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G.R. No.

L-23357 April 30, 1974 Relations, from the resolution of February 25, 1964 of the Presiding
Judge and three Associate Judges of the respondent Court of
Industrial Relations denying herein petitioners' motion for
MERCURY DRUG CO., INC. and MARIANO QUE, petitioners,
reconsideration of their decision dated January 17, 1964.
DAYAO, respondents. I

Caparas and Ilagan for petitioner. It is an established principle that the findings of fact of the Court of
Industrial Relations, when supported by substantial evidence, are
conclusive and binding on this Court (Sec. 6, R.A. No. 875; Phil. Fiber
E. M. Banzali for private respondent.
Processing Co., Inc. vs. CIR, L-29770, July 19, 1973, 52 SCRA 110,
114; Bulakea Rest. & Cat. vs. CIR, L-26796, May 25, 1972, 45 SCRA
87, 100; Compania Maritima vs. Compania Maritima Labor Union, L-
29504, Feb. 29, 1972, 43 SCRA 464, 468; Cruz vs. Phil. Assn. of Free
Labor Unions, L-26519, Oct. 29, 1971, 42 SCRA 68; Phil. Eng. Corp.
vs. CIR, L-27880, Sept. 30, 1971, 41 SCRA 89; Castillo vs. CIR, L-
26124, May 29, 1971 39 SCRA 75, 83; Lakas ng Manggagawang
Petitioners Mercury Drug Co., Inc. and Mariano Que, as manager, Makabayan vs. CIR, L-32178, Dec. 28, 1970, 36 SCRA 600).
seek the reversal of the decision of respondent Court of Industrial
Relations dated January 17, 1964 and its order dated February 25,
If the respondent Court ignored the evidence adduced by herein
1964 denying petitioners' motion for reconsideration of the said petitioners, it would be guilty of grave abuse of discretion to warrant a
decision. review by Us of the findings of fact (Caltex Filipino, etc. vs. CIR, L-
30632-33, Apr. 11, 1972).
Private respondent Nardo Dayao was employed on February 13, 1956
by the petitioners originally as driver, later assigned as delivery man, Contrary to the contention of herein petitioners, the finding of fact that
then as checker and was last promoted to the position of assistant
herein private respondent Nardo Dayao was dismissed from the
chief checker in the checking department with the salary of P225.00 a service because of his union activities and that consequently herein
month until his separation on April 10, 1961. petitioners were guilty of unfair labor practice is amply substantiated by
credible evidence. Thus, the referee hearing officer, whose findings of
Dayao's appointment as checker states that his annual compensation fact and conclusions of law, were affirmed in toto by the respondent
was P2,400.00 "which includes the additional compensation for work Court to be "supported by the evidence and the law on the matter,"
on Sundays and legal holidays. Our firm being a Service Enterprise, stated in his report:
you will be required to perform work every day in a year as follows: 8
hours work on regular days and all special holidays that may be Dayao testified that on April 10, 1961, respondent
declared but with 25% additional compensation; 4 hours work on every Que summoned him in the office and inquired why
other Sunday of the month; 4 hours work on all legal holidays. For any he was organizing a new union in spite of the fact
work performed in excess of the hours as above mentioned, you shall
that there is already a labor organization existing
be paid 25% additional compensation per hour." (Exh. 2, pp. 59-60, in the company and when he replied: "I did this
rec.). thing because the company has not been paying
us the minimum wage the company has not been
Days before April 10, 1961, Dayao in vain urged herein petitioners to paying us for four hours work rendered on
pay them overtime pay, criticized their, employees' association for Sundays and also for four hours work rendered on
failing to protect the welfare of the employees by not securing such special holidays" (Tsn. pp. 8-9, July 10, 1963),
additional compensation for overtime, and campaigned among his co- respondent Que said: "Ah ganoon pala. So you
employees to organize another labor union. Hearing of Dayao's union are organizing a new union, if that is so, from now
activities, petitioner Mariano Que called for Dayao on April 10, 1961, on I do not like to see you any more in this office
told him to resign and persuaded him to accept the amount of P562.50 and you can no longer enter the service or work in
as termination pay and to sign a clearance stating to the effect that he the company, I don't like unionist" (Tsn. pp. 10-
has no claims whatsoever of any kind and nature against herein 11, ibid); that several minutes after he was told to
petitioners (Exh. 1). wait, respondent Que brought out an amount of
money and a piece of paper which he was asked
to sign before delivering to him the money that he
On April 25, 1963, exactly two years and fifteen days from his told respondent Que: "I cannot sign this paper
separation on April 10, 1961, Dayao filed a complaint for unfair labor because in fact and in truth I am not resigning
practice against herein petitioners for dismissing him because of his from the company" but respondent Que retorted:
having campaigned among his co-employees to become members of a whether you sign it or not, you could no longer
new labor union that he was then organizing (Annex A, pp. 19-20, work so you better sign it; and that "after thinking
rec.). about the matter that whether or not I sign the
paper I would be laid off and if I would be laid off I
In their answer dated May 10, 1963 to the ULP complaint, herein would have no money, so ultimately, I signed the
petitioners interposed as their only defense that Dayao "was separated paper and received the amount of P562.50 stated
from the service ... for cause because of creating trouble with another in the paper." (Tsn. pp. 11-12, ibid). The paper
employee who was also dismissed and that even if the said referred to is a cash voucher (Exhibit "A" and also
complainant was separated for cause, he received compensation pay Exhibit "4") covering complainant's separation pay
and hereby relieved respondent from whatever claim or claims that he of 15 days for every year of service.
had against respondents." Laches was not invoked by herein
petitioners in their answer (Annex B, pp. 21-22, rec.), nor in their Dayao also declared that the proximate or
memorandum dated October 28, 1963 (Annex C, pp. 23-32, rec.), immediate cause why he made efforts to organize
much less in their arguments dated February 12, 1964 in support of a separate union which he actually began in
their motion dated and filed on August 3, 1964 for the reconsideration February, 1961, "was because the management,
of the decision dated January 23, 1964. It is only in their instant petition particularly the manager, in spite of my several
for review filed on August 28, 1964 that they relied on laches, aside approaches to him, and in spite of my several
from estoppel, to defeat herein private respondent Dayao's ULP representations made to pay us the additional
charge, taking a cue from the dissent dated July 27, 1964 of Judge twenty-five percent and excess of the four hours
Emiliano R. Tabigne of the herein respondent Court of Industrial work on Sundays and legal holidays, did not like to
give us such right or such payment" and for the respondents (EXHIBIT "1"). Concepcion, however,
further reason that "our union, the Mercury Drug confessed no personal knowledge of the alleged
Company, Incorporated Employees" Union, was quarrel between Dayao and Ranin in the Apollo
anemic in that it did not do anything towards the Restaurant on the evening of April 8, 1961, except
welfare and protection of its member-employees, from what respondent Que told him on April 10,
like for example those employees who were 1961.
dismissed were not investigated and also I
approached our president of the union bringing to
Romualdo Reyes, secretary and legal counsel of
his attention my request to the manager about the
the corporation, among others, claimed that
payment of extra-compensation for work on
sometime before the separation of complainant,
Sundays and special holidays and our union
the latter had consulted him outside of the office
president told me that he could not do anything
about the vale system of the Association and
about that.' (Tsn. pp. 34-35, ibid). According to
asked his intercession so that said complainant
Dayao, among the employees he had convinced
could also get bigger vales like the other officers of
beginning February, 1961 and who agreed with
the Association but that he refused telling Dayao
him to organize another union were Josias
that the company has nothing to do about the
Fideras, Nestor Talampas, Armando de Leon,
matter for that is the affair of the Association. Atty.
Aladdin Dimagmaliw and Rogelio Orbeta.
Reyes was not present at the conference between
respondent Que and complainant Dayao on April
The testimonies of Josias Fideras and Nestor 10, 1961, and just like Concepcion, he was only
Talampas, assistant traffic supervisor and driver- informed by Que of what transpired therein.
delivery man, respectively, substantially
corroborated Dayao's declaration in material
In the examination in chief and in rebuttal, Dayao
points, in that sometime in February, 1961, the
denied having had a quarrel with the Association
latter talked to them to joining a new labor union
president, Apolinario Ranin, on any date before his
that he was organizing; that they were convinced
dismissal and also asserted that he is not aware of
of Dayao's explanations and agreed to go along
whether Ranin was also dismissed or not. Fideres
with his activities because of the management's
and Talampas also professed no knowledge about
aversion to pay them overtime on Sundays and
the alleged quarrel.
holidays and in of the fact that their Association in
the company was not good or it was not doing
anything for the interest of its welfare of its There is no question that complainant from the
members; and that Dayao was not able to formally respondents the two sums of money stated above,
organize a separate union, as planned, because as well as having signed Exhibits "1", "3" and "4".
he was discharged from the service of the There is also no dispute that he was called by
corporation. respondent Que in the Office on April 10, 1961,
and on that date was separated from employment.
The only question to be decided is whether Nardo
On the other hand, testifying on the cause of
Dayao was discharged due to union activities, as
complainant's separation from the service, the
he alleged, or for valid cause because of creating
president and general manager of the corporation,
trouble with another employee, as claimed by the
respondent Mariano Que, declared: "I think he
(Dayao) quarreled with the president of their
union, as a matter of fact he even have his head
swollen, and he also threatened, I think Ranin. He After carefully scrutinizing the records and
even threatened that he would kill Ranin so I evidence adduced in this case, the Court is not
called them to the office to discuss the matter. I inclined to believe the version given by the
tried to pacify them, but they seem to be really respondents. Be it noted that there is no clear and
very very mad at each other and they wanted to positive proof establishing the fact that there really
quarrel. So I told them if that is the case, that they was a quarrel between Dayao and Ranin which
want to create scandal in the office, I think it would allegedly happened in the Apollo Restaurant on
be better for them to resign. At that time actually the night of April 8, 1961. Respondent Que's
they were in a furious mood that they could not be declaration that "I think" there was such a quarrel
pacified, so I requested that they resign from their and that he again "think" that Dayao would inflict
job because I did not want to affect the office, and bodily harm to Ranin could not be given credence
they both agreed that they resign." (Tsn. pp. 7-8, as it was only based on surmise and belief.
September 21, 1963). According to respondent Likewise, the testimonies of Jacinto Concepcion
Que, the quarrel between Dayao and Ranin and Romualdo Reyes regarding the said incident
happened on Saturday, April 8, 1961, in the Apollo could not be given probative weight because the
Restaurant. In other words, the alleged incident tales they narrated in Court relative thereto were
did not take place in the office or premises of the just information they received from respondent
respondent corporation. Que, who may be said is not a disinterested party
if not biased. And while it is incumbent upon
Concepcion to make investigation of troubles
Jacinto Concepcion, personnel manager and also
among the company employees in view of his
acting paymaster, stated that on Monday, April 10,
position as personnel manager, as he admitted, no
1961, upon instruction of Mariano Que, he
investigation was made in the case of Dayao and
prepared the cash voucher covering the
Ranin even after he was so informed of such
separation pay of Dayao of 15 days for every year
trouble. (Tsn. p. 69, J. Concepcion, August 31,
of service, as well as the corresponding check
1963). It must be noted that Dayao vehemently
therefor in the sum of P562.50 and that after
and steadfastly denied having had a quarrel with
Dayao had signed the voucher, the check was
Ranin on any given time and expressed no
delivered to him on that same day; and that Dayao
knowledge of whether Ranin was also discharged
likewise received the amount of P140.58
or is still in the employ of the corporation. In this
representing his salary for a certain period not
connection, it is significant that Ranin, then union
shown in the records (Exhibit "3"), and also signed
president and one of the alleged protagonists, who
a clearance statement to the effect that he has no
could very well corroborate respondent Que's
claims of whatever kind and nature against the
testimony on the incident and thus overcome
Dayao's denial, was not presented by the corporation because of his union activities. It has
respondents as a witness in this case, a been shown that his efforts and representations
circumstance which strongly militates against their made to respondent Que for the payment of
cause. overtime compensation and for the excess hours
of work rendered on Sundays and holidays were
of no avail. According to the respondents, such
But granting arguendo that the quarrel did really
claims are not tenable because they are fully
occur, the Court nevertheless is of the opinion that
covered by the contracts of employment. But, as
it could not be a sufficient basis for discharging
the records will indicate, Dayao believed otherwise
from employment complainant herein. The quarrel
and his stand was shared by the other employees,
admittedly took place in a restaurant far from the
like Josias Fideres and Ernesto Talampas. An
company premises and, therefore, did not and
examination of the employment or appointment
could not have prejudiced and affected in any
paper of Nardo Dayao, dated October 30, 1959
manner the normal course of business of the
(Exh. "B", also Exh. "2") would show that the
corporation nor, to say the least, has it relevant
contents thereof may be subject to interpretation,
bearing on the complainant's employment as there
more particularly with respect to whether the
is no showing that the incident happened during
employee is entitled to overtime or additional
complainant's official working time. The added
compensation to the "4 hours work on every
contention that the complainant resigned when
Sunday of the month" and "4 hours work on all
told to do so by respondent Que does not
legal holidays," or that the same is included in the
generate belief. It is worthy to mention that the
basic pay. But the Court refrains from passing on
complainant had been continuously in the service
the matter because that is not the issue in this
of the corporation for more than five years since
case. What is important to state is the fact that the
February 23, 1956, working as a driver, a delivery
management had received same request from the
man, a checker, and then as assistant to the chief
employees for clarification on whether they should
checker of the checking department. There is no
be given additional compensation for four hours
doubt his promotions in positions were with
work on Sundays and holidays. Thus, Concepcion
corresponding increase in pay. He is a family man.
His employment in the corporation is his only
means of livelihood. This being so and taking into
account the prohibitive prices of prime necessities HEARING OFFICER (To the witness)
in life nowadays, the tightness of money and
scarcity of employment opportunities being felt not
On this particular matter of
only in metropolitan areas but also in rural and
four hours work on every
urban places, it is hard to believe that Dayao
other Sunday of the month
would be so irresponsible and reckless to resign
and four hours work on legal
his position. He never intended leaving the service
holidays, have you received a
of the corporation but, as the records demonstrate
request for clarification of
the receipt of the money, execution of Exhibits "1",
such matter,
"3" and "4", and consequent separation from
employment were forced upon him. There was no
actual physical force employed by respondent Que THE WITNESS
upon the person of Davao into making him sign
the documents and receive the termination pay.
But the act of the president and general manager Yes, sir. (Tsn. p. 87, August
of the corporation in telling complainant herein that 31, 1963)
whether or not he signs the documents he would
be dismissed just the same could be said a direct Moreover, according to Atty. Reyes, in a special
threat and a display of force and authority which meeting of the Mercury Drug Company, Inc.
afforded Dayao no alternative but to obey as he Employees' Association held on August 31, 1969,
was bided to do. While troubles among the he took the opportunity to explain to those
employees, according to personnel manager gathered in the said meeting that the additional
Concepcion, are investigated by him, no such compensation for the four hours work on Sundays
investigation was conducted by him regarding the and holidays is already included in their basic pay,
alleged trouble between Dayao and Ranin which only demonstrate that there was already a
"because I did not want to prejudice the general clamor then for such additional pay. The foregoing
manager inasmuch as he was personally handling buttress the complainant's assertion that on
the case." (Tsn. p. 69, August 31, 1963). If several occasions he had requested respondent
Concepcion, who belongs to the managerial staff, Que for the payment of such additional
was fearful of antagonizing the president and compensation, a fact not denied or rebutted by the
general manager of the corporation, how much said respondent.
more of a minor employee like Dayao. Under such
a situation, it is believed that no reasonable
person would do less than what Dayao did in It has also been established that Dayao brought to
signing the documents and receiving the amount the attention of the president of the Association
of his separation pay. But acceptance of the matter of additional compensation with the
termination pay does not divest a laborer the right view to having their union make a concerted
to prosecute his employer for unfair labor practice request from management for the payment thereof
acts (PMC vs. National Labor Union, 48 O.G. but Apolinario Ranin, then the Association
2765; Philippine Sugar Institute vs. CIR, et al., president, told him that nothing could be done
G.R. No. L-13475, Sept. 29, 1960), much less for about his request. This piece of evidence
signing the clearance paper, Exhibit "1", remained unrebutted also because Ranin was not
considering the attendant circumstances called by the respondents to testify in this case. In
surrounding the execution of the same. (See also relation thereto, there is reason to believe that the
Sec. 5[a], R.A. 875). Association had been less vigorous and potent as
an existing labor organization because before and
after the present dispute arose, it had and still
The fact is that complainant herein was given the continues to have as its presidents persons
separation pay and told to leave the service of the occupying managerial and high confidential
positions, whose interests are evidently allied with The insistence on the part of petitioners that the acceptance by private
that of the management. This conclusion finds respondent Dayao of a separation pay and his signing a renunciation
further support from the testimony of the present of any other claim against herein petitioners, militates against the
Association president, Jacinto Concepcion, that he charge of unfair labor practice gets into the teeth of the principle that
was unaware of any meeting held during the such waiver of the rights of labor contravenes public policy and
incumbency of his predecessor, Apolinario Ranin, therefore null and void, more so in this case when the root cause of the
and that it was through his personal talks with union activities of Dayao was precisely motivated by his campaign for
management and not through the representation additional compensation for overtime pay under the Eight-Hour Labor
of the Association that the employees have been Law, against which claim estoppel or laches is unavailing (see Manila
granted each a sack of rice or equivalent value of Terminal Co., Inc. vs. CIR, et. al., 91 Phil. 625); because acceptance of
P25.00 a month and also the benefit of group termination pay does not divest a laborer of the right to prosecute his
insurance. What is even worse is that Concepcion employer for unfair labor practice acts (Carino vs. ACCFA, L-19808,
could not state the names of the other officers of Sept. 29, 1966, 18 SCRA 183, 190; DMC vs. National Labor Union, 48
the Association during his incumbency, as well as O.G. 2765; Phil. Sugar Institute vs. CIR, et. al., L-13475, Sept. 29,
during the term of office of Ranin. "Considering the 1960). As Mr. Justice Conrado Sanchez, speaking for the Court in the
foregoing facts and circumstances, there is reason Carino case, supra, stated: "Acceptance of those benefits would not
to believe complainant's assertion that due to the amount to estoppel. The reason is plain. Employer and employee,
failure of the management to pay them the obviously, do not stand on the same footing. The employer drove the
additional compensation for services on Sundays employee to the wall. The latter must have to get hold of money.
and holidays and for the excess of the four hours Because, out of job, he had to face the harsh necessities of life. He
work on said days and compounded by the refusal thus found himself in no position to resist money preferred him. His,
of the then Association president to take common then, in a case of adherence, not of choice. One thing sure, however,
cause with his request for the payment of such is that petitioners did not relent on their claim. They pressed it. They
money claim, he did plan to form a separate union, are deemed not to have waived any of their rights. Renuntiatio non
no doubt, upon the hypothesis that in union there praesumitur."
is strength. The records show that beginning
February, 1961, he put into effect his plan by
As in the case at bar, private respondent has never relented in his
campaigning among his co-employees in the
claim. His filing was merely delayed and he is pressing it.
respondent corporation, like Josias Fideres,
Nestor Talampas, Armando de Leon, Aladdin
Dimagmaliw and Rogelio Orbeta. That he really From the time he was employed as checker, private respondent was
exerted efforts talking to, and convincing, the made to waive his right for additional compensation for overtime pay
employees and laborers of the corporation to join under the appointment extended to him (see pp. 59-60, rec., or pp. 14-
with him in organizing a new union was 15, Annex F). Said qualified appointment is clearly an exploitation of
satisfactorily substantiated and corroborated by the employee who would be compelled to work more than eight hours
two witnesses, Fideres and Talampas, whose on Sundays and legal holidays without additional compensation, since
presence in Court it may be worth mentioning in his appointment additional compensation for work on Sundays and
was made possible by the complainant herein holidays was deemed or expressly included in his annual salary of
only through the coercive processes of the Court. P2,400.00. Under such an appointment, he can be required to work for
They, however, declared that the new union was four hours every Sunday and for four hours on every legal holiday
formally established, as planned, due to the without additional pay.
complainant's separation from the service.
Be it emphasized that respondent Que never
disclaimed knowledge of charging employee's
It is true that unfair labor practice charge with the prayer for
union activity. In his testimony, he did not state or
in any way insinuate that he was not aware of reinstatement with back wages should be filed within a reasonable
Dayao's union activity before April 10, 1961. It was period of time. But laches, like estoppel, should also be alleged as a
defense in the answer, otherwise the same is considered renounced.
Concepcion who expressed into the records no
knowledge of the activity of Dayao, but whose Petitioners failed to expressly allege the same in their answer to the
testimony to that effect, nevertheless, is of no ULP charge, in their memorandum and in their motion for
reconsideration of the CIR decision.
moment considering that he had no hand nor was
he consulted by respondent Que in the punitive
action taken against Dayao. The evidence, However, the lapse of two years and 15 days from the dismissal from
therefore, of the complainant that respondent Que the service to the filing of the ULP charge is not an unreasonable
came to know of his activity of trying to organize period of time under the circumstances.
another union before his discharge remained
In this respect, the statute of limitations prescribed by the Civil Code of
the Philippines should apply in the absence of any other specific legal
From all the foregoing discussion, it is clear that provision. Article 1146 of the Civil Code of the Philippines directs that
the preponderance of evidence sustains a finding the action upon an injury to the rights of the plaintiff must be instituted
in favor of the complainant's version of what within four years. An action upon a contract should be filed within 10
occurred between him and respondent Que in the years (Art. 1144, CCP). All other actions whose periods are not fixed in
office of the corporation on April 10, 1961, and the the Civil Code or in other laws must be brought within five years from
Court, therefore, holds that respondents have the time the right of action accrues (Art. 1149, CCP). Whether the ULP
interfered with complainant's union activity and charge is based on an injury to the rights of Dayao or placed under the
that his dismissal from employment was category of all other actions for which no law prescribes the time limit
discriminatory. (Pp. 35-42, rec.). for their institution, the filing by respondent Dayao of the ULP charge
against herein petitioners was well within either the prescriptive period.
It should be stressed that the 1935 Constitution has been very
The foregoing searching analysis by the hearing officer of the evidence
submitted by the parties in the hearing of the unfair labor practice solicitous for the welfare of labor and expressly stated that the State
charge, is so impressive and so logical that his findings of facts and shall afford protection to labor (Sec. 6, Art. XIV, 1935 Constitution) and
expressly committed itself to the promotion of social justice to insure
conclusions of law were unqualifiedly adhered to by the four members
of the respondent Court of Industrial Relations. WE can do no less. the well-being and economic security of all the people (Sec. 5, Art. II,
1935 Constitution). The 1973 Constitution expanded such guarantees
and imposes upon the State the duty to "assure the rights of workers to
II self-organization, collective bargaining, security of tenure, and just and
humane conditions of work," after stipulating that the State "shall SO ORDERED.
promote full employment and equality in employment, insure equal
work opportunities regardless of sex, race or creed" (Sec. 9, Art. II,
Makalintal, C.J., Zaldivar, Castro, Fernando, Barredo, Antonio,
1973 Constitution). WE would be denying such constitutional
Esguerra, Fernandez, Muoz Palma and Aquino, JJ., concur.
guarantees to herein private respondent Dayao, if the position of
herein petitioners were sustained.

Finally, if the dismissal of herein private respondent Dayao was for just
cause, then there was no reason for petitioners-employers to give him
termination pay; because under the Termination Pay Law, otherwise
known as Republic Act No. 1052, as amended by Republic Act No.
1787, the employee whose services are terminated for just cause is
not entitled to termination pay (Sec. 1, Rep. Act No. 1052, as

Even under the Termination Pay Law, the alleged quarrel between
private respondent Dayao and one Ranin, the president of the labor
union, in the presence of herein petitioner Mariano Que as manager of G.R. No. 100898 July 5, 1993
petitioner corporation, is not one of the grounds justifying the dismissal
of private respondent Dayao. It is not even analogous to "serious ALEX FERRER, RAFAEL FERRER HENRY DIAZ, DOMINGO
misconduct or willful disobedience of the orders of his employer or its BANCOLITA, GIL DE GUZMAN, and FEDERATION OF
representative in connection with his work." Even if it were conceded DEMOCRATIC LABOR UNIONS, (FEDLU), petitioners,
that private respondent Dayao verbally quarrelled with the former vs.
president of their employees' association in the presence of manager NATIONAL LABOR RELATIONS COMMISSION (SECOND
Mariano Que and that both ignored the latter's admonition for them to DIVISION), HUI KAM CHANG (In his capacity as General Manager
stop quarrelling, at most the same was discourtesy which was not of Occidental Foundry Corporation), OCCIDENTAL FOUNDRY
intended considering the origin of their quarrel the failure of Ranin, CORPORATION, MACEDONIO S. VELASCO (In his capacity as
former president of the labor union, to fight for overtime pay for representative of the Federation of Free Workers), GENARO
services rendered on Sundays and holidays. Such discourtesy, at CAPITLE, JESUS TUMAGAN, ERNESTO BARROGA, PEDRO
most, merits merely a reprimand or admonition but not outright LLENA, GODOFREDO PACHECO, MARCELINO CASTILLO,
dismissal, since it did not involve the efficiency nor honesty of private GEORGE IGNAS, PIO DOMINGO, and JAIME
respondent Dayao. The fact that Dayao had been in the service for five BAYNADO, respondents.
years and ten months, during which period of time he was promoted
from driver to delivery man, to checker and finally to assistant chief
checker in the Checking Department with a salary of P225.00 a month Genrosa P. Jacinto and Raymundo D. Mallilin for private respondents.
demonstrates his efficiency, competence and trustworthiness.

The remaining question is how much back wages shall be allowed

private respondent Dayao. MELO, J.:

While this case was submitted for decision on March 29, 1965, the The petition for certiorari before us seeks to annul and set aside: (a)
delay in its resolution is not due to the parties. However, it should be the decision dated June 20, 1991 of the Second Division of the
noted that private respondent Dayao filed his ULP charge with National Labor Relations Commission (NLRC) (Penned by
reinstatement and back wages about two years and fifteen days after Commissioner Rustico L. Diokno and concurred in by Presiding
his separation on April 10, 1961. As aforestated, the shortest Commissioner Edna Bonto-Perez and Commissioner Domingo H.
prescriptive period for the filing of all other actions for which the statute Zapanta) which affirmed in toto the decision of April 5, 1990 of Labor
of limitations does not fix a period, is four years. The period of delay in Arbiter Eduardo J. Carpio dismissing the complaint for illegal dismissal
instituting this ULP charge with claim for reinstatement and back and unfair labor practice on the ground that both the company and the
wages, although within the prescriptive period, should be deducted union merely complied with the collective bargaining agreement
from the liability of the employer to him for back wages. In order that provision sanctioning the termination of any employee who fails to
the employee however should be relieved from proving his income retain membership in good standing with the union; and (b) the NLRC
during the period he was out of the service and the employer from resolution denying the motion for the reconsideration of said decision
submitting counter-proofs, which may delay the execution of the (NLRC NCR Case No. 00-10-04855-89).
decision, the employer in the case at bar should be directed to pay
private respondent Dayao back wages equivalent to one year, eleven
months, and fifteen days without further disqualifications. Petitioners were regular and permanent employees of the Occidental
Foundry Corporation (OFC) in Malanday, Valenzuela, Metro Manila
which was under the management of Hui Kam Chang. As piece
In fairness to the employer, he should not be compelled to reinstate an workers, petitioners' earnings ranged from P110 to P140 a day. They
employee who is no longer physically fit for the job from which he was had been in the employ of OFC for about ten years at the time of their
illegally ousted. dismissal in 1989 (p. 38, Rollo).

WHEREFORE, THE PETITION IS HEREBY DISMISSED AND On January 5, 1989, the Samahang Manggagawa ng Occidental
PETITIONERS ARE HEREBY DIRECTED: Foundry Corporation-FFW (SAMAHAN) and the OFC entered into a
collective bargaining agreement (CBA) which would be effective for the
(1) TO PAY PRIVATE RESPONDENT NARDO DAYAO BACK three-year period between October 1, 1988 and September 30, 1991
WAGES EQUIVALENT TO ONE YEAR, ELEVEN MONTHS, AND (Memorandum for OFC and Hui Kam Chang, p. 6, Rollo; p. 551).
FIFTEEN DAYS; . Article II thereof provides for a union security clause thus:

(2) TO REINSTATE HIM AFTER CERTIFICATION OF HIS PHYSICAL Sec. 1 The company agrees that all permanent
FITNESS BY A GOVERNMENT PHYSICIAN; AND and regular factory workers in the company who
are members in good standing of the union or who
thereafter may become members, shall as a
(3) TO PAY THE COSTS. condition of continued employment, maintain their
membership in the union in good standing for the which they sent the Federation of Democratic Labor Unions (FEDLU).
duration of the agreement. They volunteered therein to be admitted as members of the FEDLU
and requested that they be represented ("katawanin") by said
federation before the DOLE in the complaint which they intended to file
xxx xxx xxx
against the union (SAMAHAN), the FFW and the company for illegal
dismissal, reinstatement, and other benefits in accordance with law
Sec. 3 The parties agree that failure to retain (p. 74, Rollo).
membership in good standing with the UNION
shall be ground for the operation of paragraph 1
Thereafter, on various dates, petitioners sent individual letters to Hui
hereof and the dismissal by the company of the
Kam Chang professing innocence of the charges levelled against them
aforesaid employee upon written request by the
by the SAMAHAN and the FFW and pleading that they be reinstated
union. The aforesaid request shall be
(pp. 69-73, Rollo). Their letters appear to have elicited no response.
accompanied by a verified carbon original of the
Board of (sic) Resolution by the UNION signed by
at least a majority of its officers/directors. (p. Thus, contending that their dismissal was without cause and in utter
562, Rollo.) disregard of their right to due process of law, petitioners, through the
FEDLU, filed a complaint for illegal dismissal and unfair labor practice
before the NLRC against Hui Kam Chang, OFC, Macedonio S.
On May 6, 1989, petitioner Alex Ferrer and the SAMAHAN, filed in the
Velasco (as representative of the FFW) the FFW, and the SAMAHAN
Department of Labor and Employment (DOLE), a complaint for the
officers headed by Capitle (p. 75, Rollo).
expulsion from SAMAHAN of the following officers: Genaro Capitle
(president), Jesus Tumagan (vice-president), Godofredo Pacheco
(auditor), and Marcelino Pacheco (board member) (Case No. NCR-00- In due course, after the case was ventilated through position papers
M-89-11-01). The complaint was founded on said officers' alleged and other documents, the labor arbiter rendered a decision dismissing
inattentiveness to the economic demands of the workers. However, on petitioners' complaint (pp. 79-89, Rollo). He found that in dismissing
September 4, 1989, petitioners Diaz and Alex Ferrer withdrew the petitioners, OFC was "merely complying with the mandatory provisions
petition (p. 590, Rollo). of the CBA the law between it and the union." He added:

On September 10, 1989, petitioners conducted a special election of To register compliance with the said covenant, all
officers of the SAMAHAN (pp. 205 & 583, Rollo). Said election was, that is necessary is a written request of the union
however, later questioned by the FFW. Nonetheless, the elected set of requesting dismissal of the employees who have
officers tried to dissuade the OFC from remitting union dues to the failed to retain membership in good standing with
officers led by Capitle who were allied with the FFW. Later, however, the union. The matter or question, therefore of
Romulo Erlano, one of the officers elected at the special election, determining why and how did complainants fail to
manifested to the DOLE that he was no longer objecting to the retain membership in good standing is not for the
remittance of union dues to the officers led by Capitle. Petitioners' company to inquire via formal investigation. By
move to stage a strike based on economic demands was also later having the request of the union, a legal
disowned by members of the SAMAHAN. presumption that the request was born out of a
formal inquiry by the union that subject employees
failed to exist. This means generally that where a
The intraunion squabble came to a head when, on September 11,
valid closed shop or similar agreement is in force
1989, a resolution expelling petitioners from the SAMAHAN was issued
with respect to a particular bargaining unit as in
by the aforesaid union officials headed by Capitle, together with board
the case a quo, the employer shall refuse to
members George Ignas, Pio Domingo, and Jaime Baynado (pp. 286 &
employ any person unless he is a member of the
599, Rollo). The following day, Capitle sent OFC the following letter:
majority union and the employer shall dismiss
employees who fail to retain their membership in
Mr. Hui Kam Chang the majority union. This must be deemed a just
General Manager cause recognized by law and jurisprudence. The
Malanday, Valenzuela effect is discrimination to encourage membership
Metro Manila in other unions. (pp. 86-87, Rollo.)

Dear Mr. Chang: Hence, the labor arbiter concluded, the dismissal of petitioners was an
exercise of legitimate management prerogative which cannot be
considered as an unfair labor practice. On whether the SAMAHAN and
In compliance with Article II, Sec. 3 of the Union Security Clause as the FFW could be held liable for illegal dismissal and unfair labor
enunciated in our Collective Bargaining Agreement, I would like you to practice, the arbiter opined that since there was no employer-employee
dismiss the following employees on the ground of failure to retain
relationship between petitioners and respondent unions, the complaint
membership in good standing: against the latter has no factual and legal bases, because petitioners
"should not have confused expulsion from membership in the union as
1. Alex Ferrer one and the same incident to their subsequent employment
2. Gil de Guzman termination."
3. Henry Diaz
4. Domingo Bancolita
Consequently, petitioners appealed to the NLRC on the grounds that
5. Rafael Ferrer, Jr. there was prima facie evidence of abuse of discretion on the part of the
labor arbiter and that he committed serious errors in his findings of
Attached herewith is the verified carbon original of the Board facts.
Resolution of the union signed by the majority of its officers/directors.
On June 20, 1991, the NLRC rendered the herein questioned decision
Thank you very much. affirming in toto the decision of the arbiter. Petitioners motion for the
reconsideration of the NLRC decision having been denied, they
resorted to the instant petition for certiorari which presents the issue of
wether or not respondent Commision gravely t abused its discretion in
affirming the decision of the labor arbiter which is allegedly in defiance
Although petitioners received this letter weeks after its date, it appears of the elementary principles of procedural due process as the
that on that same date, they had learned about their dismissal from petitioners were summarily dismissed from employment without an
employment as shown by the letter also dated September 13, 1989
investigation having been conducted by the OFC on the veracity of the SAMAHAN had failed to maintain their membership in good standing in
allegation of the SAMAHAN-FFW that they violated the CBA. accordance with the CBA, it summarily dismissed petitioners. To make
matters worse, the labor arbiter and the NLRC shared the same view
in holding that "(t)he matter or question, therefore, of determining why
A CBA is the law between the company and the union and compliance
and how did complainants fail to retain membership in good standing is
therewith is mandated by the express policy to give protection to labor.
not for the company to inquire via formal investigation" (pp. 87 &
Said policy should be given paramount consideration unless otherwise
135, Rollo). In this regard, the following words of my learned brother,
provided for by law (Meycauayan College vs. Drilon, 185 SCRA 50
Mr. Justice Feliciano, in the Resolution in Cario are apt:
[1990]. A CBA provision for a closed shop is a valid form of union
security and it is not a restriction on the right or freedom of association
guaranteed by the Constitution (Lirag Textile Mill, Inc. vs. Blanco, 109 4. Turning now to the involvement of the Company
SCRA 87 [1981]. However, in the implementation of the provisions of in the dismissal of petitioner Cario, we note that
the CBA, both parties thereto should see to it that no right is violated or the Company upon being formally advised in
impaired. In the case at bar, while it is true that the CBA between OFC writing of the expulsion of petitioner Cario from
and the SAMAHAN provided for the dismissal of employees who have the Union, in turn simply issued a termination letter
not maintained their membership in the union, the manner in which the to Cario, the termination being made effective the
dismissal was enforced left much to be desired in terms of respect for very next day. We believe that the Company
the right of petitioners to procedural due process. should have given petitioner Cario an opportunity
to explain his side of the controversy with the
Union. Notwithstanding the Union's Security
In the first place, the union has a specific provision for the permanent
Clause in the CBA, the Company should have
or temporary "expulsion" of its erring members in its constitution and
reasonably satisfied itself by its own inquiry that
by-laws ("saligang batas at alituntunin"). Under the heading
the Union had not been merely acting arbitrarily
membership and removal ("pag-aanib at pagtitiwalag"), it states:
and capriciously in impeaching and expelling
petitioner Cario . . .
Sec. 4. Ang sinumang kasapi ay maaring itwalag
(sic) ng Samahan pangsamantala o tuluyan sa
xxx xxx xxx
pamamagitan (sic) ng tatlo't ikaapat () na bahagi
ng dami ng bilang ng Pamunuang
Tagapagpaganap. Pagkaraan lamang sa pandinig 5. We conclude that the Company had failed to
sa kanyang kaso. Batay sa sumusunod: accord to petitioner Cario the latter's right to
procedural due process. The right of an employee
to be informed of the charges against him and to
(a) Sinumang gumawa ng mga bagay bagay na
reasonable opportunity to present his side in a
labag at lihis sa patakaran ng Samahan.
controversy with either the Company or his own
Union, is not wiped away by a Union Security
(b) Sinumang gumawa ng mga bagay na Clause or a Union Shop Clause in a CBA. An
maaaring ikabuwag ng Samahan. employee is entitled to be protected not only from
a company which disregards his rights but also
from his own Union the leadership of which could
(c) Hindi paghuhulog ng butaw sa loob ng tatlong yield to the temptation of swift and arbitrary
buwan na walang sakit o Doctor's Certificate.
expulsion from membership and hence dismissal
from his job. (pp. 186 & 189.)
(d) Hindi pagbibigay ng abuloy na itinatadhana ng
The need for a company investigation is founded on the consistent
ruling of this Court that the twin requirements of notice and hearing
(e) Sinumang kasapi na natanggal sa kapisanan which are essential elements of due process must be met in
at gustong, sumapi uli ay magpapanibago ng employment-termination cases. The employee concerned must be
bilang, mula sa taon ng kanyang pagsapi uli sa notified of the employer's intent to dismiss him and of the reason or
Samahan. (Emphasis supplied; Ibid., p. 177). reasons for the proposed dismissal. The hearing affords the employee
an opportunity to answer the charge or charges against him and to
defend himself therefrom before dismissal is effected (Kwikway
No hearing ("pandinig") was ever conducted by the SAMAHAN to look Engineering Works vs. NLRC, 195 SCRA 526 [1991]; Salaw vs. NLRC,
into petitioners' explanation of their moves to oust the union leadership 202 SCRA 7 [1991]). Observance to the letter of company rules on
under Capitle, or their subsequent affiliation with FEDLU. While it is investigation of an employee about to be dismissed is not mandatory. It
true that petitioners' actions might have precipitated divisiveness and, is enough that there is due notice and hearing before a decision to
later, showed disloyalty to the union, still, the SAMAHAN should have dismiss is made (Mendoza vs. NLRC, 195 SCRA 606 (1991]). But
observed its own constitution and by-laws by giving petitioners an even if no hearing is conducted, the requirement of due process would
opportunity to air their side and explain their moves. If, after an have been met where a chance to explain a party's side of the
investigation the petitioners were found to have violated union rules, controversy had been accorded him (Philippine Airlines, Inc. vs. NLRC,
then and only then should they be subjected to proper disciplinary 198 SCRA 748 [1991]).

If an employee may be considered illegally dismissed because he was

Here lies the distinction between the facts of this case and that not accorded fair investigation (Hellenic Philippine Shipping vs. Siete,
of Cario vs. NLRC (185 SCRA 177 [1990]) upon which the Solicitor 195 SCRA 179 (1991]), the more reason there is to strike down as an
General heavily relies in supporting the stand of petitioners. In Cario, inexcusable and disdainful rejection of due process a situation where
the erring union official was given the chance to answer the complaints there is no investigation at all (See: Colegio del Sto. Nio vs. NLRC,
against him before an investigating committee created for that 197 SCRA 611 [1991]; Artex Development Co., Inc. vs. NLRC, 187
purpose. On the other, hand, herein petitioners were not given even SCRA 611 [1990]). The need for the observance of an employee's right
one opportunity to explain their side in the controversy. This procedural to procedural due process in termination cases cannot be
lapse should not have been overlooked considering the union security overemphasized. After all, one's employment, profession, trade, or
provision of the CBA. calling is a "property right" and the wrongful interference therewith
gives rise to an actionable wrong (Callanta vs. Carnation Philippines,
What aggravated the situation in this case is the fact that OFC itself Inc., 145 SCRA 268 (1986]). Verily, a man's right to his labor is
took for granted that the SAMAHAN had actually conducted an inquiry property within the meaning of constitutional guarantees which he
and considered the CBA provision for the closed shop as self- cannot be deprived of without due process (Batangas Laguna Tayabas
operating that, upon receipt of a notice that some members of the Bus Co. vs. Court of Appeals, 71 SCRA 470 [1976]).
While the law recognizes the right of an employer to dismiss Security of Tenure. In cases of regular
employees in warranted cases, it frowns upon arbitrariness as when employment, the employer shall not terminate the
employees are not accorded due process (Tan, Jr. vs. NLRC, 183 services of an employee except for a just cause or
SCRA 651 [1990]). Thus, the prerogatives of the OFC to dismiss when authorized by this Title. An employee who is
petitioners should not have been whimsically done for it unduly unjustly dismissed from work shall be entitled to
exposed itself to a charge of unfair labor practice for dismissing reinstatement without loss of seniority rights and
petitioners in line with the closed shop provision of the CBA, without a other privileges and to his full backwages,
proper hearing (Tropical Hut Employees' Union-CGW vs. Tropical Hut inclusive of allowances, and to his other benefits
Food Market, Inc., 181 SCRA 173 [1990]; citing Binalbagan-Isabela or their monetary equivalent computed from the
Sugar Co., Inc. (BISCOM) vs. Philippine Association of Free Labor time his compensation was withheld from him up
Unions (PAFLU), 8 SCRA 700 [1983]). Neither can the manner of to the time of his actual reinstatement.
dismissal be considered within the ambit of managerial prerogatives,
for while termination of employment is traditionally considered a
and as implemented by Section 3, Rule 8 of the 1990 New Rules of
management prerogative, it is not an absolute prerogative subject as it
Procedure of the National Labor Relations Commission, it would seem
is to limitations founded in law, the CBA, or general principles of fair
that the Mercury Drug Rule (Mercury Drug Co., Inc. vs. Court of
play and justice (University of Sto. Tomas vs. NLRC, 190 SCRA 758
Industrial Relations, 56 SCRA 694 [1974]) which limited the award of
back wages of illegally dismissed workers to three (3) years "without
deduction or qualification" to obviate the need for further proceedings
Under Rule XIV, Sections 2, 5, and 6 of the rules implementing Batas in the course of execution, is no longer applicable.
Pambansa Blg. 130, the OFC and the SAMAHAN should solidarity
indemnify petitioners for the violation of their right to procedural due
A legally dismissed employee may now be paid his back wages,
process (Great Pacific Life Assurance Corporation vs. NLRC, 187
allowances, and other benefits for the entire period he was out of work
SCRA 694[1990], citing Wenphil vs. NLRC, 170 SCRA 69 [1989],
subject to the rule enunciated before the Mercury Drug Rule, which is
Cario vs. NLRC, supra). However, such penalty may be imposed only
that the employer may, however, deduct any amount which the
where the termination of employment is justified and not when the
employee may have earned during the period of his illegal termination
dismissal is illegal as in this case where the damages are in the form of
(East Asiatic Company, Ltd. vs. Court of Industrial Relations, 40 SCRA
back wages.
521 [1971]). Computation of full back wages and presentation of proof
as to income earned elsewhere by the illegally dismissed employee
As earlier discussed, petitioners' alleged act of sowing disunity among after his termination and before actual reinstatement should be
the members of the SAMAHAN could have been ventilated and ventilated in the execution proceedings before the Labor Arbiter
threshed out through a grievance procedure within the union itself. But concordant with Section 3, Rule 8 of the 1990 new Rules of Procedure
resort to such procedure was not pursued. What actually happened in of the National Labor Relations Commission.
this case was that some members, including petitioners, tried to unseat
the SAMAHAN leadership headed by Capitle due to the latter's alleged
Inasmuch as we have ascertained in the text of this discourse that the
inattention to petitioners' demands for the implementation of the P25-
OFC whimsically dismissed petitioners without proper hearing and has
wage increase which took effect on July 1, 1989. The intraunion
thus opened OFC to a charge of unfair labor practice, it ineluctably
controversy was such that petitioners even requested the FFW to
follows that petitioners can receive their back wages computed from
intervene to facilitate the enforcement of the said wage increase
the moment their compensation was withheld after their dismissal in
(Petition, p. 54; p. 55, Rollo).
1989 up to the date of actual reinstatement. In such a scenario, the
award of back wages can extend beyond the 3-year period fixed by the
Petitioners sought the help of the FEDLU only after they had learned of Mercury Drug Rule depending, of course, on when the employer will
the termination of their employment upon the recommendation of reinstate the employees.
Capitle. Their alleged application with federations other than the FFW
(Labor Arbiter's Decision, pp. 4-5; pp. 82-83, Rollo) can hardly be
It may appear that Article 279 of the Labor Code, as amended by
considered as disloyalty to the SAMAHAN, nor may the filing of such
Republic Act No. 6715, has made the employer bear a heavier burden
applications denote that petitioners failed to maintain in good standing
than that pronounced in the Mercury Drug Rule, but perhaps Republic
their membership in the SAMAHAN. The SAMAHAN is a different
Act No. 6715 was enacted precisely for the employer to realize that the
entity from FFW, the federation to which it belonged. Neither may it, be
employee must be immediately restored to his former position, and to
inferred that petitioners sought disaffiliation from the FFW for
impress the idea that immediate reinstatement is tantamount to a cost-
petitioners had not formed a union distinct from that of the SAMAHAN.
saving measure in terms of overhead expense plus incremental
Parenthetically, the right of a local union to disaffiliate from a federation
productivity to the company which lies in the hands of the employer.
in the absence of any provision in the federation's constitution
preventing disaffiliation of a local union is legal (People's Industrial and
Commercial Employees and Worker's Org. (FFW) vs. People's WHEREFORE, the decision appealed from is hereby SET ASIDE and
Industrial and Commercial Corp., 112 SCRA 440 (1982]). Such right is private respondents are hereby ordered to reinstate petitioners to their
consistent with the constitutional guarantee of freedom of association former or equivalent positions without loss of seniority rights and with
(Tropical Hut Employees Union-CGW vs. Tropical Hut Food Market, full back wages, inclusive of allowances and other benefits or their
Inc., 181 SCRA 173 [1990]). monetary equivalent, pursuant to Article 279 of the Labor Code, as
amended by Republic Act No. 6715.
Hence, while petitioners' act of holding a special election to oust
Capitle, et al. may be considered as an act of sowing disunity among SO ORDERED.
the SAMAHAN members, and, perhaps, disloyalty to the union
officials, which could have been dealt with by the union as a
Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.
disciplinary matter, it certainly cannot be considered as constituting
disloyalty to the union. Faced with a SAMAHAN leadership which they
had tried to remove as officials, it was but a natural act of self-
preservation that petitioners fled to the arms of the FEDLU after the
union and the OFC had tried to terminate their employment. Petitioners
should not be made accountable for such an act.

With the passage of Republic Act No. 6715 which took effect on March
21, 1989, Article 279 of the Labor Code was amended to read as
follows: G.R. No. 96779 November 10, 1993
PINE CITY EDUCATIONAL CENTER and EUGENIO complainants immediately to their former positions
BALTAO, petitioners, and to pay their full backwages and other benefits
vs. and privileges without qualification and deduction
THE NATIONAL LABOR RELATIONS COMMISSION (THIRD from the time they were dismissed up to their
Thus respondents should pay complainants the
BERMUDEZ and LUCIA CHAN, respondents.

Tenefrancia, Agranzamendez, Liceralde & Associates for petitioners.


Reynaldo B. Cajucom for private respondents.

NOTE: Computation covers only the
period complainants were terminated up
to January 31, 1990 or 10 months and
does not include backwages from
January 31, 1990 up to their actual

The is a petition for certiorari seeking the reversal of the resolution of

public respondent National Labor Relations Commission dated
November 29, 1990, in NLRC Case No. 01-04-0056-89, which
affirmed in toto the decision of the Labor Arbiter dated February a) Latest salary per month P2,136.00
28,1990. b) Multiplied by period covered
(March 31, 1989 to January 31, 1990) x 10 months

The antecedent facts are, a follows:
c) Equals backwages due P21,360.00

Private respondents Dangwa Bentrez, Roland Picart, Apollo Ribaya,

Sr., Ruperta Ribaya, Virginia Boado, Cecilia Emocling, Jane Bentrez,
Leila Dominguez, Rose Ann Bermudez and Lucia Chan were all
employed as teachers on probationary basis by petitioner Pines City a) Latest salary per month P1,600.00
Educational Center, represented in this proceedings by its President, b) Multiplied by period covered x 10 months
Eugenio Baltao. With the exception of Jane Bentrez who was hired as
a grade school teacher, the remaining private respondents were hired c) Equals backwages due P16,000.00
as college instructors. All the private respondents, except Roland
Picart and Lucia Chan, signed contracts of employment with petitioner
for a fixed duration. On March 31, 1989, due to the expiration of private
respondents' contracts and their poor performance as teachers, they
were notified of petitioners' decision not to renew their contracts a) Latest salary per month P1,648.24
anymore. b) Multiplied by period covered x 10 months

c) Equals backwages due P16,482.40
On April 10, 1989, private respondents filed a complaint for illegal
dismissal before the Labor Arbiter, alleging that their dismissals were
without cause and in violation of due process. Except for private 4) RUPERTA RIBAYA
respondent Leila Dominguez who worked with petitioners for one
semester, all other private respondents were employed for one to two
years. They were never informed in writing by petitioners regarding the a) Latest salary per month P1,856.00
b) Multiplied by period covered x 10 months
standards or criteria of evaluation so as to enable them to meet the
requirements for appointment as regular employees. They were merely
notified in writing by petitioners, through its chancellor, Dra. Nimia R. c) Equals backwages due P18,560.00
Concepcion, of the termination of their respective services as on March
31, 1989, on account of their below-par performance as teachers. 5) CECILIA EMOCLING

For their part, petitioners contended that private respondents' a) Latest salary per month P1,648.00
separation from employment, apart from their poor performance, was b) Multiplied by period covered x 10 months
due to the expiration of the periods stipulated in their respective
contracts. In the case of private respondent Dangwa Bentrez, the c) Equals backwages due P16,480.00
duration of his employment contract was for one year, or beginning
June, 1988 to March 1989 whereas in the case of the other private
respondents, the duration of their employment contracts was for one 6) ROSE ANN BERMUDEZ
semester, or beginning November, 1988 to March 1989. These
stipulations were the laws that governed their relationships, and there a) Latest salary per month P2,600.00
was nothing in said contracts which was contrary to law, morals, good b) Multiplied by period covered x 10 months
customs and public policy. They argued further that they cannot be
compelled o enter into new contracts with private respondents. they c) Equals backwages due P26,000.00
concluded that the separation of private respondents from the service
was justified.

On February 28, 1990, the Labor Arbiter rendered judgment in favor of

private respondents, the dispositive portion of which reads: a) Latest salary per month P1,700.00
b) Multiplied by period covered x 10 months

WHEREFORE, in the light of the foregoing c) Equals backwages due P17,000.00
considerations, judgment is hereby rendered
ORDERING the respondents to reinstate the
a) Latest salary per month P1,315.44
b) ultiplied by period covered x 10 months

c) Equals backwages due P13,154.40 Petitioners reiterate their previous arguments, relying heavily in the
case of Brent School, Inc. et al., v. Zamora, et al. 7
It is quite easy to resolve the present controversy because
the Brent case, which is a product of extensive research, already
a) Latest salary per month P1,875.00
provides the answer. We were categorical therein that:
b) Multiplied by period covered x 10 months

c) Equals backwages due P18,7500.00 Accordingly, and since the entire purpose behind
the development of legislation culminating in the
present Article 280 of the Labor Code clearly
appears to have been, as already observed, to
prevent circumvention of the employee's right to
a) Latest salary per month P1,648.24 be secure in his tenure, the clause in said article
b) Multiplied by period covered x 10 months indiscriminately and completely ruling out all
written and oral agreements conflicting with the
c) Equals backwages due P16,482.40 concept of regular employment as defined therein
should be construed to refer to the substantive evil
that the Code itself has singled out: agreements
SUMMARY entered into precisely to prevent security of
tenure. It should have no application to instances
1) Roland Picart 21,360.00 where a fixed period of employment was agreed
2) Lucia Chan 16,000.00 upon knowingly and voluntarily by the parties,
3) Leila Dominguez 16,482.40 without any force, duress or improper pressure
4) Ruperta Ribaya 18,560.00 brought to bear upon the employee and absent
5) Cecilia Emocling 16,480.00 any other circumstances vitiating his consent, or
6) Rose Ann Bermudez where it satisfactorily appears that the employer or
26,000.00 employee dealt with each other on more or less
7) Dangwa Bentrez 17,000.00 equal terms with no moral dominance whatever
8) Jane Bentrez 13,154.40 being exercised by the former over the latter.
9) Apollo Ribaya 18,750.00 Unless thus limited in its purview, the law would be
10) Virginia Boado 16,482.40 made to apply to purposes other than those
expressly stated by its framers; it thus becomes
GRAND TOTAL (Backwages) pointless and arbitrary, unjust in its effects and apt
P180,269.20 to lead to absurd and unintended consequences.
(Emphasis supplied.)
Complainants claims for indemnity pay, premium
pay for holidays and rest days, illegal deduction, The ruling was reiterated in Pakistan International Airlines
13th month pay and underpayment are hereby Corporation v. Ople, etc., et al.8 and La Sallete of Santiago,
DENIED for lack of merit. Inc. v. NLRC, et al.9

SO ORDERED.1 In the present case, however, We have to make a distinction.

In support of this decision, the Labor Arbiter rationalized that the Insofar as the private respondents who knowingly and voluntarily
teacher's contracts2 are vague and do not include the specific agreed upon fixed periods of employment are concerned, their
description of duties and assignments of private respondents. They do services were lawfully terminated by reason of the expiration of the
not categorically state that there will be no renewal because their periods of their respective contracts. These are Dangwa Bentrez,
appointments automatically terminate at the end of the semester. Apollo Ribaya, Sr., Ruperta Ribaya, Virginia Boado, Cecilia Emocling,
Petitioners did not present any written evidence to substantiate their Jose Bentrez, Leila Dominguez and Rose Ann Bermudez. Thus, public
allegation that the Academic Committee has evaluated private respondent committed grave abuse of discretion in affirming the
respondents' performance during their one semester employment. On decision of the Labor Arbiter ordering the reinstatement and payment
the contrary, they were hastily dismissed. of full backwages and other benefits and privileges.

On appeal to the National Labor Relations Commission, the decision With respect to private respondents Roland Picart and Lucia Chan,
was affirmed in toto in its resolution dated November 29, 1990, with the both of whom did not sign any contract fixing the periods of their
additional reasoning that "the stipulation in the contract providing for a employment nor to have knowingly and voluntarily agreed upon fixed
definite period in the employment of complainant is obviously null and periods of employment, petitioners had the burden of proving that the
void, as such stipulation directly assails the safeguards laid down in termination of their services was legal. As probationary employees,
Article 280 (of the Labor Code), 3 which explicitly abhors the they are likewise protected by the security of tenure provision of the
consideration of written or oral agreements pertaining to definite period Constitution. Consequently, they cannot be removed from their
in regular employments. 4 Hence, the present petition for certiorari with positions unless for cause. 10 On the other hand, petitioner contended
prayer for the issuance of a temporary restraining order. that base don the evaluation of the Academic Committee their
performance as teachers was poor. The Labor Arbiter, however, was
not convinced. Thus he found as follows:
As prayed for, this Court issued a temporary restraining order on
March 11, 1991, enjoining respondents from enforcing the questioned
resolution.5 Respondents likewise aver that the Academic
Committee has evaluated their performance
during their one semester employment (see
Petitioners raise this sole issue: "THAT THERE IS PRIMA Annexes "M" to "X" of complainants' position
paper). However, they did not present any written
proofs or evidence to support their allegation. 11
G.R. No. 111651 November 28, 1996
xxx xxx xxx
There is absolutely nothing in the record which will FERNANDO L. BUSTAMANTE, MARIO D. SUMONOD, and SABU J.
show that the complainants were afforded even an LAMARAN, petitioners,
iota of chance to refute respondents' allegations vs.
that the complainants did not meet the reasonable NATIONAL LABOR RELATIONS COMMISSION, FIFTH DIVISION,
standards and criteria set by the school. . . .12 and EVERGREEN FARMS, INC. respondents.

We concur with these factual findings, there being no showing that RESOLUTION
they were resolved arbitrarily. 13 Thus, the order for their reinstatement
and payment of full backwages and other benefits and privileges from
the time they were dismissed up to their actual reinstatement is proper,
conformably with Article 279 of the Labor Code, as amended by
Section 34 of Republic Act No. 6715, 14 which took effect on March 21, PADILLA, J.:
1989. 15 It should be noted that private respondents Roland Picart and
Lucia Chan were dismissed illegally on March 31, 1989, or after the
effectivity of said amendatory law. However, in ascertaining the total On 15 March 1996, the Court (First Division) promulgated a decision in
amount of backwages payable to them, we go back to the rule prior to this case, the dispositive part of which states:
the mercury drug rule 16 that the total amount derived from employment
elsewhere by the employee from the date of dismissal up to the date of WHEREFORE, the Resolution of the National
reinstatement, if any, should be deducted therefrom. 17 We restate the Labor Relations Commission dated 3 May 1993 is
underlying reason that employees should not be permitted to enrich modified in that its deletion of the award for
themselves at the expense of their employer.18In addition, the law backwages in favor of petitioners, is SET ASIDE.
abhors double compensation.19 to this extent, our ruling in Alex Ferrer, The decision of the Labor Arbiter dated 26 April
et al., v. NLRC, et al.,G.R. No. 100898, promulgated on July 5, 1993, is 1991 is AFFIRMED with the modification that
hereby modified. backwages shall be paid to petitioners from the
time of their illegal dismissal on 25 June 1990 up
Public respondent cannot claim not knowing the ruling in to the date of their reinstatement. If reinstatement
the Brent case because in its questioned resolution, it is stated that is no longer feasible, a one-month salary shall be
one of the cases invoked by petitioners in their appeal is said paid the petitioners as ordered in the labor
case.20 This notwithstanding, it disregarded Our ruling therein without arbiter's decision, in addition to the adjudged
any reason at all and expressed the erroneous view that: backwages.

The agreement of the parties fixing a definite date Private respondent now moves to reconsider the decision on grounds
for the termination of the employment relations is that (a) petitioners are not entitled to recover backwages because they
contrary to the specific provision of Article 280. not actually dismissed but their probationary employment was not
being contrary to law, the agreement cannot be converted to permanent employment; and (b) assuming that petitioners
legitimized. . . . 21 are entitled to backwages, computation thereof should not start from
cessation of work up to actual reinstatement, and that salary earned
elsewhere (during the period of illegal dismissal) should be deducted
Stare decisis et no quieta movere. Once a case ha been decided one from the award such backwages.
way, then another case, involving exactly the same point at issue,
should be decided in the same manner. Public respondent had no
choice on the matter. It could not have ruled in any other way. This There is no compelling reason to reconsider the decision of the Court
Tribunal having spoken in the Brent case, its duty was to obey. 22 Let it (First Division) dated 15 March 1996. However, we here clarify the
be warned that to defy its decisions is to court contempt. 23 computation of backwages due an employee on account of his illegal
dismissal from employment.

WHEREFORE, the resolution of public respondent National Labor

Relations Commission dated November 29, 1990 is hereby This Court has, over the years, applied different methods in the
MODIFIED. private respondents Roland Picart and Lucia Chan are computation of backwages. The first labor relations law governing the
ordered reinstated without loss of seniority rights and other privileges award of backwages was Republic Act No. 875, the Industrial Peace
and their backwages paid in full inclusive of allowances, and to their Act, approved on 17 June 1953. Sections 5 and 15 thereof provided
other benefits or their monetary equivalent pursuant to Article 279 of thus:
the Labor Code, as amended by Section 34 of Republic Act No. 6715,
subject to deduction of income earned elsewhere during the period of Sec. 5. Unfair Labor Practice Cases.
dismissal, if any, to be computed from the time they were dismissed up
to the time of their actual reinstatement. the rest of the Labor Arbiter's
decision dated February 28, 1990, as affirmed by the NLRC is set (c) . . . If, after investigation, the Court shall be of
aside. The temporary restraining order issued on March 11, 1991 is the opinion that any person named in the
made permanent. complaint has engaged in or is engaging in any
unfair labor practice, then the Court shall state its
findings of fact and shall issue and cause to be
SO ORDERED. served on such person an order requiring such
person to cease and desist from such unfair labor
Narvasa, C.J., Cruz, Feliciano, Bidin, Regalado, Davide, Jr., Romero, practice and take such affirmative action as will
Bellosillo, Melo, Quiason and Vitug, JJ., concur. effectuate the policies of this Act, including (but
not limited to) reinstatement of employees with or
without back-pay and including rights of the
employees prior to dismissal including seniority.
. . . (emphasis supplied)
Sec. 15. Violation of Duty to Bargain Collectively. the remainder of the prescriptive period after deducting the period
. . . Any employee whose work has stopped as corresponding to the delay incurred by the employee in filing the
a consequence of such lockout shall be entitled to complaint for unfair labor practice and reinstatement. Justice
back-pay. (emphasis supplied) Teehankee opined that:

In accordance with these provisions, backpay (the same as . . . an award of back wages equivalent to three
backwages) could be awarded where, in the opinion of the Court of years (where the case is not terminated sooner)
Industrial Relations (CIR), such was necessary to effectuate the should serve as the base figure for such awards
policies of the Industrial Peace without deduction, subject to deduction where
Act. 1 Only in one case was backpay a matter of right, that was, when there are mitigating circumstances in favor of the
an employer had declared a lockout without having first bargained employer but subject to increase by way of
collectively with his employees in accordance with the provisions of the exemplary damages where there are aggravating
Act. circumstances (e.g. oppression or dilatory
appeals) on the employer's part. 10
As the CIR was given wide discretion to grant or disallow payment of
backpay (backwages) to an employee, it also had the implied power of The proposal on the three-year backwages was subsequently adopted
mitigating (reducing) the backpay where backpay was allowed. 2 Thus, in later cases, among them, Feati University Faculty
in the exercise of its jurisdiction, the CIR increased or diminished the Club (PAFLU) v. Feati University (No. L-31503, 15 August 1974, 58
award of backpay, depending on several circumstances, among them, SCRA 395), Luzon Stevedoring Corporation v. CIR (No. L-34300, 22
the good faith of the employer, 3 the employee's employment in other November 1974, 61 SCRA 154), Danao Development Corporation
establishments during, the period of illegal dismissal, or the probability v. NLRC (Nos. L-40706 and L-40707, 16 February 1978, 81 SCRA
that the employee could have realized net earnings from outside 487), Associated Anglo-American Tobacco Corporation v.Lazaro (No.
employment if he had exercised due diligence to search for outside 63779, 27 October 1983, 125 SCRA 463), Philippine National Oil
employment. 4 In labor cases decided during the effectivity of R.A. No. Company - Energy Development Corporation v. Leogardo (G.R. No.
875, this Court acknowledged and upheld the CIR's authority to deduct 58494, 5 July 1989, 175 SCRA 26).
any amount from the employee's backwages, 5 including the discretion
to reduce such award of backwages whatever earnings were obtained
Then came Presidential Decree No. 442 (the Labor Code of
by the employee elsewhere during the period of his illegal
Philippines) which was signed into law on 1 May 1974 and which took
dismissal. 6 In the case of Itogon-Suyoc Mines, Inc. v. Sagilo-Itogon
effect on 1 November 1974. Its posture on the award of backwages, as
Workers' Union, 7 this Court restated the guidelines for determination of
amended, was expressed as follows.
total backwages, thus:

Art. 279. Security of tenure. In cases of regular

First. To be deducted from the backwages
employment, the employer shall not terminate the
accruing to each of the laborers to be reinstated is
services of an employee except for a just cause or
the total amount of earnings obtained by him from
when authorized by this Title. An employee who is
other employment(s) from the date of dismissal to
unjustly dismissed from work shall be entitled to
the date of reinstatement. Should the laborer
reinstatement without loss of seniority rights and to
decide that it is preferable not to return to work,
his back wages computed from the time his
the deduction should be made up to the time
compensation was withheld from him up to the
judgment becomes final. And these, for the reason
time of his reinstatement. (emphasis supplied).
that employees should not be permitted to enrich
themselves at the expense of their employer.
Besides, there is the "law's abhorrence for double Under the abovequoted provision, it became mandatory to award
compensation". backwages to illegally dismissed regular employees. The law
specifically declared that the award of backwages was to be computed
from the time compensation was withheld from the employee up to the
Second. Likewise, in mitigation of the damages
time of his instatement. This notwithstanding, the rule generally applied
that the dismissed respondents are entitled to,
by the Court under the promulgation of the Mercury
account should be taken of whether in the
Drug case, 11 and during the effectivity of P.D.No. 442 was still
exercise of due diligence respondents might have
the Mercury Drug rule. A survey of causes from 1974 until 1989, when
obtained income from suitable remunerative
the amendatory law to P.D. No. 442, namely, R.A. No. 6715 took
employment. We are prompted to give out this last
effect, supports this conclusion.
reminder because it is really unjust that a
discharged employee should, with folded arms,
remain inactive in the expectation that a windfall In the case of New Manila Candy Workers Union (Naconwa-
would come to him. A contrary view would breed Paflu) v. CIR (1978), 12 or after the Labor Code (P.D. No. 442) had
idleness; it is conducive to lack of initiative on the taken effect, the court still followed the Mercury Drug rule to avoid the
part of a laborer. Both bear the stamp of necessity of a hearing on earnings obtained elsewhere by the
undesirability. employee during the period of illegal dismissal. In an even later case
(1987) 13the Court declared that the general principle is that an
employee is entitled to receive as backwages the amounts he may
From this ruling came the burden of disposing of an illegal dismissal
have received from the date of his dismissal up to the time of his
case on its merits and of determining whether or not the computation
reinstatement. However, in compliance with the jurisprudential policy of
of the award of backwages is correct. In order not to unduly delay the
fixing the amount of backwages to a just and reasonable level, the
disposition of illegal dismissal cases, this Court found occasion in the
award of backwages equivalent to three (3) years, without qualification
case of Mercury Drug Co., Inc., et al. v. CIR, et al. 8 to rule that a fixed
or deduction, was nonetheless followed in said case.
amount of backwages without further qualifications should be awarded
to an illegally dismissed employee (hereinafter the Mercury Drug rule).
This ruling was grounded upon considerations of expediency in the In a more direct approach to the rule on the award of backwages, this
execution of the decision. Former Justice Claudio Teehankee Court declared in the 1990 case of Medado v. Court of Appeals 14 that
approved of this formula expressing that such method of computation "any decision or order granting backwages in excess of three (3) years
is a "realistic, reasonable and mutually beneficial solution" and "thus is null nad void as to the excess."
obviates the twin evils of idleness on the part of the employees and
attrition and undue delay in satisfying the award on the part of the
In sum, during the effectivity of P.D. 442, the Court enforced
employer" 9However, Justice Teehankee dissented from the majority
view that the employee in said case should be awarded backwages the Mercury Drug rule and, in effect, qualified the provision under P.D.
only for a period of 1 year, 11 months and 15 day which represented No. 442 by limiting the award of backwages to three (3) years.
On March 1989, Republic Act No. 6715 took effect, amending the Narvasa, C.J., Regalado, Davide, Jr., Romero, Bellosillo Melo, Puno,
Labor Code. Article 279 thereof states in part : Vitug, Kapunan, Mendoza, Francisco, Hermosisima, Jr., Panganiban
and Torres, Jr., JJ., concur.
Art. 279 Security of Tenure. . . . 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 is
witheld from him up to the time of his actual
reinstatement. (emphasis supplied) G.R. NO. 103215 November 6, 1992

In accordance with the above provision, an illegally dismissed MARANAW HOTELS AND RESORTS CORPORATION (CENTURY
employee is entitled to his full backwages from the time his PARK SHERATON MANILA), petitioner,
compensation was witheld from him (which, as a rule, is from the time vs.
of his illegal dismissal) up to the time of his actual reinstatement. It is COURT OF APPEALS, HON. SANTIAGO O. TAADA (Voluntary
true that this Court had ruled in the case of Pines City Educational Arbitrator) and GREGORIO GALE, respondents.
Center vs. NLRC (G.R. No. 96779, 10 November 1993, 227 SCRA
655) that "in ascertaining the total amount of backwages payable to
them (employees), we go back to the rule prior to the Mercury Drug
rule that the total amount derived from employment elsewhere by the
employee from the date of dismissal up to the date of reinstatement, if BELLOSILLO, J.:
any, should be deducted therefrom." 15 The rationale for such ruling
was that, the earnings derived elsewhere by the dismissed employee
while litigating the legality of his dismissal, should be deducted from For blurting out offensive remarks 1 against his supervisors in their
the full amount of backwages which the law grants him upon absence but promptly reported to them, private respondent Gregorio
reinstatement, so as not to unduly or unjustly enrich the employee at Gale, a roomboy at the five-star Century Park Sheraton Manila owned
the sense of the employer. and operated by petitioner Maranaw Hotels and Resorts Corporation,
was dismissed for "discourtesy and use of disrespectful and impolite
language against a superior which constitutes gross misconduct."
The Court deems it appropriate, however, to reconsider such earlier on
the computation of backwages as enunciated in said Pines City
Educational Center case, by now holding that comformably with the Gregorio Gale subsequently instituted a complaint for illegal dismissal
evident legislative intent as expressed in Rep. Act No. 6715, above- which, conformably with their collective bargaining agreement, was
quoted, backwages to be awarded to an illegally dismissed employee, then submitted to retired Judge Santiago O. Taada for voluntary
should not, as general rule, be diminished or reduced by the earnings arbitration.
derived by him elsewhere during the period of his illegal dismissal. The
underlying reason of this ruling is that the employee, while litigating the On 13 December 1989, after hearing and the submission of the
legality (illegality) of his dismissal, must still earn a living to support evidence, position papers and memoranda of the parties, Voluntary
himself and family, while his backwages have to be paid by the Arbitrator Taada rendered a decision pertinent portions of which read
employer as part of the price or penalty he has to pay for illegally
dismissing his employee. The clear legislative intent of the amendment
in Rep. Act No. 6715 is to give more benefits to workers than was
previously given them under the Mercury Drug rule or the "deduction of After going over the evidence adduced by the
earnings elsewhere" rule. Thus, a closer adherence to the legislative parties, the Arbitrator finds no evidence that there
policy behind Rep. Act No. 6715 points to "full backwages" as meaning was fighting, nor challenging to a fight, no
exactly that, i.e., without deducting from backwages the earnings assaulting nor intimidation of co-employees or
derived elsewhere by the concerned employee during the period of his supervisors within the hotel premises. What was
illegal dismissal. 16 In other words, the provision handling for "full established as per evidence on record was more
backwages" to illegally dismissed employees is clear, plain and free of discourtesy, and use of disrespectful and
from ambiguity and, therefore, must be applied without attempted or impolite language uttered by complainant which
strained interpretation. Index animi sermo est. 17 falls under Section 2, Rule VI of the Rules of the
Hotel and carries the penalty of 7 days of
suspension for first offense. The evidence shows it
Therefore, in accordance with R.A. No. 6715, petitioners are entitled was a first offense.
on their full backwages, inclusive of allowances and other benefits or
their monetary equivalent, from the time their actual compensation was
withheld on them up to the time of their actual reinstatement. IN VIEW OF THE FOREGOING, the Arbitrator
finds and so holds that complainant Gregorio Gale
has violated Section 2, Rule VI of the Rules of the
As to reinstatement of petitioners, this Court has already ruled that Hotel and orders his suspension for a period of
reinstatement is no longer feasible, because the company would be seven (7) days. However, as per admission of the
adjustly prejudiced by the continued employment of petitioners who at parties, Mr. Gale has already been dismissed. In
present are overage, a separation pay equal to one-month salary case complainant Mr. Gale has been out of his job
granted to them in the Labor Arbiter's decision was in order and, as roomboy of the Hotel for more than that period
therefore, affirmed on the Court's decision of 15 March 1996. of 7 days, his immediate reinstatement is hereby
Furthermore, since reinstatement on this case is no longer feasible, the ordered with right to collect his share in the service
amount of backwages shall be computed from the time of their illegal charge. 2
termination on 25 June 1990 up to the time of finality of this decision. 18

Its motion for reconsideration having been denied by the Voluntary

ACCORDINGLY, private respondent's Motion for Reconsideration, Arbitrator, petitioner filed before this Court a motion for extension of
dated 10 April 1996, is DENIED. time to file a petition for certiorari, which We referred to the Court of
Appeals for resolution. On 24 October 1991, after taking cognizance of
SO ORDERED. the case and thereafter receiving the parties' respective memoranda,
the appellate court 3 dismissed the petition for lack of merit, 4 and on 4
December 1991 denied petitioner's motion for
reconsideration. 5 Hence, this petition for review alleging that The case at bar is akin to the aforementioned cases.
respondent appellate court erred in not imposing the penalty of
dismissal upon private respondent considering that he was found guilty
We do not agree with petitioner's submission that private respondent's
of gross misconduct, and in allowing him to collect his share in the
reinstatement will not conduce to industrial peace and harmony in the
service charge.
hotel due to strained relations. Simply, the cases cited by petitioner are
misplaced. We are not unmindful of the "strained relations" brought
The petition should have been dismissed outright for We see no about by the filing of the case and the underlying causes. Indeed,
reason to reverse the appellate court in its finding that there was no relations may have become acrimonious and hostile. However, the
grave abuse of discretion on the part of the Voluntary Arbitrator. doctrine of strained relations cannot be applied with impunity lest We
trifle with the rights of wage earners by authorizing management to
indiscriminately dismiss them and thereafter provide the employer with
As in the case of a labor arbiter, the conclusions of a voluntary
the convenient and ready excuse not to reinstate them. On the
arbitrator, when they are sufficiently corroborated by the evidence on
contrary, We have to exercise extreme caution in this regard. As the
record, should similarly be respected by appellate tribunals since he is
Court reasoned in Globe-Mackay Cable and Radio Corporation
also in a vantage position to assess and evaluate the credibility of the
v. NLRC 12
contending parties.

Obviously, the principle of strained relations'

We have also emphasized the rule that decisions of voluntary
cannot be applied indiscriminately. Otherwise,
arbitrators are final and unappealable except when there is want of
reinstatement can never be possible simply
jurisdiction, grave abuse of discretion, violation of due process, denial
because some hostility is invariably engendered
of substantial justice, or erroneous interpretation of the law. 6 None of
between the parties as a result of litigation. That is
the exceptions lie in the case before Us.
human nature.

Indeed, the discharge of an employee who uttered unfelicitous remarks

Indeed, "strained relations" may be invoked only against employees
against his supervisors, in general, for strictly enforcing company rules
whose positions demand trust and confidence, or whose differences
against union members, but who thereafter apologized, is too harsh.
with their employer are of such nature or degree as to preclude
We have held time and again that it is cruel to unjust to mete out the
reinstatement. In the instant case, however, the relationship between
drastic penalty of dismissal if it is not proximate to the gravity of
private respondent, a roomboy, and management was clearly on an
misdeed. 7 The reason as We concluded in Almira v. B.F. Goodrich
impersonal level. 13 Gale did not occupy such a sensitive position as
Philippines, Inc. 8 is that
would require complete trust and confidence, where personal ill will
would preclude his reinstatement. Hence, in Panday v. NLRC 14 We
(W)here a penalty less punitive would suffice, ruled that "[i]f the respondent had been a laborer, clerk or other rank-
whatever missteps may be committed by labor and-file employee, there would be no problem in ordering her
ought not to be visited with a consequence so reinstatement with facility." Neither is the enmity of such degree as to
severe. It is not only because of the law's concern prevent private respondent's reinstatement. 15
for the workingman. There is, in addition, his
family to consider. Unemployment brings untold
We do not concur with petitioner that private respondent is not entitled
hardships and sorrows on those dependent on the
to his share in the service charge. As pointed out by the Court of
wage-earner. The misery and pain attendant on
Appeals, that private respondent was entitled to his share in the
the loss of jobs then could be avoided if there be
service charge collected during the period he was illegally dismissed
acceptance of the view that under all
finds support in the provisions of their collective bargaining agreement.
circumstances of this case, petitioners should not
Hence, We will not disturb this factual finding.
be deprived of their means of livelihood. Nor is this
to condone what had been done by them . . . From
the strictly juridical standpoint, it cannot be too Interestingly, however, petitioner alleges that private respondent
strongly stressed, to follow Davis in his masterly continued to receive his monthly salary from his dismissal on 4
work, Discretionary Justice, that where a decision December 1987 to 15 January 1992, which amounted to a total of
may be made to rest on informed judgment rather P76,598.46, conformably with their agreement "concluded between the
than rigid rules, all the equities of the case must Hotel and the Union so that the Union may withdraw its notice of strike
be accorded their due weight. Finally, labor law from the Department of Labor and Employment and not to go on
determinations, to quote from Bultmann, should be strike," 16 notwithstanding the fact that shortly after his separation he
not only secundum rationem but also secundum joined the Armed Forces of the Philippines from which he also received
caritatem. renumeration. This allegation does not only remain unrefuted but is, in
fact, implicitly admitted by private respondent in his pleadings filed with
respondent court. By his implied admission, private respondent, thus,
Thus, in Foodmine, Incorporated v. NLRC 9 We ruled that granting that
acknowledges that he received double compensation, which may also
the unsubstantiated claims of a co-employee that she was slapped on
explain why the Voluntary Arbitrator, after ordering the former's
the cheek and thereafter her left breast grabbed and pulled were true,
reinstatement, did not rule on the payment of backwages. The matter
the penalty of removal from employment was not commensurate to the
of double compensation cannot be countenanced not because We
misconduct allegedly committed.
fault private respondent for not remaining idle during the pendency of
his case but because he should not be allowed to unjustly enrich
In Rubberworld (Phil.), Inc. v. NLRC 10 We said that assuming that himself at the expense of petitioner who continues to pay his salary
private respondent posted entries in the stock cards without counter- despite his dismissal.
checking the actual movement status of the items in the warehouse,
thereby resulting in unmanageable inaccuracies in the data posted in
Thus, in PAL v. PALEA 17 We concluded that under the principle that
the stock cards, his dismissal was not justified as he did not appear to
no one should be permitted to feather his nest to the disadvantage of
be an incorrigible offender nor did his negligence cause serious
another, and proceeding form the law's traditional aversion to double
damage to the company.
payment, it is neither fair nor just that the reinstated workers who have
not rendered any service to the employer, who apparently dismissed
Then in PT&T v. NLRC 11 We held that even considering that there them in good faith, should receive relatively sizeable amounts in
may have been valid grounds for private respondent's discharge, the backwages, and at the same time keep the salary and other monetary
imposition of such supreme penalty would certainly be very harsh and benefits they had earned elsewhere during their layoff which they could
disproportionate to the infraction committed, specially since it was his not have obtained had they remained in the employ of their employer.
first offense.
In Itogon-Suyoc Mines, Inc. v. Sangilo-Itogon Worker's Union, 18 We or their monetary equivalent computed from the
restated these guidelines time his compensation was withheld from him up
to the time of his actual reinstatement. (Emphasis
First. To be deducted from the back wages
accruing to each of the laborers to be reinstated is
the total amount of earnings obtained by him from But as We resolved in Sealand Service,
other employment(s) from the date of Inc. v. NLRC 21
reinstatement. Should the laborer decide that it is
preferable not to return to work, the deduction
[I]t may be mentioned in passing that the
should be made up to the time judgment becomes
amendatory provision in R.A. 6715, which entitled
final. And these, for the reason that employees
an employee who is unjustly dismissed from work
should not be permitted to enrich themselves at
to his full backwages inclusive of allowance, and
the expense of their employer. Besides, there is
to his other benefits or their monetary equivalent
the law's abhorrence for double compensation.
computed from the time his compensation was
withheld from him up to the time of actual
Second. Likewise, in mitigation of the damages reinstatement has no application in the case at
that the dismissed respondents are entitled to, bar, said amendment having taken effect on
account should be taken of whether in the March 21, 1989, after the decision sought to be
exercise of due diligence respondents might have enforced in the case had become final and
obtained income from suitable remunerative executory. We have ruled in Lantion, et
employment. We are prompted to give out this last al. v. NLRC, et al., that said amendment has no
reminder because it is really unjust that a retroactive application.
discharged employee should, with folded arms,
remain inactive in the expectation that a windfall
Perforce, except for Balasbas vs. NLRC, 22 We have
would come to him. A contrary view would breed
refrained from awarding full backwages unless the unlawful
Idleness; it is conducive to lack of initiative on the
dismissal occurred on 21 March 1989 or thereafter.
part of a laborer.

And while We have continued applying the rule in New Manila Candy
We reiterated the principle against unjust enrichment in East Asiatic
Workers Union (Naconwa-Paflu) v. CIR 23 in some cases, e.g., Panday
Co., Ltd. v. CIR 19
v. NLRC 24 where five (5) years' backwages were decreed on account
of employer's unfair labor practice and evident bad faith, the general
In other words, the just and equitable rule rule remains: where the illegal dismissal transpired before the
regarding the point under discussion is this: It is effectivity of R.A. 6715, or before 21 March 1989, the award of
the obligation of the employer to pay an illegally backwages in favor of the dismissed employee is limited to three (3)
dismissed employee or worker the whole amount years without deduction or qualification. 25
of the salaries or wages, plus all other benefits
and bonuses and general increases, to which he
In the case before Us, since the illegal dismissal of private respondent
would have been normally entitled had he not
occurred on 4 December 1987, or before R.A. 6715 took effect on 21
been dismissed and had not stopped working, but
March 1989, he is entitled only to three (3) years' backwages, inclusive
it is the right, on the other hand, of the employer to
of all allowances and other benefits, without deducting any
deduct from the total of these, the amount
renumerations he may have received as member of the Armed Forces
equivalent to the salaries or wages the employee
of the Philippines, or from any other employment, and not to his full
or worker would have earned in his old
wages from the time he was dismissed up to the present. Certainly,
employment on the corresponding days that he
private respondent cannot be allowed to receive salary from petitioner
was actually gainfully employed elsewhere with an
for the whole duration that he was not working as roomboy by reason
equal or higher salary or wage, such that if his
of his unjust dismissal, while at the same time, draw compensation as
salary or wage in his other employment was less,
member of the Armed Forces of the Philippines which would not have
the employer may deduct only what has been
been possible had he continued to work for petitioner; for that would be
actually earned.
unjust enrichment. Consequently, if private respondent already
received more than what he is entitled to in accordance herewith, he
Although the principle that no one should be allowed to enrich himself should reimburse petitioner such amount in excess of what is due him;
at the expense of another has thus far endured, We have, however, otherwise, petitioner should make good the corresponding deficiency.
modified the rule. In the course of time We have adopted the policy of
fixing the amount of backwages at a just and reasonable level without
WHEREFORE, except as herein above modified, the Decision of 24
qualification or deduction so as to free the employees from the burden
October 1991 and the Resolution of 4 December 1991 of respondent
of proving their earnings during their layoffs and the employer from
Court of Appeals are hereby AFFIRMED. No costs.
submitting counter proofs and thus obviate the twin evils of idleness on
the part of employees and attrition and delay by the employer in
satisfying the award. This practice has been hailed as a realistic, SO ORDERED.
reasonable and mutually beneficial solution. An award of backwages
equivalent to three (3) years (where the case is not terminated sooner)
serves as the base figure, without qualification or deduction. 20 Cruz, Padilla and Grio-Aquino, JJ., concur.

Medialdea, J., is on leave.

This is not to overlook the passage of R.A. 6715, amending among
others Art. 279 of the Labor Code, which now provides

Art. 279. Security of Tenure. In cases of regular

employment, the employer shall not terminate the
services of an employee except for 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, G.R. No. 122468 September 3, 1998
inclusive of allowances, and to his other benefits
SENTINEL SECURITY AGENCY, INC., petitioner, xxx xxx xxx 5
The challenged Resolution denied reconsideration "for lack of merit." 6
The Facts
G.R. No. 122716 September 3, 1998
The undisputed factual backdrop is narrated by Respondent
Commission as follows: 7
NATIONAL LABOR RELATIONS COMMISSION, VERONICO The complainants were employees of Sentinel
ZAMBO, HELCIAS ARROYO, ADRIANO CABANO, MAXIMO ORTIZ, [Security Agency, Inc., hereafter referred to as "the
and RUSTICO ANDOY, respondents. Agency"] since March 1, 1966 in the case of
Veronico Zambo; October 27, 1975 in the case of
Helcias Arroyo; September 20, 1985 in the case of
Adriano Cabano; February 1, 1990 in the case of
Maximo Ortiz; and November 1, 1967 in the case
of Rustico Andoy. They were assigned to render
PANGANIBAN, J.: guard duty at the premises of [Philippine American
Life Insurance Company] at Jones Avenue, Cebu
City. On December 16, 1993 Philippine American
The transfer of an employee involves a lateral movement within the
Life Insurance Company ["the Client," for brevity],
business or operation of the employer, without demotion in rank,
through Carlos De Pano, Jr., sent notice to all
diminution of benefits or, worse, suspension of employment even if
concerned that the [Agency] was again awarded
temporary. The recall and transfer security guards require
the contract of [s]ecurity [s]ervices together with a
reassignment to another post and are not equivalent to their placement
request to replace all the security guards in the
on "floating status." Off-detailing security guards for a reasonable
company's offices at the cities of Cebu, Bacolod,
period of six months is justified only in bona fide cases of suspension
Cagayan de Oro, Dipolog and Iligan. In
of operation, business or undertaking.
compliance therewith, [the Agency] issued on
January 12, 1994, a Relief and Transfer Order
The Case replacing the complainants as guards [of the
Client] and for them to be re-assigned [to] other
clients effective January 16, 1994. As ordered, the
This is the rationale used by the Court in dismissing the two complainants reported but were never given new
consolidated petitions for certiorari before us, seeking the reversal of assignments but instead they were told in the
the Decision dated August 25, 1995, and the Resolution dated October vernacular, "gui-ilisan mo kay mga tigulang naman
24, 1995, both promulgated by the National Labor Relations mo" which when translated means, "you were
Commission 1 in NLRC Case No. V-0317-94 (RAB VII-01-0097-94,
replace[d] because you are already old." Precisely,
RAB VII-02-0173-94, and RAB VII-01-0133-94). the complainants lost no time but filed the subject
illegal dismissal cases on January 18, January 26
In the action for illegal dismissal and payment of salary differential, and February 4, 1994 and prayed for payment of
service incentive leave pay and separation pay filed by private separation pay and other labor standard benefits.
respondents, Labor Arbiter Dominador A. Almirante rendered a
Decision, which disposed:2
[The Client and the Agency] maintained there was
no dismissal on the part of the complainants,
WHEREFORE, premises considered[,] judgment constructive or otherwise, as they were protected
is hereby rendered ordering . . . Sentinel Security by the contract of security services which allows
Agency, Inc. jointly and severally with . . . the recall of security guards from their assigned
Philamlife, Cebu Branch, to pay complainants the posts at the will of either party. It also advanced
total amount of [s]ixty [t]housand [o]ne [h]undred that the complainants prematurely filed the subject
[t]welve [p]esos and 50/100 (P60,112.50) in the cases without giving the [Agency] a chance to give
concept of 13th month pay and service incentive them some assignments.
leave benefits as computed by our Labor
Arbitration Associate whose computation is hereto On the part of [the Client], it averred further that
attached and forming part hereof.3
there [was] no employer-employee relationship
between it and the complainants as the latter were
On appeal, the NLRC modified the labor arbiter's Decision. The merely assigned to its Cebu Branch under a job
dispositive portion of the NLRC Decision 4 reads: contract; that [the Agency] ha[d] its own separate
corporate personality apart from that of [the
Client]. Besides, it pointed out that the functions of
WHEREFORE, the assailed Decision is hereby the complainants in providing security services to
MODIFIED in so far as the award of 13th month [the Client's] property [were] not necessary and
pay for the previous years which is hereby desirable to the usual business or trade of [the
excluded. Further, . . . Sentinel Security Agency, Client], as it could still operate and engage in its
Inc. is hereby ORDERED to pay complainants life insurance business without the security
separation pay at the rate of 1/2 month pay for guards. In fine, [the Client] maintains that the
every year of service and for both . . . Philippine complainants have no cause of action against it.
American Life Insurance, Inc. and Sentinel
Security Agency, Inc. and/or Daniel Iway to pay to
the [complainants] jointly and severally their Ruling of Respondent Commission
backwages from January 16, 1994 to January 15,
1995 and the corresponding 13th month pay for
Respondent Commission ruled that the complainants were
the said year. The monetary awards hereby constructively dismissed, as "the recall of the complainants from their
granted are broken down as follows [into long time post[s] at [the premises of the Client] without any good
separation pay, back wages, 13th month pay and
reason is a scheme to justify or camouflage illegal dismissal.
service incentive leave pay]:
It ruled that Superstar Security Agency, Inc. vs. National Labor In sum, the resolution of these consolidated petitions hinges on (1)
Relations Commission 8 A' Prime Security Services, Inc. vs. National whether the complainants were illegally dismissed, and (2) whether the
Labor Relations Commission 9 were not applicable to the case at bar. Client is jointly and severally liable for their thirteenth-month and
In the former, the security guard was placed on temporary "off-detail" service incentive leave pays.
due to his poor performance and lack of elementary courtesy and tact,
and to the cost-cutting program of the agency. In the latter, the relief of
The Court's Ruling
the security guard was due to his sleeping while on duty and his
repeated refusal to resume work despite notice.
The petition is partly meritorious.
In the present case, the complainants were told by the Agency that
they lost their assignment at the Client's premises because they were First Issue:
already old, and not because they had committed any infraction or Illegal Dismissal
irregularity. The NLRC applied RA 7641, 10 which gives retirement
benefits of one-half month pay per year of service to retirable
employees viz.: The private respondents' transfer, according to Respondent
Commission, was effected to circumvent the mandate of Republic Act
7641 (New Retirement Law), which by then had already taken effect, in
. . . As stated earlier . . ., the complainants were in view of the fact that the complainants had worked for both the Client
the service of [the Client] for nearly twenty (20) and the Agency for 10 to 20 years and were nearing retirement age.
years in the cases of Helcias Arroyo and for more With this premise, the NLRC concluded that the guards were illegally
than twenty (20) years in the cases of Veronico dismissed. The complainants add that the findings of the Commission
Zambo and Rustico Andoy, which long years of match the remarks of the personnel manager of the Agency, Feliciano
service [appear] on record to be unblemished. The Marticion; that is, that they were being replaced because they were
complainants were then confronted with an already old. They insist that their service records are unblemished;
impending sudden loss of earnings for while the hence, they could not have been dismissed by reason of any just
order of [the Agency] to "immediately report for cause.
reassignment" momentarily gave them hope, there
was in fact no immediate reinstatement. While it
could have been prudent for the complainants to We agree that the security guards were illegally dismissed, but not for
wait, they were set unstable and were actually the reasons given by the public respondent. The aforecited contentions
threatened by the statement of the personnel in of the NLRC are speculative and unsupported by the evidence on
charge of [the Agency] that they were already old, record. As the solicitor general said in his Manifestation in Lieu of
that was why they were replaced. Comment, the relief and transfer order was akin to placing private
respondents on temporary "off-detail."

Against these glaring facts is the new Retirement

Law, R.A. 7641 which took effect on January 7, Being sidelined temporarily is a standard stipulation in employment
1993 giving retirement benefits of 1/2 month pay contracts, as the availability of assignment for security guards is
primarily dependent on the contracts entered into by the agency with
per year of service to an employee upon reaching
retirement age to be paid by the employer, in this third parties. Most contracts for security services, as in this case,
case at quite a sizeable amount and in not so long stipulate that the client may request the replacement of the guards
assigned to it. In security agency parlance, being placed "off detail" or
due time as some of the complainants were
on "floating" status means "waiting to be posted." 14 This circumstance
described as already old.
is not equivalent to dismissal, so long as such status does not continue
beyond a reasonable time. 15
As complainants were illegally dismissed, the NLRC ruled that they
were entitled to the twin remedies of back wages for one (1) year from
the time of their dismissal on January 15, 1994, payable by both the In the case at bar, the relief and transfer order per se did not sever the
employment relationship between the complainants and the Agency.
Client and the Agency, and separation pay of one-half month pay for
every year of service payable only by the Agency. Reinstatement was Thus, despite the fact that complainants were no longer assigned to
not granted due to the resulting antipathy and resentment among the the Client, Article 287 of the Labor Code, as amended by RA 7641, still
binds the Agency to provide them upon their reaching the retirement
complainants, the Agency and the Client.
age of sixty to sixty-five years retirement pay or whatever else was
established in the collective bargaining agreement or in any other
Hence, this petition. 11 applicable employment contract. On the other hand, the Client is not
liable to the complainants for their retirement pay because of the
absence of an employer-employee relationship between them.
The Issues

12 However, the Agency claims that the complainants, after being placed
In their memoranda, the Agency poses this question:
off-detail, abandoned their employ. The solicitor general, siding with
the Agency and the labor arbiter, contends that while abandonment of
. . . [Whether . . . Sentinel is guillty of illegal employment is inconsistent with the filing of a complaint for illegal
dismissal[,] dismissal, such rule is not applicable "where [the complainant]
expressly rejects this relief and asks for separation pay instead."
On the other hand, the Client raises the following issues: 13
The Court disagrees. Abandonment, as a just and valid cause for
termination, requires a deliberate and unjustified refusal of an
Whether . . . [the complainants] were illegally
employee to resume his work, coupled with a clear absence of any
dismissed by their employer, Sentinel Security
intention of returning to his or her work. 16 That complainants, did not
Agency, Inc., and in holding petitioner to be
pray for reinstatement is not sufficient proof of abandonment. A strong
equally liable therefor.
indication of the intention of complainants to resume work is their
allegation that on several dates they reported to the Agency for
Whether . . . petitioner is jointly and severally liable reassignment, but were not given any. In fact, the contention of
with Sentinel Security Agency, Inc., in the latter's complainant is that the Agency constructively dismissed them.
payment of backwages, 13th month pay and Abandonment has recently been ruled to be incompatible with
service incentive leave pay to its employees . . . . constructive dismissal. We, thus, rule that complainants did not
abandon their jobs. 17
We will now demonstrate why we believe complainants were illegally prescribed by the Labor Code, pursuant to Articles 106, 107 and 109
dismissed. thereof, which we quote hereunder:

In several cases, the Court has recognized the prerogative of Art. 106. Contractor or subcontractor.
management to transfer an employee from one office to another within Whenever an employer enters into a contract with
the same business establishment, as the exigency of the business my another person for the performance of the
require, provided that the said transfer does nor result in a demotion in former['s] work, the employees of the contractor
rank or a diminution in salary, benefits and other privileges of the and of the latter['s] subcontractor, if any, shall be
employee; 18 or is not unreasonable, inconvenient or prejudicial to the paid in accordance with the provisions of this
latter; 19 or is not used as a subterfuge by the employer to rid himself of Code.
an undesirable worker. 20
In the event that the contractor or subcontractor
A transfer means a movement (1) from one position to another of fails to pay the wages of his employees in
equivalent rank, level or salary, without a break in the service; 21 and accordance with this Code, the employer shall be
(2) from one office to another within the same business jointly and severally liable with his contractor or
establishment. 22 It is distinguished from a promotion in the sense that subcontractor to such employees to the extent of
it involves a lateral change as opposed to a scalar ascent. 23 the work performed under the contract, in the
same manner and extent that he is liable to
employees directly employed by him.
In this case, transfer of the complainants implied more than a relief
from duty to give them time to rest a mere "changing of the guards.
"Rather, their transfer connoted a reshuffling or exchange of their The Secretary of Labor may, by appropriate
posts, or their reassignment to other posts, such that no security guard regulations, restrict or prohibit the contracting out
would be without an assignment. of labor to protect the rights of workers established
under this Code. In so prohibiting or restricting, he
may make appropriate distinctions between labor-
However, this legally recognized concept of transfer was not
only contracting and job contracting as well as
implemented. The Agency hired new security guards to replace the
differentiations within these types of contracting
complainants, resulting in a lack of posts to which the complainants
and determine who among the parties involved
could have been reassigned. Thus, it refused to reassign Complainant
shall be considered the employer for purposes of
Andoy when he reported for duty on February 2, 4 and 7, 1994; and
this Code, to prevent any violation or
merely told the other complainants on various dates from January 25
circumvention of any provision of this Code.
to 27, 1994 that they were already too old to be posted anywhere.

. . . In such cases [labor-only contracting], the

The Agency now explains that since, under the law, the Agency is
person or intermediary shall be considered merely
given a period of not more than six months to retain the complainants
as an agent of the employer who shall be
on floating status, the complaint for illegal dismissal is premature. This
responsible to the workers in the same manner
contention is incorrect.
and extent as if the latter were directly employed
by him.
A floating status requires the dire exigency of the employer's bona fide
suspension of operation, business or undertaking. In security services,
Art. 107. Indirect employer. The provisions of
this happens when the clients that do not renew their contracts with a
the immediately preceding Article shall likewise
security agency are more than those that do and the new ones that the
apply to any person, partnership, association or
agency gets. However, in the case at bar, the Agency was awarded a
corporation which, not being an employer,
new contract by the Client. There was no surplus of security guards
contracts with an independent contractor for the
over available assignments. If there were, it was because the Agency
performance of any work, task, job or project.
hired new security guards. Thus, there was no suspension of
operation, business or undertaking, bona fide or not, that would have
justified placing the complainants off-detail and making them wait for a Art. 109. Solidary liability. The provisions of
period of six months. If indeed they were merely transferred, there existing laws to the contrary notwithstanding,
would have been no need to make them wait for six months. every employer or indirect employer shall be held
responsible with his contractor or subcontractor for
any violation of any provision of this Code.
The only logical conclusion from the foregoing discussion is that the
Agency illegally dismissed the complainants. Hence, as a necessary
consequence, the complainants are entitled to reinstatement and back For purposes of determining the extent of their civil
wages. 24 However, reinstatement is no longer feasible in this case. liability under this Chapter, they shall be
The Agency cannot reassign them to the Client, as the former has considered as direct employers.
recruited new security guards; the complainants, on the other hand,
refuse to accept other assignment. Verily, complainants do not pray for
Under these provisions, the indirect employer, who is the Client in the
reinstatement; in fact they refused to be reinstated. Such refusal is
case at bar, is jointly and severally liable with the contractor for the
indicative of strained relations. 25 Thus, separation pay is awarded in
workers' wages, in the same manner and extent that it is liable to its
lieu of reinstatement. 26
direct employees. This liability of the Client covers the payment of the
service incentive leave pay of the complainants during the time they
Second Issue: were posted at the Cebu branch of the Client. As service had been
Client's Liability rendered, the liability accrued, even if the complainants were
eventually transferred or reassigned.
The Client did not, as it could not, illegally dismiss the complainants.
Thus, it should not be held liable for separation pay and back wages. The service incentive leave is expressly granted by these pertinent
But even if the Client is not. responsible for the illegal dismissal of the provisions of the Labor Code:
complainants, it is jointly and severally liable with the Agency for the
complainants' service incentive leave pay. In Rosewood Processing,
Art. 95. Right to service incentive leave. (a)
Inc. vs. National Labor Relations Commission, 27 the Court explained
Every employee who has rendered at least one
that, notwithstanding the service contract between the client and the
year of service shall be entitled to a yearly service
security agency, the two are solidarily liable for the proper wages
incentive leave of five days with pay.
(b) This provision shall not apply to those who are every year of service, 13th month pay for the year 1986 and the money
already enjoying the benefit herein provided, those value of their respective service incentive leave amounting to fifteen
enjoying vacation leave with pay of at least five (15) days salary each with allowances. The petition also assails the
days and those employed in establishments resolution of the respondent NLRC dated April 18, 1988 denying the
regularly employing less than ten employees or in motion for reconsideration filed by petitioner.
establishments exempted from granting this
benefit by the Secretary of Labor after considering
Private respondents, numbering forty-six (46) in all, worked as security
the viability or financial condition of such
guards and/or janitors under individual contracts with petitioner. They
were assigned to firms and offices where petitioner had contracts
providing security and janitorial services. Their service period and last
(c) The grant of benefit in excess of that provided rates of salary are stated in the decision of the labor arbiter.1Their
herein shall not be made a subject of arbitration or individual contracts of employment provide, among others, as follows:
any court [or] administrative action.
3.d. That the security guard, agrees to temporary
Under the Implementing Rules and Regulations of the Labor Code, an suspension of his employment completely to
unused service incentive leave is commutable to its money include such changes in his employment status
equivalent, viz.: with the Agency, in case of termination of contract
between the Agency and its Client, or reduction in
force of same;
Sec. 5. Treatment of benefit. The service
incentive leave shall be commutable to its money
equivalent if not used or exhausted at the end of In the early part of 1986, petitioner's service contracts with various
the year. corporations and government agencies to which private respondents
were previously assigned had been terminated generally due to the
sequestration of the said offices by the Presidential Commission on
The award of the thirteenth-month pay is deleted in view of the
Good Government. Accordingly, many of the private respondents were
evidence presented by the Agency, proving that such claim has
placed on "floating status" on September 16, 1986. A number of them
already been paid to the complainants. Obviously then, the award of
had been put on that status even earlier. "Floating status" means an
such benefit in the dispositive portion of the assailed Decision is
indefinite period of time when private respondents do not receive any
merely an oversight, considering that Respondent Commission itself
salary or financial benefit provided by law. A number of them later
deleted it from the main body of the said Decision.
obtained employment in other security agencies.

WHEREFORE, the petition is DISMISSED and the assailed Decision

On account of the uncertainty of their employment with the petitioner,
and Resolution are hereby AFFIRMED, but the award of the thirteenth-
on July 25, 1986, private respondents filed a complaint for illegal
month pay is DELETED. Costs against petitioners.
dismissal in the Arbitration Branch of the Department of Labor and
Employment against petitioner. They sought the payment of their
SO ORDERED. respective separation pay, 13th month pay for 1986 and service
incentive leave pay. After due' proceedings where the parties were
required to submit their position papers and stipulation of facts, the
Davide, Jr., Bellosillo, Vitug and Quisumbing, JJ., concur. respondent labor arbiter ruled in favor of the private respondents
whose decision as above-related was affirmed by the NLRC.

Hence, the herein petition alleging that the petitioner was denied due
process of law by the NLRC and it committed a grave abuse of
discretion in considering private respondents as employees of
petitioner, in ruling that the "floating status" of private respondents
G.R. Nos. 82823-24 July 31, 1989 amounted to an illegal dismissal, and in causing the execution of the
judgment pending a complete and full adjudication of the issues.
INC., petitioner, Forthwith, the allegation of denial of due process is without basis.
vs. Petitioner was afforded the opportunity to file its position paper. It even
THE NATIONAL LABOR RELATIONS COMMISSION, HON. LABOR entered into a stipulation of facts with private respondent.
ET AL., respondents.
As to the issue of employer-employee relationship, an examination of
the records shows that private respondents are regular employees of
San Juan, Gonzalez, San Agustin & Sinense for petitioner. petitioner. Their individual length of service ranges from four (4) to
more than ten (10) years. In accordance with the stipulation of facts, it
Mauricio Law Office for private respondents. appears that private respondents worked with petitioner as security
guards/janitors Their employment contracts provide, among others:

1. That the AGENCY hereby undertakes to look for, procure, and/or

furnish the services of the SECURITY GUARD, with any individual,
GANCAYCO, J.: business establishment, residential houses or any entity whatsoever,
and the SECURITY GUARD agrees to supply his services,
Is there an employer-employee relationship between a security agency assignments, position and undertaking, subject to the following
and its security guards? Is the so-called "floating status" of a security conditions:
guard lawful and could such prolonged status amount to illegal
dismissal? These are the issues raised in this petition for certiorari and a) That the SECURITY GUARD upon acceptance of his position or
prohibition with preliminary injunction questioning the resolution dated undertaking for employment, shall observe, follow and obey all rules,
January 20, 1988 of public respondent National Labor Relations regulations, code of conduct required by the AGENCY and any of its
Commission (NLRC) affirming the decision of public respondent labor contracted client, in accordance with the provisions of RA 5487 and its
arbiter Bienvenido V. Hermogenes dated March 19, 1987 finding implement Rules and Regulations;
private respondents to have been illegally dismissed and ordering
petitioner to pay them separation pay of one-half (1/2) month salary for
b) That the AGENCY shall pay the SECURITY GUARD a monthly ART. 286. When employment not deemed
salary of P _______/day payable on the 5th and 20th of the month; terminated. The bonafide suspension of the
operation of a business or undertaking for a period
not exceeding six months, or the fulfillment by the
c) That the AGENCY shall have the exclusive right to withdraw or re-
employee of a military or civic duty shall not
assign the SECURITY GUARD;
terminate employment. In all such cases, the
employer shall reinstate the employee to his
d) That the SECURITY GUARD, agrees to temporary suspension of former position without loss of seniority rights if he
his employment completely to include such changes; in bis indicates his desire to resume his work not later
employment status with the AGENCY, in case of termination of than one month from the resumption of operations
contract between the AGENCY and its client, or reduction in force of of his employer or from his relief from the military
same; or civic duty.

e) That the AGENCY may terminate or dismiss the SECURITY From the foregoing it is clear that when
GUARD, if, after proper and due investigation it is shown that the the bonafide suspension of the operation of a
SECURITY GUARD has violated any rule, regulation, code of conduct business or undertaking exceeds six (6) months
and discipline, imposed by the AGENCY; then the employment of the employee shall be
deemed terminated. By the same token and
applying the said rule by analogy to security
f) That the terms and conditions pertinent to service and discipline
guards, if they remained without work or
embodied in the Agreement executed between the AGENCY and any assignment that is in "floating status" for a period
person, establishment, or entity with whom the SECURITY GUARD is exceeding six (6) months, then they are in effect
going to serve or is assigned shall be considered part of this
constructively dismissed.
Agreement and therefore binding on SECURITY GUARD. 2

The labor arbiter disagreed with the representations of petitioner that

It was petitioner who determined how much private respondents
the private respondents who accepted assignments in other security
received as their monthly salary, overtime/night differential pay, mid- agencies without previously resigning should be considered to have
year and Christmas bonus and 13th month pay, uniforms and meal been dismissed with just cause. In the stipulation of facts, the parties
allowances and other benefits mandated by law. Private respondents admitted that the disciplinary rules promulgated by petitioner for its
were reported by the petitioner as its employees for purposes of social employees provide that acceptance by an employee of other
security coverage. Petitioner remitted their withholding taxes to the employment without first resigning from the agency is a cause for
Bureau of Internal Revenue and made monthly contributions to the dismissal.
Pag-ibig fund for their benefit. It was petitioner who determined and
decided on the assignments, promotions and salary increases of
private respondents, their working hours, the firearms to be issued to In this case, it appears that twenty-seven (27) of the private
them and janitorial devices and tools to be used. Likewise, it was respondents violated this rule by accepting employment in other
petitioner who imposed the appropriate disciplinary measures on security agencies without previously resigning from employment with
private respondents by way of reprimand, suspension and dismissal. petitioner. No doubt, this is a just cause for termination of their services
and as such they are not entitled to any separation pay. 5
In determining the existence of an employee-employer relationship, the
following elements are generally considered: As regards the other seventeen (17) private respondents, they
admittedly remained in "floating status" for more than six (6) months.
Such a 'floating status" is not unusual for security guards employed in
1) the selection and engagement of the
security agencies as their assignments primarily depend on the
employees; contracts entered into by the agency with third parties. Such a
stipulated status is, therefore, lawful.
2) payment of wages;
The "floating status" of such an employee should last only for a
3) the power of dismissal and reasonable time. In this case, respondent labor arbiter correctly held
that when the "floating status" of said employees lasts for more than
six (6) months, they may be considered to have been illegally
4) the power to control the employees' conduct . dismissed from the service. Thus, they are entitled to the
corresponding benefits for their separation.
It is clear, therefore, that private respondents are petitioner's regular
employees who enjoy security of tenure and who cannot be dismissed WHEREFORE, the petition is GRANTED insofar as the twenty- seven
except for cause . 4 (27) private respondents are concerned who have accepted
employment elsewhere. The questioned resolutions of the NLRC dated
As to the alleged illegal dismissal of private respondents, the records January 29, 1988 and April 18, 1988 are hereby modified as to said
show that they filed their complaint against petitioner on July 25, 1986. twenty-seven (27) private respondents in that their complaint is hereby
At the time they filed their complaint, most of them were still on the job dismissed for lack of merit. The questioned resolutions are hereby
or on assignments and it was only in September 1986 when most of affirmed in all other respects as to the other private respondents. No
them were placed on "floating status." pronouncement as to costs.

Obviously, the filing of the complaint was premature. Apparently, this SO ORDERED.
issue was not raised at all and so it is deemed waived. Thus, when the
labor arbiter rendered his decision, he considered those who have Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.
been out of work or "floating status" for a period exceeding six (6)
months to have been terminated from the service without just cause
thus entitling them to the corresponding benefits for such separation.
We agree.

Under Article 286 of the Labor Code it is provided as follows: