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G.R. No. 151378.

March 28, 2005

JAKA FOOD PROCESSING CORPORATION, petitioner, vs. DARWIN PACOT, ROBERT


PAROHINOG, DAVID BISNAR, MARLON DOMINGO, RHOEL LESCANO and JONATHAN
CAGABCAB, respondents.

Assailed and sought to be set aside in this appeal by way of a petition for review on certiorari under rule 45 of
the Rules of Court are the following issuances of the Court of Appeals in CA-G.R. SP. No. 59847, to wit:

1. Decision dated 16 November 2001,[1] reversing and setting aside an earlier decision of the National Labor
Relations Commission (NLRC); and

2. Resolution dated 8 January 2002,[2] denying petitioners motion for reconsideration.

The material facts may be briefly stated, as follows:

Respondents Darwin Pacot, Robert Parohinog, David Bisnar, Marlon Domingo, Rhoel Lescano and Jonathan
Cagabcab were earlier hired by petitioner JAKA Foods Processing Corporation (JAKA, for short) until the
latter terminated their employment on August 29, 1997 because the corporation was in dire financial straits. It is
not disputed, however, that the termination was effected without JAKA complying with the requirement under
Article 283 of the Labor Code regarding the service of a written notice upon the employees and the Department
of Labor and Employment at least one (1) month before the intended date of termination.

In time, respondents separately filed with the regional Arbitration Branch of the National Labor Relations
Commission (NLRC) complaints for illegal dismissal, underpayment of wages and nonpayment of service
incentive leave and 13th month pay against JAKA and its HRD Manager, Rosana Castelo.

After due proceedings, the Labor Arbiter rendered a decision[3] declaring the termination illegal and ordering
JAKA and its HRD Manager to reinstate respondents with full backwages, and separation pay if reinstatement
is not possible. More specifically the decision dispositively reads:

WHEREFORE, judgment is hereby rendered declaring as illegal the termination of complainants and ordering
respondents to reinstate them to their positions with full backwages which as of July 30, 1998 have already
amounted to P339,768.00. Respondents are also ordered to pay complainants the amount of P2,775.00
representing the unpaid service incentive leave pay of Parohinog, Lescano and Cagabcab an the amount of
P19,239.96 as payment for 1997 13th month pay as alluded in the above computation.

If complainants could not be reinstated, respondents are ordered to pay them separation pay equivalent to one
month salary for very (sic) year of service.

SO ORDERED.

Therefrom, JAKA went on appeal to the NLRC, which, in a decision dated August 30, 1999,[4] affirmed in toto
that of the Labor Arbiter.

JAKA filed a motion for reconsideration. Acting thereon, the NLRC came out with another decision dated
January 28, 2000,[5] this time modifying its earlier decision, thus:

WHEREFORE, premises considered, the instant motion for reconsideration is hereby GRANTED and the
challenged decision of this Commission [dated] 30 August 1999 and the decision of the Labor Arbiter xxx are
hereby modified by reversing an setting aside the awards of backwages, service incentive leave pay. Each of the
complainants-appellees shall be entitled to a separation pay equivalent to one month. In addition, respondents-
appellants is (sic) ordered to pay each of the complainants-appellees the sum of P2,000.00 as indemnification
for its failure to observe due process in effecting the retrenchment.

SO ORDERED.
Their motion for reconsideration having been denied by the NLRC in its resolution of April 28, 2000,[6]
respondents went to the Court of Appeals via a petition for certiorari, thereat docketed as CA-G.R. SP No.
59847.

As stated at the outset hereof, the Court of Appeals, in a decision dated November 16, 2000, applying the
doctrine laid down by this Court in Serrano vs. NLRC,[7] reversed and set aside the NLRCs decision of January
28, 2000, thus:

WHEREFORE, the decision dated January 28, 2000 of the National Labor Relations Commission is
REVERSED and SET ASIDE and another one entered ordering respondent JAKA Foods Processing
Corporation to pay petitioners separation pay equivalent to one (1) month salary, the proportionate 13th month
pay and, in addition, full backwages from the time their employment was terminated on August 29, 1997 up to
the time the Decision herein becomes final.

SO ORDERED.

This time, JAKA moved for a reconsideration but its motion was denied by the appellate court in its resolution
of January 8, 2002.

Hence, JAKAs present recourse, submitting, for our consideration, the following issues:

I. WHETHER OR NOT THE COURT OF APPEALS CORRECTLY AWARDED FULL BACKWAGES


TO RESPONDENTS.

II. WHETHER OR NOT THE ASSAILED DECISION CORRECTLY AWARDED SEPARATION PAY
TO RESPONDENTS.

As we see it, there is only one question that requires resolution, i.e. what are the legal implications of a situation
where an employee is dismissed for cause but such dismissal was effected without the employers compliance
with the notice requirement under the Labor Code.

This, certainly, is not a case of first impression. In the very recent case of Agabon vs. NLRC,[8] we had the
opportunity to resolve a similar question. Therein, we found that the employees committed a grave offense, i.e.,
abandonment, which is a form of a neglect of duty which, in turn, is one of the just causes enumerated under
Article 282 of the Labor Code. In said case, we upheld the validity of the dismissal despite non-compliance
with the notice requirement of the Labor Code. However, we required the employer to pay the dismissed
employees the amount of P30,000.00, representing nominal damages for non-compliance with statutory due
process, thus:

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

xxx xxx xxx

The violation of petitioners right to statutory due process by the private respondent warrants the payment of
indemnity in the form of nominal damages. The amount of such damages is addressed to the sound discretion of
the court, taking into account the relevant circumstances. Considering the prevailing circumstances in the
case at bar, we deem it proper to fix it at P30,000.00. We believe this form of damages would serve to deter
employers from future violations of the statutory due process rights of employees. At the very least, it provides
a vindication or recognition of this fundamental right granted to the latter under the Labor Code and its
Implementing Rules, (Emphasis supplied).
The difference between Agabon and the instant case is that in the former, the dismissal was based on a just
cause under Article 282 of the Labor Code while in the present case, respondents were dismissed due to
retrenchment, which is one of the authorized causes under Article 283 of the same Code.

At this point, we note that there are divergent implications of a dismissal for just cause under Article 282, on
one hand, and a dismissal for authorized cause under Article 283, on the other.

A dismissal for just cause under Article 282 implies that the employee concerned has committed, or is guilty
of, some violation against the employer, i.e. the employee has committed some serious misconduct, is guilty of
some fraud against the employer, or, as in Agabon, he has neglected his duties. Thus, it can be said that the
employee himself initiated the dismissal process.

On another breath, a dismissal for an authorized cause under Article 283 does not necessarily imply
delinquency or culpability on the part of the employee. Instead, the dismissal process is initiated by the
employers exercise of his management prerogative, i.e. when the employer opts to install labor saving devices,
when he decides to cease business operations or when, as in this case, he undertakes to implement a
retrenchment program.

The clear-cut distinction between a dismissal for just cause under Article 282 and a dismissal for authorized
cause under Article 283 is further reinforced by the fact that in the first, payment of separation pay, as a rule, is
not required, while in the second, the law requires payment of separation pay.[9]

For these reasons, there ought to be a difference in treatment when the ground for dismissal is one of the just
causes under Article 282, and when based on one of the authorized causes under Article 283.

Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under Article 282 but the
employer failed to comply with the notice requirement, the sanction to be imposed upon him should be
tempered because the dismissal process was, in effect, initiated by an act imputable to the employee; and (2) if
the dismissal is based on an authorized cause under Article 283 but the employer failed to comply with the
notice requirement, the sanction should be stiffer because the dismissal process was initiated by the employers
exercise of his management prerogative.

The records before us reveal that, indeed, JAKA was suffering from serious business losses at the time it
terminated respondents employment. As aptly found by the NLRC:

A careful study of the evidence presented by the respondent-appellant corporation shows that the audited
Financial Statement of the corporation for the periods 1996, 1997 and 1998 were submitted by the respondent-
appellant corporation, The Statement of Income and Deficit found in the Audited Financial Statement of the
respondent-appellant corporation clearly shows the following in 1996, the deficit of the respondent-appellant
corporation was P188,218,419.00 or 94.11% of the stockholders [sic] equity which amounts to
P200,000,000.00. In 1997 when the retrenchment program of respondent-appellant corporation was undertaken,
the deficit ballooned to P247,222,569.00 or 123.61% of the stockholders equity, thus a capital deficiency or
impairment of equity ensued. In 1998, the deficit grew to P355,794,897.00 or 177% of the stockholders equity.
From 1996 to 1997, the deficit grew by more that (sic) 31% while in 1998 the deficit grew by more than 47%.

The Statement of Income and Deficit of the respondent-appellant corporation to prove its alleged losses was
prepared by an independent auditor, SGV & Co. It convincingly showed that the respondent-appellant
corporation was in dire financial straits, which the complainants-appellees failed to dispute. The losses incurred
by the respondent-appellant corporation are clearly substantial and sufficiently proven with clear and
satisfactory evidence. Losses incurred were adequately shown with respondent-appellants audited financial
statement. Having established the loss incurred by the respondent-appellant corporation, it necessarily
necessarily (sic) follows that the ground in support of retrenchment existed at the time the complainants-
appellees were terminated. We cannot therefore sustain the findings of the Labor Arbiter that the alleged losses
of the respondent-appellant was [sic] not well substantiated by substantial proofs. It is therefore logical for the
corporation to implement a retrenchment program to prevent further losses.[10]
Noteworthy it is, moreover, to state that herein respondents did not assail the foregoing finding of the NLRC
which, incidentally, was also affirmed by the Court of Appeals.

It is, therefore, established that there was ground for respondents dismissal, i.e., retrenchment, which is one of
the authorized causes enumerated under Article 283 of the Labor Code. Likewise, it is established that JAKA
failed to comply with the notice requirement under the same Article. Considering the factual circumstances in
the instant case and the above ratiocination, we, therefore, deem it proper to fix the indemnity at P50,000.00.

We likewise find the Court of Appeals to have been in error when it ordered JAKA to pay respondents
separation pay equivalent to one (1) month salary for every year of service. This is because in Reahs
Corporation vs. NLRC,[11] we made the following declaration:

The rule, therefore, is that in all cases of business closure or cessation of operation or undertaking of the
employer, the affected employee is entitled to separation pay. This is consistent with the state policy of treating
labor as a primary social economic force, affording full protection to its rights as well as its welfare. The
exception is when the closure of business or cessation of operations is due to serious business losses or
financial reverses; duly proved, in which case, the right of affected employees to separation pay is lost for
obvious reasons. xxx. (Emphasis supplied)

WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed decision and resolution of the
Court of Appeals respectively dated November 16, 2001 and January 8, 2002 are hereby SET ASIDE and a new
one entered upholding the legality of the dismissal but ordering petitioner to pay each of the respondents the
amount of P50,000.00, representing nominal damages for non-compliance with statutory due process.

SO ORDERED.
JENNY M. AGABON and G.R. No. 158693
VIRGILIO C. AGABON, November 17, 2004
Petitioners, Present:

- versus -
NATIONAL LABOR RELATIONS
COMMISSION (NLRC), RIVIERA
HOME IMPROVEMENTS, INC.
and VICENTE ANGELES, Respondents.

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

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

Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling and
installing ornamental and construction materials. It employed petitioners Virgilio Agabon and Jenny Agabon as
gypsum board and cornice installers on January 2, 1992[2] until February 23, 1999 when they were dismissed
for abandonment of work.

Petitioners then filed a complaint for illegal dismissal and payment of money claims[3] and on
December 28, 1999, the Labor Arbiter rendered a decision declaring the dismissals illegal and ordered private
respondent to pay the monetary claims. The dispositive portion of the decision states:

WHEREFORE, premises considered, We find the termination of the complainants illegal. Accordingly,
respondent is hereby ordered to pay them their backwages up to November 29, 1999 in the sum of:

1. Jenny M. Agabon - P56, 231.93


2. Virgilio C. Agabon - 56, 231.93

and, in lieu of reinstatement to pay them their separation pay of one (1) month for every year of
service from date of hiring up to November 29, 1999.

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

SO ORDERED.[4]

On appeal, the NLRC reversed the Labor Arbiter because it found that the petitioners had abandoned
their work, and were not entitled to backwages and separation pay. The other money claims awarded by
the Labor Arbiter were also denied for lack of evidence.[5]

Upon denial of their motion for reconsideration, petitioners filed a petition for certiorari with the Court of
Appeals.

The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal because they had
abandoned their employment but ordered the payment of money claims. The dispositive portion of the decision
reads:
WHEREFORE, the decision of the National Labor Relations Commission is REVERSED only
insofar as it dismissed petitioners money claims. Private respondents are ordered to pay
petitioners holiday pay for four (4) regular holidays in 1996, 1997, and 1998, as well as their
service incentive leave pay for said years, and to pay the balance of petitioner Virgilio Agabons
13th month pay for 1998 in the amount of P2,150.00.

SO ORDERED.[6]

Hence, this petition for review on the sole issue of whether petitioners were illegally dismissed.[7]

Petitioners assert that they were dismissed because the private respondent refused to give them
assignments unless they agreed to work on a pakyaw basis when they reported for duty on February 23, 1999.
They did not agree on this arrangement because it would mean losing benefits as Social Security System (SSS)
members. Petitioners also claim that private respondent did not comply with the twin requirements of notice and
hearing.[8]

Private respondent, on the other hand, maintained that petitioners were not dismissed but had abandoned their
work.[9] In fact, private respondent sent two letters to the last known addresses of the petitioners advising them
to report for work. Private respondents manager even talked to petitioner Virgilio Agabon by telephone
sometime in June 1999 to tell him about the new assignment at Pacific Plaza Towers involving 40,000 square
meters of cornice installation work. However, petitioners did not report for work because they had
subcontracted to perform installation work for another company. Petitioners also demanded for an increase in
their wage to P280.00 per day. When this was not granted, petitioners stopped reporting for work and filed the
illegal dismissal case.[10]

It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are accorded not only respect but
even finality if the findings are supported by substantial evidence. This is especially so when such findings were
affirmed by the Court of Appeals.[11] However, if the factual findings of the NLRC and the Labor Arbiter are
conflicting, as in this case, the reviewing court may delve into the records and examine for itself the questioned
findings.[12]

Accordingly, the Court of Appeals, after a careful review of the facts, ruled that petitioners dismissal was for a
just cause. They had abandoned their employment and were already working for another employer.

To dismiss an employee, the law requires not only the existence of a just and valid cause but also enjoins the
employer to give the employee the opportunity to be heard and to defend himself.[13] Article 282 of the Labor
Code enumerates the just causes for termination by the employer: (a) serious misconduct or willful
disobedience by the employee of the lawful orders of his employer or the latters representative in connection
with the employees work; (b) gross and habitual neglect by the employee of his duties; (c) fraud or willful
breach by the employee of the trust reposed in him by his employer or his duly authorized representative; (d)
commission of a crime or offense by the employee against the person of his employer or any immediate
member of his family or his duly authorized representative; and (e) other causes analogous to the foregoing.

Abandonment is the deliberate and unjustified refusal of an employee to resume his employment.[14] It is a
form of neglect of duty, hence, a just cause for termination of employment by the employer.[15] For a valid
finding of abandonment, these two factors should be present: (1) the failure to report for work or absence
without valid or justifiable reason; and (2) a clear intention to sever employer-employee relationship, with the
second as the more determinative factor which is manifested by overt acts from which it may be deduced that
the employees has no more intention to work. The intent to discontinue the employment must be shown by clear
proof that it was deliberate and unjustified.[16]

In February 1999, petitioners were frequently absent having subcontracted for an installation work for another
company. Subcontracting for another company clearly showed the intention to sever the employer-employee
relationship with private respondent. This was not the first time they did this. In January 1996, they did not
report for work because they were working for another company. Private respondent at that time warned
petitioners that they would be dismissed if this happened again. Petitioners disregarded the warning and
exhibited a clear intention to sever their employer-employee relationship. The record of an employee is a
relevant consideration in determining the penalty that should be meted out to him.[17]

In Sandoval Shipyard v. Clave,[18] we held that an employee who deliberately absented from work without
leave or permission from his employer, for the purpose of looking for a job elsewhere, is considered to have
abandoned his job. We should apply that rule with more reason here where petitioners were absent because they
were already working in another company.

The law imposes many obligations on the employer such as providing just compensation to workers,
observance of the procedural requirements of notice and hearing in the termination of employment. On the other
hand, the law also recognizes the right of the employer to expect from its workers not only good performance,
adequate work and diligence, but also good conduct[19] and loyalty. The employer may not be compelled to
continue to employ such persons whose continuance in the service will patently be inimical to his interests.[20]

After establishing that the terminations were for a just and valid cause, we now determine if the procedures for
dismissal were observed.

The procedure for terminating an employee is found in Book VI, Rule I, Section 2(d) of the Omnibus
Rules Implementing the Labor Code:

Standards of due process: requirements of notice. In all cases of termination of


employment, the following standards of due process shall be substantially observed:

I. For termination of employment based on just causes as defined in Article 282 of the
Code:

(a) A written notice served on the employee specifying the ground or grounds for
termination, and giving to said employee reasonable opportunity within which to explain his
side;

(b) A hearing or conference during which the employee concerned, with the assistance
of counsel if the employee so desires, is given opportunity to respond to the charge, present his
evidence or rebut the evidence presented against him; and

(c) A written notice of termination served on the employee indicating that upon due
consideration of all the circumstances, grounds have been established to justify his termination.

In case of termination, the foregoing notices shall be served on the employees last known
address.

Dismissals based on just causes contemplate acts or omissions attributable to the employee while
dismissals based on authorized causes involve grounds under the Labor Code which allow the employer to
terminate employees. A termination for an authorized cause requires payment of separation pay. When the
termination of employment is declared illegal, reinstatement and full backwages are mandated under Article
279. If reinstatement is no longer possible where the dismissal was unjust, separation pay may be granted.

Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give the
employee two written notices and a hearing or opportunity to be heard if requested by the employee before
terminating the employment: a notice specifying the grounds for which dismissal is sought a hearing or an
opportunity to be heard and after hearing or opportunity to be heard, a notice of the decision to dismiss; and (2)
if the dismissal is based on authorized causes under Articles 283 and 284, the employer must give the employee
and the Department of Labor and Employment written notices 30 days prior to the effectivity of his separation.

From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just cause
under Article 282 of the Labor Code, for an authorized cause under Article 283, or for health reasons under
Article 284, and due process was observed; (2) the dismissal is without just or authorized cause but due process
was observed; (3) the dismissal is without just or authorized cause and there was no due process; and (4) the
dismissal is for just or authorized cause but due process was not observed.

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

In the second and third situations where the dismissals are illegal, Article 279 mandates that the employee is
entitled to reinstatement without loss of seniority rights and other privileges and full backwages, inclusive of
allowances, and other benefits or their monetary equivalent computed from the time the compensation was not
paid up to the time of actual reinstatement.

In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot be cured, it
should not invalidate the dismissal. However, the employer should be held liable for non-compliance with the
procedural requirements of due process.

The present case squarely falls under the fourth situation. The dismissal should be upheld because it was
established that the petitioners abandoned their jobs to work for another company. Private respondent, however,
did not follow the notice requirements and instead argued that sending notices to the last known addresses
would have been useless because they did not reside there anymore. Unfortunately for the private respondent,
this is not a valid excuse because the law mandates the twin notice requirements to the employees last known
address.[21] Thus, it should be held liable for non-compliance with the procedural requirements of due process.

A review and re-examination of the relevant legal principles is appropriate and timely to clarify the various
rulings on employment termination in the light of Serrano v. National Labor Relations Commission.[22]

Prior to 1989, the rule was that a dismissal or termination is illegal if the employee was not given any notice. In
the 1989 case of Wenphil Corp. v. National Labor Relations Commission,[23] we reversed this long-standing
rule and held that the dismissed employee, although not given any notice and hearing, was not entitled to
reinstatement and backwages because the dismissal was for grave misconduct and insubordination, a just
ground for termination under Article 282. The employee had a violent temper and caused trouble during office
hours, defying superiors who tried to pacify him. We concluded that reinstating the employee and awarding
backwages may encourage him to do even worse and will render a mockery of the rules of discipline that
employees are required to observe.[24] We further held that:

Under the circumstances, the dismissal of the private respondent for just cause should be
maintained. He has no right to return to his former employment.

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

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

On January 27, 2000, in Serrano, the rule on the extent of the sanction was changed. We held that the
violation by the employer of the notice requirement in termination for just or authorized causes was not a denial
of due process that will nullify the termination. However, the dismissal is ineffectual and the employer must pay
full backwages from the time of termination until it is judicially declared that the dismissal was for a just or
authorized cause.
The rationale for the re-examination of the Wenphil doctrine in Serrano was the significant number of
cases involving dismissals without requisite notices. We concluded that the imposition of penalty by way of
damages for violation of the notice requirement was not serving as a deterrent. Hence, we now required
payment of full backwages from the time of dismissal until the time the Court finds the dismissal was for a just
or authorized cause.

Serrano was confronting the practice of employers to dismiss now and pay later by imposing full
backwages.

We believe, however, that the ruling in Serrano did not consider the full meaning of Article 279 of the
Labor Code which states:

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

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

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

To be sure, the Due Process Clause in Article III, Section 1 of the Constitution embodies a system of
rights based on moral principles so deeply imbedded in the traditions and feelings of our people as to be deemed
fundamental to a civilized society as conceived by our entire history. Due process is that which comports with
the deepest notions of what is fair and right and just.[26] It is a constitutional restraint on the legislative as well
as on the executive and judicial powers of the government provided by the Bill of Rights.

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

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

In Sebuguero v. National Labor Relations Commission,[28] the dismissal was for a just and valid cause
but the employee was not accorded due process. The dismissal was upheld by the Court but the employer was
sanctioned. The sanction should be in the nature of indemnification or penalty, and depends on the facts of each
case and the gravity of the omission committed by the employer.

In Nath v. National Labor Relations Commission,[29] it was ruled that even if the employee was not
given due process, the failure did not operate to eradicate the just causes for dismissal. The dismissal being for
just cause, albeit without due process, did not entitle the employee to reinstatement, backwages, damages and
attorneys fees.
Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v. National Labor
Relations Commission,[30] which opinion he reiterated in Serrano, stated:

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

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

The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not complying
with statutory due process may have far-reaching consequences.

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

The constitutional policy to provide full protection to labor is not meant to be a sword to oppress employers.
The commitment of this Court to the cause of labor does not prevent us from sustaining the employer when it is
in the right, as in this case.[32] Certainly, an employer should not be compelled to pay employees for work not
actually performed and in fact abandoned.

The employer should not be compelled to continue employing a person who is admittedly guilty of misfeasance
or malfeasance and whose continued employment is patently inimical to the employer. The law protecting the
rights of the laborer authorizes neither oppression nor self-destruction of the employer.[33]

It must be stressed that in the present case, the petitioners committed a grave offense, i.e., abandonment, which,
if the requirements of due process were complied with, would undoubtedly result in a valid dismissal.

An employee who is clearly guilty of conduct violative of Article 282 should not be protected by the Social
Justice Clause of the Constitution. Social justice, as the term suggests, should be used only to correct an
injustice. As the eminent Justice Jose P. Laurel observed, social justice must be founded on the recognition of
the necessity of interdependence among diverse units of a society and of the protection that should be
equally and evenly extended to all groups as a combined force in our social and economic life, consistent
with the fundamental and paramount objective of the state of promoting the health, comfort, and quiet of all
persons, and of bringing about the greatest good to the greatest number.[34]

This is not to say that the Court was wrong when it ruled the way it did in Wenphil, Serrano and related
cases. Social justice is not based on rigid formulas set in stone. It has to allow for changing times and
circumstances.
Justice Isagani Cruz strongly asserts the need to apply a balanced approach to labor-management
relations and dispense justice with an even hand in every case:

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

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

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

Under the Civil Code, nominal damages is adjudicated in order that a right of the plaintiff, which has been
violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying
the plaintiff for any loss suffered by him.[37]

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

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

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

We are not persuaded.

We affirm the ruling of the appellate court on petitioners money claims. Private respondent is liable for
petitioners holiday pay, service incentive leave pay and 13th month pay without deductions.

As a general rule, one who pleads payment has the burden of proving it. Even where the employee must allege
non-payment, the general rule is that the burden rests on the employer to prove payment, rather than on the
employee to prove non-payment. The reason for the rule is that the pertinent personnel files, payrolls, records,
remittances and other similar documents which will show that overtime, differentials, service incentive leave
and other claims of workers have been paid are not in the possession of the worker but in the custody and
absolute control of the employer.[41]

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

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

(f) Wage paid to any employee shall mean the remuneration or earnings, however designated,
capable of being expressed in terms of money whether fixed or ascertained on a time, task,
piece , or commission basis, or other method of calculating the same, which is payable by an
employer to an employee under a written or unwritten contract of employment for work done or
to be done, or for services rendered or to be rendered and includes the fair and reasonable
value, as determined by the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee from which an employer is prohibited
under Article 113[45] of the same Code from making any deductions without the employees
knowledge and consent. In the instant case, private respondent failed to show that the deduction
of the SSS loan and the value of the shoes from petitioner Virgilio Agabons 13th month pay was
authorized by the latter. The lack of authority to deduct is further bolstered by the fact that
petitioner Virgilio Agabon included the same as one of his money claims against private
respondent.

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

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

SO ORDERED.
G.R. No. 188035 July 2, 2014

IMMACULATE CONCEPTION ACADEMY/DR. JOSE PAULO E. CAMPOS, Petitioners,


vs.
EVELYNE. CAMILON, Respondent.

Before us is a petition for review on certiorari seeking to reverse and set aside the March 30, 2009 Decision1
and May 25, 2009 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 105166. The CA had affirmed
with modification the February 29, 2008 Decision3 of the National Labor Relations Commission (NLRC)
finding respondent Evelyn Camilon to have been validly dismissed but holding petitioners liable to pay her
separation pay as a measure of social justice.

The records bear out the following factual antecedents:

Petitioner Immaculate Conception Academy (ICA) is an educational corporation duly organized and existing
under the laws of the Philippines with principal address at Malihan Street, Poblacion, Dasmariiias, Cavite (Zone
IV, Aguinaldo Highway, Dasmarias, Cavite). Co-petitioner Dr. Jose Paulo Campos is the president of ICA.

Respondent Evelyn Camilon was an employee of ICA for 12 years. She was ICAs Chief Accountant and
Administrator from June 2000 until her dismissal. As Chief Accountant, respondent was responsible, among
others, for pre-auditing the school cashiers report, checking the entries therein and keeping custody of the petty
cash fund. She has also direct supervision over the School Cashier, Janice Loba (Loba).

In July 2004, ICAs Treasurer, Shirley Enobal, received a complaint from the father of one student who claimed
that his son was denied issuance of an examination permit for nonpayment oftuition fees despite the fact that the
said fees had already been paid.

In August 2004, Cristina Javier, Internal Auditor of ICA, conducted an audit upon the instruction of petitioner
Campos. She made the following findings:

a) There were several payments of tuition and school fees made by a number of ICA students which
were neither accounted for, turned over and/or posted by the ICA Cashier, Ms.Janice C. Loba, to the
students subsidiary ledgers, nor were the collected amounts deposited in ICAs account with the Rural
Bank of Dasmarias, Inc.;

b) The unaccounted collections received from more or less 186 ICA students amount to ONE
MILLION ONE HUNDRED SIXTY SEVEN THOUSAND ONE HUNDRED EIGHTY-ONE PESOS
and 45/100 (1,167,181.45).

xxxx

c) There were missing or unsurrendered booklets of official receipts issued to and received by Ms.
Janice C. Loba as cashier which were not accounted for, the amount of collection made therein is still
undetermined.

xxxx

d) Ms. Janice C. Loba manipulated entries in the computerized subsidiary ledger and destroyed records
so that the unaccounted amounts collected by her and the missing official receipts issued to her as
cashier could not be traced or detected.4

In a letter5 dated September 1, 2004,petitioner Campos placed respondent under suspension pending
investigation of the case in light of her duties and responsibilities as Chief Accountant of ICA.
In a letter-reply6 dated September 13, 2004,respondent denied any involvement in the irregularities committed
and claimed that she had no intention of profiting at the expense of the school or of betraying the trust reposed
on her by the corporation.

On October 27, 2004, petitioners terminated the services of respondent after finding that respondent was
negligent and remiss in her duties as the superior officer of Loba. The termination letter reads:

After investigation made regarding the misappropriation and manipulation of Immaculate Conception Academy
collections of students fees by Cashier Janice C. Loba, the management entertains the belief that the
misappropriation could have not been committed without your cooperation or assistance apart from your being
lax or negligent and [remiss] in the performance of duties as superior officer of Miss Loba.

Consequently, the management has decided to terminate your service from the Immaculate Conception
Academy as Chief Accountant effective on the date of your preventive suspension which is September 01,
2004.

Please be advised accordingly.7

On November 26, 2004, respondent filed a complaint8 for illegal dismissal and other money claims against
petitioners. The case was docketed as NLRC Case No. RAB IV-11-20120-04-C. Respondent claimed that
petitioners failed to cite specific negligent acts or to state the manner and means she employed in assisting or
cooperating with the cashier in the misappropriation of school funds. Respondent claimed that she was
suspended from work without pay despite the absence of any evidence directly or indirectly implicating her in
the financial irregularity from September 1, 2004 until her termination on October 27, 2004. Also, she was not
given her salary from August 16-30, 2004 and the proportionate sick leave pay and 13th month pay.

On June 5, 2007, the Labor Arbiter rendered a Decision,9 declaring ICA guilty of illegal dismissal. The fallo of
the Labor Arbiters decision reads:

WHEREFORE, premises considered, judgment is hereby rendered declaring respondent guilty of illegal
dismissal and ordering respondent as follows:

1. Pay complainant her unpaid salary from August 15-30, 2004 in the amount of 12,311.96,
proportionate 13th month pay of 16,415.95 and proportionate SIL pay of 3,156.91.

2. Pay complainant her full backwages from the time of her illegal dismissal until the finality of this
decision, which is as of this date, is computed in the total amount of 896,846.57[.]

3. Pay complainant separation pay in lieu of reinstatement in the amount of 295,487.04.

4. Pay complainant 10% of the total monetary award as attorneys fees.

5. All other claims are dismissed for lack of merit.

SO ORDERED.10

The Labor Arbiter held that petitioners failed to present substantial evidence to prove that respondent has been
negligent in her duties as Chief Accountant; hence, her dismissal was illegal. The Labor Arbiter also held that
due process was not observed by petitioners in dismissing respondent. The law requires that the employer must
furnish the worker sought to be dismissed with two written notices before termination of employment can be
legally effected, i.e., (1) notice which apprises the employee of the particular acts or omissions for which his
dismissal is sought; and (2) the subsequent notice after due hearing, which informs the employee of the
employers decision to dismiss him. In this case, the first notice given to the complainant is a notice of
preventive suspension. A notice of preventive suspension cannot be considered adequate notice where the
objective of the employees preventive suspension, as stated in the notice, was merely to ascertain the extent of
the loss and to pinpoint responsibility of the parties involved and not to apprise the employee of the causes of
his desired dismissal.
Petitioners appealed the decision of the Labor Arbiter to the NLRC.

On February 29, 2008, the NLRC rendered a decision finding respondents dismissal and preventive suspension
legal and setting aside the awards for back wages, separation pay and attorneys fees. However, the awards for
unpaid salary for the period from August 15-30, 2004, 13th month pay and service incentive leave pay which
respondent already earned even prior to her dismissal was upheld. The NLRC likewise ordered the payment to
respondent of her unpaid salaries for the number of working days she remained under preventive suspension
beyond 30 days.

The dispositive portion of the NLRC decision states,

WHEREFORE, premises considered, judgment is hereby rendered upholding the legality of complainants
dismissal and preventive suspension, and setting aside the awards of backwages, separation pay and attorneys
fees stated in the Decision of the Labor Arbiter dated 5 June 2007. Respondent school, however, is ordered as
follows:

1. Pay complainant her unpaid salary from August 15-30, 2004 in the amount of Php 12,311.96,
proportionate 13th month pay of Php 16,415.95 and proportionate SIL pay of Php 3,156.91.

2. Pay complainant her unpaid salary corresponding to the number of working days in excess of the
thirty (30) working days of preventive suspension.

SO ORDERED.11

The NLRC found that respondent was negligent in the performance of her duties and responsibilities as
petitioners Chief Accountant and as the immediate supervisor of Loba. Respondents negligence was
underscored by the fact that the school records were manipulated and destroyed, official receipts of the school
were lost, and the amount of 1,167,181.45 worth of tuition fees paid for by 186 students in an eleven-month
period were lost and misappropriated. The NLRC held that these anomalies would not have happened if only
respondent did her job to supervise all personnel in the accounting department, to check and verify students
payments, to audit the cashiers report, and to act as custodian of official receipts. The NLRC further stated that
given the substantial amount of the loss not only of money but important financial documents as well, there was
no doubt that respondents negligence was gross in character. The NLRC also found the respondents
negligence was not only gross but habitual as well.

Thus, the NLRC ruled that petitioners had just cause to terminate the services of respondent. Although
respondent has been in the service for 12 years without derogatory records, such cannot erase the fact that
respondent failed to monitor and oversee the finances of her employer. As to the procedural requirement of due
process, the NLRC found that respondent was served a letter dated September 1, 2004 where she was apprised
of the investigation of her case regarding her duties and responsibilities as Chief Accountant.

Respondent appealed to the CA.

On March 30, 2009, the CA rendered a Decision12 affirming the ruling of the NLRC but with the modification
that petitioners are held liable to pay separation pay to respondent. The CA justified its award of separation pay
to respondent in this wise:

As regards separation pay, petitioner claims that she is entitled thereto considering her 12 years of service for
the private respondents as an employee in concurrent various capacities, to wit: Chief Accountant of ICA,
acting Administrator of University Physicians Services Inc. (a Campos family-owned subsidiary corporation),
Officer-in-Charge in canvassing and purchasing of construction materials, school and office property and
equipment, Assistant Secretary of ICA, and, the Head of Human Resources Department of ICA.

We rule that petitioner is entitled to separation pay. An employee who is dismissed for just cause is generally
not entitled to separation pay. In some cases, however, the Supreme Court awards separation pay to a legally
dismissed employee on grounds of equity and social justice x x x.
In the case of Philippine Long Distance Telephone Co. vs. NLRC, 164 SCRA 671, the Supreme Court
emphatically declared:

"We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances
where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his
moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense
involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be
required to give the dismissed employee separation pay, or financial assistance, or whatever other name it is
called, on the ground of social justice (Emphasis supplied)."

This Court holds that petitioners cause of dismissal does not fall under any of the two circumstances and as
such, separation pay should have been awarded to her. Clearly, petitioners dismissal was not premised on her
serious misconduct nor does it involve her moral character.

Accordingly, petitioners employment of 12 years supports the award of separation pay. Absent any evidence
proving her serious misconduct, separation pay should be paid to the petitioner equivalent to at least one (1)
month pay for every year of service.13

The dispositive portion of the decision states:

WHEREFORE, premises considered, the Decision dated February 29, 2008, and Resolution dated June 20,
2008 of the Second Division of the National Labor Relations Commission, Quezon City are hereby
AFFIRMED with the MODIFICATION that ICA is hereby held liable for the payment of the separation pay of
petitioner Evelyn E. Camilon.

SO ORDERED.14

Not agreeing with the ruling, petitioners filed the present petition claiming that the CA erred in awarding
separation pay to respondent who was dismissed because of her gross and habitual negligence, a more serious
offense than mere inefficiency at work. Petitioners assert that respondent is not entitled to separation pay since
her negligence resulted in a substantial amount of loss and destruction of official receipts and schools records.
Petitioners also claim that separation pay cannot be justified on the basis of respondents length of service
considering the gravity of the offense committed.

In granting separation pay to respondent, the CA relied on the case of Philippine Long Distance Telephone Co.
v. NLRC15 (PLDT ruling) where the Court held that separation pay shall be allowed as a measure of social
justice only in those instances where the employee is validly dismissed for causes other than serious misconduct
or those reflecting on his moral character. The CA then ruled that since respondent was dismissed for gross and
habitual negligence, a cause other than serious misconduct or those reflecting on her moral character,
respondent is entitled to the payment of separation pay on the basis of equity and her length of service.
According to petitioners, the appellate courts reliance on the case of PLDT v. NLRC in granting separation pay
to respondent was misplaced. Petitioners maintain that social justice cannot shield wrongdoers from the legal
consequences of their acts and to award separation pay to respondent would have the effect of rewarding rather
than punishing respondent for her gross and habitual negligence. Moreover, petitioners aver that even if
respondent has been an employee for 12 years, this does not justify the award of separation pay. To do so would
be contradictory to the earlier finding of the appellate court that her years in service do not erase the fact that
she failed to observe the diligence necessary in the performance of her primary duties. Petitioners further point
out that the PLDT ruling had already been modified if not superseded by this Courts ruling in Toyota Motor
Philippines Corporation Workers Association (TMPCWA) v. NLRC16 where it was ruled that the grant of
separation pay should be barred in all cases of just causes under Article 282 of the Labor Code, not only in
cases of serious misconduct and those reflecting on the moral character of the employee.

Respondent, meanwhile, maintains that the award of separation pay was proper. According to respondent,
separation pay may be given though an employee is validly dismissed when the Court finds justification in
applying the principle of social justice. Respondent stresses that she had worked for petitioners with zeal,
competence and dedication with no known previous record and therefore, she is entitled to be given full
separation pay.17
We find merit in the petition.

Prefatorily, we note that respondent Evelyn Camilon did not appeal or file a petition for certiorari to assail the
decision of the CA which affirmed the ruling of the NLRC finding her grossly and habitually negligent in her
duties for failing to regularly pre-audit the school cashiers report, check the entries therein and keep the
custody of the petty cash fund which negligence resulted in the school cashiers (Loba) misappropriation of
school funds and students tuition fees. It is axiomatic that a party who does not appeal or file a petition for
certiorari is not entitled to any affirmative relief.18 An appellee who is not an appellant may assign errors in his
brief where his purpose is to maintain the judgment but he cannot seek modification or reversal of the judgment
or claim affirmative relief unless he has also appealed.19 Thus, for failure of respondent to assail the validity of
her dismissal, such ruling is no longer in issue.

Now to the main issue of whether the CA correctly granted an award of separation pay to respondent as a
measure of social justice.

The issue of whether a validly dismissed employee is entitled to separation pay has been settled in the 2007 case
of Toyota Motor Philippines Corporation Workers Association (TMPCWA) v. NLRC,20 where it was further
clarified that "in addition to serious misconduct, in dismissals based on other grounds under Art. 282 like
willful disobedience, gross and habitual neglect of duty, fraud or willful breach of trust, and commission of a
crime against the employer or his family, separation pay should not be conceded to the dismissed employee."

This ruling was reiterated in the case of Central Philippines Bandag Retreaders, Inc. v. Diasnes,21 where the
Court set aside the award of separation pay to Diasnes in view of the latters gross and habitual negligence. To
quote:

To reiterate our ruling in Toyota, labor adjudicatory officials and the CA must demur the award of separation
pay based on social justice when an employees dismissal is based on serious misconduct or willful
disobedience; gross and habitual neglect of duty; fraud or willful breach of trust; or commission of a crime
against the person of the employer or his immediate family grounds under Art.282 of the Labor Code that
sanction dismissals of employees. They must be most judicious and circumspect in awarding separation pay or
financial assistance as the constitutional policy to provide full protection to labor is not meant to be an
instrument to oppress the employers. The commitment of the Court to the cause of labor should not embarrass
us from sustaining the employers when they are right, as here. In fine, we should be more cautious in awarding
financial assistance to the undeserving and those who are unworthy of the liberality of the law.

Again in the recent case of Moya v. First Solid Rubber Industries, Inc.,22 the Court disallowed the payment of
separation pay to an employee dismissed from work based on one of the grounds under Article 282 of the Labor
Code or willful breach by the employee of the trust reposed in him by his employer. Therein, the Court held that
Moyas act of concealing the truth from the company is outside of the protective mantle of the principle of
social justice.

Pursuant to the aforementioned rulings, respondent is clearly not entitled to separation pay. Respondent was
holding a position which involves a high degree of responsibility requiring trust and confidence as it involves
the financial interests of the school. However, respondent proved to be unfit for the position when she failed to
exercise the necessary diligence in the performance of her duties and responsibilities as Chief Accountant, thus
justifying her dismissal from service. Respondent was guilty of gross and habitual negligence when she failed to
regularly pre-audit the report of the school cashier, check the entries therein and keep custody of the petty cash
fund. Had respondent been assiduously doing her job, the unaccounted school funds would havebeen
discovered right away. Respondents dereliction in her duties spanned a period of 11 months thus enabling the
school cashier to misappropriate tuition fee payments, manipulate the school records and destroy official
receipts, in the total amount of 1,167,181.45 to the prejudice of petitioners. Hence, she should not be granted
separation pay. To rule otherwise would be to reward respondent for her negligent acts instead of punishing her
for her offense. As we held in Reno Foods, Inc. v. Nagkakaisang Lakas ng Manggagawa (NLM)-Katipunan,23
"[s]eparation pay is only warranted when the cause for termination is not attributable to the employee's fault,
such as those provided in Articles 283 and 284 of the Labor Code, as well as in cases of illegal dismissal in
which reinstatement is no longer feasible. It is not allowed when an employee is dismissed for just cause."
As to whether respondents length of service with petitioners justifies the award of separation pay, we rule in
the negative.1wphi1 Respondents 12 years of service and clean employment record cannot simply erase her
gross and habitual negligence in her duties. Length of service is not a bargaining chip that can simply be
stacked against the employer.24 As we held in Central Pangasinan Electric Cooperative, Inc. v. NLRC,25

Although long years of service might generally be considered for the award of separation benefits or some form
of financial assistance to mitigate the effects of termination, this case is not the appropriate instance for
generosity x x x. The fact that private respondent served petitioner for more than twenty years with no negative
record prior to his dismissal, in our view of this case, does not call for such award of benefits, since his
violation reflects a regrettable lack of loyalty and worse, betrayal of the company. If an employees length of
service is to be regarded as a justification for moderating the penalty of dismissal, such gesture will actually
become a prize for disloyalty, distorting the meaning of social justice and undermining the efforts of labor to
cleanse its ranks of undesirables.

WHEREFORE, the petition is GRANTED. The March 30, 2009 Decision and May 25, 2009 Resolution of the
Court of Appeals in CA-G.R. SP No. 105166 are AFFIRMED with the modification that the award of
separation pay in favor of respondent Evelyn Camilon is DELETED.

No pronouncement as to costs.

SO ORDERED.
G.R. No. 185449 November 12, 2014

GOODYEAR PHILIPPINES, INC. and REMEGIO M. RAMOS, Petitioners,


vs.
MARINA L. ANGUS, Respondent.

In the absence of an express or implied prohibition against it, collection of both retirement benefits and
separation pay upon severance from employment is allowed. This is grounded on the social justice policy that
doubts should always be resolved in favor of labor rights.1

By this Petition for Review on Certiorari with Prayer for Injunctive Relief,2 petitioners Goodyear Philippines,
Inc. (Goodyear) and Remigio M. Ramos (Ramos) assail the May 13, 2008 Decision3 and November 17, 2008
Resolution4 of the Court of Appeals (CA) in CA-G.R. SP No. 98418. The CA partly granted the Petition for
Certiorari filed there with by modifying the September 30, 2005 Decision5 of the National Labor Relations
Commission (NLRC) in that it ordered p etitioners to pay respondent Marina L. Angus (Angus) separation pay,
attorney's fees equivalent to 10% of the separation pay, and moral damages.

Factual Antecedents

Angus was employed by Goodyear on November 16, 1966 and occupied the position of Secretary to the
Manager of Quality and Technology.

In order to maintain the viability of its operations in the midst of economic reversals, Goodyear implemented
cost-saving measures which included the streamlining of its workforce. Consequently, on September 19, 2001,
Angus received from Ramos, the Human Resources Director of Goodyear, a letter which reads as follows:

September 18, 2001

Dear Ms. Angus:

Please be advised that, based on a thorough study made by Management, the position of Secretary to the
Manager of Quality & Technology is already redundant or is no longer necessary for its effective operation and
is to be abolished effective today, September 18, 2001.

In view of the above, we regret to inform you that your services, as Secretary to the Manager of Quality &
Technology, will be terminated effective October 18, 2001. Your last day of work, however, will be effective
today, September 18, 2001, to give you a month's time to look for another employment.

As Company practice, termination due to redundancy or retrenclunent is paid at 45 days' pay per year of
service. Considering, that you have rendered 34.92 years of service to the Company as of October 18, 2001, and
have reached the required minimum age of 55 to qualify for early retirement, Management has decided to grant
you early retirement benefit at 47 days' per year of service.

The Company will pay you the following termination benefits on October 18, 2001: 47 days' gay per year of
service (which will come from the Pension Fund), fractions of 13th and 14th months pay, longevity pay,
emergency leave and any earned and unused vacation and/or sick leave. The refund of your contributions to the
Goodyear Savings Plan, as well as the Company's share will be handled separately by Security Bank
Corporation, the Administrator of said Plan.

Should the Company find in the future that your services are again needed, it shall inform you of the
opportunity so you can apply. The Company will try to assist you find new work elsewhere, and you may use
Goodyear as a reference, if needed.

We thank you for your 34.92 years of loyal service with Goodyear Philippines, and we wish you success in your
future endeavours.
Very truly yours,

GOODYEAR PHILIPPINES INC.

(signed)
LUIS J. ISON
Manager-Quality & Technology

(signed)
REMIGIO M. RAMOS
Hwnan Resources Director6

Upon receipt, Angus responded through a letter of even date, viz:

Dear Sirs:

With reference to the attached letter dated September 18, 2001, I accept Management decision to avail early
retirement benefit. However, I do not agree on the terms stated therein. I suggest I be given a premiwn of
additional 3 days for every year of service which is only 6.3% or a total of 50 days. I gathered it is Philippine
industry's practice to give premiwn to encourage employees to avail of the early retirement benefit.

Acceptance of this proposal will make my separation from Goodyear pleasant.

Very truly yours,

(signed)
MARINA L. ANGUS7

Meanwhile and in connection with the retrenchment of Angus, an Establishment Termination Report8 was filed
by Goodyear with the Department of Labor and Employment (DOLE).

On November 20, 2001, Angus accepted the checks which covered payment of her retirement benefits
computed at 4 7 days' pay per year of service and other company benefits. However, she put the following
annotation in the acknowledgement receipt thereof:

Received under protest - amount is not acceptable. Acceptance is on condition that I will be given a premiwn of
additional 3 days for every year of service.

Since my service was tenninated due to redundancy, I now claim my separation pay as mandated by law. This is
a separate claim from my early retirement benefit.

(Signed)

Marina L. Angus

11-20-019

Allegedly because of the above-quoted annotation, and also of Angus' refusal to sign a Release and Quitclaim,
petitioners took back the checks.10

In response to Angus' protest, Ramos wrote her a letter11 dated November 29, 2001 explaining that the
company has already offered her the most favorable separation benefits due to redundancy, that is, 47 days' pay
per year of service instead of the applicable rate of 45 days' pay per year of service. And based on the
Retirement Plan under the Collective Bargaining Agreement (CBA) and the parties' Employment Contract,
Angus is entitled to only one of the following kinds of separation pay: (1) normal retirement which is payable at
47 days' pay per year of service; (2) early retirement at a maximum of 47 days' pay per year of service; (3)
retrenchment, redundancy, closure of establishment at 45 days' pay per year of service; (4) medical disability at
45 days' pay per year of service; or (5) resignation at 20 days' pay per year of service. Because of these, Ramos
informed Angus that the company cannot anymore entertain any of her additional claims.

In reply,12 Angus reiterated her claim for both termination pay and early retirement benefits. She also
demanded that she be given a copy of the Notice of Redundancy filed with the DOLE and a copy of the specific
provisions in the Retirement Plan, CBA and Employment Contract which could justify the prohibition against
the grant of both to a separated employee as asserted by petitioners. However, Ramos merely reminded Angus
to claim her checks and brushed aside her demands in a letter13 dated December 19, 2001.

On January 17, 2002, Angus finally accepted a check in the amount of 1,958,927.89 purportedly inclusive of
all termination benefits computed at 47 days' pay per year of service. She likewise executed a Release and
Quitclaim14 in favor of Goodyear.

On February 5, 2002, Angus fil.ed with the Labor Arbiter a complaint for illegal dismissal with claims for
separation pay, damages and attorney's fees against petitioners.

In her Position Paper,15 Angus claimed that her termination by reason of redundancy was effected in violation
of the Labor Code for it was not timely reported to the DOLE and no separation pay was given to her; that the
separation pay to which she is entitled by law is entirely different from the retirement benefits that she received;
that nothing in the company's Retirement Plan under the CBA, the CBA itself or the Employment Contract
prohibits the grant of more than one kind of separation pay; and, that she was only forced to sign a quitclaim
after accepting her retirement benefits.

On the other hand, petitioners asseverated in their Position Paper16 that Angus was validly dismissed for an
authorized cause; that she voluntarily accepted her termination benefits and freely executed the corresponding
quitclaim; that her receipt of early retirement benefits equivalent to 4 7 days' pay for every year of service,
which amount is higher than the regular separation pay, had effectively barred her from recovering separation
pay due to redundancy; and, that the following Section 1, Article XI of the last company CBA supports the
grant of only one benefit:

It is hereby understood that the availment of the retirement benefits herein provided for shall exclude
entitlement to any separation pay, termination pay, redundancy pay, retrenchment pay or any other severance
pay.

The parties finally agree that an employee shall be entitled to only one (1) benefit, whichever is higher.17

In her Rejoinder,18 Angus disputed the existence of the aforesaid provision in the company's CBA. She
presented a copy of the latest CBA19 between Goodyear and Unyon ng mga Manggagawa sa Goma sa
Goodyear Phils., Inc. effective for the period July 25, 2001 to July 24, 2004, to show that the provisions alluded
to by the petitioners do not exist. In contrast, she pointed to Section 5, Article VIII of the latest CBA which she
claimed to be the one applicable to her case, viz:

SECTION 5. Retirement Plan.

At normal retirement age of 60 years, a worker shall be entitled to a lump sum retirement benefit in an amount
equivalent to his daily rate (base rate x 8) multiplied by 4 7 days, and further multiplied by his years of service.

A worker who is at least 50 years old and with at least 15 years of service, and who has been recommended by
the President of the UNION for early retirement and duly approved by the Human Resources Director, shall be
paid a lump sum retirement benefit as follows:

Years of Retirement Benefit


Service Rendered Equivalent to

15 - less than 21 34 days pay per year of service


21 - less than 26 35 days pay per year of service

26 - less than 31 36 days pay per year of service

31 and up 47 days pay per year of service20

Ruling of the Labor Arbiter

In a Decision21 dated January 23, 2004, the Labor Arbiter upheld the validity of Angus' termination from
employment. It likewise declared that the amount she received from the company was actually payment of
separation pay due to redundancy, only that it was computed under the CBA's retirement plan since the same
was more advantageous to her. Anent her claim for both separation pay and retirement benefits, the Labor
Arbiter held that the grant of both is not allowed under the Retirement Plan/CBA. Moreover, it was held that her
claim of vitiated consent in signing the quitclaim is unworthy of credence considering that she fairly negotiated
the matter with the management and that the consideration for its execution is higher than what she is mandated
to receive.

Hence, the dispositive portion of the Labor Arbiter's Decision, viz:

WHEREFORE, premises considered, the instant complaint is hereby dismissed for lack of merit.

SO ORDERED.22

Ruling of the National Labor Relations Commission

Angus appealed to the NLRC, but was unsuccessful as it rendered a Decision23 dated September 30, 2005
affirming the ruling of the Labor Arbiter. Thus:

WHEREFORE, finding no cogent reason to modify, alter, much less reverse the decision appealed from, the
same is AFFIRMED and the instant appeal is DISMISSED for lack of merit. SO ORDERED.24

Angus filed a motion for reconsideration, but was denied by the NLRC in a Resolution25 dated January 9,
2007.

Ruling of the Court of Appeals

Still undeterred, Angus filed a Petition for Certiorari26 with the CA. She attributed grave abuse of discretion
amounting to lack of or in excess of jurisdiction on the part of the NLRC in sustaining the ruling of the Labor
Arbiter.

On May 13, 2008, the CA rendered a Decision27 partially granting Angus' Petition. While it found her
dismissal valid in both substance and procedural aspects, it declared Angus entitled to separation pay in addition
to the retirement pay she already received. Citing Croz v. Philippine Global Communications, Inc.,28 the CA
ruled that Angus is entitled to the payment of both retirement benefit and separation pay in view of the absence
of any provision in the CBA prohibiting the payment of both. It also concluded that Angus did not voluntarily
sign the release and quitclaim as under its terms, she would receive less than what she is legally entitled to.
Further, Angus was granted attorney's fees as she was forced to litigate to protect her rights and interest, as well
as moral damages for the anxiety and distress that she suffered because of the pressure exerted on her to avail of
early retirement and accept her retirement pay.

The dispositive portion of the CA Decision reads:

WHEREFORE, premises considered, the petition for certiorari is hereby partially GRANTED. The NLRC
Decision dated September 30, 2005 is modified by ordering Goodyear to pay Angus: (1) separation pay
pursuant to Article 283 of the Labor Code, (2) attorney's fees equivalent to ten percent (10%) of her separation
pay, and (3) moral damages in the amount of five thousand pesos (5,000.00).
SO ORDERED.29

Petitioners filed a Partial Motion for Reconsideration30 vehemently questioning the awards for separation pay,
attorney's fees and moral damages. This was, however, denied by the CA in its Resolution31 dated November
17, 2008.

Hence, the present Petition.

Issues

Petitioners raise the following grounds for this Court's review:

I.

THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW WHEN IT ORDERED THE
PAYMENT OF SEPARATION PAY TO RESPONDENT ON TOP OF THE RETIREMENT PAY DESPITE
THE FACT THAT IT IS VERY CLEAR IN THE COLLECTIVE BARGAINING AGREEMENT THAT
RESPONDENT IS ENTITLED TO ONLY ONE TYPE OF BENEFIT, EITHER SEPARATION PAY OR
RETIREMENT BENEFIT, WHICHEVER IS HIGHER.

II.

THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW WHEN IT ORDERED


GOODYEAR TO PAY AGAIN SEPARATION PAY TO RESPONDENT DESPITE THE FACT THAT
RESPONDENT EXECUTED A VALID AND BINDING QUITCLAIM, THE CONSEQUENCES AND
EFFECTS OF WHICH SHE FULLY UNDERSTOOD, AND WHICH SHE CANNOT NOW
UNILATERALLY REVOKE.

III.

THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW WHEN IT ORDERED THE
PAYMENT OF MORAL DAMAGES AND ATTORNEY'S FEES NOTWITHSTANDING THAT THE
COMPLAINT FOR ILLEGAL DISMISSAL AND MONEY CLAIMS LACKED MERIT.32 Petitioners argue
that the CA erred in ordering them to still pay Angus separation pay as she was already paid the same at the rate
used for computing early retirement benefits. They insist that Angus is entitled to only one kind of pay as the
recovery of both retirement benefits and separation pay is proscribed by the company's CBA. Petitioners further
contend that the CA has no basis in disregarding the quitclaim since it was knowingly and voluntarily executed
by Angus. And such voluntary execution, coupled with her acceptance of separation pay computed at early
retirement rate, had effectively barred Angus from demanding for more.

Our Ruling

The Petition is devoid of merit.

Angus is entitled to both separation pay and early retirement benefit due to the absence of a specific provision
in the CEA prohibiting recovery of both.

In Aquino v. National Labor Relations Commission,33 citing Batangas Laguna Tayabas Bus Company v. Court
of Appeals34 and University of the East v. Hon. Minister of Labor,35 the Court held that an employee is
entitled to recover both separation pay and retirement benefits in the absence of a specific prohibition in the
Retirement Plan or CBA. Concomitantly, the Court ruled that an employee's right to receive separation pay in
addition to retirement benefits depends upon the provisions of the company's Retirement Plan and/or CBA.36

Here, petitioners allege that there is a provision in the last CBA against the recovery of both retirement benefits
and separation pay.1wphi1 To support their claim, petitioners submitted a copy of what appears to be a portion
of the company CBA entitled "Retirement Plan, Life Insurance, Physical Disability Pay and Resignation Pay."
Section 1, Article XI thereof provides that the availment of retirement benefits precludes entitlement to any
separation pay. The same, however, can hardly be considered as substantial evidence because it does not appear
to be an integral part of Goodyear's CBA. Even assuming that it is, it would still not suffice as there is no
showing if the CBA under which the said provision is found was the one in force at the time material to this
case. On the other hand, Angus presented the parties' 2001-2004 CBA and upon examination of the same, the
Court agrees with her that it does not contain any restriction on the availment of benefits under the company's
Retirement Plan and of separation pay. Indeed, the Labor Arbiter and the NLRC erred in ignoring this material
piece of evidence which is decisive of the issue presented before them. The CA, thus, committed no error in
reversing the Decisions of the labor tribunals when it ruled in favor of Angus' entitlement to both retirement
benefits and separation pay.

Moreover, the Court agrees with the CA that the amount Angus received from petitioners represented only her
retirement pay and not separation pay. A cursory reading of petitioners' September 18, 2001 letter notifying
Angus of her termination from employment shows that they granted her early retirement benefits pegged at 4 7
days' pay per year of service. This rate was arrived at after petitioners considered respondent's length of service
with the company, as well as her age which qualified her for early retirement. In fact, petitioners were even
explicit in stating in the said letter that the amount she was to receive would come from the company's Pension
Fund, which, as correctly asserted by Angus, was created to cover retirement benefit payment of employees. In
addition, the document37 showing a detailed account of Angus' termination benefits speaks for itself as the
same is entitled "Sununary of Retirement Pay and other Company Benefits." In view therefore of the clear
showing that what petitioners decided to grant Angus was her early retirement benefits, they cannot now be
permitted to deny having paid such benefit.

Petitioners further argue that Angus is not entitled to retirement pay because she does not meet the requirements
enumerated in the Retirement Plan provision of the CBA. The Court disagrees. While it is obvious that Angus is
not entitled to compulsory retirement as she has not yet reached the age of 60, there is no denying, however,
that she is qualified for early retirement. Under the provision of the Retirement Plan of the CBA as earlier
quoted, a worker who is at least 50 years old and with at least 15 years of service, and who has been
recommended by the President of the Union for early retirement and duly approved by the Human Resources
Director, shall be entitled to lump sum retirement benefits. At the time of her tennination, Angus was already 57
years of age and had been in the service for more than 34 years. The exchange of correspondence between
Angus and Ramos also shows that the latter, as Goodyear's Human Resources Director, offered, recommended
and approved the grant of early retirement in favor of the former. Clearly, all the requirements for Angus'
availment of early retirement under the Retirement Plan of CBA were substantially complied with.

It is worthy to mention at this point that retirement benefits and separation pay are not mutually exclusive.38
Retirement benefits are a form of reward for an employee's loyalty and service to an employer39 and are earned
under existing laws, CBAs, employment contracts and company policies.40 On the other hand, separation pay is
that amount which an employee receives at the time of his severance from employment, designed to provide the
employee with the wherewithal during the period that he is looking for another employment and is recoverable
only in instances enumerated under Articles 283 and 284 of the Labor Code or in illegal dismissal cases when
reinstatement is not feasible.41 In the case at bar, Article 28342 clearly entitles Angus to separation pay apart
from the retirement benefits she received from petitioners.

Release and Quitclaim signed by Angus is invalid

The release and quitclaim signed by Angus cannot be used by petitioners to legalize the denial of Angus'
rightful claims. As aptly observed by the CA, the terms of the quitclaim authorizes Angus to receive less than
what she is legally entitled to. "Under prevailing jurisprudence, x x x a quitclaim cannot bar an employee from
demanding benefits to which he is legally entitled."43 It was held to be "ineffective in barring claims for the full
measure of the worker's rights and the acceptance of benefits therefrom does not amount to estoppel".44
Moreover, release and quitclaims are often looked upon with disfavor when the waiver was not done voluntarily
by employees who were pressured into signing them by unscrupulous employers seeking to evade their
obligations.45

Angus is entitled to moral damages and attorney's fees.


The Court likewise finds no cogent reason to overturn the CA's award of moral damages in the amount of
5,000.00 and attorney's fees. Moral damages is awarded when fraud and bad faith have been established,46 as
in this case. Petitioners' false contention over what has been paid to Angus suggests an attempt to feign
compliance with their legal obligation to grant their employee all the benefits provided for by agreement and
law. Their bad faith is evident in the intent to circumvent this legal mandate. And as Angus was then forced to
litigate her just claims when petitioners refused to heed her demands for the payment of separation pay, the
award of attorneys fees equivalent to 10% of the amount of separation pay is also in order.47

WHEREFORE, the Petition is DENIED. The May 13, 2008 Decision and November 17, 2008 Resolution of the
Court of Appeals in CA-G.R. SP No. 98418, are AFFIRMED.

SO ORDERED.
G.R. No. 177845 August 20, 2014

GRACE CHRISTIAN HIGH SCHOOL, represented by its Principal, DR. JAMES TAN, Petitioner,
vs.
FILIPINAS A. LAVANDERA, Respondent.

Assailed in this petition for review on certiorari1 is the Decision2 dated April 30, 2007 of the Court of Appeals
(CA) in CA-G.R. SP. No. 75958 which affirmed with modification the Decision3 dated August 30, 2002 of the
National Labor Relations Commission (NLRC) in NLRC CA No. 031739-02, applying the 22.5-day multiplier
in computing respondent Filipinas A. Lavandera' s (Filipinas) retirement benefits differential, with legal interest
reckoned from the filing date of the latter's illegal dismissal complaint.

The Facts

Filipinas was employed by petitioner Grace Christian High School (GCHS) as high school teacher since
June1977, with a monthly salary of 18,662.00 as of May 31, 2001.4

On August 30, 2001,5 Filipinas filed a complaint for illegal (constructive) dismissal, non-payment of service
incentive leave (SIL) pay, separation pay, service allowance, damages, and attorneys fees against GCHS6
and/or its principal,7 Dr. James Tan. She alleged that on May 11, 2001, she was informed that her serviceswere
to be terminated effective May 31, 2001, pursuant to GCHS retirement plan which gives the school the option
to retire a teacher who has rendered at least 20 years of service, regardless of age, with a retirement pay of one-
half () month for every year of service. At that time, Filipinas was only 58 years old and still physically fit to
work. She pleaded with GCHS toallow her to continue teaching but her services were terminated,8 contrary to
the provisions of Republic Act No. (RA) 7641,9 otherwise known as the "Retirement Pay Law."

For their part, GCHS denied that they illegally dismissed Filipinas. They asserted that the latter was considered
retired on May 31, 1997 after having rendered 20 years of service pursuant to GCHS retirement plan and that
she was duly advised that her retirement benefits in the amount of 136,210.00 based on her salary atthe time of
retirement, i.e., 13,621.00, had been deposited to the trustee-bank in her name. Nonetheless, her services were
retained on a yearly basis until May 11, 2001 when she was informed that her year-to-year contract would no
longer be renewed.10

The LA Ruling

In a Decision11 dated March 26, 2002, the Labor Arbiter (LA) dismissed the illegal dismissal complaint for
lack of merit.

The LA found that GCHS has a retirement plan for its faculty and non-faculty members which pertinently
provides:

ARTICLE X
RETIREMENT DATES12

Section 1. Normal Retirement Date For qualified members of the Plans, the normal retirement date shall be the
last day of the month during which he attains age sixty (60) regardless of length of service or upon completion
of 20 years of service unless extended at the option of the School. Such extension is subject tothe approval of
the School on a case to case and year to year basis. The School reserves the right to require an employee before
it approveshis application for an extension of service beyond the normal retirement date, to have a licensed
physician appointed by the School, certify that the employee concerned has no physical and/or mental
impediments which will prevent the employee from performing the duties in the School.13 (Emphasis supplied)

Consequently, the LA ruled that Filipinas was not terminated from employment but was considered retired14 as
of May 31, 1997 after rendering 20 years of service15 and was only allowed by GCHS to continue teaching on
a year-to-year basis (until May 31, 2001)in the exercise of its option to do so under the aforementioned
retirement plan until she was informed that her contract would not be renewed.16
Nonetheless, the LA found the retirement benefits payable under GCHS retirement plan to be deficient vis--vis
those provided under RA 7641,17 and, accordingly, awarded Filipinas retirement pay differentials based on her
latest salaryas follows:

18,662.00/30 = 622.06/day
622.06 x 22.5 = 13,996.35 x 20 = 279,927.00 18
- 136,210.00

143,717.00

The LA, however, denied Filipinasclaims for service allowance, salary increase, and damages for lack of
sufficient bases, but awarded her attorneys fees equivalent to five percent (5%) of the total award, or the
amount of 7,185.85.19

Dissatisfied, GCHS filed an appeal before the NLRC.

The NLRC Ruling

In a Decision20 dated August 30, 2002 (August 30, 2002 Decision), the NLRC set aside the LAs award, and
ruled that Filipinas retirement pay should be computed based on her monthly salary at the time of her
retirementon May 31, 1997, i.e., 13,621.00. Moreover, it held that under Article 287 of the Labor Code, as
amended by RA 7641, the retirement package consists of 15 days salary, plus 13th month pay and SIL pay pro-
rated to their one-twelfth (1/12) equivalent.21

In view of the foregoing, the NLRC awarded Filipinas retirement pay differentials in the amount of
27,057.20consisting of one-twelfth (1/12) of the 13th month pay and SIL pay based on her salary at the time of
her retirement on May 31, 1997, or 13,621.00 multiplied by 20 years. It, however, deleted the award of
attorneys fees for failure of Filipinas to show that GCHS had unreasonably and in bad faith refused to pay her
retirement benefits.22

Aggrieved, Filipinas filed a petition for certioraribefore the CA.

The CA Ruling

In a Decision23 dated April 30, 2007, the CA affirmed with modification the NLRCs Decision. It held that the
Court, in the case of Capitol Wireless, Inc.v. Sec. Confesor,24 has simplified the computation of "one-half
month salary" by equating it to"22.5 days" which is "arrived at after adding 15 days plus 2.5 days representing
one-twelfth of the 13th month pay, plus 5 days of [SIL]."25 Accordingly, it computed Filipinas retirement
benefits differential as follows:

1wphi1
Monthly salary 13,624.00 26
30 days 30 days

Daily rate 454.13 27


x 22.5 days x 22.5 days
1/2 month salary28 10,218.00

x 20 years x 20 years

Total amount of retirement benefits 204,360.00


- Amount deposited in trust 136,210.00

Retirement benefits differential 68,150.00 29

The CA further imposed legal interestat the rate of six percent (6%) per annum on the award reckoned from the
date of the filing of the illegal dismissal complaint until actual payment30 pursuant to the Courts Decision in
Manuel L. Quezon University v. NLRC(MLQU v. NLRC).31 Unperturbed, GCHS filed the instant petition.

The Issue before the Court

The essential issue in this case is whether or not the CA committed reversible error in using the multiplier "22.5
days" in computing the retirement pay differentials of Filipinas.

The Courts Ruling

The petition is bereft of merit.

RA 7641, which was enacted on December 9, 1992, amended Article 287 of the Labor Code, providing for the
rules on retirement pay to qualified private sector employees in the absence of any retirement plan in the
establishment. The said law32 states that "an employees retirement benefits under any collective bargaining
[agreement (CBA)] and other agreements shall not be less than those provided" under the same that is, at least
onehalf (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one
whole year and that "[u]nless the parties provide for broader inclusions, the term one-half (1/2) month salary
shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more
than five (5) days of service incentive leaves."

The foregoing provision is applicable where (a) there is no CBA or other applicable agreement providing for
retirement benefits to employees, or (b) there is a CBA or other applicableagreement providing for retirement
benefits but it is below the requirement set by law.33 Verily, the determining factor in choosing which
retirement scheme to apply is still superiority in terms of benefits provided.34

In the present case, GCHS has a retirement plan for its faculty and non-faculty members, which gives it the
option to retire a teacher who has rendered at least 20 years of service, regardless of age, with a retirement pay
of one-half (1/2) month for every year ofservice. Considering, however, that GCHS computed Filipinas
retirement pay without including one-twelfth (1/12) of her 13th month pay and the cash equivalent of her five
(5) days SIL, both the NLRC and the CA correctly ruled that Filipinas retirement benefits should be computed
in accordance withArticle 287 of the Labor Code, as amended by RA 7641, being the more beneficent
retirement scheme. They differ, however, in the resulting benefit differentials due to divergent interpretations of
the term "one-half (1/2) month salary" as used under the law.

The Court, in the case of Elegir v. Philippine Airlines,Inc.,35 has recently affirmed that "one-half (1/2) month
salary means 22.5 days: 15 days plus 2.5 days representingone-twelfth (1/12) of the 13th month pay and the
remaining 5 days for [SIL]."36 The Court sees no reason to depart from this interpretation. GCHS argument37
therefore that the 5 days SIL should be likewise pro-rated to their 1/12 equivalent must fail.1wphi1

Section 5.2, Rule II38 of the Implementing Rules of Book VI of the Labor Code, as amended, promulgated to
implement RA 7641, further clarifies what comprises the " month salary" due a retiring employee, to wit:

RULE II
Retirement Benefits

xxxx

SEC. 5. Retirement Benefits.


xxxx

5.2 Components of One-half (1/2) Month Salary. For the purpose of determining the minimum retirement pay
due an employee under this Rule, the term "one-half month salary" shall include all the following:

(a) Fifteen (15) days salary of the employee based on his latest salary rate. As used herein, the term
"salary" includes all remunerations paid by an employer to his employees for services rendered during
normal working days and hours, whether such payments are fixed or ascertained on a time, task, piece
or commission basis, or other method of calculating the same, and includes the fair and reasonable
value, as determined by the Secretary of Labor and Employment, of food, lodging or other facilities
customarily furnished by the employer to his employees. The term does not include cost of living
allowance,profit-sharing payments and other monetary benefits which are not considered as part of or
integrated into the regular salary of the employees.

(b) The cash equivalent of not more than five (5) days of service incentive leave;

(c) One-twelfth of the 13th month paydue the employee.

(d) All other benefits that the employer and employee may agree upon that should be included in the
computation of the employees retirement pay.

x x x x (Emphases supplied)

The foregoing rules are, thus, clear that the whole 5 days of SIL are included in the computation of a retiring
employees pay,39 as correctly ruled by the CA.1wphi1

Nonetheless, the Court finds that the award of legal interest at the rate of 6% per annum on the amount of
68,150.00 representing the retirement pay differentials due Filipinas should be reckoned from the rendition of
the LA's Decision on March 26, 2002 and not from the filing of the illegal dismissal complaint as ordered by
the CA,40 in accordance with the ruling in Eastern Shipping Lines, Inc. v. CA41 (Eastern Shipping). Unlike in
MLQU v. NLRC, where the retired teachers sued for the payment of the deficiency in their retirement benefits,
Filipinas' complaint was for illegal (constructive) dismissal, and the obligation to provide retirement pay was
only determined upon the rendition of the LA's Decision, which also found the same to be deficient vis-a-vis
those provided under RA 7641. As such, it is only from the date of the LA's Decision that GCHS' obligation to
pay Filipinas her retirement pay differentials may be deemed to have been reasonably ascertained and its
payment legally adjudged to be due, although the actual base for the computation of legal interest shall be on
the amount finally adjudged. As held in the Eastern Shipping case:42

When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of
damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest,
however, shall be adjudged on unliquidated claims or damages except when or until the demand can be
established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty,
the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil
Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest
shall begin to run only from the date the judgment of the court is made (at which time the quantification of
damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal
interest shall, in any case, be on the amount finally adjudged. (Emphases supplied)

WHEREFORE, the petition is DENIED. The Decision dated April 30, 2007 of the Court of Appeals in CA-
G.R. SP. No. 75958 is hereby AFFIRMED with MODIFICATION that the legal interest at the rate of six
percent (6%) per annum on the amount of 68,150.00 representing the retirement pay differentials payable by
petitioner Grace Christian High School to respondent Filipinas A. Lavandera shall be reckoned from the
promulgation of the Labor Arbiter's Decision on March 26, 2002 until full payment.

SO ORDERED.
G.R. No. 195466 July 2, 2014

ARIEL L. DAVID, doing business under the name and style "YIELS HOG DEALER," Petitioner,
vs.
JOHN G. MACASIO, Respondent.

We resolve in this petition for review on certiorari1 the challenge to the November 22, 2010 decision2 and the
January 31, 2011 resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 116003. The CA decision
annulled and set aside the May 26, 2010 decision4 of the National Labor Relations Commission (NLRC)5
which, in turn, affirmed the April 30, 2009 Decision6 of the Labor Arbiter (LA). The LA's decision dismissed
respondent John G. Macasio's monetary claims.

The Factual Antecedents

In January 2009, Macasio filed before the LA a complaint7 against petitioner Ariel L. David, doing business
under the name and style "Yiels Hog Dealer," for non-payment of overtime pay, holiday pay and 13th month
pay. He also claimed payment for moral and exemplary damages and attorneys fees. Macasio also claimed
payment for service incentive leave (SIL).8

Macasio alleged9 before the LA that he had been working as a butcher for David since January 6, 1995.
Macasio claimed that David exercised effective control and supervision over his work, pointing out that 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 700.00, which was increased from 600.00 in 2007, 500.00 in 2006 and
400.00 in 2005; and (3) approved and disapproved his leaves. Macasio added that David owned the hogs
delivered for chopping, as well as the work tools and implements; the latter also rented the workplace. Macasio
further claimed that David employs about twenty-five (25) butchers and delivery drivers.

In his defense,10 David claimed that he started his hog dealer business in 2005 and that he only has ten
employees. He alleged that he hired Macasio as a butcher or chopper on "pakyaw" or task basis who is,
therefore, not entitled to overtime pay, holiday pay and 13th month pay pursuant to the provisions of the
Implementing Rules and Regulations (IRR) of the Labor Code. David pointed out that Macasio: (1) usually
starts his work at 10:00 p.m. and ends at 2:00 a.m. of the following day or earlier, depending on the volume of
the delivered hogs; (2) received the fixed amount of 700.00 per engagement, regardless of the actual number
of hours that he spent chopping the delivered hogs; and (3) was not engaged to report for work and,
accordingly, did not receive any fee when no hogs were delivered.

Macasio disputed Davids allegations.11 He argued that, first, David did not start his business only in 2005. He
pointed to the Certificate of Employment12 that David issued in his favor which placed the date of his
employment, albeit erroneously, in January 2000. Second, he reported for work every day which the payroll or
time record could have easily proved had David submitted them in evidence.

Refuting Macasios submissions,13 David claims that Macasio was not his employee as he hired the latter on
"pakyaw" or task basis. He also claimed that he issued the Certificate of Employment, upon Macasios request,
only for overseas employment purposes. He pointed to the "Pinagsamang Sinumpaang Salaysay,"14 executed
by Presbitero Solano and Christopher (Antonio Macasios co-butchers), to corroborate his claims.

In the April 30, 2009 decision,15 the LA dismissed Macasios complaint for lack of merit. The LA gave
credence to Davids claim that he engaged Macasio on "pakyaw" or task basis. The LA noted the following
facts to support this finding: (1) Macasio received the fixed amount of 700.00 for every work done, regardless
of the number of hours that he spent in completing the task and of the volume or number of hogs that he had to
chop per engagement; (2) Macasio usually worked for only four hours, beginning from 10:00 p.m. up to 2:00
a.m. of the following day; and (3) the 700.00 fixed wage far exceeds the then prevailing daily minimum wage
of 382.00. The LA added that the nature of Davids business as hog dealer supports this "pakyaw" or task
basis arrangement.

The LA concluded that as Macasio was engaged on "pakyaw" or task basis, he is not entitled to overtime,
holiday, SIL and 13th month pay.
The NLRCs Ruling

In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling.17 The NLRC observed that David did not
require Macasio to observe an eight hour work schedule to earn the fixed 700.00 wage; and that Macasio had
been performing a non-time work, pointing out that Macasio was paid a fixed amount for the completion of the
assigned task, irrespective of the time consumed in its performance. Since Macasio was paid by result and not
in terms of the time that he spent in the workplace, Macasio is not covered by the Labor Standards laws on
overtime, SIL and holiday pay, and 13th month pay under the Rules and Regulations Implementing the 13th
month pay law.18

Macasio moved for reconsideration19 but the NLRC denied his motion in its August 11, 2010 resolution,20
prompting Macasio to elevate his case to the CA via a petition for certiorari.21

The CAs Ruling

In its November 22, 2010 decision,22 the CA partly granted Macasios certiorari petition and reversed the
NLRCs ruling for having been rendered with grave abuse of discretion.

While the CA agreed with the LAand the NLRC that Macasio was a task basis employee, it nevertheless found
Macasio entitled to his monetary claims following the doctrine laid down in Serrano v. Severino Santos
Transit.23 The CA explained that as a task basis employee, Macasio is excluded from the coverage of holiday,
SIL and 13th month pay only if he is likewise a "field personnel." As defined by the Labor Code, a "field
personnel" is one who performs the work away from the office or place of work and whose regular work hours
cannot be determined with reasonable certainty. In Macasios case, the elements that characterize a "field
personnel" are evidently lacking as he had been working as a butcher at Davids "Yiels Hog Dealer" business in
Sta. Mesa, Manila under Davids supervision and control, and for a fixed working schedule that starts at 10:00
p.m.

Accordingly, the CA awarded Macasios claim for holiday, SIL and 13th month pay for three years, with 10%
attorneys fees on the total monetary award. The CA, however, denied Macasios claim for moral and
exemplary damages for lack of basis.

David filed the present petition after the CA denied his motion for reconsideration24 in the CAs January 31,
2011 resolution.25

The Petition

In this petition,26 David maintains that Macasios engagement was on a "pakyaw" or task basis. Hence, the
latter is excluded from the coverage of holiday, SIL and 13th month pay. David reiterates his submissions
before the lower tribunals27 and adds that he never had any control over the manner by which Macasio
performed his work and he simply looked on to the "end-result." He also contends that he never compelled
Macasio to report for work and that under their arrangement, Macasio was at liberty to choose whether to report
for work or not as other butchers could carry out his tasks. He points out that Solano and Antonio had, in fact,
attested to their (David and Macasios) established "pakyawan" arrangement that rendered a written contract
unnecessary. In as much as Macasio is a task basis employee who is paid the fixed amount of 700.00 per
engagement regardless of the time consumed in the performance David argues that Macasio is not entitled to
the benefits he claims. Also, he posits that because he engaged Macasio on "pakyaw" or task basis then no
employer-employee relationship exists between them.

Finally, David argues that factual findings of the LA, when affirmed by the NLRC, attain finality especially
when, as in this case, they are supported by substantial evidence. Hence, David posits that the CA erred in
reversing the labor tribunals findings and granting the prayed monetary claims.

The Case for the Respondent

Macasio counters that he was not a task basis employee or a "field personnel" as David would have this Court
believe.28 He reiterates his arguments before the lower tribunals and adds that, contrary to Davids position, the
700.00 fee that he was paid for each day that he reported for work does not indicate a "pakyaw" or task basis
employment as this amount was paid daily, regardless of the number or pieces of hogs that he had to chop.
Rather, it indicates a daily-wage method of payment and affirms his regular employment status. He points out
that David did not allege or present any evidence as regards the quota or number of hogs that he had to chop as
basis for the "pakyaw" or task basis payment; neither did David present the time record or payroll to prove that
he worked for less than eight hours each day. Moreover, David did not present any contract to prove that his
employment was on task basis. As David failed to prove the alleged task basis or "pakyawan" agreement,
Macasio concludes that he was Davids employee. Procedurally, Macasio points out that Davids submissions
in the present petition raise purely factual issues that are not proper for a petition for review on certiorari. These
issues whether he (Macasio) was paid by result or on "pakyaw" basis; whether he was a "field personnel";
whether an employer-employee relationship existed between him and David; and whether David exercised
control and supervision over his work are all factual in nature and are, therefore, proscribed in a Rule 45
petition. He argues that the CAs factual findings bind this Court, absent a showing that such findings are not
supported by the evidence or the CAs judgment was based on a misapprehension of facts. He adds that the
issue of whether an employer-employee relationship existed between him and David had already been settled by
the LA29 and the NLRC30 (as well as by the CA per Macasios manifestation before this Court dated
November 15, 2012),31 in his favor, in the separate illegal case that he filed against David.

The Issue

The issue revolves around the proper application and interpretation of the labor law provisions on holiday, SIL
and 13th month pay to a worker engaged on "pakyaw" or task basis. In the context of the Rule 65 petition
before the CA, the issue is whether the CA correctly found the NLRC in grave abuse of discretion in ruling that
Macasio is entitled to these labor standards benefits.

The Courts Ruling

We partially grant the petition.

Preliminary considerations: the Montoya ruling and the factual-issue-bar rule

In this Rule 45 petition for review on certiorari of the CAs decision rendered under a Rule 65 proceeding, this
Courts power of review is limited to resolving matters pertaining to any perceived legal errors that the CA may
have committed in issuing the assailed decision. This is in contrast with the review for jurisdictional errors,
which we undertake in an original certiorari action. In reviewing the legal correctness of the CA decision, we
examine the CA decision based on how it determined the presence or absence of grave abuse of discretion in the
NLRC decision before it and not on the basis of whether the NLRC decision on the merits of the case was
correct.32 In other words, we have to be keenly aware that the CA undertook a Rule 65 review, not a review on
appeal, of the NLRC decision challenged before it.33

Moreover, the Courts power in a Rule 45 petition limits us to a review of questions of law raised against the
assailed CA decision.34

In this petition, David essentially asks the question whether Macasio is entitled to holiday, SIL and 13th
month pay. This one is a question of law. The determination of this question of law however is intertwined with
the largely factual issue of whether Macasio falls within the rule on entitlement to these claims or within the
exception. In either case, the resolution of this factual issue presupposes another factual matter, that is, the
presence of an employer-employee relationship between David and Macasio.

In insisting before this Court that Macasio was not his employee, David argues that he engaged the latter on
"pakyaw" or task basis. Very noticeably, David confuses engagement on "pakyaw" or task basis with the lack of
employment relationship. Impliedly, David asserts that their "pakyawan" or task basis arrangement negates the
existence of employment relationship.

At the outset, we reject this assertion of the petitioner. Engagement on "pakyaw" or task basis does not
characterize the relationship that may exist between the parties, i.e., whether one of employment or independent
contractorship. Article 97(6) of the Labor Code defines wages as "xxx 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 of calculating the same, which is payable by an employer to an employee
under a written or unwritten contract of employment for work done or to be done, or for services rendered or to
be rendered[.]"35 In relation to Article 97(6), Article 10136 of the Labor Code speaks of workers paid by
results or those whose pay is calculated in terms of the quantity or quality of their work output which includes
"pakyaw" work and other non-time work.

More importantly, by implicitly arguing that his engagement of Macasio on "pakyaw" or task basis negates
employer-employee relationship, David would want the Court to engage on a factual appellate review of the
entire case to determine the presence or existence of that relationship. This approach however is not authorized
under a Rule 45 petition for review of the CA decision rendered under a Rule 65 proceeding.

First, the LA and the NLRC denied Macasios claim not because of the absence of an employer-employee but
because of its finding that since Macasio is paid on pakyaw or task basis, then he is not entitled to SIL, holiday
and 13th month pay. Second, we consider it crucial, that in the separate illegal dismissal case Macasio filed with
the LA, the LA, the NLRC and the CA uniformly found the existence of an employer-employee relationship.37

In other words, aside from being factual in nature, the existence of an employer-employee relationship is in fact
a non-issue in this case. To reiterate, in deciding a Rule 45 petition for review of a labor decision rendered by
the CA under 65, the narrow scope of inquiry is whether the CA correctly determined the presence or absence
of grave abuse of discretion on the part of the NLRC. In concrete question form, "did the NLRC gravely abuse
its discretion in denying Macasios claims simply because he is paid on a non-time basis?"

At any rate, even if we indulge the petitioner, we find his claim that no employer-employee relationship exists
baseless. Employing the control test,38 we find that such a relationship exist in the present case.

Even a factual review shows that Macasio is Davids employee

To determine the existence of an employer-employee relationship, four elements generally need to be


considered, namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power
of dismissal; and (4) the power to control the employees conduct. These elements or indicators comprise the
so-called "four-fold" test of employment relationship. Macasios relationship with David satisfies this test.

First, David engaged the services of Macasio, thus satisfying the element of "selection and engagement of the
employee." David categorically confirmed this fact when, in his "Sinumpaang Salaysay," he stated that "nag
apply po siya sa akin at kinuha ko siya na chopper[.]"39 Also, Solano and Antonio stated in their "Pinagsamang
Sinumpaang Salaysay"40 that "[k]ami po ay nagtratrabaho sa Yiels xxx na pag-aari ni Ariel David bilang
butcher" and "kilalanamin si xxx Macasio na isa ring butcher xxx ni xxx David at kasama namin siya sa aming
trabaho."

Second, David paid Macasios wages.Both David and Macasio categorically stated in their respective pleadings
before the lower tribunals and even before this Court that the former had been paying the latter 700.00 each
day after the latter had finished the days task. Solano and Antonio also confirmed this fact of wage payment in
their "Pinagsamang Sinumpaang Salaysay."41 This satisfies the element of "payment of wages."

Third, David had been setting the day and time when Macasio should report for work. This power to determine
the work schedule obviously implies power of control. By having the power to control Macasios work
schedule, David could regulate Macasios work and could even refuse to give him any assignment, thereby
effectively dismissing him.

And fourth, David had the right and power to control and supervise Macasios work as to the means and
methods of performing it. In addition to setting the day and time when Macasio should report for work, the
established facts show that David rents the place where Macasio had been performing his tasks. Moreover,
Macasio would leave the workplace only after he had finished chopping all of the hog meats given to him for
the days task. Also, David would still engage Macasios services and have him report for work even during the
days when only few hogs were delivered for butchering.
Under this overall setup, all those working for David, including Macasio, could naturally be expected to observe
certain rules and requirements and David would necessarily exercise some degree of control as the chopping of
the hog meats would be subject to his specifications. Also, since Macasio performed his tasks at Davids
workplace, David could easily exercise control and supervision over the former. Accordingly, whether or not
David actually exercised this right or power to control is beside the point as the law simply requires the
existence of this power to control 4243 or, as in this case, the existence of the right and opportunity to control
and supervise Macasio.44

In sum, the totality of the surrounding circumstances of the present case sufficiently points to an employer-
employee relationship existing between David and Macasio.

Macasio is engaged on "pakyaw" or task basis

At this point, we note that all three tribunals the LA, the NLRC and the CA found that Macasio was
engaged or paid on "pakyaw" or task basis. This factual finding binds the Court under the rule that factual
findings of labor tribunals when supported by the established facts and in accord with the laws, especially when
affirmed by the CA, is binding on this Court.

A distinguishing characteristic of "pakyaw" or task basis engagement, as opposed to straight-hour wage


payment, is the non-consideration of the time spent in working. In a task-basis work, the emphasis is on the task
itself, in the sense that payment is reckoned in terms of completion of the work, not in terms of the number of
time spent in the completion of work.45 Once the work or task is completed, the worker receives a fixed
amount as wage, without regard to the standard measurements of time generally used in pay computation.

In Macasios case, the established facts show that he would usually start his work at 10:00 p.m. Thereafter,
regardless of the total hours that he spent at the workplace or of the total number of the hogs assigned to him for
chopping, Macasio would receive the fixed amount of 700.00 once he had completed his task. Clearly, these
circumstances show a "pakyaw" or task basis engagement that all three tribunals uniformly found.

In sum, the existence of employment relationship between the parties is determined by applying the "four-fold"
test; engagement on "pakyaw" or task basis does not determine the parties relationship as it is simply a method
of pay computation. Accordingly, Macasio is Davids employee, albeit engaged on "pakyaw" or task basis.

As an employee of David paid on pakyaw or task basis, we now go to the core issue of whether Macasio is
entitled to holiday, 13th month, and SIL pay.

On the issue of Macasios entitlement to holiday, SIL and 13th month pay

The LA dismissed Macasios claims pursuant to Article 94 of the Labor Code in relation to Section 1, Rule IV
of the IRR of the Labor Code, and Article 95 of the Labor Code, as well as Presidential Decree (PD) No. 851.
The NLRC, on the other hand, relied on Article 82 of the Labor Code and the Rules and Regulations
Implementing PD No. 851. Uniformly, these provisions exempt workers paid on "pakyaw" or task basis from
the coverage of holiday, SIL and 13th month pay.

In reversing the labor tribunals rulings, the CA similarly relied on these provisions, as well as on Section 1,
Rule V of the IRR of the Labor Code and the Courts ruling in Serrano v. Severino Santos Transit.46 These
labor law provisions, when read together with the Serrano ruling, exempt those engaged on "pakyaw" or task
basis only if they qualify as "field personnel."

In other words, what we have before us is largely a question of law regarding the correct interpretation of these
labor code provisions and the implementing rules; although, to conclude that the worker is exempted or covered
depends on the facts and in this sense, is a question of fact: first, whether Macasio is a "field personnel"; and
second, whether those engaged on "pakyaw" or task basis, but who are not "field personnel," are exempted from
the coverage of holiday, SIL and 13th month pay.

To put our discussion within the perspective of a Rule 45 petition for review of a CA decision rendered under
Rule 65 and framed in question form, the legal question is whether the CA correctly ruled that it was grave
abuse of discretion on the part of the NLRC to deny Macasios monetary claims simply because he is paid on a
non-time basis without determining whether he is a field personnel or not.

To resolve these issues, we need tore-visit the provisions involved.

Provisions governing SIL and holiday pay

Article 82 of the Labor Code provides the exclusions from the coverage of Title I, Book III of the Labor Code -
provisions governing working conditions and rest periods.

Art. 82. Coverage. The provisions of [Title I] shall apply to employees in all establishments and undertakings
whether for profit or not, but not to government employees, managerial employees, field personnel, members of
the family of the employer who are dependent on him for support, domestic helpers, persons in the personal
service of another, and workers who are paid by results as determined by the Secretary of Labor in appropriate
regulations.

xxxx

"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. [emphases and underscores ours]

Among the Title I provisions are the provisions on holiday pay (under Article 94 of the Labor Code) and SIL
pay (under Article 95 of the Labor Code). Under Article 82,"field personnel" on one hand and "workers who are
paid by results" on the other hand, are not covered by the Title I provisions. The wordings of Article82 of the
Labor Code additionally categorize workers "paid by results" and "field personnel" as separate and distinct
types of employees who are exempted from the Title I provisions of the Labor Code.

The pertinent portion of Article 94 of the Labor Code and its corresponding provision in the IRR47 reads:

Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage during regular holidays,
except in retail and service establishments regularly employing less than (10) workers[.] [emphasis ours]

xxxx

SECTION 1. Coverage. This Rule shall apply to all employees except:

xxxx

(e)Field personnel and other employees whose time and performance is unsupervised by the employer including
those who are engaged on task or contract basis, purely commission basis, or those who are paid a fixed amount
for performing work irrespective of the time consumed in the performance thereof. [emphases ours]

On the other hand, Article 95 of the Labor Code and its corresponding provision in the IRR48 pertinently
provides:

Art. 95. Right to service incentive. (a) Every employee who has rendered at least one year of service shall be
entitled to a yearly service incentive leave of five days with pay.

(b) This provision shall not apply to those who are already enjoying the benefit herein provided, those enjoying
vacation leave with pay of at least five days and those employed in establishments regularly employing less
than ten employees or in establishments exempted from granting this benefit by the Secretary of Labor and
Employment after considering the viability or financial condition of such establishment. [emphases ours]

xxxx
Section 1. Coverage. This rule shall apply to all employees except:

xxxx

(e) 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 a fixed amount for
performing work irrespective of the time consumed in the performance thereof. [emphasis ours]

Under these provisions, the general rule is that holiday and SIL pay provisions cover all employees. To be
excluded from their coverage, an employee must be one of those that these provisions expressly exempt, strictly
in accordance with the exemption. Under the IRR, exemption from the coverage of holiday and SIL pay refer to
"field personnel and other employees whose time and performance is unsupervised by the employer including
those who are engaged on task or contract basis[.]" Note that unlike Article 82 of the Labor Code, the IRR on
holiday and SIL pay do not exclude employees "engaged on task basis" as a separate and distinct category from
employees classified as "field personnel." Rather, these employees are altogether merged into one classification
of exempted employees.

Because of this difference, it may be argued that the Labor Code may be interpreted to mean that those who are
engaged on task basis, per se, are excluded from the SIL and holiday payment since this is what the Labor Code
provisions, in contrast with the IRR, strongly suggest. The arguable interpretation of this rule may be conceded
to be within the discretion granted to the LA and NLRC as the quasi-judicial bodies with expertise on labor
matters.

However, as early as 1987 in the case of Cebu Institute of Technology v. Ople49 the phrase "those who are
engaged on task or contract basis" in the rule has already been interpreted to mean as follows:

[the phrase] should however, 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 xxx Clearly, petitioner's
teaching personnel cannot be deemed field personnel which refers "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. [Par. 3, Article 82, Labor Code
of the Philippines]. Petitioner's claim that private respondents are not entitled to the service incentive leave
benefit cannot therefore be sustained.

In short, the payment of an employee on task or pakyaw basis alone is insufficient to exclude one from the
coverage of SIL and holiday pay. They are exempted from the coverage of Title I (including the holiday and
SIL pay) only if they qualify as "field personnel." The IRR therefore validly qualifies and limits the general
exclusion of "workers paid by results" found in Article 82 from the coverage of holiday and SIL pay. This is the
only reasonable interpretation since the determination of excluded workers who are paid by results from the
coverage of Title I is "determined by the Secretary of Labor in appropriate regulations."

The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport Systems, Inc., v. Bautista:

A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive leave
has been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to those
employees not explicitly excluded by Section 1 of Rule V. According to the Implementing Rules, Service
Incentive Leave 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.
The Autobus ruling was in turn the basis of Serrano v. Santos Transit which the CA cited in support of granting
Macasios petition.

In Serrano, the Court, applying the rule on ejusdem generis50 declared that "employees engaged on task or
contract basis xxx are not automatically exempted from the grant of service incentive leave, unless, they fall
under the classification of field personnel."51 The Court explained that the phrase "including those who are
engaged on task or contract basis, purely commission basis" found in Section 1(d), Rule V of Book III of the
IRR should not be understood as a separate classification of employees to which SIL shall not be granted.
Rather, as with its preceding phrase - "other employees whose performance is unsupervised by the employer" -
the phrase "including those who are engaged on task or contract basis" serves to amplify the interpretation of
the Labor Code definition of "field personnel" as those "whose actual hours of work in the field cannot be
determined with reasonable certainty."

In contrast and in clear departure from settled case law, the LA and the NLRC still interpreted the Labor Code
provisions and the IRR as exempting an employee from the coverage of Title I of the Labor Code based simply
and solely on the mode of payment of an employee. The NLRCs utter disregard of this consistent
jurisprudential ruling is a clear act of grave abuse of discretion.52 In other words, by dismissing Macasios
complaint without considering whether Macasio was a "field personnel" or not, the NLRC proceeded based on a
significantly incomplete consideration of the case. This action clearly smacks of grave abuse of discretion.

Entitlement to holiday pay

Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA and the NLRC had only taken counsel
from Serrano and earlier cases, they would have correctly reached a similar conclusion regarding the payment
of holiday pay since the rule exempting "field personnel" from the grant of holiday pay is identically worded
with the rule exempting "field personnel" from the grant of SIL pay. To be clear, the phrase "employees
engaged on task or contract basis "found in the IRR on both SIL pay and holiday pay should be read together
with the exemption of "field personnel."

In short, in determining whether workers engaged on "pakyaw" or task basis" is entitled to holiday and SIL pay,
the presence (or absence) of employer supervision as regards the workers time and performance is the key: if
the worker is simply engaged on pakyaw or task basis, then the general rule is that he is entitled to a holiday pay
and SIL pay unless exempted from the exceptions specifically provided under Article 94 (holiday pay) and
Article95 (SIL pay) of the Labor Code. However, if the worker engaged on pakyaw or task basis also falls
within the meaning of "field personnel" under the law, then he is not entitled to these monetary benefits.

Macasio does not fall under the classification of "field personnel"

Based on the definition of field personnel under Article 82, we agree with the CA that Macasio does not fall
under the definition of "field personnel." The CAs finding in this regard is supported by the established facts of
this case: first, Macasio regularly performed his duties at Davids principal place of business; second, his actual
hours of work could be determined with reasonable certainty; and, third, David supervised his time and
performance of duties. Since Macasio cannot be considered a "field personnel," then he is not exempted from
the grant of holiday, SIL pay even as he was engaged on "pakyaw" or task basis.

Not being a "field personnel," we find the CA to be legally correct when it reversed the NLRCs ruling
dismissing Macasios complaint for holiday and SIL pay for having been rendered with grave abuse of
discretion.

Entitlement to 13th month pay

With respect to the payment of 13th month pay however, we find that the CA legally erred in finding that the
NLRC gravely abused its discretion in denying this benefit to Macasio.1wphi1

The governing law on 13th month pay is PD No. 851.53


As with holiday and SIL pay, 13th month pay benefits generally cover all employees; an employee must be one
of those expressly enumerated to be exempted. Section 3 of the Rules and Regulations Implementing P.D. No.
85154 enumerates the exemptions from the coverage of 13th month pay benefits. Under Section 3(e),
"employers of those who are paid on xxx task basis, and those who are paid a fixed amount for performing a
specific work, irrespective of the time consumed in the performance thereof"55 are exempted.

Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the Rules and Regulations
Implementing PD No. 851 exempts employees "paid on task basis" without any reference to "field personnel."
This could only mean that insofar as payment of the 13th month pay is concerned, the law did not intend to
qualify the exemption from its coverage with the requirement that the task worker be a "field personnel" at the
same time.

WHEREFORE, in light of these considerations, we hereby PARTIALLY GRANT the petition insofar as the
payment of 13th month pay to respondent is concerned. In all other aspects, we AFFIRM the decision dated
November 22, 2010 and the resolution dated January 31, 2011 of the Court of Appeals in CA-G.R. SP No.
116003.

SO ORDERED.
G.R. Nos. 196280 & 196286 April 2, 2014

UNIVERSIDAD DE STA. ISABEL, Petitioner,


vs.
MARVIN-JULIAN L. SAMBAJON, JR., Respondent.

Before us is a petition for review on certiorari under Rule 45 urging this Court to set aside the Decision1 dated
March 25, 2011 of the Court of Appeals (CA) in CA-GR. SP Nos. 108103 and 108168 which affirmed with
modification the Decision2 dated August 1, 2008 of the National Labor Relations Commission (NLRC). The
NLRC affirmed the Decision3 dated August 22, 2006 of the Labor Arbiter in NLRC Sub-RAB V-05-04-00053-
05) declaring petitioner liable for illegal dismissal of respondent.

The Facts

Universidad de Sta. Isabel (petitioner) is a non-stock, non-profit religious educational institution in Naga City.
Petitioner hired Marvin-Julian L. Sambajon, Jr. (respondent) as a full-time college faculty member with the
rank of Assistant Professor on probationary status, as evidenced by an Appointment Contract4 dated November
1, 2002, effective November 1, 2002 up to March 30, 2003.

After the aforesaid contract expired, petitioner continued to give teaching loads to respondent who remained a
full-time faculty member of the Department of Religious Education for the two semesters of school-year (SY)
2003-2004 (June 1, 2003 to March 31, 2004); and two semesters of SY 2004-2005 (June 2004 to March 31,
2005).5

Sometime in June 2003, after respondent completed his course in Master of Arts in Education, major in
Guidance and Counseling, he submitted the corresponding Special Order from the Commission on Higher
Education (CHED), together with his credentials for the said masters degree, to the Human Resources
Department of petitioner for the purpose of salary adjustment/increase. Subsequently, respondents salary was
increased, as reflected in his pay slips starting October 1-15, 2004.6 He was likewise re-ranked from Assistant
Professor to Associate Professor.

In a letter dated October 15, 2004 addressed to the President of petitioner, Sr. Ma. Asuncion G. Evidente, D.C.,
respondent vigorously argued that his salary increase should be made effective as of June 2003 and demanded
the payment of his salary differential. The school administration thru Sr. Purita Gatongay, D.C., replied by
explaining its policy on re-ranking of faculty members7, viz:

xxxx

Please be informed that teachers in the Universidad are not re-ranked during their probationary period. The
Faculty Manual as revised for school year 2002-2003 provides (page 38) "Re-ranking is done every two years,
hence the personnel hold their present rank for two years. Those undergoing probationary period and those on
part-time basis of employment are not covered by this provision." This provision is found also in the 2000-2001
Operations Manual.

Your personnel file shows that you were hired as a probationary teacher in the second semester of school year
2002-2003. By October 2004, you will be completing four (4) semesters (two school years) of service. Even
permanent teachers are re-ranked only every two years, and you are not even a permanent teacher. I am
informed that you have been told several times and made to read the Provision in the Faculty Manual by the
personnel office that you cannot be re-ranked because you are still a probationary teacher.

x x x x8

Respondent insisted on his demand for retroactive pay. In a letter dated January 10, 2005, Sr. Evidente
reiterated the school policy on re-ranking of teachers, viz:

xxx
Under the Faculty Manual a permanent teacher is not entitled to re-ranking oftener than once every two years.
From this it should be obvious that, with all the more reason, a probationary teacher would not be entitled to
"evaluation," which could result in re-ranking or "adjustment in salary" oftener than once every two years.

Since you are a probationary teacher, the University is under no obligation to re-rank you or adjust your salary
after what you refer to as "evaluation." Nevertheless, considering that in October 2004 you were completing
two years of service, the University adjusted your salary in the light of the CHED Special Order you submitted
showing that you had obtained the degree of Master of Arts in Education. Instead of being grateful for the
adjustment, you insist that the adjustment be made retroactive to June 2003. Simply stated, you want your
salary adjusted after one semester of probationary service. We do not think a probationary teacher has better
rights than a permanent teacher in the matter of re-ranking or "evaluation."9

However, respondent found the above explanation insufficient and not clear enough. In his letter dated January
12, 2005, he pointed out the case of another faculty member -- whom he did not name -- also on probationary
status whose salary was supposedly adjusted by petitioner at the start of school year (June) after he/she had
completed his/her masters degree in March. Respondent thus pleaded for the release of his salary differential,
or at the very least, that petitioner give him categorical answers to his questions.10

Apparently, to resolve the issue, a dialogue was held between respondent and Sr. Evidente. As to the outcome
of this conversation, the parties gave conflicting accounts. Respondent claimed that Sr. Evidente told him that
the school administration had decided to shorten his probationary period to two years on the basis of his
satisfactory performance.11 This was categorically denied by Sr. Evidente though the latter admitted having
informed respondent "that he was made Associate Professor on account of his incessant requests for a salary
increase which the Universidad de Santa Isabel eventually accommodatedconsidering that [respondent] had
obtained a Masters Degree in June 2003." She further informed respondent that "his appointment as Associate
Professor did not affect his status as a probationary employee" and that petitioner "was not and did not exercise
its prerogative to shorten his probationary period to only two years." Sr. Stella O. Real, D.C., who issued a
Certificate of Employment to respondent, likewise denied that she confirmed to respondent that petitioner has
shortened his probationary employment.12

On February 26, 2005, respondent received his letter of termination which stated:

Greetings of Peace in the Lord!

We regret to inform your good self that your full time probationary appointment will not be renewed when it
expires at the end of this coming March 31, 2005.

Thank you so much for the services that you have rendered to USI and to her clientele the past several
semesters. We strongly and sincerely encourage you to pursue your desire to complete your Post Graduate
studies in the University of your choice as soon as you are able.

God bless you in all your future endeavors.

Godspeed!13

On April 14, 2005, respondent filed a complaint for illegal dismissal against the petitioner.

In his Decision dated August 22, 2006, Labor Arbiter Jesus Orlando M. Quinones ruled that there was no just or
authorized cause in the termination of respondents probationary employment. Consequently, petitioner was
found liable for illegal dismissal, thus:

WHEREFORE, in view of the foregoing, judgment is hereby rendered finding respondent school
UNIVERSIDAD DE SANTA ISABEL liable for the illegal dismissal of complainant MARVIN-JULIAN L.
SAMBAJON, JR.

Accordingly, and consistent with Article 279 of the Labor Code, respondent school is hereby directed to pay
complainant full backwages covering the period/duration of the 1st semester of academic year 2005-2006.
Reinstatement being rendered moot by the expiration of the probationary period, respondent school is directed
to pay complainant separation pay in lieu of reinstatement computed at one (1) months pay for every year of
service. An award of 10% attorneys fees in favor of complainant is also held in order.

(please see attached computation of monetary award as integral part of this decision).

All other claims and charges are DISMISSED for lack of legal and factual basis.

SO ORDERED.14

Petitioner appealed to the NLRC raising the issue of the correct interpretation of Section 92 of the Manual of
Regulations for Private Schools and DOLE-DECS-CHED-TESDA Order No. 01, series of 1996, and alleging
grave abuse of discretion committed by the Labor Arbiter in ruling on a cause of action/issue not raised by the
complainant (respondent) in his position paper.

On August 1, 2008, the NLRC rendered its Decision affirming the Labor Arbiter and holding that respondent
had acquired a permanent status pursuant to Sections 91, 92 and 93 of the 1992 Manual of Regulations for
Private Schools, in relation to Article 281 of the Labor Code, as amended. Thus:

In the instant case, the first contract (records, pp. 36; 92) executed by the parties provides that he was hired on a
probationary status effective November 1, 2002 to March 30, 2003. While his employment continued beyond
the above-mentioned period and lasted for a total of five (5) consecutive semesters, it appears that the only other
contract he signed is the one (records, p. 103) for the second semester of SY 2003-2004. A portion of this
contract reads:

"I am pleased to inform you that you are designated and commissioned to be an Apostle of Love and Service,
Unity and Peace as you dedicate and commit yourself in the exercise of your duties and responsibilities as a:

FULL-TIME FACULTY MEMBER


of the Religious Education Department from November 1, 2003 to March 31, 2004.

Unless otherwise renewed in writing this designation automatically terminates as of the date expiration above
stated without further notice."

There is no showing that the complainant signed a contract for the first and second semesters of SY 2004-2005.

Under the circumstances, it must be concluded that the complainant has acquired permanent status. The last
paragraph of Article 281 of the Labor Code provides that "an employee who is allowed to work after a
probationary period shall be considered a regular employee." Based thereon, the complainant required [sic]
permanent status on the first day of the first semester of SY 2003-2004.

As presently worded, Section 92 of the revised Manual of Regulations for Private Schools merely provides for
the maximum lengths of the probationary periods of academic personnel of private schools in the three (3)
levels of education (elementary, secondary, tertiary). The periods provided therein are not requirements for the
acquisition, by them, of permanent status.

WHEREFORE, the decision appealed from is hereby AFFIRMED.

SO ORDERED.15

Petitioner and respondent sought reconsideration of the above decision, with the former contending that the
NLRC resolved an issue not raised in the appeal memorandum, while the latter asserted that the NLRC erred in
not awarding him full back wages so as to conform to the finding that he had acquired a permanent status. Both
motions were denied by the NLRC which ruled that regardless of whether or not the parties were aware of the
rules for the acquisition of permanent status by private school teachers, these rules applied to them and overrode
their mistaken beliefs. As to respondents plea for back wages, the NLRC said the award of back wages was not
done in this case because respondent did not appeal the Labor Arbiters decision.

Both parties filed separate appeals before the CA. On motion by respondent, the two cases were consolidated
(CA-G.R. SP Nos. 108103 and 108168).16

By Decision dated March 25, 2011, the CA sustained the conclusion of the NLRC that respondent had already
acquired permanent status when he was allowed to continue teaching after the expiration of his first
appointment-contract on March 30, 2003. However, the CA found it necessary to modify the decision of the
NLRC to include the award of back wages to respondent. The dispositive portion of the said decision reads:

WHEREFORE, premises considered, the petition docketed as CA-G.R. SP No. 108103 is GRANTED. The
challenged Decision of the NLRC dated August 1, 2008 in NLRC NCR CA No. 050481-06 (NLRC Sub-RAB
V-05-04-00053-05) is AFFIRMED with MODIFICATION in that Universidad de Sta. Isabel is directed to
reinstate Marvin-Julian L. Sambajon, Jr. to his former position without loss of seniority rights and to pay him
full backwages computed from the time his compensation was withheld from him up to the time of his actual
reinstatement. All other aspects are AFFIRMED.

As regards CA-G.R. SP No. 108168, the petition is DENIED for lack of merit.

SO ORDERED.17

The Petition/Issues

Before this Court, petitioner ascribes grave error on the part of the CA in sustaining the NLRC which ruled that
respondent was dismissed without just or authorized cause at the time he had already acquired permanent or
regular status since petitioner allowed him to continue teaching despite the expiration of the first contract of
probationary employment for the second semester of SY 2002-2003. Petitioner at the outset underscores the fact
that the NLRC decided an issue which was not raised on appeal, i.e., whether respondent had attained regular
status. It points out that the Labor Arbiters finding that respondent was dismissed while still a probationary
employee was not appealed by him, and hence such finding had already become final.

In fine, petitioner asks this Court to rule on the following issues: (1) whether the NLRC correctly resolved an
issue not raised in petitioners appeal memorandum; and (2) whether respondents probationary employment
was validly terminated by petitioner.

Our Ruling

The petition is partly meritorious.

Issues on Appeal before the NLRC

Section 4(d), Rule VI of the 2005 Revised Rules of Procedure of the NLRC, which was in force at the time
petitioner appealed the Labor Arbiters decision, expressly provided that, on appeal, the NLRC shall limit itself
only to the specific issues that were elevated for review, to wit:

Section 4. Requisites for perfection of appeal. x x x.

xxxx

(d) Subject to the provisions of Article 218 of the Labor Code, once the appeal is perfected in accordance with
these Rules, the Commission shall limit itself to reviewing and deciding only the specific issues that were
elevated on appeal.
We have clarified that the clear import of the aforementioned procedural rule is that the NLRC shall, in cases of
perfected appeals, limit itself to reviewing those issues which are raised on appeal. As a consequence thereof,
any other issues which were not included in the appeal shall become final and executory.18

In this case, petitioner sets forth the following issues in its appeal memorandum:

5.01

WHETHER THE MARVIN JULIAN L. SAMBAJON, JR. WAS ILLEGALLY DISMISSED FROM THE
UNIVERSIDAD DE STA. ISABEL.

5.02

WHETHER THE UNIVERSIDAD DE STA. ISABEL SHORTENED THE PROBATIONARY PERIOD OF


MARVIN JULIAN L. SAMBAJON.

5.03

WHETHER RESPONDENTS-APPELLANTS ARE ENTITLED TO DAMAGES.19

Specifically, petitioner sought the correct interpretation of the Manual of Regulations for Private School
Teachers and DOLE-DECS-CHED-TESDA Order No. 01, series of 1996, insofar as the probationary period for
teachers.

In reviewing the Labor Arbiters finding of illegal dismissal, the NLRC concluded that respondent had already
attained regular status after the expiration of his first appointment contract as probationary employee. Such
conclusion was but a logical result of the NLRCs own interpretation of the law. Since petitioner elevated the
questions of the validity of respondents dismissal and the applicable probationary period under the aforesaid
regulations, the NLRC did not gravely abuse its discretion in fully resolving the said issues.

As the Court held in Roche (Phils.) v. NLRC20:

Petitioners then suggest that the respondent Commission abused its discretion in awarding reliefs in excess of
those stated in the decision of the labor arbiter despite the absence of an appeal by Villareal. To stress this point,
they cited Section 5(c) of the Rules of Procedure of the National Labor Relations Commission which provides
that the Commission shall, in cases of perfected appeals, limits itself to reviewing those issues which were
raised on appeal. Consequently, those which were not raised on appeal shall be final and executory.

There is no merit to this contention. The records show that the petitioners elevated the issues regarding the
correctness of the award of damages, reinstatement with backpay, retirement benefits and the cost-saving bonus
to the respondent Commission in their appeal. This opened the said issues for review and any action taken
thereon by the Commission was well within the parameters of its jurisdiction. (Emphasis supplied.)

Probationary Employment Period

A probationary employee is one who is on trial by the employer during which the employer determines whether
or not said employee is qualified for permanent employment. A probationary appointment is made to afford the
employer an opportunity to observe the fitness of a probationary employee while at work, and to ascertain
whether he will become a proper and efficient employee. The word probationary as used to describe the period
of employment implies the purpose of the term or period, but not its length.21

It is well settled that the employer has the right or is at liberty to choose who will be hired and who will be
denied employment. In that sense, it is within the exercise of the right to select his employees that the employer
may set or fix a probationary period within which the latter may test and observe the conduct of the former
before hiring him permanently.22 The law, however, regulates the exercise of this prerogative to fix the period
of probationary employment. While there is no statutory cap on the minimum term of probation, the law sets a
maximum "trial period" during which the employer may test the fitness and efficiency of the employee.23

Article 281 of the Labor Code provides:

ART. 281. Probationary Employment.Probationary employment shall not exceed six (6) months from the date
the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period.
The services of an employee who has been engaged on a probationary basis may be terminated for a just cause
or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the
employer to the employee at the time of his engagement. An employee who is allowed to work after a
probationary period shall be considered a regular employee.

The probationary employment of teachers in private schools is not governed purely by the Labor Code. The
Labor Code is supplemented with respect to the period of probation by special rules found in the Manual of
Regulations for Private Schools.24 On the matter of probationary period, Section 92 of the 1992 Manual of
Regulations for Private Schools regulations states:

Section 92. Probationary Period. Subject in all instances to compliance with the Department and school
requirements, the probationary period for academic personnel shall not be more than three (3) consecutive years
of satisfactory service for those in the elementary and secondary levels, six (6) consecutive regular semesters of
satisfactory service for those in the tertiary level, and nine (9) consecutive trimesters of satisfactory service for
those in the tertiary level where collegiate courses are offered on a trimester basis. (Emphasis supplied.)

Thus, it is the Manual of Regulations for Private Schools, and not the Labor Code, that determines whether or
not a faculty member in an educational institution has attained regular or permanent status.25 Section 9326 of
the 1992 Manual of Regulations for Private Schools provides that full-time teachers who have satisfactorily
completed their probationary period shall be considered regular or permanent.

In this case, the CA sustained the NLRCs ruling that respondent was illegally dismissed considering that he
had become a regular employee when petitioner allowed him to work beyond the date specified in his first
probationary appointment contract which expired on March 30, 2003. According to the CA:

As can be gleaned from Section 92 of the 1992 Manual of Regulations for Private Schools, the probationary
period applicable in this case is not more than six (6) consecutive regular semesters of satisfactory service. In
other words, the probationary period for academic personnel in the tertiary level runs from one (1) semester to
six (6) consecutive regular semesters of satisfactory service. In the instant case, records reveal that Sambajon,
Jr. only signed two appointment contracts. The first appointment-contract which he signed was dated November
2002 for the period November 1, 2002 to March 30, 2003, as Assistant Professor 10 on probationary status. x x
x The second appointment-contract which Sambajon, Jr. executed was dated February 26, 2004, for the period
November 1, 2003 to March 31, 2004. x x x Compared with the first appointment-contract, it was not indicated
in the February 26, 2004 appointment-contract that Sambajon, Jr. was hired on probationary status, which
explains the NLRCs conclusion that Sambajon, Jr. already attained permanent status. At this juncture, it is
worthy to emphasize that other than the period provided under Article 281 of the Labor Code, the following
quoted portion of Article 281 of the Labor Code still applies:

"ART. 281. PROBATIONARY EMPLOYMENT.

x x x x An employee who is allowed to work after a probationary period shall be considered a regular
employee."

Thus, We sustain the NLRCs conclusion that Sambajon, Jr. acquired permanent status on the first day of the
first semester of SY 2003-2004 when he was allowed to continue with his teaching stint after the expiration of
his first appointment-contract on March 30, 2003.27

On record are five appointment contracts28 of respondent:


Date Contract Period
November 1, 2002 November 1, 2002-March 30, 2003
September 28, 2003 June 1, 2003-October 31, 2003
February 26, 2004 November 1, 2003-March 31, 2004
September 30, 2004 June 1, 2004-October 31, 2004
October 28, 2004 November 3, 2004-March 31, 2005

Only the first and third contracts were signed by the respondent. However, such lack of signature in the second
contract appears not to be the crucial element considered by the CA but the fact that the third contract dated
February 26, 2004, unlike the previous contracts, does not indicate the nature of the appointment as
probationary employment. According to the CA, this implies, as concluded by the NLRC, that respondent was
already a regular employee.

We disagree.

The third appointment contract dated February 26, 2004 reads:

February 26, 2004

MR. MARVIN JULIAN SAMBAJON


Religious Education Department

Dear Mr. Sambajon,

I am pleased to inform you that you are designated and commissioned to be an Apostle of Love and Service,
Unity and Peace as you dedicate and commit yourself in the exercise of your duties and responsibilities as a:

FULL TIME FACULTY MEMBER


of the Religious Education Department from November 1, 2003 to March 31, 2004.

Unless otherwise renewed in writing, this designation automatically terminates as of the date expiration above
states without further notice.

As a member of the academic/clinical community, you are expected to live by and give your full support to the
promotion and attainment of the Vision-Mission, goals and objectives, the rules and regulations, the Core
Values which the University professes to believe and live by.

Congratulations and keep your work full in the spirit of the Lord for the Charity of Christ urges us to live life to
the fullest.

God bless

In Christ,

Sr. Ma. Asuncion G. Evidente, D.C.


USI President

Witness:

Sr. Stella O. Real, D.C.


HR Officer
I, ______________________ understand that unless renewed in writing, my services as ________________
expires automatically on the specific date above stated.

Furthermore, I fully accept this appointment to help build the Kingdom of God here and now and to facilitate
the living of the Core Values and the attainment of the Vision-Mission and the goals and objectives of the
University.

Received and Conforme:

(SGD.) MARVIN-JULIAN L. SAMBAJON, JR.29

Since it was explicitly provided in the above contract that unless renewed in writing respondents appointment
automatically expires at the end of the stipulated period of employment, the CA erred in concluding that simply
because the word "probationary" no longer appears below the designation (Full-Time Faculty Member),
respondent had already become a permanent employee. Noteworthy is respondents admission of being still
under probationary period in his January 12, 2005 letter to Sr. Evidente reiterating his demand for salary
differential, which letter was sent almost one year after he signed the February 26, 2004 appointment contract,
to wit:

The problem is that your good office has never categorically resolved whether or not probationary teachers can
also be evaluated for salary adjustment. Nevertheless, inferring from your statement that evaluation precedes re-
ranking and in fact is the basis for re-ranking, may I categorically ask: does it really mean that since, it precedes
re-ranking, evaluation should not take place among probationary teachers for they can not yet be re-ranked? If
so, then how pitiful are we, probationary teachers for our credentials are never evaluated since we cannot yet be
re-ranked. Oh my goodness! Can your good office not give me a clearer and more convincing argument
shedding light on this matter?30

Respondent nonetheless claims that subsequently, the probationary period of three years under the regulations
was shortened by petitioner as relayed to him by Sr. Evidente herself. However, the latter, together with Sr.
Real, categorically denied having informed respondent that his probationary period was abbreviated, allegedly
the reason his salary adjustment was not made retroactive. Apart from his bare assertion, respondent has not
adduced proof of any decision of the school administration to shorten his probationary period.

In Rev. Fr. Labajo v. Alejandro,31 we held that:

The three (3)-year period of service mentioned in paragraph 75 [of the Manual of Regulations for Private
Schools] is of course the maximum period or upper limit, so to speak, of probationary employment allowed in
the case of private school teachers. This necessarily implies that a regular or permanent employment status may,
under certain conditions, be attained in less than three (3) years. By and large, however, whether or not one has
indeed attained permanent status in ones employment, before the passage of three (3) years, is a matter of
proof. (Emphasis supplied.)

There can be no dispute that the period of probation may be reduced if the employer, convinced of the fitness
and efficiency of a probationary employee, voluntarily extends a permanent appointment even before the three-
year period ends. Conversely, if the purpose sought by the employer is neither attained nor attainable within the
said period, the law does not preclude the employer from terminating the probationary employment on
justifiable ground; or, a shorter probationary period may be incorporated in a collective bargaining agreement.
But absent any circumstances which unmistakably show that an abbreviated probationary period has been
agreed upon, the three-year probationary term governs.32

As to the Certificate of Employment33 issued by Sr. Real on January 31, 2005, it simply stated that respondent
"was a full time faculty member in the Religious Education Department of this same institution" and that he
holds the rank of Associate Professor. There was no description or qualification of respondents employment as
regular or permanent. Neither did the similar Certification34 also issued by Sr. Real on March 18, 2005 prove
respondents status as a permanent faculty member of petitioner.
It bears stressing that full-time teaching primarily refers to the extent of services rendered by the teacher to the
employer school and not to the nature of his appointment. Its significance lies in the rule that only full-time
teaching personnel can acquire regular or permanent status. The provisions of DOLE-DECS-CHED-TESDA
Order No. 01, series of 1996, "Guidelines on Status of Employment of Teachers and of Academic Personnel in
Private Educational Institutions" are herein reproduced:

2. Subject in all instances to compliance with the concerned agency and school requirements, the
probationary period for teaching or academic personnel shall not be more than three (3) consecutive
school years of satisfactory service for those in the elementary and secondary levels; six (6) consecutive
regular semesters of satisfactory service for those in the tertiary and graduate levels, and nine (9)
consecutive trimesters of satisfactory service for those in the tertiary level where collegiate courses are
offered on a trimester basis.

Unless otherwise provided by contract, school academic personnel who are under probationary
employment cannot be dismissed during the applicable probationary period, unless dismissal is
compelled by a just cause or causes.

3. Teachers or academic personnel who have served the probationary period as provided for in the
immediately preceding paragraph shall be made regular or permanent if allowed to work after such
probationary period. The educational institution, however, may shorten the probationary period after
taking into account the qualifications and performance of the probationary teachers and academic
personnel.

Full-time teaching or academic personnel are those meeting all the following requirements:

3.1. Who possess at least the minimum academic qualifications prescribed by the Department
of Education, Culture and Sports for Basic Education, the Commission on Higher Education for
Tertiary Education, and the Technical Education and Skills Development Authority for
Technical and Vocational Education under their respective Manual of Regulations governing
said personnel;

3.2 Who are paid monthly or hourly, based on the normal or regular teaching loads as provided
for in the policies, rules and standards of the agency concerned;

3.3 Whose regular working day of not more than eight (8) hours a day is devoted to the school;

3.4 Who have no other remunerative occupation elsewhere requiring regular hours of work that
will conflict with the working hours in the school; and

3.5 Who are not teaching full-time in any other educational institution.

All teaching or academic personnel who do not meet the foregoing qualifications are considered part
time.

4. Part-time teaching or academic personnel cannot acquire regular or permanent employment status.

5. Teaching or academic personnel who do not meet the minimum academic qualifications shall not
acquire tenure or regular status. The school may terminate their services when a qualified teacher
becomes available.35

In this case, petitioner applied the maximum three-year probationary period equivalent to six consecutive
semesters provided in the Manual of Regulations. This can be gleaned from the letter dated March 24, 2004 of
Sr. Grace Namocancat, D.C. addressed to respondent, informing the latter of the result of evaluation of his
performance for SY 2003-2004 and stating that November 2004 marks his second year of full-time teaching,
which means he had one more year to become a permanent employee.36
The circumstance that respondents services were hired on semester basis did not negate the applicable
probationary period, which is three school years or six consecutive semesters. In Magis Young Achievers
Learning Center37 the Court explained the three years probationary period rule in this wise:

The common practice is for the employer and the teacher to enter into a contract, effective for one school year.
At the end of the school year, the employer has the option not to renew the contract, particularly considering the
teachers performance. If the contract is not renewed, the employment relationship terminates. If the contract is
renewed, usually for another school year, the probationary employment continues. Again, at the end of that
period, the parties may opt to renew or not to renew the contract. If renewed, this second renewal of the contract
for another school year would then be the last year since it would be the third school year of probationary
employment. At the end of this third year, the employer may now decide whether to extend a permanent
appointment to the employee, primarily on the basis of the employee having met the reasonable standards of
competence and efficiency set by the employer. For the entire duration of this three-year period, the teacher
remains under probation. Upon the expiration of his contract of employment, being simply on probation, he
cannot automatically claim security of tenure and compel the employer to renew his employment contract. It is
when the yearly contract is renewed for the third time that Section 93 of the Manual becomes operative, and the
teacher then is entitled to regular or permanent employment status.38 (Emphasis supplied.)

Petitioner argues that respondents probationary period expires after each semester he was contracted to teach
and hence it was not obligated to renew his services at the end of the fifth semester (March 2005) of his
probationary employment. It asserts that the practice of issuing appointment contracts for every semester was
legal and therefore respondent was not terminated when petitioner did not renew his contract for another
semester as his probationary contract merely expired. Plainly, petitioner considered the subject appointment
contracts as fixed-term contracts such that it can validly dismiss respondent at the end of each semester for the
reason that his contract had expired.

The Court finds no merit in petitioners interpretation of the Manual of Regulations, supplemented by DOLE-
DECS-CHED-TESDA Order No. 01, series of 1996. As we made clear in the afore-cited case of Magis Young
Achievers Learning Center, the teacher remains under probation for the entire duration of the three-year period.
Subsequently, in the case of Mercado v. AMA Computer College-Paraaque City, Inc.39 the Court, speaking
through Justice Arturo D. Brion, recognized the right of respondent school to determine for itself that it shall
use fixed-term employment contracts as its medium for hiring its teachers. Nevertheless, the Court held that the
teachers probationary status should not be disregarded simply because their contracts were fixed-term. Thus:

The Conflict: Probationary Status


and Fixed-term Employment

The existence of the term-to-term contracts covering the petitioners employment is not disputed, nor is it
disputed that they were on probationary status not permanent or regular status from the time they were
employed on May 25, 1998 and until the expiration of their Teaching Contracts on September 7, 2000. As the
CA correctly found, their teaching stints only covered a period of at least seven (7) consecutive trimesters or
two (2) years and three (3) months of service. This case, however, brings to the fore the essential question of
which, between the two factors affecting employment, should prevail given AMACCs position that the
teachers contracts expired and it had the right not to renew them. In other words, should the teachers
probationary status be disregarded simply because the contracts were fixed-term?

The provision on employment on probationary status under the Labor Code is a primary example of the fine
balancing of interests between labor and management that the Code has institutionalized pursuant to the
underlying intent of the Constitution.

On the one hand, employment on probationary status affords management the chance to fully scrutinize the true
worth of hired personnel before the full force of the security of tenure guarantee of the Constitution comes into
play. Based on the standards set at the start of the probationary period, management is given the widest
opportunity during the probationary period to reject hirees who fail to meet its own adopted but reasonable
standards. These standards, together with the just and authorized causes for termination of employment the
Labor Code expressly provides, are the grounds available to terminate the employment of a teacher on
probationary status. For example, the school may impose reasonably stricter attendance or report compliance
records on teachers on probation, and reject a probationary teacher for failing in this regard, although the same
attendance or compliance record may not be required for a teacher already on permanent status. At the same
time, the same just and authorize[d] causes for dismissal under the Labor Code apply to probationary teachers,
so that they may be the first to be laid-off if the school does not have enough students for a given semester or
trimester. Termination of employment on this basis is an authorized cause under the Labor Code.

Labor, for its part, is given the protection during the probationary period of knowing the company standards the
new hires have to meet during the probationary period, and to be judged on the basis of these standards, aside
from the usual standards applicable to employees after they achieve permanent status. Under the terms of the
Labor Code, these standards should be made known to the teachers on probationary status at the start of their
probationary period, or at the very least under the circumstances of the present case, at the start of the semester
or the trimester during which the probationary standards are to be applied. Of critical importance in invoking a
failure to meet the probationary standards, is that the school should show as a matter of due process how
these standards have been applied. This is effectively the second notice in a dismissal situation that the law
requires as a due process guarantee supporting the security of tenure provision, and is in furtherance, too, of the
basic rule in employee dismissal that the employer carries the burden of justifying a dismissal. These rules
ensure compliance with the limited security of tenure guarantee the law extends to probationary employees.

When fixed-term employment is brought into play under the above probationary period rules, the situation as
in the present case may at first blush look muddled as fixed-term employment is in itself a valid employment
mode under Philippine law and jurisprudence. The conflict, however, is more apparent than real when the
respective nature of fixed-term employment and of employment on probationary status are closely examined.

The fixed-term character of employment essentially refers to the period agreed upon between the employer and
the employee; employment exists only for the duration of the term and ends on its own when the term expires.
In a sense, employment on probationary status also refers to a period because of the technical meaning
"probation" carries in Philippine labor law a maximum period of six months, or in the academe, a period of
three years for those engaged in teaching jobs. Their similarity ends there, however, because of the overriding
meaning that being "on probation" connotes, i.e., a process of testing and observing the character or abilities of
a person who is new to a role or job.

Understood in the above sense, the essentially protective character of probationary status for management can
readily be appreciated. But this same protective character gives rise to the countervailing but equally protective
rule that the probationary period can only last for a specific maximum period and under reasonable, well-laid
and properly communicated standards. Otherwise stated, within the period of the probation, any employer move
based on the probationary standards and affecting the continuity of the employment must strictly conform to the
probationary rules.

Under the given facts where the school year is divided into trimesters, the school apparently utilizes its fixed-
term contracts as a convenient arrangement dictated by the trimestral system and not because the workplace
parties really intended to limit the period of their relationship to any fixed term and to finish this relationship at
the end of that term. If we pierce the veil, so to speak, of the parties so-called fixed-term employment
contracts, what undeniably comes out at the core is a fixed-term contract conveniently used by the school to
define and regulate its relations with its teachers during their probationary period.

To be sure, nothing is illegitimate in defining the school-teacher relationship in this manner. The school,
however, cannot forget that its system of fixed-term contract is a system that operates during the probationary
period and for this reason is subject to the terms of Article 281 of the Labor Code. Unless this reconciliation is
made, the requirements of this Article on probationary status would be fully negated as the school may freely
choose not to renew contracts simply because their terms have expired. The inevitable effect of course is to
wreck the scheme that the Constitution and the Labor Code established to balance relationships between labor
and management.

Given the clear constitutional and statutory intents, we cannot but conclude that in a situation where the
probationary status overlaps with a fixed-term contract not specifically used for the fixed term it offers, Article
281 should assume primacy and the fixed-period character of the contract must give way. This conclusion is
immeasurably strengthened by the petitioners and the AMACCs hardly concealed expectation that the
employment on probation could lead to permanent status, and that the contracts are renewable unless the
petitioners fail to pass the schools standards.40 (Additional emphasis supplied.)

Illegal Dismissal

Notwithstanding the limited engagement of probationary employees, they are entitled to constitutional
protection of security of tenure during and before the end of the probationary period.41 The services of an
employee who has been engaged on probationary basis may be terminated for any of the following: (a) a just or
(b) an authorized cause; and (c) when he fails to qualify as a regular employee in accordance with reasonable
standards prescribed by the employer.42

Thus, while no vested right to a permanent appointment had as yet accrued in favor of respondent since he had
not completed the prerequisite three-year period (six consecutive semesters) necessary for the acquisition of
permanent status as required by the Manual of Regulations for Private Schools43 -- which has the force of
law44 -- he enjoys a limited tenure. During the said probationary period, he cannot be terminated except for just
or authorized causes, or if he fails to qualify in accordance with reasonable standards prescribed by petitioner
for the acquisition of permanent status of its teaching personnel.

In a letter dated February 26, 2005, petitioner terminated the services of respondent stating that his probationary
employment as teacher will no longer be renewed upon its expiry on March 31, 2005, respondents fifth
semester of teaching. No just or authorized cause was given by petitioner. Prior to this, respondent had
consistently achieved above average rating based on evaluation by petitioners officials and students. He had
also been promoted to the rank of Associate Professor after finishing his masters degree course on his third
semester of teaching. Clearly, respondents termination after five semesters of satisfactory service was illegal.

Respondent therefore is entitled to continue his three-year probationary period, such that from March 31, 2005,
his probationary employment is deemed renewed for the following semester (1st semester of SY 2005-2006).
However, given the discordant relations that had arisen from the parties dispute, it can be inferred with
certainty that petitioner had opted not to retain respondent in its employ beyond the three-year period.

On the appropriate relief and damages, we adhere to our disposition in Magis Young Achievers Learning
Center45:

Finally, we rule on the propriety of the monetary awards.1wphi1 Petitioner, as employer, is entitled to decide
whether to extend respondent a permanent status by renewing her contract beyond the three-year period. Given
the acrimony between the parties which must have been generated by this controversy, it can be said
unequivocally that petitioner had opted not to extend respondent's employment beyond this period. Therefore,
the award of backwages as a consequence of the finding of illegal dismissal in favor of respondent should be
confined to the three-year probationary period. Computing her monthly salary of F15,000.00 for the next two
school years (F15,000.00 x 10 months x 2), respondent already having received her full salaries for the year
2002-2003, she is entitled to a total amount of F300,000.00. Moreover, respondent is also entitled to receive her
13th month pay correspondent to the said two school years, computed as yearly salary, divided by 12 months in
a year, multiplied by 2, corresponding to the school years 2003-2004 and 2004-2005, or F150,000.00 I 12
months x 2 = F25,000.00. Thus, the NLRC was correct in awarding respondent the amount of F325,000.00 as
backwages, inclusive of 13th month pay for the school years 2003-2004 and 2004-2005, and the amount of
3,750.00 as pro-rated 13th month pay.

WHEREFORE, the petition for review on certiorari is PARTLY GRANTED. The Decision dated March 25,
2011 of the Court of Appeals in CA-G.R. SP Nos. 108103 & 108168 is hereby MODIFIED. Petitioner
Universidad de Sta. Isabel is hereby DIRECTED to PAY respondent Marvin-Julian L. Sambajon, Jr. back
wages corresponding to his full monthly salaries for one semester (1st semester of SY 2005-2006) and pro-rated
13th month pay.

The case is REMANDED to the Labor Arbiter for a recomputation of the amounts due to respondent in
conformity with this Decision.

No pronouncement as to costs. SO ORDERED.


G.R. No. 179654 September 22, 2014

HACIENDA LEDDY/RICARDO GAMBOA, JR., Petitioner,


vs.
PAQUITA VILLEGAS, Respondent.

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal of the
Decision1 dated May 25, 2007 and Resolution2 dated August 10, 2007 of the Court of Appeals in CA-G.R. SP
No. 01923,3 which granted the Petition for Certiorari under Rule 65 of the 1997 Rules of Civil Procedure filed
by Villegas, and reversed the January 26, 2006 and March 31, 2006 Orders of the National Labor Relations
Commission (NLRC). These two Orders issued by the NLRC reversed the December 3, 2003 Decision of
Executive Labor Arbiter Danilo Acosta.

The facts, as culled from the records, are as follows:

Villegas is an employee at the Hacienda Leddy as early as 1960, when it was still named Hacienda Teresa.
Later on named Hacienda Leddy owned by Ricardo Gamboa Sr., the same was succeeded by his son Ricardo
Gamboa, Jr. During his employment up to the time of his dismissal, Villegas performed sugar farming job 8
hours a day, 6 days a week work, continuously for not less than 302 days a year, and for which services he was
paid 45.00 per day. He likewise worked in petitioner's coconut lumber business where he was paid 34.00 a
day for 8 hours work.

On June 9, 1993, Gamboa went toVillegas' house and told him that his services were no longer needed without
prior notice or valid reason. Hence, Villegas filed the instant complaint for illegal dismissal.

Gamboa, on the other hand, denied having dismissed Villegas but admitted in his earlier position paper
thatVillegas indeed worked with the said farm owned by his father, doing casual and odd jobs until the latter's
death in 1993.4 He was even given the benefit of occupying a small portion of the land where his house was
erected. He, however, maintained that Villegas ceased working at the farm as early as 1992, contrary to his
allegation that he was dismissed.5

However, later, Gamboaapparently retracted and instead insisted that the farm records reveal that the only time
Villegas rendered service for the hacienda was only in the year 1993,specifically February 9, 1993 and February
11, 1993 when he was contracted by the farm to cut coconut lumber which were given to regular workers for
the repairs of their houses.6 Gamboa added that they informed Villegas that they need the property, hence, they
requested that he vacateit, but he refused. Thus, Gamboa surmised that Villegas filed the instant complaint to
gain leverage so he would not be evicted from the land he is occupying. He further argued that during his
employment, Villegas was paid in accordance with the rate mandated by law and that his claim for illegal
dismissal was merely a fabrication as he was the one who opted not to work. The Labor Arbiter found thatthere
was illegal dismissal.7 The dispositive portion of the decision reads:

WHEREFORE, in view of all the foregoing, respondent Ricardo Gamboa, Jr., is hereby ordered to pay
complainant Paquito Villegas the amount of One Hundred Forty Thousand Three Hundred Eight Pesos and
Eighty-Four/00 (140,308.84), representing his wage differential, backwages and separation pay, the award to
be deposited with this office within ten (10) days from receipt of this decision.

SO ORDERED.8

On appeal, on January 26, 2006, the NLRC set aside and vacated the Labor Arbiter's decision.9 Complainant
moved for reconsideration, but was denied.10

Thus, viapetition for certiorariunder Rule 65 of the Rules of Court, raising grave abuse of discretion as ground,
Villegas appealed before the Court of Appeals and sought the annulment of the Resolutions of the NLRC.

In the disputed Decision11 dated May 25, 2007, the Court of Appeals granted the petition and annulled and set
aside the NLRC Decision dated January 26, 2006 and Resolution dated March 31, 2006. It further reinstated the
Labor Arbiter's Decision dated December 3, 2003.
Hence, this appeal anchored on the following grounds:

WHETHER THE COURT OFAPPEALS COMMITTED REVERSIBLE ERROR, BASED ON


SUBSTANTIAL QUESTIONS OF LAW, IN REVERSING THE DECISION OF THE NLRC AND
AFFIRMING THE DECISION OF the EXECUTIVE LABOR ARBITER DECLARING THAT
RESPONDENT IS A REGULAR WORKER, THE FINDINGS NOT BEING IN ACCORD WITH LAW;

II

WHETHER THE COURT OFAPPEALS COMMITTED REVERSIBLE ERROR, BASED ON


SUBSTANTIAL QUESTIONS OF LAW, IN REVERSING THE DECISION OF THE NLRC AND
AFFIRMING THE DECISION OF THE EXECUTIVE LABOR ARBITER AND FAILED TO CONSIDER
THE MOTIVE OF THE RESPONDENT IN FILING THE CASE AND THE CREDIBILITY OF HIS
WITNESS;

III

THAT ASSUMING WITHOUT ADMITTING THAT RESPONDENT IS A REGULAR WORKER, THE


HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON SUBSTANTIAL
QUESTIONS OF LAW, IN REVERSING THE DECISION OF THE NLRC AND AFFIRMING THE
DECISION OF THE EXECUTIVE LABOR ARBITER IN DIRECTING A STRAIGHT COMPUTATION
FOR WAGE DIFFERENTIALS, BACKWAGES AND SEPARATION PAY, THE FINDINGS NOT BEING
INACCORD WITH LAW.

Petitioner disputed that there exists an employer-employee relationship between him and Villegas. He claimed
that respondent was paid on a piece-rate basis without supervision.12 Petitioner added that since his job was not
necessary or desirable in the usual business or trade of the hacienda, he cannot be considered as a regular
employee. Petitioner insisted that it was Villegas who has stopped working in the hacienda and that he was not
dismissed.

We deny the petition.

The issue of Villegas' alleged illegal dismissal is anchored on the existence of an employer-employee
relationship between him and Gamboa; thus, essentially a question of fact. Generally, the Court does not review
errors that raise factual questions. However, when there is conflict among the factual findings of the antecedent
deciding bodies like the LA, the NLRC and the CA, "it is proper, in the exercise of Our equity jurisdiction, to
review and re-evaluate the factual issues and to look into the records of the case and re-examine the questioned
findings."13

A perusal of the records would show that respondent, having been employed in the subject Hacienda while the
same was still being managed by petitioner's father until the latter's death in 1993, is undisputed as the same
was even admitted by Gamboa in his earlier pleadings.14 While refuting that Villegas was a regular employee,
petitioner however failed to categorically deny that Villegas was indeed employed in their hacienda albeit he
insisted that Villegas was merely a casual employee doing odd jobs.

The rule is long and well settled that, in illegal dismissal cases like the one at bench, the burden of proof is upon
the employer to show that the employees termination from service is for a just and valid cause. The employers
case succeeds or fails on the strength of its evidence and not the weakness of that adduced by the employee, in
keeping with the principle that the scales of justice should be tilted in favor of the latter in case of doubt in the
evidence presented by them. Often described as more than a mere scintilla, the quantum of proof is substantial
evidence which is understood as 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.15

In the instant case, if we are to follow the length of time that Villegas had worked with the Gamboas, it should
be more than 20 years of service. Even Gamboa admitted that by act of generosity and compassion, Villegas
was given a privilege of erecting his house inside the hacienda during his employment.16 While it may indeed
be an act of good will on the part of the Gamboas, still, such act is usually done by the employer either out of
gratitude for the employees service orfor the employer's convenience as the nature of the work calls for it.
Indeed, petitioner's length of service is an indication of the regularity of his employment. Even assuming that he
was doing odd jobs around the farm, such long period of doing said odd jobs is indicative that the same was
either necessary or desirable to petitioner's trade or business. Owing to the length ofservice alone, he became a
regular employee, by operation of law, one year after he was employed.

Article 280 of the Labor Code, describes a regular employee as one who is either (1) engaged to perform
activities which are necessary or desirable in the usual business or trade of the employer; and (2) those casual
employees who have rendered at least one year of service, whether continuous or broken, with respect to the
activity in which he is employed.

In Integrated Contractor and Plumbing Works, Inc. v. National Labor Relations Commission,17 we held that the
testto determine whether employment is regular or not is the reasonable connection between the particular
activity performed by the employee in relation to the usual business or trade of the employer. If the employee
has been performing the job for at least one year, even if the performance is not continuous or merely
intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the
necessity, if not indispensability of that activity to the business. Clearly,with more than 20 years of service,
Villegas, without doubt, passed this test to attain employment regularity.

While length of time may not be the controlling test to determine if Villegas is indeed a regular employee, it is
vital in establishing if he was hired to perform tasks which are necessary and indispensable to the usual business
or trade of the employer. If it was true that Villegas worked in the hacienda only in the year 1993, specifically
February 9,1993 and February 11, 1993, why would then hebe given the benefit toconstruct his house in the
hacienda? More significantly, petitioner admitted that Villegas had worked in the hacienda until his
father'sdemise. Clearly, even assuming that Villegas' employment was only for a specific duration, the fact that
he was repeatedly re-hired over a long periodof time shows that his job is necessary and indispensable to the
usual business or trade of the employer.

Gamboa likewise argued that Villegas was paid on a piece-rate basis.18 However, payment on a piece-ratebasis
does not negate regular employment. "The term wage is broadly defined in Article 97 of the Labor Code as
remuneration or earnings, capable of being expressed in terms of money whether fixed or ascertained on a time,
task, piece or commission basis. Payment by the piece is just a method of compensation and does not define the
essence of the relations."19

We are likewise unconvinced thatit was Villegas who suddenly stopped working. Considering that hewas
employed with the Gamboas for more than 20 years and was even given a place to call his home, it does not
make sense why Villegas would suddenly stop working therein for no apparent reason. To justify a finding of
abandonment of work, there must be proof of a deliberate and unjustified refusal on the part of an employee to
resume his employment. The burden of proof is on the employer to show an unequivocal intent on the part of
the employee to discontinue employment. Mere absence is not sufficient. It must be accompanied by manifest
acts unerringly pointing to the fact that the employee simply does not want to work anymore.20

Petitioner failed to discharge this burden. Other than the self-serving declarations in the affidavit of his
employee, petitioner did not adduce proof of overt acts of Villegas showing his intention to abandon his work.
Abandonment is a matter of intention;it cannot be inferred or presumed from equivocal acts. On the contrary,
the filing of the instant illegal dismissal complaint negates any intention on his part to sever their employment
relationship. The delay of morethan 1 year infiling the instant illegal dismissal case likewise is non-issue
considering that the complaint was filed within a reasonable period during the three-year period provided under
Article 291 of the Labor Code.21 As aptly observed by the appellate court, Villegas appeared tobe without
educational attainment. He could not have known that he has rights as a regular employee that is protected by
law.

The Labor Code draws a fine line between regular and casual employees to protect the interests of labor. We
ruled in Baguio Country Club Corporation v. NLRC22 that "its language evidently manifests the intent to
safeguard the tenurial interest of the worker who may be denied the rights and benefits due a regular employee
by virtue of lopsided agreements with the economically powerful employer who can maneuver to keep an
employee on a casual status for as long as convenient." Thus, notwithstanding any agreements to the contrary,
what determines whether a certain employment is regular or casual is not the will and word of the employer, to
which the desperate worker often accedes, much less the procedure of hiring the employee or the manner of
paying his salary. It is the nature of the activities performed in relation to the particular business or trades
considering all circumstances, and in some cases the length of time of its performance and itscontinued
existence.23

All these having discussed, as a regular worker, Villegas is entitled to security of tenure under Article 279 ofthe
Labor Code and can only be removed for cause. We found no valid cause attending to his dismissal and found
also that his dismissal was without due process.

Article 277(b) of the Labor Code provides that:

x x x Subject to the constitutional right of workers to security of tenure and their right to be protected against
dismissal except for a just and authorized cause and without prejudice to the requirement of notice under Article
283 of this Code, the employer shall furnish the worker whose employment is sought to be terminated a written
notice containing a statement of the causes for termination and shall afford the latter ample opportunity to be
heard and to defend himself with the assistance of his representative if he so desires in accordance with
company rules and regulations promulgated pursuant to guidelines set by the Department of Labor and
Employment. x x x

The failure of the petitioner to comply with these procedural guidelines renders its dismissal of Villegas
illegal.1wphi1 An illegally dismissed employee should be entitled to either reinstatement - if viable, or
separation pay if reinstatement is no longer viable, plus backwages in either instance.24 Considering that
reinstatement is no longer feasible because of strained relations between the employee and the employer,
separation pay should be granted. The basis for computing separation pay is usually the length of the
employee's past service, while that for backwages is the actual period when the employee was unlawfully
prevented from working.25 It should be emphasized, however, that the finality of the illegal dismissal decision
becomes the reckoning point. In allowing separation pay, the final decision effectively declares that the
employment relationship ended so that separation pay and backwages are to be computed up to that point. The
decision also becomes a judgment for money from which another consequence flows - the payment of interest
in case of delay.26

WHEREFORE, premises considered, the Decision dated May 25, 2007 and Resolution dated August 10, 2007
of the Court of Appeals are hereby AFFIRMED. The Decision dated December 3, 2003 of the Labor Arbiter in
RAB Case No. 06-08-10480-94 is hereby REINSTATED. This case is hereby REMANDED to the Labor
Arbiter for the recomputation of respondent's separation pay and backwages with legal interest.

SO ORDERED.