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CALALANG VS WILLIAMS order to promote the general welfare may interfere with personal

liberty, with property, and with business and occupations. Persons

Facts: and property may be subject to all kinds of restraints and burdens
in order to secure the general comfort, health, and prosperity of the
The National Traffic Commission, in its resolution of July 17, 1940, State. To this fundamental aims of the government, the rights of
resolved to recommend to the Director of the Public Works and to the individual are subordinated. Liberty is a blessing which should
the Secretary of Public Works and Communications that animal- not be made to prevail over authority because society will fall into
drawn vehicles be prohibited from passing along the following for a anarchy. Neither should authority be made to prevail over liberty
period of one year from the date of the opening of the Colgante because then the individual will fall into slavery. The paradox lies in
Bridge to traffic: the fact that the apparent curtailment of liberty is precisely the very
means of insuring its preserving.
1) Rosario Street extending from Plaza Calderon de la Barca to
Dasmariñas Street from 7:30Am to 12:30 pm and from 1:30 pm to 2) No. Social justice is “neither communism, nor despotism, nor
530 pm; and atomism, nor anarchy,” but the humanization of laws and the
equalization of social and economic forces by the State so that
2) along Rizal Avenue extending from the railroad crossing at justice in its rational and objectively secular conception may at
Antipolo Street to Echague Street from 7 am to 11pm least be approximated. Social justice means the promotion of the
welfare of all the people, the adoption by the Government of
The Chairman of the National Traffic Commission on July 18, 1940 measures calculated to insure economic stability of all the
recommended to the Director of Public Works with the approval of competent elements of society, through the maintenance of a
the Secretary of Public Works the adoption of thethemeasure proper economic and social equilibrium in the interrelations of the
proposed in the resolution aforementioned in pursuance of the members of the community, constitutionally, through the adoption
provisions of theCommonwealth Act No. 548 which authorizes said of measures legally justifiable, or extra-constitutionally, through the
Director with the approval from the Secretary of the Public Works exercise of powers underlying the existence of all governments on
and Communication to promulgate rules and regulations to the time-honored principles of salus populi estsuprema lex.
regulate and control the use of and traffic on national roads.
Social justice must be founded on the recognition of the necessity
On August 2, 1940, the Director recommended to the Secretary the of interdependence among divers and diverse units of a society
approval of the recommendations made by the Chairman of the and of the protection that should be equally and evenly extended
National Traffic Commission with modifications. The Secretary of to all groups as a combined force in our social and economic life,
Public Works approved the recommendations on August 10,1940. consistent with the fundamental and paramount objective of the
The Mayor of Manila and the Acting Chief of Police of Manila have state of promoting health, comfort and quiet of all persons, and of
enforced and caused to be enforced the rules and regulation. As a bringing about “the greatest good to the greatest number.”
consequence, all animal-drawn vehicles are not allowed to pass
and pick up passengers in the places above mentioned to the
detriment not only of their owners but of the riding public as well.
1) Whether the rules and regulations promulgated by the
respondents pursuant to the provisions of Commonwealth Act NO. In 1961, Republic Act No. 3043 (An Act to Further Amend
548 constitute an unlawful inference with legitimate business or Commonwealth Act Numbered One Hundred Twenty, as Amended
trade and abridged the right to personal liberty and freedom of by Republic Act Numbered Twenty Six Hundred and Forty One)
locomotion? was passed. This law amended the charter of NAPOCOR
(National Power Corporation). Section 3 of RA 3043 provides that:
2) Whether the rules and regulations complained of infringe upon a. contractors being supplied by NAPOCOR shall not exceed an
the constitutional precept regarding the promotion of social justice annual profit of 12%;
to insure the well-being and economic security of all the people? b. if they do, they shall refund such excess to their customers;
c. that NAPOCOR has the power to renew all existing contracts
Held: with franchise holders for the supply of energy.

1) No. The promulgation of the Act aims to promote safe transit Petitioners Santiago Alalayan and the Philippine Power and
upon and avoid obstructions on national roads in the interest and Development Company (PPDC), one/ member of NAPOCOR’s
convenience of the public. In enacting said law, the National franchisee with existing and valid contract assailed that the said
Assembly was prompted by considerations of public convenience provision deprived them from liberty to contract without due
and welfare. It was inspired by the desire to relieve congestion of process of law.
traffic, which is a menace to the public safety. Public welfare lies at
the bottom of the promulgation of the said law and the state in Issue:


Whether or not the Section 3 of RA 3043 violates the petitioner’s
liberty to contract? Accordingly, petitioners’ dismissal was for a just cause. They had
abandoned their employment and were already working for
Held: another employer.

No. I is to be admitted of course that property rights find shelter in To dismiss an employee, the law requires not only the existence of
specific constitutional provisions, one of which is the due process a just and valid cause but also enjoins the employer to give the
clause. It is equally certain that our fundamental law framed at a employee the opportunity to be heard and to defend himself.
time of “surging unrest and dissatisfaction”,26 when there was the
fear expressed in many quarters that a constitutional democracy, in Abandonment is the deliberate and unjustified refusal of an
view of its commitment to the claims of property, would not be able employee to resume his employment. It is a form of neglect of duty,
to cope effectively with the problems of poverty and misery that hence, a just cause for termination of employment by the
unfortunately afflict so many of our people, is not susceptible to the employer.
indictment that the government therein established is impotent to
take the necessary remedial measures. After establishing that the terminations were for a just and valid
It is to be remembered that the liberty relied upon is not freedom of cause, we now determine if the procedures for dismissal were
the mind, which occupies a preferred position, nor freedom of the observed.
person, but the liberty to contract, associated with business
activities, which, as has been so repeatedly announced, may be The procedure for terminating an employee is found in Book VI,
subjected, in the interest of the general welfare under the police Rule I, Section 2(d) of the Omnibus Rules Implementing the Labor
power, to restrictions varied in character and wide ranging in scope Code:
as long as due process is observed.
In order to promote the general welfare the state may interfere with Standards of due process: requirements of notice. – In all cases of
personal liberty, with property, and with business and occupations. termination of employment, the following standards of due process
Persons and property may be subjected to all kinds of restraints shall be substantially observed:
and burdens, in order to secure the general comfort, health, and
prosperity of the state For termination of employment based on just causes as defined in
Article 282 of the Code:
A written notice served on the employee specifying the ground or
Facts: grounds for termination, and giving to said employee reasonable
opportunity within which to explain his side;
Private respondent Riviera Home Improvements, Inc. is engaged A hearing or conference during which the employee concerned,
in the business of selling and installing ornamental and with the assistance of counsel if the employee so desires, is given
construction materials. It employed petitioners Virgilio Agabon and opportunity to respond to the charge, present his evidence or rebut
Jenny Agabon as gypsum board and cornice installers on January the evidence presented against him; and
2, 1992 until February 23, 1999 when they were dismissed for (c) A written notice of termination served on the employee
abandonment of work. Thus, Petitioners then filed a complaint for indicating that upon due consideration of all the circumstances,
illegal dismissal and payment of money claims grounds have been established to justify his termination.

Petitioners also claim that private respondent did not comply with In case of termination, the foregoing notices shall be served on the
the twin requirements of notice and hearing. Private respondent, employee’s last known address.
on the other hand, maintained that petitioners were not dismissed
but had abandoned their work.NLRC ruled there was just cause Procedurally, (1) if the dismissal is based on a just cause under
and petitioners were not entitled to backwages and separation pay. Article 282, the employer must give the employee two written
The CA in turn ruled that the dismissal was not illegal because they notices and a hearing or opportunity to be heard if requested by
have abandoned their work but ordered the payment of money the employee before terminating the employment: a notice
claims. specifying the grounds for which dismissal is sought a hearing or
an opportunity to be heard and after hearing or opportunity to be
Issue: heard, a notice of the decision to dismiss; and (2) if the dismissal is
based on authorized causes under Articles 283 and 284, the
Whether or not petitioners were illegally dismissed. 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 Labor Arbiter Isabel P. Ortiguerra handling the case called the
reasons under Article 284, and due process was observed; (2) the parties to a conference but they failed to appear at the scheduled
dismissal is without just or authorized cause but due process was date. Interpreting such failure as a waiver of the parties’ right to
observed; (3) the dismissal is without just or authorized cause and present evidence, the labor arbiter considered the case submitted
there was no due process; and (4) the dismissal is for just or for decision. On November 7, 1986, a decision was rendered
authorized cause but due process was not observed. finding no bad faith on the part of PAL in adopting the Code and
ruling that no unfair labor practice had been committed. However,
The present case squarely falls under the fourth situation. The the arbiter held that PAL was “not totally fault free” considering that
dismissal should be upheld because it was established that the while the issuance of rules and regulations governing the conduct
petitioners abandoned their jobs to work for another company. of employees is a “legitimate management prerogative” such rules
Private respondent, however, did not follow the notice and regulations must meet the test of “reasonableness, propriety
requirements and instead argued that sending notices to the last and fairness.”
known addresses would have been useless because they did not
reside there anymore. Unfortunately for the private respondent, PAL appealed to the NLRC. On August 19, 1988, the NLRC
this is not a valid excuse because the law mandates the twin notice through Commissioner Encarnacion, with Presiding Commissioner
requirements to the employee’s last known address. Thus, it Bonto-Perez and Commissioner Maglaya concurring, found no
should be held liable for non-compliance with the procedural evidence of unfair labor practice committed by PAL and affirmed
requirements of due process. the dismissal of PALEA’s charge.

Petition denied. CA affirmed with modifications. PAL then filed the instant petition for certiorari charging public
respondents with grave abuse of discretion
Whether the management may be compelled to share with the
On March 15, 1985, the Philippine Airlines, Inc. (PAL) completely union or its employees its prerogative of formulating a code of
revised its 1966 Code of Discipline. The Code was circulated discipline.
among the employees and was immediately implemented, and
some employees were forthwith subjected to the disciplinary Held:
measures embodied therein.
It was only on March 2, 1989, with the approval of Republic Act No.
On August 20, 1985, the Philippine Airlines Employees Association 6715, amending Article 211 of the Labor Code, that the law
(PALEA) filed a complaint before the National Labor Relations explicitly considered it a State policy “(t)o ensure the participation
Commission (NLRC) for unfair labor practice with the following of workers in decision and policy-making processes affecting the
remarks: “ULP with arbitrary implementation of PAL’s Code of rights, duties and welfare.” However, even in the absence of said
Discipline without notice and prior discussion with Union by clear provision of law, the exercise of management prerogatives
Management”. In its position paper, PALEA contended that PAL, by was never considered boundless.
its unilateral implementation of the Code, was guilty of unfair labor
practice, specifically Paragraphs E and G of Article 249 and Article San Miguel Brewery vs Ople: So long as a company’s
253 of the Labor Code. PALEA alleged that copies of the Code had management prerogatives are exercised in good faith for the
been circulated in limited numbers; that being penal in nature the advancement of the employer’s interest and not for the purpose of
Code must conform with the requirements of sufficient publication, defeating or circumventing the rights of the employees under
and that the Code was arbitrary, oppressive, and prejudicial to the special laws or under valid agreements, this Court will uphold
rights of the employees. It prayed that implementation of the Code them.
be held in abeyance; that PAL should discuss the substance of the
Code with PALEA; that employees dismissed under the Code be UST vs NLRC: All this points to the conclusion that the exercise of
reinstated and their cases subjected to further hearing; and that managerial prerogatives is not unlimited. It is circumscribed by
PAL be declared guilty of unfair labor practice and be ordered to limitations found in law, a collective bargaining agreement, or the
pay damages. general principles of fair play and justice.

PAL filed a motion to dismiss the complaint, asserting its A line must be drawn between management prerogatives
prerogative as an employer to prescibe rules and regulations regarding business operations per se and those which affect the
regarding employess’ conduct in carrying out their duties and rights of the employees. In treating the latter, management should
functions, and alleging that by implementing the Code, it had not see to it that its employees are at least properly informed of its
violated the collective bargaining agreement (CBA) or any decisions or modes action. PAL asserts that all its employees have
provision of the Labor Code. been furnished copies of the Code. Public respondents found to
the contrary, which finding, to say the least is entitled to great


for rank-and-file was P1,400.00 and was reduced to P1,350.00; for
The collective bargaining agreement may not be interpreted as 1993; further reduced to P1,150.00 for 1994. For supervisory
cession of employees’ rights to participate in the deliberation of employees, the agreed wage increase for the years 1992-1994 are
matters which may affect their rights and the formulation of policies P1,742.50, P1,682.50 and P1,442.50, respectively. Based on the
relative thereto. And one such mater is the formulation of a code of foregoing figures, the P2,000.00 increase for the two-year period
discipline. awarded to the rank-and-file is much higher than the highest
increase granted to supervisory employees.
Industrial peace cannot be achieved if the employees are denied
their just participation in the discussion of matters affecting their Issue:
rights. Thus, even before Article 211 of the labor Code (P.D. 442)
was amended by Republic Act No. 6715, it was already declared a W/N matters of salary are part of management prerogative
policy of the State, “(d) to promote the enlightenment of workers
concerning their rights and obligations . . . as employees.” This Held:
was, of course, amplified by Republic Act No 6715 when it decreed
the “participation of workers in decision and policy making Yes. There is no need to consult the Secretary of Labor in cases
processes affecting their rights, duties and welfare.” PAL’s position involving contracting out for 6 months or more as it is part of
that it cannot be saddled with the “obligation” of sharing management prerogative. However, a line must be drawn with
management prerogatives as during the formulation of the Code, respect to management prerogatives on business operations per
Republic Act No. 6715 had not yet been enacted (Petitioner’s se and those which affect the rights of the workers. Employers
Memorandum, p. 44; Rollo, p. 212), cannot thus be sustained. must see to it that that employees are properly informed of its
While such “obligation” was not yet founded in law when the Code decisions to attain harmonious labor relations and enlighten the
was formulated, the attainment of a harmonious labor- worker as to their rights.
management relationship and the then already existing state policy
of enlightening workers concerning their rights as employees The contracting out business or services is an exercise of business
demand no less than the observance of transparency in judgment if it is for the promotion of efficiency and attainment of
managerial moves affecting employees’ rights. economy. Management must be motivated by good faith and
contracting out should not be done to circumvent the law. Provided
MANILA ELECTRIC VS SECRETARY OF LABOR there was no malice or that it was not done arbitrarily, the courts
QUISUMBING will not interfere with the exercise of this judgment.


The parties has a pending case before the Secretary of Labor who
rendered a decision ordering that they execute the CBA Facts:
incorporating the modifications made by the Secretary.
The private respondent (ANGEL ESQUEJO) used to be a security
Some of the alleged members of the union filed an intervention guard under the employment of the petitioner company. He works
and reconsideration as well as the supervisors union. They were for 12 hours a day and is receiving a monthly salary. He was then
ordered to file comments.Petitioner warns that if the wage increase dismissed by the petitioner company. Because of this, the
of P2,200.00 per month as ordered by the Secretary is allowed, it respondent filed a complaint with the Labor Arbiter for the payment
would simply pass the cost covering such increase to the of his overtime pay. The Labor Arbiter ruled that the respondent is
consumers through an increase in the rate of electricity. This is a entitled to an overtime pay. The NLRC affirmed the decision of the
non sequitur. The Court cannot be threatened with such a Labor Arbiter. Hence, the current petition.
misleading argument. An increase in the prices of electric current The petitioner contends that the fact that the monthly salary of the
needs the approval of the appropriate regulatory government petitioner is higher than the minimum wage provided by law is
agency and does not automatically result from a mere increase in already compensatory of the excess of 4 hours of work rendered
the wages of petitioner’s employees. by the said employee. It argues that the salary of the petitioner
already includes the payment for the excess of 4 hours of work
An estimate by the All Asia financial analyst stated that petitioner’s rendered by the respondent. It also contends that since there is a
net operating income for the same year was about P5.7 billion, a meeting of the minds between the respondent and the petitioner,
figure which the Union relies on to support its claim. Assuming there is already a perfected contract which means that the parties
without admitting the truth thereof, the figure is higher than the are bound by their agreements.
P4.171 billion allegedly suggested by petitioner as its projected net
operating income. The P5.7 billion which was the Secretary’s basis Issue:
for granting the P2,200.00 is higher than the actual net income of
P5.1 billion admitted by petitioner. It would be proper then to 1. WON the contract (overtime pay for work rendered for
increase this Court’s award of P1,900.00 to P2,000.00 for the two four (4) hours in excess of the eight (8) hour regular
years of the CBA award. For 1992, the agreed CBA wage increase


working period is already included in the P1,990.00 basic
salary), between the parties is binding. INNODATA PHILIPPINES INC. VS QUIJADA-LOPEZ
2. WON Laches can be applied.
Innodata Philippines, Inc., is engaged in the encoding/data
1. No. With regard to the petitioner’s second contention that there conversion business. It employs encoders, indexers, formatters,
is already a perfected contract (overtime pay for work rendered for programmers, quality/quantity staff, and others, to maintain its
four (4) hours in excess of the eight (8) hour regular working period business and do the job orders of its clients.
is already included in the P1,990.00 basic salary), hence the terms
and conditions imposed therein binds the parties to the contract, Estrella G. Natividad and Jocelyn L. Quejada were employed as
the Supreme Court held that while such contention has the weight formatters by Innodata Philippines, Inc. They [worked] from March
and force of law, it is still subject to certain exception. The general 4, 1997, until their separation on March 3, 1998. They believed that
right to contract is subject to a limitation that such terms and their job was necessary and desirable to the usual business of the
conditions must not be contrary to law, public order, public policy, company which is data processing/conversion and that their
morals and good customs. Employment contracts are imbued with employment is regular pursuant to Article 280 of the Labor
public interest and are therefore subject to the police power of the Code,they filed a complaint for illegal dismissal and for damages
state. The subject contract in the case at bar is contrary to labor as well as for attorney’s fees against Innodata Phils., Incorporated.
laws. Therefore, not binding to the parties of the case.
Generally speaking, contracts are respected as the law between Innodata contended that their employment contracts expired,
the contracting parties, and they may establish such stipulations, having a fixed period of one (1) year. Since the period expired,
clauses, terms and conditions as they may see fit; and for as long their employment was likewise terminated applying the ruling in the
as such agreements are not contrary to law, morals, good Brent School case.
customs, public policy or public order, they shall have the force of
law between them.[18] However, x x x, while it is the inherent and Labor Arbiter Donato G. Quinto rendered a judgment in favor of
inalienable right of every man to have the utmost liberty of complainants holding complainants Estella G. Natividad and
contracting, and agreements voluntarily and fairly made will be Jocelyn Quejada to have been illegally dismissed by Innodata
held valid and enforced in the courts, the general right to contract Philippines Incorporated and Innodata Processing Corporation and
is subject to the limitation that the agreement must not be in ordering reinstatement to their former position without loss of
violation of the Constitution, the statute or some rule of law (12 Am. seniority rights, or to a substantially equivalent position, and to pay
Jur. pp. 641-642).[19] And under the Civil Code, contracts of labor them jointly and severally, backwages computed from the time they
are explicitly subject to the police power of the State because they were illegally dismissed on March 3, 1998 up to the date of this
are not ordinary contracts but are impressed with public interest. decision in the amount of P112,535.28 EACH, or in the total
[20] Inasmuch as in this particular instance the contract is question amount of P225,070.56 for the two of them; and further ordered to
would have been deemed in violation of pertinent labor laws, the pay them attorney’s fees in the amount equivalent to 10% of their
provisions of said laws would prevail over the terms of the contract, respective awards.
and private respondent would still be entitled to overtime pay.
Innodata appealed to NLRC which reversed and set aside the
2. No. Petitioners allegation that private respondent is guilty of Labor Arbiter’s decision declaring that the contract was for a fixed
laches is likewise devoid of merit. Laches is defined as failure or term and therefore, the dismissal at the end of their one year term
neglect for an unreasonable and unexplained length of time to do agreed upon was valid. An MR was filed but was denied.
that which, by exercising due diligence, could or should have been
done earlier. It is negligence or omission to assert a right within an The CA ruled that respondents were regular employees in
unreasonable time, warranting the presumption that the party accordance with Section 280 of the Labor Code. It said that the
entitled to assert it has either abandoned or declined to assert it. fixed-term contract prepared by petitioner was a crude attempt to
[23] The question of laches is addressed to the sound discretion of circumvent respondents’ right to security of tenure.
the court, and since it is an equitable doctrine, its application is
controlled by equitable considerations. It cannot work to defeat The disputed contract reads, as follows:
justice or to perpetrate fraud and injustice.[24] Laches cannot be
charged against any worker when he has not incurred undue delay “TERM/DURATION
in the assertion of his rights. Private respondent filed his complaint
within the three-year reglementary period. He did not sleep on his The EMPLOYER hereby employs, engages and hires the
rights for an unreasonable length of time.[25] EMPLOYEE, and the EMPLOYEE hereby accepts such
appointment as FORMATTER effective March 04, 1997 to March
03, 1998, a period of one (1) year.



DISPOSITIVE: Petition is DENIED, and the assailed Decision and
7.1 This Contract shall automatically terminate on March 03, 1998 Resolution are AFFIRMED. Costs against petitioner.
without need of notice or demand.
xxxxxxxxx EMPLOYEES

7.4 The EMPLOYEE acknowledges that the EMPLOYER entered Facts:

into this Contract upon his express representation that he/she is
qualified and possesses the skills necessary and desirable for the This resolves the motion for reconsideration and supplemental
position indicated herein. Thus, the EMPLOYER is hereby granted motion for reconsideration filed by respondent, Cirtek Electronics,
the right to pre-terminate this Contract within the first three (3) Inc., of the Court’s Decision dated November 15, 2010.
months of its duration upon failure of the EMPLOYEE to meet and
pass the qualifications and standards set by the EMPLOYER and Respondent-movant maintains that the Secretary of Labor cannot
made known to the EMPLOYEE prior to execution hereof. Failure insist on a ruling beyond the compromise agreement entered into
of the EMPLOYER to exercise its right hereunder shall be without by the parties; and that, as early as February 5, 2010, petitioner
prejudice to the automatic termination of the EMPLOYEE’s Union had already filed with the Department of Labor and
employment upon the expiration of this Contract or cancellation Employment (DOLE) a resolution of disaffiliation from the
thereof for other causes provided herein and by law.” Federation of Free Workers resulting in the latter’s lack of
personality to represent the workers in the present case.
The contract provided two periods. Aside from the fixed one-year
term set in paragraph 1, paragraph 7.4 provides for a three-month Issue:
period during which petitioner has the right to pre-terminate the
employment for the “failure of the employees to meet and pass the WON petitioner lost its personality to represent the workers
qualifications and standards set by the employer and made known because of its disaffiliation from the Federation of Free Workers.
to the employee prior to” their employment. In effect, the paragraph
7.4 is a probationary period. Held:

Innodata claims that it was constrained by the nature of its The issue of disaffiliation is an intra-union dispute which must be
business to enter into fixed-term employment contracts with resolved in a different forum in an action at the instance of either or
employees assigned to job orders. It relies on the availability of job both the FFW and the Union or a rival labor organization, not the
orders or undertakings from its clients. Thus, the continuity of work employer.
cannot be ascertained.
Indeed, as respondent-movant itself argues, a local union may
Hence, this petition. disaffiliate at any time from its mother federation, absent any
showing that the same is prohibited under its constitution or rule.
Issue: Such, however, does not result in it losing its legal personality
altogether. Verily, Anglo-KMU v. Samahan Ng Mga Manggagawang
Whether the alleged fixed-term employment contracts are valid. Nagkakaisa Sa Manila Bay Spinning Mills At J.P. Coats enlightens:

Held: A local labor union is a separate and distinct unit primarily

designed to secure and maintain an equality of bargaining power
No, “Art. 1700 of the Civil Code provides that the relations between between the employer and their employee-members. A local union
capital and labor are not merely contractual. They are so does not owe its existence to the federation with which it is
impressed with public interest that labor contracts must yield to the affiliated. It is a separate and distinct voluntary association owing
common good. Therefore, such contracts are subject to the special its creation to the will of its members. The mere act of affiliation
laws on labor unions, collective bargaining, strikes and lockouts, does not divest the local union of its own personality, neither does
closed shop, wages, working conditions, hours of labor and similar it give the mother federation the license to act independently of the
subjects. Innodata’s contract of employment failed to comply with local union. It only gives rise to a contract of agency where the
the standards set by law and by this Court. “ A contract of former acts in representation of the latter. (emphasis and
employment is impressed with public interest. For this reason, underscoring supplied)
provisions of applicable statutes are deemed written into the
contract. Hence, the “parties are not at liberty to insulate MR denied.
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.”


MISAMIS ORIENTAL II ELECTRIC SERVICE the said letter- request without any valid explanation casts doubt
COOPERATIVE VS VIRGILIO CAGALAWAN on its credibility, specially so when the same is not a newly
discovered evidence. For one, the letter-request was dated May 8,
Facts 2002 or a day before the memorandum for Cagalawan’s transfer
was issued. MORESCO II could have easily presented the letter in
the proceedings before the Labor Arbiter for serious examination.
- MORESCO II, a rural electric cooperative, hired Cagalawan as Why it was not presented at the earliest opportunity is a serious
a Disconnection Lineman on a probationary basis. On March 1, question which lends credence to Cagalawan’s theory that it may
1994 Cagalawan was appointed to the same post this time on a have just been fabricated for the purpose of appeal.
permanent basis.
It should also be recalled that after Cagalawan received the
- July 17, 2001, he was designated as Acting Head of the memorandum for his transfer to the Gingoog sub-office, he
disconnection crew in one of the sub-office in Misamis Oriental. immediately questioned the basis thereof through a letter
In a Memorandum, MORESCO II General Manager Ke-e addressed to Ke-e. If at that time there was already a letter-
transferred Cagalawan to another area as a member of the request from the Gingoog area manager, Ke-e could have easily
disconnection crew. referred to or specified this in his subsequent memorandum of May
16, 2002 which served as his response to Cagalawan’s queries
about the transfer. However, the said memorandum was silent in
- In a letter dated May 15, 2002, cagalawan assailed his transfer this respect. Nevertheless, Cagalawan, for his part, faithfully
claiming he was effectively demoted to his position as head of complied with the transfer order but with the reservation to contest
the disconnection crew to a mere member. He also averted that its validity precisely because he was not adequately informed of its
such transfer was inconvenient and prejudicial to him. real basis. The rule is that it is within the ambit of the employer’s
prerogative to transfer an employee for valid reasons and
- In a memorandum dated May 16, 2002 the Ke-e explained that according to the requirement of its business, provided that the
said transfer was not a demotion since he was holding the transfer does not result in demotion in rank or diminution of salary,
position only by mere designation and not appointment. benefits and other privileges. This Court has always considered
Meanwhile and in view of Cagalawan’s transfer, Ke-e issued an the management’s prerogative to transfer its employees in pursuit
order recalling the former’s previous designation as Acting of its legitimate interests. But this prerogative should be exercised
Head of the disconnection crew of the Balingasag sub-office. without grave abuse of discretion and with due regard to the basic
elements of justice and fair play, such that if there is a showing that
the transfer was unnecessary or inconvenient and prejudicial to the
- Cagalawan eventually stopped reporting for work. On July 1, employee, it cannot be upheld. Here, while we find that the transfer
2002, he filed a complaint for constructive dismissal before the of Cagalawan neither entails any demotion in rank since he did not
Arbitration branch of the NLRC against MORESCO II and its have tenurial security over the position of head of the
officers, Ke-e and Danilo Subrado, in their capacities as disconnection crew, nor result to diminution in pay as this was not
General Manager and Board Chairman, respectively. sufficiently proven by him, MORESCO II’s evidence is
nevertheless not enough to show that said transfer was required
- In reply, Cagalawan claimed that was transferred because he by the exigency of the electric cooperative’s business interest.
executed an Affidavit in support of his co-employee Jessie Simply stated, the evidence sought to be admitted by MORESCO
Rances, who filed an illegal dismissal case against MORESCO II is not substantial to prove that there was a genuine business
II. urgency that necessitated the transfer.


(1) Was the respondent constructively dismissed by the Facts:

Ruling The defendant was charged with a violation of Act No. 2549, as
amended by Acts Nos. 3085 and 3958 The information alleged that
The petition has no merit
from September 9 to October 28, 1936, and for the some time
MORESCO II’s belated submission of evidence cannot be after, the accused, in his capacity as president and general
permitted. manager of the Consolidated Mines, having engaged the services
Labor tribunals, such as the NLRC, are not precluded from of Severa Velasco de Vera as stenographer, at an agreed salary of
receiving evidence submitted on appeal as technical rules are not P35 a month willfully and illegally refused to pay the salary of said
binding in cases submitted before them. However, any delay in the stenographer corresponding to the above-mentioned period of
submission of evidence should be adequately explained and time, which was long due and payable, in spite of her repeated
should adequately prove the allegations sought to be proven.
In the present case, MORESCO II did not cite any reason why it
had failed to file its position paper or present its cause before the The accused interposed a demurrer on the ground that the facts
Labor Arbiter despite sufficient notice and time given to do so. Only alleged in the information do not constitute any offense, and that
after an adverse decision was rendered did it present its defense even if they did, the laws penalizing it are unconstitutional.
and rebut the evidence of Cagalawan by alleging that his transfer
was made in response to the letter-request of the area manager of After the hearing, the court sustained the demurrer, declaring
the Gingoog sub-office asking for additional personnel to meet its
collection quota. To our mind, however, the belated submission of unconstitutional the last part of section 1 of Act No. 2549 as last


amended by Act No. 3958, which considers as an offense the facts
alleged in the information, for the reason that it violates the Without this law, the laborers and employees who earn meager
constitutional prohibition against imprisonment for debt, and salaries would be compelled to institute civil actions which, in the
dismissed the case, with costs de oficio. majority of cases, would cost them more than that which they
would receive in case of a decision in their favor.

In this appeal the Solicitor-General contends that the court erred in

declaring Act No. 3958 unconstitutional.


Whether the said constitutional provision is unconstitutional.


No. The last part of section 1 considers as illegal the refusal of an

employer to pay, when he can do so, the salaries of his employees
or laborers on the fifteenth or last day of every month or on
Saturday of every week, with only two days extension, and the
nonpayment of the salary within the periods specified is considered
as a violation of the law.

The same Act exempts from criminal responsibility the employer

who, having failed to pay the salary, should prove satisfactorily that
it was impossible to make such payment.

The court held that this provision is null because it violates the
provision of section 1 (12), Article III, of the Constitution, which
provides that no person shall be imprisoned for debt.

We do not believe that this constitutional provision has been

correctly applied in this case. A close perusal of the last part of
section 1 of Act No. 2549, as amended by section 1 of Act No.
3958, will show that its language refers only to the employer who,
being able to make payment, shall abstain or refuse to do so,
without justification and to the prejudice of the laborer or employee.
An employer so circumstanced is not unlike a person who defrauds
another, by refusing to pay his just debt. In both cases the deceit or
fraud is the essential element constituting the offense. The first
case is a violation of Act No. 3958, and the second isestafa
punished by the Revised Penal Code. In either case the offender
cannot certainly invoke the constitutional prohibition against
imprisonment for debt.

Another doctrine:

Police power is the power inherent in a government to enact laws,

within constitutional limits, to promote the order, safety, health,
morals, and general welfare of society. (12 C. J., p. 904.) In the
exercise of this power the Legislature has ample authority to
approve the disputed portion of Act No. 3958 which punishes the
employer who, being able to do so, refuses to pay the salaries of
his laborers or employers in the specified periods of time.

Undoubtedly, one of the purposes of the law is to suppress

possible abuses on the part of employers who hire laborers or
employees without paying them the salaries agreed upon for their
services, thus causing them financial difficulties.