G.R. No.

81958 June 30, 1988

PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS, INC., petitioner, vs.
HON. FRANKLIN M. DRILON as Secretary of Labor and Employment, and TOMAS D. ACHACOSO, as
Administrator of the Philippine Overseas Employment Administration, respondents.
Gutierrez & Alo Law Offices for petitioner.

SARMIENTO, J.:
The petitioner, Philippine Association of Service Exporters, Inc. (PASEI, for short), a firm "engaged principally in the
recruitment of Filipino workers, male and female, for overseas placement," 1 challenges the Constitutional validity of
Department Order No. 1, Series of 1988, of the Department of Labor and Employment, in the character of
"GUIDELINES GOVERNING THE TEMPORARY SUSPENSION OF DEPLOYMENT OF FILIPINO DOMESTIC
AND HOUSEHOLD WORKERS," in this petition for certiorari and prohibition. Specifically, the measure is assailed
for "discrimination against males or females;" 2 that it "does not apply to all Filipino workers but only to domestic
helpers and females with similar skills;" 3 and that it is violative of the right to travel. It is held likewise to be an
invalid exercise of the lawmaking power, police power being legislative, and not executive, in character.

In its supplement to the petition, PASEI invokes Section 3, of Article XIII, of the Constitution, providing for worker
participation "in policy and decision-making processes affecting their rights and benefits as may be provided by law." 4
Department Order No. 1, it is contended, was passed in the absence of prior consultations. It is claimed, finally, to be in
violation of the Charter's non-impairment clause, in addition to the "great and irreparable injury" that PASEI members
face should the Order be further enforced.

On May 25, 1988, the Solicitor General, on behalf of the respondents Secretary of Labor and Administrator of the
Philippine Overseas Employment Administration, filed a Comment informing the Court that on March 8, 1988, the
respondent Labor Secretary lifted the deployment ban in the states of Iraq, Jordan, Qatar, Canada, Hongkong, United
States, Italy, Norway, Austria, and Switzerland. * In submitting the validity of the challenged "guidelines," the
Solicitor General invokes the police power of the Philippine State.

It is admitted that Department Order No. 1 is in the nature of a police power measure. The only question is whether or
not it is valid under the Constitution.

The concept of police power is well-established in this jurisdiction. It has been defined as the "state authority to enact
legislation that may interfere with personal liberty or property in order to promote the general welfare." 5 As defined, it
consists of (1) an imposition of restraint upon liberty or property, (2) in order to foster the common good. It is not
capable of an exact definition but has been, purposely, veiled in general terms to underscore its all-comprehensive
embrace.

"Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the future where it could be done,
provides enough room for an efficient and flexible response to conditions and circumstances thus assuring the greatest
benefits." 6

It finds no specific Constitutional grant for the plain reason that it does not owe its origin to the Charter. Along with the
taxing power and eminent domain, it is inborn in the very fact of statehood and sovereignty. It is a fundamental
attribute of government that has enabled it to perform the most vital functions of governance. Marshall, to whom the
expression has been credited, 7 refers to it succinctly as the plenary power of the State "to govern its citizens." 8

"The police power of the State ... is a power coextensive with self- protection, and it is not inaptly termed the "law of
overwhelming necessity." It may be said to be that inherent and plenary power in the State which enables it to prohibit
all things hurtful to the comfort, safety, and welfare of society." 9

It constitutes an implied limitation on the Bill of Rights. According to Fernando, it is "rooted in the conception that
men in organizing the state and imposing upon its government limitations to safeguard constitutional rights did not
intend thereby to enable an individual citizen or a group of citizens to obstruct unreasonably the enactment of such
salutary measures calculated to ensure communal peace, safety, good order, and welfare." 10 Significantly, the Bill of
Rights itself does not purport to be an absolute guaranty of individual rights and liberties "Even liberty itself, the
greatest of all rights, is not unrestricted license to act according to one's will." 11 It is subject to the far more overriding
demands and requirements of the greater number.

Notwithstanding its extensive sweep, police power is not without its own limitations. For all its awesome
consequences, it may not be exercised arbitrarily or unreasonably. Otherwise, and in that event, it defeats the purpose
for which it is exercised, that is, to advance the public good. Thus, when the power is used to further private interests at
the expense of the citizenry, there is a clear misuse of the power. 12

In the light of the foregoing, the petition must be dismissed.

As a general rule, official acts enjoy a presumed vahdity. 13 In the absence of clear and convincing evidence to the
contrary, the presumption logically stands.

The petitioner has shown no satisfactory reason why the contested measure should be nullified. There is no question
that Department Order No. 1 applies only to "female contract workers," 14 but it does not thereby make an undue
discrimination between the sexes. It is well-settled that "equality before the law" under the Constitution 15 does not
import a perfect Identity of rights among all men and women. It admits of classifications, provided that (1) such
classifications rest on substantial distinctions; (2) they are germane to the purposes of the law; (3) they are not confined
to existing conditions; and (4) they apply equally to all members of the same class. 16

The Court is satisfied that the classification made-the preference for female workers — rests on substantial distinctions.

As a matter of judicial notice, the Court is well aware of the unhappy plight that has befallen our female labor force
abroad, especially domestic servants, amid exploitative working conditions marked by, in not a few cases, physical and
personal abuse. The sordid tales of maltreatment suffered by migrant Filipina workers, even rape and various forms of
torture, confirmed by testimonies of returning workers, are compelling motives for urgent Government action. As
precisely the caretaker of Constitutional rights, the Court is called upon to protect victims of exploitation. In fulfilling
that duty, the Court sustains the Government's efforts.

The same, however, cannot be said of our male workers. In the first place, there is no evidence that, except perhaps for
isolated instances, our men abroad have been afflicted with an Identical predicament. The petitioner has proffered no
argument that the Government should act similarly with respect to male workers. The Court, of course, is not
impressing some male chauvinistic notion that men are superior to women. What the Court is saying is that it was
largely a matter of evidence (that women domestic workers are being ill-treated abroad in massive instances) and not
upon some fanciful or arbitrary yardstick that the Government acted in this case. It is evidence capable indeed of
unquestionable demonstration and evidence this Court accepts. The Court cannot, however, say the same thing as far as
men are concerned. There is simply no evidence to justify such an inference. Suffice it to state, then, that insofar as
classifications are concerned, this Court is content that distinctions are borne by the evidence. Discrimination in this
case is justified.

As we have furthermore indicated, executive determinations are generally final on the Court. Under a republican
regime, it is the executive branch that enforces policy. For their part, the courts decide, in the proper cases, whether that
policy, or the manner by which it is implemented, agrees with the Constitution or the laws, but it is not for them to
question its wisdom. As a co-equal body, the judiciary has great respect for determinations of the Chief Executive or
his subalterns, especially when the legislature itself has specifically given them enough room on how the law should be
effectively enforced. In the case at bar, there is no gainsaying the fact, and the Court will deal with this at greater length
shortly, that Department Order No. 1 implements the rule-making powers granted by the Labor Code. But what should
be noted is the fact that in spite of such a fiction of finality, the Court is on its own persuaded that prevailing conditions
indeed call for a deployment ban.

There is likewise no doubt that such a classification is germane to the purpose behind the measure. Unquestionably, it
is the avowed objective of Department Order No. 1 to "enhance the protection for Filipino female overseas workers" 17
this Court has no quarrel that in the midst of the terrible mistreatment Filipina workers have suffered abroad, a ban on
deployment will be for their own good and welfare.

The Order does not narrowly apply to existing conditions. Rather, it is intended to apply indefinitely so long as those
conditions exist. This is clear from the Order itself ("Pending review of the administrative and legal measures, in the
Philippines and in the host countries . . ." 18), meaning to say that should the authorities arrive at a means impressed
with a greater degree of permanency, the ban shall be lifted. As a stop-gap measure, it is possessed of a necessary
malleability, depending on the circumstances of each case. Accordingly, it provides:

9. LIFTING OF SUSPENSION. — The Secretary of Labor and Employment (DOLE) may, upon recommendation of
the Philippine Overseas Employment Administration (POEA), lift the suspension in countries where there are:

1. Bilateral agreements or understanding with the Philippines, and/or,

2. Existing mechanisms providing for sufficient safeguards to ensure the welfare and protection of Filipino
workers. 19

The Court finds, finally, the impugned guidelines to be applicable to all female domestic overseas workers. That it does
not apply to "all Filipina workers" 20 is not an argument for unconstitutionality. Had the ban been given universal
applicability, then it would have been unreasonable and arbitrary. For obvious reasons, not all of them are similarly
circumstanced. What the Constitution prohibits is the singling out of a select person or group of persons within an
existing class, to the prejudice of such a person or group or resulting in an unfair advantage to another person or group
of persons. To apply the ban, say exclusively to workers deployed by A, but not to those recruited by B, would
obviously clash with the equal protection clause of the Charter. It would be a classic case of what Chase refers to as a
law that "takes property from A and gives it to B." 21 It would be an unlawful invasion of property rights and freedom
of contract and needless to state, an invalid act. 22 (Fernando says: "Where the classification is based on such
distinctions that make a real difference as infancy, sex, and stage of civilization of minority groups, the better rule, it
would seem, is to recognize its validity only if the young, the women, and the cultural minorities are singled out for
favorable treatment. There would be an element of unreasonableness if on the contrary their status that calls for the law
ministering to their needs is made the basis of discriminatory legislation against them. If such be the case, it would be
difficult to refute the assertion of denial of equal protection." 23 In the case at bar, the assailed Order clearly accords
protection to certain women workers, and not the contrary.)
It is incorrect to say that Department Order No. 1 prescribes a total ban on overseas deployment. From scattered
provisions of the Order, it is evident that such a total ban has hot been contemplated. We quote:
5. AUTHORIZED DEPLOYMENT-The deployment of domestic helpers and workers of similar skills defined herein
to the following [sic] are authorized under these guidelines and are exempted from the suspension.

5.1 Hirings by immediate members of the family of Heads of State and Government;
5.2 Hirings by Minister, Deputy Minister and the other senior government officials; and
5.3 Hirings by senior officials of the diplomatic corps and duly accredited international organizations.
5.4 Hirings by employers in countries with whom the Philippines have [sic] bilateral labor agreements or
understanding.

xxx xxx xxx

7. VACATIONING DOMESTIC HELPERS AND WORKERS OF SIMILAR SKILLS--Vacationing domestic helpers

and/or workers of similar skills shall be allowed to process with the POEA and leave for worksite only if they are
returning to the same employer to finish an existing or partially served employment contract. Those workers returning
to worksite to serve a new employer shall be covered by the suspension and the provision of these guidelines.

xxx xxx xxx

9. LIFTING OF SUSPENSION-The Secretary of Labor and Employment (DOLE) may, upon recommendation of
the Philippine Overseas Employment Administration (POEA), lift the suspension in countries where there are:

1. Bilateral agreements or understanding with the Philippines, and/or,

2. Existing mechanisms providing for sufficient safeguards to ensure the welfare and protection of Filipino
workers. 24

xxx xxx xxx

The consequence the deployment ban has on the right to travel does not impair the right. The right to travel is subject,
among other things, to the requirements of "public safety," "as may be provided by law." 25 Department Order No. 1 is
a valid implementation of the Labor Code, in particular, its basic policy to "afford protection to labor," 26 pursuant to
the respondent Department of Labor's rule-making authority vested in it by the Labor Code. 27 The petitioner assumes
that it is unreasonable simply because of its impact on the right to travel, but as we have stated, the right itself is not
absolute. The disputed Order is a valid qualification thereto.

Neither is there merit in the contention that Department Order No. 1 constitutes an invalid exercise of legislative
power. It is true that police power is the domain of the legislature, but it does not mean that such an authority may not
be lawfully delegated. As we have mentioned, the Labor Code itself vests the Department of Labor and Employment
with rulemaking powers in the enforcement whereof. 28

The petitioners's reliance on the Constitutional guaranty of worker participation "in policy and decision-making
processes affecting their rights and benefits" 29 is not well-taken. The right granted by this provision, again, must
submit to the demands and necessities of the State's power of regulation.

The Constitution declares that:

Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all. 30

"Protection to labor" does not signify the promotion of employment alone. What concerns the Constitution more
paramountly is that such an employment be above all, decent, just, and humane. It is bad enough that the country has to
send its sons and daughters to strange lands because it cannot satisfy their employment needs at home. Under these
circumstances, the Government is duty-bound to insure that our toiling expatriates have adequate protection, personally
and economically, while away from home. In this case, the Government has evidence, an evidence the petitioner cannot
seriously dispute, of the lack or inadequacy of such protection, and as part of its duty, it has precisely ordered an
indefinite ban on deployment.

The Court finds furthermore that the Government has not indiscriminately made use of its authority. It is not contested
that it has in fact removed the prohibition with respect to certain countries as manifested by the Solicitor General.
The non-impairment clause of the Constitution, invoked by the petitioner, must yield to the loftier purposes targetted
by the Government. 31 Freedom of contract and enterprise, like all other freedoms, is not free from restrictions, more
so in this jurisdiction, where laissez faire has never been fully accepted as a controlling economic way of life.
 Antonio M. Serrano vs. Gallant Maritime Service, et al.,
G.r. No. 167614, March 24, 2009

DECISION
AUSTRIA-MARTINEZ, J.:
For decades, the toil of solitary migrants has helped lift entire families and communities out of poverty. Their earnings
have built houses, provided health care, equipped schools and planted the seeds of businesses. They have woven
together the world by transmitting ideas and knowledge from country to country. They have provided the dynamic
human link between cultures, societies and economies. Yet, only recently have we begun to understand not only how
much international migration impacts development, but how smart public policies can magnify this effect.
United Nations Secretary-General Ban Ki-Moon Global Forum on Migration and Development Brussels, July 10,
2007[1]
For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5th paragraph of Section 10, Republic Act
(R.A.) No. 8042,[2] to wit:
Sec. 10. Money Claims. - x x x In case of termination of overseas employment without just, valid or authorized cause
as defined by law or contract, the workers shall be entitled to the full reimbursement of his placement fee with interest
of twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment contract or for three
(3) months for every year of the unexpired term, whichever is less.
x x x x (Emphasis and underscoring supplied)
does not magnify the contributions of overseas Filipino workers (OFWs) to national development, but exacerbates the
hardships borne by them by unduly limiting their entitlement in case of illegal dismissal to their lump-sum salary either
for the unexpired portion of their employment contract or for three months for every year of the unexpired term,
whichever is less (subject clause). Petitioner claims that the last clause violates the OFWs' constitutional rights in that it
impairs the terms of their contract, deprives them of equal protection and denies them due process.
By way of Petition for Review under Rule 45 of the Rules of Court, petitioner assails the December 8, 2004
Decision[3] and April 1, 2005 Resolution[4] of the Court of Appeals (CA), which applied the subject clause, entreating
this Court to declare the subject clause unconstitutional.
Petitioner was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd. (respondents) under a
Philippine Overseas Employment Administration (POEA)-approved Contract of Employment with the following terms
and conditions:
Duration of contract 12 months Hours of work 48.0 hours per week
Position Chief Officer Overtime US$700.00 per month
Basic monthly salary US$1,400.00 Vacation leave with pay 7.00 days per month[5]
On March 19, 1998, the date of his departure, petitioner was constrained to accept a downgraded employment contract
for the position of Second Officer with a monthly salary of US$1,000.00, upon the assurance and representation of
respondents that he would be made Chief Officer by the end of April 1998.[6]
Respondents did not deliver on their promise to make petitioner Chief Officer.[7] Hence, petitioner refused to stay on
as Second Officer and was repatriated to the Philippines on May 26, 1998.[8]
Petitioner's employment contract was for a period of 12 months or from March 19, 1998 up to March 19, 1999, but at
the time of his repatriation on May 26, 1998, he had served only two (2) months and seven (7) days of his contract,
leaving an unexpired portion of nine (9) months and twenty-three (23) days.
Petitioner filed with the Labor Arbiter (LA) a Complaint[9] against respondents for constructive dismissal and for
payment of his money claims in the total amount of US$26,442.73, broken down as follows:
May 27/31, 1998 (5 days) incl. Leave
pay Sept. 01/30, 1998 Jan. 01/31, 1999
US$ 413.90 2,590.00 2,590.00
June 01/30, 1998 Oct. 01/31, 1998 Feb. 01/28, 1999
2,590.00 2,590.00 2,590.00
July 01/31, 1998 Nov. 01/30, 1998 Mar. 1/19, 1999 (19 days) incl. leave
2,590.00 2,590.00 pay
August 01/31, 1998 Dec. 01/31, 1998 1,640.00
2,590.00 2,590.00
--------------------------------------------------------------------------------
25,382.23
Amount adjusted to chief mate's salary
(March 19/31, 1998 to April 1/30, 1998) +
1,060.50[10]
----------------------------------------------------------------------------------------------
TOTAL CLAIM
US$ 26,442.73[11]
as well as moral and exemplary damages and attorney's fees.
The LA rendered a Decision dated July 15, 1999, declaring the dismissal of petitioner illegal and awarding him
monetary benefits, to wit:
WHEREFORE, premises considered, judgment is hereby rendered declaring that the dismissal of the complainant
(petitioner) by the respondents in the above-entitled case was illegal and the respondents are hereby ordered to pay the
complainant [petitioner], jointly and severally, in Philippine Currency, based on the rate of exchange prevailing at the time of
payment, the amount of EIGHT THOUSAND SEVEN HUNDRED SEVENTY U.S. DOLLARS (US $8,770.00),
representing the complainants salary for three (3) months of the unexpired portion of the aforesaid contract of employment.
The respondents are likewise ordered to pay the complainant [petitioner], jointly and severally, in Philippine Currency,
based on the rate of exchange prevailing at the time of payment, the amount of FORTY FIVE U.S. DOLLARS (US$
45.00),[12] representing the complainants claim for a salary differential. In addition, the respondents are hereby
ordered to pay the complainant, jointly and severally, in Philippine Currency, at the exchange rate prevailing at the
time of payment, the complainants (petitioner's) claim for attorneys fees equivalent to ten percent (10%) of the total
amount awarded to the aforesaid employee under this Decision.
The claims of the complainant for moral and exemplary damages are hereby DISMISSED for lack of merit.
All other claims are hereby DISMISSED.
SO ORDERED.[13] (Emphasis supplied)
In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his computation on the salary period of three
months only -- rather than the entire unexpired portion of nine months and 23 days of petitioner's employment contract
- applying the subject clause. However, the LA applied the salary rate of US$2,590.00, consisting of petitioner's [b]asic
salary, US$1,400.00/month + US$700.00/month, fixed overtime pay, + US$490.00/month, vacation leave pay =
US$2,590.00/compensation per month.[14]
Respondents appealed[15] to the National Labor Relations Commission (NLRC) to question the finding of the LA that
petitioner was illegally dismissed.
Petitioner also appealed[16] to the NLRC on the sole issue that the LA erred in not applying the ruling of the Court in
Triple Integrated Services, Inc. v. National Labor Relations Commission[17] that in case of illegal dismissal, OFWs are
entitled to their salaries for the unexpired portion of their contracts.[18]
In a Decision dated June 15, 2000, the NLRC modified the LA Decision, to wit:
WHEREFORE, the Decision dated 15 July 1999 is MODIFIED. Respondents are hereby ordered to pay complainant,
jointly and severally, in Philippine currency, at the prevailing rate of exchange at the time of payment the following:
1. Three (3) months salary 2. Salary differential 45.00 3. 10% Attorneys fees 424.50
$1,400 x 3 US$4,200.00 US$4,245.00 TOTAL US$4,669.50

The other findings are affirmed.

SO ORDERED.[19]
The NLRC corrected the LA's computation of the lump-sum salary awarded to petitioner by reducing the applicable
salary rate from US$2,590.00 to US$1,400.00 because R.A. No. 8042 does not provide for the award of overtime pay,
which should be proven to have been actually performed, and for vacation leave pay.[20]
Petitioner filed a Motion for Partial Reconsideration, but this time he questioned the constitutionality of the subject
clause.[21] The NLRC denied the motion.[22]
Petitioner filed a Petition for Certiorari[23] with the CA, reiterating the constitutional challenge against the subject
clause.[24] After initially dismissing the petition on a technicality, the CA eventually gave due course to it, as directed
by this Court in its Resolution dated August 7, 2003 which granted the petition for certiorari, docketed as G.R. No.
151833, filed by petitioner.
In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on the reduction of the applicable salary rate;
however, the CA skirted the constitutional issue raised by petitioner.[25]
His Motion for Reconsideration[26] having been denied by the CA,[27] petitioner brings his cause to this Court on the
following grounds:
I The Court of Appeals and the labor tribunals have decided the case in a way not in accord with applicable decision of
the Supreme Court involving similar issue of granting unto the migrant worker back wages equal to the unexpired
portion of his contract of employment instead of limiting it to three (3) months
II In the alternative that the Court of Appeals and the Labor Tribunals were merely applying their interpretation of Section
10 of Republic Act No. 8042, it is submitted that the Court of Appeals gravely erred in law when it failed to discharge its
judicial duty to decide questions of substance not theretofore determined by the Honorable Supreme Court, particularly, the
constitutional issues raised by the petitioner on the constitutionality of said law, which unreasonably, unfairly and arbitrarily
limits payment of the award for back wages of overseas workers to three (3) months.
III Even without considering the constitutional limitations [of] Sec. 10 of Republic Act No. 8042, the Court of Appeals
gravely erred in law in excluding from petitioners award the overtime pay and vacation pay provided in his contract
since under the contract they form part of his salary.[28]
On February 26, 2008, petitioner wrote the Court to withdraw his petition as he is already old and sickly, and he
intends to make use of the monetary award for his medical treatment and medication.[29] Required to comment,
counsel for petitioner filed a motion, urging the court to allow partial execution of the undisputed monetary award and,
at the same time, praying that the constitutional question be resolved.[30]
Considering that the parties have filed their respective memoranda, the Court now takes up the full merit of the petition
mindful of the extreme importance of the constitutional question raised therein.
On the first and second issues
The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner was illegal is not disputed. Likewise
not disputed is the salary differential of US$45.00 awarded to petitioner in all three fora. What remains disputed is only
the computation of the lump-sum salary to be awarded to petitioner by reason of his illegal dismissal.
Applying the subject clause, the NLRC and the CA computed the lump-sum salary of petitioner at the monthly rate of
US$1,400.00 covering the period of three months out of the unexpired portion of nine months and 23 days of his
employment contract or a total of US$4,200.00.
Impugning the constitutionality of the subject clause, petitioner contends that, in addition to the US$4,200.00 awarded
by the NLRC and the CA, he is entitled to US$21,182.23 more or a total of US$25,382.23, equivalent to his salaries for
the entire nine months and 23 days left of his employment contract, computed at the monthly rate of US$2,590.00.[31]
The Arguments of Petitioner
Petitioner contends that the subject clause is unconstitutional because it unduly impairs the freedom of OFWs to
negotiate for and stipulate in their overseas employment contracts a determinate employment period and a fixed salary
package.[32] It also impinges on the equal protection clause, for it treats OFWs differently from local Filipino workers
(local workers) by putting a cap on the amount of lump-sum salary to which OFWs are entitled in case of illegal
dismissal, while setting no limit to the same monetary award for local workers when their dismissal is declared illegal;
that the disparate treatment is not reasonable as there is no substantial distinction between the two groups;[33] and that
it defeats Section 18,[34] Article II of the Constitution which guarantees the protection of the rights and welfare of all
Filipino workers, whether deployed locally or overseas.[35]
Moreover, petitioner argues that the decisions of the CA and the labor tribunals are not in line with existing
jurisprudence on the issue of money claims of illegally dismissed OFWs. Though there are conflicting rulings on this,
petitioner urges the Court to sort them out for the guidance of affected OFWs.[36]
Petitioner further underscores that the insertion of the subject clause into R.A. No. 8042 serves no other purpose but to
benefit local placement agencies. He marks the statement made by the Solicitor General in his Memorandum, viz.:
Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the event that
jurisdiction over the foreign employer is not acquired by the court or if the foreign employer reneges on its obligation.
Hence, placement agencies that are in good faith and which fulfill their obligations are unnecessarily penalized for the
acts of the foreign employer. To protect them and to promote their continued helpful contribution in deploying Filipino
migrant workers, liability for money claims was reduced under Section 10 of R.A. No. 8042. [37] (Emphasis supplied)
Petitioner argues that in mitigating the solidary liability of placement agencies, the subject clause sacrifices the well-
being of OFWs. Not only that, the provision makes foreign employers better off than local employers because in cases
involving the illegal dismissal of employees, foreign employers are liable for salaries covering a maximum of only
three months of the unexpired employment contract while local employers are liable for the full lump-sum salaries of
their employees. As petitioner puts it:
In terms of practical application, the local employers are not limited to the amount of backwages they have to give their
employees they have illegally dismissed, following well-entrenched and unequivocal jurisprudence on the matter. On the
other hand, foreign employers will only be limited to giving the illegally dismissed migrant workers the maximum of three
(3) months unpaid salaries notwithstanding the unexpired term of the contract that can be more than three (3) months.
Lastly, petitioner claims that the subject clause violates the due process clause, for it deprives him of the salaries and
other emoluments he is entitled to under his fixed-period employment contract.[39]
The Arguments of Respondents
In their Comment and Memorandum, respondents contend that the constitutional issue should not be entertained, for
this was belatedly interposed by petitioner in his appeal before the CA, and not at the earliest opportunity, which was
when he filed an appeal before the NLRC.[40]
The Arguments of the Solicitor General
The Solicitor General (OSG)[41] points out that as R.A. No. 8042 took effect on July 15, 1995, its provisions could not
have impaired petitioner's 1998 employment contract. Rather, R.A. No. 8042 having preceded petitioner's contract, the
provisions thereof are deemed part of the minimum terms of petitioner's employment, especially on the matter of
money claims, as this was not stipulated upon by the parties.[42]
Moreover, the OSG emphasizes that OFWs and local workers differ in terms of the nature of their employment, such
that their rights to monetary benefits must necessarily be treated differently. The OSG enumerates the essential
elements that distinguish OFWs from local workers: first, while local workers perform their jobs within Philippine
territory, OFWs perform their jobs for foreign employers, over whom it is difficult for our courts to acquire
jurisdiction, or against whom it is almost impossible to enforce judgment; and second, as held in Coyoca v. National
Labor Relations Commission[43] and Millares v. National Labor Relations Commission,[44] OFWs are contractual
employees who can never acquire regular employment status, unlike local workers who are or can become regular
employees. Hence, the OSG posits that there are rights and privileges exclusive to local workers, but not available to
OFWs; that these peculiarities make for a reasonable and valid basis for the differentiated treatment under the subject
clause of the money claims of OFWs who are illegally dismissed. Thus, the provision does not violate the equal
protection clause nor Section 18, Article II of the Constitution.[45]
Lastly, the OSG defends the rationale behind the subject clause as a police power measure adopted to mitigate the
solidary liability of placement agencies for this redounds to the benefit of the migrant workers whose welfare the
government seeks to promote. The survival of legitimate placement agencies helps [assure] the government that
migrant workers are properly deployed and are employed under decent and humane conditions.[46]
The Court's Ruling
The Court sustains petitioner on the first and second issues.
When the Court is called upon to exercise its power of judicial review of the acts of its co-equals, such as the Congress,
it does so only when these conditions obtain: (1) that there is an actual case or controversy involving a conflict of rights
susceptible of judicial determination;[47] (2) that the constitutional question is raised by a proper party[48] and at the
earliest opportunity;[49] and (3) that the constitutional question is the very lis mota of the case,[50] otherwise the Court
will dismiss the case or decide the same on some other ground.[51]
Without a doubt, there exists in this case an actual controversy directly involving petitioner who is personally
aggrieved that the labor tribunals and the CA computed his monetary award based on the salary period of three months
only as provided under the subject clause.
The constitutional challenge is also timely. It should be borne in mind that the requirement that a constitutional issue be
raised at the earliest opportunity entails the interposition of the issue in the pleadings before a competent court, such
that, if the issue is not raised in the pleadings before that competent court, it cannot be considered at the trial and, if not
considered in the trial, it cannot be considered on appeal.[52] Records disclose that the issue on the constitutionality of
the subject clause was first raised, not in petitioner's appeal with the NLRC, but in his Motion for Partial
Reconsideration with said labor tribunal,[53] and reiterated in his Petition for Certiorari before the CA.[54]
Nonetheless, the issue is deemed seasonably raised because it is not the NLRC but the CA which has the competence to
resolve the constitutional issue. The NLRC is a labor tribunal that merely performs a quasi-judicial function its
function in the present case is limited to determining questions of fact to which the legislative policy of R.A. No. 8042
is to be applied and to resolving such questions in accordance with the standards laid down by the law itself;[55] thus,
its foremost function is to administer and enforce R.A. No. 8042, and not to inquire into the validity of its provisions.
The CA, on the other hand, is vested with the power of judicial review or the power to declare unconstitutional a law or
a provision thereof, such as the subject clause.[56] Petitioner's interposition of the constitutional issue before the CA
was undoubtedly seasonable. The CA was therefore remiss in failing to take up the issue in its decision.
The third condition that the constitutional issue be critical to the resolution of the case likewise obtains because the
monetary claim of petitioner to his lump-sum salary for the entire unexpired portion of his 12-month employment
contract, and not just for a period of three months, strikes at the very core of the subject clause.
Thus, the stage is all set for the determination of the constitutionality of the subject clause.
Does the subject clause violate Section 10, Article III of the Constitution on non-impairment of contracts?
The answer is in the negative.
Petitioner's claim that the subject clause unduly interferes with the stipulations in his contract on the term of his
employment and the fixed salary package he will receive[57] is not tenable.
Section 10, Article III of the Constitution provides:
No law impairing the obligation of contracts shall be passed.
The prohibition is aligned with the general principle that laws newly enacted have only a prospective operation,[58]
and cannot affect acts or contracts already perfected;[59] however, as to laws already in existence, their provisions are
read into contracts and deemed a part thereof.[60] Thus, the non-impairment clause under Section 10, Article II is
limited in application to laws about to be enacted that would in any way derogate from existing acts or contracts by
enlarging, abridging or in any manner changing the intention of the parties thereto.
As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995 preceded the execution of the employment
contract between petitioner and respondents in 1998. Hence, it cannot be argued that R.A. No. 8042, particularly the
subject clause, impaired the employment contract of the parties. Rather, when the parties executed their 1998
employment contract, they were deemed to have incorporated into it all the provisions of R.A. No. 8042.
But even if the Court were to disregard the timeline, the subject clause may not be declared unconstitutional on the
ground that it impinges on the impairment clause, for the law was enacted in the exercise of the police power of the
State to regulate a business, profession or calling, particularly the recruitment and deployment of OFWs, with the noble
end in view of ensuring respect for the dignity and well-being of OFWs wherever they may be employed.[61] Police
power legislations adopted by the State to promote the health, morals, peace, education, good order, safety, and general
welfare of the people are generally applicable not only to future contracts but even to those already in existence, for all
private contracts must yield to the superior and legitimate measures taken by the State to promote public welfare.[62]
Does the subject clause violate Section 1, Article III of the Constitution, and Section 18, Article II and Section 3,
Article XIII on labor as a protected sector?
The answer is in the affirmative.
Section 1, Article III of the Constitution guarantees:
No person shall be deprived of life, liberty, or property without due process of law nor shall any person be denied the
equal protection of the law.
Section 18,[63] Article II and Section 3,[64] Article XIII accord all members of the labor sector, without distinction as
to place of deployment, full protection of their rights and welfare.
To Filipino workers, the rights guaranteed under the foregoing constitutional provisions translate to economic security
and parity: all monetary benefits should be equally enjoyed by workers of similar category, while all monetary
obligations should be borne by them in equal degree; none should be denied the protection of the laws which is enjoyed
by, or spared the burden imposed on, others in like circumstances.[65]
Such rights are not absolute but subject to the inherent power of Congress to incorporate, when it sees fit, a system of
classification into its legislation; however, to be valid, the classification must comply with these requirements: 1) it is
based on substantial distinctions; 2) it is germane to the purposes of the law; 3) it is not limited to existing conditions
only; and 4) it applies equally to all members of the class.[66]
There are three levels of scrutiny at which the Court reviews the constitutionality of a classification embodied in a law:
a) the deferential or rational basis scrutiny in which the challenged classification needs only be shown to be rationally
related to serving a legitimate state interest;[67] b) the middle-tier or intermediate scrutiny in which the government
must show that the challenged classification serves an important state interest and that the classification is at least
substantially related to serving that interest;[68] and c) strict judicial scrutiny[69] in which a legislative classification
which impermissibly interferes with the exercise of a fundamental right[70] or operates to the peculiar disadvantage of
a suspect class[71] is presumed unconstitutional, and the burden is upon the government to prove that the classification
is necessary to achieve a compelling state interest and that it is the least restrictive means to protect such interest.[72]
Under American jurisprudence, strict judicial scrutiny is triggered by suspect classifications[73] based on race[74] or
gender[75] but not when the classification is drawn along income categories.[76]
It is different in the Philippine setting. In Central Bank (now Bangko Sentral ng Pilipinas) Employee Association, Inc. v.
Bangko Sentral ng Pilipinas,[77] the constitutionality of a provision in the charter of the Bangko Sentral ng Pilipinas (BSP),
a government financial institution (GFI), was challenged for maintaining its rank-and-file employees under the Salary
Standardization Law (SSL), even when the rank-and-file employees of other GFIs had been exempted from the SSL by their
respective charters. Finding that the disputed provision contained a suspect classification based on salary grade, the Court
deliberately employed the standard of strict judicial scrutiny in its review of the constitutionality of said provision. More
significantly, it was in this case that the Court revealed the broad outlines of its judicial philosophy, to wit:
Congress retains its wide discretion in providing for a valid classification, and its policies should be accorded recognition
and respect by the courts of justice except when they run afoul of the Constitution. The deference stops where the
classification violates a fundamental right, or prejudices persons accorded special protection by the Constitution. When these
violations arise, this Court must discharge its primary role as the vanguard of constitutional guaranties, and require a stricter
and more exacting adherence to constitutional limitations. Rational basis should not suffice.
Admittedly, the view that prejudice to persons accorded special protection by the Constitution requires a stricter
judicial scrutiny finds no support in American or English jurisprudence. Nevertheless, these foreign decisions and
authorities are not per se controlling in this jurisdiction. At best, they are persuasive and have been used to support
many of our decisions. We should not place undue and fawning reliance upon them and regard them as indispensable
mental crutches without which we cannot come to our own decisions through the employment of our own endowments.
We live in a different ambience and must decide our own problems in the light of our own interests and needs, and of
our qualities and even idiosyncrasies as a people, and always with our own concept of law and justice. Our laws must
be construed in accordance with the intention of our own lawmakers and such intent may be deduced from the
language of each law and the context of other local legislation related thereto. More importantly, they must be
construed to serve our own public interest which is the be-all and the end-all of all our laws. And it need not be
stressed that our public interest is distinct and different from others.
Further, the quest for a better and more equal world calls for the use of equal protection as a tool of effective judicial intervention.
Equality is one ideal which cries out for bold attention and action in the Constitution. The Preamble proclaims equality as an
ideal precisely in protest against crushing inequities in Philippine society. The command to promote social justice in Article
II, Section 10, in all phases of national development, further explicitated in Article XIII, are clear commands to the State to
take affirmative action in the direction of greater equality. x x x [T]here is thus in the Philippine Constitution no lack of
doctrinal support for a more vigorous state effort towards achieving a reasonable measure of equality.
Our present Constitution has gone further in guaranteeing vital social and economic rights to marginalized groups of
society, including labor. Under the policy of social justice, the law bends over backward to accommodate the interests
of the working class on the humane justification that those with less privilege in life should have more in law. And the
obligation to afford protection to labor is incumbent not only on the legislative and executive branches but also on the
judiciary to translate this pledge into a living reality. Social justice calls for the humanization of laws and the
equalization of social and economic forces by the State so that justice in its rational and objectively secular conception
may at least be approximated.

Under most circumstances, the Court will exercise judicial restraint in deciding questions of constitutionality,
recognizing the broad discretion given to Congress in exercising its legislative power. Judicial scrutiny would be based
on the rational basis test, and the legislative discretion would be given deferential treatment.
But if the challenge to the statute is premised on the denial of a fundamental right, or the perpetuation of prejudice
against persons favored by the Constitution with special protection, judicial scrutiny ought to be more strict. A weak
and watered down view would call for the abdication of this Courts solemn duty to strike down any law repugnant to
the Constitution and the rights it enshrines. This is true whether the actor committing the unconstitutional act is a
private person or the government itself or one of its instrumentalities. Oppressive acts will be struck down regardless of
the character or nature of the actor.
In the case at bar, the challenged proviso operates on the basis of the salary grade or officer-employee status. It is akin
to a distinction based on economic class and status, with the higher grades as recipients of a benefit specifically
withheld from the lower grades. Officers of the BSP now receive higher compensation packages that are competitive
with the industry, while the poorer, low-salaried employees are limited to the rates prescribed by the SSL. The
implications are quite disturbing: BSP rank-and-file employees are paid the strictly regimented rates of the SSL while
employees higher in rank - possessing higher and better education and opportunities for career advancement - are given
higher compensation packages to entice them to stay. Considering that majority, if not all, the rank-and-file employees
consist of people whose status and rank in life are less and limited, especially in terms of job marketability, it is they -
and not the officers - who have the real economic and financial need for the adjustment . This is in accord with the
policy of the Constitution "to free the people from poverty, provide adequate social services, extend to them a decent
standard of living, and improve the quality of life for all. Any act of Congress that runs counter to this constitutional
desideratum deserves strict scrutiny by this Court before it can pass muster. (Emphasis supplied)
Imbued with the same sense of obligation to afford protection to labor, the Court in the present case also employs the
standard of strict judicial scrutiny, for it perceives in the subject clause a suspect classification prejudicial to OFWs.
Upon cursory reading, the subject clause appears facially neutral, for it applies to all OFWs. However, a closer
examination reveals that the subject clause has a discriminatory intent against, and an invidious impact on, OFWs at
two levels:
First, OFWs with employment contracts of less than one year vis--vis OFWs with employment contracts of one year or
more;
Second, among OFWs with employment contracts of more than one year; and
Third, OFWs vis--vis local workers with fixed-period employment;
OFWs with employment contracts of less than one year vis--vis OFWs with employment contracts of one year or more
As pointed out by petitioner,[78] it was in Marsaman Manning Agency, Inc. v. National Labor Relations
Commission[79] (Second Division, 1999) that the Court laid down the following rules on the application of the periods
prescribed under Section 10(5) of R.A. No. 804, to wit:
A plain reading of Sec. 10 clearly reveals that the choice of which amount to award an illegally dismissed overseas
contract worker, i.e., whether his salaries for the unexpired portion of his employment contract or three (3) months
salary for every year of the unexpired term, whichever is less, comes into play only when the employment contract
concerned has a term of at least one (1) year or more. This is evident from the words for every year of the unexpired
term which follows the words salaries x x x for three months. To follow petitioners thinking that private respondent is
entitled to three (3) months salary only simply because it is the lesser amount is to completely disregard and overlook
some words used in the statute while giving effect to some. This is contrary to the well-established rule in legal
hermeneutics that in interpreting a statute, care should be taken that every part or word thereof be given effect since the
law-making body is presumed to know the meaning of the words employed in the statue and to have used them
advisedly. Ut res magis valeat quam pereat.[80] (Emphasis supplied)
In Marsaman, the OFW involved was illegally dismissed two months into his 10-month contract, but was awarded his
salaries for the remaining 8 months and 6 days of his contract.
Prior to Marsaman, however, there were two cases in which the Court made conflicting rulings on Section 10(5). One
was Asian Center for Career and Employment System and Services v. National Labor Relations Commission (Second
Division, October 1998),[81] which involved an OFW who was awarded a two-year employment contract, but was
dismissed after working for one year and two months. The LA declared his dismissal illegal and awarded him
SR13,600.00 as lump-sum salary covering eight months, the unexpired portion of his contract. On appeal, the Court
reduced the award to SR3,600.00 equivalent to his three months salary, this being the lesser value, to wit:
Under Section 10 of R.A. No. 8042, a worker dismissed from overseas employment without just, valid or authorized
cause is entitled to his salary for the unexpired portion of his employment contract or for three (3) months for every
year of the unexpired term, whichever is less.
In the case at bar, the unexpired portion of private respondents employment contract is eight (8) months. Private
respondent should therefore be paid his basic salary corresponding to three (3) months or a total of SR3,600.[82]
Another was Triple-Eight Integrated Services, Inc. v. National Labor Relations Commission (Third Division,
December 1998),[83] which involved an OFW (therein respondent Erlinda Osdana) who was originally granted a 12-
month contract, which was deemed renewed for another 12 months. After serving for one year and seven-and-a-half
months, respondent Osdana was illegally dismissed, and the Court awarded her salaries for the entire unexpired portion
of four and one-half months of her contract.
The Marsaman interpretation of Section 10(5) has since been adopted in the following cases:
Case Title
Contract Period
Period of Service
Unexpired Period
Period Applied in the Computation of the Monetary Award

Skippers v. Maguad[84] 8 months 5 months

6 months 4 months Talidano v. Falcon[87]
2 months 4 months 12 months
4 months Centennial Transmarine v. dela 3 months
4 months Cruz l[86] 9 months
Bahia Shipping v. Reynaldo Chua 9 months 3 months
[85] 4 months Univan v. CA [88]
9 months 5 months
12 months 11 months and 9 days 2 months
3 months 3 months Unexpired portion
9 months JSS v. Ferrer[92] Flourish Maritime v. Almanzor
3 months 12 months [95]
Oriental v.CA [89] 16 days 2 years
12 months more than 2 months 11 months and 24 days 26 days
10 months 3 months 23 months and 4 days
3 months Pentagon v. Adelantar[93] 6 months or 3 months for each
PCL v. NLRC[90] 12 months year of contract
12 months 9 months and 7 days Athenna Manpower v. Villanos
more than 2 months 2 months and 23 days [96]
more or less 9 months 2 months and 23 days 1 year, 10 months and 28 days
3 months Phil. Employ v. Paramio, 1 month
Olarte v. Nayona[91] et al.[94] 1 year, 9 months and 28 days
12 months 12 months 6 months or 3 months for each
21 days year of contract
10 months
As the foregoing matrix readily shows, the subject clause classifies OFWs into two categories. The first category
includes OFWs with fixed-period employment contracts of less than one year; in case of illegal dismissal, they are
entitled to their salaries for the entire unexpired portion of their contract. The second category consists of OFWs with
fixed-period employment contracts of one year or more; in case of illegal dismissal, they are entitled to monetary
award equivalent to only 3 months of the unexpired portion of their contracts.
The disparity in the treatment of these two groups cannot be discounted. In Skippers, the respondent OFW worked for
only 2 months out of his 6-month contract, but was awarded his salaries for the remaining 4 months. In contrast, the
respondent OFWs in Oriental and PCL who had also worked for about 2 months out of their 12-month contracts were
awarded their salaries for only 3 months of the unexpired portion of their contracts. Even the OFWs involved in
Talidano and Univan who had worked for a longer period of 3 months out of their 12-month contracts before being
illegally dismissed were awarded their salaries for only 3 months.
To illustrate the disparity even more vividly, the Court assumes a hypothetical OFW-A with an employment contract of
10 months at a monthly salary rate of US$1,000.00 and a hypothetical OFW-B with an employment contract of 15
months with the same monthly salary rate of US$1,000.00. Both commenced work on the same day and under the same
employer, and were illegally dismissed after one month of work. Under the subject clause, OFW-A will be entitled to
US$9,000.00, equivalent to his salaries for the remaining 9 months of his contract, whereas OFW-B will be entitled to
only US$3,000.00, equivalent to his salaries for 3 months of the unexpired portion of his contract, instead of
US$14,000.00 for the unexpired portion of 14 months of his contract, as the US$3,000.00 is the lesser amount.
The disparity becomes more aggravating when the Court takes into account jurisprudence that, prior to the effectivity of R.A.
No. 8042 on July 14, 1995,[97] illegally dismissed OFWs, no matter how long the period of their employment contracts,
were entitled to their salaries for the entire unexpired portions of their contracts. The matrix below speaks for itself:
Case Title Unexpired Period
Contract Period Period Applied in the Computation of the Monetary
Period of Service Award
ATCI v. CA, et al.[98] 9 months 19 months
2 years 15 months Barros v. NLRC, et al.[103]
2 months 15 months 12 months
22 months Agoy v. NLRC[101] 4 months
22 months 2 years 8 months
Phil. Integrated v. NLRC[99] 2 months 8 months
2 years 22 months Philippine Transmarine v.
7 days 22 months Carilla[104]
23 months and 23 days EDI v. NLRC, et al.[102] 12 months
23 months and 23 days 2 years 6 months and 22 days
JGB v. NLC[100] 5 months 5 months and 18 days
2 years 19 months 5 months and 18 days
It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods or the unexpired portions thereof, were
treated alike in terms of the computation of their monetary benefits in case of illegal dismissal. Their claims were
subjected to a uniform rule of computation: their basic salaries multiplied by the entire unexpired portion of their
employment contracts.
The enactment of the subject clause in R.A. No. 8042 introduced a differentiated rule of computation of the money
claims of illegally dismissed OFWs based on their employment periods, in the process singling out one category whose
contracts have an unexpired portion of one year or more and subjecting them to the peculiar disadvantage of having
their monetary awards limited to their salaries for 3 months or for the unexpired portion thereof, whichever is less, but
all the while sparing the other category from such prejudice, simply because the latter's unexpired contracts fall short of
one year.
Among OFWs With Employment Contracts of More Than One Year
Upon closer examination of the terminology employed in the subject clause, the Court now has misgivings on the
accuracy of the Marsaman interpretation.
The Court notes that the subject clause or for three (3) months for every year of the unexpired term, whichever is less
contains the qualifying phrases every year and unexpired term. By its ordinary meaning, the word term means a limited
or definite extent of time.[105] Corollarily, that every year is but part of an unexpired term is significant in many ways:
first, the unexpired term must be at least one year, for if it were any shorter, there would be no occasion for such
unexpired term to be measured by every year; and second, the original term must be more than one year, for otherwise,
whatever would be the unexpired term thereof will not reach even a year. Consequently, the more decisive factor in the
determination of when the subject clause for three (3) months for every year of the unexpired term, whichever is less
shall apply is not the length of the original contract period as held in Marsaman,[106] but the length of the unexpired
portion of the contract period -- the subject clause applies in cases when the unexpired portion of the contract period is
at least one year, which arithmetically requires that the original contract period be more than one year.
Viewed in that light, the subject clause creates a sub-layer of discrimination among OFWs whose contract periods are
for more than one year: those who are illegally dismissed with less than one year left in their contracts shall be entitled
to their salaries for the entire unexpired portion thereof, while those who are illegally dismissed with one year or more
remaining in their contracts shall be covered by the subject clause, and their monetary benefits limited to their salaries
for three months only.
To concretely illustrate the application of the foregoing interpretation of the subject clause, the Court assumes
hypothetical OFW-C and OFW-D, who each have a 24-month contract at a salary rate of US$1,000.00 per month.
OFW-C is illegally dismissed on the 12th month, and OFW-D, on the 13th month. Considering that there is at least 12
months remaining in the contract period of OFW-C, the subject clause applies to the computation of the latter's
monetary benefits. Thus, OFW-C will be entitled, not to US$12,000,00 or the latter's total salaries for the 12 months
unexpired portion of the contract, but to the lesser amount of US$3,000.00 or the latter's salaries for 3 months out of
the 12-month unexpired term of the contract. On the other hand, OFW-D is spared from the effects of the subject
clause, for there are only 11 months left in the latter's contract period. Thus, OFW-D will be entitled to US$11,000.00,
which is equivalent to his/her total salaries for the entire 11-month unexpired portion.
OFWs vis--vis Local Workers With Fixed-Period Employment
As discussed earlier, prior to R.A. No. 8042, a uniform system of computation of the monetary awards of illegally
dismissed OFWs was in place. This uniform system was applicable even to local workers with fixed-term
employment.[107]
The earliest rule prescribing a uniform system of computation was actually Article 299 of the Code of Commerce
(1888),[108] to wit:
Article 299. If the contracts between the merchants and their shop clerks and employees should have been made of a
fixed period, none of the contracting parties, without the consent of the other, may withdraw from the fulfillment of
said contract until the termination of the period agreed upon.
Persons violating this clause shall be subject to indemnify the loss and damage suffered, with the exception of the
provisions contained in the following articles.
In Reyes v. The Compaia Maritima,[109] the Court applied the foregoing provision to determine the liability of a shipping
company for the illegal discharge of its managers prior to the expiration of their fixed-term employment. The Court therein
held the shipping company liable for the salaries of its managers for the remainder of their fixed-term employment.
There is a more specific rule as far as seafarers are concerned: Article 605 of the Code of Commerce which provides:
Article 605. If the contracts of the captain and members of the crew with the agent should be for a definite period or
voyage, they cannot be discharged until the fulfillment of their contracts, except for reasons of insubordination in
serious matters, robbery, theft, habitual drunkenness, and damage caused to the vessel or to its cargo by malice or
manifest or proven negligence.
Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie,[110] in which the Court held the shipping
company liable for the salaries and subsistence allowance of its illegally dismissed employees for the entire unexpired
portion of their employment contracts.

While Article 605 has remained good law up to the present,[111] Article 299 of the Code of Commerce was replaced
by Art. 1586 of the Civil Code of 1889, to wit:
Article 1586. Field hands, mechanics, artisans, and other laborers hired for a certain time and for a certain work cannot
leave or be dismissed without sufficient cause, before the fulfillment of the contract. (Emphasis supplied.)
Citing Manresa, the Court in Lemoine v. Alkan[112] read the disjunctive "or" in Article 1586 as a conjunctive "and" so
as to apply the provision to local workers who are employed for a time certain although for no particular skill. This
interpretation of Article 1586 was reiterated in Garcia Palomar v. Hotel de France Company.[113] And in both
Lemoine and Palomar, the Court adopted the general principle that in actions for wrongful discharge founded on
Article 1586, local workers are entitled to recover damages to the extent of the amount stipulated to be paid to them by
the terms of their contract. On the computation of the amount of such damages, the Court in Aldaz v. Gay[114] held:
The doctrine is well-established in American jurisprudence, and nothing has been brought to our attention to the
contrary under Spanish jurisprudence, that when an employee is wrongfully discharged it is his duty to seek other
employment of the same kind in the same community, for the purpose of reducing the damages resulting from such
wrongful discharge. However, while this is the general rule, the burden of showing that he failed to make an effort to
secure other employment of a like nature, and that other employment of a like nature was obtainable, is upon the
defendant. When an employee is wrongfully discharged under a contract of employment his prima facie damage is the
amount which he would be entitled to had he continued in such employment until the termination of the period.
(Howard vs. Daly, 61 N. Y., 362; Allen vs. Whitlark, 99 Mich., 492; Farrell vs. School District No. 2, 98 Mich.,
43.)[115] (Emphasis supplied)
On August 30, 1950, the New Civil Code took effect with new provisions on fixed-term employment: Section 2
(Obligations with a Period), Chapter 3, Title I, and Sections 2 (Contract of Labor) and 3 (Contract for a Piece of Work),
Chapter 3, Title VIII, Book IV.[116] Much like Article 1586 of the Civil Code of 1889, the new provisions of the Civil
Code do not expressly provide for the remedies available to a fixed-term worker who is illegally discharged. However,
it is noted that in Mackay Radio & Telegraph Co., Inc. v. Rich,[117] the Court carried over the principles on the
payment of damages underlying Article 1586 of the Civil Code of 1889 and applied the same to a case involving the
illegal discharge of a local worker whose fixed-period employment contract was entered into in 1952, when the new
Civil Code was already in effect.[118]
More significantly, the same principles were applied to cases involving overseas Filipino workers whose fixed-term
employment contracts were illegally terminated, such as in First Asian Trans & Shipping Agency, Inc. v. Ople,[119]
involving seafarers who were illegally discharged. In Teknika Skills and Trade Services, Inc. v. National Labor Relations
Commission,[120] an OFW who was illegally dismissed prior to the expiration of her fixed-period employment contract as a
baby sitter, was awarded salaries corresponding to the unexpired portion of her contract. The Court arrived at the same ruling
in Anderson v. National Labor Relations Commission,[121] which involved a foreman hired in 1988 in Saudi Arabia for a
fixed term of two years, but who was illegally dismissed after only nine months on the job -- the Court awarded him salaries
corresponding to 15 months, the unexpired portion of his contract. In Asia World Recruitment, Inc. v. National Labor
Relations Commission,[122] a Filipino working as a security officer in 1989 in Angola was awarded his salaries for the
remaining period of his 12-month contract after he was wrongfully discharged. Finally, in Vinta Maritime Co., Inc. v.
National Labor Relations Commission,[123] an OFW whose 12-month contract was illegally cut short in the second month
was declared entitled to his salaries for the remaining 10 months of his contract.
In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term employment who were illegally discharged
were treated alike in terms of the computation of their money claims: they were uniformly entitled to their salaries for
the entire unexpired portions of their contracts. But with the enactment of R.A. No. 8042, specifically the adoption of
the subject clause, illegally dismissed OFWs with an unexpired portion of one year or more in their employment
contract have since been differently treated in that their money claims are subject to a 3-month cap, whereas no such
limitation is imposed on local workers with fixed-term employment.
The Court concludes that the subject clause contains a suspect classification in that, in the computation of the monetary
benefits of fixed-term employees who are illegally discharged, it imposes a 3-month cap on the claim of OFWs with an
unexpired portion of one year or more in their contracts, but none on the claims of other OFWs or local workers with fixed-
term employment. The subject clause singles out one classification of OFWs and burdens it with a peculiar disadvantage.
There being a suspect classification involving a vulnerable sector protected by the Constitution, the Court now subjects
the classification to a strict judicial scrutiny, and determines whether it serves a compelling state interest through the
least restrictive means.
What constitutes compelling state interest is measured by the scale of rights and powers arrayed in the Constitution and
calibrated by history.[124] It is akin to the paramount interest of the state[125] for which some individual liberties must
give way, such as the public interest in safeguarding health or maintaining medical standards,[126] or in maintaining
access to information on matters of public concern.[127]
In the present case, the Court dug deep into the records but found no compelling state interest that the subject clause
may possibly serve.
The OSG defends the subject clause as a police power measure designed to protect the employment of Filipino
seafarers overseas x x x. By limiting the liability to three months [sic], Filipino seafarers have better chance of getting
hired by foreign employers. The limitation also protects the interest of local placement agencies, which otherwise may
be made to shoulder millions of pesos in termination pay.[128]
The OSG explained further:
Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the event that
jurisdiction over the foreign employer is not acquired by the court or if the foreign employer reneges on its obligation.
Hence, placement agencies that are in good faith and which fulfill their obligations are unnecessarily penalized for the
acts of the foreign employer. To protect them and to promote their continued helpful contribution in deploying Filipino
migrant workers, liability for money are reduced under Section 10 of RA 8042.
This measure redounds to the benefit of the migrant workers whose welfare the government seeks to promote. The
survival of legitimate placement agencies helps [assure] the government that migrant workers are properly deployed
and are employed under decent and humane conditions.[129] (Emphasis supplied)
However, nowhere in the Comment or Memorandum does the OSG cite the source of its perception of the state interest
sought to be served by the subject clause.
The OSG locates the purpose of R.A. No. 8042 in the speech of Rep. Bonifacio Gallego in sponsorship of House Bill No.
14314 (HB 14314), from which the law originated;[130] but the speech makes no reference to the underlying reason for the
adoption of the subject clause. That is only natural for none of the 29 provisions in HB 14314 resembles the subject clause.
On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on money claims, to wit:
Sec. 10. Money Claims. - Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National
Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide, within
ninety (90) calendar days after the filing of the complaint, the claims arising out of an employer-employee relationship
or by virtue of the complaint, the claim arising out of an employer-employee relationship or by virtue of any law or
contract involving Filipino workers for overseas employment including claims for actual, moral, exemplary and other
forms of damages.
The liability of the principal and the recruitment/placement agency or any and all claims under this Section shall be
joint and several.
Any compromise/amicable settlement or voluntary agreement on any money claims exclusive of damages under this
Section shall not be less than fifty percent (50%) of such money claims: Provided, That any installment payments, if
applicable, to satisfy any such compromise or voluntary settlement shall not be more than two (2) months. Any
compromise/voluntary agreement in violation of this paragraph shall be null and void.
Non-compliance with the mandatory period for resolutions of cases provided under this Section shall subject the
responsible officials to any or all of the following penalties:
(1) The salary of any such official who fails to render his decision or resolution within the prescribed period shall be, or
caused to be, withheld until the said official complies therewith;
(2) Suspension for not more than ninety (90) days; or
(3) Dismissal from the service with disqualification to hold any appointive public office for five (5) years.
Provided, however, That the penalties herein provided shall be without prejudice to any liability which any such
official may have incurred under other existing laws or rules and regulations as a consequence of violating the
provisions of this paragraph.
But significantly, Section 10 of SB 2077 does not provide for any rule on the computation of money claims.
A rule on the computation of money claims containing the subject clause was inserted and eventually adopted as the 5th
paragraph of Section 10 of R.A. No. 8042. The Court examined the rationale of the subject clause in the transcripts of the
Bicameral Conference Committee (Conference Committee) Meetings on the Magna Carta on OCWs (Disagreeing Provisions
of Senate Bill No. 2077 and House Bill No. 14314). However, the Court finds no discernible state interest, let alone a
compelling one, that is sought to be protected or advanced by the adoption of the subject clause.
In fine, the Government has failed to discharge its burden of proving the existence of a compelling state interest that
would justify the perpetuation of the discrimination against OFWs under the subject clause.
Assuming that, as advanced by the OSG, the purpose of the subject clause is to protect the employment of OFWs by
mitigating the solidary liability of placement agencies, such callous and cavalier rationale will have to be rejected.
There can never be a justification for any form of government action that alleviates the burden of one sector, but
imposes the same burden on another sector, especially when the favored sector is composed of private businesses such
as placement agencies, while the disadvantaged sector is composed of OFWs whose protection no less than the
Constitution commands. The idea that private business interest can be elevated to the level of a compelling state
interest is odious.
Moreover, even if the purpose of the subject clause is to lessen the solidary liability of placement agencies vis-a-vis
their foreign principals, there are mechanisms already in place that can be employed to achieve that purpose without
infringing on the constitutional rights of OFWs.
The POEA Rules and Regulations Governing the Recruitment and Employment of Land-Based Overseas Workers,
dated February 4, 2002, imposes administrative disciplinary measures on erring foreign employers who default on their
contractual obligations to migrant workers and/or their Philippine agents. These disciplinary measures range from
temporary disqualification to preventive suspension. The POEA Rules and Regulations Governing the Recruitment and
Employment of Seafarers, dated May 23, 2003, contains similar administrative disciplinary measures against erring
foreign employers.

Resort to these administrative measures is undoubtedly the less restrictive means of aiding local placement agencies in
enforcing the solidary liability of their foreign principals.
Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is violative of the right of petitioner and
other OFWs to equal protection.
Further, there would be certain misgivings if one is to approach the declaration of the unconstitutionality of the subject
clause from the lone perspective that the clause directly violates state policy on labor under Section 3,[131] Article XIII
of the Constitution.
While all the provisions of the 1987 Constitution are presumed self-executing,,[132] there are some which this Court
has declared not judicially enforceable, Article XIII being one,[133] particularly Section 3 thereof, the nature of which,
this Court, in Agabon v. National Labor Relations Commission,[134] has described to be not self-actuating:
Thus, the constitutional mandates of protection to labor and security of tenure may be deemed as self-executing in the
sense that these are automatically acknowledged and observed without need for any enabling legislation. However, to
declare that the constitutional provisions are enough to guarantee the full exercise of the rights embodied therein, and
the realization of ideals therein expressed, would be impractical, if not unrealistic. The espousal of such view presents
the dangerous tendency of being overbroad and exaggerated. The guarantees of "full protection to labor" and "security
of tenure", when examined in isolation, are facially unqualified, and the broadest interpretation possible suggests a
blanket shield in favor of labor against any form of removal regardless of circumstance. This interpretation implies an
unimpeachable right to continued employment-a utopian notion, doubtless-but still hardly within the contemplation of
the framers. Subsequent legislation is still needed to define the parameters of these guaranteed rights to ensure the
protection and promotion, not only the rights of the labor sector, but of the employers' as well. Without specific and
pertinent legislation, judicial bodies will be at a loss, formulating their own conclusion to approximate at least the aims
of the Constitution.
Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a positive enforceable right to stave
off the dismissal of an employee for just cause owing to the failure to serve proper notice or hearing. As manifested by
several framers of the 1987 Constitution, the provisions on social justice require legislative enactments for their
enforceability.[135] (Emphasis added)
Thus, Section 3, Article XIII cannot be treated as a principal source of direct enforceable rights, for the violation of
which the questioned clause may be declared unconstitutional. It may unwittingly risk opening the floodgates of
litigation to every worker or union over every conceivable violation of so broad a concept as social justice for labor.
It must be stressed that Section 3, Article XIII does not directly bestow on the working class any actual enforceable
right, but merely clothes it with the status of a sector for whom the Constitution urges protection through executive or
legislative action and judicial recognition. Its utility is best limited to being an impetus not just for the executive and
legislative departments, but for the judiciary as well, to protect the welfare of the working class. And it was in fact
consistent with that constitutional agenda that the Court in Central Bank (now Bangko Sentral ng Pilipinas) Employee
Association, Inc. v. Bangko Sentral ng Pilipinas, penned by then Associate Justice now Chief Justice Reynato S. Puno,
formulated the judicial precept that when the challenge to a statute is premised on the perpetuation of prejudice against
persons favored by the Constitution with special protection -- such as the working class or a section thereof -- the Court
may recognize the existence of a suspect classification and subject the same to strict judicial scrutiny.
The view that the concepts of suspect classification and strict judicial scrutiny formulated in Central Bank Employee
Association exaggerate the significance of Section 3, Article XIII is a groundless apprehension. Central Bank applied
Article XIII in conjunction with the equal protection clause. Article XIII, by itself, without the application of the equal
protection clause, has no life or force of its own as elucidated in Agabon.
Along the same line of reasoning, the Court further holds that the subject clause violates petitioner's right to substantive
due process, for it deprives him of property, consisting of monetary benefits, without any existing valid governmental
purpose.[136]
The argument of the Solicitor General, that the actual purpose of the subject clause of limiting the entitlement of OFWs
to their three-month salary in case of illegal dismissal, is to give them a better chance of getting hired by foreign
employers. This is plain speculation. As earlier discussed, there is nothing in the text of the law or the records of the
deliberations leading to its enactment or the pleadings of respondent that would indicate that there is an existing
governmental purpose for the subject clause, or even just a pretext of one.
The subject clause does not state or imply any definitive governmental purpose; and it is for that precise reason that the
clause violates not just petitioner's right to equal protection, but also her right to substantive due process under Section
1,[137] Article III of the Constitution.
The subject clause being unconstitutional, petitioner is entitled to his salaries for the entire unexpired period of nine
months and 23 days of his employment contract, pursuant to law and jurisprudence prior to the enactment of R.A. No.
8042.
On the Third Issue
Petitioner contends that his overtime and leave pay should form part of the salary basis in the computation of his
monetary award, because these are fixed benefits that have been stipulated into his contract.
Petitioner is mistaken.
The word salaries in Section 10(5) does not include overtime and leave pay. For seafarers like petitioner, DOLE
Department Order No. 33, series 1996, provides a Standard Employment Contract of Seafarers, in which salary is
understood as the basic wage, exclusive of overtime, leave pay and other bonuses; whereas overtime pay is
compensation for all work performed in excess of the regular eight hours, and holiday pay is compensation for any
work performed on designated rest days and holidays.
By the foregoing definition alone, there is no basis for the automatic inclusion of overtime and holiday pay in the
computation of petitioner's monetary award, unless there is evidence that he performed work during those periods. As
the Court held in Centennial Transmarine, Inc. v. Dela Cruz,[138]
However, the payment of overtime pay and leave pay should be disallowed in light of our ruling in Cagampan v.
National Labor Relations Commission, to wit:
The rendition of overtime work and the submission of sufficient proof that said was actually performed are conditions
to be satisfied before a seaman could be entitled to overtime pay which should be computed on the basis of 30% of the
basic monthly salary. In short, the contract provision guarantees the right to overtime pay but the entitlement to such
benefit must first be established.
In the same vein, the claim for the day's leave pay for the unexpired portion of the contract is unwarranted since the
same is given during the actual service of the seamen.
WHEREFORE, the Court GRANTS the Petition. The subject clause or for three months for every year of the
unexpired term, whichever is less in the 5th paragraph of Section 10 of Republic Act No. 8042 is DECLARED
UNCONSTITUTIONAL; and the December 8, 2004 Decision and April 1, 2005 Resolution of the Court of Appeals
are MODIFIED to the effect that petitioner is AWARDED his salaries for the entire unexpired portion of his
employment contract consisting of nine months and 23 days computed at the rate of US$1,400.00 per month.
No costs.
SO ORDERED.
 JENNY M. AGABON and VIRGILIO C. AGABON vs NATIONAL LABOR RELATIONSCOMMISSION
(NLRC), RIVIERAHOME IMPROVEMENTS, INC. and
VICENTE ANGELES, November 17, 2004 G.R. No. 158693

DECISION
YNARES-SANTIAGO, J.:
This petition for review seeks to reverse the decision[1] of the Court of Appeals dated January 23, 2003, in CA-G.R. SP
No. 63017, modifying the decision of National Labor Relations Commission (NLRC) in NLRC-NCR Case No.
023442-00.
Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling and installing ornamental
and construction materials. It employed petitioners Virgilio Agabon and Jenny Agabon as gypsum board and cornice
installers on January 2, 1992[2] until February 23, 1999 when they were dismissed for abandonment of work.
Petitioners then filed a complaint for illegal dismissal and payment of money claims[3] and on December 28,
1999, the Labor Arbiter rendered a decision declaring the dismissals illegal and ordered private respondent to pay the
monetary claims. The dispositive portion of the decision states:
WHEREFORE, premises considered, We find the termination of the complainants illegal. Accordingly, respondent is
hereby ordered to pay them their backwages up to November 29, 1999 in the sum of:
1. Jenny M. Agabon - P56, 231.93
2. Virgilio C. Agabon - 56, 231.93
and, in lieu of reinstatement to pay them their separation pay of one (1) month for every year of service from date of
hiring up to November 29, 1999.
Respondent is further ordered to pay the complainants their holiday pay and service incentive leave pay for the years
1996, 1997 and 1998 as well as their premium pay for holidays and rest days and Virgilio Agabons 13 th month pay
differential amounting to TWO THOUSAND ONE HUNDRED FIFTY (P2,150.00) Pesos, or the aggregate amount of
ONE HUNDRED TWENTY ONE THOUSAND SIX HUNDRED SEVENTY EIGHT & 93/100 (P121,678.93) Pesos
for Jenny Agabon, and ONE HUNDRED TWENTY THREE THOUSAND EIGHT HUNDRED TWENTY EIGHT &
93/100 (P123,828.93) Pesos for Virgilio Agabon, as per attached computation of Julieta C. Nicolas, OIC, Research and
Computation Unit, NCR.
SO ORDERED.[4]
On appeal, the NLRC reversed the Labor Arbiter because it found that the petitioners had abandoned their work, and
were not entitled to backwages and separation pay. The other money claims awarded by the Labor Arbiter were also
denied for lack of evidence.[5]
Upon denial of their motion for reconsideration, petitioners filed a petition for certiorari with the Court of Appeals.
The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal because they had abandoned
their employment but ordered the payment of money claims. The dispositive portion of the decision reads:

WHEREFORE, the decision of the National Labor Relations Commission is REVERSED only insofar as it dismissed
petitioners money claims. Private respondents are ordered to pay petitioners holiday pay for four (4) regular holidays in
1996, 1997, and 1998, as well as their service incentive leave pay for said years, and to pay the balance of petitioner
Virgilio Agabons 13th month pay for 1998 in the amount of P2,150.00.
SO ORDERED.[6]
Hence, this petition for review on the sole issue of whether petitioners were illegally dismissed.[7]
Petitioners assert that they were dismissed because the private respondent refused to give them assignments
unless they agreed to work on a pakyaw basis when they reported for duty on February 23, 1999. They did not agree on
this arrangement because it would mean losing benefits as Social Security System (SSS) members. Petitioners also
claim that private respondent did not comply with the twin requirements of notice and hearing.[8]
Private respondent, on the other hand, maintained that petitioners were not dismissed but had abandoned their work. [9]
In fact, private respondent sent two letters to the last known addresses of the petitioners advising them to report for
work. Private respondents manager even talked to petitioner Virgilio Agabon by telephone sometime in June 1999 to
tell him about the new assignment at Pacific Plaza Towers involving 40,000 square meters of cornice installation work.
However, petitioners did not report for work because they had subcontracted to perform installation work for another
company. Petitioners also demanded for an increase in their wage to P280.00 per day. When this was not granted,
petitioners stopped reporting for work and filed the illegal dismissal case.[10]
It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are accorded not only respect but even
finality if the findings are supported by substantial evidence. This is especially so when such findings were affirmed by
the Court of Appeals.[11] However, if the factual findings of the NLRC and the Labor Arbiter are conflicting, as in this
case, the reviewing court may delve into the records and examine for itself the questioned findings.[12]
Accordingly, the Court of Appeals, after a careful review of the facts, ruled that petitioners dismissal was for
a just cause. They had abandoned their employment and were already working for another employer.
To dismiss an employee, the law requires not only the existence of a just and valid cause but also enjoins the employer
to give the employee the opportunity to be heard and to defend himself. [13] Article 282 of the Labor Code enumerates
the just causes for termination by the employer: (a) serious misconduct or willful disobedience by the employee of the
lawful orders of his employer or the latters representative in connection with the employees work; (b) gross and
habitual neglect by the employee of his duties; (c) fraud or willful breach by the employee of the trust reposed in him
by his employer or his duly authorized representative; (d) commission of a crime or offense by the employee against
the person of his employer or any immediate member of his family or his duly authorized representative; and (e) other
causes analogous to the foregoing.
Abandonment is the deliberate and unjustified refusal of an employee to resume his employment. [14] It is a form of
neglect of duty, hence, a just cause for termination of employment by the employer.[15] For a valid finding of
abandonment, these two factors should be present: (1) the failure to report for work or absence without valid or
justifiable reason; and (2) a clear intention to sever employer-employee relationship, with the second as the more
determinative factor which is manifested by overt acts from which it may be deduced that the employees has no more
intention to work. The intent to discontinue the employment must be shown by clear proof that it was deliberate and
unjustified.[16]
In February 1999, petitioners were frequently absent having subcontracted for an installation work for another
company. Subcontracting for another company clearly showed the intention to sever the employer-employee
relationship with private respondent. This was not the first time they did this. In January 1996, they did not report for
work because they were working for another company. Private respondent at that time warned petitioners that they
would be dismissed if this happened again. Petitioners disregarded the warning and exhibited a clear intention to sever
their employer-employee relationship. The record of an employee is a relevant consideration in determining the penalty
that should be meted out to him.[17]
In Sandoval Shipyard v. Clave,[18] we held that an employee who deliberately absented from work without leave or
permission from his employer, for the purpose of looking for a job elsewhere, is considered to have abandoned his job.
We should apply that rule with more reason here where petitioners were absent because they were already working in
another company.
The law imposes many obligations on the employer such as providing just compensation to workers, observance of the
procedural requirements of notice and hearing in the termination of employment. On the other hand, the law also
recognizes the right of the employer to expect from its workers not only good performance, adequate work and
diligence, but also good conduct[19] and loyalty. The employer may not be compelled to continue to employ such
persons whose continuance in the service will patently be inimical to his interests.[20]
After establishing that the terminations were for a just and valid cause, we now determine if the procedures for
dismissal were observed.
The procedure for terminating an employee is found in Book VI, Rule I, Section 2(d) of the Omnibus Rules
Implementing the Labor Code:
Standards of due process: requirements of notice. In all cases of termination of employment, the following standards of
due process shall be substantially observed:
I. For termination of employment based on just causes as defined in Article 282 of the Code:
(a) A written notice served on the employee specifying the ground or grounds for termination, and giving to said
employee reasonable opportunity within which to explain his side;
(b) A hearing or conference during which the employee concerned, with the assistance of counsel if the employee so
desires, is given opportunity to respond to the charge, present his evidence or rebut the evidence presented against him;
and
(c) A written notice of termination served on the employee indicating that upon due consideration of all the
circumstances, grounds have been established to justify his termination.
In case of termination, the foregoing notices shall be served on the employees last known address.
Dismissals based on just causes contemplate acts or omissions attributable to the employee while dismissals
based on authorized causes involve grounds under the Labor Code which allow the employer to terminate employees.
A termination for an authorized cause requires payment of separation pay. When the termination of employment is
declared illegal, reinstatement and full backwages are mandated under Article 279. If reinstatement is no longer
possible where the dismissal was unjust, separation pay may be granted.
Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give the
employee two written notices and a hearing or opportunity to be heard if requested by the employee before terminating
the employment: a notice specifying the grounds for which dismissal is sought a hearing or an opportunity to be heard
and after hearing or opportunity to be heard, a notice of the decision to dismiss; and (2) if the dismissal is based on
authorized causes under Articles 283 and 284, the employer must give the employee and the Department of Labor and
Employment written notices 30 days prior to the effectivity of his separation.
From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just cause under Article 282
of the Labor Code, for an authorized cause under Article 283, or for health reasons under Article 284, and due process
was observed; (2) the dismissal is without just or authorized cause but due process was observed; (3) the dismissal is
without just or authorized cause and there was no due process; and (4) the dismissal is for just or authorized cause but
due process was not observed.
In the first situation, the dismissal is undoubtedly valid and the employer will not suffer any liability.
In the second and third situations where the dismissals are illegal, Article 279 mandates that the employee is
entitled to reinstatement without loss of seniority rights and other privileges and full backwages, inclusive of
allowances, and other benefits or their monetary equivalent computed from the time the compensation was not paid up
to the time of actual reinstatement.
In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot be cured, it should not
invalidate the dismissal. However, the employer should be held liable for non-compliance with the procedural
requirements of due process.
The present case squarely falls under the fourth situation. The dismissal should be upheld because it was established
that the petitioners abandoned their jobs to work for another company. Private respondent, however, did not follow the
notice requirements and instead argued that sending notices to the last known addresses would have been useless
because they did not reside there anymore. Unfortunately for the private respondent, this is not a valid excuse because
the law mandates the twin notice requirements to the employees last known address.[21] Thus, it should be held liable
for non-compliance with the procedural requirements of due process.
A review and re-examination of the relevant legal principles is appropriate and timely to clarify the various rulings on
employment termination in the light of Serrano v. National Labor Relations Commission.[22]
Prior to 1989, the rule was that a dismissal or termination is illegal if the employee was not given any notice. In the
1989 case of Wenphil Corp. v. National Labor Relations Commission,[23] we reversed this long-standing rule and held
that the dismissed employee, although not given any notice and hearing, was not entitled to reinstatement and
backwages because the dismissal was for grave misconduct and insubordination, a just ground for termination under
Article 282. The employee had a violent temper and caused trouble during office hours, defying superiors who tried to
pacify him. We concluded that reinstating the employee and awarding backwages may encourage him to do even worse
and will render a mockery of the rules of discipline that employees are required to observe.[24] We further held that:
Under the circumstances, the dismissal of the private respondent for just cause should be maintained. He has no right to
return to his former employment.
However, the petitioner must nevertheless be held to account for failure to extend to private respondent his right to an
investigation before causing his dismissal. The rule is explicit as above discussed. The dismissal of an employee must
be for just or authorized cause and after due process. Petitioner committed an infraction of the second requirement.
Thus, it must be imposed a sanction for its failure to give a formal notice and conduct an investigation as required by
law before dismissing petitioner from employment. Considering the circumstances of this case petitioner must
indemnify the private respondent the amount of P1,000.00. The measure of this award depends on the facts of each
case and the gravity of the omission committed by the employer.[25]

The rule thus evolved: where the employer had a valid reason to dismiss an employee but did not follow the
due process requirement, the dismissal may be upheld but the employer will be penalized to pay an indemnity to the
employee. This became known as the Wenphil or Belated Due Process Rule.
On January 27, 2000, in Serrano, the rule on the extent of the sanction was changed. We held that the
violation by the employer of the notice requirement in termination for just or authorized causes was not a denial of due
process that will nullify the termination. However, the dismissal is ineffectual and the employer must pay full
backwages from the time of termination until it is judicially declared that the dismissal was for a just or authorized
cause.
The rationale for the re-examination of the Wenphil doctrine in Serrano was the significant number of cases
involving dismissals without requisite notices. We concluded that the imposition of penalty by way of damages for
violation of the notice requirement was not serving as a deterrent. Hence, we now required payment of full backwages
from the time of dismissal until the time the Court finds the dismissal was for a just or authorized cause.
Serrano was confronting the practice of employers to dismiss now and pay later by imposing full backwages.
We believe, however, that the ruling in Serrano did not consider the full meaning of Article 279 of the Labor Code
which states:
ART. 279. Security of Tenure. In cases of regular employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual reinstatement.
This means that the termination is illegal only if it is not for any of the justified or authorized causes
provided by law. Payment of backwages and other benefits, including reinstatement, is justified only if the employee
was unjustly dismissed.
The fact that the Serrano ruling can cause unfairness and injustice which elicited strong dissent has
prompted us to revisit the doctrine.
To be sure, the Due Process Clause in Article III, Section 1 of the Constitution embodies a system of rights based on
moral principles so deeply imbedded in the traditions and feelings of our people as to be deemed fundamental to a
civilized society as conceived by our entire history. Due process is that which comports with the deepest notions of
what is fair and right and just.[26] It is a constitutional restraint on the legislative as well as on the executive and judicial
powers of the government provided by the Bill of Rights.
Due process under the Labor Code, like Constitutional due process, has two aspects: substantive, i.e., the
valid and authorized causes of employment termination under the Labor Code; and procedural, i.e., the manner of
dismissal. Procedural due process requirements for dismissal are found in the Implementing Rules of P.D. 442, as
amended, otherwise known as the Labor Code of the Philippines in Book VI, Rule I, Sec. 2, as amended by Department
Order Nos. 9 and 10.[27] Breaches of these due process requirements violate the Labor Code. Therefore statutory due
process should be differentiated from failure to comply with constitutional due process.
Constitutional due process protects the individual from the government and assures him of his rights in criminal, civil
or administrative proceedings; while statutory due process found in the Labor Code and Implementing Rules protects
employees from being unjustly terminated without just cause after notice and hearing.
In Sebuguero v. National Labor Relations Commission,[28] the dismissal was for a just and valid cause but
the employee was not accorded due process. The dismissal was upheld by the Court but the employer was sanctioned.
The sanction should be in the nature of indemnification or penalty, and depends on the facts of each case and the
gravity of the omission committed by the employer.
In Nath v. National Labor Relations Commission,[29] it was ruled that even if the employee was not given
due process, the failure did not operate to eradicate the just causes for dismissal. The dismissal being for just cause,
albeit without due process, did not entitle the employee to reinstatement, backwages, damages and attorneys fees.
Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v. National Labor Relations
Commission,[30] which opinion he reiterated in Serrano, stated:
C. Where there is just cause for dismissal but due process has not been properly observed by an employer, it would not
be right to order either the reinstatement of the dismissed employee or the payment of backwages to him. In failing,
however, to comply with the procedure prescribed by law in terminating the services of the employee, the employer
must be deemed to have opted or, in any case, should be made liable, for the payment of separation pay. It might be
pointed out that the notice to be given and the hearing to be conducted generally constitute the two-part due process
requirement of law to be accorded to the employee by the employer. Nevertheless, peculiar circumstances might obtain
in certain situations where to undertake the above steps would be no more than a useless formality and where,
accordingly, it would not be imprudent to apply the res ipsa loquitur rule and award, in lieu of separation pay, nominal
damages to the employee. x x x.[31]
After carefully analyzing the consequences of the divergent doctrines in the law on employment
termination, we believe that in cases involving dismissals for cause but without observance of the twin requirements of
notice and hearing, the better rule is to abandon the Serrano doctrine and to follow Wenphil by holding that the
dismissal was for just cause but imposing sanctions on the employer. Such sanctions, however, must be stiffer than that
imposed in Wenphil. By doing so, this Court would be able to achieve a fair result by dispensing justice not just to
employees, but to employers as well.
The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not complying with
statutory due process may have far-reaching consequences.
This would encourage frivolous suits, where even the most notorious violators of company policy are rewarded by
invoking due process. This also creates absurd situations where there is a just or authorized cause for dismissal but a
procedural infirmity invalidates the termination. Let us take for example a case where the employee is caught stealing
or threatens the lives of his co-employees or has become a criminal, who has fled and cannot be found, or where
serious business losses demand that operations be ceased in less than a month. Invalidating the dismissal would not
serve public interest. It could also discourage investments that can generate employment in the local economy.
The constitutional policy to provide full protection to labor is not meant to be a sword to oppress employers. The
commitment of this Court to the cause of labor does not prevent us from sustaining the employer when it is in the right,
as in this case.[32] Certainly, an employer should not be compelled to pay employees for work not actually performed
and in fact abandoned.
The employer should not be compelled to continue employing a person who is admittedly guilty of misfeasance or
malfeasance and whose continued employment is patently inimical to the employer. The law protecting the rights of
the laborer authorizes neither oppression nor self-destruction of the employer.[33]
It must be stressed that in the present case, the petitioners committed a grave offense, i.e., abandonment, which, if the
requirements of due process were complied with, would undoubtedly result in a valid dismissal.
An employee who is clearly guilty of conduct violative of Article 282 should not be protected by the Social Justice
Clause of the Constitution. Social justice, as the term suggests, should be used only to correct an injustice. As the
eminent Justice Jose P. Laurel observed, social justice must be founded on the recognition of the necessity of
interdependence among diverse units of a society and of the protection that should be equally and evenly
extended to all groups as a combined force in our social and economic life, consistent with the fundamental and
paramount objective of the state of promoting the health, comfort, and quiet of all persons, and of bringing about the
greatest good to the greatest number.[34]
This is not to say that the Court was wrong when it ruled the way it did in Wenphil, Serrano and related cases.
Social justice is not based on rigid formulas set in stone. It has to allow for changing times and circumstances.
Justice Isagani Cruz strongly asserts the need to apply a balanced approach to labor-management relations
and dispense justice with an even hand in every case:
We have repeatedly stressed that social justice or any justice for that matter is for the deserving, whether he
be a millionaire in his mansion or a pauper in his hovel. It is true that, in case of reasonable doubt, we are to tilt the
balance in favor of the poor to whom the Constitution fittingly extends its sympathy and compassion. But never is it
justified to give preference to the poor simply because they are poor, or reject the rich simply because they are rich, for
justice must always be served for the poor and the rich alike, according to the mandate of the law.[35]
Justice in every case should only be for the deserving party. It should not be presumed that every case of illegal dismissal would
automatically be decided in favor of labor, as management has rights that should be fully respected and enforced by this Court. As
interdependent and indispensable partners in nation-building, labor and management need each other to foster productivity and
economic growth; hence, the need to weigh and balance the rights and welfare of both the employee and employer.
Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process should not nullify the
dismissal, or render it illegal, or ineffectual. However, the employer should indemnify the employee for the violation of
his statutory rights, as ruled in Reta v. National Labor Relations Commission.[36] The indemnity to be imposed should
be stiffer to discourage the abhorrent practice of dismiss now, pay later, which we sought to deter in the Serrano ruling.
The sanction should be in the nature of indemnification or penalty and should depend on the facts of each case, taking
into special consideration the gravity of the due process violation of the employer.
Under the Civil Code, nominal damages is adjudicated in order that a right of the plaintiff, which has been violated or
invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for
any loss suffered by him.[37]
As enunciated by this Court in Viernes v. National Labor Relations Commissions,[38] an employer is liable to pay
indemnity in the form of nominal damages to an employee who has been dismissed if, in effecting such dismissal, the
employer fails to comply with the requirements of due process. The Court, after considering the circumstances therein,
fixed the indemnity at P2,590.50, which was equivalent to the employees one month salary. This indemnity is intended
not to penalize the employer but to vindicate or recognize the employees right to statutory due process which was
violated by the employer.[39]
The violation of the petitioners right to statutory due process by the private respondent warrants the payment of
indemnity in the form of nominal damages. The amount of such damages is addressed to the sound discretion of the
court, taking into account the relevant circumstances.[40] Considering the prevailing circumstances in the case at
bar, we deem it proper to fix it at P30,000.00. We believe this form of damages would serve to deter employers from
future violations of the statutory due process rights of employees. At the very least, it provides a vindication or
recognition of this fundamental right granted to the latter under the Labor Code and its Implementing Rules.
Private respondent claims that the Court of Appeals erred in holding that it failed to pay petitioners holiday pay, service
incentive leave pay and 13th month pay.
We are not persuaded.
We affirm the ruling of the appellate court on petitioners money claims. Private respondent is liable for
petitioners holiday pay, service incentive leave pay and 13th month pay without deductions.
As a general rule, one who pleads payment has the burden of proving it. Even where the employee must allege non-
payment, the general rule is that the burden rests on the employer to prove payment, rather than on the employee to
prove non-payment. The reason for the rule is that the pertinent personnel files, payrolls, records, remittances and other
similar documents which will show that overtime, differentials, service incentive leave and other claims of workers
have been paid are not in the possession of the worker but in the custody and absolute control of the employer. [41]
In the case at bar, if private respondent indeed paid petitioners holiday pay and service incentive leave pay, it could
have easily presented documentary proofs of such monetary benefits to disprove the claims of the petitioners. But it did
not, except with respect to the 13th month pay wherein it presented cash vouchers showing payments of the benefit in
the years disputed.[42] Allegations by private respondent that it does not operate during holidays and that it allows its
employees 10 days leave with pay, other than being self-serving, do not constitute proof of payment. Consequently, it
failed to discharge the onus probandi thereby making it liable for such claims to the petitioners.
Anent the deduction of SSS loan and the value of the shoes from petitioner Virgilio Agabons 13th month pay, we find
the same to be unauthorized. The evident intention of Presidential Decree No. 851 is to grant an additional income in
the form of the 13th month pay to employees not already receiving the same[43] so as to further protect the level of real
wages from the ravages of world-wide inflation.[44] Clearly, as additional income, the 13th month pay is included in the
definition of wage under Article 97(f) of the Labor Code, to wit:
(f) Wage paid to any employee shall mean the remuneration or earnings, however designated, capable of being
expressed in terms of money whether fixed or ascertained on a time, task, piece , or commission basis, or other method
of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for services rendered or to be rendered and includes the fair and
reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished
by the employer to the employee from which an employer is prohibited under Article 113[45] of the same Code from
making any deductions without the employees knowledge and consent. In the instant case, private respondent failed to
show that the deduction of the SSS loan and the value of the shoes from petitioner Virgilio Agabons 13th month pay
was authorized by the latter. The lack of authority to deduct is further bolstered by the fact that petitioner Virgilio
Agabon included the same as one of his money claims against private respondent.
The Court of Appeals properly reinstated the monetary claims awarded by the Labor Arbiter ordering the
private respondent to pay each of the petitioners holiday pay for four regular holidays from 1996 to 1998, in the
amount of P6,520.00, service incentive leave pay for the same period in the amount of P3,255.00 and the balance of
Virgilio Agabons thirteenth month pay for 1998 in the amount of P2,150.00.
WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of Appeals dated
January 23, 2003, in CA-G.R. SP No. 63017, finding that petitioners Jenny and Virgilio Agabon abandoned their work,
and ordering private respondent to pay each of the petitioners holiday pay for four regular holidays from 1996 to 1998,
in the amount of P6,520.00, service incentive leave pay for the same period in the amount of P3,255.00 and the balance
of Virgilio Agabons thirteenth month pay for 1998 in the amount of P2,150.00 is AFFIRMED with the
MODIFICATION that private respondent Riviera Home Improvements, Inc. is further ORDERED to pay each of the
petitioners the amount of P30,000.00 as nominal damages for non-compliance with statutory due process.
No costs.
SO ORDERED.
 [G.R. No. 158693 November 17, 2004]
VIRGILIO AGABON, et al. v. NLRC

FACTS
Virgilio and Jenny Agabon worked for respondent Riviera Home Improvements, Inc. as gypsum and cornice installers
from January 1992 untilFeb 1999. Their employment was terminated when they were dismissed forallegedly
abandoning their work. Petitioners Agabon then filed a case of illegal dismissal. /// The LA ruled in favor of the
spouses and ordered Rivierato pay them their money claims. The NLRC reversed the LA, finding that theAgabons
were indeed guilty of abandonment. The CA modified the LA byruling that there was abandonment but ordering
Riviera to pay the Agabons’ money claims.///The arguments of both parties are as follows:
The Agabons claim, among others that Riviera violated the requirements of notice and hearing when the latter did not
send written letters of termination to their addresses. Riviera admitted to not sending the Agabons letters of termination
to theirlast known addresses because the same would be futile, as the Agabons donot reside there anymore. However, it
also claims that the Agabonsabandoned their work. More than once, they subcontracted installationworks for other
companies. They already were warned of termination if thesame act was repeated, still, they disregarded the warning.

ISSUES
1. Whether the Agabons were illegally dismissed2.
2. Whether Riviera violated the requirements of notice and hearing3.
3. Is the violation of the procedural requirements of notice and hearing for termination of employees a violation of the
Constitutional due process?4.
4. What are the consequences of violating the procedural requirements of termination?

RULING: Valid dismissal but violation of statutory due process = payment of nominal damages (P30,000) & balance
of 13th month pay, etc.
1. No. There was just cause for their dismissal, i.e., abandonment. Art. 282specifies the grounds for just dismissal, to wit:
a. Serious misconduct or willful disobedience of the lawful orders of the employer or his duly authorized representative
in connection with the employee’s work
b. Gross and habitual neglect of the by the employee of his duties(includes abandonment)
c. Fraud or willful breach of the trust reposed by the employer or his duly authorized representative to the employee.
Commission of a crime or offense by the employee against the person of the employer or any member of his immediate
family or his duly authorized representative.
Any other causes analogous to the foregoing. To establish abandonment, two elements must be present:
a. The unjustified failure of the employee to report for work.
b. A clear intention to severe relationship, manifested by overt acts. Here, the Agabons were frequently absent from
work for having performed installation work for another company, despite prior warning given by Riviera. This clearly
establishes an intention to sever the e-erelationship between them, and which constitutes abandonment.
2. Yes. While the employer has the right to expect good performance, diligence, good conduct and loyalty from its
employees, it also has the duty to provide just compensation to his employees and to observe the procedural
requirements of notice and hearing in the termination of his employees. Procedure of termination(Omnibus Rules
Implementing the Labor Code):
a. A written notice to the employee specifying the grounds for termination and giving the employee reasonable
opportunity to be heard.
b. A hearing where the employee is given the opportunity to respond to the charges against him and present evidence or
rebut the evidence presented against him (if he so requests)
c. A written notice of termination indicating that grounds have been established to justify his termination upon due
consideration of all circumstances. In this case, Riviera failed to notify the Agabons of their termination to their last
known addresses. Hence, they violated the procedural requirement laid down by the law in the termination of
employees.
3. No. Constitutional due process is that provided under the Constitution, which involves the protection of the
individual against governmental oppression and the assurance of his rights In civil, criminal and administrative
proceedings; statutory due process is that found in the Labor Code and its Implementing Rules and protects the
individual from being unjustly terminated without just or authorized cause after notice and hearing. The two are similar
in that they both have two aspects: substantive due process and procedural due process. However, they differ in that
under the Labor Code, the first one refers to the valid and authorized causes of employment termination, while the
second one refers to the manner of dismissal. A denial of statutory due process is not the same as a denial of
Constitutional due process for reasons enunciated in Serrano v. NLRC.
4. The dismissal is valid, but Riviera should pay nominal damages to the Agabons in vindication of the latter for
violating their right to notice and hearing. The penalty is in the nature of a penalty or indemnification, the amount
dependent on the facts of each case, including the nature of gravity of offense of the employer. In this case, the Serrano
doctrine was re-examined. First, in the Serrano case, the dismissal was upheld, but it was held to be ineffectual
(without legal effect). Hence, Serrano was still entitled to the payment of his backwages from the time of dismissal
until the promulgation of the court of the existence of an authorized cause. Further, he was entitled to his separation
pay as mandated under Art.283. The ruling is unfair to employers and has the danger of the following consequences:
a. The encouragement of filing frivolous suits even by notorious employees who were justly dismissed but were
deprived of statutory due process; they are rewarded by invoking due process.
b. It would create absurd situations where there is just or authorized cause but a procedural infirmity invalidates the
termination, ie an employee who became a criminal and threatened his co-workers’ lives, who fled and could not be
faound
c. It could discourage investments that would generate employment in the economy.

Second, the payment of backwages is unjustified as only illegal termination gives the employee the right to be paid full
backwages. When the dismissal is valid or upheld, the employee has no right to backwages.

ADDITIONAL NOTES:1.

Dismissals based on just causes: acts or omissions attributable to the employee; no right to claim backwages or to pay
separation pay (separation pay is subject to exception, ie if termination is not based on serious misconduct or a conduct
reflecting the moral depravity of a person, separation pay may be granted by reason of social justice)

Dismissals based on authorized causes: involve grounds provided under the Labor Code; employee (and DOLE) is
entitled the payment of separation pay (redundancy and installation of labor-saving devices: 1 month pay or 1 month/yr
of service, which ever is higher; retrenchment and closure or cessation of business: 1month pay or ½ month per year of
service, whichever is higher)

Illegal termination: employee is entitled to the payment of full backwages as well as reinstatement without loss of
seniority rights and other privileges, inclusive of allowances and other monetary claims from the time compensation
was withheld until reinstatement; if reinstatement is not possible, separation pay shall be given.
 INNODATA PHILIPPINES, INC., vs JOCELYN L. QUEJADA-LOPEZ
and ESTELLA G. NATIVIDAD- PASCUAL,G.R. No. 162839, October 12, 2006

DECISION
PANGANIBAN, CJ:
A contract that misuses a purported fixed-term employment to block the acquisition of tenure by the employees
deserves to be struck down for being contrary to law, morals, good customs, public order and public policy.

The Case
Before us is a Petition for Review[if !supportFootnotes][1][endif] under Rule 45 of the Rules of Court, seeking to reverse the
September 18, 2003 Decision[if !supportFootnotes][2][endif] of the Court of Appeals (CA) in CA-GR SP No. 73416, as well as its
March 15, 2004 Resolution[if !supportFootnotes][3][endif] denying petitioners Motion for Reconsideration. The decretal portion
of the Decision states:

WHEREFORE, the challenged decision of November 27, 2001 and resolution of July 22, 2002 of the National Labor
Relations Commission are SET ASIDE, and the decision of the Labor Arbiter of December 29, 1999 in NLRC NCR
CASE NO. 00-03-02732-98 is

The Facts
The factual antecedents are narrated by the CA as follows:
Innodata Philippines, Inc., is engaged in the encoding/data conversion business. It employs encoders, indexers,
formatters, programmers, quality/quantity staff, and others, to maintain its business and do the job orders of its clients.
Estrella G. Natividad and Jocelyn L. Quejada were employed as formatters by Innodata Philippines, Inc. They
[worked] from March 4, 1997, until their separation on March 3, 1998.
Claiming that their job was necessary and desirable to the usual business of the company which is data
processing/conversion and that their employment is regular pursuant to Article 280 of the Labor Code, [respondents]
filed a complaint for illegal dismissal and for damages as well as for attorneys fees against Innodata Phils.,
Incorporated, Innodata Processing Corporation and Todd Solomon. [Respondents] further invoke the stare decicis
doctrine in the case of Juanito Villanueva vs. National Labor Relations Commission, et al., G.R. No. 127448 dated
September 17, 1998 and the case of Joaquin Servidad vs. National Labor Relations Commission, et al., G.R. No.
128682 dated March 18, 1999, arguing that the Highest Court has already ruled with finality that the nature of
employment at [petitioner] corporation is regular and not on a fixed term basis, as the job in the company is necessary
and desirable to the usual business of the corporation.
On the other hand, [petitioner] contends that [respondents] employment contracts expired, for [these were] only for a
fixed period of one (1) year. [Petitioner] company further invoked the Brent School case by saying that since the period
expired, [respondents] employment was likewise terminated.
After examination of the pleadings filed, Labor Arbiter Donato G. Quinto rendered a judgment in favor of
complainants, the dispositive portion of which reads:
WHEREFORE, foregoing premises considered, judgment is hereby rendered:
Holding complainants Estella G. Natividad and Jocelyn Quejada to have been illegally dismissed by [Petitioners]
Innodata Philippines Incorporated and Innodata Processing Corporation and ordering said [petitioners] to reinstate
them to their former position without los[s] of seniority rights, or to a substantially equivalent position, and to pay them
jointly and severally, backwages computed from the time they were illegally dismissed on March 3, 1998 up to the date
of this decision in the amount of P112,535.28 EACH, or in the total amount of P225,070.56 for the two of them;
Further, [petitioners] are ordered to pay, jointly and severally, [respondents] attorneys fees in the amount equivalent to
10% of their respective awards; and
All other claims are hereby dismissed for lack of merit.
SO ORDERED.
Not satisfied, [petitioner] corporation interposed an appeal in the National Labor Relations Commission, which
reversed and set aside the Labor Arbiters decision and dismissed [respondents] complaint for lack of merit. It declared
that the contract between [respondents] and [petitioner] company was for a fixed term and therefore, the dismissal of
[respondents], at the end of their one year term agreed upon, was valid.
A motion for reconsideration was filed but was denied in an order dated July 22, 2002.
Ruling of the Court of Appeals
The CA ruled that respondents were regular employees in accordance with Section 280 of the Labor Code. It said that
the fixed-term contract prepared by petitioner was a crude attempt to circumvent respondents right to security of
tenure.
Hence, this Petition.[if !supportFootnotes][6][endif]

Issues
Petitioner raises the followings issues for the Courts consideration:
I Whether or not the Court of Appeals committed serious reversible error when it did not take into consideration that
fixed-term employment contracts are valid under the law and prevailing jurisprudence.
II Whether or not the Court of Appeals committed serious reversible error when it failed to take into consideration the
nature of the business of petitioner vis--vis its resort to fixed-term employment contracts.
III Whether or not the Court of Appeals seriously erred when it failed to consider the fixed-term employment contracts
between petitioner and respondents as valid.
IV Whether or not the Court of Appeals seriously erred when it held that regularity of employment is always premised
on the fact that it is directly related to the business of the employer.
V Whether or not the Court of Appeals committed serious reversible error in setting aside the Decision of the National
Labor Relations Commission, dated 27 November 2001 and Resolution of 22 July 2002, respectively[,] and reinstated
the decision of the Labor Arbiter dated 29 December 1999.[if !supportFootnotes][7][endif]
The foregoing issues may be reduced into one question: whether the alleged fixed-term employment contracts entered
into by petitioner and respondents are valid.

The Courts Ruling

The Petition has no merit.

Sole Issue:
Validity of the Fixed-Term Contract
Petitioner contends that the regularity of the employment of respondents does not depend on whether their task may be
necessary or desirable in the usual business of the employer. It argues that the use of fixed-term employment contracts
has long been recognized by this Court.
Petitioner adds that Villanueva v. NLRC[if !supportFootnotes][8][endif] and Servidad v. NLRC[if !supportFootnotes][9][endif] do not apply to
the present factual circumstances. These earlier cases struck down the employment contracts prepared by herein
Petitioner Innodata for being devious, but crude, attempts to circumvent [the employees] right to security of tenure x x
x. Petitioner avers that the present employment contracts it entered into with respondents no longer contain the so-
called double-bladed provisions previously found objectionable by the Court.
Petitioners contentions have no merit.
While this Court has recognized the validity of fixed-term employment contracts in a number of cases,[if
!supportFootnotes][10][endif]
it has consistently emphasized that when the circumstances of a case show that the periods were
imposed to block the acquisition of security of tenure, they should be struck down for being contrary to law, morals,
good customs, public order or public policy.[if !supportFootnotes][11][endif]
In a feeble attempt to conform to the earlier rulings of this Court in Villanueva[if !supportFootnotes][12][endif] and Servidad,[if
!supportFootnotes][13][endif]
petitioner has reworded its present employment contracts. A close scrutiny of the provisions,
however, show that the double-bladed scheme to block the acquisition of tenurial security still exists.
To stress, Servidad struck down the following objectionable contract provisions:
Section 2. This Contract shall be effective for a period of 1 [year] commencing on May 10, 1994, until May 10, 1995
unless sooner terminated pursuant to the provisions hereof.
From May 10, 1994 to November 10, 1994, or for a period of six (6) months, the EMPLOYEE shall be contractual
during which the EMPLOYER can terminate the EMPLOYEES services by serving written notice to that effect. Such
termination shall be immediate, or at whatever date within the six-month period, as the EMPLOYER may determine.
Should the EMPLOYEE continue his employment beyond November 10, 1994, he shall become a regular employee
upon demonstration of sufficient skill in the terms of his ability to meet the standards set by the EMPLOYER. If the
EMPLOYEE fails to demonstrate the ability to master his task during the first six months he can be placed on
probation for another six (6) months after which he will be evaluated for promotion as a regular employee.
In comparison, the pertinent portions of the present employment contracts in dispute read as follows:
TERM/DURATION
The EMPLOYER hereby employs, engages and hires the EMPLOYEE, and the EMPLOYEE hereby accepts such
appointment as FORMATTER effective March 04, 1997 to March 03, 1998, a period of one (1) year.
TERMINATION
7.1 This Contract shall automatically terminate on March 03, 1998 without need of notice or demand.
7.4 The EMPLOYEE acknowledges that the EMPLOYER entered into this Contract upon his express representation
that he/she is qualified and possesses the skills necessary and desirable for the position indicated herein. Thus, the
EMPLOYER is hereby granted the right to pre-terminate this Contract within the first three (3) months of its
duration upon failure of the EMPLOYEE to meet and pass the qualifications and standards set by the
EMPLOYER and made known to the EMPLOYEE prior to execution hereof. Failure of the EMPLOYER to
exercise its right hereunder shall be without prejudice to the automatic termination of the EMPLOYEEs employment
upon the expiration of this Contract or cancellation thereof for other causes provided herein and by law.
Like those in Villanueva and Servidad, the present contracts also provide for two periods. Aside from the fixed one-
year term set in paragraph 1, paragraph 7.4 provides for a three-month period during which petitioner has the right to
pre-terminate the employment for the failure of the employees to meet and pass the qualifications and standards set by
the employer and made known to the employee prior to their employment. Thus, although couched in ambiguous
language, paragraph 7.4 refers in reality to a probationary period.
Clearly, to avoid regularization, petitioner has again sought to resort alternatively to probationary employment and
employment for a fixed term. Noteworthy is the following pronouncement of this Court in Servidad:
If the contract was really for a fixed term, the [employer] should not have been given the discretion to dismiss the
[employee] during the one year period of employment for reasons other than the just and authorized causes under the
Labor Code. Settled is the rule that an employer can terminate the services of an employee only for valid and just
causes which must be shown by clear and convincing evidence.
The language of the contract in dispute is truly a double-bladed scheme to block the acquisition of the employee of
tenurial security. Thereunder, [the employer] has two options. It can terminate the employee by reason of expiration of
contract, or it may use failure to meet work standards as the ground for the employees dismissal. In either case, the
tenor of the contract jeopardizes the right of the worker to security of tenure guaranteed by the Constitution.
In the interpretation of contracts, obscure words and provisions shall not favor the party that caused the
obscurity.[if !supportFootnotes][17][endif] Consequently, the terms of the present contract should be construed strictly against
petitioner, which prepared it.[if !supportFootnotes][18][endif]
Article 1700 of the Civil Code declares:
Art. 1700. The relations between capital and labor are not merely contractual. They are so impressed with public
interest that labor contracts must yield to the common good. Therefore, such contracts are subject to the special laws on
labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and
similar subjects.

Indeed, a contract of employment is impressed with public interest. For this reason, provisions of applicable statutes
are deemed written into the contract. Hence, the parties are not at liberty to insulate themselves and their relationships
from the impact of labor laws and regulations by simply contracting with each other. [if !supportFootnotes][19][endif] Moreover, in
case of doubt, the terms of a contract should be construed in favor of labor.[if !supportFootnotes][20][endif]

Lastly, petitioner claims that it was constrained by the nature of its business to enter into fixed-term employment
contracts with employees assigned to job orders. It argues that inasmuch as its business is that of a mere service
contractor, it relies on the availability of job orders or undertakings from its clients. Hence, the continuity of work
cannot be ascertained.

Petitioners contentions deserve little consideration.

By their very nature, businesses exist and thrive depending on the continued patronage of their clients. Thus, to some
degree, they are subject to the whims of clients who may decide to discontinue patronizing their products or services
for a variety of reasons. Being inherent in any enterprise, this entrepreneurial risk may not be used as an excuse to
circumvent labor laws; otherwise, no worker could ever attain regular employment status.

Finally, it is worth noting that after its past employment contracts had been declared void by this Court, petitioner was
expected to ensure that the subsequent contracts would already comply with the standards set by law and by this Court.
Regrettably, petitioner failed to do so.

WHEREFORE, the Petition is DENIED, and the assailed Decision and Resolution are AFFIRMED. Costs
against petitioner.

SO ORDERED.
 INNODATA PHILIPPINES, INC., vs JOCELYN L. QUEJADA-LOPEZ
and ESTELLA G. NATIVIDAD- PASCUAL,G.R. No. 162839, October 12, 2006

Facts: Innodata Philippines, Inc., is engaged in the encoding/data conversion business. It employs encoders, indexers,
formatters, programmers, quality/quantity staff, and others, to maintain its business and do the job orders of its clients.
Estrella G. Natividad and Jocelyn L. Quejada were employed as formatters by Innodata Philippines, Inc. They
[worked] from March 4, 1997, until their separation on March 3, 1998. They believed that their job was necessary and
desirable to the usual business of the company which is data processing/conversion and that their employment is
regular pursuant to Article 280 of the Labor Code,they filed a complaint for illegal dismissal and for damages as well
as for attorney’s fees against Innodata Phils., Incorporated.
Innodata contended that their employment contracts expired, having a fixed period of one (1) year. Since the period
expired, their employment was likewise terminated applying the ruling in the Brent School case.
Labor Arbiter Donato G. Quinto rendered a judgment in favor of complainants holding complainants Estella G.
Natividad and Jocelyn Quejada to have been illegally dismissed by Innodata Philippines Incorporated and Innodata
Processing Corporation and ordering reinstatement to their former position without loss of seniority rights, or to a
substantially equivalent position, and to pay them jointly and severally, backwages computed from the time they were
illegally dismissed on March 3, 1998 up to the date of this decision in the amount of P112,535.28 EACH, or in the total
amount of P225,070.56 for the two of them; and further ordered to pay them attorney’s fees in the amount equivalent to
10% of their respective awards.
Innodata appealed to NLRC which reversed and set aside the Labor Arbiter’s decision declaring that the contract was for a fixed
term and therefore, the dismissal at the end of their one year term agreed upon was valid. An MR was filed but was denied.
The CA ruled that respondents were regular employees in accordance with Section 280 of the Labor Code. It said that
the fixed-term contract prepared by petitioner was a crude attempt to circumvent respondents’ right to security of
tenure.
The disputed contract reads, as follows:
“TERM/DURATION
The EMPLOYER hereby employs, engages and hires the EMPLOYEE, and the EMPLOYEE hereby accepts such
appointment as FORMATTER effective March 04, 1997 to March 03, 1998, a period of one (1) year.
xxxxxxxxx
“TERMINATION
7.1 This Contract shall automatically terminate on March 03, 1998 without need of notice or demand.
xxxxxxxxx
7.4 The EMPLOYEE acknowledges that the EMPLOYER entered into this Contract upon his express representation
that he/she is qualified and possesses the skills necessary and desirable for the position indicated herein. Thus, the
EMPLOYER is hereby granted the right to pre-terminate this Contract within the first three (3) months of its duration
upon failure of the EMPLOYEE to meet and pass the qualifications and standards set by the EMPLOYER and made
known to the EMPLOYEE prior to execution hereof. Failure of the EMPLOYER to exercise its right hereunder shall
be without prejudice to the automatic termination of the EMPLOYEE’s employment upon the expiration of this
Contract or cancellation thereof for other causes provided herein and by law.”
The contract provided two periods. Aside from the fixed one-year term set in paragraph 1, paragraph 7.4 provides for a
three-month period during which petitioner has the right to pre-terminate the employment for the “failure of the
employees to meet and pass the qualifications and standards set by the employer and made known to the employee
prior to” their employment. In effect, the paragraph 7.4 is a probationary period.
Innodata claims that it was constrained by the nature of its business to enter into fixed-term employment contracts with
employees assigned to job orders. It relies on the availability of job orders or undertakings from its clients. Thus, the
continuity of work cannot be ascertained.
Hence, this petition.

ISSUE: whether the alleged fixed-term employment contracts are valid.

HELD: No, Innodata’s contract of employment failed to comply with the standards set by law and by this Court. “ A
contract of employment is impressed with public interest. For this reason, provisions of applicable statutes are deemed
written into the contract. Hence, the “parties are not at liberty to insulate themselves and their relationships from the
impact of labor laws and regulations by simply contracting with each other.” Moreover, in case of doubt, the terms of a
contract should be construed in favor of labor.”

RATIO: The applicable laws are Article 1700 of the Civil Code which declares:
“Art. 1700. The relations between capital and labor are not merely contractual. They are so impressed with public
interest that labor contracts must yield to the common good. Therefore, such contracts are subject to the special laws on
labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and
similar subjects.”
And Section 280 of the Labor Code.
DISPOSITIVE: Petition is DENIED, and the assailed Decision and Resolution are AFFIRMED. Costs against
petitioner.
 [G.R. No. 128845. June 1, 2000]
INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner, vs. HON. LEONARDO A.
QUISUMBING in his capacity as the Secretary of Labor and Employment; HON. CRESENCIANO B. TRAJANO in
his capacity as the Acting Secretary of Labor and Employment; DR. BRIAN MACCAULEY in his capacity as the
Superintendent of International School-Manila; and INTERNATIONAL SCHOOL, INC., respondents.

DECISION
KAPUNAN, J.:
Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent School, mostly
Filipinos, cry discrimination. We agree. That the local-hires are paid more than their colleagues in other schools is, of
course, beside the point. The point is that employees should be given equal pay for work of equal value. That is a
principle long honored in this jurisdiction. That is a principle that rests on fundamental notions of justice. That is the
principle we uphold today.
Private respondent International School, Inc. (the School, for short), pursuant to Presidential Decree 732, is a domestic
educational institution established primarily for dependents of foreign diplomatic personnel and other temporary
residents.[1] To enable the School to continue carrying out its educational program and improve its standard of
instruction, Section 2(c) of the same decree authorizes the School to employ its own teaching and management
personnel selected by it either locally or abroad, from Philippine or other nationalities, such personnel being exempt
from otherwise applicable laws and regulations attending their employment, except laws that have been or will be
enacted for the protection of employees.
Accordingly, the School hires both foreign and local teachers as members of its faculty, classifying the same into two:
(1) foreign-hires and (2) local-hires. The School employs four tests to determine whether a faculty member should be
classified as a foreign-hire or a local hire:
a.....What is one's domicile?
b.....Where is one's home economy?
c.....To which country does one owe economic allegiance?
d.....Was the individual hired abroad specifically to work in the School and was the School responsible for bringing that
individual to the Philippines?[2]
Should the answer to any of these queries point to the Philippines, the faculty member is classified as a local hire;
otherwise, he or she is deemed a foreign-hire.
The School grants foreign-hires certain benefits not accorded local-hires. These include housing, transportation,
shipping costs, taxes, and home leave travel allowance. Foreign-hires are also paid a salary rate twenty-five percent
(25%) more than local-hires. The School justifies the difference on two "significant economic disadvantages" foreign-
hires have to endure, namely: (a) the "dislocation factor" and (b) limited tenure. The School explains:
A foreign-hire would necessarily have to uproot himself from his home country, leave his family and friends, and take
the risk of deviating from a promising career path-all for the purpose of pursuing his profession as an educator, but this
time in a foreign land. The new foreign hire is faced with economic realities: decent abode for oneself and/or for one's
family, effective means of transportation, allowance for the education of one's children, adequate insurance against
illness and death, and of course the primary benefit of a basic salary/retirement compensation.
Because of a limited tenure, the foreign hire is confronted again with the same economic reality after his term: that he
will eventually and inevitably return to his home country where he will have to confront the uncertainty of obtaining
suitable employment after a long period in a foreign land.
The compensation scheme is simply the School's adaptive measure to remain competitive on an international level in
terms of attracting competent professionals in the field of international education.[3]
When negotiations for a new collective bargaining agreement were held on June 1995, petitioner International School
Alliance of Educators, "a legitimate labor union and the collective bargaining representative of all faculty members"[4]
of the School, contested the difference in salary rates between foreign and local-hires. This issue, as well as the
question of whether foreign-hires should be included in the appropriate bargaining unit, eventually caused a deadlock
between the parties.
On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation and Mediation Board
to bring the parties to a compromise prompted the Department of Labor and Employment (DOLE) to assume
jurisdiction over the dispute. On June 10, 1996, the DOLE Acting Secretary, Crescenciano B. Trajano, issued an Order
resolving the parity and representation issues in favor of the School. Then DOLE Secretary Leonardo A. Quisumbing
subsequently denied petitioner's motion for reconsideration in an Order dated March 19, 1997. Petitioner now seeks
relief in this Court.
Petitioner claims that the point-of-hire classification employed by the School is discriminatory to Filipinos and that the
grant of higher salaries to foreign-hires constitutes racial discrimination.
The School disputes these claims and gives a breakdown of its faculty members, numbering 38 in all, with nationalities
other than Filipino, who have been hired locally and classified as local hires.[5]The Acting Secretary of Labor found
that these non-Filipino local-hires received the same benefits as the Filipino local-hires:
The compensation package given to local-hires has been shown to apply to all, regardless of race. Truth to tell, there
are foreigners who have been hired locally and who are paid equally as Filipino local hires.[6]
The Acting Secretary upheld the point-of-hire classification for the distinction in salary rates:
The principle "equal pay for equal work" does not find application in the present case. The international character of
the School requires the hiring of foreign personnel to deal with different nationalities and different cultures, among the
student population.
We also take cognizance of the existence of a system of salaries and benefits accorded to foreign hired personnel which
system is universally recognized. We agree that certain amenities have to be provided to these people in order to entice
them to render their services in the Philippines and in the process remain competitive in the international market.
Furthermore, we took note of the fact that foreign hires have limited contract of employment unlike the local hires who
enjoy security of tenure. To apply parity therefore, in wages and other benefits would also require parity in other terms
and conditions of employment which include the employment contract.
A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for salary and professional
compensation wherein the parties agree as follows:
All members of the bargaining unit shall be compensated only in accordance with Appendix C hereof provided that the
Superintendent of the School has the discretion to recruit and hire expatriate teachers from abroad, under terms and
conditions that are consistent with accepted international practice.
Appendix C of said CBA further provides:
The new salary schedule is deemed at equity with the Overseas Recruited Staff (OSRS) salary schedule. The 25%
differential is reflective of the agreed value of system displacement and contracted status of the OSRS as differentiated
from the tenured status of Locally Recruited Staff (LRS).
To our mind, these provisions demonstrate the parties' recognition of the difference in the status of two types of
employees, hence, the difference in their salaries.
The Union cannot also invoke the equal protection clause to justify its claim of parity. It is an established principle of
constitutional law that the guarantee of equal protection of the laws is not violated by legislation or private covenants
based on reasonable classification. A classification is reasonable if it is based on substantial distinctions and apply to
all members of the same class. Verily, there is a substantial distinction between foreign hires and local hires, the former
enjoying only a limited tenure, having no amenities of their own in the Philippines and have to be given a good
compensation package in order to attract them to join the teaching faculty of the School.[7]
We cannot agree.
That public policy abhors inequality and discrimination is beyond contention. Our Constitution and laws reflect the
policy against these evils. The Constitution[8] in the Article on Social Justice and Human Rights exhorts Congress to
"give highest priority to the enactment of measures that protect and enhance the right of all people to human dignity,
reduce social, economic, and political inequalities." The very broad Article 19 of the Civil Code requires every person,
"in the exercise of his rights and in the performance of his duties, [to] act with justice, give everyone his due, and
observe honesty and good faith."
International law, which springs from general principles of law,[9] likewise proscribes discrimination. General
principles of law include principles of equity,[10] i.e., the general principles of fairness and justice, based on the test of
what is reasonable.[11] The Universal Declaration of Human Rights,[12] the International Covenant on Economic,
Social, and Cultural Rights,[13] the International Convention on the Elimination of All Forms of Racial
Discrimination,[14] the Convention against Discrimination in Education,[15] the Convention (No. 111) Concerning
Discrimination in Respect of Employment and Occupation[16] - all embody the general principle against
discrimination, the very antithesis of fairness and justice. The Philippines, through its Constitution, has incorporated
this principle as part of its national laws.
In the workplace, where the relations between capital and labor are often skewed in favor of capital, inequality and
discrimination by the employer are all the more reprehensible.
The Constitution[17] specifically provides that labor is entitled to "humane conditions of work." These conditions are
not restricted to the physical workplace - the factory, the office or the field - but include as well the manner by which
employers treat their employees.
The Constitution[18] also directs the State to promote "equality of employment opportunities for all." Similarly, the
Labor Code[19] provides that the State shall "ensure equal work opportunities regardless of sex, race or creed." It
would be an affront to both the spirit and letter of these provisions if the State, in spite of its primordial obligation to
promote and ensure equal employment opportunities, closes its eyes to unequal and discriminatory terms and
conditions of employment.[20]
Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article 135, for example, prohibits
and penalizes[21] the payment of lesser compensation to a female employee as against a male employee for work of
equal value. Article 248 declares it an unfair labor practice for an employer to discriminate in regard to wages in order
to encourage or discourage membership in any labor organization.
Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7 thereof, provides:
The States Parties to the present Covenant recognize the right of everyone to the enjoyment of just and favourable
conditions of work, which ensure, in particular:
a.....Remuneration which provides all workers, as a minimum, with:
i.....Fair wages and equal remuneration for work of equal value without distinction of any kind, in particular women
being guaranteed conditions of work not inferior to those enjoyed by men, with equal pay for equal work;
x x x.

The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism of "equal pay
for equal work." Persons who work with substantially equal qualifications, skill, effort and responsibility, under similar
conditions, should be paid similar salaries.[22] This rule applies to the School, its "international character"
notwithstanding.

The School contends that petitioner has not adduced evidence that local-hires perform work equal to that of foreign-
hires.[23] The Court finds this argument a little cavalier. If an employer accords employees the same position and rank,
the presumption is that these employees perform equal work. This presumption is borne by logic and human
experience. If the employer pays one employee less than the rest, it is not for that employee to explain why he receives
less or why the others receive more. That would be adding insult to injury. The employer has discriminated against that
employee; it is for the employer to explain why the employee is treated unfairly.

The employer in this case has failed to discharge this burden. There is no evidence here that foreign-hires perform 25%
more efficiently or effectively than the local-hires. Both groups have similar functions and responsibilities, which they
perform under similar working conditions.

The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the distinction in salary
rates without violating the principle of equal work for equal pay.
"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services performed." Similarly,
the Philippine Legal Encyclopedia states that "salary" is the "[c]onsideration paid at regular intervals for the rendering
of services." In Songco v. National Labor Relations Commission,[24] we said that:
"salary" means a recompense or consideration made to a person for his pains or industry in another man's business.
Whether it be derived from "salarium," or more fancifully from "sal," the pay of the Roman soldier, it carries with it the
fundamental idea of compensation for services rendered. (Emphasis supplied.)
While we recognize the need of the School to attract foreign-hires, salaries should not be used as an enticement to the
prejudice of local-hires. The local-hires perform the same services as foreign-hires and they ought to be paid the same
salaries as the latter. For the same reason, the "dislocation factor" and the foreign-hires' limited tenure also cannot serve
as valid bases for the distinction in salary rates. The dislocation factor and limited tenure affecting foreign-hires are
adequately compensated by certain benefits accorded them which are not enjoyed by local-hires, such as housing,
transportation, shipping costs, taxes and home leave travel allowances.
The Constitution enjoins the State to "protect the rights of workers and promote their welfare,"[25] "to afford labor full
protection."[26] The State, therefore, has the right and duty to regulate the relations between labor and capital.[27]
These relations are not merely contractual but are so impressed with public interest that labor contracts, collective
bargaining agreements included, must yield to the common good.[28] Should such contracts contain stipulations that
are contrary to public policy, courts will not hesitate to strike down these stipulations.
In this case, we find the point-of-hire classification employed by respondent School to justify the distinction in the
salary rates of foreign-hires and local hires to be an invalid classification. There is no reasonable distinction between
the services rendered by foreign-hires and local-hires. The practice of the School of according higher salaries to
foreign-hires contravenes public policy and, certainly, does not deserve the sympathy of this Court.
We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-hires.
A bargaining unit is "a group of employees of a given employer, comprised of all or less than all of the entire body of
employees, consistent with equity to the employer indicate to be the best suited to serve the reciprocal rights and duties
of the parties under the collective bargaining provisions of the law."[29] The factors in determining the appropriate
collective bargaining unit are (1) the will of the employees (Globe Doctrine); (2) affinity and unity of the employees'
interest, such as substantial similarity of work and duties, or similarity of compensation and working conditions
(Substantial Mutual Interests Rule); (3) prior collective bargaining history; and (4) similarity of employment status.[30]
The basic test of an asserted bargaining unit's acceptability is whether or not it is fundamentally the combination which
will best assure to all employees the exercise of their collective bargaining rights.[31]
It does not appear that foreign-hires have indicated their intention to be grouped together with local-hires for purposes
of collective bargaining. The collective bargaining history in the School also shows that these groups were always
treated separately. Foreign-hires have limited tenure; local-hires enjoy security of tenure. Although foreign-hires
perform similar functions under the same working conditions as the local-hires, foreign-hires are accorded certain
benefits not granted to local-hires. These benefits, such as housing, transportation, shipping costs, taxes, and home
leave travel allowance, are reasonably related to their status as foreign-hires, and justify the exclusion of the former
from the latter. To include foreign-hires in a bargaining unit with local-hires would not assure either group the exercise
of their respective collective bargaining rights.
WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN PART. The Orders of the
Secretary of Labor and Employment dated June 10, 1996 and March 19, 1997, are hereby REVERSED and SET
ASIDE insofar as they uphold the practice of respondent School of according foreign-hires higher salaries than local-
hires.

SO ORDERED.
 ALADDIN TRANSIT CORPORATION vs THE HONORABLE COURT OF APPEALS (SPECIAL SIXTH
DIVISION), AND RAFAEL ROXAS, G.R. No. 152123, June 21, 2005

DECISION
AZCUNA, J.:
This is a petition for certiorari under Rule 45 of the Revised Rules of Court seeking to set aside and annul the Decision
of the Court of Appeals[1] and the Resolution denying the Motion for Reconsideration dated December 20, 2001 in
C.A.-G.R. SP No. 62302.
The facts are not disputed.
Petitioner Aladdin Transit Corporation, a public service entity engaged in transportation, hired respondent Rafael
Rodriguez in February 1990 as an accounting clerk. Sometime thereafter, or on July 17, 1997, respondent employee
alleged that his sister had a quarrel with their personnel manager. As a result thereof, he was barred from entering the
companys premises. He was then instructed to take a leave of absence for a month. He wrote a letter to the President of
the company but he did not receive any reply. While he was on leave, he received a letter from their personnel manager
asking him to shed light about the SSS contribution that he allegedly did not remit. Respondent merely said he tried to
report to the office, but petitioner did not allow him.
On August 11, 1997, respondent employee received another letter from the personnel department informing him of his
preventive suspension for certain offenses. He alleged that he tried to answer the allegation and wrote a letter to the
President of the company, but did not receive a reply. Thus, he filed a complaint with the Labor Arbiter.
Petitioner, on its part, alleged that respondent employee violated the trust and confidence of petitioner when he used
the companys funds and lent them with interest to his co-employees for his personal gain. Petitioner added that an
investigation they conducted showed that respondent employee and a co-employee, Divina David, had colluded in
illegally making payroll salary deductions. Furthermore, petitioner alleged that respondent employee is guilty of using
the company vehicle without authority and failed to remit the SSS contribution of his co-employees.
Finding the arguments of petitioner deserving of credence, the Labor Arbiter ruled as follows:
WHEREFORE, premises considered, the complaint is hereby DISMISSED for utter lack of merit with admonition that
the filing of another baseless complaint shall be severely dealt[ ] with in the future.[2]
Subsequently, on April 27, 2000, respondent employee appealed to the National Labor Relations Commission (NLRC).
On July 3, 2000, the NLRC denied his appeal, for lack of merit.
Respondent employee thereupon appealed through a Petition for Certiorari to the Court of Appeals. The Court of
Appeals in its Decision held, as follows:
The issue before the Court, therefore, is whether petitioner was dismissed: 1) for just cause and 2) with the observance
of due process.
With regard the requirement of just cause, the Court finds in the affirmative. Both the Labor Arbiter and the NLRC
have thoroughly discussed the reason why private respondent was justified in dismissing petitioner from the service.
(pp. 123-124, 139-140, Rollo)
However, with regard the second requirement, the Court notes that the Labor Arbiter and the NLRC failed to discuss
and rule on the same. Nothing in the records show that private respondent gave petitioner the opportunity to be heard
and to explain his side. It has been ruled by the Supreme Court that:
The law requires the employer to give the worker to be dismissed two written notices before terminating his
employment, namely: (1) a notice which apprises the employee of the particular acts or omissions for which his
dismissal is sought; and (2) the subsequent notice which informs the employee of the employers decision to dismiss
him. x x x (Tingson, Jr. vs. NLRC, 185 SCRA 498 [1990]; National Service Corp. vs. NLRC, 168 SCRA 122 [1988];
Ruffy vs. NLRC, 182 SCRA 365 [1990])
The same is provided for in Section 2(a) Rule 1 of the Implementing Rules of Book VI which reads:
SEC. 2. Security of Tenure. (a) In cases of regular employment, the employer shall not terminate the services of an
employee except for just or authorized causes as provided by law, and subject to the requirements of due process.
(Underscoring supplied)
In the case at bar, it was not proven by private respondent that it gave petitioner notice informing him of the cause of
his impending dismissal. It did not narrate that it heard petitioners side, nor did it show that petitioner was given notice
of his dismissal. The Court recognizes the right of [the] employer to discipline its employees and not to continue in its
employ those who are inimical to its business operation. However, it must be stressed that in the normal course of
things, labor stands not on equal plane as the employer which has in its disposal all means to defend itself. Thus, laws
must be read for the protection of labor.
This reality is enunciated in Article 3 of the Labor Code in relation to Article 3 of the 1987 Constitution, when it
provides:
ART. 3. DECLARATION OF BASIC POLICY. The State shall afford protection to labor, promote full employment,
ensure equal work opportunities regardless of sex, race or creed, and regulate the relations between workers and
employers. The State shall assure the rights of workers to self-organization, collective bargaining, security of tenure,
and just and humane conditions of work.
As such, based on the ruling of the Supreme Court in the earlier quoted case of Serrano vs. NLRC, private respondent
is directed to pay petitioner his backwages from the time he was dismissed up to the time the herein decision becomes
final.

WHEREFORE, based on the foregoing, the instant petition is hereby GRANTED in part. Private respondent is directed
to pay petitioner his full backwages from the time the latter was dismissed until this decision becomes final.

SO ORDERED.[3]

After the reconsideration was denied, as aforestated, petitioner appealed to this Court.

Since there is no dispute that petitioner did not inform the respondent employee in dismissing him from the service, the
whole issue to be resolved is whether the Court of Appeals correctly applied the ruling of this Court in Serrano v.
NLRC,[4] to the effect that in cases where there is a valid cause to dismiss the employee but the required notice of
dismissal was not given, the dismissal is deemed ineffectual and the employee must be reinstated with full backwages.

Recently, this Court has had occasion to revisit the Serrano doctrine and the present rule is set forth in the Agabon v.
NLRC, et al.,[5] namely, that where the dismissal is based on a just cause, the failure to give the required notice does
not invalidate the same, but merely holds the employer liable for damages for violating said notice of requirement. The
amount of damages was fixed at Thirty Thousand Pesos (P30,000) by way of nominal damages.

WHEREFORE, the Petition is GRANTED and the Decision and Resolution of the Court of Appeals dated September
5, 2001 and December 20, 2001, respectively, in C.A.-G.R. SP No. 62302, are hereby MODIFIED, in that instead of
requiring petitioner to reinstate respondent employee with full backwages, the petitioner is ORDERED to pay
respondent employee nominal damages in the amount of Thirty Thousand Pesos (P30,000).

No costs.

SO ORDERED.
 G.R. No. 71813 July 20, 1987
ROSALINA PEREZ ABELLA/HDA. DANAO-RAMONA, petitioners, vs.
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION, ROMEO QUITCO and RICARDO
DIONELE, SR., respondents.

DECISION,
PARAS, J.:
This is a petition for review on certiorari of the April 8, 1985 Resolution of the Ministry of Labor and Employment
affirming the July 16, 1982 Decision of the Labor Arbiter, which ruled in favor of granting separation pay to private
respondents.
On June 27, 1960, herein petitioner Rosalina Perez Abella leased a farm land in Monteverde, Negros Occidental,
known as Hacienda Danao-Ramona, for a period of ten (10) years, renewable, at her option, for another ten (10) years
(Rollo, pp. 16-20).
On August 13, 1970, she opted to extend the lease contract for another ten (10) years (Ibid, pp. 26-27).
During the existence of the lease, she employed the herein private respondents. Private respondent Ricardo Dionele, Sr.
has been a regular farm worker since 1949 and he was promoted to Cabo in 1963. On the other hand, private
respondent Romeo Quitco started as a regular employee in 1968 and was promoted to Cabo in November of the same
year.
Upon the expiration of her leasehold rights, petitioner dismissed private respondents and turned over the hacienda to
the owners thereof on October 5, 1981, who continued the management, cultivation and operation of the farm (Rollo,
pp. 33; 89).
On November 20, 1981, private respondents filed a complaint against the petitioner at the Ministry of Labor and
Employment, Bacolod City District Office, for overtime pay, illegal dismissal and reinstatement with backwages. After
the parties had presented their respective evidence, Labor Arbiter Manuel M. Lucas, Jr., in a Decision dated July 16,
1982 (Ibid, pp. 29-31), ruled that the dismissal is warranted by the cessation of business, but granted the private
respondents separation pay. Pertinent portion of the dispositive portion of the Decision reads:
In the instant case, the respondent closed its business operation not by reason of business reverses or losses.
Accordingly, the award of termination pay in complainants' favor is warranted.
WHEREFORE, the respondent is hereby ordered to pay the complainants separation pay at the rate of half-month
salary for every year of service, a fraction of six (6) months being considered one (1) year. (Rollo pp. 29-30)
On appeal on August 11, 1982, the National Labor Relations Commission, in a Resolution dated April 8, 1985 (Ibid,
pp. 3940), affirmed the decision and dismissed the appeal for lack of merit.
On May 22, 1985, petitioner filed a Motion for Reconsideration (Ibid, pp. 41-45), but the same was denied in a
Resolution dated June 10, 1985 (Ibid, p. 46). Hence, the present petition (Ibid, pp. 3-8).
The First Division of this Court, in a Resolution dated September 16, 1985, resolved to require the respondents to
comment (Ibid, p. 58). In compliance therewith, private respondents filed their Comment on October 23, 1985 (Ibid,
pp. 53-55); and the Solicitor General on December 17, 1985 (Ibid, pp. 71-73-B).
On February 19, 1986, petitioner filed her Consolidated Reply to the Comments of private and public respondents
(Ibid, pp. 80-81).
The First Division of this Court, in a Resolution dated March 31, 1986, resolved to give due course to the petition; and
to require the parties to submit simultaneous memoranda (Ibid., p. 83). In compliance therewith, the Solicitor General
filed his Memorandum on June 18, 1986 (Ibid, pp. 89-94); and petitioner on July 23, 1986 (Ibid, pp. 96-194).

The petition is devoid of merit.

The sole issue in this case is —

WHETHER OR NOT PRIVATE RESPONDENTS ARE ENTITLED TO SEPARATION PAY.

Petitioner claims that since her lease agreement had already expired, she is not liable for payment of separation pay.
Neither could she reinstate the complainants in the farm as this is a complete cessation or closure of a business
operation, a just cause for employment termination under Article 272 of the Labor Code.

On the other hand, the legal basis of the Labor Arbiter in granting separation pay to the private respondents is Batas
Pambansa Blg. 130, amending the Labor Code, Section 15 of which, specifically provides:

Sec 15 Articles 285 and 284 of the Labor Code are hereby amended to read as follows:

xxx xxx xxx

Art. 284. Closure of establishment and reduction of personnel. — The employer may also terminate the employment of
any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing
or cessation of operation of the establisment or undertaking unless the closing is for the purpose of circumventing the
provisions of this title, by serving a written notice on the workers and the Ministry of Labor and Employment at least
one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month
pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent
losses and in cases of closure or cessation of operations of establishment or undertaking not due to serious business
losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month
pay for every year of service whichever is higher. A fraction of at least six (6) months shall be considered one (1)
whole year.1avvphi1

There is no question that Article 284 of the Labor Code as amended by BP 130 is the law applicable in this case.

Article 272 of the same Code invoked by the petitioner pertains to the just causes of termination. The Labor Arbiter
does not argue the justification of the termination of employment but applied Article 284 as amended, which provides
for the rights of the employees under the circumstances of termination.

Petitioner then contends that the aforequoted provision violates the constitutional guarantee against impairment of
obligations and contracts, because when she leased Hacienda Danao-Ramona on June 27, 1960, neither she nor the
lessor contemplated the creation of the obligation to pay separation pay to workers at the end of the lease.
Such contention is untenable.
This issue has been laid to rest in the case of Anucension v. National Labor Union (80 SCRA 368-369 [1977]) where
the Supreme Court ruled:
It should not be overlooked, however, that the prohibition to impair the obligation of contracts is not absolute and
unqualified. The prohibition is general, affording a broad outline and requiring construction to fill in the details. The
prohibition is not to read with literal exactness like a mathematical formula for it prohibits unreasonable impairment
only. In spite of the constitutional prohibition the State continues to possess authority to safeguard the vital interests of
its people. Legislation appropriate to safeguard said interest may modify or abrogate contracts already in effect. For not
only are existing laws read into contracts in order to fix the obligations as between the parties but the reservation of
essential attributes of sovereign power is also read into contracts as a postulate of the legal order. All contracts made
with reference to any matter that is subject to regulation under the police power must be understood as made in
reference to the possible exercise of that power. Otherwise, important and valuable reforms may be precluded by the
simple device of entering into contracts for the purpose of doing that which otherwise maybe prohibited. ...

In order to determine whether legislation unconstitutionally impairs contract of obligations, no unchanging yardstick,
applicable at all times and under all circumstances, by which the validity of each statute may be measured or
determined, has been fashioned, but every case must be determined upon its own circumstances. Legislation impairing
the obligation of contracts can be sustained when it is enacted for the promotion of the general good of the people, and
when the means adopted must be legitimate, i.e. within the scope of the reserved power of the state construed in
harmony with the constitutional limitation of that power. (Citing Basa vs. Federacion Obrera de la Industria Tabaquera
y Otros Trabajadores de Filipinas [FOITAF] [L-27113], November 19, 1974; 61 SCRA 93,102-113]).
The purpose of Article 284 as amended is obvious-the protection of the workers whose employment is terminated
because of the closure of establishment and reduction of personnel. Without said law, employees like private
respondents in the case at bar will lose the benefits to which they are entitled — for the thirty three years of service in
the case of Dionele and fourteen years in the case of Quitco. Although they were absorbed by the new management of
the hacienda, in the absence of any showing that the latter has assumed the responsibilities of the former employer,
they will be considered as new employees and the years of service behind them would amount to nothing.
Moreover, to come under the constitutional prohibition, the law must effect a change in the rights of the parties with
reference to each other and not with reference to non-parties.
As correctly observed by the Solicitor General, Article 284 as amended refers to employment benefits to farm hands
who were not parties to petitioner's lease contract with the owner of Hacienda Danao-Ramona. That contract cannot
have the effect of annulling subsequent legislation designed to protect the interest of the working class.
In any event, it is well-settled that in the implementation and interpretation of the provisions of the Labor Code and its
implementing regulations, the workingman's welfare should be the primordial and paramount consideration. (Volshel
Labor Union v. Bureau of Labor Relations, 137 SCRA 43 [1985]). It is the kind of interpretation which gives meaning
and substance to the liberal and compassionate spirit of the law as provided for in Article 4 of the New Labor Code
which states that "all doubts in the implementation and interpretation of the provisions of this Code including its
implementing rules and regulations shall be resolved in favor of labor." The policy is to extend the applicability of the
decree to a greater number of employees who can avail of the benefits under the law, which is in consonance with the
avowed policy of the State to give maximum aid and protection to labor. (Sarmiento v. Employees Compensation
Commission, 144 SCRA 422 [1986] citing Cristobal v. Employees Compensation Commission, 103 SCRA 329;
Acosta v. Employees Compensation Commission, 109 SCRA 209).

PREMISES CONSIDERED, the instant petition is hereby DISMISSED and the July 16, 1982 Decision of the Labor
Arbiter and the April 8, 1985 Resolution of the Ministry of Labor and Employment are hereby AFFIRMED.

SO ORDERED.