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Hanjin Heavy Industries and Construction Co. Ltd., et. al. vs.

Felicito Ibañez


Petitioner HANJIN is a foreign company duly registered with the Securities and Exchange Commission to
engage in the construction business in the Philippines. Petitioners Hak Kon Kim and Jhunie Adajar were
employed as Project Director and Supervisor, respectively, by HANJIN.

Respondents Felicito Ibañez, Aligwas Carolino, Elmer Gacula, Enrique Dagotdot, Ruel Calda, and four
other co-workers filed a complaint before the NLRC for illegal dismissal with prayer for reinstatement and
full backwages against petitioners. They alleged that HANJIN hired them for various positions on different
dates and that their tasks were usual and necessary or desirable in the usual business or trade of

On 15 April 2002, Hanjin dismissed respondents from employment. Respondents claimed that at the time
of their dismissal, HANJIN had several construction projects that were still in progress, such as Metro Rail
Transit (MRT) II and MRT III, and continued to hire employees to fill the positions vacated by the

Petitioners denied the respondents' allegations. They maintained that respondents were hired as project
employees for the construction of the LRT/MRT Line 2 Package 2 and 3 Project. HANJIN and
respondents purportedly executed contracts of employment, in which it was clearly stipulated that the
respondents were to be hired as project employees for a period of only three months, but that the
contracts may be renewed.

However, petitioners failed to furnish the Labor Arbiter a copy of said contracts of employment.
Petitioners asserted that respondents were duly informed of HANJIN's policies, rules and regulations, as
well as the terms of their contracts. Copies of the employees' rules and regulations were posted on the
bulletin boards of all HANJIN campsite offices

Petitioners further emphasized that prior to 15 April 2002, Hak Kon Kim, HANJIN's Project Director,
notified respondents of the company's intention to reduce its manpower due to the completion of the
LRT/MRT Line 2 Package 2 and 3 Project. Respondents were among the project employees who were
thereafter laid off, as shown in the Establishment Termination Report filed by HANJIN before the
Department of Labor and Employment (DOLE).

Finally, petitioners insist that in accordance with the usual practice of the construction industry, a
completion bonus was paid to the respondents.10 To support this claim, they offered as evidence payroll
records for the period 4 April 2002 to 20 April 2002, with the words "completion bonus" written at the
lower left corner of each page

Petitioners attached copies of the Quitclaims,12 executed by the respondents, which uniformly stated that
the latter received all wages and benefits that were due them and released HANJIN and its
representatives from any claims in connection with their employment.

Respondents vehemently refuted having signed any written contract stating that they were project

The Labor Arbiter ruled in favor of respondents and declared that they were regular employees who had
been dismissed without just and valid causes and without due process.

HANJIN's allegation that respondents were project employees was negated by its failure to present proof
thereof. It also noted that a termination report should be presented after the completion of every project or
a phase thereof and not just the completion of one of these projects. The Labor Arbiter further construed
the number of years that respondents rendered their services for HANJIN as an indication that
respondents were regular, not project, employees.

But the NLRC reversed it: the respondents were project employees who were legally terminated from
employment. The NLRC gave probative value to the Termination Report submitted by HANJIN to the
DOLE, receipts signed by respondents for their completion bonus upon phase completion, and the
Quitclaims executed by the respondents in favor of HANJIN. The NLRC also observed that the records
were devoid of any proof to support respondents' allegation that they were employed before 1997, the
time when construction work on the MRT started.

But the CA reversed it: the employer had the burden of proving the legality of the dismissal, the appellate
court ruled that respondents were regular employees and upheld the Labor Arbiter's finding that they
were illegally dismissed.


Whether the respondents are project or regular employees.


Project employees.

The principal test for determining whether particular employees are properly characterized as "project
employees" as distinguished from "regular employees" is whether or not the project employees were
assigned to carry out a "specific project or undertaking," the duration and scope of which were specified
at the time the employees were engaged for that project

In a number of cases, 25 the Court has held that the length of service or the re-hiring of construction
workers on a project-to-project basis does not confer upon them regular employment status, since their
re-hiring is only a natural consequence of the fact that experienced construction workers are preferred.
Employees who are hired for carrying out a separate job, distinct from the other undertakings of the
company, the scope and duration of which has been determined and made known to the employees at
the time of the employment, are properly treated as project employees and their services may be lawfully
terminated upon the completion of a project.26 Should the terms of their employment fail to comply with
this standard, they cannot be considered project employees.

In other cases, the Court markedly stressed the importance of the employees' knowing consent to being
engaged as project employees when it clarified that "there is no question that stipulation on employment
contract providing for a fixed period of employment such as `project-to-project' contract is valid provided
the period was agreed upon knowingly and voluntarily by the parties, without any force, duress or
improper pressure being brought to bear upon the employee and absent any other circumstances
vitiating his consent

During the proceedings before the Labor Arbiter, the petitioners' failure to produce respondents' contracts
of employment was already noted. In their appeal before the NLRC until the present, petitioners now
claim that due to a lapse in management procedure, no such employment contracts were executed;
nonetheless, the absence of a written contract does not remove respondents from the ambit of being
project employees.

While the absence of a written contract does not automatically confer regular status, it has been
construed by this Court as a red flag in cases involving the question of whether the workers concerned
are regular or project employees.

Even though the absence of a written contract does not by itself grant regular status to respondents, such
a contract is evidence that respondents were informed of the duration and scope of their work and their
status as project employees. In this case, where no other evidence was offered, the absence of an
employment contract puts into serious question whether the employees were properly informed at the
onset of their employment status as project employees. It is doctrinally entrenched that in illegal dismissal
cases, the employer has the burden of proving with clear, accurate, consistent and convincing evidence
that a dismissal was valid.35 Absent any other proof that the project employees were informed of their
status as such, it will be presumed that they are regular employees in accordance with Clause 3.3(a) of
Department Order No. 19, Series of 1993

It also bears to note that petitioners did not present other Termination Reports apart from that filed on 11
April 2002. The failure of an employer to file a Termination Report with the DOLE every time a project or a
phase thereof is completed indicates that respondents were not project employees.37 Employers cannot
mislead their employees, whose work is necessary and desirable in the former's line of business, by
treating them as though they are part of a work pool from which workers could be continually drawn and
then assigned to various projects and thereafter denied regular status at any time by the expedient act of
filing a Termination Report. This would constitute a practice in which an employee is unjustly precluded
from acquiring security of tenure, contrary to public policy, morals, good customs and public order.38
In this case, only the last and final termination of petitioners was reported to the DOLE. If respondents
were actually project employees, petitioners should have filed as many Termination Reports as there
were construction projects actually finished and for which respondents were employed. Thus, a lone
Termination Report filed by petitioners only upon the termination of the respondents' final project, and
after their previous continuous employment for other projects, is not only unconvincing, but even

Due to petitioners' failure to adduce any evidence showing that petitioners were project employees who
had been informed of the duration and scope of their employment, they were unable to discharge the
burden of proof required to establish that respondents' dismissal was legal and valid. Furthermore, it is a
well-settled doctrine that if doubts exist between the evidence presented by the employer and that by the
employee, the scales of justice must be tilted in favor of the latter.44 For these reasons, respondents are
to be considered regular employees of HANJIN.



On 6 February 1987, PAL and PALEA entered into a CBA that was to cover the period of 1986 – 1989.
Part of said agreement required PAL to pay its rank and file employees the following bonuses: 13 th month
pay and Christmas Bonus.

Prior to the payment of the 13th month pay (mid – year bonus), PAL released an implementing guideline
on 22 April 1988. It stated that:

1) Eligibility
a) Ground employees in the general payroll who are regular as of April 30, 1988;
b) Other ground employees in the general payroll, not falling within category (a) above shall receive their
13th Month Pay on or before December 24, 1988;

2) Amount
a) For category (a) above, one month basic salary as of April 30, 1988;
b) Employees covered under 1 (b) above shall be paid not less than 1/12 of their basic salary for every
month of service within the calendar year.

PALEA assailed the implementation of the foregoing guideline. It is of the view that all employees of PAL,
whether regular or non-regular, should be paid their 13th month pay. In response to the above, PAL
informed PALEA that rank and file employees who were regularized after 30 April 1988 were not entitled
to the 13th month pay as they were already given the Christmas bonus in December of 1988.

PALEA, disagreeing with PAL, filed a Complaint for unfair labor practice before the NLRC. The union
argued that "the cut-off period for regularization should not be used as the parameter for granting [the]
13thmonth pay considering that the law covers all employees.

PAL countered that those rank and file employees who were not regularized by 30 April of a particular
year are, in principle, not denied their 13th month pay, considering they receive said mandatory bonus in
the form of the Christmas Bonus.

LA ruled that PAL was not guilty of unfair labor practice. On appeal to the NLRC, the assailed decision of
the Labor Arbiter was reversed. MR by PAL was denied. PAL went to SC but it only referred the case to
CA which dismissed the petition of PAL.

In refusing payment of the mid-year bonus, petitioner PAL argues that 1) the CBA does not apply to non-
regular employees such that any benefits arising from said agreement cannot be made to apply to them,
including the mid-year bonus; and 2) it has always been the company practice not to extend the mid-year
bonus to those employees who have not attained regular status prior to the month of May, when payment
of the particular bonus accrues.

Respondent PALEA, however, disputes petitioner PALs allegations and maintains that the benefits to all
employees in the collective bargaining unit, including those who do not belong to the chosen bargaining
labor organization, applies.

1. Whether the Court of Appeals committed reversible error in affirming the order of the NLRC for the
payment of the 13thmonth pay or mid-year bonus to its employees regularized after 30 April 1988.

2. Whether the 13th month pay or mid-year bonus can be equated to the Christmas bonus.


1. No. A cursory reading of the 1986-1989 CBA of the parties herein will instantly reveal that Art. I,
Sec. 3 of said agreement made its provision applicable to all employees in the bargaining unit
without distinguishing between regular and non-regular employees.

It is a well-settled doctrine that the benefits of a CBA extend to the laborers and employees in the
collective bargaining unit, including those who do not belong to the chosen bargaining labor
organization. Otherwise, it would be a clear case of discrimination.

Hence, to be entitled to the benefits under the CBA, the employees must be members of the
bargaining unit, but not necessarily of the labor organization designated as the bargaining agent.

A bargaining unit has been defined as a group of employees of a given employer, comprised of
all or less than all of the entire body of employees, which the collective interest of all the
employees, consistent with equity to the employer, indicates to be the best suited to serve the
reciprocal rights and duties of the parties under the collective bargaining provisions of the law.

PAL excludes certain employees from the benefits of the CBA only because they have not yet
achieved regular status by the cut-off date, 30 April 1988. There is no showing that the non-
regular status of the concerned employees by said cut-off date sufficiently distinguishes their
interests from those of the regular employees so as to exclude them from the collective
bargaining unit and the benefits of the CBA.

2. No. PAL is claiming an exemption from payment of the 13th month pay or mid-year bonus provided
in the CBA under the guise of paying the Christmas bonus which it claims to be the equivalent of
the 13th month pay under Presidential Decree No. 851.

Presidential Decree No. 851 mandates that all employers must pay all their employees receiving a
basic salary of not more than P1,000.00 a month, regardless of the nature of the employment, a
13th month pay not later than 24 December of every year. Memorandum Order No. 28,[35] dated 13
August 1986, removed the salary ceiling, generally making all employees entitled to the 13 th month
pay regardless of the amount of their basic salary, designation or employment status, and
irrespective of the method by which their wages are paid, provided that they have worked for at
least one (1) month during a calendar year.

Presidential Decree No. 851, as amended, does admit of certain exceptions or exclusions from its
coverage, among which is:

Sec. 3(c). Employers already paying their employees 13-month pay or more in a
calendar year or its equivalent at the time of this issuance.

While employers already paying their employees a 13 th month pay or more in a calendar
year or its equivalent at the time of the issuance of Presidential Decree No. 851 are already
exempted from the mandatory coverage of said law, petitioner PAL cannot escape liability
in this case by virtue thereof.

It must be stressed that in the 1986-1989 CBA, petitioner PAL agreed to pay its employees
1) the 13th month pay or the mid-year bonus, and 2) the Christmas bonus. The 13th month
pay, guaranteed by Presidential Decree No. 851, is explicitly covered or provided for as
the mid-year bonus in the CBA, while the Christmas bonus is evidently and distinctly a
separate benefit.

Presidential Decree No. 851 mandates the payment of the 13th month pay to uniformly
provide the low-paid employees with additional income. It but sets a minimum requirement
that employers must comply with. It does not intend, however, to preclude the employers
from voluntarily granting additional bonuses that will benefit their employees.

A bonus is an amount granted and paid to an employee for his industry and loyalty which
contributed to the success of the employer's business and made possible the realization
of profits. It is an act of generosity of the employer for which the employee ought to be
thankful and grateful. It is also granted by an enlightened employer to spur the employee
to greater efforts for the success of the business and realization of bigger profits. We deem
that the Christmas bonus in this case is of this nature, although, by virtue of its incorporation
into the CBA, it has become more than just an act of generosity on the part of petitioner
PAL, but a contractual obligation it has undertaken.
If petitioner PAL truly intended that the Christmas bonus be treated as the equivalent of
the 13th month pay required by law, then said intention should have been expressly
declared in their 1986-1989 CBA, or the separate provision therein on the Christmas bonus
should have been removed because it would only be superfluous.
A collective bargaining agreement refers to a negotiated contract between a legitimate
labor organization and the employer concerning wages, hours of work and all other terms
and conditions of employment in a bargaining unit. As in all other contracts, the parties to
a CBA may establish such stipulations, clauses, terms and conditions as they may deem
convenient, provided these are not contrary to law, morals, good customs, public order or
public policy. Thus, where the CBA is clear and unambiguous, it becomes the law between
the parties, and compliance therewith is mandated by the express policy of the law.



Petitioner commenced the instant suit by filing a complaint for illegal dismissal, underpayment of wages,
non-payment of premium pay for holiday and rest day, five (5) days incentive leave pay, damages and
attorney’s fees, against the respondent.

Petitioner claimed that he worked as a carpenter at the Hacienda Pamplona since 1995; that he worked
from 7:30 a.m. to 12:00 noon and from 1:00 p.m. to 5:00 p.m. daily with a salary rate of P90.00 a day paid
weekly; and that he worked continuously until 1997 when he was not given any work assignment.

On a claim that he was a regular employee, petitioner alleged to have been illegally dismissed when the
respondent refused without just cause to give him work assignment.

On the other hand, respondent denied having hired the petitioner as its regular employee. It instead
argued that petitioner was hired by a certain Antoy Cañaveral, the manager of the hacienda at the time it
was owned by Mr. Bower and leased by Manuel Gonzales, a jai-alai pelotari known as "Ybarra."6
Respondent added that it was not obliged to absorb the employees of the former owner.

In 1995, Pamplona Plantation Leisure Corporation (PPLC) was created for the operation of tourist resorts,
hotels and bars. Petitioner, thus, rendered service in the construction of the facilities of PPLC. If at all,
petitioner was a project but not a regular employee.

Labor Arbiter Geoffrey P. Villahermosa dismissed the case for lack of merit since petitioner was hired by
the former owner, hence, was not an employee of the respondent.

National Labor Relations Commission (NLRC) reverse LA’s decision. It upheld the existence of an
employer-employee relationship and held that the respondent should have presented its employment
records if only to show that petitioner was not included in its list of employees; its failure to do so was

CA concluded that there was no employer-employee relationship. The CA stressed that petitioner having
raised a positive averment, had the burden of proving the existence of an employer-employee


1. W/N there exist an employer-employee relationship.

2. If yes, w/n petitioner was illegally dismissed.

1. Yes. Respondent departs from its initial stand that it never hired petitioner, the respondent
eventually admitted the existence of employer-employee relationship before the CA. It, however,
qualified such admission by claiming that it was PPLC that hired the petitioner and that the nature
of his employment therein was that of a "project" and not "regular" employee. It is true that
petitioner admitted having been employed by the former owner prior to 1993 or before the
respondent took over the ownership and management of the plantation, however, he likewise
alleged having been hired by the respondent as a carpenter in 1995 and having worked as such
for two years until 1997.

Parenthetically, this Court in Pamplona Plantation Company, Inc. v. Tinghil23 and Pamplona
Plantation Company v. Acosta24 had pierced the veil of corporate fiction and declared that the
two corporations,25 PPLC and the herein respondent, are one and the same.
By setting forth these defenses, respondent, in effect, admitted that petitioner worked for it, albeit
in a different capacity. Such an allegation is in the nature of a negative pregnant, a denial
pregnant with the admission of the substantial facts in the pleadings responded to which are not
squarely denied and amounts to an acknowledgment that petitioner was indeed employed by

2. Yes. Well-established is the rule that regular employees enjoy security of tenure and they can
only be dismissed for just cause and with due process, i.e., after notice and hearing. In cases
involving an employee’s dismissal, the burden is on the employer to prove that the dismissal was
legal. This burden was not amply discharged by the respondent in this case.
Obviously, petitioner’s dismissal was not based on any of the just or authorized causes
enumerated under Articles 282,34 28335 and 28436 of the Labor Code, as amended. After
working for the respondent for a period of two years, petitioner was shocked to find out that he
was not given any work assignment anymore.
Hence, the requirement of substantive due process was not complied with.

SILVESTRE P. ILAGAN doing business under the name and style "Infantry Surveillance
Investigation Security Agency” vs. CA


Petitioner Silvestre P. Ilagan is the president and proprietor of Infantry Surveillance Investigation Security
Agency. The agency hired as security guards private respondents Peter B. Orias and Romelito Pueblo,
Sr. on November 6, 1992 and October 4, 1995, and as head guard, private respondent Dolores Peregrino
in December 1996.

On separate occasions in 1998, they were orally informed by petitioner not to report for work anymore.

Private respondents filed with the Labor Arbiter separate complaints against petitioner for illegal

In the course of the mandatory conciliation and mediation conference, the parties agreed that the only
issue left was the payment of money claims. However, the parties later moved for the submission of their
respective position papers, thereby terminating the conciliation and mediation conference.

LA ruled in favor of respondents which was affirmed by NLRC and CA.

Petitioner insists absent proof of a positive act of dismissal, a complaint for illegal dismissal could not
prosper. Petitioner claims private respondents simply resigned from their jobs, but he no longer presented
the resignation letters to the Labor Arbiter simply because he thought the issue of illegal dismissal was
already moot due to an agreement that limits the issue to money claims.
Private respondents, for their part, counter that the issue of illegal dismissal was not amicably resolved.
They stress that no compromise agreement or any actual settlement of the case ever materialized before
the Labor Arbiter. They aver that they have substantially proven the fact of their illegal dismissal.


W/N issue of illegal dismissal has been amicably settled.


No. Section 2, Rule V of the then New Rules of Procedure of the NLRC provides:

Section 2. Mandatory Conciliation/Mediation Conference. – ….

Should the parties arrive at any agreement as to the whole or any part of the dispute, the same shall be
reduced to writing and signed by the parties and their respective counsels, if any[,] before the Labor

In order to be valid, any agreement arrived at in the course of the mandatory conciliation and mediation
conference should be in writing and signed by the parties, or their counsel, before the Labor Arbiter.

In this case, no such written and duly signed evidence of any amicable settlement of the dispute, whether
in whole or in part, was ever adduced. Thus, petitioner has no basis for claiming that the issue of illegal
dismissal has been amicably settled.

Petitioner’s belated submission that private respondents voluntarily resigned deserves no consideration. It
should have been raised in the hearing before the Labor Arbiter. We are not prepared to indulge
petitioner’s defense that he thought illegal dismissal was no longer an issue. He could not have been
unaware that during the conciliation and mediation conference, no agreement on either of the two issues
was ever forged.

Concededly, employers have the right to terminate the services of an employee for a just or authorized
cause. However, the dismissal of employees must be made in accordance with law. The burden of proof
is always on the employer to prove that the dismissal was for a just or authorized cause

In this case, petitioner failed to prove (1) that the dismissal of private respondents was for a valid cause
and (2) that he complied with the two- notice requirement of procedural due process. Hence, we are
constrained to agree that this case is a matter of illegal dismissal.



The case stemmed from a Complaint for illegal dismissal with money claims filed on November 10, 1997
by respondents against petitioner before the Regional Arbitration Branch of Davao City.

Petitioner is the owner and manager of G.S. Saberola Electrical Services, a firm engaged in the
construction business specializing in installing electrical devices in subdivision homes and in commercial
and non-commercial buildings.

Respondents were employed by petitioner as electricians.

Respondent Ronald Suarez (Suarez) was employed by petitioner from February 1995 until October 1997;
while respondent Raymundo Lirasan, Jr. (Lirasan) worked from February 1995 until September 1997.
Respondent Lirasan alleged that he was dismissed without cause and due process. He was merely
informed by petitioner that his services were no longer needed without any explanation why he was
terminated. Both respondents claimed that they received compensation below the minimum wage. They
also alleged that they did not receive 13th month pay for the entire period of their employment.

Petitioner averred that respondents were part-time project employees and were employed only when
there were electrical jobs to be done in a particular housing unit contracted by petitioner. He maintained
that the services of respondents as project employees were coterminous with each project. As project
employees, the time of rendition of their services was not fixed.

Thus, there was no practical way of determining the appropriate compensation of the value of
respondents’ accomplishment, as their work assignment varied depending on the needs of a specific

LA dismissed the complaint and ruled that respondents were project employees and were not entitled to
their monetary claims.

NLRC affirmed with modification the findings of the Labor Arbiter. It maintained that respondents were
project employees of petitioner. However, it declared that respondent Suarez was illegally dismissed from
employment. It also awarded the monetary claims of respondents.

CA dismissed the appeal filed by petitioners.


(1) whether respondent Suarez was illegally terminated

(2) whether respondents are entitled to their monetary claims.


(1) Yes. respondents, even if working as project employees, enjoy security of tenure. Section 3,
Article XIII, of the Constitution guarantees the right of workers to security of tenure, and because
of this, an employee may only be terminated for just15 or authorized16 causes that must comply
with the due process requirements17 mandated by law.
When a project employee is dismissed, such dismissal must still comply with the substantive and
procedural requirements of due process. Termination of his employment must be for a lawful
cause and must be done in a manner which affords him the proper notice and hearing.

A project employee must be furnished a written notice of his impending dismissal and must be
given the opportunity to dispute the legality of his removal.21 In termination cases, the burden of
proof rests on the employer to show that the dismissal was for a just or authorized cause.
Employers who hire project employees are mandated to state and prove the actual basis for the
employee’s dismissal once its veracity is challenged.

Petitioner failed to present any evidence to disprove the claim of illegal dismissal.

(2) Yes. As employer, the petitioner has the burden of proving that the rate of pay given to the
respondents is in accordance with the minimum fixed by the law and that he paid thirteenth month
pay, service incentive leave pay and other monetary claims.

We have consistently held that as a rule, one who pleads payment has the burden of proving it.
Even when the plaintiff alleges non-payment, still the general rule is that the burden rests on the
defendant to prove payment, rather than on the plaintiff to prove non-payment. The debtor has
the burden of showing with legal certainty that the obligation has been discharged by payment.
In the instant case, the burden of proving payment of the monetary claims rests on petitioner,
being the employer of respondents. This is because the pertinent personnel files, payrolls,
records, remittances and other similar documents that would show that the claims have been paid
are not in the possession of the worker but in the custody and absolute control of the employer.



Respondent Emmanuel V. Santos was employed by petitioner Pepsi Cola Products Phils., Inc. and was
promoted as Acting Regional Sales Manager at the Libis Sales Office.

On February 14, 1997, respondent received from petitioner Ernesto F. Gochuico a memorandum4
charging him with violation of company rules and regulations and Article 282(a)5 of the Labor Code, as


NO. 12 Falsifying company records or documents or knowingly using falsified records or documents.
NO. 8 Breach of trust and confidence.
NO. 4 Engaging in fictitious transactions, fake invoicing, deals padding and other sales malpractices.
NO. 5 Misappropriation or embezzlement of company funds or property and other acts of dishonesty.
Article 282 (a) Serious misconduct or willful disobedience to the lawful orders of his employer.

The charges arose out of alleged artificial sales by the sales personnel of the Libis Sales Office in March
1996 allegedly upon the instruction of respondent. The alleged artificial sales resulted in damage to
petitioners amounting to P795,454.54.

After the termination of the hearings, petitioners found respondent guilty of the aforesaid charges with the
exception of falsifying company records. As a result, respondent was dismissed on June 27, 1997.

Respondent filed a case for illegal dismissal which the Labor Arbiter dismissed.

On appeal, the NLRC remanded the case to the Labor Arbiter for further proceedings.

Labor Arbiter ruled that petitioners failed to satisfactorily prove the serious charges against respondent.
The only relevant evidence adduced by petitioners was the notice of termination which narrated what
happened during the administrative investigation.

Petitioners appealed to the NLRC which affirmed the Labor Arbiter’s finding of illegal dismissal.

CA agreed with the Labor Arbiter and the NLRC that the charges in the memorandum of suspension and
the notice of termination were not satisfactorily proven. The only evidence submitted by petitioners was
the notice of termination which narrated what happened during the administrative investigation.

It is petitioners’ view that since respondent never denied these allegations, he is deemed to have
admitted the same.


Whether respondent was validly dismissed.

Yes. In an illegal dismissal case, the onus probandi (the burden of proof) rests on the employer to prove
that its dismissal of an employee is for a valid cause.

In the instant case, petitioners failed to present evidence to justify respondent’s dismissal. Save for the
notice of termination, we could not find any evidence which would clearly and convincingly show that
respondent was guilty of the charges imputed against him.

There appears to be no compelling reason why petitioners would rather present their witnesses on direct
testimony rather than reduce their testimonies into affidavits.

The submission of these affidavits appears to be the more prudent course of action particularly when the
Labor Arbiter informed the parties that no further trial will be conducted in the case.



Respondent Elite Shipping A.S. hired petitioner Dante D. de la Cruz as third engineer for the vessel M/S
Arktis Morning through its local agency in the Philippines.

The contract of employment was for a period of nine months. Petitioner was deployed to Jebel Ali, United
Arab Emirates.

In a logbook entry dated June 18, 1999, chief engineer Normann Per Nielsen expressed his
dissatisfaction over petitioner's performance, stating that not been able to live up to the company's SMS
job description for 3rd Engineer and informed him that if he does not improve his Job/Working
performance within [a] short time he will be signed off according to CBA Article 1 (7).

CBA Article 1 (7) provides that the first sixty (60) days of service is to be considered a probationary period
which entitles a shipowner or his representative, i.e., the master of the vessel, to terminate the contract by
giving fourteen (14) days of written notice.

This entry was followed by another one dated June 26, 1999 which was similar in content.

On June 27, 1999, petitioner was informed of his discharge through a notice captioned "Notice according
to CBA Article 1 (7).

Petitioner was then made to disembark at the port of Houston, Texas and was repatriated to Manila.

Petitioner thereafter filed a complaint for illegal dismissal with claims for the monetary equivalent of the
unexpired portion of his contract, damages and attorney's fees in the National Labor Relations
Commission (NLRC).

The labor arbiter (LA) ruled that petitioner was dismissed without just cause and due process as the
logbook entry was vague. It failed to expound on or state the details of petitioner's
shortcomings or infractions. He was deprived of opportunity to explain his side.

NLRC upheld the LA's finding of illegal dismissal but deleted the award of moral and exemplary damages.

CA reversed the same: the logbook entries to be sufficient compliance with the first notice requirement of
the law. It was a written appraisal of petitioner's poor job performance coupled with a warning that should
he fail to improve his performance, he would be signed off in accordance with the provisions of the CBA.
It reasoned that a probationary employee may be dismissed at anytime during the probationary period for
failure to live up to the expectations of the employer.

Whether petitioner was illegally dismissed by respondents.


Yes. An employer has the burden of proving that an employee's dismissal was for a just cause. Failure to
show this necessarily means that the dismissal was unjustified and therefore illegal. Furthermore, not only
must the dismissal be for a cause provided by law, it should also comply with the rudimentary
requirements of due process, that is, the opportunity to be heard and to defend oneself.

These requirements are of equal application to cases of Filipino seamen recruited to work on board
foreign vessels. Procedural due process requires that a seaman must be given a written notice of the
charges against him and afforded a formal investigation where he can defend himself personally or
through a representative before he can be dismissed and disembarked from the vessel.

The employer is bound to furnish him two notices: (1) the written charge and (2) the written notice of
dismissal (in case that is the penalty imposed). This is in accordance with the POEA Revised Standard
Employment Terms and Conditions Governing the Employment of Filipino Seafarers on Board Ocean-
Going Vessels (POEA Revised Standard Employment Terms and Conditions).

Section 17 of the POEA Revised Standard Employment Terms and Conditions laid down the disciplinary
procedures to be taken against erring seafarers:


The Master shall comply with the following disciplinary procedures against an erring seafarer:

A. The Master shall furnish the seafarer with a written notice containing the following:

1. Grounds for the charges as listed in Section 31 of this Contract.

2. Date, time and place for a formal investigation of the charges against the seafarer concerned.

B. The Master or his authorized representative shall conduct the investigation or hearing, giving the
seafarer the opportunity to explain or defend himself against the charges. An entry on the investigation
shall be entered into the ship's logbook.

C. If, after the investigation or hearing, the Master is convinced that imposition of a penalty is justified, the
Master shall issue a written notice of penalty and the reasons for it to the seafarer, with copies furnished
to the Philippine agent.

xxx xxx xxx

Furthermore, the notice must state with particularity the acts or omissions for which his dismissal is being

Contrary to respondents' claim, the logbook entries did not substantially comply with the first notice, or the
written notice of charge(s). It did not state the particular acts or omissions for which petitioner was
charged. The statement therein was couched in terms too general for legal comfort.

The entries did not contain any information at all as to why he was even being warned of discharge in the
first place. Even we were left to speculate as to what really transpired, calling for such an extreme course
of action from the chief engineer. The entries raised more questions than answers.

How exactly was he unable to live up to the company's SMS job description of a third engineer?
Respondents should have indicated the grounds for the threatened termination, the specific acts or
omissions illustrating the same, along with the date and the approximate time of their occurrence. For
how else could petitioner be expected to meet the charges against him if all he was given as reason for
his discharge was a vague and general accusation such as that handed down by the chief engineer?
Even if the chief engineer verbally informed him of what his specific shortcomings were, as insisted upon
by respondents, the POEA Revised Standard Employment Terms and Conditions and jurisprudence
require that the charges be put in writing.

Moreover, we observed that the records were devoid of any proof indicating that petitioner was ever given
an opportunity to present his side. Respondents in fact admitted not having conducted any formal
investigation arguing that “it was not necessary because the findings against petitioner were not in the
form of infractions that ought to be investigated. Having been duly notified of his shortcomings, it
devolved upon the petitioner to improve the quality of his work in order to pass his probationary period
and be a regular employee.”

Also, it was held in previous cases that seafarers are not covered by the term regular employment, as
defined under Article 280 of the Labor Code. Instead, they are considered contractual employees whose
rights and obligations are governed primarily by the POEA Standard Employment Contract for Filipino
Seamen (POEA Standard Employment Contract), the Rules and Regulations Governing Overseas
Employment, and, more importantly, by Republic Act No. 8042, otherwise known as The Migrant Workers
and Overseas Filipinos Act of 1995.21 Even the POEA Standard Employment Contract itself mandates
that in no case shall a contract of employment concerning seamen exceed 12 months.

In using the terms "probationary" and "permanent" vis-à-vis seafarers, what was really meant was
"eligible for re-hire."

Seafarers cannot stay for a long and indefinite period of time at sea as limited access to shore activity
during their employment has been shown to adversely affect them. Furthermore, the diversity in
nationality, culture and language among the crew necessitates the limitation of the period of employment.

Furthermore, the CBA cannot override the provisions of the POEA Standard Employment Contract. The
law is read into, and forms part of, contracts. And provisions in a contract are valid only if they are not
contrary to law, morals, good customs, public order or public policy.

The petitioner was reinstated.

ARCO METAL PRODUCTS, CO., INC., and MRS. SALVADOR UY, petitioners, vs.