and Seamens Union of the
Philippines/International Mariners Management Association of Japan Collective Bargaining Agreement
(IBF/AMOSUP/IMMAJ CBA).

Voluntary Arbitrator Rene Ofreneo (VA Ofreneo), invoking the provisions of the Philippine Overseas
Employment Administration Standard Employment Contract (POEA SEC) and the IBF/AMOSUP/IMMAJ CBA,
awarded death benefits to the petitioners. The Court of Appeals reversed the decision of VA Ofreneo.
Petitioners contend that they are entitled to death benefits.

ISSUE: Whether or not within the purview of the IBF/AMOSUP/IMMAJ CBA, Edwin's death on April 13, 2006, or
more than a year from his repatriation, can be considered as one occurring while he was still in the employment
of the respondents.

SC RULING:
YES. Edwin's death can be considered can be considered as one occuring while he was still in the employment
of respondents. Under the IBF/AMOSUP/IMMAJ CBA provisions, Edwin's death a little more than a year from
his repatriation can still be considered as one occurring while he was still under the respondents' employ.
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From the foregoing, the SC concluded that at the time of Edwin's death on April 13, 2006 due to GBM, he was
still in the employment of the respondents. While it is true that Article 22.1 of the IBF/AMOSUP/IMMAJ CBA
considers a seafarer as terminated when he signs off from the vessel due to sickness, the foregoing is subject to
the provisions of Article 29. Under Article 29, a seafarer remains under the respondents' employ as long as the
former is still entitled to medical assistance and sick pay, and provided that the death which eventually occurs is
directly attributable to the sickness which caused the seafarer's employment to be terminated. As discussed
above, the company-designated physician, Dr. Cruz, in effect admitted that Edwin was repatriated due to
symptoms which a person suffering from GBM normally exhibits. The petitioners are, however, not entitled to
moral and exemplary damages and attorney's fees.

79. DEBAUDIN v. SSS


G.R. No. 148308 September 21, 2007
AZCUNA, J.:

FOR A NON-OCCUPATIONAL DISEASE(those not included in the list of occupational disease


enumerated under Annex "A" of P.D. 626) TO BE COMPENSABLE, THE CLAIMANT MUST
SUBSTANTIATE HIS CLAIM WITH EVIDENCE THAT HIS EMPLOYMENT OR WORKING CONDITIONS
CONTRIBUTED IN CONTRACTING THE AILMENT

DOCTRINE:
An employee is entitled to compensation benefits if the sickness is a result of an occupational disease listed
under the Rules on Employees' Compensation; or in case of any other illness, if it is caused by employment,
subject to proof that the risk of contracting the same is increased by the working conditions. This is as it should
be because for an illness to be compensable, it must be (1) directly caused by such employment; (2) aggravated
by the employment; or (3) the result of the nature of such employment. Jurisprudence provides that to establish
compensability of a non-occupational disease, reasonable proof of work-connection and not direct causal
relation is required.

FACTS:
Petitioner, Roberto Debaudin, is a seaman by profession as a utility staff who performed cleaning chemical-spill-
oil on deck, slat dislodging, and spraying naphtha chemical and washing dirt and rusts inside the tank. 18 years
after, Debaudin sought medical assistance after he experienced episodes of bilateral blurring of vision and was
later diagnosed of chronic open angle glaucoma.

On account of his ailment, petitioner filed before the SSS a claim for compensation benefits under P.D. No. 626
claiming that the strenuous tasks required climbing, bending over and running for so many times acts which a
medical book considered as contributory factors that would increase intraocular pressure which causes
glaucoma. He also adds that he was also subjected to emotional strains of going through the perils of the sea
and homesickness for being away from his family during the entire duration of the contracts. He, thus, alleges
that his employment as a seaman contributed, even in a small degree, to the development of his ailment.
His claim, however, was denied by SSS on the ground that there is no causal relationship between the illness
and his job as a seaman.

EMPLOYEES COMPENSTAION COMMISSION (EEC): EEC denied Debaudins motion for reconsideration
holding that Debaudins Chronic Open Angle Glaucoma is not an occupational disease under the law. Thus, he
is required to show by substantial evidence that the nature of his job as a Seaman had increased the risk of
contracting the disease. However, appellant failed to discharge the burden of proof required by the law.

CA RULING: The CA dismissed the case on the ground that petitioner failed to adduce substantial evidence
supporting the conclusion that the working conditions as a seaman increased the risk of contracting his chronic
open angle glaucoma.

ISSUE: Whether or not the work of Debaudin as a seaman contributed even in a small degree in or had
increased the risk of contracting his chronic open angle glaucoma.

SC RULING:
NO. In the present case, petitioners chronic open angle glaucoma is not listed as an occupational disease;
hence, he has the burden of proving by substantial evidence, or such relevant evidence which a reasonable

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mind might accept as adequate to justify a conclusion, that the nature of his employment or working conditions
increased the risk of contracting the ailment or that its progression or aggravation was brought about thereby.

It is enough that the hypothesis on which the workmen's claim is based is probable. Probability, not the ultimate
degree of certainty, is the test of proof in compensation proceedings since in carrying out and interpreting the
provisions of the Labor Code and its implementing rules and regulations the primordial and paramount
consideration is the employees' welfare.

Other than positing petitioners allegations, petitioner presented no competent medical history, records or
physicians report to objectively substantiate the claim that there is a reasonable nexus between his work and
his ailment. Without saying more, his bare allegations do not ipso facto make his illness compensable. Awards
of compensation cannot rest on speculations or presumptions. The claimant must present concrete evidence to
prove a positive proposition.

San Beda College of Law 185


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80. AUSTRIA v. CA and EMPLOYEES COMPENSATION COMMISSION
G.R. No. 146636 August 12, 2002
PUNO, J.:

THE 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;

DOCTRINE:
The 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; and It is partial and permanent if as a result
of the injury or sickness, the employee suffers a permanent partial loss of the use of any part of his body.

FACTS:
Petitioner Pablo A. Austria was employed as bag piler at Central Azucarera de Tarlac from June 1, 1977 to July
20, 1997. In 1994, petitioner began to feel severe back pain. In 1998, it was revealed that he was suffering from
osteoarthritis of the lumbar spine. Thus petitioner filed with the SSS a claim for compensation benefits under PD
626 as amended. The claim was granted and petitioner was awarded permanent partial disability benefits.
Petitioner thereafter requested the SSS for conversion of his permanent partial disability benefit to permanent
total disability benefit. The SSS denied the request

ECC RULING: On appeal, the ECC affirmed the decision of the SSS. The ECC held that considering the degree
of his disability at the time he was separated from the service, petitioner has already availed of the maximum
benefits to which he is entitled on account of his osteoarthritis.

CA RULING: The appellate court dismissed the petition, ruling that the law does not allow the conversion of
permanent partial disability to permanent total disability

ISSUE: Whether or not the Honorable Court of Appeals erred in denying the claim for additional benefits in favor
of the petitioner and not allowing the conversion of his (petitioner) permanent partial disability to permanent total
disability

SC RULING:
YES. The test of whether or not an employee suffers from permanent total disability is a showing of the capacity
of the employee to continue performing his work notwithstanding the disability he incurred. Thus, if by reason of
the injury or sickness he sustained, the employee is unable to perform his customary job for more than 120 days
and he does not come within the coverage of Rule X of the Amended Rules on Employees Compensability
(which, in more detailed manner, describes what constitutes temporary total disability), then the said employee
undoubtedly suffers from permanent total disability regardless of whether or not he loses the use of any part of
his body.

PD 626 as amended provides three types of disability benefits to qualified employees: (1) temporary total
disability, (2) permanent total disability, and (3) permanent partial disability. In the case at bar, petitioner was
granted by the SSS, as affirmed by the ECC, permanent partial disability benefit, but he seeks to avail of
permanent total disability benefit. Under Section 2 Rule VII of the Amended Rules on Employees
Compensation, 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; and a disability is partial and
permanent if as a result of the injury or sickness, the employee suffers a permanent partial loss of the use of any
part of his body.

Total disability does not require that the employee be absolutely disabled, or totally paralyzed. What is
necessary is that the injury must be such that she cannot pursue her usual work and earn therefrom. Applying
the foregoing standards, we find petitioner entitled to permanent total disability benefit under the law. Petitioner
has been employed as bag piler for twenty (20) years at the Central Azucarera de Tarlac. His duties require him
to carry heavy loads of refined sugar and to perform other manual work. Since his work obviously taxes so much
on his back, his illness which affects his lumbar spine renders him incapable of doing his usual work as bag
piler. Hence, his disability to perform his regular duties may be considered total and permanent.

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81. GATUS v. SSS


G.R. No. 174725 January 26, 2011
LEONARDO-DE CASTRO, J.:

A CLAIMANT MUST SHOW, AT LEAST BY SUBSTANTIAL EVIDENCE, THAT THE DEVELOPMENT OF


THE DISEASE WAS BROUGHT ABOUT LARGELY BY THE CONDITIONS PRESENT IN THE NATURE OF
THE JOB.

DOCTRINE:
His disease not being listed as an occupational disease, he was expected to show that the illness or the fatal
disease was caused by his employment and the risk of contracting the disease was increased or aggravated by
the working conditions. His proof would constitute a reasonable basis for arriving at a conclusion that the
conditions of his employment had caused the disease or that such working conditions had aggravated the risk of
contracting the illness or the fatal disease.

FACTS:
Gatus worked at the Central Azucarera de Tarlac beginning 1972. He was a covered member of the SSS and
was certified as being fit to work before employment. He optionally retired from Central Azucarera de Tarlac
upon reaching 30 years of service at the age of 62. He was diagnosed to be suffering from Coronary Artery
Disease (CAD): Triple Vessel and Unstable Angina in 1995. His medical records showed him to be hypertensive
for 10 years and a smoker. Thus he was given by the SSS EC/SSS Permanent Partial Disability (PPD) benefits.
In 2003, an SSS audit revealed the need to recover the EC benefits already paid to him on the ground that his
CAD, being attributed to his chronic smoking, was not work-related. He elevated the matter to the ECC, which
denied his appeal on December 10, 2004, essentially ruling that although his CAD was a cardiovascular disease
listed as an occupational disease under Annex A of the Implementing Rules on Employees Compensation,
nothing on record established the presence of the qualifying circumstances for responsibility; that it was
incumbent upon him to prove that the nature of his previous employment and the conditions prevailing therein
had increased the risk of contracting his CAD; and that he had failed to prove this requisite. Hence, this
recourse, wherein he contends that he had contracted the disease due to the presence of harmful fuel smoke
emission of methane gas from a nearby biological waste digester and a railway terminal.

CA RULING: CA affirmed the ruling of SSS ruling that petitioner failed to submit substantial evidence that might
have shown that he was entitled to the benefits he had applied for.

ISSUE: Whether the Court of Appeals committed grave abuse of discretion in affirming the finding of the ECC
that petitioners ailment is not compensable under Presidential Decree No. 626, as amended

SC RULING: The court held NO. Gatus was diagnosed to have suffered from CAD; Triple Vessel and Unstable
Angina, diseases or conditions falling under the category of Cardiovascular Diseases which are not considered
occupational diseases under the Amended Rules on Employees Compensation. His disease not being listed as
an occupational disease, he was expected to show that the illness or the fatal disease was caused by his
employment and the risk of contracting the disease was increased or aggravated by the working conditions. His
proof would constitute a reasonable basis for arriving at a conclusion that the conditions of his employment had
caused the disease or that such working conditions had aggravated the risk of contracting the illness or the fatal
disease. While he might have been exposed to various smoke emissions at work for 30 years, he did not submit
satisfactory evidence proving that the exposure had contributed to the development of his disease or had
increased the risk of contracting the illness. Neither did he show that the disease had progressed due to
conditions in his job as a factory worker. In fact, he did not present any physicians report in order to substantiate
his allegation that the working conditions had increased the risk of acquiring the cardiovascular disease.
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San Beda College of Law 188


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82. REPUBLIC OF THE PHILIPPINES v. MARIANO
G.R. No. 139455 March 28, 2003
QUISUMBING, J.:

WHERE IT WAS ESTABLISHED THAT THE CLAIMANTS AILMENT OCCURRED DURING AND IN THE
COURSE OF HIS EMPLOYMENT, IT MUST BE PRESUMED THAT THE NATURE OF THE CLAIMANTS
EMPLOYMENT IS THE CAUSE OF THE DISEASE

DOCTRINE:
For the sickness to be compensable, the same must be an occupational disease included in the list provided,
with the conditions set therein satisfied; otherwise, the claimant must show proof that the risk of contracting it is
increased by the working conditions.

FACTS:
For an eleven-year period, respondent Pedro Mariano was an employee of LGP Printing Press. During his
employment, Mariano worked in various capacities, including that of a machine operator, paper cutter,
monotype composer, film developer, and supervisor of the printing press. Sometime in February 1994, Marianos
service abruptly ended when he could no longer perform any work due to a heart ailment. An electrocardiograph
test revealed that he was suffering from Incomplete Right Bundle Branch Block. Respondent had consulted Dr.
Rogelio Mariano, whose diagnosis showed he was suffering from Parkinsons disease and hypertension.
Mariano filed a claim for employees compensation benefit with the SSS. In its medical evaluation dated April 15,
1997, SSS denied his claim on the ground that there was no causal connection between his ailment and his job
as film developer. The ECC ultimately dismissed the case on the ground that the claimant failed to establish a
causal connection between Parkinsons disease and the conditions of the printing press.

CA RULING: The Court of Appeals found that the nature of petitioners work at LGP resulted in his exposure to
various toxic chemicals, which is a possible cause of Parkinsons Disease. As to his hypertension, the appellate
court ruled that the respondents duties as machine operator and paper cutter involved physical pressure and
restlessness, since he was required to meet urgent deadlines for rush print orders. This in turn caused
respondent to suffer from stress and anxiety. In sum, the appellate court held that respondent had substantially
established the connection between the cause of his ailments and the nature of his work.

ISSUE: Whether or not Mariano was able to prove that his employment had a causal relation that with his
ailments: Parkinson's and Hypertension.

SC RULING:
YES. Workmens Compensation cases are governed by the law in force at the time the claimant contracted his
illness. In the instant case, the applicable rule is Section 1 (b), Rule III, of the Rules Implementing P.D. No. 626.
Under said Rule, for the sickness to be compensable, the same must be an occupational disease included in the
list provided, with the conditions set therein satisfied; otherwise, the claimant must show proof that the risk of
contracting it is increased by the working conditions.

As to Parkinsons disease, while it is true that this disease is not included in the list of compensable diseases
under the law then prevailing, it was found by the Court of Appeals that the conditions prevailing at LGP largely
led to the progression of the ailment. The respondents functions entailed constant exposure to hazardous or
toxic chemicals such as carbon disulfate, carbon monoxide, or manganese. As the ECC itself admitted in its
judgment, the exposure to these toxic substances is among the possible causes of this disease. Where it was
established that the claimants ailment occurred during and in the course of his employment, it must be
presumed that the nature of the claimants employment is the cause of the disease.

Second, even if we were to assume that Parkinsons Disease is not compensable, there can be no question that
Essential Hypertension is a compensable illness, following our ruling in Government Service Insurance System
v. Gabriel, that hypertension and heart ailments are compensable illnesses.

In upholding respondent Marianos claim, the Court of Appeals found that among the various jobs the
respondent performed were those of a machine operator, paper cutter, monotype composer, and later as
supervisor, most of which are physical and stressful in character. In established cases of Essential
Hypertension, the blood pressure fluctuates widely in response to emotional stress and physical activity. Given
the nature of his assigned job and the printing business, with its tight deadlines entailing large amounts of rush
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work, indeed the emotional and physical stress of respondents work at the printing press caused, and then
exacerbated, his hypertension. On this score, we hold that the Court of Appeals did not err in liberally construing
the rules implementing P.D. No. 626. In matters of labor and social legislation, it is well established that doubts
in the interpretation and application of the law are resolved liberally in favor of the worker and strictly against the
employer.

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83. MAGSAYSAY MARITIME CORPORATION and/or WASTFEL-LARSEN MANAGEMENT A/S v. OBERTO
LOBUSTA
G.R. No. 177578 January 25, 2012
VILLARAMA, JR., J.

TEMPORARY TOTAL DISABILITY

DOCTRINE:
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.

FACTS:
Petitioner Magsaysay Maritime Corporation is a domestic corporation and the local manning agent of the vessel
MV "Fossanger" and of petitioner Wastfel-Larsen Management A/S. Respondent Oberto S. Lobusta is a
seaman who has worked for Magsaysay Maritime Corporation. Lobusta boarded MV "Fossanger" on March 16,
1998. After two months, he complained of breathing difficulty and back pain. On May 12, 1998, while the vessel
was in Singapore, Lobusta was admitted at Gleneagles Maritime Medical Center and was diagnosed to be
suffering from severe acute bronchial asthma with secondary infection and lumbosacral muscle strain. Dr. C K
Lee certified that Lobusta was fit for discharge on May 21, 1998, for repatriation for further treatment. Upon
repatriation, Lobusta was referred to Metropolitan Hospital. The medical coordinator, Dr. Robert Lim, reported
that Lobusta has been diagnosed to have a moderate obstructive pulmonary disease which tends to be a
chronic problem, such that Lobusta needs to be on medications indefinitely. Petitioners "then faced the need for
confirmation and grading by a second opinion" and "it took the parties time to agree on a common doctor, until
they agreed on Dr. Camilo Roa." According to Dr. Roa, Lobusta is not physically fit to resume his normal work
as a seaman due to the persistence of his symptoms. Magsaysay Maritime Corporation suggested that Lobusta
be examined by another company-designated doctor for an independent medical examination. Dr. David opined
that Mr. Lobusta ought not to be considered fit to return to work as an Able Seaman. As no settlement was
reached despite the above findings, the Labor Arbiter ordered the parties to file their respective position papers.

LA RULING: ordered petitioners to pay Lobusta (a) US$2,060 as medical allowance, (b) US$20,154 as
disability benefits, and (c) 5% of the awards as attorneys fees. The Labor Arbiter held that provisions of the
Labor Code, as amended, on permanent total disability do not apply to overseas seafarers.

NLRC RULING: Lobusta appealed. The NLRC dismissed his appeal and affirmed the Labor Arbiters decision.
The NLRC ruled that Lobustas condition may only be considered permanent partial disability.

CA RULING: The CA ruled that Lobusta's disability brought about by his bronchial asthma is permanent and
total as he had been unable to work since May 14, 1998 up to the present or for more than 120 days, and
because Dr. David found him not fit to return to work as an able seaman.

ISSUE: Does the poea contract considers the mere lapse of more than one hundred twenty (120) days as total
and permanent disability?

SC RULING:
No. 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.

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.

Upon repatriation, Lobusta was first examined by the Pulmonologist and Orthopedic Surgeon on May 22, 1998.
The maximum 240-day (8-month) medical-treatment period expired, but no declaration was made that Lobusta
is fit to work. Nor was there a declaration of the existence of Lobustas permanent disability. On February 16,
1999, Lobusta was still prescribed medications for his lumbosacral pain and was advised to return for
reevaluation. May 22, 1998 to February 16, 1999 is 264 days or 6 days short of 9 months.

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Dr. Roas clinical summary also shows that as of December 16, 1999, Lobusta was still unfit to resume his
normal work as a seaman due to the persistence of his symptoms. But neither did Dr. Roa declare the existence
of Lobustas permanent disability. Again, the maximum 240-day medical treatment period had already expired.
May 22, 1998 to December 16, 1999 is 19 months or 570 days. In Remigio, unfitness to work for 11-13 months
was considered permanent total disability. So it must be in this case. And Dr. Davids much later report that
Lobusta "ought not to be considered fit to return to work as an Able Seaman" validates that his disability is
permanent and total as provided under the POEA Standard Employment Contract and the Labor Code, as
amended.

In fact, the CA has found that Lobusta was not able to work again as a seaman and that his disability is
permanent "as he has been unable to work since 14 May 1998 to the present or for more than 120 days." This
period is more than eight years, counted until the CA decided the case in August 2006. On the CA ruling that
Lobustas disability is permanent since he was unable to work "for more than 120 days," SC have clarified in
Vergara that this "temporary total disability period may be extended up to a maximum of 240 days."

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84. MAGSAYSAY MITSUI OSK MARINE, INC. and/or MOL TANKSHIP MANAGEMENT (ASIA) PTE LTD. v.
JUANITO G. BENGSON
G.R. No. 198528 October 13, 2014

WORK-RELATED COMPENSABLE ILLNESS

DOCTRINE:
Time and again, this Court has held that cardiovascular disease, coronary artery disease, and other heart
ailments are work-related and, thus, compensable.

FACTS:
Since 1986, Juanito Bengson has been working as a seafarer for Magsaysay, Inc. He entered into his 22nd
contract of employment with Magsaysay, Inc. Prior to his deployment, Bengson underwent and passed the Pre-
Employment Medical Examination (PEME) and was found to be "fit for sea duty. On October 5, 2007, after
doing his usual duties on board the vessel, [Bengson] suddenly experienced difficulty in breathing and
numbness on half of his body. He was examined in Izola General Hospital in Slovenia. Due to his incapacity to
work, his immediate repatriation was arranged. Upon arrival in the Philippines, he was immediately brought to
the Manila Doctors Hospital for confinement under the supervision of company-designated-physician Dr.
Benigno F. Agbayani, Jr. Bengsons Medical Abstract/Discharge Summary showed that he had a stroke. Dr.
Agbayani issued an Initial Out-Patient Consult Report which stated that Bengsons illness was not work-related.
Thus, Magsaysay, Inc. did not anymore issue any assessment on [Bengsons] disability grade. [Bengson], on
the other hand, continuously took medications and was unable to return to his work as a seaman due to the
severity of his disability. [Bengson] thus filed his disability compensation claim against x x x Magsaysay, Inc.
However, during the grievance proceedings before the Associated Marine Officers and Seamens Union of the
Philippines (AMOSUP), his claim was outrightly denied by x x x Magsaysay, Inc.

LA RULING: illness of Bengson is related to his work and the strenuous nature of his work and the conditions
he was subjected to while working on board petitioners vessel caused his illness.

NLRC RULING: under the POEA-SEC, hematoma is not included in the list of compensable illnesses; this being
the case, Bengson should have proved that such illness was work-related and compensable, and it is not
enough for him to claim or show that it was contracted during his employment with petitioners.

CA RULING: Bengsons exposure to different hazards on board petitioners vessel, the performance of his
functions as Third Mate, and the extraordinary physical and mental strain required by his position caused him to
suffer his present illness. Therefore, his illness is work-related.

ISSUE: Is cardiovascular disease an occupational disease and and, thus, compensable?

SC RULING:
YES. In many cases decided in the past, this Court has held that cardiovascular disease, coronary artery
disease, and other heart ailments are compensable.

In the present case, petitioners flatly claim that Bengsons hypertensive cardio-vascular disease is not
compensable on the sole basis of its company-designated physician Agbayanis declaration that such illness is
not work-related.

However, the Court finds that Bengsons illness is work-related. The undisputed facts indicate that respondent
37
has been working for petitioners since 1988; that per his service record, he has been serving as Third Mate for
twelve (12) years; and that as Third Mate, he was saddled with heavy responsibilities relative to navigation of
the vessel, ship safety and management of emergencies. It is beyond doubt that respondent was subjected to
physical and mental stress and strain: as Third Mate, he is the ships fourth in command, and he is the ships
safety officer; these responsibilities have been heavy burdens on respondents shoulders all these years, and
certainly contributed to the development of his illness. Besides, "[i]t is already recognized that any kind of work
or labor produces stress and strain normally resulting in wear and tear of the human body." "Notably, it is a
matter of judicial notice that an overseas worker, having to ward off homesickness by reason of being physically
separated from his family for the entire duration of his contract, bears a great degree of emotional strain while
making an effort to perform his work well. The strain is even greater in the case of a seaman who is constantly
subjected to the perils of the sea while at work abroad and away from his family."
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Having worked for petitioners since 1988 under employment contracts that were continuously renewed, it can be
said that respondent spent much of his productive years with petitioners; his years of service certainly took a toll
on his body, and he could not have contracted his illness elsewhere except while working for petitioners. To be
sure, the Court has ruled that "the list of illnesses/diseases in Section 32-A does not preclude other
illnesses/diseases not so listed from being compensable. The POEA-SEC cannot be presumed to contain all the
possible injuries that render a seafarer unfit for further sea duties." And equally significant, "it is not the injury
which is compensated, but rather it is the incapacity to work resulting in the impairment of ones earning
capacity."

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85. PEDRO LIBANG, JR. vs. INDOCHINA SHIP MANAGEMENT, INC., MR. MIGUEL SANTOS and
MAJESTIC CARRIERS, INC.
G.R. No. 189863 September 17, 2014
REYES, J.

ASSESSMENT BY COMPANY-DESIGNATED DOCTOR VS. ASSESSMENT BY CLAIMANTS DOCTOR

DOCTRINE:
The respondents could not be allowed to benefit from their physicians inaction or refusal to disclose the results
of the diagnostic tests performed upon Libang, the extent of the patients illnesses, and the effect of the severity
of these illnesses on his fitness or disability.

FACTS:
Libang entered into a nine-month employment contract with ISMI, a domestic manning agency that acted for and
in behalf of its foreign shipping company, Majestic. Libang was engaged as a Cook 1 for the vessel M/V
Baltimar Orion. While Libang was on board M/V Baltimar Orion, he experienced numbness on the left side of his
face, difficulty in hearing from his left ear, blurred vision of his left eye and speech problem. Libang was
eventually repatriated. Two days later, he reported to ISMI and was endorsed for medical attention to the
company-designated physician, Dr. Robert Lim (Dr. Lim) of the Marine Medical Services in Metropolitan
Hospital. Dr. Lim issued to Libang a medical certificate which states that the hypertension of Libang could be
pre-existing. Considering Dr. Lims failure to assess Libangs disability despite his health status, the latter
sought medical attention and assessment from another doctor, Dr. Efren R. Vicaldo (Dr. Vicaldo) of the
Philippine Heart Center. A medical certificate issued by Dr. Vicaldo states that Libang has Hypertensive
Cardiovascular Disease, Diabetes Mellitus and S/P Cerebrovascular accident and gave Impediment Grade VI
(50%). Libang filed with NLRC a complaint for disability benefit. The respondents disputed any liability arguing
that the disability was pre-existing.

LA RULING: granted claim for disability benefit. Without doubt, [Libang] had gone through a thorough and rigid
screening process of [ISMI and Santos] (medical examinations included) before an agreement or the contract of
employment between the parties was reached and actualized. This is precisely the reason why [ISMI and
Santos], should not be allowed to make use of the argument that [Libang] is not entitled to any disability
benefits as he was already suffering from a pre-existing illness when he entered into a contract of
employment with [ISMI and Santos].

NLRC RULING: In sustaining the LAs finding that Libang was entitled to disability benefit, the NLRC considered
the reasonable connection between the nature of Libangs work as a cook and the development of his illness.

CA RULING: For the CA, the lone assessment made by Dr. Vicaldo could not have justified the LAs and
NLRCs finding of a Grade VI disability. The Philippine Overseas Employment Administration-Standard
Employment Contract (POEA-SEC) requires the company-designated physician to be the one to make a
disability assessment of a seafarer.

ISSUE: Is Libang entitled to disability benefit?

SC RULING:
YES. Rather than making a full assessment of Libangs health condition, disability or fitness, Dr. Lim only
reasoned in his medical certificate dated that Libangs hypertension could be pre-existing and that it was
difficult to say whether his diabetes mellitus and small pontine infarct are pre-existing or not. His assessment
was evidently uncertain and the extent of his examination for a proper medical diagnosis was incomplete. The
alleged concealment by Libang of his hypertension during his pre-employment medical examination was also
unsubstantiated, but was a mere hearsay purportedly relayed to Dr. Lim by one Dr. Aileen Corbilla, his co-
attending physician. A categorical statement from Dr. Lim that Libangs illnesses were pre-existing and non-
work-related was made only in his affidavit dated July 16, 2004, or after the subject labor complaint had been
filed. Still, Dr. Lim gave no explanation for his statement that Libangs illnesses were not work-related.

Given the failure of Dr. Lim to fully evaluate Libangs illness, disability or fitness to work, the seafarer was
justified in seeking the medical expertise of his physician of choice. The NLRC did not commit grave abuse of
discretion in considering Dr. Vicaldos assessment. As against an incomplete evaluation by Dr. Lim, the medical
certificate issued by Dr. Vicaldo included a determination of the disability grade that applied to Libangs
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condition. Libang was diagnosed to have both Hypertensive Cardiovascular Disease and Diabetes Mellitus with
an Impediment Grade VI. He was declared to be unfit to resume to work as a seafarer in any capacity.

The respondents could not be allowed to benefit from their physicians inaction or refusal to disclose the results
of the diagnostic tests performed upon Libang, the extent of the patients illnesses, and the effect of the severity
of these illnesses on his fitness or disability. The respondents even failed to sufficiently dispute the finding of the
LA and NLRC that Libangs illnesses had resulted in a Grade VI disability.

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86. INTERORIENT MARITIME ENTERPRISES, INC. vs. VICTOR M. CREER III
G.R. No. 181921 September 17, 2014
DEL CASTILLO, J.:

ELEMENTS FOR DISABILITY TO BE COMPENSABLE

DOCTRINE:
For an illness to be compensable, Section 20(B)(6) of the 2000 Amended Standard Terms and Conditions
Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels (2000 Amended Standard
Terms and Conditions), deemed incorporated in the POEA Contract, requires the concurrence of two elements:
first, that the illness mustbe work-related; and second, that the work- related illness must have existed during
the term of the seafarers employment contract.

FACTS:
InterOrient hired Victor as Galley Boy on board the vessel M/V MYRTO owned by Calidero Shipping Company,
Ltd. (Calidero). Victor alleged that when he was about to get provisions from the cold storage sometime in
November 2001, he felt a sudden pain in his chest that radiated to his back. Since then, he experienced
incessant cough, nasal congestion, difficulty in breathing, physical weakness, chills and extreme apprehension.
According to him, this condition persisted until the expiration of his contract on May 7, 2002. On May 9, 2002,
Victor arrived in Manila. The following day, he reported to the office of InterOrient and informed the company
about the pain he experienced while he was on board. Victor averred that InterOrient merely advised him to
consult a doctor without giving him any doctors referral. He did, however, sign a Receipt and Release where he
acknowledged receipt of the full payment of his monetary entitlements under the employment contract.
According to him, he underwent medical examinations in different hospitals and that he shouldered all the
expenses. Victor consulted another physician, Dr. Vicaldo, at the Philippine Heart Center. After conducting a
medical examination and evaluation, Dr. Vicaldo issued a medical certificate indicating that Victor was
diagnosed with Hypertension, Stage II, and Pulmonary Tuberculosis. He gave Victor an impediment grade VIII
(33.59%) and further declared him unfit to resume work as a seaman in any capacity, and that his illness was
considered work-aggravated. Victor claimed for disability benefit.

LA RULING: denied claim. Labor Arbiter noted that there is nothing on record to show that Victor ever made
any formal claim for sickness allowance, medical benefits and disability benefits while on board the vessel or
immediately after his repatriation. Neither did he submit to, nor apply for any post-employment medical
examination within three days from his repatriation a requirement for claims for sickness and disability
benefits.

NLRC RULING: affirmed in toto the Decision of the Labor Arbiter and dismissed Victors appeal.

CA RULING: granted the same and awarded him permanent disability benefits and attorneys fees. Applying
Section 32-A of the POEA Contract, the CA declared Victors illness, pulmonary tuberculosis, included inthe list
of occupational diseases. It found that Victor was overworked and over-fatigued as a result of the long hours of
work required by his duties and that he was exposed todaily rapid variations in temperature.

ISSUE: Is Victor entitled to disability benefits?

SC RULING:
No. For a seamans claim for disability to prosper, it is mandatory that within three days from his repatriation, he
is examined by a company-designated physician. Non-compliance with this mandatory requirement results in
the forfeiture of the right to claim for compensation and disability benefits. It is undisputed that on May 7, 2002,
Victors employment contract was completed. He arrived in Manila on May 9, 2002; the following day, or on May
10, 2002, he reported to the office of InterOrient. Although he averred that he informed InterOrient about the
pain he experienced whileon board the vessel, the company allegedly only advised him to consult a doctor but
did not give any referral.

SC is not persuaded. His repatriation was not due to any medical reasons but because his employment contract
had already expired. Other than his self-serving allegation that he experienced pain while on board, he was not
able to substantiate the same. There was no showing that he reported his injury to his officers while on board
the vessel; neither did he prove that he sought medical attention but was refused. Likewise, other than his bare
and self-serving assertion that he informed InterOrient about his pain, he presented no evidence ortangible
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proof that he indeed requested for medical attention, much more that he was rebuffed.

On the contrary, the records show that when he reported to InterOrient immediately after his repatriation, he
signed a Receipt and Release stating that he has not contracted or suffered any illness or injury from work and
that he was discharged in good and perfect health.

Victors illness is not compensable.


Even if we disregard the mandatory three-day rule on post-employment medical examination by the company-
designated physician, Victors claim for disability benefits must still fail for not being compensable. For an illness
to be compensable, Section 20(B)(6) of the 2000 Amended Standard Terms and Conditions Governing the
Employment of Filipino Seafarers on Board Ocean-Going Vessels (2000 Amended StandardTerms and
Conditions), deemed incorporated in the POEA Contract, requires the concurrence of two elements: first, that
the illness mustbe work-related; and second, that the work- related illness must have existed during the term of
the seafarers employment contract.

a) Victor failed to show that his illness existed during the term of his contract - As already mentioned, the
reason for Victors repatriation was the completion/expiration of his contract and not because of any
sickness. Other than his uncorroborated and self-serving assertion that he experienced chest pains
while on board the vessel, there was absolutely no proof at all that he consulted a doctor while on
board, or that he reported the same to his superiors so that he will be provided with medical assistance.
On the contrary, upon repatriation, he signed a Receipt and Release wherein he acknowledged that he
worked under normal conditions on board the vessel; that he did not contract or suffer any injury; and
that he was discharged in good health. Victor never alleged that he was coerced into signing the
Receipt and Release or that he did not understand the same.
b) Victor failed to show that his illness is work-related - While pulmonary tuberculosis is listed as an
occupational disease, the Court is not convinced that Victors pulmonary tuberculosis is work-acquired
or work-aggravated because if it were so, then at the outset, Victor should have already been diagnosed
with pulmonary tuberculosis when he sought medical help one month from his repatriation. Instead, Dr.
Ayuyao diagnosed him with Community Acquired Pneumonia I and Bronchial Asthma sicknesses
which aside from being different from pulmonary tuberculosis, were not shown to have any relation
thereto.

San Beda College of Law 198


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LABOR LAW REVIEW Atty. Joyrich Golangco

87. RICARDO A. DALUSONG vs. EAGLE CLARC SHIPPING PHILIPPINES, INC., NORFIELD OFFSHORE
AS, and/or CAPT. LEOPOLDO T. ARCILLAR, and COURT OF APPEALS
G.R. No. 204233, September 3, 2014
CARPIO, Acting C.J.

ASSESSMENT BY COMPANY-DESIGNATED DOCTOR VS. ASSESSMENT BY CLAIMANTS DOCTOR

DOCTRINE:
The doctor who have had a personal knowledge of the actual medical condition, having closely, meticulously
and regularly monitored and actually treated the seafarers illness, is more qualified to assess the seafarers
disability.

FACTS:
Private respondents hired petitioner as Able Seaman on board their vessel MV Malene Ostervold with a basic
salary of US$800 per month. On 13 December 2009, while petitioner was drilling to attach an overboard safety
equipment on the vessel, a sudden swell caused some movement ofthe vessel. As a result, one of the crew fell
directly on petitioner, inflicting injury on petitioners right foot. Petitioner was repatriated to the Philippines for
further examination and medical treatment.

Dr. Nicomedes Cruz, the company-designated doctor, gave petitioner an interim disability grading based on the
Philippine Overseas Employment Administration (POEA) schedule of disability of "grade 8 that is moderate
rigidity or one third loss of motion or lifting power of the trunk." Petitioner disagreed with the disability
assessment and consulted Dr. Nicanor Escutin, a physician of his own choice, who found petitioner to be
suffering from "PARTIAL PERMANENT DISABILITY and concluded that petitioner is "unfit for seaduty in
whatever capacity as seaman."
Petitioner filed with the NLRC a complaint against private respondents, claiming disability benefits, sick wages,
damages, and attorneys fees. Petitioner maintained that he is entitled to full disability benefits of US$80,000,
while private respondents insisted that petitioner is only entitled to US$12,551 based on the disability
assessment of the company-designated doctor.

ISSUE: Is Dalusong entitled to full disability benefits?

LA RULING: ruled in favor of private respondents. The Labor Arbiter did not give probative value to the medical
report presented by petitioner.

NLRC RULING: modified the Labor Arbiters decision.

CA RULING: ruled that it is the company-designated doctor who initially determines the degree of disability of
petitioner.

SC RULING:
NO. SC agree with the Court of Appeals ruling, giving more credence to the medical findings of the company-
designated doctor. Contrary to the ruling of the NLRC, petitioners doctor did not categorically give petitioner a
grade 1 disability rating which is equivalent to total and permanent disability. Petitioners physician found
petitioner to be suffering from "PARTIAL PERMANENT DISABILITY," and "is UNFIT FOR SEA DUTY in
whatever capacity as seaman." Aside from this seemingly inconsistent assessment by petitioners doctor, there
was no evidence submitted of medical procedures, examinations or tests which would support his conclusion
that petitioner is unfit for sea duty in whatever capacity as a seaman. In contrast, the company-designated
doctor gave petitioner a final disability grading under the POEA schedule of disabilities of "grade 11-complete
immobility of an ankle joint in normal position," only after petitioner had undergone a series of medical tests and
examinations, and physical therapy over a period of six months, during which the company designated doctor
issued periodic medical reports. As the Court aptly stated in Philman Marine Agency, Inc. (now DOHLE-
PHILMAN Manning Agency, Inc.) v. Cabanban, "the doctor who have had a personal knowledge of the actual
medical condition, having closely, meticulously and regularly monitored and actually treated the seafarers
illness, is more qualified to assess the seafarers disability." Based on the Disability Report of petitioners doctor,
it appears that he only conducted a physical examination on petitioner before issuing his final diagnosis and
disability rating on petitioners condition. Clearly, the findings of the company-designated doctor, who, with his
team of specialists which included an orthopedic surgeon and a physical therapist, periodically treated petitioner
for months and monitored his condition, deserve greater evidentiary weight than the single medical report of
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petitioners doctor, who appeared to have examined petitioner only once.

Petitioner argues that since his treatment lasted for more than 120 days, then his disability is deemed total and
permanent. Petitioners contention is not entirely correct.

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.

Just because the seafarer is unable to perform his job and is undergoing medical treatment for more than 120
days does not automatically entitle the seafarer to total and permanent disability compensation. In this case,
petitioner's medical treatment lasted more than 120 days but less than 240 days, after which the company-
designated doctor gave petitioner a final disability grading under the POEA schedule of disabilities of "grade 11 -
complete immobility of an ankle joint in normal position." Thus, before the maximum 240-day medical treatment
period expired, petitioner was issued a final disability grade 11 which is merely equivalent to a permanent partial
disability, since under Section 32 of the POEA-SEC, only those classified under grade 1 are considered total
and permanent disability. Clearly, petitioner is only entitled to permanent partial disability compensation, since
his condition cannot be considered as permanent total disability.

San Beda College of Law 200


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LABOR LAW REVIEW Atty. Joyrich Golangco

88. ROBERT KUA, CAROLINE N. KUA, AND MA. TERESITA N. KUA, v. GREGORIO SACUPAYO AND
MAXIMINIANO PANERIO
G.R. No. 191237 September 24, 2014
PEREZ, J.:

DOCTRINE:
Probable cause is affirmed against an employer who failed to remit SSS contributions and payments on
loans of its employees if it was only under threat of criminal liability that the employers subsequently remitted
what they had long deducted from the wages of said employees.
FACTS:
Petitioners are members of the Board of Directors and the officers of Vicmar Development Corporation (Vicmar).
Respondents Sacupayo and Panerio were VICMAR employees.

As required by law, Vicmar, deducted the SSS contributions of respondents from their wages. A certain amount
from Sacupayos wage representing the monthly amortization from a he loan he obtained from the SSS. The
deductions were initially remitted to SSS.

However, sometime in 2003 and 2004, unknown to respondents and despite the continued SSS and
amortization deductions from their wages, Vicmar stopped remitting the same. Meantime in 2004, Sacupayo
and Panerio were dismissed from employment. Both filed complaints for illegal dismissal.

Panerio was thereafter afflicted with Chronic Persistent Asthma but when he applied for sickness benefits before
the SSS the same was denied for the reason that no contributions or payments were made for 12 months prior
to the semester of confinement. Sacupayo, for his part, filed another loan application but this was also denied
outright for non-payment of a previous loan which should have been fully paid if not for the failure of Vicmar to
remit the amounts due to the SSS.

Aggrieved respondents filed complaints before the Office of the City Prosecutor. Vicmar then remitted to SSS
the contributions and loan payments of respondents. Nevertheless 3 separate Informations were filed against
petitioners officers of Vicmar for violation of Section 22 (a) in relation to Section 28 (e) of RA 8282 otherwise
known as the Social Security Act of 1997.

MTC RULING: Dismissed outright for lack of jurisdiction

RTC RULING: Given due course but later on granted the Motion of petitioners to withdraw the criminal cases.

ISSUE: Validity of the order of the trial court directing the withdrawal from its dockets of Criminal Case Nos.
2006-072, 2006-073 and 2006-074 for violation of Sec. 22 (a) and (d) in relation to Sec. 28 (e) of R.A. No. 8282.

SC RULING:
The factual milieu obtaining herein does not denote a simple delay in payment. Again, petitioners initially failed
to remit the SSS contributions and payments of respondents such that respondents were denied benefits under
the SS Law which they wanted to avail of. It was only under threat of criminal liability that petitioners
subsequently remitted what they had long deducted from the wages of respondents.

The culpability of the accused under the indictment is not yet before us. Yet to be determined during the
ensuing trial are considerations such as the extent and reason for the delay, the date of actual remittance and
all other circumstances that attended such remittance. All these are matters of defense that need proof during
trial.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 01569-MIN
is AFFIRMED. Criminal Case Nos. 2006-072, 2006-073 and 2006-074 pending before the Regional Trial Court,
Branch 20, Cagayan de Oro City are REINSTATED and the Presiding Judge thereof is DIRECTED to dispose of
the cases with dispatch.

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89. GOVERNMENT SERVICE INSURANCE SYSTEM v. JOSE M. CAPACITE
G.R. No. 199780 September 24, 2014
BRION, J.:

DOCTRINE:
For sickness and the resulting death of an employee to be compensable, the claimant must show either: (1) that
it is a result of an occupational disease listed under Annex "A" of the Amended Rules on Employees'
Compensation with the conditions set therein satisfied; or (2) if not so listed, that the risk of contracting the
disease was increased by the working conditions.

FACTS:
Provincial Office who successively held the following positions: Junior Statistician, Bookkeeper, Bookkeeper II,
and finally as Accountant I. Due to persistent cough coupled with abdominal pain, Elma was admitted at the
Bethany Hospital where the pathology examination showed that she was suffering from Adenocarcinoma,
moderately differentiated, probably cecal origin with metastases to mesenteric lymph node and seeding of the
peritoneal surface.c i Elma died due to Respiratory Failure secondary to Metastatic Cancer to the lungs; Bowel
cancer with Hepatic and Intraperitoneal Seeding and Ovarian cancer. Elmas surviving spouse, Jose, filed a
claim for ECC death benefits before the GSIS Branch Office, alleging that Elmas stressful working condition
caused the cancer that eventually led to her death.
GSIS: denied Joses claim for failure to present direct evidence to prove a causal connection between Elmas
illness and her work.

ECC: also denied it holding that colorectal cancer is not listed as an occupational and compensable disease
under Annex A of the Amended Rules on Employees Compensation. Although its item 17 provides that cancer
of the lungs, liver and brain shall be compensable, the rules required that it had been incurred by employees
working as vinyl chloride workers, or plastic workers.

CA RULING: reversed ECC. That it was enough that the nature of her employment contributed to the
development of the disease. As a bookkeeper, Elma had been exposed to voluminous dusty records and
other harmful substances that aggravated her respiratory disease.

ISSUE: Whether CA erred in ruling that Metastasized to the lungs is an ailment akin to respiratory disease
under ANNEX A of P.D. NO. 626, as amended, o that such disease is work-related.

SC RULING:
PD 626, as amended, defines compensable sickness as any illness definitely accepted as an occupational
disease listed by the Commission, or any illness caused by employment subject to proof by the employee that
the risk of contracting the same is increased by the working conditions. Of particular significance in this
definition is the use of the conjunction or, which indicates alternative situations.

Based on this definition, we ruled in GSIS v. Vicencio that for sickness and the resulting death of an employee
to be compensable, the claimant must show either: (1) that it is a result of an occupational disease listed under
Annex "A" of the Amended Rules on Employees' Compensation with the conditions set therein satisfied; or (2) if
not so listed, that the risk of contracting the disease was increased by the working conditions.

While item 17, Annex A of the Amended Rules of Employees Compensation considers lung cancer to be a
compensable occupational disease, it likewise provides that the employee should be employed as a vinyl
chloride worker or a plastic worker. In this case, however, Elma did not work in an environment involving the
manufacture of chlorine or plastic, for her lung cancer to be considered an occupational disease. There was,
therefore, no basis for the CA to simply categorize her illness as an occupational disease without first
establishing the nature of Elmas work. Both the law and the implementing rules clearly state that the given
alternative conditions must be satisfied for a disease to be compensable.

Aside from Joses general allegations proving the stressful duties of his late wife, no reasonable proof exists to
support the claim that her respiratory disease, which is similar to lung cancer, was aggravated by her working
conditions. The records do not support the contention that she had been exposed to voluminous and dusty
records, nor do they provide any definite picture of her working environment.

San Beda College of Law 202


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

90. OSG SHIPMANAGEMENT MANILA, INC., MERCEDES M. RAVANOPOLOUS, OSG SHIPMANAGEMENT


(UK) LTD. & M/T DELPHINA, v. JOSELITO B. PELLAZAR
G.R. No. 198367 August 06, 2014
BRION, J.:

DOCTRINE:
In the present case, since there is a conflict in the assessment of the company-designated physicians and an
employees physician of choice, the matter should have been referred to a third doctor for final determination as
required by the POEA-SEC and the parties CBA. Since the employee was responsible for the non-referral to
the third doctor because of his failure to inform the manning agency that he would be consulting a doctor of his
choice, he should suffer the consequences of the absence of a binding third opinion.

FACTS:
Pellazar was deployed to the M/T Delphina under an employment contract for eight months. While he was on
duty onboard the vessel, his right hand was injured after it was struck by a solid iron pipe. He was given
medical attention in a hospital in Braziland was later on medically repatriated.

Upon his arrival in Manila, Pellazar reported to OSG Manila and was referred to the company-designated
physicians, Dr. De Guzman and Dr. Banaga. Pellazars working diagnosis was complete fracture, distal part of
5th finger, right hand post-casting. The company-designated physicians gave Pellazar a Grade 10 disability
rating7 for loss of grasping power for large objects between fingers and palm of one hand.

Pellazar consulted a physician of his choice,Dr. Sabado who diagnosed him with loss of grasping power of 5th
finger, loss of opposition between finger and thumb (r) and ankylosis of the 5thfinger (r), and certified that he
was permanently unfit for any sea duty.

Petitioners denied liability alleging that Pellazar failed to comply with his duty to observe the dispute resolution
provisions of the CBA. Also, that Pellazar was not entitled to disability compensation higher than what was
provided under a Grade 10 disability rating as that was the company-designated physicians assessment of his
disability. A Grade 10 disability is compensated US$10,075.00 under the POEA Standard Employment Contract
(POEA-SEC).

LA RULING: in favor of Pellazar

NLRC: affirmed but modified the labor arbiters decision ruling that Pellazar is entitled only to an award of
$10,075.01 which is the equivalent of a Grade 10 disability in accordance with the disability rating given to him
by the company-designated physicians

CA RULING: reversed the challenged NLRC rulings and, reinstated LAs award of permanent total disability
benefits to Pellazar
ISSUE: Whether Pellazar is entitled to a Grade 10 disability or a permanent total disability.

SC RULING:
Entitlement to disability benefits by seamen on overseas work is a matter governed, not only by medical findings
but, by Philippine law and by the contract between the parties. The material statutory provisions are Articles 191
to 193 under Chapter VI (Disability Benefits) of the Labor Code, in relation with Rule X of the Rules and
Regulations Implementing Book IV of the Labor Code. By contract, Department Order No. 4, series of 2000 of
the Department of Labor and Employment (the POEA Standard Employment Contract) and the parties' CBA
bind the seaman and his employer to each other. The terms under the POEA-SEC are to be read in accordance
with what the Philippine law provides.

Under the POEA-SEC and the AMOSUP/IMEC TCCC CBA, the degree of disability arising from a work-
connected injury or illness of a seafarer or his fitness to work shall be assessed by the company-designated
physician to make the employer liable. Controversy arose, however, when Pellazar consulted a physician of his
San Beda College of Law 203
4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

choice, whose findings are in conflict with those of the company-designated physicians. This conflict invariably
leads to the question of whose findings should prevail.

In the present case, since there is a conflict in the assessment of the company-designated physicians and Dr.
Sabados certification in relation to Pellazars fitness or unfitness to work, the matter should have been referred
to a third doctor for final determination as required by the POEA-SEC and the parties CBA. Since Pellazar was
responsible for the non-referral to the third doctor because of his failure to inform the manning agency that he
would be consulting Dr. Sabado, he should suffer the consequences of the absence of a binding third opinion.
Thus, the NLRC was well within the bounds of its jurisdiction, in upholding the disability assessment of Drs. De
Guzman and Banaga as against Pellazars physician of choice.

Since the company-designated physicians gave Pellazar only a Grade 10 disability - and not a permanent total
disability - he cannot be entitled to the full disability benefits of US$75,000.00 under the CBA
91. ESTRELLA D. S. BAEZ v. SOCIAL SECURITY SYSTEM AND DE LA SALLE UNIVERSITY
G.R. No. 189574 July 18, 2014

DOCTRINE:
For death benefits the law requires proof by substantial evidence, or such relevant evidence which a reasonable
mind might accept as adequate to justify a conclusion, that the nature of his employment or working conditions
increased the risk of contracting the ailment or that its progression or aggravation was brought about thereby.

FACTS:
Baylon, the husband of petitioner, was employed by DLSU. From 21991-2006, Baylon worked as a Laboratory
Technician at the Chemistry Department.

In 2006, Baylon was confined at Manila Doctors Hospital due to fever, weakness, dysuria and flank pains. He
was diagnosed to be suffering from urinary tract infection. A month later he was confined again for functional
dyspepsia. Later, he was diagnosed to be suffering from Systemic Lupus Erythematosus (SLE).

Dr. Castillo prepared a clinical abstract/toxicologic assessment on Baylon and she stated that based on the
occupational history of the patient, x x x the probability of a chemically induced disease cannot be discounted.

Baylon succumbed to the complications of his disease on 27 August 2006. Baylons attending physician, Dr.
Torres, issued a Medical Certificate stating that Baylon who was confined and expired in Medical Center Manila
for Systemic Lupus Erythematosus may have been precipitated by the chronic exposure to chemicals which is
an occupational hazard in his performance of being a laboratory technician. Based on medical opinions of Dr.
Castillo and Dr. Torres, petitioner filed a claim for death benefits under the Employees Compensation Law
before the Social Security System (SSS).

SSS: Denied claim on two grounds: 1) the cause of death, cardiac complication of SLE, is not considered work-
related; and 2) SLE is not included in the list of occupational diseases.

ECC: Also denied claim on the ground that SLE is caused by a genetic tendency to mount an abnormal
immune response against ones own tissues or organs leading to their destruction or malfunction.

CA RULING: dismissed petition for review for being filed out of time.

ISSUE: Whether petitioners claim should prosper.

SC RULING:
NO. In order for the beneficiary of an employee to be entitled to death benefits under the SSS, the cause of
death of the employee must be a sickness listed as an occupational disease by ECC; or any other illness
caused by employment, subject to proof that the risk of contracting the same is increased by the working
conditions.
It is undisputed that SLE is not listed as an occupational disease under Annex A of the Rules on Employees
Compensation. Thus, petitioner has to prove by substantial evidence the causal relationship between her
husbands illness and his working conditions.

While there are certain chemicals accepted as increasing the risks of contracting SLE such as chlorinated
San Beda College of Law 204
4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

pesticides and crystalline silica, the law requires proof by substantial evidence, or such relevant evidence which
a reasonable mind might accept as adequate to justify a conclusion, that the nature of his employment or
working conditions increased the risk of contracting the ailment or that its progression or aggravation was
brought about thereby.

Petitioner relied unqualifiedly on the toxicological report which failed to prove the causal relationship between
Baylons work and his illness. The report made an indirect link between SLE and chemicals through drug-
induced lupus.

SLE and Drug-Induced Lupus Erythematosus are both autoimmune diseases. Drug-induced lupus is a
temporary and mild form of lupus caused by certain prescription medications. They include some types of high
blood pressure drugs (such as hydralazine, ACE inhibitors, and calcium channel blockers)
and diuretics (hydrochlorothiazide). Symptoms resolve once the medication is stopped.

Furthermore, the toxicological report made mention of certain drugs with chemical structures related to
aromatic amines or substituted hydrazines, listed in the inventory of the school, can affect the immune system.
This would include Benzenes, Naphthylamine, Toluene, Dinitrophenylhydrazine, etc. However, these drugs
were not proven to have been administered on Baylon. These substances which can induce the disease all
pertain to drugs which are orally administered on the patient. There is no showing that the drugs given to
Baylon had increased his risk of contracting Drug-Induced Lupus and SLE.
92. ALPHA SHIP MANAGEMENT CORPORATION/JUNEL M CHAN and/or CHUO-KAIUN COMPANY,
LIMITED v. ELEOSIS v. CALO
G.R. No. 192034 January 13, 2014
DEL CASTILLO, J.:
DOCTRINE:
An employees disability becomes permanent and total when so declared by the company-designated physician,
or, in case of absence of such a declaration either of fitness or permanent total disability, upon the lapse of the
120 or 24045-day treatment period, while the employees disability continues and he is unable to engage in
gainful employment during such period, and the company-designated physician fails to arrive at a definite
assessment of the employees fitness or disability. This is true "regardless of whether the employee loses the
use of any part of his body.

FACTS:
Respondent Calo worked for petitioners Alpha Ship, Junel M. Chan and their foreign principal, (CKCL) under 7
employment contracts.

While MV Iris was in China, respondent suffered back pain on the lower part of his lumbar region and urinated
with solid particles. On checkup, the doctor found him suffering from urinary tract infection and renal colic, and
was given antibiotics. When respondents condition did not improve, he consulted another doctor in Chile and
was found to have kidney problems and urinary tract infection but was declared fit for work on a "light duty"
basis. In Japan, respondent was diagnosed with suspected renal and/or ureter calculus and was declared "unfit
for work.

Respondent was thus repatriated and was referred by petitioners to Dr. Cruz, the company-designated
physician who continously examined respondent from 2004-2005.
Respondent, who felt that his condition has not improved consulted another specialist in internal medicine, Dr.
Vicaldo, who issued the following diagnosis: that it was Impediment Grade X, that he is now unfit to resume
work as seaman in any capacity and that his illness is considered work aggravated/related. Respondent filed a
claim for disability benefits with petitioners, but the claim was denied.

LA: granted permanent total disability benefits and attorneys fees to respondent, but denied his claim for moral
and exemplary damages.

NLRC: Appeal is granted. The decision of the Labor Arbiter was vacated and set aside. The complaint for
dismissed for lack of merit.

CA RULING: NLRC decision was reversed. Decision of the Labor Arbiter was reinstated.
ISSUE: Whether respondents claim for disability benefits should prosper.
SC RULING:
San Beda College of Law 205
4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

YES. An employees disability becomes permanent and total when so declared by the company-designated
physician, or, in case of absence of such a declaration either of fitness or permanent total disability, upon the
lapse of the 120 or 24045-day treatment period, while the employees disability continues and he is unable to
engage in gainful employment during such period, and the company-designated physician fails to arrive at a
definite assessment of the employees fitness or disability. This is true "regardless of whether the employee
loses the use of any part of his body."

Respondent was repatriated on October 12, 2004 and underwent treatment by the company-designated
physician, Dr. Cruz, until October 14, 2005, or for a continuous period of over one year or for more than the
statutory 120-day47 or even 240-day48 period. During said treatment period, Dr. Cruz did not arrive at a definite
assessment of respondents fitness or disability; thus, respondents medical condition remained unresolved. It
was only on July 18, 2006 that respondent was declared fit to work by Dr. Cruz. Such declaration, however,
became irrelevant, for by then, respondent had been under medical treatment and unable to engage in gainful
employment for more than 240 days. Pursuant to the doctrine in Kestrel, the conclusive presumption that the
respondent is totally and permanently disabled thus arose.

In the same manner, the issue of which among the two diagnoses or opinions should prevail that of Dr. Cruz
or Dr. Vicaldo is rendered irrelevant in view of the lapse of the said 240-day period. As far as the parties are
concerned, respondents medical treatment and disability continued for more than 240 days without any finding
or diagnosis by the company-designated physician that he was fit to resume work. Thus, consonant with law
and jurisprudence, respondent is entitled to a declaration of permanent total disability, as well as the
corresponding benefit attached thereto in the amount of US$60,000.00.
93. INC. SHIPMANAGEMENT, INC., CAPTAIN SIGFREDO E. MONTERROYO AND/OR INTERORIENT
NAVIGATION LIMITED, v. ALEXANDER L. MORADAS G.R. No. 178564 January 15, 2014
PAYMENT OF DISABILITY BENEFITS

DOCTRINE:
An employer shall be liable for the injury or illness suffered by a seafarer during the term of his contract. There is
no need to show that such injury is work-related except that it must be proven to have been contracted during
the term of the contract. The rule, however, is not absolute and the employer may be exempt from liability if he
can successfully prove that the cause of the seamans injury was directly attributable to his deliberate or willful
act.

FACTS:
Respondent was employed as wiper for the vessel MV Commander by petitioner INC Shipmanagement, Inc. for
its principal, petitioner Interorient Navigation, Ltd. Respondent claimed while working, certain chemicals
splashed all over his body because of an explosion. Respondent demanded for the payment of his full disability
benefits under Section 20 (B) in relation to Sections 30 and 30-A of the Philippine Overseas Employment
Agency (POEA) Standard Employment Contract (POEA-SEC), in the amount of US$60,000.00, which
petitioners refused to heed. Thus, respondent filed a complaint against petitioners for the same.

Petitioners denied respondents claims, contending that his injury was self-inflicted and, hence, not
compensable under Section 20 (D) of the POEA-SEC. They denied that there was an explosion and claimed
that respondent poured thinners on himself and set himself on fire. They averred that he was led to commit such
act because he was to be dismissed for stealing supplies. They also stated that before they discovered
respondent burning, he caused flooding in the engine room.

LA RULING: The LA ruled in favor of petitioners, dismissing respondents complaint for lack of merit. The LA
held that respondents injury was self-inflicted and that no incinerator explosion occurred that would have
caused the latters injuries.

NLRC RULING: The NLRC sustained the findings of the LA. It pointed out that respondents mental or physical
fitness was not at issue since he was motivated to inflict injury to himself for reasons related to his impending
discharge and not because of his disposition.

CA RULING: CA found that the NLRC gravely abused its discretion. It found no logical and causal connection
between the act of pilferage as well as the act of causing the flooding in the engine room and the conclusion that
respondents injury was self-inflicted. It added that it was contrary to human nature and experience for
respondent to burn himself.
San Beda College of Law 206
4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

ISSUE: Is the petitioner liable to pay the permanent total disability benefits?

SC RULING:
NO. The prevailing rule under Section 20 (B) of the 1996 POEA-SEC on compensation and benefits for injury or
illness was that an employer shall be liable for the injury or illness suffered by a seafarer during the term of his
contract. There was no need to show that such injury was work-related except that it must be proven to have
been contracted during the term of the contract. The rule, however, is not absolute and the employer may be
exempt from liability if he can successfully prove that the cause of the seamans injury was directly attributable
to his deliberate or willful act as provided under Section 20 (D) thereof.

Petitioners have successfully discharged the burden of proving by substantial evidence that respondents injury
was directly attributable to himself.

First, records bear out circumstances which all lead to the reasonable conclusion that respondent was
responsible for the flooding and burning incidents. The LA and NLRC gave credence to the corroborating
testimonies of the crewmen pointing to respondent as the person who deliberately caused the flooding incident.
Second, respondents version that the burning was caused by an accident is hardly supported by the evidence
on record. In addition to testimonies, an inspection of the incinerator after the incident showed that there were
unburnt cardboard cartons found inside with no sign of explosion and the steel plates surrounding it were cool to
the touch. Third, petitioners theory that respondents burns were self-inflicted gains credence through the
existence of motive. Both the LA and the NLRC made a factual finding that prior to the burning incident,
respondent was caught pilfering the vessels supplies for which he was told that he was to be relieved from his
duties. This adequately supports the reasonable conclusion that respondent may have harbored a grudge
against the captain and the chief steward who denied giving him the questioned items. At the very least, it was
natural for him to brood over feelings of resentment considering his impending dismissal. These incidents shore
up the theory that he was motivated to commit an act of sabotage which, however, backfired into his own
burning.

All told, petitioners having established through substantial evidence that respondents injury was self-inflicted
and, hence, not compensable pursuant to Section 20 (D) of the 1996 POEA-SEC.

San Beda College of Law 207


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

94. UNITED PHILIPPINE LINES, INC. AND HOLLAND AMERICA LINE, v. GENEROSO E. SIBUG
G.R. No. 201072 April 2, 2014
VILLARAMA, JR., J.:

PHYSICIAN ASSESMENT RE: PERMANENT AND TOTAL DISABILITY

DOCTRINE:
Company-designated physicians must arrive at a definite assessment of the seafarers fitness to work or
permanent disability within the period of 120 or 240 days. If he fails to do so and the seafarers medical
condition remains unresolved, the latter shall be deemed totally and permanently disabled.

FACTS:
Petitioners hired Sibug as waste handler on the vessel M/S Volendam. While cleaning, Sibug fell from a ladder
and suffered from Anterior Cruciate Ligament (ACL) which required surgery. After being declared fit for work,
Sibug was rehired by petitioners for the vessel M/S Ryndam. Sibug met another accident injuring his right hand
and wrist. He was repatriated and arrived in the Philippines on Jan. 15, 2007. On Sep. 7, 2007, the company
doctor issued a medical report that Sibug has a permanent but incomplete disability. In an email dated Sep. 28,
2007, the company doctor classified Sibugs disability as a grade 10 disability. Sibug filed two complaints for
disability benefits, illness allowance, damages and attorneys fees against petitioners.

LA RULING: Dismissed the Volendam case on the ground that Sibug was declared fit to work after his ACL
reconstruction surgery. As regards the Ryndam case, the Labor Arbiter awarded to Sibug US$10,075 which is
the equivalent award for the grade 10 disability rating issued by the company-designated doctor.

NLRC RULING: Reversed the LAs Decision granting Sibug permanent and total disability benefit of US$60,000
for his Volendam injury and another US$60,000 for his Ryndam injury. On reconsideration it reinstated the LA
decision.

CA RULING: Reinstated the NLRCs first decision ruling that Sibug was unable to perform his customary work
for more than 120 days on account of his Volendam and Ryndam injuries. Thus, he is entitled to permanent and
total disability benefit for both injuries.

ISSUE: Is Sibug entitled to permanent and total disability benefits?

SC RULING:
Volendam Injury No.
Ryndam Injury Yes.

Sibug is not entitled to permanent and total disability benefit for his Volendam injury since he became already fit
to work again as a seaman. As regards his Ryndam injury, Sibug is entitled to permanent and total disability
benefit amounting to US$60,000. The company-designated doctor failed to issue a certification with a
definite assessment of the degree of Sibugs disability for his Ryndam injury within 240 days. In Fil-Pride
Shipping Company, Inc., et al. v. Balasta, we held that the "company-designated physician must arrive at a
definite assessment of the seafarers fitness to work or permanent disability within the period of 120 or 240 days,
pursuant to Article 192 (c)(1) of the Labor Code and Rule X, Section 2 of the Amended Rules on Employees
Compensation. If he fails to do so and the seafarers medical condition remains unresolved, the latter shall be
deemed totally and permanently disabled." This definite assessment of the seamans permanent disability must
include the degree of his disability, as required by Section 20-B of the POEA-SEC.

In this case, Sibug was repatriated and arrived in the country on January 15, 2007 after his Ryndam injury. On
September 7, 2007, the company-designated doctor issued a medical report that Sibug has a permanent but
incomplete disability. But this medical report failed to state the degree of Sibugs disability. Only in an email
dated September 28, 2007, copy of which was attached as Annex 3 of petitioners position paper, was Sibugs
disability from his Ryndam injury classified as a grade 10 disability by the company-designated doctor. By that
time, however, the 240-day extended period when the company-designated doctor must give the definite
assessment of Sibugs disability had lapsed. From January 15, 2007 to September 28, 2007 is 256 days. Hence,
Sibugs disability is already deemed permanent and total.

San Beda College of Law 208


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

95. MAGSAYSAY MARITIME CORPORATION, v. OSCAR D. CHIN, JR.
G.R. No. 199022 April 7, 2014
ABAD, J.:

PERMANENT AND TOTAL DISABILITY BENEFIT LOSS OF EARNING CAPACITY

DOCTRINE:
After an award of disability compensation, an additional award for loss of earnings will result in double recovery.
In a catena of cases, the Court has consistently ruled that disability should not be understood more on its
medical significance but on the loss of earning capacity. Permanent total disability means disablement of an
employee to earn wages in the same kind of work, or work of similar nature that he was trained for or
accustomed to perform, or any kind of work which a person of his mentality and attainment could do. Disability,
therefore, is not synonymous with "sickness" or "illness." What is compensated is ones incapacity to work
resulting in the impairment of his earning capacity.

FACTS:
Thome Ship Management Pte. Ltd., acting through its agent petitioner Magsaysay Maritime Corporation hired
respondent Chin as seaman on board MV Star Siranger. Chin sustained injuries while working on his job aboard
the vessel. Chin filed a claim for disability with Pandiman Phils., Inc. which is the local agent of P&I Club of
which Magsaysay Maritime is a member. Pandiman offered US$30,000.00 as disability compensation which
Chin accepted. He then executed a Release and Quitclaim in favor of Magsaysay Maritime. Chin later filed a
complaint with (NLRC), claiming underpayment of disability benefits and attorneys fees.

The LA dismissed it for lack of merit, which the NLRC affirmed. The CA reversed the NLRC and ruled that Chin
was entitled to permanent total disability benefit of US$60,000.00. It remanded the case to the LA for
determination of other monetary awards. Magsaysay paid the deficiency award of US$30,000.00.

LA RULING: The LA ordered Magsaysay to pay Chin: a) P19,279.75 as reimbursement for medical expenses;
b) US$147,026.43 as loss of future wages; c) P200,000.00 as moral damages; d) P75,000.00 as exemplary
damages; and e) 10% of the total award as attorneys fees.

NLRC RULING: modified the Labor Arbiters Decision by deleting the awards of loss of future wages and moral
and exemplary damages for lack of factual and legal bases.

CA RULING: reversed NLRC; reinstated LA ruling

ISSUE: Is Chin entitled to an award of loss of future earnings on top of his disability benefits?

SC RULING:
NO. The Labor Arbiters award of loss of earning is unwarranted since Chin had already been given disability
compensation for loss of earning capacity. An additional award for loss of earnings will result in double recovery.
In a catena of cases, the Court has consistently ruled that disability should not be understood more on its
medical significance but on the loss of earning capacity. Permanent total disability means disablement of an
employee to earn wages in the same kind of work, or work of similar nature that he was trained for or
accustomed to perform, or any kind of work which a person of his mentality and attainment could do. Disability,
therefore, is not synonymous with "sickness" or "illness." What is compensated is ones incapacity to work
resulting in the impairment of his earning capacity.

Moreover, the award for loss of earning lacks basis since the Philippine Overseas Employment Agency (POEA)
Standard Contract of Employment (POEA SCE), the governing law between the parties, does not provide for
such a grant. What Section 20, paragraph (G) of the POEA SCE provides is that payment for injury, illness,
incapacity, disability, or death of the seafarer covers "all claims arising from or in relation with or in the course of
the seafarers employment, including but not limited to damages arising from the contract, tort, fault or
negligence under the laws of the Philippines or any other country." The permanent disability compensation of
US$60,000 clearly amounts to reasonable compensation for the injuries and loss of earning capacity of the
seafarer

San Beda College of Law 209


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

96. CARLO F. SUNGA, v. VIRJEN SHIPPING CORPORATION, NISSHO ODYSSEY SHIP MANAGEMENT
PTE. LTD., and/or CAPT. ANGEL ZAMBRANO,
G.R. No. 198640 April 23, 2014
BRION, J.:

DISABILITY BENEFITS

DOCTRINE:
An accident pertains to an unforeseen event in which no fault or negligence attaches to the defendant. It is "a
fortuitous circumstance, event or happening; an event happening without any human agency, or if happening
wholly or partly through human agency, an event which under the circumstances is unusual or unexpected by
the person to whom it happens."

FACTS:
Sunga was hired as fitter by Virjen Shipping Corporation (Virjen), acting in behalf of its foreign principal, Nissho
Odyssey Ship Management Pte. Ltd. While on board the MT Sunway vessel, Sunga started to experience an
on-and-off right flank pain, making it difficult for him to work. Dr. Cruz issued a medical certificate recommending
a Grade 8 disability based on the POEA Standard Employment Contract; and another recommending a disability
rating of 25% in accordance with the CBA. Based on these two certificates, Virjen offered US$ 16,795.00 in
accordance with the POEA-SEC. Sunga rejected the offer and demanded disability benefits pursuant to the
CBA. Virjen denied Sungas demand prompting the latter to file a complaint for disability benefits. Virjen claimed
that the CBA requires that for permanent disability to be compensable, the disability should be the result of an
accident incurred during the course of the seafarers employment. Virjen argued that Sunga failed to present
any proof that his disability was indeed the result of an accident.

LA RULING: In favour of Sunga. Ordered Virjen to pay US$110,000 pursuant to the CBA. The result of the MRI
revealed that Sunga had a herniated disc is already a manifestation that the injury resulted from an accident,
commonly incurred through falling or by lifting heavy objects.

NLRC RULING: Affirmed the LA

CA RULING: Reversed the NLRC. The injury was not accidental since carrying heavy objects can cause injury
and that lifting and carrying heavy objects are part of his duties as fitter. Thus, a back injury is reasonably
anticipated. It cannot serve as basis for Sunga to be entitled to disability benefits.

ISSUE: Is Sunga entitled to the benefits under the CBA?

SC RULING:
YES. Sunga did not incur the injury while solely performing his regular duties; an intervening event transpired
which brought upon the injury. To repeat, the two other oilers who were supposed to help carry the weight of the
200-kilogram globe valve lost their grasp of the globe valve. As a result, Sungas back snapped when the entire
weight of the item fell upon him. Notably, this incident cannot be considered as foreseeable, nor can it be
reasonably anticipated. Sungas duty as a fitter involved changing the valve, not to routinely carry a 200-
kilogram globe valve singlehandedly.

In Jarco Marketing Corporation, et al., v. Court of Appeals, we ruled that an accident pertains to an unforeseen
event in which no fault or negligence attaches to the defendant. It is "a fortuitous circumstance, event or
happening; an event happening without any human agency, or if happening wholly or partly through human
agency, an event which under the circumstances is unusual or unexpected by the person to whom it happens."

Since Sunga encountered an accident on board MT Sunway, the CA thus grossly misappreciated and misread
the ruling of the NLRC, leading the appellate court to find a grave abuse of discretion sufficient for a reversal of
the NLRC ruling. In other words, as the NLRC found, Sunga's disability benefits should fall within the coverage
of the parties' CBA.

San Beda College of Law 210


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

97. D. M. CONSUNJI, INC., v. COURT OF APPEALS and MARIA J. JUEGO
G.R. No. 137873 April 20, 2001
KAPUNAN, J.:

EXCEPTION TO THE WAIVER BY ELECTION

DOCTRINE:
An injured worker has a choice of either to recover from the employer the fixed amounts set by the Workmens
Compensation Act or to prosecute an ordinary civil action against the tortfeasor for higher damages but he
cannot pursue both courses of action simultaneously. However, if the choice of the first remedy was based on
ignorance or a mistake of fact, the choice is nullified as it was not an intelligent choice.

FACTS:
On Nov. 2, 1990, Jose Juego, a construction worker of D. M. Consunji, Inc., fell 14 floors from the Renaissance
Tower, resulting to his death. Jose Juegos widow, Maria, filed in the RTC a complaint for damages against the
deceaseds employer, D.M. Consunji, Inc. The employer raised, among other defenses, the widows prior
availment of the benefits from the State Insurance Fund. Petitioner argues that private respondent had
previously availed of the death benefits provided under the Labor Code and is, therefore, precluded from
claiming from the deceaseds employer damages under the Civil Code.

RTC RULING: Ruled in favour of Juego, awarding among others, damages.

CA RULING: Affirmed the RTC.

ISSUE: Is Juego precluded from recovering damages?

SC RULING:
No. An injured worker has a choice of either to recover from the employer the fixed amounts set by the
Workmens Compensation Act or to prosecute an ordinary civil action against the tortfeasor for higher damages
but he cannot pursue both courses of action simultaneously. However, if the choice of the first remedy was
based on ignorance or a mistake of fact, the choice is nullified as it was not an intelligent choice.

When a party having knowledge of the facts makes an election between inconsistent remedies, the election is
final and bars any action, suit, or proceeding inconsistent with the elected remedy, in the absence of fraud by
the other party. The choice of a party between inconsistent remedies results in a waiver by election. The
claimant, by his choice of one remedy, is deemed to have waived the other. However, ignorance of a material
fact negates waiver. Waiver cannot be established by a consent given under a mistake or misapprehension of
fact. That lack of knowledge of a fact that nullifies the election of a remedy is the basis for the exception.

It bears stressing that what negates waiver is lack of knowledge or a mistake of fact.
Private respondents case came under the exception because private respondent was unaware of petitioners
negligence when she filed her claim for death benefits from the State Insurance Fund. Private respondent filed
the civil complaint for damages after she received a copy of the police investigation report and the Prosecutors
Memorandum dismissing the criminal complaint against petitioners personnel.
There is also no showing that private respondent knew of the remedies available to her when the claim before
the ECC was filed. On the contrary, private respondent testified that she was not aware of her rights.

San Beda College of Law 211


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

98. THE HEIRS OF THE LATE DELFIN DELA CRUZ, REPRESENTED BY HIS SPOUSE, CARMELITA DELA
CRUZ v. PHILIPPINE TRANSMARINE CARRIERS, INC., REPRESENTED BY MR. CARLOS C. SALINAS
AND/OR TECTO BELGIUM N.V.
G.R. No. 196357 April 20, 2015
DEL CASTILLO, J.

THE 3-DAY MANDATORY REPORTING REQUIREMENT MUST BE STRICTLY OBSERVED.

DOCTRINE:
The 3-day mandatory reporting requirement must be strictly observed since within 3 days from repatriation, it
would be fairly manageable for the physician to identity whether the disease was contracted during the term of
his employment or that his working conditions increased the risk of contracting the ailment.

FACTS:
The late Delfin Dela Cruz was contracted for the position of Oiler by Philippine Transmarine Carriers, a local
manning agent for and in behalf of the latter's principal, Tecto Belgium N.V. Delfin was declared Fit for Sea
Servce and left the Philippines on 16 August 2000 and immediately embarked the vessel "Lady Hilde" on 17
August 2000.

While on board, he felt gradual chest pains and pain in his upper abdominal region. In 2001, while performing
his regular duties, he was hit by a metal board on his back. He, thereafter, requested medical attention and was
given medications and advised to be given light duties for the rest of the week. Upon the vessel's arrival at a
convenient port on 16 August 2001, his contract expired and he was signed off from the vessel. He reported to
respondents as required. He also sought medical assistance but was not extended such.

On 13 November 2003, Delfin sought for proper medical attention. Afterwards, he was not employed by
respondents because he was already incapacitated to engage in his customary work. He filed his claim for
sickness allowance from the same manning agency but the same was not granted. His condition deteriorated
and was later diagnosed to be suffering from malignant peripheral nerve sheath tumor [MPNST].

On 4 December 2003, he filed a complaint before the NLRC to, claim payment for sickness allowance and
disability compensation. Delfin averred that he is entitled to sickness allowance because his inability to work and
perform his usual occupation after he acquired the sickness while on board, lasted for more than 120 days.

Respondents, on the other hand, averred that the medical condition of Delfin was not acquired or suffered
during the term of his employment, that said medical condition is not work-related, and, therefore, the said
illness is not compensable under the POEA Standard Employment Contract. Furthermore, respondents
asseverated that more than two years had elapsed from the time of the termination of Delfin's employment in
August 2001 up to the time the claim was filed in November 2003, and thus the illness was not acquired during
the period of employment.

LA RULING: Delfin is ENTITLED to his claims. The LA opined that Delfin contracted his illness during the
period of his employment with respondents and that such illness is a compensable occupational disease.
Hence,

NLRC RULING: It REVERSED the LA decision.

CA RULING: AFFIRMED NLRC

ISSUE: Are petitioners, in behalf of the late Delfin Dela Cruz, entitled to permanent disability benefits and
sickness allowance?

SC RULING:
NO. The 1996 POEA SEC clearly provides that a seafarer must submit himself to a post-employment medical
examination within three days from his arrival in the Philippines (mandatory reporting requirement) so that his
claim for disability and sickness allowance can prosper. The 3-day mandatory reporting requirement must be
strictly observed since within 3 days from repatriation, it would be fairly manageable for the physician to identity
whether the disease was contracted during the term of his employment or that his working conditions increased
the risk of contracting the ailment.
San Beda College of Law 212
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LABOR LAW REVIEW Atty. Joyrich Golangco

Whoever claims entitlement to the benefits provided by law should establish his right to the benefits by
substantial evidence" or "such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion, even if other equally reasonable minds might conceivably opine otherwise." Absent a showing
thereof, any decision set forth will only be based on unsubstantiated allegations. Accordingly, the Court cannot
grant a claim for disability benefits without adequate substantiation for to do so will offend due process.

Petitioners failed to show the steps supposedly undertaken by Delfin to comply with the mandatory reporting
requirement. To the Court's mind, this lapse on petitioners' part only demonstrates that Delfin did not comply
with what was incumbent upon him. The reasonable conclusion, therefore, is that at the time of his repatriation,
Delfin was not suffering from any physical disability requiring immediate medical attendance. Otherwise, and
even if his request for medical assistance went unheeded, he would have submitted himself for check-up with
his personal physician. After all, the injury complained of by Delfin was a serious one and it would seem illogical
for him to just suffer in silence and bear the pain for a considerable length of time. Moreover, while the rule on
mandatory reporting requirement is not absolute as a seafarer may show that he was physically incapable to
comply with the same by submitting a written notice to the agency within the same three-day period, nowhere in
the records does it show that Delfin submitted any such notice. Clearly, petitioners failed to show that Delfin
complied with the mandatory reporting requirement. Thus, he is deemed to have forfeited his right to claim
disability benefits and sickness allowance.

San Beda College of Law 213


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

Social Security System (SSS) Law

99. SOCIAL SECURITY COMMISSION v. EDNA A. AZOTE


G.R. No. 209741 April 15, 2015
MENDOZA, J.

DESIGNATION OF BENEFICIARY MUST CONFORM TO THE STATUTE.

DOCTRINE:
Although an SSS member is free to designate a beneficiary, the designation must always conform to the
statute. To blindly rely on the form submitted by the deceased-member would subject the entire social security
system to the whims and caprices of its members and would render the SS Law inutile.

FACTS:
On June 19, 1992, respondent Edna and Edgardo, a member of the Social Security System (SSS), were
married. Their union produced six children. In 1994, Edgardo submitted Form E-4 to the SSS with Edna and
their three older children as designated beneficiaries. Thereafter or on September 7, 2001, Edgardo submitted
another Form E-4 to the SSS designating his three younger children as additional beneficiaries.

On January 13, 2005, Edgardo passed away. Shortly thereafter, Edna filed her claim for death benefits with the
SSS as the wife of a deceased-member. It appeared, however, from the SSS records that Edgardo had earlier
submitted another Form E-4 on November 5, 1982 with a different set of beneficiaries, namely: Rosemarie
Azote (Rosemarie), as his spouse; and Elmer Azote (Elmer), as dependent, born on October 9,
1982. Consequently, Ednas claim was denied. Her children were adjudged as beneficiaries and she was
considered as the legal guardian of her minor children. The benefits, however, would be stopped once a child
would attain the age of 21.

On March 13, 2007, Edna filed a petition with the SSC to claim the death benefits, lump sum and monthly
7
pension of Edgardo. She insisted that she was the legitimate wife of Edgardo. In its answer, the SSS averred
that there was a conflicting information in the forms submitted by the deceased. Summons was published in a
newspaper of general circulation directing Rosemarie to file her answer. Despite the publication, no answer was
filed and Rosemarie was subsequently declared in default.

SSC RULING: Edna is NOT ENTITLED to the benefits. The SSC dismissed Ednas petition for lack of
merit. Citing Section 24(c) of the SS Law, it explained that although Edgardo filed the Form E-4 designating
Edna and their six children as beneficiaries, he did not revoke the designation of Rosemarie as his wife-
beneficiary, and Rosemarie was still presumed to be his legal wife.

CA RULING: Reversed SSC decision.

ISSUE: Is respondent entitled to claim the SSS death benefit and pension of Edgardo?

SC RULING:
NO. Under R. A. No. 8282, the law in force at the time of Edgardos death, only the legal spouse of the
deceased-member is qualified to be the beneficiary of the latters SS benefits. In this case, there is a concrete
proof that Edgardo contracted an earlier marriage with another individual as evidenced by their marriage
contract and Edgardos acknowledgment of his married status when he filled out the 1982 Form E-4 designating
Rosemarie as his spouse.

The updated Form E-4 of Edgardo was not determinative of Ednas status and eligibility to claim the death
benefits of deceased-member. Although an SSS member is free to designate a beneficiary, the designation
must always conform to the statute. To blindly rely on the form submitted by the deceased-member would
subject the entire social security system to the whims and caprices of its members and would render the SS
Law inutile.

Although the SSC is not intrinsically empowered to determine the validity of marriages, it is required by Section
4(b) (7) of R.A. No. 8282 to examine available statistical and economic data to ensure that the benefits fall into
the rightful beneficiaries. The existence of two Form E-4s designating, on two different dates, two different
women as his spouse is already an indication that only one of them can be the legal spouse. It should be
San Beda College of Law 214
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LABOR LAW REVIEW Atty. Joyrich Golangco

emphasized that the SSC determined Ednas eligibility on the basis of available statistical data and documents
on their database as expressly permitted by Section 4(b) (7) of R.A. No. 8282.

San Beda College of Law 215


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

100. SOCIAL SECURITY COMMISSION and SOCIAL SECURITY SYSTEM vs. TERESA G. FAVILA
G.R. No. 170195 March 28, 2011
DEL CASTILLO, J.

FACTORS FOR SPOUSE TO BE CONSIDERED AS PRIMARY BENEFICIARY

DOCTRINE:
A spouse who claims entitlement to death benefits as a primary beneficiary under the Social Security Law must
establish two qualifying factors, to wit: (1) that he/she is the legitimate spouse; and (2) that he/she is dependent
upon the member for support.

FACTS:
On August 5, 2002, respondent Teresa G. Favila (Teresa) filed a Petition before petitioner SSC. She averred
therein that after she was married to Florante Favila (Florante) on January 17, 1970, the latter designated her as
the sole beneficiary in the E-1 Form he submitted before petitioner Social Security System (SSS). When they
begot their children Jofel, Floresa and Florante II, her husband likewise designated each one of them as
beneficiaries. When Florante died on February 1, 1997, his pension benefits under the SSS were given to their
only minor child at that time, Florante II, but only until his emancipation at age 21. Believing that as the surviving
legal wife she is likewise entitled to receive Florantes pension benefits, Teresa subsequently filed her claim for
said benefits before the SSS.

In its Answer, SSS averred that the claim for Florantes pension benefits was initially settled in favor of Teresa
as guardian of the minor Florante II. SSS also alleged that Estelita Ramos, sister of Florante, wrote a letter
stating that her brother had long been separated from Teresa. She alleged therein that the couple lived together
for only ten years and then decided to go their separate ways because Teresa had an affair with a married man.

SSC RULING: The SSC ruled that she is DISQUALIFIED from claiming the death benefits because she was
deemed not dependent for support from Florante due to marital infidelity.

CA RULING: The CA REVERSED the SSC decision. It gave weight to the fact that she is a primary beneficiary
because she is the lawful surviving spouse of Florante and in addition, she was designated by Florante as such
beneficiary.

ISSUE:
Is Teresa a primary beneficiary in contemplation of the Social Security Law as to be entitled to death benefits
accruing from the death of Florante?

SC RULING:
NO. A spouse who claims entitlement to death benefits as a primary beneficiary under the Social Security Law
must establish two qualifying factors, to wit: (1) that he/she is the legitimate spouse; and (2) that he/she is
dependent upon the member for support.

There is no question that Teresa was Florantes legal wife. However, Teresa failed to show that despite their
separation she was dependent upon Florante for support at the time of his death. Aside from Teresas bare
allegation that she was dependent upon her husband for support and her misplaced reliance on the presumption
of dependency by reason of her valid and then subsisting marriage with Florante, Teresa has not presented
sufficient evidence to discharge her burden of proving that she was dependent upon her husband for support at
the time of his death. She could have done this by submitting affidavits of reputable and disinterested persons
who have knowledge that during her separation with Florante, she does not have a known trade, business,
profession or lawful occupation from which she derives income sufficient for her support and such other
evidence tending to prove her claim of dependency. While we note from the abovementioned SSS
Memorandum that Teresa submitted affidavits executed by Napoleon Favila and Josefina Favila, same only
pertained to the fact that she never remarried nor cohabited with another man. On the contrary, what is clear is
that she and Florante had already been separated for about 17 years prior to the latters death as Florante was
in fact, living with his common law wife when he died. Suffice it to say that "whoever claims entitlement to the
benefits provided by law should establish his or her right thereto by substantial evidence."

San Beda College of Law 216


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

101. ROMARICO J. MENDOZA vs. PEOPLE OF THE PHILIPPINES
G.R. No. 183891 August 3, 2010
CARPIO MORALES, J.

MANAGING HEAD- MEANING

DOCTRINE:
The term "managing head" in Section 28(f) is used, in its broadest connotation, not to any specific organizational
or managerial nomenclature.

FACTS:
An Information was filed against petitioner, being the proprietor of Summa Alta Tierra Industries, Inc. (SATII), for
failure and/or refusal to remit the SSS premium contributions in favor of its employees, in violation of Sec. 22(a)
and (d) in relation to Sec. 28 of Republic Act No. 8282, as amended.

The monthly premium contributions of SATII employees to SSS which petitioner admittedly failed to remit
covered the period August 1998 to July 1999 amounting to P421, 151.09 inclusive of penalties. After petitioner
was advised by the SSS to pay the above-said amount, he proposed to settle it over a period of 18
months which proposal the SSS approved.

Despite the grant of petitioners request for several extensions of time to settle the delinquency in installments,
petitioner failed, hence, his indictment.

Petitioner maintains that the managing head or president or general manager of a corporation is not among
those specifically mentioned as liable in the above-quoted Section 28(f). And he calls attention to an alleged
congenital infirmity in the Information in that he was charged as "proprietor" and not as director of SATII.

RTC RULING: Found Mendoza GUILTY for failure to remit the Social Security System (SSS) premium
contributions of employees of the SATII of which he was president.

CA RULING: AFFIRMED the RTC decision

ISSUE:
Is Mendoza guilty of violation of RA 8282 (SSS Law)?

SC RULING:
YES. Section 28(f) of the Act reads:
(f) If the act or omission penalized by this Act be committed by an association, partnership, corporation
or any other institution, its managing head, directors or partners shall be liable for the penalties
provided in this Act for the offense.

The provision of the law being clear and unambiguous, petitioners interpretation that a "proprietor," as he was
designated in the Information, is not among those specifically mentioned under Sec. 28(f) as liable, does not lie.
For the word connotes management, control and power over a business entity. No need to resort to statutory
construction for Section 28(f) of the Social Security Law imposes penalty on: (1) the managing head; (2)
directors; or (3) partners, for offenses committed by a juridical person. The term "managing head" in Section
28(f) is used, in its broadest connotation, not to any specific organizational or managerial nomenclature. To
heed petitioners reasoning would allow unscrupulous businessmen to conveniently escape liability by the
creative adoption of managerial titles.

San Beda College of Law 217


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

102. YOLANDA SIGNEY vs. SOCIAL SECURITY SYSTEM, EDITHA ESPINOSA-CASTILLO, and GINA
SERVANO, representative of GINALYN and RODELYN SIGNEY
G.R. No. 173582 January 28, 2008
TINGA, J.

QUALIFIED DEPENDENTS UNDER SSS LAW

DOCTRINE:
The dependent shall be the following:

(1) The legal spouse entitled by law to receive support from the member;
(2) The legitimate, legitimated, or legally adopted, and illegitimate child who is unmarried, not gainfully
employed and has not reached twenty-one years (21) of age, or if over twenty-one (21) years of age, he
is congenitally or while still a minor has been permanently incapacitated and incapable of self-support,
physically or mentally; and
(3) The parent who is receiving regular support from the member.

FACTS:
Rodolfo Signey, Sr., a member of the SSS, died on 21 May 2001. In his members records, he had designated
Yolanda Signey (petitioner) as primary beneficiary and his four children with her as secondary beneficiaries. On
6 July 2001, petitioner filed a claim for death benefits with the public respondent SSS. She revealed in her SSS
claim that the deceased had a common-law wife, Gina Servano (Gina), with whom he had two minor children
namey, Ginalyn Servano (Ginalyn), born on 13 April 1996, and Rodelyn Signey (Rodelyn), born on 20 April
2000.

Petitioners declaration was confirmed when Gina herself filed a claim for the same death benefits on 13 July
2001 in which she also declared that both she and petitioner were common-law wives of the deceased and that
Editha Espinosa (Editha) was the legal wife.

In addition, in October 2001, Editha also filed an application for death benefits with the SSS stating that she was
the legal wife of the deceased.

The SSS denied the death benefit claim of petitioner. Thereafter, petitioner filed a petition with the SSC in which
she attached a waiver of rights executed by Editha.

SSC RULING: DENIED the claim of petitioner Yolanda. The SSC gave more weight to the SSS field
investigation and the confirmed certification of marriage showing that the deceased was married to Editha on 29
October 1967, than to the aforestated declarations of Editha in her waiver of rights.

CA RULING: AFFIRMED the SSC decision.

ISSUE: Who is entitled to the social security benefits of a Social Security System (SSS) member who was
survived not only by his legal wife, but also by two common-law wives with whom he had six children?

SC RULING:
Ginalyn and Rodelyn, the minor children of the deceased with Gina.
The records disclosed that the deceased had one legitimate child, Ma. Evelyn Signey, who predeceased him,
and several illegitimate children with petitioner and with Gina. Based on their respective certificates of live birth,
the deceased SSS members four illegitimate children with petitioner could no longer be considered dependents
at the time of his death because all of them were over 21 years old when he died on 21 May 2001, the youngest
having been born on 31 March 1978. On the other hand, the deceased SSS members illegitimate children with
Gina were qualified to be his primary beneficiaries for they were still minors at the time of his death, Ginalyn
having been born on 13 April 1996, and Rodelyn on 20 April 2000.
Section 8(e) and (k) of R.A. No. 8282 provides:
SEC. 8. Terms Defined.For the purposes of this Act, the following terms shall, unless the context
indicates otherwise, have the following meanings:
xxx
(e) Dependents The dependent shall be the following:
(1) The legal spouse entitled by law to receive support from the member;
San Beda College of Law 218
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2) The legitimate, legitimated, or legally adopted, and illegitimate child who is unmarried, not
gainfully employed and has not reached twenty-one years (21) of age, or if over twenty-one (21)
years of age, he is congenitally or while still a minor has been permanently incapacitated and incapable
of self-support, physically or mentally; and
3) The parent who is receiving regular support from the member.
xxx
(k) Beneficiaries The dependent spouse until he or she remarries, the dependent legitimate,
legitimated or legally adopted, and illegitimate children, who shall be the primary beneficiaries of the
member: Provided, That the dependent illegitimate children shall be entitled to fifty percent (50%) of the
share of the legitimate, legitimated or legally adopted children: Provided, further, That in the absence of
the dependent legitimate, legitimated or legally adopted children of the member, his/her dependent
illegitimate children shall be entitled to one hundred percent (100%) of the benefits. In their absence, the
dependent parents who shall be the secondary beneficiaries of the member. In the absence of all of
the foregoing, any other person designated by the member as his/her secondary beneficiary.
Whoever claims entitlement to the benefits provided by law should establish his or her right thereto by
substantial evidence. Since petitioner is disqualified to be a beneficiary and because the deceased has no
legitimate child, it follows that the dependent illegitimate minor children of the deceased shall be entitled to the
death benefits as primary beneficiaries. The SSS Law is clear that for a minor child to qualify as a "dependent,"
the only requirements are that he/she must be below 21 years of age, not married nor gainfully employed.
In this case, the minor illegitimate children Ginalyn and Rodelyn were born on 13 April 1996 and 20 April 2000,
respectively. Had the legitimate child of the deceased and Editha survived and qualified as a dependent under
the SSS Law, Ginalyn and Rodelyn would have been entitled to a share equivalent to only 50% of the share of
the said legitimate child. Since the legitimate child of the deceased predeceased him, Ginalyn and Rodelyn, as
the only qualified primary beneficiaries of the deceased, are entitled to 100% of the benefits.

San Beda College of Law 219


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

103. SSS v. TERESITA JARQUE VDA DE BAILON
G.R. No. 165545 March 24, 2006
CARPIO MORALES, J.:

DOCTRINE:
SSS and/or SSC has no jurisdiction to declare a marriage null and void.

FACTS:
1955, Clemente Bailon (Bailon) and Alice Diaz (Alice) contracted marriage in Barcelona, Sorsogon. After 15
year Alice Diaz was declared presumptively dead. 13 years after his wife Alice was declared presumptively
dead, Bailon contracted marriage with Teresita Jarque (respondent). After the death of Bailon, Jarque filed a
claim for funeral benefits, and was granted P12,000 by the SSS.

However, after coming to knowledge of the claim, Alice reappeared contesting the release of funeral benefits
and pension to Jarque asking that the benefits be granter to her as the lawful wife.

SSS RULING: SSS advised respondent of the cancellation of her monthly pension for death benefits and
requested respondent to return the monthly pension she had received from the SSS because her marriage with
Bailon was void as it was contracted while the latters marriage with Alice was still subsisting. Jarque then
elevated the decision to the SSC (Commission).

SSC RULING: By Resolution, the SSC found that the marriage of respondent to Bailon was void and, therefore,
she was "just a common-law-wife affirmed the decision of SSS.

CA RULING: Decision reversing that of SSC


According to the CA, SSS/SSC has no jurisdiction to declare the second marriage null and void on the basis
alone of its own investigation and declare that the decision of the RTC declaring one to be presumptively dead
is without basis. Respondent SSS cannot arrogate upon itself the authority to review the decision of the regular
courts under the pretext of determining the actual and lawful beneficiaries of its members.

ISSUE: Can the SSS and Commission validly declare the first marriage subsisting and the second marriage null
and void?

SC RULING:
No. Although SSC is empowered to settle any dispute with respect to SSS coverage, benefits and
contributions, in so exercising such power, however, it cannot review, much less reverse, decisions rendered by
courts of law as it did in the case at bar when it declared that the CFI Order was obtained through fraud and
subsequently disregarded the same, making its own findings with respect to the validity of Bailon and Alices
marriage on the one hand and the invalidity of Bailon and respondents marriage on the other.
In interfering with and passing upon the CFI Order, the SSC virtually acted as an appellate court. The law does
not give the SSC unfettered discretion to trifle with orders of regular courts in the exercise of its authority to
determine the beneficiaries of the SSS.

San Beda College of Law 220


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

Government Service Insurance System (GSIS) Law

104. GERSIP ASSOCIATION, INC., LETICIA ALMAZAN, ANGELA NARVAEZ, MARIA B. PINEDA, LETICIA
DE MESA AND ALFREDO D. PINEDA, v. GOVERNMENT INSURANCE SERVICE SYSTEM
G.R. No. 18982 October 16, 2013
VILLARAMA, J.:

DOCTRINE:
GRF creates a trust and not a co-ownership between the employees and GSIS.

FACTS:
GSIS Board of Trustees (GSIS Board) approved the proposed GSIS Provident Fund Plan (Plan) to provide
supplementary benefits to GSIS employees upon their retirement, disability or separation from the service, and
payment of definite amounts to their beneficiaries in the event of death. It likewise adopted the "Provident Fund
Rules and Regulations" (PFRR).

Under the Plan, employees who are members of the Provident Fund (Fund) contribute through salary deduction
a sum equivalent to five percent (5%) of their monthly salary while GSIS monthly contribution is fixed at 45% of
each members monthly salary.

Out of the earnings realized by the Fund, twenty percent (20%) of the proportionate earnings of GSIS
contributions is deducted and credited to a General Reserve Fund (GRF) and the remainder is credited to the
accounts of the members in proportion to the amounts standing to their credit at the beginning of each quarter.
Upon retirement, members are entitled to withdraw the entire amount of their contributions and proportionate
share of the accumulated earnings thereon, and 100% of respondents contributions with its proportionate
earnings.

GERSIP Association, Inc. (GERSIP), composed of retired GSIS employees and officers, wrote the President
and General Manager of respondent requesting the liquidation and partition of the General Reserve Fund
(GRF). Petitioners initially filed a civil suit before the RTC but on motion of respondent said case was dismissed
on the ground that it is the GSIS Board which has jurisdiction over the controversy. Petitioners filed a Petition
with the GSIS Board alleging that they have not been paid their portion of the GRF upon their retirement, to
which they are entitled as "co-owners" of the Fund.

Contention of GERSIP
(1) GSIS Provident Fund is an employee fringe benefit package incorporated in the (CBA), the members
own not only their personal contributions to the Fund but also 100% of GSIS management contributions
remitted in their names and for their benefit, plus all the earnings of both personal contributions and the
earnings of the management contribution, 20% of which is allotted by respondent to the GRF.

(2) Upon the remittance by GSIS of its contributions to the Fund, the same ceased to be part of
management funds but becomes part of the equity of the members for whom they were remitted as a
contractual obligation.

(3) Members are entitled also to that part of earnings from respondents contributions which are remitted to
the GRF, or at least the remaining balance thereof pertaining to the share of each member.

(4) GSIS has no legal title to the funds and it has no basis to impose any condition on how to avail of the
Fund benefits, or to refuse its accounting and audit.

GSIS RULING: This was affirmed by CA.

GSIS Board denied the petition for lack of merit. It held that the execution of the Trust Agreement between
respondent and the Committee is a clear indication that the parties intended to establish an express trust, not a
co-ownership, with respondent as Trustor, the Committee as Trustee of the Fund and the members as
Beneficiaries. As to the GRF, the Board said that it answers only for the contingent claims and there is no
requirement for the accounting and partition of GRF.

ISSUE: What is the nature of the funds contributed and its accumulated earnings under the Plan?
San Beda College of Law 221
4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

SC RULING:
A provident fund is a type of retirement plan where both the employer and employee make fixed contributions.
Out of the accumulated fund and its earnings, employees receive benefits upon their retirement, separation from
service or disability.

The GSIS Provident Fund was established through Resolution No. 201 of the GSIS Board.1wphi1 The GSIS
Board likewise adopted a set of rules and regulations (PFRR) to govern the membership, fund contributions and
investment, payment of benefits and the trustees.

On July 23, 1981, a Trust Agreement was executed between respondent and the Committee. The latter was
tasked to administer, manage and invest the Fund, out of which it shall pay the benefits due to members or their
beneficiaries in accordance with the policies, rules and regulations approved by respondent. The Agreement
likewise explicitly declares:

SECTION 2. - The COMMITTEE OF TRUSTEES shall hold title and manage the FUND in trust
for the exclusive benefit of the members and their beneficiaries as provided for in the PLAN. No
part of the FUND shall be used for, or diverted to any purpose or purposes other than for the
exclusive benefits of such members and their beneficiaries. (Emphasis supplied.)

Respondents contention that it had thereby created an express trust was upheld by the GSIS Board
and the CA. The appellate court further ruled that the rules on co-ownership do not apply and there is
nothing in the PFRR that allows the distribution of the GRF in proportion to the members share therein.

We sustain the rulings of the GSIS Board and CA.

Trust is the legal relationship between one person having an equitable ownership in property and another
person owning the legal title to such property, the equitable ownership of the former entitling him to the
performance of certain duties and the exercise of certain powers by the latter. A trust fund refers to money or
property set aside as a trust for the benefit of another and held by a trustee.Under the Civil Code, trusts are
classified as either express or implied. An express trust is created by the intention of the trustor or of the parties,
while an implied trust comes into being by operation of
law.http://www.lawphil.net/judjuris/juri2013/oct2013/gr_189827_2013.html - fnt21
There is no doubt that respondent intended to establish a trust fund from the employees contributions (5% of
monthly salary) and its own contributions (45% of each members monthly salary and all unremitted Employees
Welfare contributions). We cannot accept petitioners submission that respondent could not impose terms and
conditions on the availment of benefits from the Fund on the ground that members already own respondents
contributions from the moment such was remitted to their account. Petitioners assertion that the Plan was a
purely contractual obligation on the part of respondent is likewise mistaken.

Republic Act No. 8291, otherwise known as "The Government Service Insurance System Act of 1997,"
mandated respondent to maintain a provident fund subject to rules and regulations it may adopt. Thus:
SECTION 41. Powers and Functions of the GSIS. The GSIS shall exercise the following
powers and functions:
xxxx
(s) to maintain a provident fund , which consists of contributions made by both the
GSIS and its officials and employees and their earnings, for the payment of benefits to
such officials and employees or their heirs under such terms and conditions as it may
prescribe; (Emphasis supplied.)

In Development Bank of the Philippines v. Commission on Audit,this Court recognized DBPs establishment of a
trust fund to cover the retirement benefits of certain employees. We noted that as the trustor, DBP vested in the
trustees legal title over the Fund as well as control over the investment of the money and assets of the Fund.
The Trust Agreement therein also stated that the principal and income must be used to satisfy all of the liabilities
to the beneficiary officials and employees under the Gratuity
Plan.http://www.lawphil.net/judjuris/juri2013/oct2013/gr_189827_2013.html - fnt23
Here, petitioners as beneficiaries of the Fund contend that they became co-owners of the entire Fund including
respondents contributions and its accumulated earnings. On this premise, they demand a proportionate share
in the GRF which was deducted from the earnings on respondents contributions.
San Beda College of Law 222
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LABOR LAW REVIEW Atty. Joyrich Golangco

Under the PFRR, however, the GRF is allocated for specific purposes and not intended for distribution to
members. Section 8, Article IV thus provides:

Section 8. Earnings. At the beginning of each quarter, the earnings realized by the Fund in the
previous quarter just ended shall be credited to the accounts of the members in proportion to
the amounts standing to their credit as of the beginning of the same quarter after deducting
therefrom twenty per cent (20%) of the proportionate earnings of the Systems contributions,
which deduction shall be credited to a General Reserve Fund. Whenever circumstances
warrant, however, the Committee may reduce the percentage to be credited to the General
Reserve Fund for any given quarter; provided that in no case shall such percentage be lower
than five per cent (5%) of the proportionate earnings of the Systems contributions for the
quarter. When and as long as the total amount in the General Reserve Fund is equivalent to at
least ten per cent (10%) of the total assets of the Fund, the Committee may authorize all the
earnings for any given quarter to be credited to the members.

The General Reserve Fund shall be used for the following purposes:
(a) To cover the deficiency, if any, between the amount standing to the credit of a member who dies or is
separated from the service due to permanent and total disability, and the amount due him under Article
V Section 4;
(b) To make up for any investment losses and write-offs of bad debts, in accordance with policies to be
promulgated by the Board;
(c) To pay the benefits of separated employees in accordance with Article IV, Section 3; and (d) For other
purposes as may be approved by the Board, provided that such purposes is consistent with Article IV,
Section 4

It is clear that while respondents monthly contributions are credited to the account of each member,
and the same were received by petitioners upon their retirement, they were entitled to only a
proportionate share of the earnings thereon. The benefits of retiring members of the Fund are covered
by Section 1(b), Article V which states:

(b) Retirement. In the event the separation from the System is due to retirement under existing
laws, such as P.D. 1146, R.A. 660 or R.A. 1616, irrespective of the length of membership to
the Fund, the retiree shall be entitled to withdraw the entire amount of his contributions to the
Fund, as well as the corresponding proportionate share of the accumulated earnings thereon,
and in addition, 100% of the Systems contributions, plus the proportionate earnings thereon.

We find nothing illegal or anomalous in the creation of the GRF to address certain contingencies and ensure the
Funds continuing viability. Petitioners right to receive retirement benefits under the Plan was subject to well-
defined rules and regulations that were made known to and accepted by them when they applied for
membership in the Fund.

Petitioners have the right to demand for an accounting of the Fund including the GRF. Under Section 5, Article
VIII of the PFRR, the Committee is required to prepare an annual report showing the income and expenses and
the financial condition of the Fund as of the end of each calendar year. Said report shall be submitted to the
GSIS Board and shall be available to members. There is, however, no allegation or evidence that the
Committee failed to comply with the submission of such annual report, or that such report was not made
available to members.

San Beda College of Law 223


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

105. GOVERNMENT SERVICE INSURANCE SYSTEM, Petitioner, v. FERNANDO P. DE LEON,
G.R. No. 186560 November 17, 2010
NACHURA, J.:

DOCTRINE:
Disqualification from receiving retirement benefits under R.A. No. 910 does not mean that he is disqualified from
receiving any retirement benefit under any other existing retirement law.

FACTS:
Respondent Fernando P. de Leon retired as Chief State Prosecutor of the Department of Justice (DOJ), after 44
years of service to the government. He applied for retirement under Republic Act (R.A.) No. 910, invoking R.A.
No. 3783, as amended by R.A. No. 4140, which provides that chief state prosecutors hold the same rank as
judges. The application was approved by GSIS and for more than 9 years, respondent continuously received his
retirement benefits, until he failed to receive his monthly pension.

De Leon learned that GSIS cancelled the payment of his pension because the Department of Budget and
Management (DBM) informed GSIS that respondent was not qualified to retire under R.A. No. 910 since it only
applies to justices and judges not to prosecutors. Thus, GSIS stopped the payment of respondents monthly
pension. Because of the discontinuance of his pension, respondent sought to convert his retirement under R.A.
No. 910 to one under another law administered by GSIS .He then wrote a letter to GSIS regarding the
continuation of his pension.

GSIS RULING: Discontinuance of the pension. De Leon already retired and received benefits and pension
under Republic Act No. 910. However DBM already refused to release the funds for your pension benefit on the
ground that Chief State Prosecutors are not covered by R.A. 910. Since De Leon retired and received benefits
under the said law, he cannot seek to secure benefits under any other applicable GSIS law. There is nothing in
the GSIS law which sanctions double retirement unless the retiree is first re-employed and qualifies once again
to retire under GSIS law. In fact, Section 55 of Republic Act No. 8291 provides for exclusivity of benefits which
means that a retiree may choose only one retirement scheme available to him to the exclusion of all others.

CA RULING: The CA found that GSIS allowed respondent to retire under R.A. No. 910, following precedents
which allowed non-judges to retire under the said law. The CA said that it was not respondents fault that he was
allowed to avail of the benefits under R.A. No. 910; and that, even if his retirement under that law was
erroneous, respondent was, nonetheless, entitled to a monthly pension under the GSIS Act. The CA held that
this was not a case of double retirement, but merely a continuation of the payment of respondents pension
benefit to which he was clearly entitled. Since the error in the award of retirement benefits under R.A. 910 was
not attributable to respondent, it was incumbent upon GSIS to continue defraying his pension in accordance with
the appropriate law which might apply to him. It was unjust for GSIS to entirely stop the payment of respondents
monthly pension without providing any alternative sustenance to him.

ISSUE: Whether or not the GSIS can stop defraying the pension without specifying other pension scheme.

SC RULING:
NO.

(1) Retirement laws, in particular, are liberally construed in favor of the retiree because their objective is
to provide for the retirees sustenance and, hopefully, even comfort, when he no longer has the
capability to earn a livelihood. The liberal approach aims to achieve the humanitarian purposes of the law in
order that efficiency, security, and well-being of government employees may be enhanced.Indeed, retirement
laws are liberally construed and administered in favor of the persons intended to be benefited, and all doubts
are resolved in favor of the retiree to achieve their humanitarian purpose.

In this case, as adverted to above, respondent was able to establish that he has a clear legal right to the
reinstatement of his retirement benefits.

(2) In stopping the payment of respondents monthly pension, GSIS relied on the memorandum of the
DBM and because respondent had been mistakenly allowed to receive retirement benefits under R.A. No. 910,
GSIS erroneously concluded that respondent was not entitled to any retirement benefits at all, not even
under any other extant retirement law. This is flawed logic.
San Beda College of Law 224
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LABOR LAW REVIEW Atty. Joyrich Golangco

Respondents disqualification from receiving retirement benefits under R.A. No. 910 does not mean that
he is disqualified from receiving any retirement benefit under any other existing retirement law.

(3) To grant respondent these benefits does not equate to double retirement, as GSIS mistakenly claims.
Since respondent has been declared ineligible to retire under R.A. No. 910, GSIS should simply apply the
proper retirement law to respondents claim, in substitution of R.A. No. 910. In this way, GSIS would be faithful
to its mandate to administer retirement laws in the spirit in which they have been enacted, i.e., to provide
retirees the wherewithal to live a life of relative comfort and security after years of service to the government.
Respondent will not receive --- and GSIS is under no obligation to give him --- more than what is due him under
the proper retirement law.

It must be emphasized that P.D. No. 1146 specifically mandates that a retiree is entitled to monthly pension for
life. As this Court previously held:

Considering the mandatory salary deductions from the government employee, the government pensions do not
constitute mere gratuity but form part of compensation.

In a pension plan where employee participation is mandatory, the prevailing view is that employees have
contractual or vested rights in the pension where the pension is part of the terms of employment. The reason for
providing retirement benefits is to compensate service to the government. Retirement benefits to government
employees are part of emolument to encourage and retain qualified employees in the government service.
Retirement benefits to government employees reward them for giving the best years of their lives in the service
of their country.

Thus, where the employee retires and meets the eligibility requirements, he acquires a vested right to benefits
that is protected by the due process clause. Retirees enjoy a protected property interest whenever they acquire
a right to immediate payment under pre-existing law. Thus, a pensioner acquires a vested right to benefits that
have become due as provided under the terms of the public employees pension statute. No law can deprive
such person of his pension rights without due process of law, that is, without notice and opportunity to be heard.

It must also be underscored that GSIS itself allowed respondent to retire under R.A. No. 910, following
jurisprudence laid down by this Court.

One could hardly fault respondent, though a seasoned lawyer, for relying on petitioners interpretation of the
pertinent retirement laws, considering that the latter is tasked to administer the governments retirement system.
He had the right to assume that GSIS personnel knew what they were doing.

Since the change in circumstances was through no fault of respondent, he cannot be prejudiced by the same.
His right to receive monthly pension from the government cannot be jeopardized by a new interpretation of the
law.

(4) GSIS argument that respondent has already been enormously benefited under R.A. No. 910 misses
the point.

Retirement benefits are a form of reward for an employees loyalty and service to the employer, and are
intended to help the employee enjoy the remaining years of his life, lessening the burden of having to worry
about his financial support or upkeep. A pension partakes of the nature of "retained wages" of the retiree for a
dual purpose: to entice competent people to enter the government service; and to permit them to retire from the
service with relative security, not only for those who have retained their vigor, but more so for those who have
been incapacitated by illness or accident.

Surely, giving respondent what is due him under the law is not unjust enrichment.

(5) As to GSIS contention that what respondent seeks is conversion of his retirement mode, which is
prohibited under R.A. No. 8291, the Court agrees with the CA that this is not a case of conversion within
the contemplation of the law. The conversion under the law is one that is voluntary, a choice to be made by
the retiree. Here, respondent had no choice but to look for another law under which to claim his pension benefits
because the DBM had decided not to release the funds needed to continue payment of his monthly pension.
San Beda College of Law 225
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LABOR LAW REVIEW Atty. Joyrich Golangco

Respondent himself admitted that, if the DBM had not suspended the payment of his pension, he would not
have sought any other law under which to receive his benefits. The necessity to "convert" was not a voluntary
choice of respondent but a circumstance forced upon him by the government itself.

(6) Finally, GSIS would like this Court to believe that because it has returned respondents premium
contributions, it is now legally impossible for it to comply with the CAs directive.

Given the fact that respondent is ineligible to retire under R.A. No. 910, the refund by GSIS of respondents
premium payments was erroneous. Hence, GSIS can demand the return of the erroneous payment or it may opt
to deduct the amount earlier received by respondent from the benefits which he will receive in the future.
Considering its expertise on the matter, GSIS can device a scheme that will facilitate either the reimbursement
or the deduction in the most cost-efficient and beneficial manner.

The foregoing disquisition draws even greater force from subsequent developments. While this case was
pending, the Congress enacted Republic Act No. 10071, the Prosecution Service Act of 2010. By virtue of this
express provision, respondent is covered by R.A. No. 10071. In addition, he is now entitled to avail of the
benefits provided by Section 23, that "all pension benefits of retired prosecutors of the National Prosecution
Service shall be automatically increased whenever there is an increase in the salary and allowance of the same
position from which he retired."

Respondent, as former Chief State Prosecutor, albeit the position has been renamed "Prosecutor General,"
should enjoy the same retirement benefits as the Presiding Justice of the CA, pursuant to Section 14 of R.A. No.
10071, to wit:

Section 14. Qualifications, Rank and Appointment of the Prosecutor General. - The Prosecutor General shall
have the same qualifications for appointment, rank, category, prerogatives, salary grade and salaries,
allowances, emoluments, and other privileges, shall be subject to the same inhibitions and disqualifications, and
shall enjoy the same retirement and other benefits as those of the Presiding Justice of the Court of Appeals and
shall be appointed by the President.34

Furthermore, respondent should also benefit from the application of Section 16 of the law, which states:

Section 16. Qualifications, Ranks, and Appointments of Prosecutors, and other Prosecution Officers. x x x.

Any increase after the approval of this Act in the salaries, allowances or retirement benefits or any upgrading of
the grades or levels thereof of any or all of the Justices or Judges referred to herein to whom said emoluments
are assimilated shall apply to the corresponding prosecutors.

Lastly, and most importantly, by explicit fiat of R.A. No. 10071, members of the National Prosecution Service
have been granted the retirement benefits under R.A. No. 910, to wit:

Section 25. Applicability. - All benefits heretofore extended under Republic Act No. 910, as amended, and all
other benefits that may be extended by the way of amendment thereto shall likewise be given to the prosecutors
covered by this Act.

Hence, from the time of the effectivity of R.A. No. 10071, respondent should be entitled to receive retirement
benefits granted under R.A. No. 910.

Consequently, GSIS should compute respondents retirement benefits from the time the same were withheld
until April 7, 2010 in accordance with P.D. No. 1146; and his retirement benefits from April 8, 2010 onwards in
accordance with R.A. No. 910.

A final note. The Court is dismayed at the cavalier manner in which GSIS handled respondents claims,
keeping respondent in the dark as to the real status of his retirement benefits for so long. That the agency
tasked with administering the benefits of retired government employees could so unreasonably treat one of its
beneficiaries, one who faithfully served our people for over 40 years, is appalling. It is well to remind GSIS of its
mandate to promote the efficiency and welfare of the employees of our government, and to perform its tasks not
only with competence and proficiency but with genuine compassion and concern.
San Beda College of Law 226
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San Beda College of Law 227


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

106. GOVERNMENT SERVICE INSURANCE SYSTEM v. MARILOU ALCZARAZ
G.R. No. 187474 February 06, 2013
BRION, J.:

DOCTRINE:
It is not necessary that the disease causing the death of the employee be directly connected to the work.
Substantial evidence that the development of the disease is brought largely by the conditions present in the
nature of the job is sufficient.

FACTS:
Bernardo was employed for almost twenty-nine (29) years by the (MMDA) in Makati City. He worked at the
MMDA as labourer. Bernardo was diagnosed with Pulmonary Tuberculosis (PTB) and Community Acquired
Pneumonia (CAP). He was discharged on May 19, 2004 with the following diagnosis: Acute Diffuse
Anterolateral Wall Myocardial Infarction. A year Bernardo was found dead at the basement of the MMDA
building. His body was brought to the Southern Police District Crime Laboratory in Makati City for an autopsy.
Medico-Legal Officer Ma. Cristina B. Freyra performed the autopsy and concluded that Bernardo died of
Myocardial Infarction, old and recent.Bernardos widow, Marilou, subsequently filed a claim for death benefits
with the GSIS.

GSIS RULING: The GSIS denied the claim for death benefits on the ground that myocardial infarction, the
cause of Bernardos death, was directly related to diabetes which is not considered a work-connected illness;
hence, its complications, such as myocardial infarction, are not work-related. This decision of GSIS was affirmed
by ECC. The GSIS insists that myocardial infarction which caused Bernardos death cannot be said to have
been aggravated by the nature of his duties. It stresses that on the contrary, there was no evidence showing
that it was the performance of his duties that caused the development of myocardial infarction as it was a mere
complication of diabetes mellitus, a non-occupational disease. His heart ailment, therefore, cannot be
considered an occupational disease.

CA RULING: The CA granted the petition and set aside the ECC ruling. It pointed out that, as this Court held in
Salmone v. Employees Compensation Commission, "[t]he claimant must show, at least, by substantial evidence
that the development of the disease is brought largely by the conditions present in the nature of the job."

The CA found sufficient proof of work-connection between Bernardos ailment and his working conditions. It
believed that his work as laborer and metro aide must have substantially contributed to his illness.

The CA ordered the GSIS to pay Bernardos heirs the proper benefits for his death consistent with the State
policy to extend the applicability of the employees compensation law, Presidential Decree No. 626, to a greater
number of employees who can avail of the benefits under the law, in consonance with the avowed policy of the
State to give maximum aid and protection to labor.

ISSUE: Whether or not the indirect relation of the cause of death of Bernardo to his work negates the award of
benefits to his dependents.

SC RULING:
No. Diabetes mellitus not the sole predisposing factor to myocardial infarction
Bernardo died after almost three decades of service with the MMDA (July 1, 1976 to January 15, 2005). His
death occurred within his employers premises, at the basement of the MMDA building while he was at work.
The GSIS and the ECC denied the claim of his widow for death benefits on the ground that his death was due to
myocardial infarction which they declared to be non-compensable; they opined that it is not work-related as it is
simply a complication of diabetes mellitus. They pointed out that diabetes mellitus is not in the list of
occupational diseases and, for this reason, its complications such as myocardial infarction, are not work-related.

We disagree with the GSISs position. The conclusions of the two agencies totally disregarded the stressful
and strenuous conditions under which Bernardo toiled for almost 29 long years as a laborer and as a metro
aide. By so doing, they closed the door to other influences that caused or contributed to Bernardos fatal heart
problem an ailment aggravated with the passage of time by the risks present in the difficult working conditions
that Bernardo had to bear from day to day in his employment.

San Beda College of Law 228


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LABOR LAW REVIEW Atty. Joyrich Golangco

The CA vividly captured Bernardos hazardous working environment (the streets of Makati City) and its effects
on his health when it stated:

Petitioner contends that the ECC erred in ruling that petitioner is not entitled to claim benefits
for her husbands death. She pointed out that as early as May 3, 2004, the deceased was
already complaining of shortness of breath and dizziness; that despite such condition, he still
continued performing his work until he was confined at the Ospital ng Makati from May l3 to
19, 2004 where he was diagnosed with Acute Diffuse Anterlateral Wall Myocardial Infarction;
that the short intervening period between his confinement at the hospital and his last day of
duty with the MMDA on January 14, 2005, indicate that he had been suffering from such
disease at the time that he was employed; that his [everyday] exposure under the sweltering
heat of the sun during summer and his constant exposure to rain during the rainy season,
aggravated by his contact to smoke emitted by vehicles passing as he cleaned the streets of
Makati, are enough proofs of the strenuous nature of his work; that his everyday exposure to
these elements not only resulted to his developing myorcardial infarction, but also aggravated
pre-existing illness which were pulmonary tuberculosis and community acquired pneumonia.
http://www.lawphil.net/judjuris/juri2013/feb2013/gr_187474_2013.html - fnt14
While diabetes mellitus was indeed a complicating factor in Bernardos health condition and indisputably
aggravated his heart problem, we cannot discount other employment factors, mental and physical, that had
been indisputably present; they contributed, if not as a direct cause of the heart condition itself, as aggravation
that worsened and hastened his fatal myocardial infarction.

For instance, it is undisputed that Bernardo was earlier diagnosed with CAP which could also be a predisposing
factor to myocardial infarction.There is also stress due to the nature of Bernardos work. As Marilou pointed out,
this Court recognized that stress could influence the onset of myocardial infarction.1wphi1 The Court declared
inGoverment Service Insurance System (GSIS) v. Cuanang:"Myocardial infarction, also known as coronary
occlusion or just a coronary, is a life threatening condition. Predisposing factors for myocardial infarction are
the same for all forms of Coronary Artery Disease, and these factors include stress. Stress appears to be
associated with elevated blood pressure."

The CA, therefore, is correct in holding that there is substantial evidence supporting the conclusion that
myocardial infarction in Bernardos case is work-related.

Cardio-vascular disease compensable


The CAs conclusion is bolstered by the fact that the ECC itself, the government agency tasked by law to
implement the employees compensation program (together with the GSIS in the public sector and the Social
Security System [SSS] in the private sector), included cardio-vascular diseases in the list of occupational
diseases, making them compensable, subject to any of the conditions stated in its enabling Resolution No.
432.With the resolution, it should be obvious that by itself, a heart disease, such as myocardial infarction, can be
considered work-related, with or without the complicating factors of other non-occupational illnesses. Thus, the
20
Court so ruled in Raises v. ECC, where it emphasized that the incidence of acute myocardial infarction,
whether or not associated with a non-listed ailment, is enough basis for compensation.

Resolution No. 432 provides (as one of the conditions) that a heart disease is compensable if it was known to
have been present during employment, there must be proof that an acute exacerbation was clearly precipitated
by the unusual strain by reason of the nature of his work. Based on the evidence on record, we find as the
CA did, that the nature of Bernardos duties and the conditions under which he worked were such as to
eventually cause the onset of his myocardial infarction. The stresses, the strain, and the exposure to street
pollution and to the elements that Bernardo had to bear for almost 29 years are all too real to be ignored. They
cannot but lead to a deterioration of health particularly with the contributing factors of diabetes and pulmonary
disease.

Bernardo had in fact been a walking time bomb ready to explode towards the end of his employment days.
Records show that the debilitating effect of Bernardos working conditions on his health manifested itself several
months before his death. As early as May 3, 2004, Bernardo was already complaining of shortness of breath
and dizziness. From May 13 to 19, 2004, he had to be confined at the Ospital ng Makati and was diagnosed
with acute myocardial infarction which caused his death on January 15, 2005 while he was at work. To be sure,
a reasonable mind analyzing these facts cannot but arrive at the conclusion that the risks present in his work

San Beda College of Law 229


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environment for the entire duration of his employment precipitated the acute myocardial infarction that led to his
death.

We thus find no merit in the petition. The CA committed no reversible error nor any grave abuse of discretion in
awarding death benefits to Bernardos heirs. As a final point, we take this occasion to reiterate that as an
agency charged by law with the implementation of social justice guaranteed and secured by the Constitution
the ECC (as well as the GSIS and the SSS) should adopt a liberal attitude in favor of the employees in
deciding claims for compensability, especially where there is some basis in the facts for inferring a work-
connection to the accident or to the illness. This is what the Constitution dictates.

San Beda College of Law 230


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

ARTICLE 212 (now Art. 219) Definition of Labor Dispute

107. CITIBANK, N. A. v. CA (Third Division), AND CITIBANK INTEGRATED GUARDS LABOR ALLIANCE
(CIGLA) SEGATUPAS/FSM LOCAL CHAPTER No. 1394
G.R. No. 108961 November 27, 1998
PARDO, J.:

DOCTRINE:
Non-renewal of Security Guard Service agreement is a civil dispute and not a labor dispute.

FACTS:
Citibank and El Toro Security Agency, Inc. (hereafter El Toro) entered into a contract for the latter to provide
security and protective services. In 1990, the contract between Citibank and El Toro expired.
Integrated Guards Labor Alliance-SEGA-TUPAS/FSM (hereafter CIGLA) filed with the National Conciliation and
Mediation Board (NCMB) a request for preventive mediation citing Citibank as respondent therein giving as
issues for preventive mediation the following: (1) Unfair labor practice (2) Dismissal of union officers/members;
and (3) Union busting.

Three days after, Citibank served on El Toro a written notice that the bank would not renew anymore the service
agreement with the latter. Simultaneously, Citibank hired another security agency, the Golden Pyramid Security
Agency, to render security services at Citibank's premises.

Hence, CIGLA filed a manifestation with the NCMB that it was converting its request for preventive mediation
into a notice of strike for failure of the parties to reach a mutually acceptable settlement of the issues, which it
followed with a supplemental notice of strike alleging as supplemental issue the mass dismissal of all union
officers and members.

The following day the guards of El Toro were replaced by guards of the Golden Pyramid Security Agency. They
threatened to go on strike against Citibank and picket its premises. CIGLA filed a notice of strike directed at the
premises of the Citibank main office.

Citibank filed with the Regional Trial Court, Makati, a complaint for injunction and damages to which respondent
CIGLA filed with the trial court a motion to dismiss the complaint. The motion alleged that the Court had no
jurisdiction, this being labor dispute.

RTC RULING: The trial court denied respondent CIGLA's motion to dismiss because plaintiff's complaint there
are allegations, which negate any employer-employee relationship between it and the CIGLA members.
Respondent CIGLA filed with the Court of Appeals a petition for certiorari with preliminary injunction assailing
the validity of the proceedings had before the regional trial court.

CA RULING: It declared the proceedings before the RTC null and void.

ISSUE:
(1) The basic issue involved is whether it is the labor tribunal or the regional trial court that has jurisdiction over
the subject matter of the complaint filed by Citibank with the trial court.

(2) Is there a labor dispute between Citibank and the security guards, members of respondent CIGLA,
regardless of whether they stand in the relation of employer and employees?

SC RULING:
(1) Yes.
The Court sustained the petitioner's contention. This Court has held in many cases that "in determining the
existence of an employer-employee relationship, the following elements are generally considered: 1) the
selection and engagement of the employee; 2) the payment of wages; 3) the power of dismissal; and 4) the
employer's power to control the employee with respect to the means and methods by which the work is to be
6
accomplished". It has been decided also that the Labor Arbiter has no jurisdiction over a claim filed where no
employer-employee relationship existed between a company and the security guards assigned to it by a security
7
service contractor. In this case, it was the security agency El Toro that recruited, hired and assigned the

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watchmen to their place of work. It was the security agency that was answerable to Citibank for the conduct of
its guards.

2. No. It is a civil dispute.


Article 212, paragraph l of the Labor Code provides the definition of a "labor dispute". It "includes any
controversy or matter concerning terms or conditions of employment or the association or representation of
persons in negotiating, fixing, maintaining, changing or arranging the terms and conditions of employment,
regardless of whether the disputants stand in the proximate relation of employer and employee."

If at all, the dispute between Citibank and El Toro security agency is one regarding the termination or non-
8
renewal of the contract of services. This is a civil dispute . El Toro was an independent contractor. Thus, no
employer-employee relationship existed between Citibank and the security guard members of the union in the
security agency who were assigned to secure the bank's premises and property. Hence, there was no labor
dispute and no right to strike against the bank.

It is a basic rule of procedure that "jurisdiction of the court over the subject matter of the action is determined by
the allegations of the complaint, irrespective of whether or not the plaintiff is entitled to recover upon all or some
of the claims asserted therein. The jurisdiction of the court can not be made to depend upon the defenses set up
in the answer or upon the motion to dismiss, for otherwise, the question of jurisdiction would almost entirely
9
depend upon the defendant." "What determines the jurisdiction of the court is the nature of the action pleaded
as appearing from the allegations in the complaint. The averments therein and the character of the relief sought
are the ones to be consulted."

In the complaint filed with the trial court, petitioner alleged that in 1983, it entered into a contract with El Toro, a
security agency, for security and protection service. The parties renewed the contract yearly until April 22, 1990.
Petitioner further alleged that from June 11, 1990, until the filing of the complaint, El Toro security guards
formerly assigned to guard Citibank premises loitered around the bank's premises in large groups and
threatened to stage a strike, which would hamper its operations and the normal conduct of its business and that
the bank would suffer damages should a strike push through.

On the basis of the allegations of the complaint, it is safe to conclude that the dispute involved is a civil one, not
a labor dispute. Consequently, we rule that jurisdiction over the subject matter of the complaint lies with the
regional trial court.

San Beda College of Law 232


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LABOR LAW REVIEW Atty. Joyrich Golangco

108. PHILIPPINE AIRLINES, INC. vs. NATIONAL LABOR RELATIONS COMMISSION, FERDINAND PINEDA
and GODOFREDO CABLING
G.R. No. 120567 20 March 1998
Martinez, J.:

DEFINITION OF A LABOR DISPUTE

DOCTRINE:
The power of the NLRC to issue an injunctive writ originates from "any labor dispute. The term "labor dispute" is
defined as "any controversy or matter concerning terms and conditions of employment or the association or
representation of persons in negotiating, fixing, maintaining, changing, or arranging the terms and conditions of
employment regardless of whether or not the disputants stand in the proximate relation of employers and
employees. There is no labor dispute when there has yet been no complaint for illegal dismissal filed with the
labor arbiter.

FACTS:
Ferdinand Pineda and Godofredo Cabling, flight stewards of PAL, were dismissed by the latter from the service
for their alleged involvement in the currency smuggling in Hong Kong. Aggrieved by said dismissal, they went
directly to the NLRC and filed a petition for injunction with the object of making PAL withhold its orders of
dismissal and reinstate them to work. The NLRC granted their petition.

Displeased, PAL challenged the NLRC through a motion for reconsideration questioning its jurisdiction to issue
an injunction or restraining order since this may be issued only under Article 218 of the Labor Code if the case
involves or arises from labor disputes.

NLRC RULING: It denied PALs motion for reconsideration and upheld its jurisdiction to issue the mandatory
injunctive writ ordering PAL to withhold the enforcement of the orders of dismissal and reinstate Pineda and
Cabling.

ISSUE: Can the NLRC, even without a complaint for illegal dismissal filed before the labor arbiter, entertain an
action for injunction and issue such writ?

SC RULING:
NO. Generally, injunction is not a cause of action in itself but merely a provisional remedy, an adjunct to a main
suit. Relative to this, the power of the NLRC to issue an injunctive writ originates from "any labor dispute.

The term "labor dispute" is defined as "any controversy or matter concerning terms and conditions of
employment or the association or representation of persons in negotiating, fixing, maintaining, changing, or
arranging the terms and conditions of employment regardless of whether or not the disputants stand in the
proximate relation of employers and employees."

The term "controversy" is likewise defined as "a litigated question; adversary proceeding in a court of law; a civil
action or suit, either at law or in equity; a justiciable dispute."

A "justiciable controversy" is "one involving an active antagonistic assertion of a legal right on one side and a
denial thereof on the other concerning a real, and not a mere theoretical question or issue."

From the foregoing definitions, it is therefore an essential requirement that there must first be a labor dispute
between the contending parties before the labor arbiter.

In the present case, there is no labor dispute between PAL and respondents Pineda and Cabling as there has
yet been no complaint for illegal dismissal filed with the labor arbiter by them against the PAL. The petition for
injunction directly filed before the NLRC is in reality an action for illegal dismissal. This is clear from the
allegations in the petition which prays for their reinstatement; award of full backwages, moral and exemplary
damages; and attorney's fees. As such, the petition should have been filed with the labor arbiter who has the
original and exclusive jurisdiction to hear and decide the following cases involving all workers, whether
agricultural or non-agricultural.

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Managerial Employee

109. CHARLITO PEARANDA v. BAGANGA PLYWOOD CORPORATION and HUDSON CHUA


G.R. No. 159577 3 May 2006
Panganiban, C.J.:

MEMBERS OF THE MANAGERIAL STAFF

DOCTRINE:
Members of the managerial staff are those who customarily and regularly exercise discretion and independent
judgment. Members of the managerial staff are exempted from the provisions of the Labor Code on labor
standards.

FACTS:
Charlito Pearanda was hired as an employee of Baganga Plywood Corporation (BPC) to take charge of the
operations and maintenance of its steam plant boiler. Subsequently, Pearanda filed a Complaint for illegal
dismissal with money claims against BPC and its general manager, Hudson Chua, before the NLRC. Pearanda
claims, among others, that he was not a managerial employee, and therefore, entitled to the award granted by
the labor arbiter.

LA RULING: There was no illegal dismissal and that petitioners Complaint was premature because he was still
employed by BPC. The temporary closure of BPCs plant did not terminate his employment; hence, he need not
reapply when the plant reopened. Nevertheless, the labor arbiter found Pearanda entitled to overtime pay,
premium pay for working on rest days

NLRC RULING: Deleted the award of overtime pay and premium pay for working on rest days. According to the
Commission, petitioner was not entitled to these awards because he was a managerial employee.

CA RULING: Denied Pearandas petition on purely procedural grounds, which prompted him to seek recourse
with the SC.

ISSUE: Is Pearanda a managerial employee?

SC RULING:
NO. He was a member of the managerial staff. The Implementing Rules of the Labor Code define members of a
managerial staff as those who customarily and regularly exercise discretion and independent judgment.

As borne out by the facts, Pearanda supervised the engineering section of the steam plant boiler. His work
involved overseeing the operation of the machines and the performance of the workers in the engineering
section. This work necessarily required the use of discretion and independent judgment to ensure the proper
functioning of the steam plant boiler. As supervisor, he is deemed a member of the managerial staff.

Members of the managerial staff are exempted from the provisions of the Labor Code on labor standards. Since
Pearanda belongs to this class of employees, he is not entitled to overtime pay and premium pay for working
on rest days.

San Beda College of Law 234


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110. SAMAHANG MANGGAGAWA SA CHARTER CHEMICAL SOLIDARITY OF UNIONS IN THE
PHILIPPINES FOR EMPOWERMENT AND REFORMS (SMCC-SUPER), ZACARRIAS JERRY VICTORIO-
Union President v. CHARTER CHEMICAL and COATING CORPORATION
G.R. No. 169717 16 March 2011
Del Castillo, J.:

MANAGERIAL EMPLOYEES

DOCTRINE:
After a labor organization has been registered, it may exercise all the rights and privileges of a legitimate labor
organization. Any mingling between supervisory and rank-and-file employees in its membership cannot affect its
legitimacy for that is not among the grounds for cancellation of its registration, unless such mingling was brought
about by misrepresentation, false statement or fraud under Article 239 of the Labor Code.

FACTS:
Samahang Manggagawa sa Charter Chemical Solidarity of Unions in the Philippines for Empowerment and
Reforms (petitioner union) filed a petition for certification election among the regular rank-and-file employees of
Charter Chemical and Coating Corporation (respondent company) with the Mediation Arbitration Unit of the
DOLE, National Capital Region.

Respondent company filed an Answer with Motion to Dismiss on the ground that petitioner union is not a
legitimate labor organization because of (1) failure to comply with the documentation requirements set by law,
and (2) the inclusion of supervisory employees within petitioner union.

MED-ARBITER RULING: Sided with the company.

DOLE RULING: Granted the unions petition for a certification election.

CA RULING: Reversed the DOLE and upheld the Med-Arbiters Ruling.

ISSUE: Does the commingling of supervisory and rank-and-file employees in a union divest it of its personality
as a legitimate labor organization?

SC RULING:
NO. After a labor organization has been registered, it may exercise all the rights and privileges of a legitimate
labor organization. Any mingling between supervisory and rank-and-file employees in its membership cannot
affect its legitimacy for that is not among the grounds for cancellation of its registration, unless such mingling
was brought about by misrepresentation, false statement or fraud under Article 239 of the Labor Code.

Applying this principle to the case at bar, petitioner union was not divested of its status as a legitimate labor
organization even if some of its members were supervisory employees. It had the right to file the subject petition
for certification election. Besides, the legal personality of the union cannot be collaterally attacked by the
company in the certification election proceedings the latter being in the eyes of the law a mere bystander in
such proceedings.

111. PAMELA FLORENTINA JUMUAD, Petitioner v. HI-FLYER FOOD, INC. and/or JESUS R.
MONTEMAYOR
G.R. No. 187877 September 2011
Mendoza, J.:

MANAGERIAL EMPLOYEES

DOCTRINE:

As long as there is some basis for loss of confidence, such as when the employer has reasonable ground to
believe that the employee concerned is responsible for the purported misconduct, and the nature of his
participation therein renders him unworthy of the trust and confidence demanded of his position, a managerial
employee may be dismissed.

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FACTS:
Pamela Florentina Jumuad was employed as Area Manager in Visayas by Hi-Flyer, Inc., the company managing
Kentucky Fried Chicken stores throughout the country. Later on, the company discovered lapses on the part of
Jumuad in doing her job. Jumuad was given the opportunity to explain the reason these. Nonetheless, the
company still terminated her employment on the ground of neglect of duty and breach of trust and confidence.
This prompted Jumuad to file a complaint against Hi-Flyer for illegal dismissal.

LA RULING: After finding that no serious cause for termination existed, the LA ruled that Jumuad was illegally
dismissed.

NLRC RULING: Affirmed the LA

CA RULING: Reversed the NLRC. CA was of the opinion that the requirements of substantive and procedural
due process were complied with affording Jumuad an opportunity to be heard first, when she submitted her
written explanation and then, when she was informed of the decision and the basis of her termination.

ISSUE: Was Jumuad Illegally dismissed?

SC RULING:
NO. As long as there is some basis for loss of confidence, such as when the employer has reasonable ground
to believe that the employee concerned is responsible for the purported misconduct, and the nature of his
participation therein renders him unworthy of the trust and confidence demanded of his position, a managerial
employee may be dismissed.

Here, there is ample evidence that Jumuad indeed committed acts justifying loss of trust and confidence of Hi-
Flyer, which resulted to her dismissal from service. Her mismanagement and negligence in supervising the
effective operation of KFC branches in the span of less than a year, resulting in the closure of KFC-Gaisano due
to deplorable sanitary conditions, cash shortages in KFC-Bohol, in which the said branch, at the time of
discovery, was only several months into operation, and the poor sanitation at KFC-Cocomall. The glaring fact
that three (3) out of the seven (7) branches under her area were neglected cannot be glossed over by her
explanation that there was no negligence on her part as the sanitation problem was structural, that she had
been usually busy conducting management team meetings in several branches of KFC in her area or that she
had no participation whatsoever in the alleged cash shortages.

As the employer, Hi-Flyer has the right to regulate, according to its discretion and best judgment, all aspects of
employment, including work assignment, working methods, processes to be followed, working regulations,
transfer of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of workers.

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ARTICLE 217 (now Art. 224) Jurisdiction of Labor Arbiters

112. PEOPLES BROADCASTING SERVICE (BOMBO RADYO PHILS., INC.) v. THE SECRETARY OF THE
DEPARTMENT OF LABOR AND EMPLOYMENT, THE REGIONAL DIRECTOR, DOLE REGION VII, and
JANDELEON JUEZAN
G.R. No. 179652 6 March 2012
Velasco, Jr., J.:

JURISDICTION OF THE LABOR ARBITER

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

FACTS:
Jandeleon Juezan filed a complaint against petitioner with the Department of Labor and Employment (DOLE),
for illegal deduction, nonpayment of service incentive leave, 13th month pay, premium pay for holiday and rest
day and illegal diminution of benefits, delayed payment of wages and noncoverage of SSS, PAG-IBIG and
Philhealth. The DOLE Regional Director found that private respondent was an employee of petitioner, and was
entitled to his money claims.

When the matter was brought before the CA it was held that PBS was accorded due process as it had been
given the opportunity to be heard, and that the DOLE Secretary had jurisdiction over the matter, as the
jurisdictional limitation imposed by Article 129 of the Labor Code on the power of the DOLE Secretary under Art.
128(b) of the Code had been repealed by Republic Act No. (RA) 7730.

However, the SC found that there was no employer-employee relationship between PBS and and private respo.
It was held that while the DOLE may make a determination of the existence of an employer-employee
relationship, this function could not be co-extensive with the visitorial and enforcement power provided in Art.
128(b) of the Labor Code, as amended by RA 7730. The National Labor Relations Commission (NLRC) was
held to be the primary agency in determining the existence of an employer-employee relationship. This was the
interpretation of the Court of the clause in cases where the relationship of employer-employee still exists in Art.
128(b).

From this Decision, the Public Attorneys Office (PAO) filed a Motion for Clarification of Decision. The PAO
sought to clarify as to when the visitorial and enforcement power of the DOLE be not considered as co-
extensive with the power to determine the existence of an employer-employee relationship. The DOLE also
sought the same clarification.

ISSUE: Is the NLRC the sole body with jurisdiction to determine the existence of an employer-employee
relationship?

SC RULING:
NO. No procedure was laid down where the DOLE would only make a preliminary finding, that the power was
primarily held by the NLRC. The law did not say that the DOLE would first seek the NLRCs determination of the
existence of an employer-employee relationship, or that should the existence of the employer-employee
relationship be disputed, the DOLE would refer the matter to the NLRC. The DOLE must have the power to
determine whether or not an employer-employee relationship exists, and from there to decide whether or not to
issue compliance orders in accordance with Art. 128(b) of the Labor Code, as amended by RA 7730.

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The determination of the existence of an employer-employee relationship by the DOLE must be respected. The
expanded visitorial and enforcement power of the DOLE granted by RA 7730 would be rendered nugatory if the
alleged employer could, by the simple expedient of disputing the employer-employee relationship, force the
referral of the matter to the NLRC.
If the DOLE makes a finding that there is an existing employer-employee relationship, it takes cognizance of the
matter, to the exclusion of the NLRC. The DOLE would have no jurisdiction only if the employer-employee
relationship has already been terminated, or it appears, upon review, that no employer-employee relationship
existed in the first place.

It must also be remembered that the power of the DOLE to determine the existence of an employer-employee
relationship need not necessarily result in an affirmative finding. The DOLE may well make the determination
that no employer-employee relationship exists, thus divesting itself of jurisdiction over the case. It must not be
precluded from being able to reach its own conclusions, not by the parties, and certainly not by the SC.

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

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113. EX-BATAAN VETERANS SECURITY AGENCY, INC., (EBVSAI) v. THE SECRETARY OF LABOR
BIENVENIDO E. LAGUESMA
G.R. No. 152396 November 20, 2007
CARPIO, J.:

THE VISITORIAL AND ENFORCEMENT POWERS OF THE DOLE REGIONAL DIRECTOR CAN BE
EXERCISED EVEN WHERE THE INDIVIDUAL CLAIM EXCEEDS P5,000

DOCTRINE:
While it is true that under Articles 129 and 217 of the Labor Code, the LA has jurisdiction to hear and decide
cases where the aggregate money claims of each employee exceeds P5,000.00, said provisions of law do not
contemplate nor cover the visitorial and enforcement powers of the Secretary of Labor or his duly authorized
representatives. Rather, said powers are defined and set forth in Article 128 of the Labor Code.

FACTS:
Private respondents are EBVSAI's employees who instituted a complaint for underpayment of wages against
EBVSAI before the Regional Office (RO) of DOLE. Consequently, RO conducted a complaint inspection of
EBVSAIs Plant where several labor law violations were noted. On the same day, the RO issued a notice of
hearing requiring EBVSAI and private respondents to attend. After the hearing, the Regional Director (RD)
ordered EBVSAI to pay Php 763,927.85 to the affected employees.

EBVSAI filed a motion for reconsideration and alleged that under Articles 129 and 217(6) of the Labor Code, the
Labor Arbiter, not the Regional Director, has exclusive and original jurisdiction over the case because the
individual monetary claim of private respondents exceeds P5,000. RD denied the motion stating that, pursuant
to RA 7730, the limitations under Articles 129 and 217(6) of the Labor Code no longer apply to the Secretary of
Labor's visitorial and enforcement powers under Article 128(b). The Secretary of Labor or his duly authorized
representatives are now empowered to hear and decide, in a summary proceeding, any matter involving the
recovery of any amount of wages and other monetary claims arising out of employer-employee relations at the
time of the inspection.

DOLE SECRETARY RULING: It affirmed the Directors decision on the ground that pursuant to RA 7730, the
Court's decision in the Servando case is no longer controlling insofar as the restrictive effect of Article 129 on
the visitorial and enforcement power of the Secretary of Labor is concerned.

CA RULING: affirmed DOLE Secretary ruling

ISSUE: Whether the Secretary of Labor or his duly authorized representatives have jurisdiction over the money
claims of private respondents which exceed P5,000?

SC RULING:
YES. In Allied Investigation Bureau, Inc. v. Sec. of Labor, SC ruled that while it is true that under Articles 129
and 217 of the Labor Code, the LA has jurisdiction to hear and decide cases where the aggregate money claims
of each employee exceeds P5,000.00, said provisions of law do not contemplate nor cover the visitorial and
enforcement powers of the Secretary of Labor or his duly authorized representatives. Rather, said powers are
defined and set forth in Article 128 of the Labor Code (as amended by R.A. No. 7730) thus: (b) Notwithstanding
the provisions of Article[s] 129 and 217 of this Code to the contrary, and in cases where the relationship of
employer-employee still exists, the Secretary of Labor and Employment or his duly authorized representatives
shall have the power to issue compliance orders to give effect to [the labor standards provisions of this Code
and other] labor legislation based on the findings of labor employment and enforcement officers or industrial
safety engineers made in the course of inspection.

However, if the labor standards case is covered by the exception clause in Article 128(b) of the Labor Code,
then the RD will have to endorse the case to the appropriate Arbitration Branch of the NLRC. In order to divest
the RD or his representatives of jurisdiction, the following elements must be present: (a) that the employer
contests the findings of the labor regulations officer and raises issues thereon; (b) that in order to resolve such
issues, there is a need to examine evidentiary matters; and (c) that such matters are not verifiable in the normal
course of inspection. The rules also provide that the employer shall raise such objections during the hearing of
the case or at any time after receipt of the notice of inspection results.

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In this case, the RD validly assumed jurisdiction over the money claims of private respondents even if the claims
exceeded P5,000 because such jurisdiction was exercised in accordance with Article 128(b) of the Labor Code
and the case does not fall under the exception clause. EBVSAI did not contest the findings of the labor
regulations officer during the hearing or after receipt of the notice of inspection results. It was only in its
supplemental motion for reconsideration before the RD that EBVSAI questioned the findings of the labor
regulations officer and presented documentary evidence to controvert the claims of private respondents. But
even if this was the case, the RD and the Secretary of Labor still looked into and considered EBVSAI's
documentary evidence and found that such did not warrant the reversal of the order.

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114. ARSENIO LOCSIN v. NISSAN CAR LEASE PHILS., INC. (NCLPI) and LUIS BANSON
G.R. No. 185567 October 20, 2010
BRION, J.:

LA HAS NO JURISDICTION OVER INTRA-CORPORATE CONTROVERSY

DOCTRINE:
Given Locsins status as a corporate officer, the RTC, not the Labor Arbiter or the NLRC, has jurisdiction to hear
the legality of the termination of his relationship with Nissan. A corporate officers dismissal is always a corporate
act, or an intra-corporate controversy which arises between a stockholder and a corporation so that RTC should
exercise jurisdiction based on Section 5(c) of PD 902-A.

FACTS:
Locsin was elected Executive Vice President and Treasurer (EVP/Treasurer) of NCLPI. Locsin held this position
for 13 years until he was nominated and elected Chairman. A few months thereafter, an election was held and
Locsin was neither re-elected Chairman nor reinstated to his previous position as EVP/Treasurer. Locsin filed a
complaint for illegal dismissal before the Labor Arbiter against NCLPI. NCLPI filed a Motion to Dismiss on the
ground that the Labor Arbiter did not have jurisdiction over the case since the issue of Locsins removal as
EVP/Treasurer involves an intra-corporate dispute. Locsin maintained that he is an employee of NCPI.

LA RULING: LA denied the Motion to Dismiss, holding that its office-acquired jurisdiction to arbitrate and/or
decide the instant complaint finding extant in the case an employer-employee relationship. Article 280 of the
Labor Code, the receipt of salaries by Locsin, SSS deductions on that salary, and the element of control in the
performance of work duties were used by LA to conclude that Locsin was a regular employee.

CA RULING: NCLPI elevated the case to the CA through a Petition for Certiorari under Rule 65 of the Rules of
Court. CA ruled that Locsin was a corporate officer; hence the issue of his removal as EVP/Treasurer is an intra-
corporate dispute under the RTCs jurisdiction. The fact that the position of EVP/Treasurer is specifically
enumerated as an office in the corporations by-laws makes him a corporate officer.

ISSUE: Whether Locsins position as EVP/Treasurer makes him a corporate officer thereby excluding him from
the coverage of the Labor Code?

SC RULING:
YES. Locsin was undeniably Chairman and President, and was elected to these positions by the Nissan board
pursuant to its By-laws. As such, he was a corporate officer, not an employee. Section 25 of the Corporation
Code provides that corporate officers are the president, secretary, treasurer and such other officers as may
be provided for in the by-laws.

Even as EVP/Treasurer, Locsin already acted as a corporate officer because such position is provided for in
Nissans By-Laws. An office is created by the charter of the corporation and the officer is elected by the directors
or stockholders. On the other hand, an employee usually occupies no office and generally is employed by the
managing officer of the corporation who also determines the compensation to be paid to such employee. Locsin
was elected by the NCLPI Board, in accordance with the Amended By-Laws of the corporation.
Given Locsins status as a corporate officer, the RTC, not the Labor Arbiter or the NLRC, has jurisdiction to hear
the legality of the termination of his relationship with Nissan. A corporate officers dismissal is always a corporate
act, or an intra-corporate controversy which arises between a stockholder and a corporation so that RTC should
exercise jurisdiction based on Section 5(c) of PD 902-A.

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115. OSCAR C. REYES vs. HON. REGIONAL TRIAL COURT OF MAKATI, Branch 142, ZENITH
INSURANCE CORPORATION, and RODRIGO C. REYES
G.R. No. 165744 August 11, 2008
BRION, J.:

JURISDICTION OF SPECIAL COMMERCIAL COURTS

DOCTRINE:
Without the settlement of Anastacias estate, there can be no definite partition and distribution of the estate to
the heirs. Without the partition and distribution, there can be no registration of the transfer. And without the
registration, we cannot consider the transferee-heir a stockholder who may invoke the existence of an intra-
corporate relationship as premise for an intra-corporate controversy within the jurisdiction of a special
commercial court.

FACTS:
Oscar and private respondent Rodrigo C. Reyes (Rodrigo) are the children of the spouses Pedro and Anastacia
Reyes. Pedro, Anastacia, Oscar, and Rodrigo each owned shares of stock of Zenith Insurance Corporation
(Zenith). Pedro died in 1964, while Anastacia died in 1993. Although Pedros estate was judicially partitioned
among his heirs sometime in the 1970s, no similar settlement and partition appear to have been made with
Anastacias estate, which included her shareholdings in Zenith. Zenith and Rodrigo filed a derivative suit with
SEC (now RTC) against Oscar in order to obtain an accounting of the funds and assets of Zenith which are now
in the possession of Oscar and to determine the shares of stock of deceased spouses that were arbitrarily and
fraudulently appropriated by Oscar for himself and which were not collated and taken into account in the
partition, distribution, and/or settlement of the estate.

Oscar filed a Motion to Declare Complaint as Nuisance or Harassment Suit. He claimed that the complaint is a
mere nuisance or harassment suit and should be dismissed; and that it is not a bona fide derivative suit as it
partakes of the nature of a petition for the settlement of estate of the Anastacia that is outside the jurisdiction of
a RTC.

RTC RULING: RTC denied the motion as to the action for determination of the shares of stock of deceased
allegedly taken by Oscar, its accounting and the corresponding delivery of these shares since it is not a
derivative suit and should properly be threshed out in a petition for settlement of estate. However, the action
with respect to the derivative suit for accounting of the funds and assets of the corporation which are in the
control, custody, and/or possession of the Oscar was not dismissed and was taken cognizance of by RTC.

CA RULING: affirmed the RTC order

ISSUE: Whether the special commercial court (RTC) have jurisdiction over the subject matter of Rodrigos
complaint?

SC RULING:
NO. While Rodrigo holds shares of stock in Zenith, he holds them in two capacities: in his own right with respect
to the 4,250 shares registered in his name, and as one of the heirs of Anastacia Reyes with respect to the
136,598 shares registered in her name. What is material in resolving the issues of this case under the
allegations of the complaint is Rodrigos interest as an heir since the subject matter of the present controversy
centers on the shares of stocks belonging to Anastacia, not on Rodrigos personally-owned shares nor on his
personality as shareholder owning these shares.

Hence, Rodrigo must first prove that there are shareholdings that will be left to him and his co-heirs, and this
can be determined only in a settlement of the decedents estate. No such proceeding has been commenced to
date. Without the settlement of Anastacias estate, there can be no definite partition and distribution of the estate
to the heirs. Without the partition and distribution, there can be no registration of the transfer. And without the
registration, we cannot consider the transferee-heir a stockholder who may invoke the existence of an intra-
corporate relationship as premise for an intra-corporate controversy within the jurisdiction of a special
commercial court.

San Beda College of Law 242


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LABOR LAW REVIEW Atty. Joyrich Golangco

116. LESLIE OKOL v. SLIMMERS WORLD INTERNATIONAL, BEHAVIOR MODIFICATIONS, INC., and
RONALD JOSEPH MOY
G.R. No. 160146 DECEMBER 11, 2009
CARPIO, J.:

LA HAS NO JURISDICTION OVER INTRA-CORPORATE CONTROVERSY

DOCTRINE: In a number of cases, SC held that a corporate officers dismissal is always a corporate act, or an
intra-corporate controversy which arises between a stockholder and a corporation. The question of
remuneration involving a stockholder and officer, not a mere employee, is not a simple labor problem but a
matter that comes within the area of corporate affairs and management and is a corporate controversy in
contemplation of the Corporation Code.

FACTS:
Respondent Slimmers World International operating under the name Behavior Modifications, Inc. (Slimmers
World) employed petitioner Leslie Okol (Okol) as a management trainee. Okol was promoted as Head Office
Manager and then Director and Vice President. Okols services was terminated by Slimmers World due to the
seizure by the Bureau of Customs of machines and treadmills to or consigned to Slimmers World but the
shipment of the equipment was placed under the name of Okol.

Okol filed an illegal dismissal complaint with the LA. Respondents filed a Motion to Dismiss asserting that the
NLRC had no jurisdiction over the subject matter of the complaint. Okol argued that even as vice-president, the
work that she performed conforms to that of an employee rather than a corporate officer. Mere title or
designation in a corporation will not, by itself, determine the existence of an employer-employee relationship.

LA RULING: LA granted the motion to dismiss ruling that Okol was the vice-president of Slimmers World at the
time of her dismissal. Since it involved a corporate officer, the dispute was an intra-corporate controversy falling
outside the jurisdiction of the Arbitration branch.

NLRC RULING: It reversed the LA decision

CA RULING: It affirmed LAs ruling holding that being an intra-corporate dispute, the case falls within the
jurisdiction of the regular courts pursuant to Republic Act No. 8799.

ISSUE: Does NLRC have jurisdiction over the illegal dismissal case filed by petitioner?

SC RULING:
NO. Section 25 of the Corporation Code enumerates corporate officers as the president, secretary, treasurer
and such other officers as may be provided for in the by-laws. An office is created by the charter of the
corporation and the officer is elected by the directors or stockholders. On the other hand, an employee usually
occupies no office and generally is employed not by action of the directors or stockholders but by the managing
officer of the corporation who also determines the compensation to be paid to such employee.

The Amended By-Laws of Slimmers World which enumerate the power of the board of directors as well as the
officers of the corporation clearly shows that Okol was a director and officer of Slimmers World. In a number of
cases, SC held that a corporate officers dismissal is always a corporate act, or an intra-corporate controversy
which arises between a stockholder and a corporation. The question of remuneration involving a stockholder
and officer, not a mere employee, is not a simple labor problem but a matter that comes within the area of
corporate affairs and management and is a corporate controversy in contemplation of the Corporation Code.

San Beda College of Law 243


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117. RURAL BANK OF CORON (PALAWAN), INC., EMPIRE COLD STORAGE AND DEVELOPMENT
CORPORATION, CITIZENS DEVELOPMENT INCOPRORATED (CDI), CARIDAD B. GARCIA, SANDRA G.
ESCAT, LORNA GARCIA, and OLGA G. ESCAT v. ANNALISA CORTES
G.R. No. 164888 December 6, 2006
CARPIO MORALES, J.:

JURISDICTION OF LA; POSTING A BOND IS A REQUIREMENT FOR PERFECTION OF APPEAL TO NLRC

DOCTRINES:
1. While respondent was the Corporate Secretary of the Rural Bank of Coron, she was also its Financial
Assistant and the Personnel Officer of the two other petitioner corporations. A corporation can engage
its corporate officers to perform services under a circumstance which would make them employees. The
Labor Arbiter has thus jurisdiction over respondents complaint.
2. All that is required to perfect the appeal is the posting of a bond to ensure that the award is eventually
paid should the appeal be dismissed. Petitioners should thus have posted a bond, even if it were only
partial, but they did not.

FACTS:
Respondent was the Financial Assistant, Personnel Officer and Corporate Secretary of The Rural Bank of
Coron, Personnel Officer of CDI, and also Personnel Officer and Disbursing Officer of The Empire Cold Storage
Development Corporation (ECSDC). She simultaneously received salaries from these corporations.
On examination of the financial books of the corporations, it was discovered that respondent was involved in
5
several anomalies, drawing petitioners to terminate respondents services. Respondent filed a complaint for
illegal dismissal and non-payment of salaries and other benefits before the LA. Petitioners moved for the
dismissal of the complaint on the ground of lack of jurisdiction, contending that the case was an intra-corporate
controversy involving the removal of a corporate officer, respondent being the Corporate Secretary of the Rural
Bank of Coron, Inc., hence, cognizable by the Securities and Exchange Commission (SEC) (now RTC) pursuant
to Section 5 of PD 902-A.

LA RULING: LA assumed jurisdiction ruling that aside from her being Corporate Secretary of Rural Bank of
Coron, complainant was likewise appointed as Financial Assistant & Personnel Officer, which is not a corporate
officer of petitioners. LA ordered petitioners to pay respondent P1,168,090.00.

NLRC RULING: On the tenth or last day of the period of appeal, petitioners filed a Notice of Appeal and Motion
for Reduction of Bond to which they attached a Memorandum on Appeal. In their Motion for Reduction of Bond,
petitioners alleged that the corporations were under financial distress and the Rural Bank of Coron was under
receivership. NLRC, while noting that petitioners timely filed the appeal, held that the same was not
accompanied by an appeal bond, a mandatory requirement under Article 223 of the Labor Code and Section 6,
Rule VI of the NLRC New Rules of Procedure. It also noted that the Motion for Reduction of Bond was
"premised on self-serving allegations." It accordingly dismissed the appeal.

ISSUES:
1. Whether LA has jurisdiction over the case?
2. Whether petitioners appeal before NLRC was perfected?

SC RULING:
1. YES. While respondent was the Corporate Secretary of the Rural Bank of Coron, she was also its
Financial Assistant and the Personnel Officer of the two other petitioner corporations. Mainland
Construction Co., Inc. v. Movilla instructs that a corporation can engage its corporate officers to perform
services under a circumstance which would make them employees. The Labor Arbiter has thus
jurisdiction over respondents complaint.
2. NO. All that is required to perfect the appeal is the posting of a bond to ensure that the award is
eventually paid should the appeal be dismissed. Petitioners should thus have posted a bond, even if it
were only partial, but they did not. In the case at bar, petitioner did not post a full or partial appeal bond
within the prescribed period, thus, no appeal was perfected from the decision of the LA. For this reason,
the decision sought to be appealed to the NLRC had become final and executory and therefore
immutable. No relaxation of the Rule may thus be considered. Clearly then, the NLRC has no authority
to entertain the appeal, much less to reverse the decision of the LA.
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San Beda College of Law 245


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LABOR LAW REVIEW Atty. Joyrich Golangco

118. HALGUENA v. PAL
G.R. No. 172013 October 2, 2009
PERALTA, J.:

JURISDICTION OF LABOR ARBITER

DOCTRINE:
Not every controversy or money claim by an employee against the employer or vice-versa is within the exclusive
jurisdiction of the labor arbiter. Actions between employees and employer where the employer-employee
relationship is merely incidental and the cause of action precedes from a different source of obligation is within
the exclusive jurisdiction of the regular court.

FACTS:
Petitioners were employed as female flight attendants of PAL. They are members of the Flight Attendants and
Stewards Association of the Philippines (FASAP), the exclusive exclusive bargaining representative of the flight
attendants.Section 144, Part A of the PAL-FASAP CBA, provides that: 3. Compulsory Retirement. Subject to
the grooming standards provisions of this Agreement, compulsory retirement shall be fifty-five (55) for females
and sixty (60) for males. x x x. petitioners and several female cabin crews manifested that the aforementioned
CBA provision on compulsory retirement is discriminatory, and demanded for an equal treatment with their male
counterparts. This demand was reiterated in a letter. On July 12, 2004, Robert D. Anduiza, President of FASAP
submitted their 2004-2005 CBA proposals[6] and manifested their willingness to commence the collective
bargaining negotiations between the management and the association, at the soonest possible time.

In 2004, petitioners filed a Special Civil Action for Declaratory Relief with Prayer for the Issuance of TRO and
Writ of Preliminary Injunction with the Regional Trial Court (RTC) of Makati Cityagainst respondent for the
invalidity of Section 144, Part A of the PAL-FASAP CBA.

RTC RULING: The RTC issued an Order upholding its jurisdiction over the present case. The RTC reasoned
that: The allegations in the Petition do not make out a labor dispute arising from employer-employee relationship
as none is shown to exist. This case is not directed specifically against respondent arising from any act of the
latter, nor does it involve a claim against the respondent. Rather, this case seeks a declaration of the nullity of
the questioned provision of the CBA, which is within the Court's competence, with the allegations in the Petition
constituting the bases for such relief sought.

The RTC issued a TRO on August 10, 2004, enjoining the respondent for implementing Section 144, Part A of
the PAL-FASAP CBA.

CA RULING: declared RTC to have NO JURISDICTION OVER THE CASE

ISSUE: Does the RTC have jurisdiction over the petitioners' action challenging the legality or constitutionality of
the provisions on the compulsory retirement age contained in the CBA between respondent PAL and FASAP?

SC RULING:
YES. The subject of litigation is incapable of pecuniary estimation, exclusively cognizable by the RTC, pursuant
to Section 19 (1) of Batas Pambansa Blg. 129, as amended. Being an ordinary civil action, the same is beyond
the jurisdiction of labor tribunals.

The said issue cannot be resolved solely by applying the Labor Code. Rather, it requires the application of the
Constitution, labor statutes, law on contracts and the Convention on the Elimination of All Forms of
Discrimination Against Women, and the power to apply and interpret the constitution and CEDAW is within the
jurisdiction of trial courts, a court of general jurisdiction. In Georg Grotjahn GMBH & Co. v. Isnani, this Court
held that not every dispute between an employer and employee involves matters that only labor arbiters and the
NLRC can resolve in the exercise of their adjudicatory or quasi-judicial powers. The jurisdiction of labor arbiters
and the NLRC under Article 217 of the Labor Code is limited to disputes arising from an employer-employee
relationship which can only be resolved by reference to the Labor Code, other labor statutes, or their collective
bargaining agreement.

Not every controversy or money claim by an employee against the employer or vice-versa is within the exclusive
jurisdiction of the labor arbiter. Actions between employees and employer where the employer-employee
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relationship is merely incidental and the cause of action precedes from a different source of obligation is within
the exclusive jurisdiction of the regular court. Here, the employer-employee relationship between the parties is
merely incidental and the cause of action ultimately arose from different sources of obligation, i.e., the
Constitution and CEDAW.

Thus, where the principal relief sought is to be resolved not by reference to the Labor Code or other labor
relations statute or a collective bargaining agreement but by the general civil law, the jurisdiction over the
dispute belongs to the regular courts of justice and not to the labor arbiter and the NLRC. In such situations,
resolution of the dispute requires expertise, not in labor management relations nor in wage structures and other
terms and conditions of employment, but rather in the application of the general civil law. Clearly, such claims
fall outside the area of competence or expertise ordinarily ascribed to labor arbiters and the NLRC and the
rationale for granting jurisdiction over such claims to these agencies disappears.

San Beda College of Law 247


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119. SANTIAGO v. CF SHARP CREW MANAGEMENT
G.R. No. 162419 July 10, 2007
TINGA, J.:

JURISDICTION OF LABOR ARBITER

DOCTRINE:
The jurisdiction of labor arbiters is not limited to claims arising from employer-employee relationships.

FACTS:
In 1998, Paul Santiago signed a new contract of employment with CF Sharp Crew Mgmt., Inc., with the duration
of nine (9) months. He was assured of a monthly salary of US$515.00, overtime pay and other benefits.
Santiago was to be deployed on board the "MSV Seaspread". A week before the scheduled date of departure,
Capt. Pacifico Fernandez, CF Sharps Vice President, sent a fax to the captain of "MSV Seaspread telling the
latter that he received calls from various individuals about the possibility that Santiago may jump ship in Canada
like his brother did before him. Santiago was thus told that he would not be leaving for Canada anymore, but he
was reassured that he might be considered for deployment at some future date.

Consequently, Santiago filed a complaint for illegal dismissal, damages, and attorney's fees against CF Sharp
and its foreign principal. In defense, CF Sharp contends that there is no employer-employee relationship
between petitioner and respondent because under the POEA Standard Contract, the employment contract shall
commence upon actual departure of the seafarer from the airport or seaport at the point of hire. In the absence
of an employer-employee relationship between the parties, the claims for illegal dismissal, actual damages, and
attorneys fees should be dismissed as the NLRC does not have jurisdiction over the same.

LA RULING: The labor arbiter held respondent liable

NLRC RULING: (NLRC) ruled that there is no employer-employee relationship between petitioner and
respondent because under the Standard Terms and Conditions Governing the Employment of Filipino Seafarers
on Board Ocean Going Vessels (POEA Standard Contract), the employment contract shall commence upon
actual departure of the seafarer from the airport or seaport at the point of hire and with a POEA-approved
contract. In the absence of an employer-employee relationship between the parties, the claims for illegal
dismissal, actual damages, and attorneys fees should be dismissed.

CA RULING: It agreed with the NLRCs finding that petitioners non-deployment was a valid exercise of
respondents management prerogative.

ISSUE: Does the NLRC have jurisdiction over the case?

SC RULING:
YES. The jurisdiction of labor arbiters is not limited to claims arising from employer-employee relationships.
Section 10 of R.A. No. 8042 (Migrant Workers Act), provides that:

Sec. 10. Money Claims. Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National
Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide, within
ninety (90) calendar days after the filing of the complaint, the claims arising out of an employer-employee
relationship or by virtue of any law or contract involving Filipino workers for overseas deployment including
claims for actual, moral, exemplary and other forms of damages. x x x

Since the present petition involves the employment contract entered into by petitioner for overseas employment,
his claims are cognizable by the labor arbiters of the NLRC.

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120. ATLAS FARMS, INC. v. NLRC
G.R. No. 142244 November 18, 2002
QUISUMBING, J.:

JURISDICTION OF LABOR ARBITER

DOCTRINE:
Where the dispute is just in the interpretation, implementation or enforcement stage, it may be referred to the
grievance machinery set up in the CBA, or brought to voluntary arbitration. But, where there was already actual
termination, with alleged violation of the employees rights, it is already cognizable by the labor arbiter.

FACTS:
Private respondent Jaime O. dela Pea was employed as a veterinary aide by petitioner. He was among several
employees terminated in July 1989. On July 8, 1989, he was re-hired by petitioner and given the additional job
of feedmill operator. He was instructed to train selected workers to operate the feedmill.

In 1993, Pea was allegedly caught urinating and defecating on company premises not intended for the purpose.
The farm manager of petitioner issued a formal notice directing him to explain within 24 hours why disciplinary
action should not be taken against him. Pea refused, however, to receive the formal notice. He never bothered
to explain. Thus, a notice of termination with payment of his monetary benefits was sent to him.

Co-respondent Marcial I. Abion was a carpenter/mason and a maintenance man whose employment by
petitioner. Allegedly, he caused the clogging of the fishpond drainage resulting in damages worth several
hundred thousand pesos when he improperly disposed of the cut grass and other waste materials into the
ponds drainage system. Petitioner sent a written notice to Abion, requiring him to explain what happened,
otherwise, disciplinary action would be taken against him. He refused to receive the notice and give an
explanation, according to petitioner. Consequently, the company terminated his services. He acknowledged
receipt of a written notice of dismissal, with his separation pay.

Pea and Abion filed separate complaints for illegal dismissal that were later consolidated. Both claimed that their
termination from service was due to petitioners suspicion that they were the leaders in a plan to form a union to
compete and replace the existing management-dominated union.

LA RULING: The labor arbiter dismissed their complaints on the ground that the grievance machinery in the
collective bargaining agreement (CBA) had not yet been exhausted. Private respondents availed of the
grievance process, but later on refiled the case before the NLRC in Region IV. They alleged lack of sympathy on
petitioners part to engage in conciliation proceedings.

NLRC RULING: NLRC reversed the labor arbiters decision.

CA RULING: The appellate court denied the petition and affirmed the NLRC resolution with some modifications,
thus: 1) The private respondents can not be reinstated, due to their acceptance of the separation pay offered by
the petitioner; 2) The private respondents are entitled to their full back wages; and, 3) The amount of the
separation pay received by private respondents from petitioner shall not be deducted from their full back wages.

ISSUE: Does the LA and NLRC have jurisdiction over the case?

SC RULING:
YES. Coming to the merits of the petition, the NLRC found that petitioner did not comply with the requirements
of a valid dismissal. For a dismissal to be valid, the employer must show that: (1) the employee was accorded
due process, and (2) the dismissal must be for any of the valid causes provided for by law. No evidence was
shown that private respondents refused, as alleged, to receive the notices requiring them to show cause why no
disciplinary action should be taken against them. Without proof of notice, private respondents who were
subsequently dismissed without hearing were also deprived of a chance to air their side at the level of the
grievance machinery. Given the fact of dismissal, it can be said that the cases were effectively removed from
the jurisdiction of the voluntary arbitrator, thus placing them within the jurisdiction of the labor arbiter. Where the
dispute is just in the interpretation, implementation or enforcement stage, it may be referred to the grievance
machinery set up in the CBA, or brought to voluntary arbitration. But, where there was already actual
termination, with alleged violation of the employees rights, it is already cognizable by the labor arbiter.
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121. PERPETUAL HELP CREDIT COOPERATIVE, INC. (PHCCI) v. BENEDICTO FABURADA
G.R. No. 121948. October 8, 2001
SANDOVAL-GUTIERREZ, J.:

JURISDICTION OF LABOR ARBITER

DOCTRINE:
The dispute is about payment of wages, overtime pay, rest day and termination of employment. Under Art. 217
of the Labor Code, these disputes are within the original and exclusive jurisdiction of the Labor Arbiter.

FACTS:
Benedicto Faburada, Sisinita Vilar, Imelda Tamayo and Harold Catipay, private respondents, filed a complaint
against petitioner, with the Arbitration Branch, DOLE for illegal dismissal, premium pay on holidays and rest
days, separation pay, wage differential, moral damages, and attorneys fees.

Petitioner PHCCI filed a motion to dismiss the complaint on the ground that there is no employer-employee
relationship between them as private respondents are all members and co-owners of the cooperative and they
have not exhausted the remedies provided in the cooperative by-laws. Petitioner filed a supplemental motion to
dismiss alleging that Article 121 of R.A. No. 6939 or the Cooperative Development Authority Law which took
effect on March 26, 1990, requires conciliation or mediation within the cooperative before a resort to judicial
proceeding.

LA RULING: The Labor Arbiter denied petitioner's motion to dismiss, holding that the case is impressed with
employer-employee relationship and that the law on cooperatives is subservient to the Labor Code.

NLRC RULING: NLRC affirmed the Labor Arbiter's decision

CA RULING: The appellate court denied the petition and affirmed the NLRC resolution with some modifications,
thus: 1) The private respondents cannot be reinstated, due to their acceptance of the separation pay offered by
the petitioner; 2) The private respondents are entitled to their full back wages; and, 3) The amount of the
separation pay received by private respondents from petitioner shall not be deducted from their full back wages.

ISSUE: Does the LA have jurisdiction over the case?

SC RULING:
YES. As aptly stated by the Solicitor General in his comment, P.D. 175 (strengthening the Cooperative
Movement) does not provide for a grievance machinery where a dispute or claim may first be submitted. LOI 23
refers to instructions to the Secretary of Public Works and Communications to implement immediately the
recommendation of the Postmaster General for the dismissal of some employees of the Bureau of Post.
Obviously, this LOI has no relevance to the instant case.

Article 121 of Republic Act No. 6938 (Cooperative Code of the Philippines) provides the procedure how
cooperative disputes are to be resolved, thus:

ART. 121. Settlement of Disputes.- Disputes among members, officers, directors, and
committee members, and intra-cooperative disputes shall, as far as practicable, be settled
amicably in accordance with the conciliation or mediation mechanisms embodied in the bylaws
of the cooperative, and in applicable laws.

Should such a conciliation/mediation proceeding fail, the matter shall be settled in a court of competent
jurisdiction.

Complementing this Article is Section 8 of R.A. No. 6939 (Cooperative Development Authority Law) which
reads:

SEC. 8 Mediation and Conciliation.- Upon request of either or both parties, the Authority shall
mediate and conciliate disputes within a cooperative or between cooperatives: Provided, That if
no mediation or conciliation succeeds within three (3) months from request thereof, a certificate
of non-resolution shall be issued by the Commission prior to the filing of appropriate action
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before the proper courts.

The above provisions apply to members, officers and directors of the cooperative involved in disputes within a
cooperative or between cooperatives.

There is no evidence that private respondents are members of petitioner PHCCI and even if they are, the
dispute is about payment of wages, overtime pay, rest day and termination of employment. Under Art. 217 of the
Labor Code, these disputes are within the original and exclusive jurisdiction of the Labor Arbiter.

San Beda College of Law 251


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122. AUSTRIA v. NLRC
G.R. No. 124382 August 16, 1999
KAPUNAN, J.:

JURISDICTION OF LABOR ARBITER

DOCTRINE:
Under the Labor Code, the provision which governs the dismissal of employees, is comprehensive enough to
include religious corporations, such as the SDA, in its coverage.

The active participation of a party against whom the action was brought, coupled with his failure to object to the
jurisdiction of the court or quasi-judicial body where the action is pending, is tantamount to an invocation of that
jurisdiction and a willingness to abide by the resolution of the case and will bar said party from later on
impugning the court or bodys jurisdiction.

FACTS:
Private Respondent Central Philippine Union Mission Corporation of the Seventh-Day Adventists (SDA) is a
religious corporation. Petitioner, on the other hand, was a Pastor of the SDA until 31 October 1991, when his
services were terminated.

petitioner received several communications from Mr. Eufronio Ibesate, the treasurer of the Negros Mission
asking him to admit accountability and responsibility for the church tithes and offerings collected by his wife,
Mrs. Thelma Austria, in his district which amounted to P15,078.10, and to remit the same to the Negros Mission.
Petitioner reasoned out that he should not be made accountable since it was private respondents Pastor Gideon
Buhat and Mr. Eufronio Ibesate who authorized his wife to collect the tithes and offerings since he was very sick
to do the collecting at that time.

On 16 October 1991,Petitioner went to the office of Pastor Buhat, the president of the Negros Mission. During
said call, petitioner tried to persuade Pastor Buhat to convene the Executive Committee for the purpose of
settling the dispute between him and the private respondent, Pastor David Rodrigo. The dispute between Pastor
Rodrigo and petitioner arose from an incident in which petitioner assisted his friend, Danny Diamada, to collect
from Pastor Rodrigo the unpaid balance for the repair of the latters motor vehicle which he failed to pay to
Diamada. Due to the assistance of petitioner in collecting Pastor Rodrigos debt, the latter harbored ill-feelings
against petitioner. When news reached petitioner that Pastor Rodrigo was about to file a complaint against him
with the Negros Mission, he immediately proceeded to the office of Pastor Buhat on the date abovementioned
and asked the latter to convene the Executive Committee. Pastor Buhat denied the request of petitioner since
some committee members were out of town and there was no quorum. Thereafter, the two exchanged heated
arguments.

A fact-finding committee was created to investigate petitioner. Subsequently, petitioner received a letter of
dismissal citing misappropriation of denominational funds, willful breach of trust, serious misconduct, gross and
habitual neglect of duties, and commission of an offense against the person of employers duly authorized
representative, as grounds for the termination of his services.

Reacting against the adverse decision of the SDA, petitioner filed a complaint before the Labor Arbiter for illegal
dismissal against the SDA and its officers and prayed for reinstatement with backwages and benefits, moral and
exemplary damages and other labor law benefits.

Private respondents contend that by virtue of the doctrine of separation of church and state, the Labor Arbiter
and the NLRC have no jurisdiction to entertain the complaint filed by petitioner. Since the matter at bar allegedly
involves the discipline of a religious minister, it is to be considered a purely ecclesiastical affair to which the
State has no right to interfere.

LA RULING: The Labor Arbiter RENDERED DECISION IN FAVOR OF PETITIONER.

NLRC RULING: sustained the argument posed by private respondents and, accordingly, dismissed the
complaint of petitioner.

ISSUE: Does the LA have jurisdiction over the case?


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SC RULING:
YES. Under the Labor Code, the provision which governs the dismissal of employees, is comprehensive enough
to include religious corporations, such as the SDA, in its coverage. Article 278 of the Labor Code on post-
employment states that the provisions of this Title shall apply to all establishments or undertakings, whether for
profit or not. Obviously, the cited article does not make any exception in favor of a religious corporation. This is
made more evident by the fact that the Rules Implementing the Labor Code, particularly, Section 1, Rule 1,
Book VI on the Termination of Employment and Retirement, categorically includes religious institutions in the
coverage of the law, to wit:

Section 1. Coverage. This Rule shall apply to all establishments and undertakings, whether operated for profit or
not, including educational, medical, charitable and religious institutions and organizations, in cases of regular
employment with the exception of the Government and its political subdivisions including government-owned or
controlled corporations.

With this clear mandate, the SDA cannot hide behind the mantle of protection of the doctrine of separation of
church and state to avoid its responsibilities as an employer under the Labor Code.

Finally, as correctly pointed out by petitioner, private respondents are estopped from raising the issue of lack of
jurisdiction for the first time on appeal. It is already too late in the day for private respondents to question the
jurisdiction of the NLRC and the Labor Arbiter since the SDA had fully participated in the trials and hearings of
the case from start to finish. The Court has already ruled that the active participation of a party against whom
the action was brought, coupled with his failure to object to the jurisdiction of the court or quasi-judicial body
where the action is pending, is tantamount to an invocation of that jurisdiction and a willingness to abide by the
resolution of the case and will bar said party from later on impugning the court or bodys jurisdiction. Thus, the
active participation of private respondents in the proceedings before the Labor Arbiter and the NLRC mooted the
question on jurisdiction.

San Beda College of Law 253


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123. DEPARTMENT OF FOREIGN AFFAIRS v. NATIONAL LABOR RELATIONS COMMISSION, HON.
LABOR ARBITER NIEVES V. DE CASTRO and JOSE C. MAGNAYI
G.R. No. 113191 September 18, 1996
VITUG, J.:

ART. 217

DOCTRINE:
The stipulations of both the Charter and Headquarters Agreement should be able, may well enough, to establish
that, except in the specified cases of borrowing and guarantee operations, as well as the purchase, sale and
underwriting of securities, the ADB enjoys immunity from legal process of every form. Thus, the decision of the
Labor Arbiter is rendered vacant for being null and void.

FACTS:
Jose Magnayi initiated case for his alleged illegal dismissal by ADB and the latter's violation of the "labor-only"
contracting law. Two summonses were served, one sent directly to the ADB and the other through DFA, both
with a copy of the complaint. Forthwith, the ADB and the DFA notified respondent Labor Arbiter that the ADB, as
well as its President and Officers, were covered by an immunity from legal process except for borrowings,
guaranties or the sale of securities pursuant to its Charter in relation to Headquarters Agreement of ADB and
the Government.

LA RULING: The Labor Arbiter took cognizance of the complaint on the impression that the ADB had waived its
diplomatic immunity from suit. Labor Arbiter concluded (that there Magnayi is illegally dismissed): The ADB did
not appeal. Instead, the DFA sought a "formal vacation of the void judgment from NLRC.

NLRC CHAIRMAN: The defense of immunity could have been raised before the Labor Arbiter by a special
appearance which, naturally, may NOT be considered as a waiver of the very defense being raised. Except
where an appeal is seasonably and properly made, neither the Commission nor the NLRC Chairman may
review, or even question, the propriety of any decision by a Labor Arbiter. Incidentally, the Commission sits en
banc (all fifteen Commissioners) only to promulgate rules of procedure or to formulate policies (Art. 213, Labor
Code).

"If the Department of Foreign Affairs feels that the action of Labor Arbiter Nieves de Castro constitutes
misconduct, malfeasance or misfeasance, it is suggested that an appropriate complaint be lodged with the
Office of the Ombudsman.

Dissatisfied, the DFA lodged the instant petition for certiorari.

OSG in its comment initially assailed the claim of immunity by the ADB. Subsequently, however, it submitted a
Manifestation stating, that ADB, indeed, was correct in invoking its immunity from suit under the Charter and the
Headquarters Agreement.

ISSUE: Is ADB covered by immunity rendering NLRC without jurisdiction?

SC RULING:
YES. The stipulations of both the Charter and Headquarters Agreement should be able, may well enough, to
establish that, except in the specified cases of borrowing and guarantee operations, as well as the purchase,
sale and underwriting of securities, the ADB enjoys immunity from legal process of every form. The Banks
officers, on their part, enjoy immunity in respect of all acts performed by them in their official capacity.

Diplomatic immunity is essentially a political question and courts should refuse to look beyond a determination
by the executive branch of the government, and where the plea of diplomatic immunity is recognized and
affirmed by the executive branch of the government x x x it is then the duty of the courts to accept the claim of
immunity upon appropriate suggestion by the principal law officer of the government, x x x or other officer acting
under his direction.
Being an international organization that has been extended a diplomatic status, the ADB is independent of the
municipal law.
The Office of the President, likewise, has issued a letter to the Secretary of Labor

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"Despite information from DFA, the labor arbiter in question persisted to send summons. Courts should respect
diplomatic immunities of foreign officials recognized by the Philippine government.
There are two conflicting concepts of sovereign immunity, each widely held and firmly established. According to
the classical or absolute theory, a sovereign cannot, without its consent, be made a respondent in the Courts of
another sovereign. According to the newer or restrictive theory, the immunity of the sovereign is recognized only
with regard to public acts or acts jure imperii of a state, but not with regard to private act or acts jure gestionis.

The service contracts referred to by private respondent have not been intended by the ADB for profit or gain but
are official acts over which a waiver of immunity would not attach.

The DFA must be allowed to plead its case whenever necessary or advisable to enable it to help keep the
credibility of the Philippine government before the international community.

"In the United States, the procedure followed is the process of 'suggestion,' where the foreign state or the
international organization sued in an American court requests the Secretary of State to make a determination as
to whether it is entitled to immunity.

"In the Philippines, the practice is for the foreign government or the international organization to first secure an
executive endorsement of its claim of sovereign or diplomatic immunity.
Decision of the Labor Arbiter is VACATED for being NULL AND VOID.

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124. PHILIPPINE NATIONAL BANK v. FLORENCE O. CABANSAG
G.R. No. 157010 June 21, 2005
PANGANIBAN, J.:
DOCTRINE:
Philippine government requires non-Filipinos working in the country to first obtain a local work permit in order to
be legally employed here. That permit, however, does not automatically mean that the non-citizen is thereby
bound by local laws only, as averred by petitioner. It does not at all imply a waiver of ones national laws on
labor. Absent any clear and convincing evidence to the contrary, such permit simply means that its holder has a
legal status as a worker in the issuing country.
All Filipino workers, whether employed locally or overseas, enjoy the protective mantle of Philippine labor and
social legislations. Our labor statutes may not be rendered ineffective by laws or judgments promulgated, or
stipulations agreed upon, in a foreign country.

FACTS:
Florence Cabansag] arrived in Singapore as a tourist. She applied for employment, with the Singapore Branch of
the Philippine National Bank. At the time, too, the Branch Office had two (2) types of employees: (a) expatriates
or the regular employees, hired in Manila and assigned abroad including Singapore, and (b) locally (direct)
hired. Tobias, General Manager found her eminently qualified recommending the appointment of Florence O.
Cabansag, for the position which was approved.

She then filed an Application, with the Ministry of Manpower of the Government of Singapore, for the issuance
of an Employment Pass as an employee of the Singapore PNB Branch. Her application was approved for a
period of two (2) years.

Cabansag submitted to Ruben C. Tobias, her initial Performance Report. Ruben C. Tobias was so impressed
with the Report that he made a notation and, on said Report: GOOD WORK. However, in the evening, she was
told by two (2) co-employees that Ruben C. Tobias has asked them to tell Florence O. Cabansag to resign from
her job. Tobias confirmed the veracity of the information, with the explanation that her resignation was imperative
as a cost-cutting measure of the Bank. She then asked Ruben C. Tobias that she be furnished with a Formal
Advice from the PNB Head Office in Manila. However, Tobias flatly refused. Florence O. Cabansag did not
submit any letter of resignation.

Tobias again summoned Florence O. Cabansag to his office and demanded that she submit her letter of
resignation. For failure thereof, she received a letter from Ruben C. Tobias terminating her employment with the
Bank.

LA RULING: rendered finding respondents guilty of Illegal dismissal.


NLRC RULING: the NLRC affirmed that Decision.

CA RULING: CA noted that petitioner bank had failed to adduce in evidence the Singaporean law supposedly
governing the latters employment Contract with respondent. CA found that the Contract had actually been
processed by the Philippine Embassy in Singapore and approved by POEA, which then used that Contract as a
basis for issuing an Overseas Employment Certificate in favor of respondent.

Even though respondent secured an employment pass from the Singapore Ministry of Employment, she did not
thereby waive Philippine labor laws, or the jurisdiction of the labor arbiter or the NLRC over her Complaint for
illegal dismissal. Finally, the CA held that PNB had failed to establish a just cause for the dismissal of
respondent.

ISSUE:Whether or not the arbitration branch of the NLRC in the National Capital Region has jurisdiction over
the instant controversy;

SC RULING:
YES. The jurisdiction of labor arbiters and the NLRC is specified in Article 217.

More specifically, Section 10 of RA 8042 reads in part:


SECTION 10. Money Claims. Notwithstanding any provision of law to the contrary, the Labor
Arbiters of the National Labor Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90) calendar days after the filing of the
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complaint, the claims arising out of an employer-employee relationship or by virtue of any law
or contract involving Filipino workers for overseas deployment including claims for actual,
moral, exemplary and other forms of damages.
Based on the foregoing provisions, labor arbiters clearly have original and exclusive jurisdiction over claims
arising from employer-employee relations, including termination disputes involving all workers, among whom are
overseas Filipino workers (OFW).

Prior to employing respondent, petitioner had to obtain an employment pass for her from the Singapore Ministry
of Manpower.

Similarly, the Philippine government requires non-Filipinos working in the country to first obtain a local work
permit in order to be legally employed here. That permit, however, does not automatically mean that the non-
citizen is thereby bound by local laws only, as averred by petitioner. It does not at all imply a waiver of ones
national laws on labor. Absent any clear and convincing evidence to the contrary, such permit simply means that
its holder has a legal status as a worker in the issuing country.

Under Philippine law, this document authorized her working status in a foreign country and entitled her to all
benefits and processes under our statutes. Thus, even assuming arguendo that she was considered at the start
of her employment as a direct hire governed by and subject to the laws, common practices and customs
[17]
prevailing in Singapore she subsequently became a contract worker or an OFW who was covered by
Philippine labor laws and policies upon certification by the POEA.

Undeniably, respondent was employed by petitioner in its branch office in Singapore. Admittedly, she is a
Filipino and not a legal resident of that state. She thus falls within the category of migrant worker or overseas
Filipino worker.

As such, it is her option to choose the venue of her Complaint against petitioner for illegal dismissal. The law
gives her two choices: (1) at the Regional Arbitration Branch (RAB) where she resides or (2) at the RAB where
the principal office of her employer is situated. Since her dismissal by petitioner, respondent has returned to the
Philippines -- specifically to her residence at Filinvest II, Quezon City. Thus, in filing her Complaint before the
RAB office in Quezon City, she has made a valid choice of proper venue.

Notice and Hearing Not Complied With; No Valid Cause for Dismissal. Cabansag was Illegally Dismissed.

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125. BEBIANO M. BAEZ v. HON. DOWNEY C. VALDEVILLA and ORO MARKETING, INC.
G.R. No. 128024 May 9, 2000
GONZAGA-REYES, J.:

DOCTRINE:
By the designating clause "arising from the employer-employee relations" Article 217 should apply with equal
force to the claim of an employer for actual damages against its dismissed employee, where the basis for the
claim arises from or is necessarily connected with the fact of termination, and should be entered as a
counterclaim in the illegal dismissal case.

This is, of course, to distinguish from cases of actions for damages where the employer-employee relationship is
merely incidental and the cause of action proceeds from a different source of obligation. Thus, the jurisdiction of
regular courts was upheld where the damages, claimed for were based on tort, malicious prosecution, or breach
of contract, as when the claimant seeks to recover a debt from a former employee or seeks liquidated damages
in enforcement of a prior employment contract.

FACTS:
Bebiano Baez was the sales operations manager of Oro Marketing in its branch in Iligan City Oro "indefinitely
suspended" petitioner and the latter filed a complaint for illegal dismissal with NLRC.

Baez alleged a modus operandi used by Oro Marketing. herein: Defendant canvassed customers personally or
through salesmen of plaintiff which were hired or recruited by him. If said customer decided to buy items from
plaintiff on installment basis, defendant, without the knowledge of said customer and plaintiff, would buy the
items on cash basis at ex-factory price, a privilege not given to customers, and thereafter required the customer
to sign promissory notes and other documents using the name and property of plaintiff, purporting that said
customer purchased the items from plaintiff on installment basis. Thereafter, defendant collected the installment
payments either personally or through Venus Lozano, a Group Sales Manager of plaintiff but also utilized by him
as secretary in his own business for collecting and receiving of installments, purportedly for the plaintiff but in
reality on his own account or business. The collection and receipt of payments were made inside the Iligan City
branch using plaintiffs facilities, property and manpower. That accordingly plaintiffs sales decreased and
reduced to a considerable extent the profits which it would have earned.

LA RULING: Labor Arbiter found petitioner to have been illegally dismissed.

NLRC RULING: dismissed the same for having been filed out of time.
[3]
Elevated by petition for certiorari before the Supreme Court, the case was dismissed on technical grounds ;
and that even if all the procedural requirements for the filing of the petition were met, it would still be dismissed
for failure to show grave abuse of discretion on the part of the NLRC.

Oro filed a complaint for damages before RTC Misamis Oriental which prayed for the payment of loss of profit
and/or unearned income and expenses of litigation.

Baez filed a motion to dismiss the above complaint. He interposed in the court below that the action for
damages, having arisen from an employer-employee relationship, was squarely under the exclusive original
jurisdiction of the NLRC. He accused Oro Marketing of splitting causes of action, stating that the latter could
very well have included the instant claim for damages in its counterclaim before the Labor Arbiter. He also
pointed out that the civil action of private respondent is an act of forum-shopping.

RTC RULING: A perusal of the complaint which is for damages does not ask for any relief under the Labor
Code. The Court believes such cause of action is within the realm of civil law, and jurisdiction over the
controversy belongs to the regular courts.

ISSUE: Whether RTC has jurisdiction over the case.

SC RULING:
NO. Article 217(a), paragraph 4 of the Labor Code,

ART. 217. Jurisdiction of Labor Arbiters and the Commission.


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4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee
relations;

The above provisions are a result of the amendment by Section 9 of R.A. No. 6715, which put to rest the earlier
confusion as to who between Labor Arbiters and regular courts had jurisdiction over claims for damages as
between employers and employees.

By the designating clause "arising from the employer-employee relations" Article 217 should apply with equal
force to the claim of an employer for actual damages against its dismissed employee, where the basis for the
claim arises from or is necessarily connected with the fact of termination, and should be entered as a
counterclaim in the illegal dismissal case.

In the case before us, private respondent's claim against petitioner for actual damages arose from a prior
employer-employee relationship. In the first place, private respondent would not have taken issue with
petitioner's "doing business of his own" had the latter not been concurrently its employee.

Second, and more importantly, to allow respondent court to proceed with the instant action for damages would
be to open anew the factual issue of whether petitioner's installment sale scheme resulted in business losses
and the dissipation of private respondent's property. This issue has been duly raised and ruled upon in the
illegal dismissal case. The Labor Arbiter, however, found to the contrary ---that no business losses may be
attributed to petitioner as in fact, it was by reason of petitioner's installment plan that the sales of the Iligan
branch reached its highest record level.

Evidently, the lawmaking authority had second thoughts about depriving the Labor Arbiters and the NLRC of the
jurisdiction to award damages in labor cases because that setup would mean duplicity of suits, splitting the
cause of action and possible conflicting findings and conclusions by two tribunals on one and the same claim.

This is, of course, to distinguish from cases of actions for damages where the employer-employee relationship is
merely incidental and the cause of action proceeds from a different source of obligation. Thus, the jurisdiction of
regular courts was upheld where the damages, claimed for were based on tort, malicious prosecution, or breach
of contract, as when the claimant seeks to recover a debt from a former employee or seeks liquidated damages
in enforcement of a prior employment contract.

Furthermore, the Labor Arbiter has jurisdiction to award not only the reliefs provided by labor laws, but also
damages governed by the Civil Code.

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126. MA. ISABEL T. SANTOS, represented by ANTONIO P. SANTOS, v. SERVIER PHILIPPINES, INC. and
NATIONAL LABOR RELATIONS COMMISSION
G.R. No. 166377 November 28, 2008
NACHURA, J.:

DOCTRINE:
The issue of deduction for tax purposes is intertwined with the main issue of whether or not petitioners benefits
have been fully given her. It is, therefore, a money claim arising from the employer-employee relationship, which
clearly falls within the jurisdictionhttp://sc.judiciary.gov.ph/jurisprudence/2008/november2008/166377.htm -
_ftn41 of the Labor Arbiter and the NLRC.

FACTS:
Ma. Isabel T. Santos was the Human Resource Manager of respondent Servier Philippines, Inc., Isabel
attended a meeting of all human resource managers of respondent, held in Paris, France. Since the last day of
the meeting coincided with the graduation of Santos only child, she arranged for a European vacation with her
family right after the meeting.

Isabel together with her husband Antonio P. Santos, her son, and some friends, had dinner at Leon des
Bruxelles, a Paris restaurant known for mussels as their specialty. While having dinner, petitioner complained of
stomach pain, then vomited. Eventually, she was brought to the hospital where she fell into coma for 21 days;
and later stayed at the Intensive Care Unit (ICU) for 52 days.

During the time that petitioner was confined at the hospital, her husband and son stayed with her
in Paris. Petitioners hospitalization expenses, as well as those of her husband and son, were paid by
respondent.

She went back to the Philippines and was then confined at the St. Lukes Medical Center for
rehabilitation. During the period of petitioners rehabilitation, respondent continued to pay the formers salaries;
and to assist her in paying her hospital bills.

Petitioners physician concluded that the Santos had not fully recovered mentally and physically. Hence,
respondent was constrained to terminate petitioners services.

Respondent offered a retirement package.

Of the promised retirement benefits amounting to P1,063,841.76, only P701,454.89 was released to
petitioners husband, the balance thereof was withheld allegedly for taxation purposes. Respondent also
failed to give the other benefits. Petitioner, represented by her husband, instituted the instant case for
unpaid amounts.

LA RULING: Labor Arbiter dismissed petitioners complaint. The Labor Arbiter stressed that respondent had
been generous in giving financial assistance to the petitioner. The arbiter refused to rule on the legality of the
deductions made by respondent from petitioners total retirement benefits for taxation purposes, as the issue
was beyond the jurisdiction of the NLRC.

NLRC RULING: NLRC set aside the Labor Arbiters decision.

The NLRC emphasized that petitioner was not retired from the service pursuant to law, collective bargaining
agreement (CBA) or other employment contract; rather, she was dismissed from employment due to a
disease/disability under Article 284. The NLRC therefore ordered the payment of the other benefits promised by
the respondent.

CA RULING: affirmed the NLRC decision.

ISSUE: Whether the benefits are taxable and thus, it was proper for Servier to deduct P362,386.87 for taxation
benefits. (Court ruled that petitioners belatedly claimed entitlement to retirement benefits which issues are not
raised in the pleading, thus deemed abandoned.)

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SC RULING:
YES. As she was dismissed on the ground of Disease, the law gives the petitioner the right to demand
separation pay. However, respondent established a retirement plan in favor of all its employees.The receipt of
retirement benefits does not bar the retiree from receiving separation pay. Separation pay is a statutory right
designed to provide the employee with the wherewithal during the period that he/she is looking for another
employment. On the other hand, retirement benefits are intended to help the employee enjoy the remaining
years of his life, lessening the burden of worrying about his financial support, and are a form of reward for his
[34]
loyalty and service to the employer. Hence, they are not mutually exclusive. However, this is only true if there
is no specific prohibition against the payment of both benefits in the retirement plan and/or in the Collective
[35]
Bargaining Agreement (CBA).

In the instant case, the Retirement Plan bars the petitioner from claiming additional benefits on top of that
provided. Section 2, Article XII of the Retirement Plan provides:

Section 2. NO DUPLICATION OF BENEFITS

Petitioners claim for illegal deduction (for tax purposes) falls within the tribunals jurisdiction. It is noteworthy that
petitioner demanded the completion of her retirement benefits, including the amount withheld by respondent for
taxation purposes. The issue of deduction for tax purposes is intertwined with the main issue of whether or not
petitioners benefits have been fully given her. It is, therefore, a money claim arising from the employer-
[41]
employee relationship, which clearly falls within the jurisdiction of the Labor Arbiter and the NLRC.

Section 32 (B) (6) (a) of the New National Internal Revenue Code (NIRC) provides for the exclusion of
retirement benefits from gross income.

Thus, for the retirement benefits to be exempt from the withholding tax, the taxpayer is burdened to prove the
concurrence of the following elements: (1) a reasonable private benefit plan is maintained by the employer; (2)
the retiring official or employee has been in the service of the same employer for at least ten (10) years; (3) the
retiring official or employee is not less than fifty (50) years of age at the time of his retirement; and (4) the benefit
[43]
had been availed of only once.

Petitioner was qualified for disability retirement. At the time of such retirement, petitioner was only 41 years of
age; and had been in the service for more or less eight (8) years. As such, the above provision is not applicable
for failure to comply with the age and length of service requirements. Therefore, respondent cannot be faulted
for deducting from petitioners total retirement benefits the amount of P362,386.87, for taxation purposes.

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127. PEPSI COLA DISTRIBUTORS OF THE PHILIPPINES, INC., represented by its Plant General Manager
ANTHONY B. SIAN, ELEAZAR LIMBAB, IRENEO BALTAZAR & JORGE HERAYA v.
HON. LOLITA O. GAL-LANG, SALVADOR NOVILLA, ALEJANDRO OLIVA, WILFREDO CABAAS &
FULGENCIO LEGO
G.R. No. 89621 September 24, 1991
CRUZ, J.:

DOCTRINE: Not every controversy involving workers and their employers can be resolved only by the labor
arbiters. This will be so only if there is a "reasonable causal connection" between the claim asserted and
employee-employer relations to put the case under the provisions of Article 217. Absent such a link, the
complaint will be cognizable by the regular courts of justice in the exercise of their civil and criminal jurisdiction.

FACTS: The private respondents were employees of the Pepsi who were suspected of complicity in the
irregular disposition of empty Pepsi Cola bottles. Pepsi filed a criminal complaint for theft against them but this
was later withdrawn and substituted with a criminal complaint for falsification of private documents. After a
preliminary investigation, the complaint was dismissed. The dismissal was affirmed by the Office of the
Provincial Prosecutor.
Meantime, allegedly after an administrative investigation, the private respondents were dismissed by the
petitioner company As a result, they lodged a complaint for illegal dismissal with NLRC in Tacloban City.

NLRC RULING: mandated reinstatement with damages.

In addition, they instituted in the Regional Trial Court of Leyte, a separate civil complaint against the petitioners
for damages arising from what they claimed to be their malicious prosecution.
Pepsi moved to dismiss the civil complaint on the ground that the trial court had no jurisdiction over the case
because it involved employee-employer relations.

RTC RULING: the respondent judge, acting on the motion for reconsideration, reinstated the complaint, saying
it was "distinct from the labor case for damages now pending before the labor courts.

Pepsi invoke Article 217 of the Labor Code and a number of decisions of this Court to support their position that
the private respondents civil complaint for damages falls under the jurisdiction of the labor arbiter.

ISSUE: Whether the RTC has jurisdiction over the case?

SC RULING:
YES. Not every controversy involving workers and their employers can be resolved only by the labor arbiters.
This will be so only if there is a "reasonable causal connection" between the claim asserted and employee-
employer relations to put the case under the provisions of Article 217. Absent such a link, the complaint will be
cognizable by the regular courts of justice in the exercise of their civil and criminal jurisdiction.

EXAMPLES OF CASES:
3
1.) In Medina v. Castro-Bartolome, two employees filed in the Court of First Instance of Rizal a civil
complaint for damages against their employer for slanderous remarks made against them by the
company president. Theirs is a simple action for damages for tortious acts allegedly committed by the
defendants. Such being the case, the governing statute is the Civil Code and not the Labor Code. It
results that the orders under review are based on a wrong premise.
4
2.) In Singapore Airlines Ltd. v. Pao, where the plaintiff was suing for damages for alleged violation by
the defendant of an "Agreement for a Course of Conversion Training at the Expense of Singapore
Airlines Limited. Petitioner seeks protection under the civil laws and claims no benefits under the Labor
Code. The primary relief sought is for liquidated damages for breach of a contractual obligation.
6
3.) In Molave Sales, Inc. v. Laron, the same Justice held for the Court that the claim of the plaintiff against
its sales manager for payment of certain accounts pertaining to his purchase of vehicles and automotive
parts, repairs of such vehicles, and cash advances from the corporation was properly cognizable by the
Regional Trial Court because "although a controversy is between an employer and an employee, the
Labor Arbiters have no jurisdiction if the Labor Code is not involved."

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4.) The latest ruling on this issue is found in San Miguel Corporation v. NLRC. That case involved a claim
of an employee for a P60,000.00 prize for a proposal made by him which he alleged had been accepted
and implemented by the defendant corporation.

Where the claim to the principal relief sought is to be resolved not by reference to the Labor Code or other labor
relations statute or a collective bargaining agreement but by the general civil law, the jurisdiction over the
dispute belongs to the regular courts of justice and not to the Labor Arbiter and the NLRC. While paragraph 3
above refers to "all money claims of workers," it is not necessary to suppose that the entire universe of money
claims that might be asserted by workers against their employers has been absorbed into the original and
exclusive jurisdiction of Labor Arbiters.

The case now before the Court involves a complaint for damages for malicious prosecution which was filed with
the Regional Trial Court of Leyte by the employees of the defendant company. It does not appear that there is a
"reasonable causal connection" between the complaint and the relations of the parties as employer and
employees. The complaint did not arise from such relations and in fact could have arisen independently of an
employment relationship between the parties. No such relationship or any unfair labor practice is asserted. What
the employees are alleging is that the petitioners acted with bad faith when they filed the criminal complaint
which the Municipal Trial Court said was intended "to harass the poor employees" and the dismissal of which
was affirmed by the Provincial Prosecutor "for lack of evidence to establish even a slightest probability that all
the respondents herein have committed the crime imputed against them." This is a matter which the labor arbiter
has no competence to resolve as the applicable law is not the Labor Code but the Revised Penal Code.

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128. 7K CORPORATION v. EDDIE ALBARICO
G.R. No. 182295 June 26, 2013
SERENO, C.J.:

JURISDICTION OF THE VOLUNTARY ARBITRATOR

DOCTRINES:
A voluntary arbitrator may, by agreement of the parties, assume jurisdiction over any of the labor disputes
enumerated under Article 223 of the Labor Code or those which could fall under the jurisdiction of the Labor
Arbiter. He has plenary jurisdiction and authority to interpret an agreement to arbitrate and to determine the
scope of his own authority when the said agreement is vague subject only, in a proper case, to the certiorari
jurisdiction of this Court.

In deciding a case, the voluntary arbitrator may award backwages upon a finding of illegal dismissal, even
though the issue of entitlement thereto is not explicitly claimed in the Submission Agreement. Backwages, in
general, are awarded on the ground of equity as a form of relief that restores the income lost by the terminated
employee by reason of his illegal dismissal.

Aside from illegal dismissal cases, separation pay may also be awarded in the following instances:
a. when employees have been terminated for authorized causes, such as redundancy, retrenchment or
installation of labor-saving devices;
b. when employees have been terminated for a just cause other than serious misconduct or an act
reflecting on moral character and social justice calls for the awarding of separation pay;
c. when it has become an established practice of the company to pay the said benefit to voluntarily
resigning employees; or
d. when an employee has been validly dismissed for non-membership in a union as required in a closed-
shop agreement
FACTS:
When he was dismissed on 5 April 1993, Albarico was a regular employee of 7K Corporation, a company selling
water purifiers. He started working for the company in 1990 as a salesman. Because of his good performance,
his employment was regularized. He was also promoted several times: from salesman, he was promoted to
senior sales representative and then to acting team field supervisor. In 1992, he was awarded the Presidents
Trophy for being one of the companys top water purifier specialist distributors.

In April of 1993, the chief operating officer of 7K Corporation terminated Albaricos employment allegedly for his
poor sales performance. Albarico had to stop reporting for work, and he subsequently submitted his money
claims against 7K Corporation for arbitration before the National Conciliation and Mediation Board (NCMB). The
issue for voluntary arbitration before the NCMB, according to the parties Submission Agreement was whether
Albarico was entitled to the payment of separation pay and the sales commission reserved for him by the
corporation.

As for its defense, 7K Corporation claimed Albarico had voluntarily stopped reporting for work after receiving a
verbal reprimand for his sales performance; hence, it was he who was guilty of abandonment of employment

While the case was pending before the NCMB, Albarico filed a complaint for illegal dismissal before the LA. The
latter ruled in favor of Albarico. However, the NLRC, on appeal, vacated the decision of the LA on the ground of
forum-shopping, without prejudice to the pending NCMB arbitration case. The decision of the NLRC became
final.

NCMB RULING: Albarico was ILLEGALLY DISMISSED


The arbitrator explained that the promotions, increases in salary, and awards received by respondent belied the
claim that the latter was performing poorly. It was also found that Albarico could not have abandoned his job, as
the abandonment should have been clearly shown. The VA also found that Albarico was dismissed from his
work without due process.

However, it was found that reinstatement was no longer possible because of the strained relationship of the
parties. Thus, in lieu of reinstatement, the VA ordered 7K Corporation to pay separation pay for two years at
P4,456 for each year, or a total amount of P8,912. The VA also ordered 7K Corporation to pay backwages in the

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LABOR LAW REVIEW Atty. Joyrich Golangco

amount of P90,804.19, plus attorneys fees since Albarico had been compelled to file an action for illegal
dismissal.

7K Corporation appealed to the CA, imputing grave abuse of discretion on the part of VA for ruling on the issue
of illegal dismissal and for awarding payment of backwages and attorneys fees. 7K Corporation contended that
the issue of the legality of dismissal was not explicitly included in the Submission Agreement.

CA RULING: AFFIRMED VA; Deleted Attorneys Fees for lack of factual basis.

ISSUE: Did the VA properly assume jurisdiction to decide the issue of the legality of the dismissal of Albarico as
well as the latters entitlement to backwages?

SC RULING:
YES. The circumstances of the instant case lead to no other conclusion than that the claim of Albarico for
separation pay was premised on his allegation of illegal dismissal. Thus, the VA properly assumed jurisdiction
over the issue of the legality of his dismissal

Moreover, it should be noted that even the NLRC was of the understanding that the NCMB arbitration case
sought to resolve the issue of the legality of the dismissal of the Albarico. In fact, the identity of the issue of the
legality of his dismissal, which was previously submitted to the NCMB, and later submitted to the NLRC, was the
basis of the latters finding of forum shopping and the consequent dismissal of the case before it. In fact, 7K
Corporation also implicitly acknowledged this when it filed before the NLRC its Motion to Dismiss Albaricos
Complaint on the ground of forum shopping. Thus, it is now estopped from claiming that the issue before the
NCMB does not include the issue of the legality of the dismissal of respondent. Besides, there has to be a
reason for deciding the issue of respondents entitlement to separation pay. To think otherwise would lead to
absurdity, because the voluntary arbitrator would then be deciding that issue in a vacuum. The arbitrator would
have no basis whatsoever for saying that Albarico was entitled to separation pay or not if the issue of the legality
of Albaricos dismissal was not resolve first.

San Beda College of Law 265


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

129. VIRGILIO KAWACHI, et al. v. DOMINIE DEL QUERO
GR No. 163768 March 27, 2007
TINGA, J.:

LA STILL HAS JURISDICTION OVER CLAIMS FOR DAMAGES ARISING FROM INCIDENTS WITH
REASONABLE CAUSAL CONNECTION WITH EMPLOYEE-EMPLOYER RELATIONSHIP

FACTS:
Kawachi hired Del Quero as a clerk of A/J Raymundo Pawnshop, Inc. On August 10, 2002, Kawachi scolded
Del Quero in front of many people about the way she treated the customers of the pawnshop and afterwards
terminated Del Quero from employment without affording her due process. Del Quero charged Virgilio Kawachi,
Julius Kawachi and A/J Raymundo Pawnshop, Inc., with illegal dismissal, non-execution of a contract of
employment, violation of minimum wage law, and non-payment of overtime pay. A few months after, Del Quero
filed an action for damages against Virgilio and Julius Kawachi before the MeTC of Quezon City. Del Quero
claimed that the August 10, 2002 incident had caused her to suffer serious embarrassment and shame so that
she could not do anything but cry because of the shameless way by which she was terminated from the service.
The Kawachis then moved for the dismissal of the complaint on the grounds of lack of jurisdiction and forum-
shopping or splitting causes of action.

MeTC RULING: DENIED the Motion for Dismissal


It ruled that no causal connection appeared between Del Queros cause of action and the employer-employee
relations between the parties.

The Kawachis filed a petition for certiorari.

RTC RULING: AFFIRMED the MeTC


It upheld the jurisdiction of the MeTC over Del Queros complaint for damages. The employees action for
damages based on slanderous remarks uttered by the employer was within the regular courts jurisdiction since
the complaint did not allege any unfair labor practice on the part of the employer.

ISSUE: Do the regular courts have jurisdiction over the claim for damages?

SC RULING:
NO. The NLRC has jurisdiction over Del Queros complaint for illegal dismissal and damages arising therefrom.
She cannot be allowed to file separate or independent civil action for damages where the alleged injury has a
reasonable connection to her termination from employment. Consequently, the action for damages filed before
the MeTC must be dismissed.

Jurisprudence has developed the reasonable causal connection rule. Under this rule, if there is a reasonable
causal connection between the claim asserted and the employer-employee relations, then the case is within the
jurisdiction of the labor courts; in the absence of such nexus, it is the regular courts that have jurisdiction. In the
instant case, the allegations of Del Quero in her complaint for damages show that her injury was the offshoot of
Kawachis immediate harsh reaction as her administrative superior to the supposedly sloppy manner by which
she had discharged her duties. The allegations in Del Queros complaint unmistakably relate to the manner of
her alleged illegal dismissal.

The Court further notes that for a single cause of action, the dismissed employee cannot be allowed to sue in
two forums: one, before the labor arbiter for reinstatement and recovery of back wages; and two, before a court
of justice for recovery of damages. Suing in the manner described is known as splitting a cause of action, a
practice engendering multiplicity of actions.

San Beda College of Law 266


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

130. GILDA G. LUNZAGA v. ALBAR SHIPPING AND TRADING CORP. AND/OR AKIRA KATO, AND
DARWIN, VENUS, ROMEO ULYSSES, MARIKIT ODESSA, ALL SURNAMED LUNZAGA (Lunzaga Siblings)
G.R. No. 200476 April 18, 2012

RELAXATION OF THE TECHNICAL RULES (1-DAY LATE IN FILING AN APPEAL)

DOCTRINE:
It has been said this time and again that the perfection of an appeal within the period fixed by the rules is
mandatory and jurisdictional. But, it is always in the power of this Court to suspend its own rules, or to except a
particular case from its operation, whenever the purposes of justice require it. Strong compelling reasons such
as serving the ends of justice and preventing a grave miscarriage thereof warrant the suspension of the rules.

FACTS:
Romeo Lunzaga was a seaman working for Albar Shipping. On June 11, 2008, Romeo was assigned as Chief
Engineer on board Albar's Philippine vessel MV Lake Aru. One month later, Romeo suffered a heart attack and
was repatriated to the Philippines only to die on September 5, 2008.

Sometime in early 2009, Gilda, claiming to be the surviving spouse of Romeo, filed with the NLRC a complaint
against Albar Shipping for payment of death benefits, damages and attorney's fees. It should be noted that Gilda
was the designated heir in Romeo's Overseas Filipino Worker Verification Sheet and PhilHealth Information
Sheet. The Lunzaga sibling, children of Romeo from his first marriage that was judicially declared null and void,
opposed the complaint through a complaint-in-intervention. The Lunzaga siblings claimed that Gilda is not
entitled to the death benefits of Romeo, as she had a subsisting marriage when she married him. They claim
that her marriage with Romeo was, therefore, bigamous. . During the mandatory conferences of the parties
before the Labor Arbiter, Albar Shipping signified its willingness to pay Romeo's death benefits in the amount of
USD 55,547.44. However, Gilda and the Lunzaga siblings could not agree as to the sharing of the benefits.

LA RULING:
The Labor Arbiter issued an Order temporarily dismissing the complaint and directing the parties to file their
case with the regular courts.

Gilda appealed to the NLRC, however, the same was made one day past the 10-day period for filing an appeal
from the decision of the Labor Arbiter

NLRC RULING: DISMISSED for filing beyond the regalamentary period.

CA RULING: AFFIRMED the decision of the NLRC


The CA ruled that despite the fact that the appeal to the NLRC was filed only one day beyond the reglementary
period, Gilda failed to present any reason for the liberal application of the rule on filing of appeals.

ISSUE: Did the NLRC and the CA err in not giving due course to the appeal due to a one (1)-day delay of its
filing?

SC RULING:
YES. Considering that the issue on whether the heirs of Romeo are entitled to receive his death benefits from
Albar Shipping properly falls under the jurisdiction of the LA, the NLRC and the CA should have had relaxed the
rigid application of the rules of procedure to afford the parties the opportunity to fully ventilate their cases on the
merits. This is in line with the time honored principle that cases should be decided only after giving all parties the
chance to argue their causes and defenses. Technicality and procedural imperfections should thus not serve as
bases of decisions. In that way, the ends of justice would be better served. For indeed, the general objective of
procedure is to facilitate the application of justice to the rival claims of contending parties, bearing always in
mind that procedure is not to hinder but to promote the administration of justice.

Verily, Albar Shipping is liable to the heirs of Romeo for the amount of USD 55,547.44. Albar hereby is ordered
to deposit this amount in an escrow account under the control of the NLRC in order to protect the interests of
Romeo's heirs. The parties claiming to be the beneficiaries of Romeo are directed to file the appropriate action
with a trial court.

San Beda College of Law 267


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

131. AMECOS INNOVATIONS, INC. and ANTONIO F. MATEO v. ELIZA R. LOPEZ
G.R. No.178055 July 2, 2014

LA HAS JURISDICTION OVER CASES INVOLVING REIMBURSEMENT OF SSS CONTRIBUTION

FACTS:
Amecos is a corporation engaged in the business of selling assorted products. In 2003, a complaint was filed by
the SSS against Amecos for an alleged delinquency in the remittance of SSS contributions and penalty liabilities
in violation of Section 22(a) and 22(d) in relation to Section 28(e) of the SSS law, as amended.

By way of explanation, Amecos claimed that it hired Lopez as Marketing Assistant to promote its products; that
upon hiring, Lopez refused to provide Amecos with her SSS Number and to be deducted her contributions; that
on the basis of the foregoing, Amecos no longer enrolled Lopez with the SSS and did not deduct her
corresponding contributions up to the time of her termination in February 2002.

Amecos eventually settled its obligations with the SSS; consequently, SSS filed a Motion to Withdraw
Complaint, which was approved by the Office of the City Prosecutor.

Thereafter, Amecos sent a demand letter to Lopez for P27,791.65 representing her share in the SSS
contributions and expenses for processing, but to no avail. Thus, Amecos filed a complaint for sum of money
and damages against Lopez before the MeTC.

Lopez filed her Answer with Motion to Dismiss claiming, among others, that the regular courts do not have
jurisdiction over the instant case as it arose out of their employer-employee relationship.

MeTC RULING: DISMISSED for lack of jurisdiction

RTC RULING: AFFIRMED the MeTC

CA RULING: AFFIRMED the RTC

ISSUE: Does the LA have jurisdiction over cases involving the reimbursement of SSS contribution paid by the
Amecos in behalf of Lopez?

SC RULING:
YES. The LA has original and exclusive jurisdiction over the matter, since the same necessarily flowed from the
employer-employee relationship between Amecos and Lopez. In this connection, it is noteworthy to state that
"the Labor Arbiter has jurisdiction to award not only the reliefs provided by labor laws, but also damages
governed by the Civil Code."

At the same time, it cannot be assumed that since the dispute concerns the payment of SSS premiums,
Amecos claim should be referred to the Social Security Commission (SSC). As far as SSS is concerned, there
is no longer a dispute with respect to Amecos accountability to the System; Amecos already settled their
pecuniary obligations to it. Since there is no longer any dispute regarding coverage, benefits, contributions and
penalties to speak of, the SSC need not be unnecessarily dragged into the picture. Besides, it cannot be made
to act as a collecting agency for petitioners claims against the respondent; the Social Security Law should not
be so interpreted, lest the SSC be swamped with cases of this sort.

At any rate, the complaint shall be dismissed for lack of cause of action. Since Amecos did not remit the full SSS
contributions of Lopez, the latter was never covered by and protected under the System. If she was never
covered by the System, certainly there is no sense in making her answerable for the required contributions
during the period of her employment. And it follows as a matter of consequence that claims for other damages
founded on the foregoing non-existent cause of action should likewise fail.

San Beda College of Law 268


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

ARTICLE 218 (now Art. 225) Powers of the Commission

132. PHILIPPINE AIRLINES, INC. v. NLRC, FERDINAND PINEDA and GOGFREDO CABLING
G.R. No. 120567 March 20, 1998
MARTINEZ, J.:

INJUNCTION CAN ONLY BE AN ANCILLARY WRIT IN ORDINARY LABOR DISPUTES.

DOCTRINE:
The power of the NLRC to issue an injunctive writ originates from any labor dispute upon the application by a
party thereof, which application if not granted may cause grave and irreparable damage to any party or render
ineffectual any decision in favor of such party. The term labor dispute is defined as any controversy or matter
concerning terms and conditions of employment x x x x. The term controversy is likewise defined as a
litigated question or a justiciable controversy. A justiciable controversy is one involving an active antagonistic
assertion of a legal right on one side and a denial thereof on the other concerning a real, and not a mere
theoretical question or issue. Given the definitions, it is thus essential that there must be a labor dispute
between the contending parties before the LA to enable the NLRC issue a injunction writ.

FACTS:
Pineda and Cabling were flight stewards of PAL. Both were dismissed from service for their alleged smuggling
in Hong Kong of a bag said to contain some PHP2.5 Million in cash. Instead of filing a case for illegal dismissal,
Pineda and Cabling filed a Petition for Injunction, with a prayer for the issuance of TRO, against PAL before the
NLRC, seeking to prohibit PAL from enforcing their Order of Dismissal against them and to ultimately reinstate
them upon a favorable decision.

NLRC RULING: TRO GRANTED


The NLRC adopted the view that Pineda and Cabling have been illegally dismissed, for the reason that PALs
Code of Discipline was formulated without the participation of its employees. The baseless dismissal has
caused Pineda and Cabling grave and irreparable injury with no speedy and adequate remedy at law.

PAL filed the present petition for certiorari.

ISSUE: Can the NLRC issue an injunctive writ even without a complaint for illegal dismissal before the LA?

SC RULING:
NO. The power of the NLRC to issue an injunctive writ originates from any labor dispute, which means that
there must be an existing controversy or a litigated question before it can issue the same. Since there is no
labor dispute between the parties as there has yet been no complaint for illegal dismissal filed before the labor
arbiter by Pineda and Cabling against PAL, the NLRC cannot, therefore, issue the assailed Order.

Contrary to the findings of the NLRC, there is no grave and irreparable damage in this case because Pineda
and Cabling can be adequately compensated if they are indeed illegally dismissed. It cannot be also said that
there is no adequate remedy because Pineda and Cabling can still file a complaint for illegal dismissal with the
LA.

It should also be noted that the Petition for Injunction filed before the NLRC is really in the nature of an action for
illegal dismissal. As such, it falls under the original and exclusive jurisdiction of the LA. The NLRC cannot
therefore entertain the petition since it only exercises appellate jurisdiction over illegal dismissal cases.

San Beda College of Law 269


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

133. LAND BANK OF THE PHILIPPINES v. SEVERINO LISTANA, SR.
G.R. No. 152611 August 5, 2003
YNARES-SANTIAGO, J.:

CONTEMPT POWERS OF QUASI-JUDICIAL AGENCIES

DOCTRINE:
Evidently, quasi-judicial agencies that have the power to cite persons for indirect contempt pursuant to Rule 71
of the Rules of Court can only do so by initiating them in the proper Regional Trial Court. It is not within their
jurisdiction and competence to decide the indirect contempt cases. These matters are still within the province of
the Regional Trial Courts.

FACTS:
Respondent Severino Listana is the owner of a parcel of land containing an area of 246.0561 hectares, located
in Inlagadian, Casiguran, Sorsogon. He voluntarily offered to sell the said land to the government, through the
Department of Agrarian Reform (DAR), under Section 20 of R.A. 6657, also known as the Comprehensive
Agrarian Reform Law of 1988 (CARL). The DAR valued the property at P5,871,689.03, which was however
rejected by the respondent. Hence, the Department of Agrarian Reform Adjudication Board (DARAB) of
Sorsogon commenced summary administrative proceedings to determine the just compensation of the land.

The DARAB rendered a Decision, setting aside the prior valuation made by the Land Bank and made a new
valuation in the amount of P10,956,963.25 for the acquired area of 240.9066 hectares. A Writ of Execution was
issued by the PARAD directing the manager of Land Bank to pay the respondent the aforesaid amount as just
compensation in the manner provided by law.
Respondent filed a Motion for Contempt with the PARAD, alleging that petitioner Land Bank failed to comply
with the Writ of Execution. He argued that such failure of the petitioner to comply with the writ of execution
constitutes contempt of the DARAB. The PARAD issued an Order granting the Motion for Contempt and issued
an arrest order against petitioners Manager Alex A. Lorayes.

ISSUE: Is the order for the arrest of petitioners manager, Mr. Alex Lorayes, by the PARAD, valid?

SC RULING:
NO. Rule 71, Section 12 of the 1997 Rules of Civil Procedure, referring to indirect contempt against quasi-
judicial entities, provides:
Sec. 12. Contempt against quasi-judicial entities. Unless otherwise provided by law, this Rule shall apply to
contempt committed against persons, entities, bodies or agencies exercising quasi-judicial functions, or shall
have suppletory effect to such rules as they may have adopted pursuant to authority granted to them by law to
punish for contempt. The Regional Trial Court of the place wherein the contempt has been committed shall
have jurisdiction over such charges as may be filed therefore.

Evidently, quasi-judicial agencies that have the power to cite persons for indirect contempt pursuant to Rule 71
of the Rules of Court can only do so by initiating them in the proper Regional Trial Court. It is not within their
jurisdiction and competence to decide the indirect contempt cases. These matters are still within the province of
the Regional Trial Courts. In the present case, the indirect contempt charge was filed, not with the Regional Trial
Court, but with the PARAD, and it was the PARAD that cited Mr. Lorayes with indirect contempt.

Hence, the contempt proceedings initiated through an unverified Motion for Contempt filed by the respondent
with the PARAD were invalid for the following reasons: First, the Rules of Court clearly require the filing of a
verified petition with the Regional Trial Court, which was not complied with in this case. The charge was not
initiated by the PARAD motu proprio; rather, it was by a motion filed by respondent. Second, neither the PARAD
nor the DARAB have jurisdiction to decide the contempt charge filed by the respondent. The issuance of a
warrant of arrest was beyond the power of the PARAD and the DARAB. Consequently, all the proceedings that
stemmed from respondents Motion for Contempt, specifically the Orders of the PARAD dated August 20, 2000
and January 3, 2001 for the arrest of Alex A. Lorayes, are null and void.

San Beda College of Law 270


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

134. FEDERICO S. ROBOSA, et. al. v. NATIONAL LABOR RELATIONS COMMISSION
G.R. No. 176085 February 8, 2012
BRION, J.:

CONTEMPT POWERS OF THE NLRC

DOCTRINE:
Under Article 218(d) of the Labor Code, the labor arbiter or the Commission is empowered or has jurisdiction to
hold the offending party or parties in direct or indirect contempt.

FACTS:
Petitioners were rank-and-file employees of respondent Chemo-Technische Manufacturing, Inc. (CTMI), the
manufacturer and distributor of Wella products. They were officers and members of the CTMI Employees Union-
DFA (union). Sometime in the first semester of 1991, the union filed a petition for certification election at CTMI.

On July 15, 1991, CTMI issued two memoranda, which were considered as union busting acts constituting
unfair labor practice by the union. Thus, the union asked for the withdrawal and deferment of CTMIs directives.
CTMI ignored the request. Instead, it issued on July 23, 1991 a notice of termination of employment to the sales
drivers, due to the abolition of the sales driver positions.

The union and its affected members filed a complaint for illegal dismissal and unfair labor practice, with a claim
for damages, against private respondents CTMI, De Luzuriaga and other CTMI officers. The union also moved
for the issuance of a writ of preliminary injunction and/or temporary restraining order.

The NLRC issued a TRO, directing CTMI, De Luzuriaga and other company executives to cease and desist
from dismissing any member of the union and from implementing the July 23, 1991 memorandum terminating
the services of the sales drivers, and to immediately reinstate them if the dismissals have been effected.

Allegedly, the respondents did not comply with the NLRCs August 23, 1991 resolution. They instead moved to
dissolve the TRO and opposed the unions petition for preliminary injunction. The NLRC upgraded the TRO to a
writ of preliminary injunction. The respondents moved for reconsideration. The union opposed the motion and
urgently moved to cite the responsible CTMI officers in contempt of court.

Private respondent De Luzuriaga argued that they were charged with indirect contempt which may be initiated
only in the appropriate regional trial court, pursuant to Section 12, Rule 71 of the Rules of Court. He posits that
the NLRC has no jurisdiction over an indirect contempt charge. He thus argues that the petitioners improperly
brought the contempt charge before the NLRC.

ISSUE: Does the NLRC (and labor arbiters) have contempt powers?

SC RULING:
YES. Under Article 218 of the Labor Code, the NLRC (and the labor arbiters) may hold any offending party in
contempt, directly or indirectly, and impose appropriate penalties in accordance with law. The penalty for direct
contempt consists of either imprisonment or fine, the degree or amount depends on whether the contempt is
against the Commission or the labor arbiter. The Labor Code, however, requires the labor arbiter or the
Commission to deal with indirect contempt in the manner prescribed under Rule 71 of the Rules of Court.

Rule 71 of the Rules of Court does not require the labor arbiter or the NLRC to initiate indirect contempt
proceedings before the trial court. This mode is to be observed only when there is no law granting them
contempt powers. As is clear under Article 218(d) of the Labor Code, the labor arbiter or the Commission is
empowered or has jurisdiction to hold the offending party or parties in direct or indirect contempt. The
petitioners, therefore, have not improperly brought the indirect contempt charges against the respondents before
the NLRC.

San Beda College of Law 271


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

ARTICLE 221 (now Art. 227) Technical Rules Not Binding

135. MANILA ELECTRIC COMPANY v. JAN CARLO GALA,


G.R. Nos. 191288 & 191304 March 7, 2012
BRION, J.:

TECHNICAL RULES NOT BINDING IN LABOR CASES

DOCTRINE:
It is the spirit and intention of labor legislation that the NLRC and the labor arbiters shall use every
reasonable means to ascertain the facts in each case speedily and objectively, without regard to
technicalities of law or procedure, provided due process is duly observed.

FACTS:
On March 2, 2006, respondent Jan Carlo Gala commenced employment with the petitioner Meralco
Electric Company (Meralco) as a probationary lineman.

On July 27, 2006, barely four months on the job, Gala was dismissed for alleged complicity in pilferages of
Meralcos electrical supplies, particularly, for the incident which took place on May 25, 2006. On that day, Gala
and other Meralco workers were instructed to replace a worn-out electrical pole at the Pacheco Subdivision in
Valenzuela City. While the Meralco crew was at work, one Noberto Bing Llanes, a non-Meralco employee,
arrived. He appeared to be known to the Meralco foremen as they were seen conversing with him. Llanes
boarded the trucks, without being stopped, and took out what were later found as electrical supplies. Aside from
Gala, the foremen and the other linemen who were at the worksite when the pilferage happened were later
charged with misconduct and dishonesty for their involvement in the incident. Unknown to Gala and the rest of
the crew, a Meralco surveillance task force was monitoring their activities and recording everything with a Sony
video camera.

Meralco called for an investigation of the incident and asked Gala to explain. Gala denied involvement in the
pilferage, contending that even if his superiors might have committed a wrongdoing, he had no participation in
what they did. Despite Galas explanation, Meralco proceeded with the investigation and eventually terminated
his employment on July 27, 2006. Gala responded by filing an illegal dismissal complaint against Meralco.

LA RULING: dismissed the complaint for lack of merit.

NLRC RULING: reversed the labor arbiters ruling. It found that Gala had been illegally dismissed.

CA RULING: concurred with the NLRC that Gala had been illegally dismissed.

ISSUES:
1. Should the Court dismiss the petition outright based on procedural grounds?
2. Was Gala illegally dismissed by petitioner Meralco?

SC RULING:
1. NO. Gala would want the petition to be dismissed outright on procedural grounds, claiming that the
Verification and Certification, Secretarys Certificate and Affidavit of Service accompanying the petition do not
contain the details of the Community Tax Certificates of the affiants, and that the lawyers who signed the
petition failed to indicate their updated MCLE certificate numbers, in violation of existing rules.

We stress at this point that it is the spirit and intention of labor legislation that the NLRC and the labor arbiters
shall use every reasonable means to ascertain the facts in each case speedily and objectively, without regard
to technicalities of law or procedure, provided due process is duly observed. In keeping with this policy and in
the interest of substantial justice, we deem it proper to give due course to the petition, especially in view of
the conflict between the findings of the labor arbiter, on the one hand, and the NLRC and the CA, on the
other. As we said in S.S. Ventures International, Inc. v. S.S. Ventures Labor Union, the application of
technical rules of procedure in labor cases may be relaxed to serve the demands of substantial justice.

2. NO. Contrary to the conclusions of the CA and the NLRC, there is substantial evidence supporting Meralcos
position that Gala had become unfit to continue his employment with the company. Gala was found, after an
San Beda College of Law 272
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administrative investigation, to have failed to meet the standards expected of him to become a regular
employee and this failure was mainly due to his undeniable knowledge, if not participation, in the pilferage
activities done by their group, all to the prejudice of the Companys interests.

San Beda College of Law 273


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

136. NATIONWIDE SECURITY ANDALLIED SERVICES, INC. v. COURT OF APPEALS
G.R. No. 155844 July 14, 2008
QUISUMBING, J.:

REGLEMENTARY PERIOD FOR APPEAL MUST BE STRICTLY FOLLOWED

DOCTRINE:
The right to appeal is a statutory right and one who seeks to avail of the right must comply with the statute or the
rules. The rules, particularly the requirements for perfecting an appeal within the reglementary period specified
in the law, must be strictly followed as they are considered indispensable interdictions against needless delays
and for the orderly discharge of judicial business. It is only in highly meritorious cases that this Court will opt not
to strictly apply the rules and thus prevent a grave injustice from being done.

FACTS:
Labor Arbiter Manuel M. Manansala found petitioner Nationwide Security and Allied Services, Inc., a security
agency, not liable for illegal dismissal in NLRC NCR 00-01-00833-96 and 00-02-01129-96 involving eight
security guards who were employees of the petitioner. However, the Labor Arbiter directed the petitioner to pay
the aforementioned security guards P81,750.00 in separation pay, P8,700.00 in unpaid salaries, P93,795.68 for
underpayment and 10% attorneys fees based on the total monetary award.

Dissatisfied with the decision, petitioner appealed to the NLRC which dismissed its appeal for two reasons first,
for having been filed beyond the reglementary period within which to perfect the appeal and second, for filing an
insufficient appeal bond.

Petitioner then appealed to the Court of Appeals to have the appeal resolved on the merits rather than on pure
technicalities in the interest of due process. The Court of Appeals dismissed the case, holding that in a special
action for certiorari, the burden is on petitioner to prove not merely reversible error, but grave abuse of discretion
amounting to lack of or excess of jurisdiction on the part of public respondent NLRC.

ISSUE: Should technicalities in labor cases prevail over the spirit and intention of the Labor Code?

SC RULING:
After considering all the circumstances in this case and the submission by the parties, we are in agreement that
the petition lacks merit.

There being a remedy of appeal via petition for review under Rule 45 of the Rules of Court available to the
petitioner, the filing of a petition for certiorari under Rule 65 is improper. But even if we bend our Rules to allow
the present petition for certiorari, still it will not prosper because we do not find any grave abuse of discretion
amounting to lack of or excess of jurisdiction on the part of the Court of Appeals when it dismissed the petition of
the security agency. The assailed decision by the Court of Appeals was certainly not capricious nor arbitrary,
nor was it a whimsical exercise of judgment amounting to a lack of jurisdiction.

The appeal to the NLRC should have been perfected, as provided by its Rules, within a period of 10 days from
receipt by petitioner of the decision on July 16, 1999. Clearly, the filing of the appeal--three days after July 26,
1999--was already beyond the reglementary period and in violation of the NLRC Rules and the pertinent Article
on Appeal in the Labor Code.

Failure to perfect an appeal renders the decision final and executory. The right to appeal is a statutory right and
one who seeks to avail of the right must comply with the statute or the rules. The rules, particularly the
requirements for perfecting an appeal within the reglementary period specified in the law, must be strictly
followed as they are considered indispensable interdictions against needless delays and for the orderly
discharge of judicial business. It is only in highly meritorious cases that this Court will opt not to strictly apply the
rules and thus prevent a grave injustice from being done. The exception does not obtain here. Thus, we are in
agreement that the decision of the Labor Arbiter already became final and executory because petitioner failed to
file the appeal within 10 calendar days from receipt of the decision.

Clearly, the NLRC committed no grave abuse of discretion in dismissing the appeal before it. It follows that the
Court of Appeals, too, did not err, nor gravely abuse its discretion, in sustaining the NLRC Order, by dismissing the
petition for certiorari before it.
San Beda College of Law 274
4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

San Beda College of Law 275


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

137. DIAMOND TAXI and/or BRYAN ONG v. FELIPE LLAMAS, JR.
G.R. No. 190724 March 12, 2014
BRION, J.:

EMPLOYEES APPEAL MUST NOT BE DISMISSED ON PURELY TECHINCAL GROUNDS

DOCTRINE:
The dismissal of an employees appeal on purely technical ground is inconsistent with the constitutional
mandate on protection to labor. Under the Constitution and the Labor Code, the State is bound to protect labor
and assure the rights of workers to security of tenure tenurial security being a preferred constitutional right
that, under these fundamental guidelines, technical infirmities in labor pleadings cannot defeat.

FACTS:
Felipe Llamas worked as a taxi driver for petitioner Diamond Taxi, owned and operated by petitioner Bryan Ong.
Llamas filed before the Labor Arbiter (LA) a complaint for illegal dismissal against the petitioners. In their
position paper, the petitioners denied dismissing Llamas. They claimed that Llamas had been absent without
official leave for several days, and submitted a copy of the attendance logbook as proof. They also pointed out
that Llamas committed several traffic violations amounting and several acts of insubordination and refusal to
heed management instructions. They argued that these acts traffic violations, insubordination and refusal to
heed management instructions constitute grounds for the termination of Llamas employment.

Llamas failed to seasonably file his position paper. On November 29, 2005, the LA rendered a
decision dismissing Llamas complaint for lack of merit. Llamas received a copy of this LA decision on January
5, 2006. Meanwhile, he filed his position paper on December 20, 2005. Llamas claimed that his failure to file his
position paper was due to the refusal of his previous counsel to comply.

He also alleged that he had a misunderstanding with Aljuver Ong, Bryans brother and operations manager of
Diamond Taxi, and the incident led to his forced resignation. Llamas filed a motion for reconsideration before the
LA. The LA treated Llamas motion as an appeal per Section 15, Rule V of the 2005 Revised Rules of
Procedure of the NLRC (2005 NLRC Rules) (the governing NLRC Rules of Procedure at the time Llamas filed
his complaint before the LA).

NLRC RULING: The NLRC dismissed for non-perfection Llamas motion for reconsideration treated as an
appeal. The NLRC pointed out that Llamas failed to attach the required certification of non-forum shopping per
Section 4, Rule VI of the 2005 NLRC Rules.

CA RULING: The CA reversed and set aside the assailed NLRC resolution. Citing jurisprudence, the CA pointed
out that non-compliance with the requirement on the filing of a certificate of non-forum shopping, while
mandatory, may nonetheless be excused upon showing of manifest equitable grounds proving substantial
compliance.

ISSUE: Did the NLRC committed grave abuse of discretion in dismissing Llamas appeal on mere technicality?

SC RULING:
YES. Article 223 (now Article 229) of the Labor Code states that decisions (or awards or orders) of the LA shall
become final and executory unless appealed to the NLRC within ten (10) calendar days from receipt of the
decision. Consistent with Article 223, Section 1, Rule VI of the 2005 NLRC Rules also provides for a ten (10)-
day period for appealing the LAs decision. Under Section 4(a), Rule VI of the 2005 NLRC Rules, the appeal
shall be in the form of a verified memorandum of appeal and accompanied by proof of payment of the appeal
fee, posting of cash or surety bond (when necessary), certificate of non-forum shopping, and proof of service
upon the other parties. Failure of the appealing party to comply with any or all of these requisites within the
reglementary period will render the LAs decision final and executory.

Indisputably, Llamas did not file a memorandum of appeal from the LAs decision. Instead, he filed, within the
ten (10)-day appeal period, a motion for reconsideration. Under Section 15, Rule V of the 2005 NLRC Rules,
motions for reconsideration from the LAs decision are not allowed; they may, however, be treated as an appeal
provided they comply with the requirements for perfecting an appeal. The NLRC dismissed Llamas motion for
reconsideration treated as an appeal for failure to attach the required certificate of non-forum shopping per
Section 4(a), Rule VI of the 2005 NLRC Rules.
San Beda College of Law 276
4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

The requirement for a sworn certification of non-forum shopping was prescribed by the Court under Revised
Circular 28-91, as amended by Administrative Circular No. 04-
94,http://www.lawphil.net/judjuris/juri2014/mar2014/gr_190724_2014.html - fnt22 to prohibit and penalize the
evils of forum shopping. Revised Circular 28-91, as amended by Administrative Circular No. 04-94, requires a
sworn certificate of non-forum shopping to be filed with every petition, complaint, application or other initiatory
pleading filed before the Court, the CA, or the different divisions thereof, or any other court, tribunal or agency.

Ordinarily, the infirmity in Llamas appeal would have been fatal and would have justified an end to the case. A
careful consideration of the circumstances of the case, however, convinces us that the NLRC should, indeed,
have given due course to Llamas appeal despite the initial absence of the required certificate. We note that in
his motion for reconsideration of the NLRCs May 30, 2006 resolution, Llamas attached the required certificate
of non-forum shopping.

Under Article 221 (now Article 227) of the Labor Code, "the Commission and its members and the Labor
Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily and objectively
and without regard to technicalities of law or procedure, all in the interest of due process." Consistently, we have
emphasized that "rules of procedure are mere tools designed to facilitate the attainment of justice. A strict and
rigid application which would result in technicalities that tend to frustrate rather than promote substantial justice
should not be allowed x x x. No procedural rule is sacrosanct if such shall result in subverting
justice." Ultimately, what should guide judicial action is that a party is given the fullest opportunity to establish
the merits of his action or defense rather than for him to lose life, honor, or property on mere technicalities.

San Beda College of Law 277


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

138. SARA LEE PHILIPPINES, INC. v. EMILINDA D. MACATLANG, ET AL.
G.R. No. 180147 January 14, 2015
PEREZ, J.:

APPEAL BOND; JUDICIAL COURTESY; COMPROMISE AGREEMENT

DOCTRINE:
The NLRC retains its authority and duty to resolve the motion and determine the final amount of bond that shall
be posted by the appellant, still in accordance with the standards of "meritorious grounds" and "reasonable
amount." Should the NLRC, after considering the motions merit, determine that a greater amount or the full
amount of the bond needs to be posted by the appellant, then the party shall comply accordingly. The appellant
shall be given a period of 10 days from notice of the NLRC order within which to perfect the appeal by posting
the required appeal bond.

FACTS:
On Oct. 9, 1995, Aris Philippines, Inc. permanently ceased operations displacing 5,984 rank-and-file employees.
On Oct. 26, 1996, Fashion Accessories Phils., Inc. (FAPI) was incorporated prompting former Aris employees to
file a case for illegal dismissal alleging that FAPI was a continuing business of Aris. Sara Lee Corporation
(SLC), Sara Lee Philippines (SLP), and Atty. Cesar C. Cruz were impleaded as defendants being major
stockholders of FAPI and officers of Aris, respectively.

LA RULING: On Oct. 30, 2004, the LA found the dismissal of 5,984 Aris employees illegal and awarded them
monetary benefits amounting to P3,453,664,710.86 as separation pay, backwages, moral and exemplary
damages, and attorneys fees.

The Corporations filed a Notice of Appeal with Motion to Reduce Appeal Bond posting a P4.5 million bond.

NLRC RULING: The NLRC granted the reduction of the appeal bond and ordered the Corporations to post an
additional P4.5 million bond.

The Aris employees, represented by Emilinda Macatlang, filed a petition for review before the CA insisting that
the appeal was not perfected due to failure of the Corporations to post the correct amount of the bond which is
equivalent to the judgment award.

Nonetheless, the NLRC prematurely issued an order setting aside the LAs decision for being procedurally
infirmed.

CA RULING: On March 26, 2007, the CA ordered the Corporations to post an additional appeal bond of P1
billion.

SC RULING: On June 4, 2014, the SC ordered the Corporations to post P725 million, in case or surety bond
and vacated the NLRC decision for being premature and directed the same to act with dispatch to resolve the
merits of the case upon perfection of the appeal.

Hence, this MR where the Corporations, relying on McBurnie v. Ganzon, argued that only 10% of the monetary
award is required to be posted as bond.

Furthermore, the Corporations filed a Motion to Admit Confession of Judgment claiming that the Corporations
entered into as compromise with some of the former Aris employees.

ISSUES:
1. Is the 10% bond requirement applicable in this case?
2. Was the ruling of the NLRC premature?
3. Should the motion to admit confession of judgment be approved?

SC RULING:
(1) No. The 10% requirement pertains to the reasonable amount which the NLRC would accept as the minimum
of the bond that should accompany the motion to reduce bond in order to suspend the period to perfect an

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4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

appeal under the NLRC rules. The 10% is based on the judgment award and should in no case be
construed as the minimum amount of bond to be posted in order to perfect appeal.

The NLRC retains its authority and duty to resolve the motion and determine the final amount of bond that
shall be posted by the appellant, still in accordance with the standards of "meritorious grounds" and
"reasonable amount." Should the NLRC, after considering the motions merit, determine that a greater
amount or the full amount of the bond needs to be posted by the appellant, then the party shall comply
accordingly. The appellant shall be given a period of 10 days from notice of the NLRC order within which to
perfect the appeal by posting the required appeal bond.

The appeal bond was set at P725 million after taking into consideration the interests of all parties. The
underlying purpose of the appeal bond is to ensure that the employer has properties on which he or she can
execute upon in the event of a final, providential award. Thus, non-payment or woefully insufficient payment
of the appeal bond by the employer frustrates these ends.

(2) Yes. There was a legal impediment for NLRC to issue the resolution vacating the LAs decision. The
principle of judicial courtesy applies if there is a strong probability that the issues before the higher court
would be renedered moot as a result of the continuation of the proceedings in the lower court.

The NLRCs ruling would moot the appeal filed before the higher courts because the issue involves the
appeal bond which is an indispensable requirement to the perfection of the appeal before the NLRC. Thus,
unless this issue is resolved, the NLRC should be precluded from ruling on the merits of the case.

Thus, the stage that has been passed in this case is the proceedings before the LA. Without the NLRC
stage, the LAs decision is final and executory.

(3) No. A confession of judgement is an acknowledgement that a debt is justly due and cuts off all defenses and
right of appeal. It is used as a shortcut to a judgment in a case where the defendant concedes liability. It is
seen as the written authority of the debtor and a director for entry of judgment against the debtor.

On the other hand, a compromise agreement is a contract whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to one already commenced. It is an agreement between two or
more persons, who, for preventing or putting an end to a lawsuit, adjust their difficulties by mutual consent in
the manner which they agree on, and which everyone of them prefers to the hope of gaining, balanced by
the danger of losing. It must not be contrary to law, morals, good customs and public policy; and must have
been freely and intelligently executed by and between the parties.

Article 227 of the Labor Code of the Philippines authorizes compromise agreements voluntarily agreed upon
by the parties, in conformity with the basic policy of the State to promote and emphasize the primacy of free
collective bargaining and negotiations, including voluntary arbitration, mediation and conciliation, as modes
of settling labor or industrial disputes.

In this case, a review of the compromise agreement shows a gross disparity between the amount offered by
the Corporations compared to the judgment award. The judgment award is P3,453,664,710.86 or each
employee is slated to receive P577,149.85. On the other hand, the P342,284,800.00 compromise is to be
distributed among 5,984 employees which would translate to only P57,200.00 per employee. From this
amount, P8,580.00 as attorneys fees will be deducted, leaving each employee with a measly P48,620.00.
In fact, the compromised amount roughly comprises only 10% of the judgment award.

The SC had already directed the NLRC to act with dispatch in resolving the merits of the case upon receipt
of the bond. If indeed the parties want an immediate and expeditious resolution of the case, then the NLRC
should be unhindered with technicalities to dispose of the case.

The petition was denied.

San Beda College of Law 279


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

ARTICLE 223 (now Art. 229) Appeal

139. ISLRIZ TRADING / VICTOR HUGO LU v. EFREN CAPADA, LAURO LICUP, NORBERTO NIGOS,
RONNIE ABEL, GODOFREDO MAGNAYE, ARNEL SIBERRE, EDMUNDO CAPADA, NOMERLITO
MAGNAYE, and ALBERTO DELA VEGA
G.R. No. 168501 January 31, 2011
DEL CASTILLO, J.:

EXTENT OF APPLICABILITY OF ART. 223

DOCTRINE:
Employees are entitled to their accrued salaries during the period between the Labor Arbiters order of
reinstatement pending appeal and the resolution of the National Labor Relations Commission (NLRC)
overturning that of the Labor Arbiter. Otherwise stated, even if the order of reinstatement of the Labor Arbiter is
reversed on appeal, the employer is still obliged to reinstate and pay the wages of the employee during the
period of appeal until reversal by a higher court or tribunal.

FACTS:
Efren Capada, Lauro Licup, Norberto Nigos, and Godofredo Magnaye were drivers while Ronnie Abel, Arnel
Siberre, Edmundo Capada, Nomerlito Magnaye, and Alberto Dela Vega were helpers of Islriz Trading, a gravel
and sand business owned and operated by Victor Hugo Lu.

Claiming that they were illegally dismissed, Capada, et al. filed a complaint for illegal dismissal and non-
payment of overtime pay,holiday pay, rest day pay, allowances, and separation pay against Islriz on August 9,
2000 before the LA. For his part, Lu imputed abandonment of work against Capada, et al.

LA & NLRC RULING: On Dec. 21, 2001, LA Waldo Emerson Gan declared Islriz Trading guilty of illegal
dismissal and ordered the reinstatement of complainants to the ir former positions and the payment of full
backwages plus 10% attorneys fees.

On Sept. 5, 2002, the NLRC set aside the LAs decision after finding that Capada, et al.s failure to continue
working for Islriz Trading was neither caused by termination nor abandonment of work and ordered
reinstatement of Capada, et al. but without backwages. On Nov. 18, 2002, MR was denied. On Dec. 7, 2002,
this became final and executory.

On Dec. 9, 2003, however, Capada, et al. filed with the LA an Ex-Parte Motion to Set Case for Conference with
Motion averring that since the LA decision ordered their reinstatement, a writ of execution dated April 22, 2002
was already issued for the enforcement of its reinstatement aspect as the same is immediately executory even
pending appeal, but Islriz still refused to reinstate them, thereby, praying that, in view of the orders of
reinstatement, a computation of the award of backwages be made and that an alias writ of execution for its
enforcement be issued.

On Jan. 29, Feb. 24, and March 5, 2004, pre-execution conferences were held but the parties failed to come to
terms on the issue of the monetary award.

The LA thus issued an undated computation of Capada, et al.s accrued salaries amounting to P1,110,665.60.
LA Danna Castillon, despite Islrizs questioning of the computation since the same was without factual or legal
basis since LA Ganss decision had already been reversed and set aside by the NLRC, issued a writ of
execution dated March 9, 2004 to enforce the monetary award. Hence, the personal property of Islriz was
levied, despite Islrizs protest, in favor of Capada, et al.

Later, Capada, et al. claimed that they could not take full control, ownership, and possession of the same
because Lu had allegedly padlocked the premises where the properties were situated. Hence, they asked LA
Castillo to issue a break-open order.

For his part, Lu filed a Motion to Quash Writ of Execution, Notice of Sale/Levy on Execution of Personal
Property and Auction Sale on Additional Grounds reiterating that since the NLRC reversed the LAs decision,
only the execution of reinstatement sans any backwages or other monetary award should be enforced.

San Beda College of Law 280


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

On June 3, 2004, LA Castillon explained that the monetary award subject of the writ refers to Capada, et al.s
accrued salaries by reason of the reinstatement order of LA Gan which is self-executory pursuant to Art. 223 of
the Labor Code.

CA RULING: On March 18, 2005, the CA agreed with the LAs ratiocination that pursuant to Art. 223 of the
Labor Code, what is sought to be enforced by the writ of execution is the accrued salaries owing to Capada, et
al. by reason of LA Gans reinstatement order. MR was also denied on June 16, 2005.

Hence, this petition for review where Lu posits that Art. 223 of the Labor Code only applies when an employee
has been illegally dismissed from work and since, Capada, et al.s failure to continue working for Islriz was not
occasioned by termination, there is no illegal dismissal to speak of, hence, Art. 223 does not apply in this case.

ISSUE: Is Art. 223 of the Labor Code applicable to this case? May Capada, et al. collect their wages during the
period between the LAs order of reinstatement pending appeal and the NLRC Resolution overturining that of
the LA?

SC RULING:
Yes. Even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of
the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until
reversal by the higher court or tribunal. It likewise settled the view that the Labor Arbiters order of reinstatement
is immediately executory and the employer has to either re-admit them to work under the same terms and
conditions prevailing prior to their dismissal, or to reinstate them in the payroll, and that failing to exercise the
options in the alternative, employer must pay the employees salaries.

After the Labor Arbiters decision is reversed by a higher tribunal, the employee may be barred from collecting
the accrued wages, if it is shown that the delay in enforcing the reinstatement pending appeal was without fault
on the part of the employer. It then provided for the two-fold test in determining whether an employee is barred
from recovering his accrued wages, to wit: (1) there must be actual delay or that the order of reinstatement
pending appeal was not executed prior to its reversal; and (2) the delay must not be due to the employers
unjustified act or omission. If the delay is due to the employers unjustified refusal, the employer may still be
required to pay the salaries notwithstanding the reversal of the Labor Arbiters Decision.

In this case, (1) there was an actual delay in the execution of the reinstatement aspect of LA Gans decision
prior to the issuance of the NLRC resolution overturning the same; and (2) the delay in the execution of Capada,
et al.s reinstatement was due to Islrizs unjustified refusal to effect the same.

Therefore, Capada, et al. have the right to collect their accrued salaries during the period between the LAs
decision ordering their reinstatement pending appeal and the NLRC resolution overturning thr same.

The petition was denied.

San Beda College of Law 281


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

140. CESAR V. GARCIA, CARLOS RAZON, ALBERTO DE GUZMAN, TOMAS RAZON, OMER PALO,
RIZALDE VALENCIA, ALLAN BBASA, JESSIE GACIA, JUANITO PARAS, ALEJANDRO ORAG, ROMMEL
PANGAN, RUEL SOLIMAN, AND CENEN CANLAPAN, represented by CESAR V. GARCIA v. KJ
COMMERCIAL and REYNALDO QUE
G.R. No. 196830 February 29, 2012
CARPIO, J.:

PERFECTION OF APPEAL; APPEAL BOND

DOCTRINE:
Section 2, Article I of the Rules of Procedure of the NLRC states: These Rules shall be liberally construed to
carry out the objectives of the Constitution, the Labor Code of the Philippines and other relevant legislations,
and to assist the parties in obtaining just, expeditious and inexpensive resolution and settlement of labor
disputes. In order to give full effect to the provisions on motion to reduce bond, the appellant must be allowed to
wait for the ruling of the NLRC on the motion even beyond the 10-day period to perfect an appeal. If the NLRC
grants the motion and rules that there is indeed meritorious ground and that the amount of the bond posted is
reasonable, then the appeal is perfected. If the NLRC denies the motion, the appellant may still file a motion for
reconsideration as provided under Section 15, Rule VII of the Rules. If the NLRC grants the motion for
reconsideration and rules that there is indeed meritorious ground and that the amount of the bond posted is
reasonable, then the appeal is perfected. If the NLRC denies the motion, then the decision of the labor arbiter
becomes final and executory.

FACTS:
KJ Commercial (KJC) is a sole proprietorship which owns trucks and engages in the business of distributing
cement products. On different dates, KJC employed as truck drivers and truck helpers herein petitioners Cesar
Garcia, Carlos Razon, Alberto De Guzman, Tomas Razon, Omer Palo, Rizalde Valencia, Allan Bbasa, Jessie
Gacia, Juanito Paras, Alejandro Orag, Rommel Pangan, Ruel Soliman, and Cenen Canlapan.

On Jan. 2, 2006, Garcia, et al. demanded for a P40 daily salary increase. To pressure KJC to grant their
demand, they stopped working and abandoned their trucks at Northern Cement Plan Station in Sison,
Pangasinan.

On Feb. 3, 2006, Garcia, et al. filed with the LA a complaint for illegal dismissal, underpayment of salary, and
th
non-payment of SIL and 13 month pay.

LA RULING: On Oct. 30, 2008, the LA held that KJC illegally dismissed Garcia, et al.

KJC appealed to the NLRC. It filed a motion to reduce bond and posted a P50,000 cash bond.

NLRC RULING: On March 9, 2009, the NLRC dismissed the appeal.

KJC filed an MR and posted a P2,562,930 surety bond.

On Feb. 8, 2010, the NLRC granted the motion and set aside the LAs decision. Garcia, et al. filed an MR which
was denied on June 25, 2010.

CA RULING: On April 21, 2011, the CA affirmed the NLRCs decision. Hence, this petition for review on
certiorari.

ISSUE: Did the motion to reduce bond stop the running of the period to appeal?

SC RULING:
Yes. KJCs filing of a motion to reduce bond and delayed posting of the P2,562,930 surety bond did not render
the LAs decision final and executory.

The Rules of Procedure of the NLRC allows the filing of a motion to reduce bond subject to two conditions:
1. There is meritorious ground; and
2. A bond in a reasonable amount is posted.

San Beda College of Law 282


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

The filing of a motion to reduce bond and compliance with the two conditions stop the running of the period to
perfect an appeal. The NLRC has full discretion to grant or deny the motion to reduce bond,21 and it may rule
on the motion beyond the 10-day period within which to perfect an appeal. Obviously, at the time of the filing of
the motion to reduce bond and posting of a bond in a reasonable amount, there is no assurance whether the
appellants motion is indeed based on meritorious ground and whether the bond he or she posted is of a
reasonable amount. Thus, the appellant always runs the risk of failing to perfect an appeal.

Section 2, Article I of the Rules of Procedure of the NLRC states: These Rules shall be liberally construed to
carry out the objectives of the Constitution, the Labor Code of the Philippines and other relevant legislations,
and to assist the parties in obtaining just, expeditious and inexpensive resolution and settlement of labor
disputes. In order to give full effect to the provisions on motion to reduce bond, the appellant must be allowed to
wait for the ruling of the NLRC on the motion even beyond the 10-day period to perfect an appeal. If the NLRC
grants the motion and rules that there is indeed meritorious ground and that the amount of the bond posted is
reasonable, then the appeal is perfected. If the NLRC denies the motion, the appellant may still file a motion for
reconsideration as provided under Section 15, Rule VII of the Rules. If the NLRC grants the motion for
reconsideration and rules that there is indeed meritorious ground and that the amount of the bond posted is
reasonable, then the appeal is perfected. If the NLRC denies the motion, then the decision of the labor arbiter
becomes final and executory.

KJ Commercial filed a motion to reduce bond and posted a P50,000 cash bond. When the NLRC denied its
motion, KJ Commercial filed a motion for reconsideration and posted the full P2,562,930 surety bond. The
NLRC then granted the motion for reconsideration.

Furthermore, KJ Commercial showed willingness to post a partial bond. In fact, it posted a P50,000 cash bond.
Also, KJ Commercial immediately posted the full amount of the bond when it filed its motion for reconsideration
of the NLRCs decision.

The petition was denied. CA decision was affirmed.

San Beda College of Law 283


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

141. MARIANO ONG, doing business under the name and style MILESTONE METAL MANUFACTURING
v. THE COURT OF APPEALS, CONRADO DABAC, BERNABE TAYACTAC, MANUEL ABEJUELLA,
LOLITO ABELONG, RONNIE HERRERO, APOLLO PAMIAS, JAIME ONGUTAN, NOEL ATENDIDO,
CARLOS TABBAL, JOEL ATENDIDO, BIENVENIDO EBBER, RENATO ABEJUELLA, LEONILO ATENDIDO,
JR., LODULADO FAA and JAIME LOZADA
G.R. No. 152494 September 22, 2004
YNARES-SANTIAGO, J.:

PERFECTION OF APPEAL; APPEAL BOND

DOCTRINE:
The NLRC Rules clearly provide that the filing of the motion to reduce bond shall not stop the running of the
period to perfect appeal. Ong should have seasonably filed the appeal bond within the ten-day reglementary
period following the receipt of the order, resolution or decision of the NLRC to forestall the finality of such order,
resolution or decision. In the alternative, he should have paid only a moderate and reasonable sum for the
premium. The law does not require its outright payment, but only the posting of a bond to ensure that the award
will be eventually paid should the appeal fail. What petitioners have to pay is a moderate and reasonable sum
for the premium for such bond.

FACTS:
Mariano Ong is the sole proprietor of Milestone Metal Manufacturing, which manufactures, among others,
wearing apparels, belts, and umbrellas. Sometime in May 1998, the business suffered very low sales and
productivity because of the economic crisis in the country. Hence, it adopted a rotation scheme by reducing the
workdays of its employees to 3 days a week or less for an indefinite period.

On separate dates, the 15 respondents filed before the NLRC complaints for illegal dismissal, underpayment of
th
wages, non-payment of overtime pay, holiday pay, SIL pay, 13 month pay, damages, and attorneys fees
against Ong.

Ong claimed that:


9 of the 15 respondents were not employees of Milestone but of Proton Industrial Corporation which,
however, stopped its operation due to business losses.
Abuela, Abelong, Herrero, Tabbal, Dabac, and Faa were not dismissed from employment; rather, they
refused to work after the rotation scheme was adopted.
Anent their monetary claims, Ong presented documents showing that he paid respondents minimum wage,
th
13 month pay, holiday pay, and contributions to the SSS, Medicare, and Pag-ibig Funds.

LA RULING: On Nov. 25, 1999, LA awarded respondents P1,111,200.40 representing their wage differential,
th
holiday pay, SIL pay, and 13 month pay, plus 10% attorneys fees and ordered Ong to pay respondents
separation pay due to the indefiniteness of the rotation scheme and strained relations caused by the filing of the
complaints.

Ong filed with the NLRC a notice of appeal with a memorandum of appeal and paid the docket fees but instead
of posting the required cash or surety bond, he filed a motion to reduce the appeal bond.

NLRC RULING: On April 28, 2000, the NLRC denied the motion to reduce bond and dismissed the appeal for
failure to post cash or surety bond. MR was also denied.

CA RULING: Petition for certiorari was dismissed. MR was denied.

Hence, this petition for review where Ong contends that he was deprived of the chance to post bond because
the NLRC took 102 days to decide his motion.

ISSUE: Is the mere filing of the motion to reduce the appeal bond, without posting the required surety or cash
bond, sufficient to perfect an appeal?

SC RULING:
No. The NLRC did not act with GAD when it denied Ongs motion for the same failed to either elucidate why the
amount of the bond was unjustified and prohibitive or to indicate what would be a reasonable level. A
San Beda College of Law 284
4S: 2015 - 2016
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substantial monetary award, even if it runs into millions, does not necessarily give the employer-appellant a
meritorious case and does not automatically warrant a reduction of the appeal bond.

Even granting arguendo that Ong has meritorious grounds to reduce the appeal bond, the result would have
been the same since he failed to post cash or surety bond within the prescribed period.

An appeal from the Labor Arbiter to the NLRC must be perfected within ten calendar days from receipt of such
decisions, awards or orders of the Labor Arbiter. In a judgment involving a monetary award, the appeal shall be
perfected only upon (1) proof of payment of the required appeal fee; (2) posting of a cash or surety bond issued
by a reputable bonding company; and (3) filing of a memorandum of appeal. A mere notice of appeal without
complying with the other requisites mentioned shall not stop the running of the period for perfection of appeal.
The posting of cash or surety bond is not only mandatory but jurisdictional as well, and non-compliance
therewith is fatal and has the effect of rendering the judgment final and executory. This requirement is intended
to discourage employers from using the appeal to delay, or even evade, their obligation to satisfy their
employees just and lawful claims.

The intention of the lawmakers to make the bond an indispensable requisite for the perfection of an appeal by
the employer is underscored by the provision that an appeal by the employer may be perfected only upon the
posting of a cash or surety bond. The word only makes it perfectly clear that the lawmakers intended the posting
of a cash or surety bond by the employer to be the exclusive means by which an employers appeal may be
perfected.

The fact that the NLRC took 102 days to resolve the motion will not help Ongs case. The NLRC Rules clearly
provide that the filing of the motion to reduce bond shall not stop the running of the period to perfect appeal.
Ong should have seasonably filed the appeal bond within the ten-day reglementary period following the receipt
of the order, resolution or decision of the NLRC to forestall the finality of such order, resolution or decision. In
the alternative, he should have paid only a moderate and reasonable sum for the premium. The law does not
require its outright payment, but only the posting of a bond to ensure that the award will be eventually paid
should the appeal fail. What petitioners have to pay is a moderate and reasonable sum for the premium for such
bond.

While the bond requirement on appeals involving monetary awards has been relaxed in certain cases, this can
only be done where there was substantial compliance of the Rules or where the appellants, at the very least,
exhibited willingness to pay by posting a partial bond.

Ong did not post a full or partial appeal bond within the prescribed period, thus, no appeal was perfected from
the decision of the Labor Arbiter. For this reason, the decision sought to be appealed to the NLRC had become
final and executory and therefore immutable. Clearly, then, the NLRC has no authority to entertain the appeal,
much less to reverse the decision of the Labor Arbiter. Any amendment or alteration made which substantially
affects the final and executory judgment is null and void for lack of jurisdiction, including the entire proceeding
held for that purpose.

The petition was denied. The CA decision was affirmed.

San Beda College of Law 285


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

142. ROSEWOOD PROCESSING, INC. v. NATIONAL LABOR RELATIONS COMMISSION, NAPOLEON C.
MAMON, ARSENIO GAZZINGAN, ROMEO C. VELASCO, ARMANDO L. BALLON, VICTOR E. ALDEZA,
JOSE L. CABRERA, VETERANS PHILIPPINE SCOUT SECURITY AGENCY, and/or ENGR. SERGIO
JAMILA IV
G.R. Nos. 116476-84 May 21, 1998
PANGANIBAN, J.:

PERFECTION OF APPEAL; APPEAL BOND; SOLIDARY LIABILITY OF INDIRECT EMPLOYER

DOCTRINES:
In a number of cases, the SC has relaxed the bond requirement in order to bring about the immediate and
appropriate resolution of controversies on the merits. Some of these cases include: (a) counsels reliance on
the footnote of the notice of the decision of the labor arbiter that the aggrieved party may appeal xxx within
ten (10) working days; (b) fundamental consideration of substantial justice; (c) prevention of miscarriage of
justice or of unjust enrichment, as where the tardy appeal is from a decision granting separation pay which
was already granted in an earlier final decision; and (d) special circumstances of the case combined with its
legal merits or the amount and the issue involved.
Under the Labor Code, an employer is solidarily liable for legal wages due security guards for the period of
time they were assigned to it by its contracted security agency. However, in the absence of proof that the
employer itself committed the acts constitutive of illegal dismissal or conspired with the security agency in
the performance of such acts, the employer shall not be liable for back wages and/or separation pay arising
as a consequence of such unlawful termination.

FACTS:
On May 13, 1991, a complaint for illegal dismissal, underpayment of wages, and non-payment of overtime pay,
th
holiday pay, premium pay for holiday and rest day, and 13 month pay, cash bond deposit, unpaid wages, and
damages was filed aganst Veterans Philippine Scout Security Agency and/or Sergio Jamila IV. Thereafter,
Rosewood Processing, Inc. (RPI) was impleaded as a third-party respondent by the security agency.

LA RULING: On March 26, 1993, the security agency, Jamila, and RPI were ordered to pay jointly and severally
the complainants the aggregate amount of P789,154.39 plus attorneys fees on the basis that the security
agency and RPI offered no evidence refuting or rebutting the complainants computation of monetary claims.

NLRC RULING: On April 28, 1994, the appeal was dismissed for failure of RPI to file the required appeal bond
within the reglementary period, thereby rendering the LAs decision final and executory as of April 23, 1993. MR
was likewise denied.

Hence, this petition.

ISSUE:
1. Was the appeal from the LA to the NLRC perfected on time?
2. Is RPI solidarily liable with the security agency for the payment of back wages, wage differential, and
separation pay.

SC RULING:
(1) Yes. The perfection of an appeal within the reglementary period and in the manner prescribed by law is
jurisdictional, and non-compliance with such legal requirement is fatal and effectively renders the judgment final
and executory. The appeal of a decision involving a monetary award in labor cases may be perfected only upon
the posting of a cash or surety bond. The lawmakers intended the posting of the bond to be an indispensable
requirement to perfect an employers appeal.

However, in a number of cases, the SC has relaxed this requirement in order to bring about the immediate and
appropriate resolution of controversies on the merits. Some of these cases include: (a) counsels reliance on the
footnote of the notice of the decision of the labor arbiter that the aggrieved party may appeal xxx within ten (10)
working days; (b) fundamental consideration of substantial justice; (c) prevention of miscarriage of justice or of
unjust enrichment, as where the tardy appeal is from a decision granting separation pay which was already
granted in an earlier final decision; and (d) special circumstances of the case combined with its legal merits or
the amount and the issue involved.

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In this case, RPI claims to have received a copy of the LAs decision only on April 6, 1993, and that it filed on
April 16, 1993, within the prescribed time, a Notice of Appeal with a Memorandum on Appeal, a Motion to
Reduce Appeal Bond, and a surety bond issued by Prudential Guarantee and Assurance Inc. in the amount of
P50,000. Ignoring RPIs motion to reduce bond, the NLRC rendered its assailed resolution dismissing the
appeal due to the late filing of the appeal bond.

RPIs motion to reduce the bond is a substantial compliance with the Labor Code. Letter-perfect rules must yield
to the broader interest of substantial justice.

(2) Yes. Notwithstanding the service contract between the petitioner and the security agency, the former is still
solidarily liable to the employees, who were not privy to said contract, pursuant to the aforecited provisions of
the Code. Labor standard legislations are enacted to alleviate the plight of workers whose wages barely meet
the spiraling costs of their basic needs.

They are considered written in every contract, and stipulations in violation thereof are considered not written.
Similarly, legislated wage increases are deemed amendments to the contract. Thus, employers cannot hide
behind their contracts in order to evade their or their contractors or subcontractors liability for noncompliance
with the statutory minimum wage.

The joint and several liability of the employer or principal was enacted to ensure compliance with the provisions
of the Code, principally those on statutory minimum wage. The contractor or subcontractor is made liable by
virtue of his or her status as a direct employer, and the principal as the indirect employer of the contractors
employees. This liability facilitates, if not guarantees, payment of the workers compensation, thus, giving the
workers ample protection as mandated by the 1987 Constitution. This is not unduly burdensome to the
employer. Should the indirect employer be constrained to pay the workers, it can recover whatever amount it
had paid in accordance with the terms of the service contract between itself and the contractor.

Withal, fairness dictates that RPI should not, however, be held liable for wage differentials incurred while the
complainants were assigned to other companies. The indirect employers liability to the contractors employees
extends only to the period during which they were working for the petitioner, and the fact that they were
reassigned to another principal necessarily ends such responsibility. The principal is made liable to his indirect
employees, because it can protect itself from irresponsible contractors by withholding such sums and paying
them directly to the employees or by requiring a bond from the contractor or subcontractor for this purpose.

Similarly, the solidary liability for payment of back wages and separation pay is limited, under Article 106, to the
extent of the work performed under the contract; under Article 107, to the performance of any work, task, job or
project; and under Article 109, to the extent of their civil liability under this Chapter [on payment of wages].

The liability arising from an illegal dismissal is unlike an order to pay the statutory minimum wage, because the
workers right to such wage is derived from law. The proposition that payment of back wages and separation pay
should be covered by Article 109, which holds an indirect employer solidarily responsible with his contractor or
subcontractor for any violation of any provision of this Code, would have been tenable if there were proof --
there was none in this case -- that the principal/employer had conspired with the contractor in the acts giving
rise to the illegal dismissal.

The petition was partially granted.

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4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

San Beda College of Law 288


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

143. FLORENCIO M. DE LA CRUZ, JR. v. NATIONAL LABOR RELATIONS COMMISSION (4th Division)
SHEMBERG MARKETING CORPORATION and ERNESTO U. DACAY, JR.
G.R. No. 145417 December 11, 2003
CORONA, J.:

ART. 223 JURISDICTION OF THE LABOR ARBITERS AND THE COMMISSION

DOCTRINE: A probationary employee is one who, for a given period of time, is under observation and
evaluation to determine whether or not he is qualified for permanent employment. During the probationary
period, the employer is given the opportunity to observe the skill, competence and attitude of the employee
while the latter seeks to prove to the employer that he has the qualifications to meet the reasonable standards
for permanent employment. The length of time is immaterial in determining the correlative rights of both the
employer and the employee in dealing with each other during said period.

FACTS:
On May 27, 1996, petitioner Florencio M. de la Cruz, Jr. was hired by private respondent Shemberg Marketing
Corporation (Shemberg) as senior sales manager with a monthly salary of P40,500. Shemberg was engaged in
the business of manufacturing, trading, distributing and importing various consumer products. The position of
senior sales manager was then newly created; its duties included, among others, the supervision and control of
the sales force of the company. The senior sales manager was also vested with some discretion to decide on
matters within the scope of his functions, including the appointment of district sales representatives and the
reshuffling of salesmen to achieve sales targets.

On September 14, 1996, Shembergs human resource department manager, Ms. Lilybeth Y. Llanto, summoned
petitioner and informed him of the managements decision to terminate his services. He was merely informed
that it had something to do with the drop in the companys sales. His request to be furnished a 30-day written
notice was also denied by the management. Hence, petitioner filed a complaint for illegal dismissal, non-
payment of salary, backwages, 13th month pay and damages.

Respondents answered that petitioners dismissal for his failure to meet the required company standards and for
loss of trust and confidence: (1) his poor performance as evidenced by the steady and substantial drop in
company sales since his assumption as senior sales manager; (2) the dissatisfaction of his subordinates over
his management style and dealings with the companys distributors which resulted in the low morale of
Shembergs sales force; (3) his unauthorized use of company cellular phone for overseas personal calls and (4)
the unauthorized reimbursement of the plane tickets of his wife and child.

LA RULING: Found that petitioner Florencio de la Cruz was illegally dismissed and granted his claim for
separation pay, backwages and unpaid wages.

NLRC RULING: Dismissed the appeal. Respondents moved for reconsideration and the NLRC partially granted
the MR, abandoning its previous decision. A new decision was rendered ordering respondent Shemberg to pay
unpaid wages of P18,900.00 and indemnity of P5,000.00.

CA RULING: De La Cruzs petition for certiorari was dismissed for lack of merit. His subsequent MR was
likewise denied.

ISSUES:
(1) Did the submission of the familys plane tickets for reimbursement tantamount to fraud and deceit which
justified the employers loss of trust and confidence in him?
(2) Is the petitioner a probationary employee?

SC DECISION:
(1) Petitioner was holding a managerial position which required the full trust and confidence of his employer.
While petitioner could exercise some discretion, this obviously did not cover acts for his own personal benefit.
The petitioners denial cannot prevail over the actual presentation of the plane ticket in the name of petitioner
and his family and terminal fee stubs bearing three (3) different serial numbers but similarly dated. The
possession by respondent corporation of the plane tickets of petitioners wife and child clearly shows that the
same were submitted to management for reimbursement along with the other transportation expenses of
petitioner. Otherwise, there is no way respondent corporation could have gotten hold of the same. Petitioner
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opted not to explain why these plane tickets were in the possession of respondent corporation. His denials
without accompanying proof coupled with his silence on this matter cannot but be taken against him.

(2) YES. Article 281 of the Labor Code provides: Probationary employment Probationary employment shall not
exceed six (6) months from the date the employee started working, unless it is covered by an apprenticeship
agreement stipulating a longer period. The services of an employee who has been engaged on a probationary
basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with
reasonable standards, made known by the employer to the employee at the time of his engagement. An
employee who is allowed to work after a probationary period shall be considered a regular employee.

This Court notes the evidence on record clearly showing that petitioner was well informed of the standards to be
met before he could qualify as a regular employee. Attached to his appointment paper was the job description of
sales manager which read:

xxx
5. Performance subject to evaluation and trial period for six (6) months or more.

A probationary employee is one who, for a given period of time, is under observation and evaluation to
determine whether or not he is qualified for permanent employment. During the probationary period, the
employer is given the opportunity to observe the skill, competence and attitude of the employee while the latter
seeks to prove to the employer that he has the qualifications to meet the reasonable standards for permanent
employment. The length of time is immaterial in determining the correlative rights of both the employer and the
employee in dealing with each other during said period.

There is no dispute that petitioner, as a probationary employee, enjoyed only temporary employment status. In
general terms, this meant that he was terminable anytime, permanent employment not having been attained in
the meantime. The employer could well decide he no longer needed the probationary employees services or his
performance fell short of expectations, etc. As long as the termination was made before the expiration of the six-
month probationary period, the employer was well within his rights to sever the employer-employee relationship.
A contrary interpretation would defect the clear meaning of the term "probationary." In this case, respondent
Shemberg had good reason to terminate petitioners employment and that was his dishonesty.

San Beda College of Law 290


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

144. LYDIA BUENAOBRA, et al. v. LIM KING GUAN, et al. as corporate officers of UNIX INTERNATIONAL
EXPORT CORPORATION, and CHEN HSIU TSUNG, et al. as stockholders of record of UNIX
INTERNATIONAL EXPORT CORPORATION, and FUJI ZIPPER MANUFACTURING CORPORATION
G.R. No. 150147 January 20, 2004
CORONA, J.:

ART. 223 JURISDICTION OF THE LABOR ARBITERS AND THE COMMISSION

DOCTRINE:
It is true that the perfection of an appeal in the manner and within the period prescribed by law is not only
mandatory but jurisdictional, and failure to perfect an appeal has the effect of making the judgment final and
executory. However, technicality should not be allowed to stand in the way of equitably and completely resolving
the rights and obligations of the parties.

FACTS:
Petitioners were employees of UNIX, a corporation engaged in the business of manufacturing bags, wallets and
the like.

Sometime in 1991 and 1992, petitioners filed several cases against UNIX and its incorporators and officers for
unfair labor practice, illegal lockout/dismissal, underpayment of wages, holiday pay, proportionate 13th month
pay, unpaid wages, interest, moral and exemplary damages and attorneys fees.

LA RULING:
In favor of the petitioners ordering respondent Unix as follows:
1. P5,821,838.40 as backwages;
2. P1,484,912.00 as separation pay;
3. P527,748.00 as wage differentials;
4. P33,830.00 as regular holiday pay differentials; and
5. P365,551.95 as proportionate 13th month pay for 1990.

All other claims were dismissed for lack of merit. However, petitioners complained that the decision could not be
executed because UNIX allegedly diverted, invested and transferred all its money, assets and properties to FUJI
whose stockholders and officers were also those of UNIX.

Thus, petitioners filed another complaint against respondents UNIX, its corporate officers and stockholders of
record, and FUJI. Petitioners mainly prayed that respondents UNIX and FUJI be held jointly and severally held
liable for the payment of the monetary awards.

LA Pati rendered a decision on the second complaint piercing the veil of corporate fiction of the two respondent
sister corporations which were considered as mere associations of persons jointly and severally pay the subject
amount of P8,233,880.30 out of the properties and unpaid subscription on subscribed Capital Stock of the Board
of Directors, Corporate Officers, Incorporators and Stockholders of said respondent corporations, plus the
amount of P3,000,000.00 and P1,000,000.00 in the form of moral and exemplary damages, respectively, as well
as 10% attorneys fees from any recoverable amounts.

FUJI, its officers and stockholders filed a memorandum on appeal and a motion to dispense with the posting of
a cash or surety appeal bond on the ground that they were not the employers of petitioners.

NLRC RULING: Motion to exempt from filing appeal bond was DENIED for lack of merit. Respondents were
directed to post cash or surety bond.

Petitioners moved for reconsideration of the said order, arguing that the timely posting of an appeal bond is
mandatory for the perfection of an appeal and should be complied with. NLRC rendered an order dismissing the
MR.

Petitioners filed a petition in the Court of Appeals imputing grave abuse of discretion to the NLRC, Third Division
when it allowed private respondents to post the mandated cash or surety bond four months after the filing of
their memorandum on appeal.

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4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

CA RULING: CA dismissed the petition for lack of merit.

ISSUE: Is the posting of bond a four months after the filing of the memorandum of appeal violative of the Labor
Code?

SC DECISION:
NO. The provision of Article 223 of the Labor Code requiring the posting of bond on appeals involving monetary
awards must be given liberal interpretation in line with the desired objective of resolving controversies on the
3
merits. If only to achieve substantial justice, strict observance of the reglementary periods may be relaxed if
warranted. The NLRC, Third Division could not be said to have abused its discretion in requiring the posting of
bond after it denied private respondents motion to be exempted therefrom.

It is true that the perfection of an appeal in the manner and within the period prescribed by law is not only
mandatory but jurisdictional, and failure to perfect an appeal has the effect of making the judgment final and
executory. However, technicality should not be allowed to stand in the way of equitably and completely resolving
4
the rights and obligations of the parties. We have allowed appeals from the decisions of the labor arbiter to the
NLRC, even if filed beyond the reglementary period, in the interest of justice.

It is only fair and just that respondent FUJI be afforded the opportunity to be heard on appeal before the NLRC,
specially in the light of labor arbiter Patis later decision holding FUJI jointly and severally liable with UNIX in the
payment of the monetary awards adjudged by labor arbiter de Vera against UNIX.

San Beda College of Law 292


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

145. LEPANTO CONSOLIDATED MINING CORPORATION v. BELIO ICAO
G.R. No. 196047 January 15, 2014
SERENO, CJ:

ART. 223 JURISDICTION OF THE LABOR ARBITERS AND THE COMMISSION

DOCTRINE:
The intention of the lawmakers to make the bond an indispensable requisite for the perfection of an appeal by
the employer, is clearly limned in the provision that an appeal by the employer may be perfected "only upon the
posting of a cash or surety bond." The word "only" makes it perfectly clear, that the lawmakers intended the
posting of a cash or surety bond by the employer to be the exclusive means by which an employer's appeal may
be perfected.

FACTS:
A complaint for illegal dismissal and damages was filed by private respondent Icao against petitioners Lepanto
Consolidated Mining Company (LCMC) and its CEO Felipe U. Yap before the Arbitration Branch of the NLRC.

Icao essentially alleged in his complaint that he was an employee of petitioner LCMC assigned as a lead miner
in its underground mine in Paco, Mankayan, Benguet. On January 4, 2008, private respondent reported for
work. While waiting for the time to ignite their round, one of his co-workers shouted to prepare the explosives for
blasting, prompting private respondent to run to the adjacent panels and warn the other miners. Thereafter, he
decided to take a bath and proceeded to the bathing station where 4 of his co-workers were also present.
Before he could join them, he heard a voice at his back and saw Security Guard (SG) Larry Bulwayan
instructing his companion SG Dale Papsa-ao to frisk him. As private respondent was removing his boots, SG
Bulwayan forcibly pulled his skullguard from his head causing it to fall to the ground including its harness and his
detergent soap which was inserted in the skullguard harness. A few minutes later, private respondent saw SG
Bulwayan pick up a wrapped object at the bathing station and gave it to his companion. SGs Bulwayan and
Papsa-ao invited the private respondent to go with them at the investigation office to answer questions
regarding the wrapped object. He was then charged with "highgrading" or the act of concealing, possessing or
unauthorized extraction of highgrade material/ore without proper authority. Private respondent vehemently
denied the charge. Consequently, he was dismissed from his work.

LA RULING: That petitioner and its CEO are liable for illegal dismissal and ordered them to pay respondent
Icao P345,879.45, representing his full backwages and separation pay. The alleged highgrading attributed by
LCMCs security guards was found to have been fabricated; consequently, there was no just cause for the
dismissal of respondent.

On 8 December 2008, petitioner and its CEO filed an Appearance with Memorandum of Appeal before the
NLRC. Instead of posting the required appeal bond in the form of a cash bond or a surety bond in an amount
equivalent to the monetary award adjudged in favor of Icao, they filed a Consolidated Motion For Release Of
Cash Bond And To Apply Bond Subject For Release As Payment For Appeal Bond (Consolidated Motion).

NLRC RULING: NLRC dismissed the appeal of petitioner and the latters CEO for non-perfection. It found that
they had failed to post the required appeal bond. equivalent to the monetary award of P345,879.45. It explained
that their Consolidated Motion for the release of the cash bond in another case (Dangiw Siggaao), for the
purpose of applying the same bond to the appealed case before it, could not be considered as compliance with
the requirement to post the required appeal bond. Consequently, it declared the labor arbiters Decision to be
final and executory.

Petitioner and its CEO filed a Motion for Reconsideration. They emphasized therein that they had tried to
comply in good faith with the requisite appeal bond by trying to produce a cash bond anew and also to procure a
new surety bond. However, after canvassing several bonding companies, the costs have proved to be
prohibitive. Hence, they resorted to using the cash bond they posted in Dangiw Siggaao because the bond was
now free, unencumbered and could rightfully be withdrawn and used by them. Their motion was denied. Hence,
they filed a Petition for Certiorari with the CA.

CA RULING: CA affirmed the Order of the NLRC, which had dismissed the appeal of petitioner and the latters
CEO for failure to comply with the requirements of law and consequently lost the right to appeal. CA said that
since the payment of appeal fees and the posting of an appeal bond are indispensable jurisdictional
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requirements, noncompliance with them resulted in petitioners failure to perfect its appeal. Consequently, the
labor arbiters Decision became final and executory and, hence, binding upon the appellate court.

ISSUE: Did the petitioners Consolidated Motion to release the cash bond it posted in a previous case, for
application to the present case, constitute compliance with the appeal bond requirement under the Labor Code?

SC RULING:
YES. The Court finds that petitioner substantially complied with the appeal bond requirement. In appeals from
any decision or order of the labor arbiter, the posting of an appeal bond is required under Article 223 of the
Labor Code, which reads:
Article 223. APPEAL. Decisions, awards, or orders of the Labor Arbiter are final and executory unless
appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions,
awards, or orders. Such appeal may be entertained only on any of the following grounds:
xxxx
In case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon
the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the
Commission in the amount equivalent to the monetary award in the judgment appealed from.

The intention of the lawmakers to make the bond an indispensable requisite for the perfection of an appeal by
the employer, is clearly limned in the provision that an appeal by the employer may be perfected "only upon the
posting of a cash or surety bond." The word "only" makes it perfectly clear, that the lawmakers intended the
posting of a cash or surety bond by the employer to be the exclusive means by which an employer's appeal may
be perfected.

First, there is no question that the appeal was filed within the 10-day reglementary period. Except for the alleged
failure to post an appeal bond, the appeal to the NLRC was therefore in order.

Second, it is also undisputed that petitioner has an unencumbered amount of money in the form of cash in the
custody of the NLRC. To reiterate, petitioner had posted a cash bond of P401,610.84 in the separate case
Dangiw Siggaao, which was earlier decided in its favor. As claimed by petitioner and confirmed by the Judgment
Division of the Judicial Records Office of this Court, the Decision in Dangiw Siggaao had become final and
executory as of 28 April 2008, or more than seven months before petitioner had to file its appeal in the present
case. This fact is shown by the Entry of Judgment on file with the aforementioned office. Hence, the cash bond
in that case ought to have been released to petitioner then.

Third, the cash bond in the amount of P401,610.84 posted in Dangiw Siggaao is more than enough to cover the
appeal bond in the amount of P345,879.45 required in the present case.

Fourth, this ruling remains faithful to the spirit behind the appeal bond requirement which is to ensure that
workers will receive the money awarded in their favor when the employers appeal eventually fails. There was no
showing at all of any attempt on the part of petitioner to evade the posting of the appeal bond. On the contrary,
petitioners move showed a willingness to comply with the requirement. Hence, the welfare of Icao is adequately
protected.

The Court found exceptional circumstances that warranted an extraordinary exercise of its power to exempt a
party from the rules on appeal bond, there is all the more reason in the present case to find that petitioner
substantially complied with the requirement. Having complied with the appeal bond requirement, petitioner s
appeal before the NLRC must therefore be reinstated.

San Beda College of Law 294


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

146. FROILAN M. BERGONIO, et al. v. SOUTH EAST ASIAN AIRLINES and IRENE DORNIER
G.R. No. 195227 April 21, 2014
BRION, J.:

ART. 223 JURISDICTION OF THE LABOR ARBITERS AND THE COMMISSION

DOCTRINE:
Under paragraph 3, Article 223 of the Labor Code, the LAs order for the reinstatement of an employee found
illegally dismissed is immediately executory even during pendency of the employers appeal from the decision.
Under this provision, the employer must reinstate the employee either by physically admitting him under the
conditions prevailing prior to his dismissal, and paying his wages; or, at the employers option, merely reinstating
the employee in the payroll until the decision is reversed by the higher court. Failure of the employer to comply
with the reinstatement order, by exercising the options in the alternative, renders him liable to pay the
employees salaries.

FACTS:
Petitioners filed before the LA a complaint for illegal dismissal and illegal suspension with prayer for
reinstatement against respondents South East Asian Airlines (SEAIR) and Irene Dornier as SEAIRs President.

LA RULING: LA found the petitioners illegally dismissed and ordered the respondents, among others, to
immediately reinstate the petitioners with full backwages. The respondents received their copy of this decision
6
on July 8, 2005.

On August 20, 2005, the petitioners filed before the LA a Motion for issuance of Writ of Execution for their
immediate reinstatement.

During the scheduled pre-execution conference, the respondents manifested their option to reinstate the
petitioners in the payroll. The payroll reinstatement, however, did not materialize. Thus, on September 22, 2005,
the petitioners filed before the LA a manifestation for their immediate reinstatement. The respondents filed an
opposition claiming that the relationship between them and the petitioners had already been strained because of
the petitioners threatening text messages, thus precluding the latters reinstatement.

LA granted the petitioners motion and issued a writ of execution but was returned unsatisfied. In response, the
petitioners filed a motion for re-computation of accrued wages and a motion for execution of the re-computed
amount which was granted. The respondents appealed with the NLRC.

NLRC RULING: NLRC dismissed the respondents appeal for non-perfection. The NLRC likewise denied the
respondents MR, prompting the respondents to file before the CA a petition for certiorari.

CA RULING: CA rendered its decision (on the illegal dismissal ruling of the LA) partly granting the respondents
petition, declaring the dismissal valid and awarded the petitioners P30,000.00 as nominal damages for the
respondents failure to observe due process.

The CA agreed that the reinstatement aspect of the LAs decision is immediately executory even pending
appeal, such that the employer is obliged to reinstate and pay the wages of the dismissed employee during the
period of appeal until the decision (finding the employee illegally dismissed including the reinstatement order) is
reversed by a higher court. Applying this principle, the CA noted that the petitioners accrued wages could have
been properly computed until December 18, 2007, the date of the CAs decision finding the petitioners validly
dismissed.

Thus, the CA declared that, given this peculiar circumstance (of the petitioners failure to report for work), the
petitioners accrued wages should only be computed until February 24, 2006 when they were supposed to
report for work per the return-to-work Memorandum. Accordingly, the CA reversed, for grave abuse of
discretion, the NLRCs July 16, 2008 decision that affirmed the LAs order to release the garnished amount.

ISSUES:
(1) Is the LAs order for reinstatement of an illegally dismissed employee immediately executory even during
pendency of the employers appeal from the decision?

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4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

(2) Should the accrued wages be computed until December 17, 2008, when the CA reversed the illegal
dismissal findings of the LA or only until February 24, 2006, when the petitioners were supposed to report
for work?

SC RULING:
(1) YES. Under paragraph 3, Article 223 of the Labor Code, the LAs order for the reinstatement of an employee
found illegally dismissed is immediately executory even during pendency of the employers appeal from the
decision. Under this provision, the employer must reinstate the employee either by physically admitting him
under the conditions prevailing prior to his dismissal, and paying his wages; or, at the employers option, merely
reinstating the employee in the payroll until the decision is reversed by the higher court. Failure of the employer
to comply with the reinstatement order, by exercising the options in the alternative, renders him liable to pay the
employees salaries.

Otherwise stated, a dismissed employee whose case was favorably decided by the LA is entitled to receive
wages pending appeal upon reinstatement, which reinstatement is immediately executory. Unless the appellate
tribunal issues a restraining order, the LA is duty bound to implement the order of reinstatement and the
employer has no option but to comply with it.

Moreover, and equally worth emphasizing, is that an order of reinstatement issued by the LA is self-executory,
i.e., the dismissed employee need not even apply for and the LA need not even issue a writ of execution to
trigger the employers duty to reinstate the dismissed employee.

After the LAs decision is reversed by a higher tribunal, the employers duty to reinstate the dismissed employee
is effectively terminated. This means that an employer is no longer obliged to keep the employee in the actual
service or in the payroll. The employee, in turn, is not required to return the wages that he had received prior to
the reversal of the LAs decision.

The reversal by a higher tribunal of the LAs finding (of illegal dismissal), notwithstanding, an employer, who,
despite the LAs order of reinstatement, did not reinstate the employee during the pendency of the appeal up to
the reversal by a higher tribunal may still be held liable for the accrued wages of the employee, i.e., the unpaid
32
salary accruing up to the time the higher tribunal reverses the decision. The rule, therefore, is that an
employee may still recover the accrued wages up to and despite the reversal by the higher tribunal. This
entitlement of the employee to the accrued wages proceeds from the immediate and self-executory nature of the
reinstatement aspect of the LAs decision.

By way of exception to the above rule, an employee may be barred from collecting the accrued wages if shown
that the delay in enforcing the reinstatement pending appeal was without fault on the part of the employer.

(2) To determine whether an employee is thus barred, two tests must be satisfied: (1) actual delay or the fact
that the order of reinstatement pending appeal was not executed prior to its reversal; and (2) the delay must not
be due to the employers unjustified act or omission. Note that under the second test, the delay must be without
the employers fault. If the delay is due to the employers unjustified refusal, the employer may still be required
to pay the salaries notwithstanding the reversal of the LAs decision.

First, the existence of delay - whether there was actual delay or whether the order of reinstatement pending
appeal was not executed prior to its reversal? We answer this test in the affirmative.

To recall, on May 31, 2005, the LA rendered the decision finding the petitioners illegally dismissed and ordering
their immediate reinstatement. Per the records, the respondents received copy of this decision on July 8, 2005.
On August 20, 2005, the petitioners filed before the LA a Motion for Issuance of Writ of Execution for their
immediate reinstatement. The LA issued the Writ of Execution on October 7, 2005. From the time the
respondents received copy of the LAs decision, and the issuance of the writ of execution, until the CA reversed
this decision on December 17, 2008, the respondents had not reinstated the petitioners, either by actual
reinstatement or in the payroll. This continued non-execution of the reinstatement order in fact moved the LA to
issue an alias writ of execution on February 16, 2006 and another writ of execution on April 24, 2007.

From these facts and without doubt, there was actual delay in the execution of the reinstatement aspect of the
LAs May 31, 2005 decision before it was reversed in the CAs decision.

San Beda College of Law 296


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

Second, the cause of the delay whether the delay was not due to the employers unjustified act or omission.
We answer this test in the negative; we find that the delay in the execution of the reinstatement pending appeal
was due to the respondents unjustified acts. For one, the respondents filed several pleadings to suspend the
execution of the LAs reinstatement order. These pleadings, to our mind, show a determined effort on the
respondents part to prevent or suspend the execution of the reinstatement pending appeal.

The respondents did not sufficiently notify the petitioners of their intent to actually reinstate them; neither did the
respondents give them ample opportunity to comply with the return-to-work directive.

Lastly, the petitioners continuously and actively pursued the execution of the reinstatement aspect of the LAs
decision, i.e., by filing several motions for execution of the reinstatement order, and motion to cite the
respondents in contempt and re-computation of the accrued wages for the respondents continued failure to
reinstate them.

These facts altogether show that the respondents were not at all sincere in reinstating the petitioners. These
facts when taken together with the fact of delay reveal the respondents obstinate resolve and willful
disregard of the immediate and self-executory nature of the reinstatement aspect of the LAs decision.

San Beda College of Law 297


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

147. WILGEN LOON, et al. v. POWER MASTER, INC., TRI-C GENERAL SERVICES, and SPOUSES HOMER
and CARINA ALUMISIN
G.R. No. 189404 December 11, 2013
BRION, J.:

ART. 223 JURISDICTION OF THE LABOR ARBITERS AND THE COMMISSION

DOCTRINE:
The issue of the appeal bonds validity may be raised for the first time on appeal since its proper filing is a
jurisdictional requirement. The requirement that the appeal bond should be issued by an accredited bonding
company is mandatory and jurisdictional. The rationale of requiring an appeal bond is to discourage the
employers from using an appeal to delay or evade the employees' just and lawful claims. It is intended to assure
the workers that they will receive the money judgment in their favor upon the dismissal of the employers appeal.

FACTS:
Respondents Power Master, Inc. and Tri-C General Services employed and assigned the petitioners as janitors
and leadsmen in various PLDT offices in Metro Manila area. Subsequently, the petitioners filed a complaint for
money claims against the respondents alleging that they were not paid minimum wages, overtime, holiday,
premium, service incentive leave, and thirteenth month pays. They further averred that the respondents made
them sign blank payroll sheets. The petitioners amended their complaint and included illegal dismissal as their
cause of action.

Notably, the respondents did not participate in the proceedings before the Labor Arbiter except on April 19,
5
2001 and May 21, 2001 when Mr. Romulo Pacia, Jr. appeared on the respondents behalf. The
6
respondents counsel also appeared in a preliminary mandatory conference on July 5, 2001. However,
the respondents neither filed any position paper nor proffered pieces of evidence in their defense despite their
knowledge of the pendency of the case.

LA RULING: LA Elias H. Salinas partially ruled in favor of the petitioners. The LA awarded the petitioners salary
differential, service incentive leave, and thirteenth month pays. However, the LA denied the petitioners
claims for backwages, overtime, holiday, and premium pays. The LA observed that the petitioners failed to
show that they rendered overtime work and worked on holidays and rest days without compensation. The LA
further concluded that the petitioners cannot be declared to have been dismissed from employment because
they did not show any notice of termination of employment. They were also not barred from entering the
respondents premises.

Both parties appealed to the NLRC. The respondents insisted that they were not personally served with
summons and other processes. They also claimed that they paid the petitioners minimum wages, service
incentive leave and thirteenth month pays. As proof, they attached photocopied and computerized copies of
payroll sheets to their memorandum on appeal.

On January 3, 2003, the respondents filed an unverified supplemental appeal. They attached photocopied and
computerized copies of list of employees with ATM cards to the supplemental appeal. This list also showed the
11
amounts allegedly deposited in the employees ATM cards. They also attached documentary evidence
showing that the petitioners were dismissed for cause and had been accorded due process.
16
NLRC RULING: NLRC partially ruled in favor of the respondents. The NLRC affirmed the LAs awards of
holiday pay and attorneys fees. It also maintained that the LA acquired jurisdiction over the persons of the
respondents through their voluntary appearance. However, it allowed the respondents to submit pieces of
evidence for the first time on appeal on the ground that they had been deprived of due process. NLRC also
vacated the LAs awards of salary differential, thirteenth month and service incentive leave pays.

The NLRC further ruled that the petitioners were lawfully dismissed on grounds of serious misconduct and willful
disobedience. It found that the petitioners failed to comply with various memoranda directing them to transfer to
other workplaces and to attend training seminars for the intended reorganization and reshuffling.

CA RULING: The CA affirmed the NLRCs ruling. The CA held that the petitioners were afforded substantive
and procedural due process. It also upheld the NLRCs findings on the petitioners monetary claims. The CA
denied the petitioners MR.
San Beda College of Law 298
4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

ISSUES:
(1) Did the respondents perfect their appeal before the NLRC?
(2) Were the petitioners illegally dismissed and are thus entitled to backwages, salary differential, holiday,
service incentive leave, and thirteenth month pays?
(3) Are the petitioners entitled to overtime and premium pay?

SC RULING:
(1) YES. Paragraph 2, Article 223 of the Labor Code provides that "[i]n case of a judgment involving a monetary
award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a
reputable bonding company duly accredited by the Commission in the amount equivalent to the monetary award
in the judgment appealed from."

The issue of the appeal bonds validity may be raised for the first time on appeal since its proper filing is a
jurisdictional requirement. The requirement that the appeal bond should be issued by an accredited bonding
company is mandatory and jurisdictional. The rationale of requiring an appeal bond is to discourage the
employers from using an appeal to delay or evade the employees' just and lawful claims. It is intended to assure
the workers that they will receive the money judgment in their favor upon the dismissal of the employers appeal.

In the present case, the respondents filed a surety bond issued by Security Pacific. At that time, Security Pacific
24
was still an accredited bonding company. However, the NLRC revoked its accreditation on February 16, 2003.
Nonetheless, this subsequent revocation should not prejudice the respondents who relied on its then subsisting
accreditation in good faith.

The CA also correctly ruled that the NLRC properly gave due course to the respondents supplemental appeal.
Neither the laws nor the rules require the verification of the supplemental appeal. Furthermore, verification is a
formal, not a jurisdictional, requirement. It is mainly intended for the assurance that the matters alleged in the
pleading are true and correct and not of mere speculation. Also, a supplemental appeal is merely an addendum
to the verified memorandum on appeal that was earlier filed in the present case; hence, the requirement for
verification has substantially been complied with.

In labor cases, strict adherence to the technical rules of procedure is not required. Time and again, we have
allowed evidence to be submitted for the first time on appeal with the NLRC in the interest of substantial justice.
Thus, we have consistently supported the rule that labor officials should use all reasonable means to ascertain
the facts in each case speedily and objectively, without regard to technicalities of law or procedure, in the
interest of due process.

The respondents failed to sufficiently prove the allegations sought to be proven. Why the respondents
photocopied and computerized copies of documentary evidence were not presented at the earliest opportunity is
a serious question that lends credence to the petitioners claim that the respondents fabricated the evidence for
purposes of appeal. While we generally admit in evidence and give probative value to photocopied
documents in administrative proceedings, allegations of forgery and fabrication should prompt the
adverse party to present the original documents for inspection.

It was also gross error for the CA to affirm the NLRCs proposition that "[i]t is of common knowledge that there
are many people who use at least two or more different signatures." The NLRC cannot take judicial notice that
many people use at least two signatures, especially in this case where the petitioners themselves disown the
signatures in the respondents assailed documentary evidence. The NLRCs position is unwarranted and is
patently unsupported by the law and jurisprudence.

(2) YES. In termination cases, the burden of proving just and valid cause for dismissing an employee from his
employment rests upon the employer. The employers failure to discharge this burden results in the finding that
the dismissal is unjustified. This is exactly what happened in the present case.

As in illegal dismissal cases, the general rule is that the burden rests on the defendant to prove payment rather
than on the plaintiff to prove non-payment of these money claims. The rationale for this rule is that the pertinent
personnel files, payrolls, records, remittances and other similar documents which will show that differentials,

San Beda College of Law 299


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

service incentive leave and other claims of workers have been paid are not in the possession of the worker but
are in the custody and control of the employer.

(3) NO. CA was correct in its finding that the petitioners failed to provide sufficient factual basis for the award of
overtime, and premium pays for holidays and rest days. The burden of proving entitlement to overtime pay and
premium pay for holidays and rest days rests on the employee because these are not incurred in the normal
course of business. In the present case, the petitioners failed to adduce any evidence that would show that they
actually rendered service in excess of the regular eight working hours a day, and that they in fact worked on
holidays and rest days.

San Beda College of Law 300


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

148. ANDREW JAMES MCBURNIE v. EULALIO GANZON, EGI-MANAGERS, INC. and E. GANZON, INC.
G.R. Nos. 178034 & 178117 G R. Nos. 186984-85 October 17, 2013
REYES, J.:

APPEAL BOND

DOCTRINE:
On the matter of the filing and acceptance of motions to reduce appeal bond, as provided in Section 6, Rule VI
of the 2011 NLRC Rules of Procedure, the following guidelines shall be observed:
(a) The filing of a motion to reduce appeal bond shall be entertained by the NLRC subject to the following
conditions: (1) there is meritorious ground; and (2) a bond in a reasonable amount is posted;
(b) For purposes of compliance with condition no. (2), a motion shall be accompanied by the posting of a
provisional cash or surety bond equivalent to ten percent (10%) of the monetary award subject of the
appeal, exclusive of damages and attorney's fees;
(c) Compliance with the foregoing conditions shall suffice to suspend the running of the 10-day
reglementary period to perfect an appeal from the labor arbiter's decision to the NLRC;
(d) The NLRC retains its authority and duty to resolve the motion to reduce bond and determine the final
amount of bond that shall be posted by the appellant, still in accordance with the standards of
meritorious grounds and reasonable amount; and
(e) In the event that the NLRC denies the motion to reduce bond, or requires a bond that exceeds the
amount of the provisional bond, the appellant shall be given a fresh period of ten 10 days from notice of
the NLRC order within which to perfect the appeal by posting the required appeal bond.

FACTS:
McBurnie, an Australian national, instituted a complaint for illegal dismissal and other monetary claims against
the respondents. McBurnie claimed that he signed an employment agreement with the company EGI as an
Executive Vice-President. On the other hand, the respondents opposed the complaint, contending that their
agreement with McBurnie was to jointly invest in and establish a company for the management of hotels and did
not intend to create an employer-employee relationship.

LA RULING: McBurnie was illegally dismissed from employment.

The respondents appealed the LAs Decision to the NLRC. They filed their Memorandum of Appeal and Motion
to Reduce Bond, and posted an appeal bond in the amount of P100,000.00. The respondents contended in their
Motion to Reduce Bond, inter alia, that the monetary awards of the LA were null and excessive, allegedly with
the intention of rendering them incapable of posting the necessary appeal bond. They claimed that an award of
"more than P60 Million Pesos to a single foreigner who had no work permit and who left the country for good
one month after the purported commencement of his employment" was a patent nullity. Furthermore, they
claimed that because of their business losses that may be attributed to an economic crisis, they lacked the
capacity to pay the bond of almost P60 Million, or even the millions of pesos in premium required for such bond.

NLRC RULING: The NLRC denied the motion to reduce bond, explaining that "in cases involving monetary
award, an employer seeking to appeal the LAs decision to the Commission is unconditionally required by Art.
223, Labor Code to post bond in the amount equivalent to the monetary award. Thus, the NLRC required from
the respondents the posting of an additional bond in the amount of P54,083,910.00.

CA RULING: The CA allowed the respondents motion to reduce appeal bond to P10,000,000.00 and directing
the NLRC to give due course to their appeal. The CA explained that "while Art. 223 of the Labor Code requiring
bond equivalent to the monetary award is explicit, Section 6, Rule VI of the NLRC Rules of Procedure, as
amended, recognized as exception a motion to reduce bond upon meritorious grounds and upon posting of a
bond in a reasonable amount in relation to the monetary award."

ISSUE: Is the 10 million pesos bond substantial and special meritorious circumstance to merit reconsideration of
the appeal?

SC RULING:
YES. The 10 million pesos bond is substantial and a special meritorious circumstance to merit reconsideration
of the appeal.

San Beda College of Law 301


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

The present rule on the matter is Section 6, Rule VI of the 2011 NLRC Rules of Procedure, which was
substantially the same provision in effect at the time of the respondents appeal to the NLRC, and which reads:

No motion to reduce bond shall be entertained except on meritorious grounds and upon the
posting of a bond in a reasonable amount in relation to the monetary award.

Prevailing rules and jurisprudence allow the reduction of appeal bonds.

While the bond may be reduced upon motion by the employer, this is subject to the conditions that (1) the
motion to reduce the bond shall be based on meritorious grounds; and (2) a reasonable amount in relation to the
monetary award is posted by the appellant, otherwise the filing of the motion to reduce bond shall not stop the
running of the period to perfect an appeal. The qualification effectively requires that unless the NLRC grants the
reduction of the cash bond within the 10 day reglementary period, the employer is still expected to post the cash
or surety bond securing the full amount within the said 10-day period. If the NLRC does eventually grant the
motion for reduction after the reglementary period has elapsed, the correct relief would be to reduce the cash or
surety bond already posted by the employer within the 10-day period.

San Beda College of Law 302


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

149. WATERFRONT CEBU CITY CASINO HOTEL, INC. AND MARCO PROTACIO v. ILDEBRANDO
LEDESMA
G.R. No. 197556 March 25, 2015
VILLARAMA, JR., J.:

APPEAL

DOCTRINE:
As to the 60-period reglementary period of filing an appeal, the relaxation of procedural rules may be allowed
only when there are exceptional circumstances to justify the same.

FACTS:
Respondent was employed as a House Detective at Waterfront. On the basis of the complaints filed before
Waterfront by Christe Mandal, a supplier of a concessionaire of Waterfront, and Rosanna Lofranco, who was
seeking a job at the same hotel, Ledesma was dismissed from employment. From the affidavits and testimonies
of Christe Mandal and Rosanna Lofranco during the administrative hearings conducted by Waterfront, the latter
found, among others, that Ledesma kissed and mashed the breasts of Christe Mandal inside the hotels
elevator, and exhibited his penis and asked Rosanna Lofranco to masturbate him at the conference room of the
hotel. Ledesma filed a complaint for illegal dismissal.

LA RULING: The LA found that the allegations leveled against Ledesma are mere concoctions, and concluded
that Ledesma was illegally dismissed, and ordered the petitioner among others to reinstate Ledesma.

NLRC RULING: The NLRC reversed the decision of the LA. The NLRC denied Ledesmas motion for
reconsideration in a Resolution dated February 22, 2010. A copy of the said Resolution was received by Atty.
Gines Abellana, Ledesmas counsel of record, on March 15, 2010. On May 17, 2010, or sixty-three (63) days
after Atty. Abellana received a copy of the NLRCs Resolution denying the motion for reconsideration, said
counsel filed before the CA a petition for certiorari under Rule 65 of the Rules of Court. In its Comment,
Waterfront prayed for the outright dismissal of the petition on the ground that it was belatedly filed.

CA RULING: The CA entertained the petition and reinstated the decision of the LA.

ISSUE: Is the unjustified failure of Ledesma to file his petition for certiorari before the CA within the 60-day
period a ground for the outright dismissal of said petition?

SC RULING:
YES. The unjustified failure of Ledesma to file his petition for certiorari before the CA within the 60-day period a
ground for the outright dismissal of said petition.

A reading of the rulings leads to the simple conclusion that the case of Laguna Metts Corporation involves a
strict application of the general rule that petitions for certiorari must be filed strictly within sixty (60) days from
notice of judgment or from the order denying a motion for reconsideration. Domdom case, on the other hand,
relaxed the rule and allowed an extension of the sixty (60)-day period subject to the Courts sound discretion. In
relaxing the rules and allowing an extension, Thenamaris Philippines, Inc. v. Court of Appeals reiterated the
necessity for the party invoking liberality to advance a reasonable or meritorious explanation for the failure to file
the petition for certiorari within the 60-day period.

The relaxation of procedural rules may be allowed only when there are exceptional circumstances to justify the
same. There should be an effort on the part of the party invoking liberality to advance a reasonable or
meritorious explanation for his/her failure to comply with the rules. Moreover, those who seek exemption from
the application of a procedural rule have the burden of proving the existence of exceptionally meritorious reason
warranting such departure.

Both in his petition and amended petition, Ledesma never invoked the liberality of the CA nor endeavored to
justify the belated filing of his petition. On the contrary, Ledesma remained firm that his petition was filed with
the CA within the reglementary period. Absent valid and compelling reasons for the procedural lapse, the
desired leniency cannot be accorded to Ledesma.

San Beda College of Law 303


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

In sum, the late filing by Ledesma of his petition for certiorari, and his failure to justify his procedural lapse to
merit a lenient application of the rules divested the CA of jurisdiction to entertain the petition.

San Beda College of Law 304


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

Reinstatement Aspect of LAs Decision

150. PIONEER TEXTURIZING CORP. and/or JULIANO LIM v. NATIONAL LABOR RELATIONS
COMMISSION, PIONEER TEXTURIZING WORKERS UNION and LOURDES A. DE JESUS
G.R. No. 118651 October 16, 1997
FRANCISCO, J.:

REINSTATEMENT ASPECT OF LAs DECISION

DOCTRINE:
An award or order for reinstatement is self-executory, and does not require a writ of execution, much less a
motion for its issuance.

FACTS:
Private respondent Lourdes A. de Jesus is petitioners reviser/trimmer since 1980. As reviser/trimmer, de Jesus
based her assigned work on a paper note posted by petitioners. The petitioners terminated her employment for
dishonesty and tampering of official records and documents with the intention of cheating. De Jesus maintained
that she merely committed a mistake.

LA RULING: Petitioners are guilty of illegal dismissal. Petitioners were accordingly ordered to reinstate de
Jesus to her previous position without loss of seniority rights and with full backwages from the time of her
suspension.

NLRC RULING: The NLRC declared that the status quo between them should be maintained and affirmed the
Labor Arbiters order of reinstatement, but without backwages. The NLRC further directed petitioner to pay de
Jesus her back salaries from the date she filed her motion for execution on September 21, 1993 up to the date
of the promulgation of the decision.

Petitioners Argument: An order for reinstatement is not self-executory. They maintain that even if a writ of
execution was issued, a timely appeal coupled by the posting of appropriate supersedeas bond, which they did
in this case, effectively forestalled and stayed execution of the reinstatement order of the Labor Arbiter.

ISSUE: Is a writ of execution required in an order for reinstatement?

SC RULING:
NO. A writ of execution is not required in an order for reinstatement.

ART. 223. Appeal. --Decisions, awards, or orders of the Labor Arbiter are final and executory
unless appealed to the Commission by any or both parties within ten (10) calendar days from
receipt of such decisions, awards, or orders.
xxx xxx xxx
In an event, the decision of the Labor Arbiter reinstating a dismissed or separated employee,
insofar as the reinstatement aspect is concerned, shall immediately be executory, even pending
appeal. The employee shall either be admitted back to work under the same terms and conditions
prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated
in the payroll. The posting of a bond by the employer shall not stay the execution for
reinstatement provided herein.
xxx xxx xxx

Under the said provision of law, the decision of the Labor Arbiter reinstating a dismissed or separated employee
insofar as the reinstatement aspect is concerned, shall be immediately executory, even pending appeal. The
employer shall reinstate the employee concerned either by: (a) actually admitting him back to work under the
same terms and conditions prevailing prior to his dismissal or separation; or (b) at the option of the employer,
merely reinstating him in the payroll. Immediate reinstatement is mandated and is not stayed by the fact that the
employer has appealed, or has posted a cash or surety bond pending appeal.

San Beda College of Law 305


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

151. ALEJANDRO ROQUERO vs. PHILIPPINE AIRLINES, INC.
G.R. No. 152329 April 22, 2003
PUNO, J.:

REINSTATEMENT ASPECT OF LAs DECISION

DOCTRINE:
The reinstatement aspect of a labor tribunals order is immediately executory unless there is a restraining order
or preliminary injunction.

FACTS:
Roquero, along with Rene Pabayo, were ground equipment mechanics of respondent PAL. From the evidence
on record, it appears that Roquero and Pabayo were caught red-handed possessing and using
Methampethamine Hydrochloride or shabu in a raid conducted by PAL security officers and NARCOM
personnel. Roquero and Pabayo were dismissed by PAL. Thus, they filed a case of illegal dismissal.

LA RULING: The dismissal of Roquero and Pabayo was upheld. The LA found both parties at fault PAL for
applying means to entice the complainants into committing the infraction and the complainants for giving in to
the temptation and eventually indulging in the prohibited activity. Nonetheless, separation pay and attorneys
fees are awarded.

NLRC RULING: It ruled in favor of complainants as it likewise found PAL guilty of instigation. It ordered
reinstatement to their former positions but without backwages.

Complainants did not appeal from the decision but filed a motion for a writ of execution of the order of
reinstatement. The LA granted the motion but PAL refused to execute the said order on the ground that they
have filed a Petition for Review before the SC which was reffered to CA.

CA RULING: It reversed the decision of the NLRC and reinstated the decision of the LA insofar as it upheld the
dismissal of Roquero. However, it denied the award of separation pay and attorneys fees to Roquero on the
ground that one who has been validly dismissed is not entitled to those benefits.

ISSUE: Can the executory nature of the decision, more so the reinstatement aspect of a labor tribunals order be
halted by a petition having been filed in higher courts without any restraining order or preliminary injunction
having been ordered in the meantime?

SC RULING:
NO. The executory nature of the decision, more so the reinstatement aspect of a labor tribunals order cannot be
halted by a petition having been filed in higher courts without any restraining order or preliminary injunction
having been ordered in the meantime.

The order of reinstatement is immediately executory. The unjustified refusal of the employer to reinstate a
dismissed employee entitles him to payment of his salaries effective from the time the employer failed to
reinstate him despite the issuance of a writ of execution. Unless there is a restraining order issued, it is
ministerial upon the Labor Arbiter to implement the order of reinstatement. In the case at bar, no restraining
order was granted. Thus, it was mandatory on PAL to actually reinstate Roquero or reinstate him in the payroll.
Having failed to do so, PAL must pay Roquero the salary he is entitled to, as if he was reinstated, from the time
of the decision of the NLRC until the finality of the decision of this Court.

We reiterate the rule that technicalities have no room in labor cases where the Rules of Court are applied only in
a suppletory manner and only to effectuate the objectives of the Labor Code and not to defeat them. Hence,
even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the
employer to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by
the higher court. On the other hand, if the employee has been reinstated during the appeal period and such
reinstatement order is reversed with finality, the employee is not required to reimburse whatever salary he
received for he is entitled to such, more so if he actually rendered services during the period.

San Beda College of Law 306


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

152. AIR PHILIPPINES CORPORATION vs. ENRICO E. ZAMORA
G.R. NO. 148247 August 7, 2006
AUSTRIA-MARTINEZ, J.:

REINSTATEMENT ASPECT OF LAs DECISION

DOCTRINE:
Even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the
employer to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by
the higher court.

FACTS:
Enrico Zamora was employed with Air Philippines Corporation (APC) as a Flight Deck Crew. He applied for
promotion to the position of airplane captain and underwent the requisite training program. After completing
training, he inquired about his promotion but APC did not act on it; instead, it continued to give him assignments
as flight deck crew. Thus, Zamora filed a Complaint with the LA. He argued that the act of APC of withholding
his promotion rendered his continued employment with it oppressive and unjust. He therefore asked that APC
be held liable for constructive dismissal.

LA RULING: Respondent was liable for illegal dismissal and ordered the respondent, among others, to reinstate
complainant to his position as Captain without loss of seniority right immediately upon receipt the decision.

NLRC RULING: It held that no dismissal, constructive or otherwise, took place for it was Zamora himself who
voluntarily terminated his employment by not reporting for work and by joining a competitor Grand Air. However,
it ordered APC to pay salaries and allowances to complainant arose from the order of his reinstatement which is
executory even pending appeal of respondent questioning the same, pursuant to Article 223 of the Labor Code.

CA RULING: It dismissed the petition of APC for failure of petitioner to attach copies of all pleadings (such
complaint, answer, position paper) and other material portions of the record as would support the allegations
therein.

ISSUE: Is the NLRC correct in ordering the APC to pay Zamora the salaries and allowances that arose from the
order of his reinstatement of the LA?

SC RULING:
YES. The NLRC is correct in ordering the APC to pay Zamora the salaries and allowances that arose from the
order of his reinstatement of the LA

The premise of the award of unpaid salary to respondent is that prior to the reversal by the NLRC of the decision
of the LA, the order of reinstatement embodied therein was already the subject of an alias writ of execution even
pending appeal. Although petitioner did not comply with this writ of execution, its intransigence made it liable
nonetheless to the salaries of respondent pending appeal. There is logic in this reasoning of the NLRC.

In Aris (Phil.) Inc. v. National Labor Relations Commission, we held: Then, by and pursuant to the same power
(police power), the State may authorize an immediate implementation, pending appeal, of a decision reinstating
a dismissed or separated employee since that saving act is designed to stop, although temporarily since the
appeal may be decided in favor of the appellant, a continuing threat or danger to the survival or even the life of
the dismissed or separated employee and his family.

San Beda College of Law 307


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

153. LUNESA O. LANSANGAN AND ROCITA CENDAA v. AMKOR TECHNOLOGY PHILIPPINES, INC.,
G.R. NO. 177026 January 30, 2009
CARPIO MORALES, J.:

DOCTRINE:
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.

FACTS:
An anonymous e-mail was sent to the General Manager of Amkor Technology Philippines (respondent) detailing
allegations of malfeasance on the part of its supervisory employees Lunesa Lansangan and Rosita Cendaa
(petitioners) for "stealing company time. Respondent thus investigated the matter, requiring petitioners to
submit their written explanation. In handwritten letters, petitioners admitted their wrongdoing. Respondent
thereupon terminated petitioners for "extremely serious offenses" as defined in its Code of Discipline.
Petitioners filed a complaint for illegal dismissal.

LA RULING: The Labor Arboter dismissed the petitioners complaint. Dismissal was for a valid cause. The
Arbiter, however, ordered the reinstatement of petitioners to their former positions without backwages
"as a measure of equitable and compassionate relief" owing mainly to petitioners prior unblemished
employment records, show of remorse, harshness of the penalty and defective attendance monitoring system of
respondent. Respondent appealed. Meanwhile, the petitioners moved to the issuance of writ of reinstatement.
The Arbiter issued an alias writ of execution following which respondents bank account at Equitable-PCI Bank
was garnished. Respondent thereupon moved for the quashal of the alias writ of execution and lifting of the
notice of garnishment, which the Arbiter, Respondent appealed to the NLRC.

NLRC RULING: NLRC, granted respondents appeals by deleting the reinstatement aspect of the Arbiters
decision and setting aside the Arbiters Alias Writ of Execution and Notice of Garnishment. Petitioners file a
motion for reconsideration which was denied. They subsequently appealed to CA.

CA RULING: Affirming the finding of LA and NLRC that there was a valid dismissal. Respondent were ordered
to "pay petitioners their corresponding backwages without qualification and deduction for the period
covering October 20, 2004 (date of the Arbiters decision) up to June 30, 2005 (date of the NLRC
Decision)," citing Article 223 of the Labor Code and Roquero v. Philippine Airlines.

Both parties filed their respective motions for partial reconsideration which were denied. Only petitioners
appealed to the SC. Petitioners highlight the Courts ruling in Roquero v. Philippine Airlines where the therein
employer was ordered to pay the wages to which the therein employee was entitled from the time the
reinstatement order was issued until the FINALITY of this Courts decision.

ISSUE: WON petitioners (Lansangan et al) are entitled to full backwages from time the reinstatement order was
issued until the FINALITY of SCs decision.

SC RULING:
NO. The decision of the Arbiter finding that petitioners committed "dishonesty as a form of serious misconduct
and fraud, or breach of trust" had become final, petitioners not having appealed the same before the NLRC as in
fact they even moved for the execution of the reinstatement aspect of the decision. It bears recalling that it was
only respondent which assailed the Arbiter's decision to the NLRC - to solely question the propriety of the order
for reinstatement, and it succeeded.

Roquero, as well as Article 22318 of the Labor Code on which the appellate court also relied, finds no
application in the present case. Article 223 concerns itself with an interim relief, granted to a dismissed or
separated employee while the case for illegal dismissal is pending appeal, as what happened in Roquero. It
does not apply where there is no finding of illegal dismissal, as in the present case.

The Arbiter found petitioners' dismissal to be valid. Such finding had, as stated earlier, become final, petitioners
not having appealed it. Following Article 279 which provides:
San Beda College of Law 308
4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

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 (Emphasis, underscoring and italics supplied), petitioners are not entitled to
full backwages as their dismissal was not found to be illegal. Agabon v. NLRC19 so states ''
payment of backwages and other benefits is justified only if the employee was unjustly
dismissed.

WHEREFORE, the petition is DENIED.

San Beda College of Law 309


4S: 2015 - 2016
LABOR LAW REVIEW Atty. Joyrich Golangco

154. MARILOU S. GENUINO