G.R. No.

143855 September 21, 2010

REPRESENTATIVES GERARDO S. ESPINA, ORLANDO FUA, JR., PROSPERO AMATONG, ROBERT ACE S.
BARBERS, RAUL M. GONZALES, PROSPERO PICHAY, JUAN MIGUEL ZUBIRI and FRANKLIN
BAUTISTA,Petitioners,
vs.
HON. RONALDO ZAMORA, JR. (Executive Secretary), HON. MAR ROXAS (Secretary of Trade and Industry),
HON. FELIPE MEDALLA (Secretary of National Economic and Development Authority), GOV. RAFAEL
BUENAVENTURA (Bangko Sentral ng Pilipinas) and HON. LILIA BAUTISTA (Chairman, Securities and Exchange
Commission), Respondents.

DECISION

ABAD, J.:

This case calls upon the Court to exercise its power of judicial review and determine the constitutionality of
the Retail Trade Liberalization Act of 2000, which has been assailed as in breach of the constitutional mandate
for the development of a self-reliant and independent national economy effectively controlled by Filipinos.

The Facts and the Case

On March 7, 2000 President Joseph E. Estrada signed into law Republic Act (R.A.) 8762, also known as the Retail
Trade Liberalization Act of 2000. It expressly repealed R.A. 1180, which absolutely prohibited foreign nationals
from engaging in the retail trade business. R.A. 8762 now allows them to do so under four categories:

Category A Less than Exclusively for Filipino citizens and corporations

US$2,500,000.00 wholly owned by Filipino citizens.

Category B US$2,500,000.00 up but less than For the first two years of R.A. 8762’s effectivity,
US$7,500,000.00 foreign ownership is allowed up to 60%. After the
two-year period, 100% foreign equity shall be
allowed.

Category C US$7,500,000.00 or more May be wholly owned by foreigners. Foreign

investments for establishing a store in Categories B
and C shall not be less than the equivalent in
Philippine Pesos of US$830,000.00.

Category D US$250,000.00 per store of May be wholly owned by foreigners.

foreign enterprises specializing in
high-end or luxury products

R.A. 8762 also allows natural-born Filipino citizens, who had lost their citizenship and now reside in the
Philippines, to engage in the retail trade business with the same rights as Filipino citizens.

On October 11, 2000 petitioners ***Magtanggol T. Gunigundo I, Michael T. Defensor, Gerardo S. Espina,
Benjamin S. Lim, Orlando Fua, Jr., Prospero Amatong, Sergio Apostol, Robert Ace S. Barbers, Enrique Garcia,
Jr., Raul M. Gonzales, Jaime Jacob, Apolinario Lozada, Jr., Leonardo Montemayor, Ma. Elena Palma-Gil,
Prospero Pichay, Juan Miguel Zubiri and Franklin Bautista, all members of the House of Representatives, filed
the present petition, assailing the constitutionality of R.A. 8762 on the following grounds:

First, the law runs afoul of Sections 9, 19, and 20 of Article II of the Constitution which enjoins the State to
place the national economy under the control of Filipinos to achieve equal distribution of opportunities,
promote industrialization and full employment, and protect Filipino enterprise against unfair competition and
trade policies.

Second, the implementation of R.A. 8762 would lead to alien control of the retail trade, which taken together
with alien dominance of other areas of business, would result in the loss of effective Filipino control of the
economy.

Third, foreign retailers like Walmart and K-Mart would crush Filipino retailers and sari-sari store vendors,
destroy self-employment, and bring about more unemployment.

Fourth, the World Bank-International Monetary Fund had improperly imposed the passage of R.A. 8762 on the
government as a condition for the release of certain loans.

Fifth, there is a clear and present danger that the law would promote monopolies or combinations in restraint
of trade.

Respondents Executive Secretary Ronaldo Zamora, Jr., Trade and Industry Secretary Mar Roxas, National
Economic and Development Authority (NEDA) Secretary Felipe Medalla, Bangko Sentral ng Pilipinas Gov. Rafael
Buenaventura, and Securities and Exchange Commission Chairman Lilia Bautista countered that:

First, petitioners have no legal standing to file the petition. They cannot invoke the fact that they are taxpayers
since R.A. 8762 does not involve the disbursement of public funds. Nor can they invoke the fact that they are
members of Congress since they made no claim that the law infringes on their right as legislators.

Second, the petition does not involve any justiciable controversy. Petitioners of course claim that, as members
of Congress, they represent the small retail vendors in their respective districts but the petition does not allege
that the subject law violates the rights of those vendors.

Third, petitioners have failed to overcome the presumption of constitutionality of R.A. 8762. Indeed, they could
not specify how the new law violates the constitutional provisions they cite. Sections 9, 19, and 20 of Article II
of the Constitution are not self-executing provisions that are judicially demandable.

Fourth, the Constitution mandates the regulation but not the prohibition of foreign investments. It directs
Congress to reserve to Filipino citizens certain areas of investments upon the recommendation of the NEDA
and when the national interest so dictates. But the Constitution leaves to the discretion of the Congress
whether or not to make such reservation. It does not prohibit Congress from enacting laws allowing the entry
of foreigners into certain industries not reserved by the Constitution to Filipino citizens.

The Issues Presented

Simplified, the case presents two issues:

1. Whether or not petitioner lawmakers have the legal standing to challenge the constitutionality of R.A. 8762;
and

2. Whether or not R.A. 8762 is unconstitutional.

The Court’s Ruling

One. The long settled rule is that he who challenges the validity of a law must have a standing to do so.1 Legal
standing or locus standi refers to the right of a party to come to a court of justice and make such a challenge.
More particularly, standing refers to his personal and substantial interest in that he has suffered or will suffer
direct injury as a result of the passage of that law.2 To put it another way, he must show that he has been or is
about to be denied some right or privilege to which he is lawfully entitled or that he is about to be subjected
to some burdens or penalties by reason of the law he complains of.3

Here, there is no clear showing that the implementation of the Retail Trade Liberalization Act prejudices
petitioners or inflicts damages on them, either as taxpayers4 or as legislators.5 Still the Court will resolve the
question they raise since the rule on standing can be relaxed for nontraditional plaintiffs like ordinary citizens,
taxpayers, and legislators when as in this case the public interest so requires or the matter is of transcendental
importance, of overarching significance to society, or of paramount public interest.6

Two. Petitioners mainly argue that R.A. 8762 violates the mandate of the 1987 Constitution for the State to
develop a self-reliant and independent national economy effectively controlled by Filipinos. They invoke the
provisions of the Declaration of Principles and State Policies under Article II of the 1987 Constitution, which
read as follows:

Section 9. The State shall promote a just and dynamic social order that will ensure the prosperity and
independence of the nation and free the people from poverty through policies that provide adequate social
services, promote full employment, a rising standard of living, and an improved quality of life for all.

xxxx

Section 19. The State shall develop a self-reliant and independent national economy effectively controlled by
Filipinos.

Section 20. The State recognizes the indispensable role of the private sector, encourages private enterprise,
and provides incentives to needed investments.

Petitioners also invoke the provisions of the National Economy and Patrimony under Article XII of the 1987
Constitution, which reads:

Section 10. The Congress shall, upon recommendation of the economic and planning agency, when the national
interest dictates, reserve to citizens of the Philippines or to corporations or associations at least sixty per
centum of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe,
certain areas of investments. The Congress shall enact measures that will encourage the formation and
operation of enterprises whose capital is wholly owned by Filipinos.

In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall
give preference to qualified Filipinos.

The State shall regulate and exercise authority over foreign investments within its national jurisdiction and in
accordance with its national goals and priorities.

xxxx

Section 12. The State shall promote the preferential use of Filipino labor, domestic materials and locally
produced goods, and adopt measures that help make them competitive.

Section 13. The State shall pursue a trade policy that serves the general welfare and utilizes all forms and
arrangements of exchange on the basis of equality and reciprocity.
But, as the Court explained in Tañada v. Angara,7 the provisions of Article II of the 1987 Constitution, the
declarations of principles and state policies, are not self-executing. Legislative failure to pursue such policies
cannot give rise to a cause of action in the courts.

The Court further explained in Tañada that Article XII of the 1987 Constitution lays down the ideals of economic
nationalism: (1) by expressing preference in favor of qualified Filipinos in the grant of rights, privileges and
concessions covering the national economy and patrimony and in the use of Filipino labor, domestic materials
and locally-produced goods; (2) by mandating the State to adopt measures that help make them competitive;
and (3) by requiring the State to develop a self-reliant and independent national economy effectively controlled
by Filipinos.8ten.lihpwal

In other words, while Section 19, Article II of the 1987 Constitution requires the development of a self-reliant
and independent national economy effectively controlled by Filipino entrepreneurs, it does not impose a policy
of Filipino monopoly of the economic environment. The objective is simply to prohibit foreign powers or
interests from maneuvering our economic policies and ensure that Filipinos are given preference in all areas of
development.

Indeed, the 1987 Constitution takes into account the realities of the outside world as it requires the pursuit of
a trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis
of equality and reciprocity; and speaks of industries which are competitive in both domestic and foreign
markets as well as of the protection of Filipino enterprises against unfair foreign competition and trade
practices. Thus, while the Constitution mandates a bias in favor of Filipino goods, services, labor and
enterprises, it also recognizes the need for business exchange with the rest of the world on the bases of equality
and reciprocity and limits protection of Filipino enterprises only against foreign competition and trade practices
that are unfair.9

In other words, the 1987 Constitution does not rule out the entry of foreign investments, goods, and services.
While it does not encourage their unlimited entry into the country, it does not prohibit them either. In fact, it
allows an exchange on the basis of equality and reciprocity, frowning only on foreign competition that is
unfair.10 The key, as in all economies in the world, is to strike a balance between protecting local businesses
and allowing the entry of foreign investments and services.1avvphi1

More importantly, Section 10, Article XII of the 1987 Constitution gives Congress the discretion to reserve to
Filipinos certain areas of investments upon the recommendation of the NEDA and when the national interest
requires. Thus, Congress can determine what policy to pass and when to pass it depending on the economic
exigencies. It can enact laws allowing the entry of foreigners into certain industries not reserved by the
Constitution to Filipino citizens. In this case, Congress has decided to open certain areas of the retail trade
business to foreign investments instead of reserving them exclusively to Filipino citizens. The NEDA has not
opposed such policy.

The control and regulation of trade in the interest of the public welfare is of course an exercise of the police
power of the State. A person’s right to property, whether he is a Filipino citizen or foreign national, cannot be
taken from him without due process of law. In 1954, Congress enacted the Retail Trade Nationalization Act or
R.A. 1180 that restricts the retail business to Filipino citizens. In denying the petition assailing the validity of
such Act for violation of the foreigner’s right to substantive due process of law, the Supreme Court held that
the law constituted a valid exercise of police power.11 The State had an interest in preventing alien control of
the retail trade and R.A. 1180 was reasonably related to that purpose. That law is not arbitrary.
Here, to the extent that R.A. 8762, the Retail Trade Liberalization Act, lessens the restraint on the foreigners’
right to property or to engage in an ordinarily lawful business, it cannot be said that the law amounts to a
denial of the Filipinos’ right to property and to due process of law. Filipinos continue to have the right to engage
in the kinds of retail business to which the law in question has permitted the entry of foreign investors.

Certainly, it is not within the province of the Court to inquire into the wisdom of R.A. 8762 save when it blatantly
violates the Constitution. But as the Court has said, there is no showing that the law has contravened any
constitutional mandate. The Court is not convinced that the implementation of R.A. 8762 would eventually
lead to alien control of the retail trade business. Petitioners have not mustered any concrete and strong
argument to support its thesis. The law itself has provided strict safeguards on foreign participation in that
business. Thus –

First, aliens can only engage in retail trade business subject to the categories above-enumerated; Second, only
nationals from, or juridical entities formed or incorporated in countries which allow the entry of Filipino
retailers shall be allowed to engage in retail trade business; and Third, qualified foreign retailers shall not be
allowed to engage in certain retailing activities outside their accredited stores through the use of mobile or
rolling stores or carts, the use of sales representatives, door-to-door selling, restaurants and sari-sari stores
and such other similar retailing activities.

In sum, petitioners have not shown how the retail trade liberalization has prejudiced and can prejudice the
local small and medium enterprises since its implementation about a decade ago.

WHEREFORE, the Court DISMISSES the petition for lack of merit. No costs.

SO ORDERED.

G.R. No. 188747 January 29, 2014

MANILA WATER COMPANY, Petitioner,

vs.
CARLITO DEL ROSARIO, Respondent.

DECISION

PEREZ, J.:

This is a Petition for Review on Certiorari1 filed pursuant to Rule 45 of the Revised Rules of Court, assailing the
31 March 2009 Decision2 rendered by the Fifth Division of the Court of Appeals in CA-G.R. SP No. 925 83. In its
assailed decision, the appellate court: ( 1) reversed as grave abuse of discretion the Resolution of the National
Labor Relations Commission (NLRC) which dismissed the petition of Manila Water Company (Manila Water) on
technical grounds; and (2) proceeded to affirm with modification the ruling of the Labor Arbiter. Manila Water
was ordered to pay respondent Carlito Del Rosario (Del Rosario) separation pay to be computed from 1 August
1997 up to June 2000.

In a Resolution3 dated 7 July 2009, the appellate court refused to reconsider its earlier decision.

The Facts
On 22 October 1979, Del Rosario was employed as Instrument Technician by Metropolitan Waterworks and
Sewerage System (MWSS). Sometime in 1996, MWSS was reorganized pursuant to Republic Act No. 8041 or
the National Water Crisis Act of 1995, and its implementing guidelines − Executive Order No. 286. Because of
the reorganization, Manila Water absorbed some employees of MWSS including Del Rosario. On 1 August 1997,
Del Rosario officially became an employee of Manila Water.

Sometime in May 2000, Manila Water discovered that 24 water meters were missing in its stockroom. Upon
initial investigation, it appeared that Del Rosario and his co-employee, a certain Danilo Manguera, were
involved in the pilferage and the sale of water meters to the company’s contractor. Consequently, Manila
Water issued a Memorandum dated 23 June 2000, directing Del Rosario to explain in writing within 72 hours
why he should not be dealt with administratively for the loss of the said water meters.4 In his letter-
explanation,5 Del Rosario confessed his involvement in the act charged and pleaded for forgiveness, promising
not to commit similar acts in the future.

On 29 June 2000, Manila Water conducted a hearing to afford Del Rosario the opportunity to personally defend
himself and to explain and clarify his defenses to the charge against him. During the formal investigation Del
Rosario was found responsible for the loss of the water meters and therefore liable for violating Section 11.1
of the Company’s Code of Conduct.6 Manila Water proceeded to dismiss Del Rosario from employment on 3
July 2000.7

This prompted Del Rosario to file an action for illegal dismissal claiming that his severance from employment
is without just cause. In his Position Paper submitted before the labor officer, Del Rosario averred that his
admission to the misconduct charged was not voluntary but was coerced by the company. Such admission
therefore, made without the assistance of a counsel, could not be made basis in terminating his employment.

Refuting the allegations of Del Rosario, Manila Water pointed out that he was indeed involved in the taking of
the water meters from the company’s stock room and of selling these to a private contractor for personal gain.
Invoking Section 11.1 of the Company’s Code of Conduct, Manila Water averred that such act of stealing the
company’s property is punishable by dismissal. The company invited the attention of this Court to the fact that
Del Rosario himself confessed his involvement to the loss of the water meters not only in his letter-explanation,
but also during the formal investigation, and in both instances, pleaded for his employer’s forgiveness.8

After weighing the positions taken by the opposing parties, including the evidence adduced in support of their
respective cases, the Labor Arbiter issued a Decision9 dated 30 May 2002 dismissing for lack of merit the
complaint filed by Del Rosario who was, however, awarded separation pay. According to the Labor Arbiter, Del
Rosario’s length of service for 21 years, without previous derogatory record, warrants the award of separation
pay. The decretal portion of the decision reads:

WHEREFORE, viewed from the foregoing, judgment is hereby rendered DISMISSING the complaint for illegal
dismissal for lack of merit.

[Manila Water] is hereby ordered to pay complainant separation pay equivalent to one-half (1/2) month’s
salary for every year of service based on his basic salary (Php 11,244.00) at the time of his dismissal. This shall
be computed from [1 August 1997] up to June 2000, the total amount of which is ONE HUNDRED EIGHTEEN
THOUSAND SIXTY-TWO (Php 118,062.00) PESOS.10

In a Resolution11 dated 30 September 2003, the NLRC dismissed the appeal interposed by Manila Water for its
failure to append a certification against forum shopping in its Memorandum of Appeal.
Similarly ill-fated was Manila Water’s Motion for Reconsideration which was denied by the NLRC in a
Resolution12dated 28 April 2005.

On Certiorari, the Court of Appeals in its Decision dated 31 March 2009, reversed the NLRC Resolution and held
that it committed a grave abuse of discretion when it dismissed Manila Water’s appeal on mere technicality.
The appellate court, however, proceeded to affirm the decision of the Labor Arbiter awarding separation pay
to Del Rosario. Considering that Del Rosario rendered 21 years of service to the company without previous
derogatory record, the appellate court considered the granting of separation pay by the labor officer justified.
The fallo of the assailed Court of Appeals Decision reads:

WHEREFORE, the petition is partly granted. The assailed Resolutions dated September 30, 2003 and [April 28,
2005] of public respondent NLRC are set aside. The Decision dated May 30, 2002 of the [L]abor [A]rbiter is
reinstated, subject to the modification that the computation of the award of separation pay [to] private
respondent shall be counted from August 1, 1997 x x x up to June 2000.13

In a Resolution14 dated 7 July 2009, the Court of Appeals refused to reconsider its earlier decision.

Unrelenting, Manila Water filed the instant Petition for Review on Certiorari assailing the foregoing Court of
Appeals Decision and Resolution on the sole ground that:

THE [COURT OF APPEALS] SERIOUSLY ERRED IN ISSUING THE QUESTIONED DECISION AND RESOLUTION WHICH
DIRECTLY CONTRAVENE BOOK VI, RULE 1, AND SECTION 7 OF THE OMNIBUS RULES IMPLEMENTING THE LABOR
CODE AND PREVAILING JURISPRUDENCE WHICH CATEGORICALLY PROVIDE THAT AN EMPLOYEE SEPARATED
FROM SERIOUS MISCONDUCT IS NOT ENTITLED TO TERMINATION (SEPARATION) PAY.15

The Court’s Ruling

In the instant petition, Manila Water essentially questions the award of separation pay to respondent who was
dismissed for stealing the company’s property which amounted to gross misconduct. It argues that separation
pay or financial assistance is not awarded to employees guilty of gross misconduct or for cause reflecting on
his moral character.16

Del Rosario for his part maintains that there is no legal ground to justify his termination from employment. He
insists that his admission pertaining to his involvement in the loss of the water meters was merely coerced by
the company. Since his dismissal was without valid or just cause, Del Rosario avers that Manila Water is guilty
of illegal dismissal rendering it liable for the payment of backwages and separation pay.17

It must be stressed at the outset that the correctness of the Labor Arbiter’s pronouncement on the legality of
Del Rosario’s dismissal is no longer an issue and is beyond modification. While Manila Water timely appealed
the ruling of the Labor Arbiter awarding separation pay to Del Rosario, the latter did not question the dismissal
of his illegal termination case.18 It is settled in our jurisprudence that a party who has not appealed cannot
obtain from the appellate court any affirmative relief other than the ones granted in the appealed
decision.19 Due process prevents the grant of additional awards to parties who did not appeal.20 Having said
that, this Court will no longer dwell on the issue of whether or not Del Rosario was illegally dismissed from
employment. Included in the closed aspect of the case is respondent’s argument that the absence of his
counsel when he admitted the charge against him diminished the evidentiary value of such admission.
Nonetheless, it may be mentioned that the constitutional right to counsel is available only during custodial
investigation. If the investigation is merely administrative conducted by the employer and not a criminal
investigation, the admission made during such investigation may be used as evidence to justify dismissal.21

Our focus will be on the propriety of the award for separation pay.
As a general rule, an employee who has been dismissed for any of the just causes enumerated under Article
28222of the Labor Code is not entitled to a separation pay.23 Section 7, Rule I, Book VI of the Omnibus Rules
implementing the Labor Code provides:

Sec. 7. Termination of employment by employer. — The just causes for terminating the services of an employee
shall be those provided in Article 282 of the Code. The separation from work of an employee for a just cause
does not entitle him to the termination pay provided in the Code, without prejudice, however, to whatever
rights, benefits and privileges he may have under the applicable individual or collective agreement with the
employer or voluntary employer policy or practice.

In exceptional cases, however, the Court has granted separation pay to a legally dismissed employee as an act
of "social justice" or on "equitable grounds."24 In both instances, it is required that the dismissal (1) was not for
serious misconduct; and (2) did not reflect on the moral character of the employee.25

In the leading case of Philippine Long Distance Telephone Company v. NLRC,26 we laid down the rule that
separation pay shall be allowed as a measure of social justice only in the instances where the employee is
validly dismissed for causes other than serious misconduct reflecting his moral character. We clarified that:

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

A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than punishing
the erring employee for his offense. And we do not agree that the punishment is his dismissal only and that
the separation pay has nothing to do with the wrong he has committed. Of course it has. Indeed, if the
employee who steals from the company is granted separation pay even as he is validly dismissed, it is not
unlikely that he will commit a similar offense in his next employment because he thinks he can expect a like
leniency if he is again found out. This kind of misplaced compassion is not going to do labor in general any good
as it will encourage the infiltration of its ranks by those who do not deserve the protection and concern of the
Constitution.

The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the
underprivileged. At best[,] it may mitigate the penalty but it certainly will not condone the offense. Compassion
for the poor is an imperative of every humane society but only when the recipient is not a rascal claiming an
undeserved privilege. Social justice cannot be permitted to be refuge of scoundrels any more than can equity
be an impediment to the punishment of the guilty. Those who invoke social justice may do so only if their hands
are clean and their motives blameless and not simply because they happen to be poor. This great policy of our
Constitution is not meant for the protection of those who have proved they are not worthy of it, like the
workers who have tainted the cause of labor with the blemishes of their own character.27

In the subsequent case of Toyota Motor Phils. Corp. Workers Association (TMPCWA) v. National Labor Relations
Commission,28 we expanded the exclusions and elucidated that separation pay shall be allowed as a measure
of social justice only in instances where the employee is validly dismissed for causes other than serious
misconduct, willful disobedience, gross and habitual neglect of duty, fraud or willful breach of trust,
commission of a crime against the employer or his family, or those reflecting on his moral character. In the
same case, we instructed the labor officials that they must be most judicious and circumspect in awarding
separation pay or financial assistance as the constitutional policy to provide full protection to labor is not meant
to be an instrument to oppress the employers.29 The commitment of the court to the cause of the labor should
not embarrass us from sustaining the employers when they are right, as here. In fine, we should be more
cautious in awarding financial assistance to the undeserving and those who are unworthy of liberality of the
law.30

Guided by the foregoing rules, we have carefully treaded the path of compassionate justice in the subsequent
cases so as not to slip and favor labor at the expense of management.

In Tirazona v. Phillippine EDS Techno-Service, Inc. (PET, Inc.),31 we denied the award of separation pay to an
employee who was dismissed from employment due to loss of trust and confidence.

While [this] Court commiserates with the plight of Tirazona, who has recently manifested that she has since
been suffering from her poor health condition, the Court cannot grant her plea for the award of financial
benefits based solely on this unfortunate circumstance. For all its conceded merit, equity is available only in
the absence of law and not as its replacement. Equity as an exceptional extenuating circumstance does not
favor, nor may it be used to reward, the indolent or the wrongdoer for that matter. This Court will not allow a
party, in guise of equity, to benefit from its own fault.32 (Emphasis supplied).

The attendant circumstances in the present case considered, we are constrained to deny Del Rosario
separation pay since the admitted cause of his dismissal amounts to serious misconduct. He is not only
responsible for the loss of the water meters in flagrant violation of the company’s policy but his act is in utter
disregard of his partnership with his employer in the pursuit of mutual benefits.

In the recent case of Daabay v. Coca-Cola Bottlers,33 this Court reiterated our ruling in Toyota and disallowed
the payment of separation pay to an employee who was found guilty of stealing the company’s property. We
repeated that an award of separation pay in such an instance is misplaced compassion for the undeserving
who may find their way back and weaken the fiber of labor.

That Del Rosario rendered 21 years of service to the company will not save the day for him.1âwphi1 To this
case, Central Pangasinan Electric Cooperative, Inc. v. National Labor Relations Commission is on all fours, thus:

Although long years of service might generally be considered for the award of separation benefits or some
form of financial assistance to mitigate the effects of termination, this case is not the appropriate instance for
generosity under the Labor Code nor under our prior decisions. The fact that private respondent served
petitioner for more than twenty years with no negative record prior to his dismissal, in our view of this case,
does not call for such award of benefits, since his violation reflects a regrettable lack of loyalty and worse,
betrayal of the company. If an employee's length of service is to be regarded as a justification for moderating
the penalty of dismissal, such gesture will actually become a prize for disloyalty, distorting the meaning of social
justice and undermining the efforts of labor to cleanse its ranks of undesirables.34
(Emphasis supplied).

Indubitably, the appellate court erred in awarding separation pay to Del Rosario without taking into
consideration that the transgression he committed constitutes a serious offense. The grant of separation pay
to a dismissed employee is determined by the cause of the dismissal. The years of service may determine how
much separation pay may be awarded. It is, however, not the reason why such pay should be granted at all.

In sum, we hold that the award of separation pay or any other kind of financial assistance to Del Rosario, under
the nomenclature of compassionate justice, is not warranted in the instant case. A contrary rule would have
the effect of rewarding rather than punishing an erring employee, disturbing the noble concept of social justice.
WHEREFORE, premises considered, the petition is GRANTED. The assailed Decision and Resolution of the Court
of Appeals are hereby REVERSED and SET ASIDE.

SO ORDERED.

G.R. No. 118978 May 23, 1997

PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY, * petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and GRACE DE GUZMAN, respondents.

REGALADO, J.:

Seeking relief through the extraordinary writ of certiorari, petitioner Philippine Telegraph and Telephone
Company (hereafter, PT & T) invokes the alleged concealment of civil status and defalcation of company funds
as grounds to terminate the services of an employee. That employee, herein private respondent Grace de
Guzman, contrarily argues that what really motivated PT & T to terminate her services was her having
contracted marriage during her employment, which is prohibited by petitioner in its company policies. She thus
claims that she was discriminated against in gross violation of law, such a proscription by an employer being
outlawed by Article 136 of the Labor Code.

Grace de Guzman was initially hired by petitioner as a reliever, specifically as a "Supernumerary Project
Worker," for a fixed period from November 21, 1990 until April 20, 1991 vice one C.F. Tenorio who went on
maternity leave.1Under the Reliever Agreement which she signed with petitioner company, her employment
was to be immediately terminated upon expiration of the agreed period. Thereafter, from June 10, 1991 to
July 1, 1991, and from July 19, 1991 to August 8, 1991, private respondent's services as reliever were again
engaged by petitioner, this time in replacement of one Erlinda F. Dizon who went on leave during both
periods.2 After August 8, 1991, and pursuant to their Reliever Agreement, her services were terminated.

On September 2, 1991, private respondent was once more asked to join petitioner company as a probationary
employee, the probationary period to cover 150 days. In the job application form that was furnished her to be
filled up for the purpose, she indicated in the portion for civil status therein that she was single although she
had contracted marriage a few months earlier, that is, on May 26, 1991.3

It now appears that private respondent had made the same representation in the two successive reliever
agreements which she signed on June 10, 1991 and July 8, 1991. When petitioner supposedly learned about
the same later, its branch supervisor in Baguio City, Delia M. Oficial, sent to private respondent a memorandum
dated January 15, 1992 requiring her to explain the discrepancy. In that memorandum, she was reminded
about the company's policy of not accepting married women for employment.4

In her reply letter dated January 17, 1992, private respondent stated that she was not aware of PT&T's policy
regarding married women at the time, and that all along she had not deliberately hidden her true civil
status.5Petitioner nonetheless remained unconvinced by her explanations. Private respondent was dismissed
from the company effective January 29, 1992,6 which she readily contested by initiating a complaint for illegal
dismissal, coupled with a claim for non-payment of cost of living allowances (COLA), before the Regional
Arbitration Branch of the National Labor Relations Commission in Baguio City.

At the preliminary conference conducted in connection therewith, private respondent volunteered the
information, and this was incorporated in the stipulation of facts between the parties, that she had failed to
remit the amount of P2,380.75 of her collections. She then executed a promissory note for that amount in
favor of petitioner7. All of these took place in a formal proceeding and with the agreement of the parties and/or
their counsel.

On November 23, 1993, Labor Arbiter Irenarco R. Rimando handed down a decision declaring that private
respondent, who had already gained the status of a regular employee, was illegally dismissed by petitioner.
Her reinstatement, plus payment of the corresponding back wages and COLA, was correspondingly ordered,
the labor arbiter being of the firmly expressed view that the ground relied upon by petitioner in dismissing
private respondent was clearly insufficient, and that it was apparent that she had been discriminated against
on account of her having contracted marriage in violation of company rules.

On appeal to the National Labor Relations Commission (NLRC), said public respondent upheld the labor arbiter
and, in its decision dated April 29, 1994, it ruled that private respondent had indeed been the subject of an
unjust and unlawful discrimination by her employer, PT & T. However, the decision of the labor arbiter was
modified with the qualification that Grace de Guzman deserved to be suspended for three months in view of
the dishonest nature of her acts which should not be condoned. In all other respects, the NLRC affirmed the
decision of the labor arbiter, including the order for the reinstatement of private respondent in her
employment with PT & T.

The subsequent motion for reconsideration filed by petitioner was rebuffed by respondent NLRC in its
resolution of November 9, 1994, hence this special civil action assailing the aforestated decisions of the labor
arbiter and respondent NLRC, as well as the denial resolution of the latter.

1. Decreed in the Bible itself is the universal norm that women should be regarded with love and respect but,
through the ages, men have responded to that injunction with indifference, on the hubristic conceit that
women constitute the inferior sex. Nowhere has that prejudice against womankind been so pervasive as in the
field of labor, especially on the matter of equal employment opportunities and standards. In the Philippine
setting, women have traditionally been considered as falling within the vulnerable groups or types of workers
who must be safeguarded with preventive and remedial social legislation against discriminatory and
exploitative practices in hiring, training, benefits, promotion and retention.

The Constitution, cognizant of the disparity in rights between men and women in almost all phases of social
and political life, provides a gamut of protective provisions. To cite a few of the primordial ones, Section 14,
Article II8 on the Declaration of Principles and State Policies, expressly recognizes the role of women in nation-
building and commands the State to ensure, at all times, the fundamental equality before the law of women
and men. Corollary thereto, Section 3 of Article XIII9 (the progenitor whereof dates back to both the 1935 and
1973 Constitution) pointedly requires the State to afford full protection to labor and to promote full
employment and equality of employment opportunities for all, including an assurance of entitlement to
tenurial security of all workers. Similarly, Section 14 of Article XIII 10 mandates that the State shall protect
working women through provisions for opportunities that would enable them to reach their full potential.

2. Corrective labor and social laws on gender inequality have emerged with more frequency in the years since
the Labor Code was enacted on May 1, 1974 as Presidential Decree No. 442, largely due to our country's
commitment as a signatory to the United Nations Convention on the Elimination of All Forms of Discrimination
Against Women (CEDAW). 11

Principal among these laws are Republic Act No. 6727 12 which explicitly prohibits discrimination against
women with respect to terms and conditions of employment, promotion, and training opportunities; Republic
Act No. 6955 13which bans the "mail-order-bride" practice for a fee and the export of female labor to countries
that cannot guarantee protection to the rights of women workers; Republic Act No. 7192 14 also known as the
"Women in Development and Nation Building Act," which affords women equal opportunities with men to act
and to enter into contracts, and for appointment, admission, training, graduation, and commissioning in all
military or similar schools of the Armed Forces of the Philippines and the Philippine National Police; Republic
Act No. 7322 15 increasing the maternity benefits granted to women in the private sector; Republic Act No.
7877 16 which outlaws and punishes sexual harassment in the workplace and in the education and training
environment; and Republic Act No. 8042, 17 or the "Migrant Workers and Overseas Filipinos Act of 1995," which
prescribes as a matter of policy, inter alia, the deployment of migrant workers, with emphasis on women, only
in countries where their rights are secure. Likewise, it would not be amiss to point out that in the Family
Code, 18 women's rights in the field of civil law have been greatly enhanced and expanded.

In the Labor Code, provisions governing the rights of women workers are found in Articles 130 to 138 thereof.
Article 130 involves the right against particular kinds of night work while Article 132 ensures the right of women
to be provided with facilities and standards which the Secretary of Labor may establish to ensure their health
and safety. For purposes of labor and social legislation, a woman working in a nightclub, cocktail lounge,
massage clinic, bar or other similar establishments shall be considered as an employee under Article 138.
Article 135, on the other hand, recognizes a woman's right against discrimination with respect to terms and
conditions of employment on account simply of sex. Finally, and this brings us to the issue at hand, Article 136
explicitly prohibits discrimination merely by reason of the marriage of a female employee.

3. Acknowledged as paramount in the due process scheme is the constitutional guarantee of protection to
labor and security of tenure. Thus, an employer is required, as a condition sine qua non prior to severance of
the employment ties of an individual under his employ, to convincingly establish, through substantial evidence,
the existence of a valid and just cause in dispensing with the services of such employee, one's labor being
regarded as constitutionally protected property.

On the other hand, it is recognized that regulation of manpower by the company falls within the so-called
management prerogatives, which prescriptions encompass the matter of hiring, supervision of workers, work
assignments, working methods and assignments, as well as regulations on the transfer of employees, lay-off of
workers, and the discipline, dismissal, and recall of employees. 19 As put in a case, an employer is free to
regulate, according to his discretion and best business judgment, all aspects of employment, "from hiring to
firing," except in cases of unlawful discrimination or those which may be provided by law. 20

In the case at bar, petitioner's policy of not accepting or considering as disqualified from work any woman
worker who contracts marriage runs afoul of the test of, and the right against, discrimination, afforded all
women workers by our labor laws and by no less than the Constitution. Contrary to petitioner's assertion that
it dismissed private respondent from employment on account of her dishonesty, the record discloses clearly
that her ties with the company were dissolved principally because of the company's policy that married women
are not qualified for employment in PT & T, and not merely because of her supposed acts of dishonesty.

That it was so can easily be seen from the memorandum sent to private respondent by Delia M. Oficial, the
branch supervisor of the company, with the reminder, in the words of the latter, that "you're fully aware that
the company is not accepting married women employee (sic), as it was verbally instructed to you." 21 Again, in
the termination notice sent to her by the same branch supervisor, private respondent was made to understand
that her severance from the service was not only by reason of her concealment of her married status but, over
and on top of that, was her violation of the company's policy against marriage ("and even told you that married
women employees are not applicable [sic] or accepted in our company.") 22 Parenthetically, this seems to be
the curious reason why it was made to appear in the initiatory pleadings that petitioner was represented in
this case only by its said supervisor and not by its highest ranking officers who would otherwise be solidarily
liable with the corporation. 23

Verily, private respondent's act of concealing the true nature of her status from PT & T could not be properly
characterized as willful or in bad faith as she was moved to act the way she did mainly because she wanted to
retain a permanent job in a stable company. In other words, she was practically forced by that very same illegal
company policy into misrepresenting her civil status for fear of being disqualified from work. While loss of
confidence is a just cause for termination of employment, it should not be simulated. 24 It must rest on an
actual breach of duty committed by the employee and not on the employer's caprices. 25 Furthermore, it
should never be used as a subterfuge for causes which are improper, illegal, or unjustified. 26

In the present controversy, petitioner's expostulations that it dismissed private respondent, not because the
latter got married but because she concealed that fact, does have a hollow ring. Her concealment, so it is
claimed, bespeaks dishonesty hence the consequent loss of confidence in her which justified her dismissal.

Petitioner would asseverate, therefore, that while it has nothing against marriage, it nonetheless takes
umbrage over the concealment of that fact. This improbable reasoning, with interstitial distinctions, perturbs
the Court since private respondent may well be minded to claim that the imputation of dishonesty should be
the other way around.

Petitioner would have the Court believe that although private respondent defied its policy against its female
employees contracting marriage, what could be an act of insubordination was inconsequential. What it submits
as unforgivable is her concealment of that marriage yet, at the same time, declaring that marriage as a trivial
matter to which it supposedly has no objection. In other words, PT & T says it gives its blessings to its female
employees contracting marriage, despite the maternity leaves and other benefits it would consequently
respond for and which obviously it would have wanted to avoid. If that employee confesses such fact of
marriage, there will be no sanction; but if such employee conceals the same instead of proceeding to the
confessional, she will be dismissed. This line of reasoning does not impress us as reflecting its true management
policy or that we are being regaled with responsible advocacy.

This Court should be spared the ennui of strained reasoning and the tedium of propositions which confuse
through less than candid arguments. Indeed, petitioner glosses over the fact that it was its unlawful policy
against married women, both on the aspects of qualification and retention, which compelled private
respondent to conceal her supervenient marriage. It was, however, that very policy alone which was the cause
of private respondent's secretive conduct now complained of. It is then apropos to recall the familiar saying
that he who is the cause of the cause is the cause of the evil caused.

Finally, petitioner's collateral insistence on the admission of private respondent that she supposedly
misappropriated company funds, as an additional ground to dismiss her from employment, is somewhat
insincere and self-serving. Concededly, private respondent admitted in the course of the proceedings that she
failed to remit some of her collections, but that is an altogether different story. The fact is that she was
dismissed solely because of her concealment of her marital status, and not on the basis of that supposed
defalcation of company funds. That the labor arbiter would thus consider petitioner's submissions on this
supposed dishonesty as a mere afterthought, just to bolster its case for dismissal, is a perceptive conclusion
born of experience in labor cases. For, there was no showing that private respondent deliberately
misappropriated the amount or whether her failure to remit the same was through negligence and, if so,
whether the negligence was in nature simple or grave. In fact, it was merely agreed that private respondent
execute a promissory note to refund the same, which she did, and the matter was deemed settled as a
peripheral issue in the labor case.

Private respondent, it must be observed, had gained regular status at the time of her dismissal. When she was
served her walking papers on January 29, 1992, she was about to complete the probationary period of 150
days as she was contracted as a probationary employee on September 2, 1991. That her dismissal would be
effected just when her probationary period was winding down clearly raises the plausible conclusion that it
was done in order to prevent her from earning security of tenure. 27 On the other hand, her earlier stints with
the company as reliever were undoubtedly those of a regular employee, even if the same were for fixed
periods, as she performed activities which were essential or necessary in the usual trade and business of PT &
T. 28 The primary standard of determining regular employment is the reasonable connection between the
activity performed by the employee in relation to the business or trade of the employer. 29

As an employee who had therefore gained regular status, and as she had been dismissed without just cause,
she is entitled to reinstatement without loss of seniority rights and other privileges and to full back wages,
inclusive of allowances and other benefits or their monetary equivalent. 30 However, as she had undeniably
committed an act of dishonesty in concealing her status, albeit under the compulsion of an unlawful imposition
of petitioner, the three-month suspension imposed by respondent NLRC must be upheld to obviate the
impression or inference that such act should be condoned. It would be unfair to the employer if she were to
return to its fold without any sanction whatsoever for her act which was not totally justified. Thus, her
entitlement to back wages, which shall be computed from the time her compensation was withheld up to the
time of her actual reinstatement, shall be reduced by deducting therefrom the amount corresponding to her
three months suspension.

4. The government, to repeat, abhors any stipulation or policy in the nature of that adopted by petitioner PT
& T. The Labor Code state, in no uncertain terms, as follows:

Art. 136. Stipulation against marriage. — It shall be unlawful for an employer to require as a condition of
employment or continuation of employment that a woman shall not get married, or to stipulate expressly or
tacitly that upon getting married, a woman employee shall be deemed resigned or separated, or to actually
dismiss, discharge, discriminate or otherwise prejudice a woman employee merely by reason of marriage.

This provision had a studied history for its origin can be traced to Section 8 of Presidential Decree No.
148, 31 better known as the "Women and
32
Child Labor Law," which amended paragraph (c), Section 12 of Republic Act No. 679, entitled "An Act to
Regulate the Employment of Women and Children, to Provide Penalties for Violations Thereof, and for Other
Purposes." The forerunner to Republic Act No. 679, on the other hand, was Act No. 3071 which became law on
March 16, 1923 and which regulated the employment of women and children in shops, factories, industrial,
agricultural, and mercantile establishments and other places of labor in the then Philippine Islands.

It would be worthwhile to reflect upon and adopt here the rationalization in Zialcita, et al. vs. Philippine Air
Lines, 33 a decision that emanated from the Office of the President. There, a policy of Philippine Air Lines
requiring that prospective flight attendants must be single and that they will be automatically separated from
the service once they marry was declared void, it being violative of the clear mandate in Article 136 of the
Labor Code with regard to discrimination against married women. Thus:
Of first impression is the incompatibility of the respondent's policy or regulation with the codal provision of
law. Respondent is resolute in its contention that Article 136 of the Labor Code applies only to women
employed in ordinary occupations and that the prohibition against marriage of women engaged in
extraordinary occupations, like flight attendants, is fair and reasonable, considering the pecularities of their
chosen profession.

We cannot subscribe to the line of reasoning pursued by respondent. All along, it knew that the controverted
policy has already met its doom as early as March 13, 1973 when Presidential Decree No. 148, otherwise known
as the Women and Child Labor Law, was promulgated. But for the timidity of those affected or their labor
unions in challenging the validity of the policy, the same was able to obtain a momentary reprieve. A close look
at Section 8 of said decree, which amended paragraph (c) of Section 12 of Republic Act No. 679, reveals that it
is exactly the same provision reproduced verbatim in Article 136 of the Labor Code, which was promulgated
on May 1, 1974 to take effect six (6) months later, or on November 1, 1974.

It cannot be gainsaid that, with the reiteration of the same provision in the new Labor Code, all policies and
acts against it are deemed illegal and therefore abrogated. True, Article 132 enjoins the Secretary of Labor to
establish standards that will ensure the safety and health of women employees and in appropriate cases shall
by regulation require employers to determine appropriate minimum standards for termination in special
occupations, such as those of flight attendants, but that is precisely the factor that militates against the policy
of respondent. The standards have not yet been established as set forth in the first paragraph, nor has the
Secretary of Labor issued any regulation affecting flight attendants.

It is logical to presume that, in the absence of said standards or regulations which are as yet to be established,
the policy of respondent against marriage is patently illegal. This finds support in Section 9 of the New
Constitution, which provides:

Sec. 9. The State shall afford protection to labor, promote full employment and equality in employment, ensure
equal work opportunities regardless of sex, race, or creed, and regulate the relations between workers and
employees. The State shall assure the rights of workers to self-organization, collective bargaining, security of
tenure, and just and humane conditions of work . . . .

Moreover, we cannot agree to the respondent's proposition that termination from employment of flight
attendants on account of marriage is a fair and reasonable standard designed for their own health, safety,
protection and welfare, as no basis has been laid therefor. Actually, respondent claims that its concern is not
so much against the continued employment of the flight attendant merely by reason of marriage as observed
by the Secretary of Labor, but rather on the consequence of marriage-pregnancy. Respondent discussed at
length in the instant appeal the supposed ill effects of pregnancy on flight attendants in the course of their
employment. We feel that this needs no further discussion as it had been adequately explained by the
Secretary of Labor in his decision of May 2, 1976.

In a vain attempt to give meaning to its position, respondent went as far as invoking the provisions of Articles
52 and 216 of the New Civil Code on the preservation of marriage as an inviolable social institution and the
family as a basic social institution, respectively, as bases for its policy of non-marriage. In both instances,
respondent predicates absence of a flight attendant from her home for long periods of time as contributory to
an unhappy married life. This is pure conjecture not based on actual conditions, considering that, in this
modern world, sophisticated technology has narrowed the distance from one place to another. Moreover,
respondent overlooked the fact that married flight attendants can program their lives to adapt to prevailing
circumstances and events.
Article 136 is not intended to apply only to women employed in ordinary occupations, or it should have
categorically expressed so. The sweeping intendment of the law, be it on special or ordinary occupations, is
reflected in the whole text and supported by Article 135 that speaks of non-discrimination on the employment
of women.

The judgment of the Court of Appeals in Gualberto, et al. vs. Marinduque Mining & Industrial
Corporation 34considered as void a policy of the same nature. In said case, respondent, in dismissing from the
service the complainant, invoked a policy of the firm to consider female employees in the project it was
undertaking as separated the moment they get married due to lack of facilities for married women. Respondent
further claimed that complainant was employed in the project with an oral understanding that her services
would be terminated when she gets married. Branding the policy of the employer as an example of
"discriminatory chauvinism" tantamount to denying equal employment opportunities to women simply on
account of their sex, the appellate court struck down said employer policy as unlawful in view of its repugnance
to the Civil Code, Presidential Decree No. 148 and the Constitution.

Under American jurisprudence, job requirements which establish employer preference or conditions relating
to the marital status of an employee are categorized as a "sex-plus" discrimination where it is imposed on one
sex and not on the other. Further, the same should be evenly applied and must not inflict adverse effects on a
racial or sexual group which is protected by federal job discrimination laws. Employment rules that forbid or
restrict the employment of married women, but do not apply to married men, have been held to violate Title
VII of the United States Civil Rights Act of 1964, the main federal statute prohibiting job discrimination against
employees and applicants on the basis of, among other things, sex. 35

Further, it is not relevant that the rule is not directed against all women but just against married women. And,
where the employer discriminates against married women, but not against married men, the variable is sex
and the discrimination is unlawful. 36 Upon the other hand, a requirement that a woman employee must
remain unmarried could be justified as a "bona fide occupational qualification," or BFOQ, where the particular
requirements of the job would justify the same, but not on the ground of a general principle, such as the
desirability of spreading work in the workplace. A requirement of that nature would be valid provided it reflects
an inherent quality reasonably necessary for satisfactory job performance. Thus, in one case, a no-marriage
rule applicable to both male and female flight attendants, was regarded as unlawful since the restriction was
not related to the job performance of the flight attendants. 37

5. Petitioner's policy is not only in derogation of the provisions of Article 136 of the Labor Code on the right of
a woman to be free from any kind of stipulation against marriage in connection with her employment, but it
likewise assaults good morals and public policy, tending as it does to deprive a woman of the freedom to choose
her status, a privilege that by all accounts inheres in the individual as an intangible and inalienable
right. 38 Hence, while it is true that the parties to a contract may establish any agreements, terms, and
conditions that they may deem convenient, the same should not be contrary to law, morals, good customs,
public order, or public policy. 39 Carried to its logical consequences, it may even be said that petitioner's policy
against legitimate marital bonds would encourage illicit or common-law relations and subvert the sacrament
of marriage.

Parenthetically, the Civil Code provisions on the contract of labor state that the relations between the parties,
that is, of capital and labor, are not merely contractual, impressed as they are with so much public interest that
the same should yield to the common good. 40 It goes on to intone that neither capital nor labor should visit
acts of oppression against the other, nor impair the interest or convenience of the public. 41 In the final
reckoning, the danger of just such a policy against marriage followed by petitioner PT & T is that it strikes at
the very essence, ideals and purpose of marriage as an inviolable social institution and, ultimately, of the family
as the foundation of the nation. 42 That it must be effectively interdicted here in all its indirect, disguised or
dissembled forms as discriminatory conduct derogatory of the laws of the land is not only in order but
imperatively required.

ON THE FOREGOING PREMISES, the petition of Philippine Telegraph and Telephone Company is hereby
DISMISSED for lack of merit, with double costs against petitioner.

SO ORDERED.

G.R. No. 181806 March 12, 2014

WESLEYAN UNIVERSITY-PHILIPPINES, Petitioner,

vs.
WESLEYAN UNIVERSITY-PHILIPPINES FACULTY and STAFF ASSOCIATION, Respondent.

DECISION

DEL CASTILLO, J.:

A Collective Bargaining Agreement (CBA) is a contract entered into by an employer and a legitimate labor
organization concerning the terms and conditions of employment.1 Like any other contract, it has the force of
law between the parties and, thus, should be complied with in good faith.2 Unilateral changes or suspensions
in the implementation of the provisions of the CBA, therefore, cannot be allowed without the consent of both
parties.

This Petition for Review on Certiorari3 under Rule 45 of the Rules of Court assails the September 25, 2007
Decision4 and the February 5, 2008 Resolution5 of the Court of Appeals (CA) in CA-G.R. SP No. 97053.

Factual Antecedents

Petitioner Wesleyan University-Philippines is a non-stock, non-profit educational institution duly organized and
existing under the laws of the Philippines.6 Respondent Wesleyan University-Philippines Faculty and Staff
Association, on the other hand, is a duly registered labor organization7 acting as the sole and exclusive
bargaining agent of all rank-and-file faculty and staff employees of petitioner.8

In December 2003, the parties signed a 5-year CBA9 effective June 1, 2003 until May 31, 2008.10

On August 16, 2005, petitioner, through its President, Atty. Guillermo T. Maglaya (Atty. Maglaya), issued a
Memorandum11 providing guidelines on the implementation of vacation and sick leave credits as well as
vacation leave commutation. The pertinent portions of the Memorandum read:

1. VACATION AND SICK LEAVE CREDITS

Vacation and sick leave credits are not automatic. They have to be earned. Monthly, a qualified employee earns
an equivalent of 1.25 days credit each for VL and SL. Vacation Leave and Sick Leave credits of 15 days become
complete at the cut off date of May 31 of each year. (Example, only a total of 5 days credit will be given to an
employee for each of sick leave [or] vacation leave, as of month end September, that is, 4 months from June
to September multiplied by 1.25 days). An employee, therefore, who takes VL or SL beyond his leave credits as
of date will have to file leave without pay for leaves beyond his credit.

2. VACATION LEAVE COMMUTATION

Only vacation leave is commuted or monetized to cash. Vacation leave commutation is effected after the
second year of continuous service of an employee. Hence, an employee who started working June 1, 2005 will
get his commutation on May 31, 2007 or thereabout.12

On August 25, 2005, respondent’s President, Cynthia L. De Lara (De Lara) wrote a letter13 to Atty. Maglaya
informing him that respondent is not amenable to the unilateral changes made by petitioner.14 De Lara
questioned the guidelines for being violative of existing practices and the CBA,15 specifically Sections 1 and 2,
Article XII of the CBA, to wit:

ARTICLE XII
VACATION LEAVE AND SICK LEAVE

SECTION 1. VACATION LEAVE - All regular and non-tenured rank-and-file faculty and staff who are entitled to
receive shall enjoy fifteen (15) days vacation leave with pay annually.

1.1 All unused vacation leave after the second year of service shall be converted into cash and be paid to the
entitled employee at the end of each school year to be given not later than August 30 of each year.

SECTION 2. SICK LEAVE - All regular and non-tenured rank-and-file faculty and staff shall enjoy fifteen (15) days
sick leave with pay annually.16

On February 8, 2006, a Labor Management Committee (LMC) Meeting was held during which petitioner
advised respondent to file a grievance complaint on the implementation of the vacation and sick leave
policy.17 In the same meeting, petitioner announced its plan of implementing a one-retirement policy,18 which
was unacceptable to respondent.

Ruling of the Voluntary Arbitrator

Unable to settle their differences at the grievance level, the parties referred the matter to a Voluntary
Arbitrator. During the hearing, respondent submitted affidavits to prove that there is an established practice
of giving two retirement benefits, one from the Private Education Retirement Annuity Association (PERAA) Plan
and another from the CBA Retirement Plan. Sections 1, 2, 3 and 4 of Article XVI of the CBA provide:

ARTICLE XVI
SEPARATION, DISABILITY AND RETIREMENT PAY

SECTION 1. ELIGIBILITY FOR MEMBERSHIP - Membership in the Plan shall be automatic for all full-time, regular
staff and tenured faculty of the University, except the University President. Membership in the Plan shall
commence on the first day of the month coincident with or next following his statement of Regular/Tenured
Employment Status.

SECTION 2. COMPULSORY RETIREMENT DATE - The compulsory retirement date of each Member shall be as
follows:

a. Faculty – The last day of the School Year, coincident with his attainment of age sixty (60) with at least five
(years) of unbroken, credited service.
b. Staff – Upon reaching the age of sixty (60) with at least five (5) years of unbroken, credited service.

SECTION 3. OPTIONAL RETIREMENT DATE - A Member may opt for an optional retirement prior to his
compulsory retirement. His number of years of service in the University shall be the basis of computing x x x
his retirement benefits regardless of his chronological age.

SECTION 4. RETIREMENT BENEFIT - The retirement benefit shall be a sum equivalent to 100% of the member’s
final monthly salary for compulsory retirement.

For optional retirement, the vesting schedule shall be:

x x x x19

On November 2, 2006, the Voluntary Arbitrator rendered a Decision20 declaring the one-retirement policy and
the Memorandum dated August 16, 2005 contrary to law. The dispositive portion of the Decision reads:

WHEREFORE, the following award is hereby made:

1. The assailed University guidelines on the availment of vacation and sick leave credits and vacation leave
commutation are contrary to law. The University is consequently ordered to reinstate the earlier scheme,
practice or policy in effect before the issuance of the said guidelines on August 16, 2005;

2. The "one retirement" policy is contrary to law and is hereby revoked and rescinded. The University is ordered
x x x to resume and proceed with the established practice of extending to qualified employees retirement
benefits under both the CBA and the PERAA Plan.

3. The other money claims are denied.21

Ruling of the Court of Appeals

Aggrieved, petitioner appealed the case to the CA via a Petition for Review under Rule 43 of the Rules of Court.

On September 25, 2007, the CA rendered a Decision22 finding the rulings of the Voluntary Arbitrator supported
by substantial evidence. It also affirmed the nullification of the one-retirement policy and the Memorandum
dated August 16, 2005 on the ground that these unilaterally amended the CBA without the consent of
respondent.23 Thus:

WHEREFORE, the instant appeal is DISMISSED for lack of merit.

SO ORDERED.24

Petitioner moved for reconsideration but the same was denied by the CA in its February 5, 2008 Resolution.25

Issues

Hence, this recourse by petitioner raising the following issues:

a.

Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrator’s ruling that
the Affidavits submitted by Respondent WU-PFSA are substantial evidence as defined by the rules and
jurisprudence that would substantiate that Petitioner WU-P has long been in the practice of granting its
employees two (2) sets of Retirement Benefits.

b.
Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrator’s ruling that
a university practice of granting its employees two (2) sets of Retirement Benefits had already been established
as defined by the law and jurisprudence especially in light of the illegality and lack of authority of such alleged
grant.

c.

Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrator’s ruling that
it is incumbent upon Petitioner WU-P to show proof that no Board Resolution was issued granting two (2) sets
of Retirement Benefits.

d.

Whether x x x the [CA] committed grave and palpable error in revoking the 16 August 2005 Memorandum of
Petitioner WU-P for being contrary to extant policy.26

Petitioner’s Arguments

Petitioner argues that there is only one retirement plan as the CBA Retirement Plan and the PERAA Plan are
one and the same.27 It maintains that there is no established company practice or policy of giving two
retirement benefits to its employees.28 Assuming, without admitting, that two retirement benefits were
released,29 petitioner insists that these were done by mere oversight or mistake as there is no Board Resolution
authorizing their release.30 And since these benefits are unauthorized and irregular, these cannot ripen into a
company practice or policy.31 As to the affidavits submitted by respondent, petitioner claims that these are
self-serving declarations,32 and thus, should not be given weight and credence.33

In addition, petitioner claims that the Memorandum dated August 16, 2005, which provides for the guidelines
on the implementation of vacation and sick leave credits as well as vacation leave commutation, is valid
because it is in full accord with existing policy.34

Respondent’s Arguments

Respondent belies the claims of petitioner and asserts that there are two retirement plans as the PERAA
Retirement Plan, which has been implemented for more than 30 years, is different from the CBA Retirement
Plan.35 Respondent further avers that it has always been a practice of petitioner to give two retirement
benefits36 and that this practice was established by substantial evidence as found by both the Voluntary
Arbitrator and the CA.37

As to the Memorandum dated August 16, 2005, respondent asserts that it is arbitrary and contrary to the CBA
and existing practices as it added qualifications or limitations which were not agreed upon by the parties.38

Our Ruling

The Petition is bereft of merit.

The Non-Diminution Rule found in Article 10039 of the Labor Code explicitly prohibits employers from
eliminating or reducing the benefits received by their employees. This rule, however, applies only if the benefit
is based on an express policy, a written contract, or has ripened into a practice.40 To be considered a practice,
it must be consistently and deliberately made by the employer over a long period of time.41
An exception to the rule is when "the practice is due to error in the construction or application of a doubtful
or difficult question of law."42 The error, however, must be corrected immediately after its
discovery;43 otherwise, the rule on Non-Diminution of Benefits would still apply.

The practice of giving two retirement

benefits to petitioner’s employees is
supported by substantial evidence.

In this case, respondent was able to present substantial evidence in the form of affidavits to support its claim
that there are two retirement plans. Based on the affidavits, petitioner has been giving two retirement benefits
as early as 1997.44 Petitioner, on the other hand, failed to present any evidence to refute the veracity of these
affidavits. Petitioner’s contention that these affidavits are self-serving holds no water. The retired employees
of petitioner have nothing to lose or gain in this case as they have already received their retirement benefits.
Thus, they have no reason to perjure themselves. Obviously, the only reason they executed those affidavits is
to bring out the truth. As we see it then, their affidavits, corroborated by the affidavits of incumbent
employees, are more than sufficient to show that the granting of two retirement benefits to retiring employees
had already ripened into a consistent and deliberate practice.

Moreover, petitioner’s assertion that there is only one retirement plan as the CBA Retirement Plan and the
PERAA Plan are one and the same is not supported by any evidence. There is nothing in Article XVI of the CBA
to indicate or even suggest that the "Plan" referred to in the CBA is the PERAA Plan. Besides, any doubt in the
interpretation of the provisions of the CBA should be resolved in favor of respondent. In fact, petitioner’s
assertion is negated by the announcement it made during the LMC Meeting on February 8, 2006 regarding its
plan of implementing a "one-retirement plan." For if it were true that petitioner was already implementing a
one-retirement policy, there would have been no need for such announcement. Equally damaging is the letter-
memorandum45 dated May 11, 2006, entitled "Suggestions on the defenses we can introduce to justify the
abolition of double retirement policy," prepared by the petitioner’s legal counsel.

These circumstances, taken together, bolster the finding that the two-retirement policy is a
practice.1âwphi1 Thus, petitioner cannot, without the consent of respondent, eliminate the two-retirement
policy and implement a one-retirement policy as this would violate the rule on non-diminution of benefits.

As a last ditch effort to abolish the two-retirement policy, petitioner contends that such practice is illegal or
unauthorized and that the benefits were erroneously given by the previous administration. No evidence,
however, was presented by petitioner to substantiate its allegations.

Considering the foregoing disquisition, we agree with the findings of the Voluntary Arbitrator, as affirmed by
the CA, that there is substantial evidence to prove that there is an existing practice of giving two retirement
benefits, one under the PERAA Plan and another under the CBA Retirement Plan.

The Memorandum dated August 16,

2005 is contrary to the existing CBA.

Neither do we find any reason to disturb the findings of the CA that the Memorandum dated August 16, 2005
is contrary to the existing CBA.

Sections 1 and 2 of Article XII of the CBA provide that all covered employees are entitled to 15 days sick leave
and 15 days vacation leave with pay every year and that after the second year of service, all unused vacation
leave shall be converted to cash and paid to the employee at the end of each school year, not later than August
30 of each year.
The Memorandum dated August 16, 2005, however, states that vacation and sick leave credits are not
automatic as leave credits would be earned on a month-to-month basis. This, in effect, limits the available
leave credits of an employee at the start of the school year. For example, for the first four months of the school
year or from June to September, an employee is only entitled to five days vacation leave and five days sick
leave.46 Considering that the Memorandum dated August 16, 2005 imposes a limitation not agreed upon by
the parties nor stated in the CBA, we agree with the CA that it must be struck down.

In closing, it may not be amiss to mention that when the provision of the CBA is clear, leaving no doubt on the
intention of the parties, the literal meaning of the stipulation shall govem.47

However, if there is doubt in its interpretation, it should be resolved in favor of labor,48 as this is mandated by
no less than the Constitution.49

WHEREFORE, the Petition is hereby DENIED. The assailed September 25, 2007 Decision and the February 5,
2008 Resolution of the Court of Appeals in CA-G.R. SP No. 97053 are hereby AFFIRMED.

SO ORDERED.

G.R. No. 167614 March 24, 2009

ANTONIO M. SERRANO, Petitioner,

vs.
Gallant MARITIME SERVICES, INC. and MARLOW NAVIGATION CO., INC., Respondents.

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, 20071

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
Decision3 and April 1, 2005 Resolution4 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

Position Chief Officer

Basic monthly salary US$1,400.00

Hours of work 48.0 hours per week

Overtime US$700.00 per month

Vacation leave with pay 7.00 days per month5

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 Complaint9 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 US$ 413.90

June 01/30, 1998 2,590.00

 July 01/31, 1998 2,590.00

August 01/31, 1998 2,590.00

Sept. 01/30, 1998 2,590.00

Oct. 01/31, 1998 2,590.00

Nov. 01/30, 1998 2,590.00

Dec. 01/31, 1998 2,590.00

Jan. 01/31, 1999 2,590.00

Feb. 01/28, 1999 2,590.00

Mar. 1/19, 1999 (19 days) incl. leave pay 1,640.00

-----------------------------
-----------------------------
----------------------

25,382.23

Amount adjusted to chief mate's salary

(March 19/31, 1998 to April 1/30, 1998) + 1,060.5010

-----------------------------
-----------------------------
-----------------------------
-------

TOTAL CLAIM US$ 26,442.7311

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 complainant’s salary for three (3) months of the
unexpired portion of the aforesaid contract of employment.1avvphi1

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 complainant’s 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 complainant’s (petitioner's) claim for attorney’s 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 appealed15 to the National Labor Relations Commission (NLRC) to question the finding of the LA
that petitioner was illegally dismissed.

Petitioner also appealed16 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 Commission17 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

$1,400 x 3 US$4,200.00

2. Salary differential 45.00

US$4,245.00

3. 10% Attorney’s fees 424.50

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 Certiorari23 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 Reconsideration26 having been denied by the CA,27 petitioner brings his cause to this Court on
the following grounds:

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 petitioner’s 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;33and 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.38
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 Commission43 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 party48 and at the earliest opportunity;49 and (3) that the constitutional question is the very lis mota of
the case,50otherwise 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.54Nonetheless, 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 receive57 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,58and 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.61Police 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 scrutiny69 in
which a legislative classification which impermissibly interferes with the exercise of a fundamental right70 or
operates to the peculiar disadvantage of a suspect class71 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 classifications73 based on race74 or
gender75 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.

xxxx

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.

xxxx

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 Court’s 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.

xxxx

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-à-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-à-vis local workers with fixed-period employment;

OFWs with employment contracts of less than one year vis-à-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
Commission79(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 respondent’s 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 of Unexpired Period Period Applied in

Period Service the Computation of
the Monetary
Award

Skippers v. 6 months 2 months 4 months 4 months

Maguad84

Bahia Shipping v. 9 months 8 months 4 months 4 months

Reynaldo Chua 85

Centennial 9 months 4 months 5 months 5 months

Transmarine v.
dela Cruz l86

Talidano v. 12 months 3 months 9 months 3 months

Falcon87
 Univan v. CA 88 12 months 3 months 9 months 3 months

Oriental v. CA 89 12 months more than 2 10 months 3 months

months

PCL v. NLRC90 12 months more than 2 more or less 9 3 months

months months

Olarte v. 12 months 21 days 11 months and 9 3 months

Nayona91 days

JSS v.Ferrer92 12 months 16 days 11 months and 24 3 months

days

Pentagon v. 12 months 9 months and 7 2 months and 23 2 months and 23

Adelantar93 days days days

Phil. Employ v. 12 months 10 months 2 months Unexpired portion

Paramio, et al.94

Flourish 2 years 26 days 23 months and 4 6 months or 3

Maritime v. days months for each year
Almanzor 95 of contract

Athenna 1 year, 10 1 month 1 year, 9 months 6 months or 3

Manpower v. months and and 28 days months for each year
Villanos 96 28 days of contract

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 Contract Period of Unexpired Period Applied in the

Period Service Period Computation of the
Monetary Award

ATCI v. CA, et 2 years 2 months 22 months 22 months

al.98

Phil. Integrated 2 years 7 days 23 months and 23 months and 23 days

v. NLRC99 23 days

JGB v. NLC100 2 years 9 months 15 months 15 months

Agoy v. NLRC101 2 years 2 months 22 months 22 months

EDI v. NLRC, et 2 years 5 months 19 months 19 months

al.102

Barros v. NLRC, 12 months 4 months 8 months 8 months

et al.103

Philippine 12 months 6 months and 5 months and 5 months and 18 days

Transmarine v. 22 days 18 days
Carilla104

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-à-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 Compañia 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. Alkan112 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. Gay114 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,119involving 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 state125 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-vistheir 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.1avvphi1

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
3,131Article 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 DECLAREDUNCONSTITUTIONAL; 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.
G.R. No. 147572 February 19, 2003

TEODORICO ROSARIO, petitioner,

vs.
VICTORY RICEMILL, respondent.

DECISION

CALLEJO, J.:

Petitioner Teodorico Rosario filed the instant petition for review on certiorari seeking to reverse and set aside
the Decision1 dated September 22, 2000 and Resolution2 dated March 16, 2001 of the Court of Appeals in CA-
G.R. SP No. 52487. In the assailed decision, the appellate court affirmed the decision of the National Labor
Relations Commission (NLRC) declaring petitioner’s dismissal from employment valid. The assailed resolution
denied petitioner’s motion for reconsideration.

The case stemmed from a complaint for illegal dismissal with money claims (separation pay, overtime pay, 13th
month pay and incentive pay) filed by petitioner against respondent Victory Ricemill, a single proprietorship
owned by Emilio Uy. The antecedent facts, as culled from the records of the case are, as follows:

Emilio Uy was engaged in the business of milling palay under the business name Victory Ricemill. He employed
petitioner as truck driver from January 11, 1982 up to his dismissal on June 22, 1993. Petitioner was paid the
wage rate of ₱110.00 per day. As truck driver, petitioner was tasked to, among others, haul palay from various
points in Isabela and Cagayan and bring them to respondent’s ricemill in Cabatuan, Isabela. In addition,
petitioner acted as personal driver to the family of Mr. Uy during their trips to Manila.

On June 22, 1993, respondent terminated petitioner’s employment for his notorious acts of insubordination
and that he attempted to kill a fellow employee. According to respondent, petitioner was guilty of
insubordination when he refused to serve as driver of Mr. Uy’s son when the latter needed a driver. Further,
on one occasion, petitioner was instructed to deliver 600 bags of cement to the Felix Hardware in Tuguegarao.
Instead of bringing the merchandise to the said store, petitioner delivered the same to one Eduardo Interior,
who had not since then paid for it to the damage of respondent in the total sum of ₱60,000.00. Because of
petitioner’s tendency to disobey the orders to him, respondent was constrained to engage the services of
another driver in the person of Michael Ng. Petitioner resented the new driver and became uncooperative,
disrespectful and quarrelsome. On June 21, 1993, petitioner, armed with a dagger, fought with Michael Ng and
inflicted an injury on the latter. Petitioner likewise inflicted injuries on the head of Rody Senias, a co-employee,
when he intervened in the fight and tried to pacify petitioner.

After the proceedings, the regional labor arbiter rendered his decision3 dismissing for lack of merit the
complaint for illegal dismissal. The regional labor arbiter found that there were valid causes, i.e., willful
disobedience to the lawful orders of the employer and commission of a crime or offense against the employer’s
duly authorized representative, for the termination of petitioner’s employment.

On appeal, the NLRC ordered the remand of the case to the regional labor arbiter for further proceedings.4 The
NLRC found that petitioner was denied due process during the proceedings with the regional labor arbiter as
he (petitioner) was not given the opportunity to present his additional rebuttal evidence. On the other hand,
respondent was allowed to submit in evidence various exhibits to discredit the rebuttal testimony of petitioner.

During the subsequent proceedings before the regional labor arbiter, petitioner submitted the affidavit of
Mario Roque. Roque averred that contrary to respondent’s claim, the 600 bags of cement delivered to Eduardo
Interior had been paid as evidenced by DBP Check No. B-065462, dated May 22, 1993, in the sum of ₱58,950.00
payable to respondent.

Thereafter, the regional labor arbiter promulgated his decision5 stating that he found no reason to deviate from
his previous decision. Roque’s testimony was not given any probative value as the same was found to be
hearsay. The regional labor arbiter concluded that respondent was justified in terminating the employment of
petitioner on ground of loss of confidence. Accordingly, the regional labor arbiter again dismissed, for lack of
merit, petitioner’s complaint for illegal dismissal.

On appeal, the NLRC affirmed the ruling of the regional labor arbiter and declared that petitioner’s dismissal
was valid.

Petitioner then elevated the case to the CA which rendered the assailed decision.6 The appellate court accorded
respect to the findings of the NLRC. It declared that petitioner’s act of delivering the merchandise to Edgardo
Interior, instead of Felix Hardware, without being authorized to do so by respondent was not only inimical to
the latter’s business interests, but constitutive of insubordination or willful disobedience as well. The CA
likewise held that petitioner’s act of fomenting a fight with a co-worker constituted serious misconduct. It
further noted that petitioner’s contumacious refusal to obey the reasonable orders of respondent was not
sufficiently explained. The CA thus found that respondent had justifiable cause to dismiss petitioner.

Anent the procedural aspect, the CA observed that although there was no strict compliance with the two-
notice rule, it could be gleaned from the records that petitioner was given ample opportunity to explain his
side. Moreover, even granting that respondent fell short of the two-notice requirement, such irregularity,
according to the CA, does not militate against the legality of the dismissal.7

The dispositive portion of the assailed CA decision reads:

WHEREFORE, premises considered, the decision, dated August 24, 1998, of the National Labor Relations
Commission in NLRC NCR CA 0008213-95 (NLRC RAB-II-CN-07-00262-93) is hereby AFFIRMED. Costs against the
petitioner.8

Petitioner filed a motion for reconsideration of the aforesaid decision but the CA denied the same in the
assailed resolution. Aggrieved, petitioner filed with this Court the instant petition on the ground that:

THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT, COMMITTED A REVERSIBLE ERROR WHEN IT
AFFIRMED THE QUESTIONED DECISION OF THE PUBLIC RESPONDENT NATIONAL LABOR RELATIONS
COMMISSION NOTWITHSTANDING THE FACT THAT PETITIONER WAS ILLEGALLY DISMISSED. THE HONORABLE
COURT OF APPEALS LIKEWISE ERRED IN NOT SUSTAINING PETITIONER’S STANCE THAT HIS DISMISSAL FROM
HIS EMPLOYMENT WAS NOT IN ACCORDANCE WITH THE DUE PROCESS REQUIREMENT OF THE LAW. AND AS
A CONSEQUENCE OF PETITIONER’S ILLEGAL DISMISSAL, HE IS ENTITLED TO SEPARATION PAY, OVERTIME PAY,
INCENTIVE LEAVE PAY, HOLIDAY PAY AND OTHER BENEFITS GRANTED BY LAW. IN SO DOING, THE HONORABLE
COURT OF APPEALS RENDERED A DECISION WHICH IS CONTRARY TO THE FACTS OF THE CASE, THE EVIDENCE,
LAW AND ESTABLISHED JURISPRUDENCE. THESE MANIFEST AND GLARING ERRORS, IF NOT CORRECTED,
WOULD INEVITABLY WORK INJUSTICE TO HEREIN PETITIONER AND MAKE HIM SUFFER IRREPARABLE
DAMAGE.9

Petitioner presented the following issues for the Court’s resolution:

WHETHER OR NOT PETITIONER’S TERMINATION WAS FOR A JUST AND LAWFUL CAUSE.
II

WHETHER OR NOT PETITIONER’S DISMISSAL FROM HIS EMPLOYMENT WAS IN ACCORDANCE WITH THE DUE
PROCESS REQUIREMENT OF THE LAW.

III

WHETHER OR NOT PETITIONER IS ENTITLED TO SEPARATION PAY, OVERTIME PAY, INCENTIVE LEAVE PAY,
HOLIDAY PAY AND OTHER BENEFITS GRANTED BY LAW.10

It is the contention of petitioner that his act of delivering the 600 bags of cement to Edgardo Interior, instead
of the Felix Hardware to which they were intended, does not constitute willful disobedience nor serious
misconduct so as to justify his dismissal. He was allegedly constrained to look for another buyer for the
merchandise because the proprietor of Felix Hardware rejected the aforesaid materials. It has been allegedly
company practice for respondent to allow the delivery of materials to other business establishments when
these are rejected by the intended customers. Contrary to respondent’s claim, Mr. Interior allegedly paid for
the bags of cement as testified to by Roque.

Petitioner maintains that his refusal to serve as driver to Mr. Uy’s son does not constitute willful disobedience
to the employer’s lawful order because it was not work-related. Further, he could not allegedly be dismissed
for committing an offense against his co-worker, Michael Ng, because he was neither the employer, nor a
member of his family nor his duly authorized representative.

Petitioner likewise claims that he was not afforded due process of law because prior to the termination letter,
he was not furnished a written notice detailing the particular acts and/or omissions which he allegedly
committed to warrant his dismissal. Petitioner thus prays that respondent be directed to reinstate him and pay
his money claims.

The regional labor arbiter, the NLRC and the CA are unanimous in finding that there was justifiable cause for
the dismissal of petitioner. They are one in holding that petitioner committed willful disobedience when he
delivered the 600 bags of cement to Mr. Interior, instead of the Felix Hardware, without respondent’s
knowledge nor permission.

The validity of petitioner’s dismissal is a factual question. It is not for the reviewing court to weigh the
conflicting evidence, determine the credibility of witnesses, or otherwise substitute its own judgment for that
of the administrative agency. Well-settled is the rule that findings of fact of quasi-judicial agencies, like the
NLRC, are accorded not only respect but at times even finality if such findings are supported by substantial
evidence.11 This is especially so in this case, in which the findings of the NLRC were affirmed by the Court of
Appeals. The findings of facts made therein can only be set aside upon showing of grave abuse of discretion,
fraud or error of law.12 None has been shown in this case.

The unanimous finding of the regional labor arbiter, the NLRC and the CA that petitioner is guilty of willful
disobedience is based on substantial evidence on record. Petitioner’s cause is not helped by the fact that he
committed a crime against his co-worker. His actuations clearly constituted willful disobedience and serious
misconduct justifying his dismissal under Article 282(a) of the Labor Code which provides:

Art. 282. Termination by employer. – An employer may terminate an employment for any of the following
causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;
xxx

Willful disobedience of the employer’s lawful orders, as a just cause for the dismissal of an employee, envisages
the concurrence of at least two requisites: (1) the employee’s assailed conduct must have been willful or
intentional, the willfulness being characterized by a "wrongful and perverse attitude;" and (2) the order
violated must have been reasonable, lawful, made known to the employee and must pertain to the duties
which he had been engaged to discharge.13

In this case, the order to petitioner was simple, i.e., to deliver the merchandise to the Felix Hardware. It was
clearly reasonable, lawful, made known to petitioner and pertained to his duty as driver of respondent.
Petitioner did not even proffer a justifiable explanation for his disobedience thereto. Every employee is charged
with the implicit duty of caring for the employer’s property.14 Petitioner’s conduct showed that he could not
even be trusted with this task. Further, his hostile attitude towards his co-workers which eventually led him to
inflict physical injuries on one of them cannot be countenanced. As correctly put by the NLRC, petitioner’s
"continuance in the service of respondent company is partly inimical not only to its interests but also to the
interest of its other employees."15

To effect the dismissal of an employee, however, the law requires not only that there be just and valid cause
as provided under Article 282 of the Labor Code. It likewise enjoins the employer to afford the employee the
opportunity to be heard and to defend himself. On the latter aspect, the employer is mandated to furnish the
employee with two (2) written notices: (a) a written notice containing a statement of the cause for the
termination to afford the employee ample opportunity to be heard and defend himself with the assistance of
his representative, if he so desires; (b) if the employer decides to terminate the services of the employee, the
employer must notify him in writing of the decision to dismiss him, stating clearly the reason therefor.16

While there was unanimity among the regional labor arbiter, the NLRC and the CA on the existence of a valid
and lawful cause for petitioner’s dismissal, the same could not be said on their respective findings on whether
or not respondent complied with the procedural requirements in effecting petitioner’s dismissal, i.e., affording
him the opportunity to be heard. The regional labor arbiter and the NLRC did not make any finding on whether
respondent afforded petitioner the opportunity to be heard and to defend himself. On the other hand, as
mentioned earlier, the CA found that petitioner was given ample opportunity to explain his side. Even granting
that there was no strict compliance with the two-notice requirement, such irregularity, according to the CA,
does not militate against the legality of the dismissal citing Serrano vs. NLRC.17

A careful review of the records revealed that, indeed, respondent’s manner of dismissing petitioner fell short
of the two-notice requirement. While it furnished petitioner the written notice informing him of his
dismissal,18 respondent failed to furnish petitioner the written notice apprising him of the charge or charges
against him. Consequently, petitioner was deprived of the opportunity to respond thereto.

However, as correctly opined by the CA, respondent’s omission does not render petitioner’s dismissal invalid
but merely ineffectual. The prevailing rule is that when the dismissal is effected for a just and valid cause, as in
this case, the failure to observe procedural requirements does not invalidate nor nullify the dismissal of an
employee. The Court had the occasion to expound this rule in the case of Serrano19 in this wise:

Not all notice requirements are requirements of due process. Some are simply part of a procedure to be
followed before a right granted to a party can be exercised. Others are simply an application of the Justinian
precept, embodied in the Civil Code, to act with justice, give everyone his due, and observe honesty and good
faith toward one’s fellowmen. Such is the notice requirement in Arts. 282-283. The consequence of the failure
either of the employer or the employee to live up to this precept is to make him liable in damages, not to
render his act (dismissal or resignation, as the case may be) void. The measure of damages is the amount of
wages the employee should have received were it not for the termination of his employment without prior
notice. If warranted, nominal and moral damages may also be awarded.

We hold, therefore, that, with respect to Art. 283 of the Labor Code, the employer’s failure to comply with the
notice requirement does not constitute a denial of due process but a mere failure to observe a procedure for
the termination of employment which makes the termination of employment merely ineffectual. It is similar
to the failure to observe the provisions of Art. 1592, in relation to Art. 1191, of the Civil Code in rescinding a
contract for the sale of immovable property. Under these provisions, while the power of a party to rescind a
contract is implied in reciprocal obligations, nonetheless, in cases involving the sale of immovable property,
the vendor cannot exercise this power even though the vendee defaults in the payment of the price, except by
bringing an action in court or giving notice of rescission by means of a notarial demand. Consequently, a notice
of rescission given in the letter of an attorney has no legal effect, and the vendee can make payment even after
the due date since no valid notice of rescission has been given.

Indeed, under the Labor Code, only the absence of a just cause for the termination of employment can make
the dismissal of an employee illegal. This is clear from Art. 279 which provides:

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.

Thus, only if the termination of employment is not for any of the causes provided by law is it illegal and,
therefore, the employee should be reinstated and paid backwages. x x x.20 (Citations omitted)

In so ruling, the Court recognized that "the law, in protecting the rights of labor, authorized neither the
oppression nor self-destruction of the employer," thus:

The refusal to look beyond the validity of the initial action taken by the employer to terminate employment
either for an authorized or just cause can result in an injustice to the employer. For not giving notice and
hearing before dismissing an employee, who is otherwise guilty of, say, theft, or even of an attempt against
the life of the employer, an employer will be forced to keep in his employ such guilty employee. This is unjust.

It is true the Constitution regards labor as "a primary social economic force." But so does it declare that it
"recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives
to needed investment. The Constitution bids the State to "afford full protection to labor." But it is equally true
that "the law, in protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the
employer. And it is oppression to compel the employer to continue in employment one who is guilty or to force
the employer to remain in operation when it is not economically in his interest to do so.

xxx

On the other hand, with respect to dismissals for cause under Art. 282, if it is shown that the employee was
dismissed for any of the just causes mentioned in said Art. 282, then, in accordance with that article, he should
not be reinstated. However, he must be paid backwages from the time his employment was terminated until
it is determined that the termination of employment is for a just cause because the failure to hear him before
he is dismissed renders the termination of his employment without legal effect.21 (Citations omitted)
In fine, the lack of notice and hearing is considered as being a mere failure to observe a procedure for the
termination of employment which makes the dismissal ineffectual but not necessarily illegal. The procedural
infirmity is then remedied by ordering the payment to the employee his full backwages from the time of his
dismissal until the court finally rules that the dismissal has been for a valid cause.22

Having established that respondent had just and valid cause to terminate petitioner’s employment but failed
to hear him prior to his dismissal, respondent is obliged to pay petitioner his backwages computed from the
time of his dismissal up to the time the decision in this case becomes final.

WHEREFORE, the Decision dated September 22, 2000 and Resolution dated March 16, 2001 of the Court of
Appeals in CA-G.R. SP No. 52487, are hereby AFFIRMED with MODIFICATION. Emilio Uy, doing business under
the business name Victory Ricemill, is ordered to pay petitioner full backwages from the time his employment
was terminated on June 22, 1993 up to the time the herein decision becomes final. For this purpose, this case
is REMANDED to the regional labor arbiter for the computation of the backwages due petitioner.

SO ORDERED.

G.R. No. 170139 August 5, 2014

SAMEER OVERSEAS PLACEMENT AGENCY, INC., Petitioner,

vs.
JOY C. CABILES, Respondent.

DECISION

LEONEN, J.:

This case involves an overseas Filipino worker with shattered dreams. It is our duty, given the facts and the law,
to approximate justice for her.

We are asked to decide a petition for review1 on certiorari assailing the Court of Appeals’ decision2 dated June
27, 2005. This decision partially affirmed the National Labor RelationsCommission’s resolution dated March
31, 2004,3declaring respondent’s dismissal illegal, directing petitioner to pay respondent’s three-month salary
equivalent to New Taiwan Dollar (NT$) 46,080.00, and ordering it to reimburse the NT$3,000.00 withheld from
respondent, and pay her NT$300.00 attorney’s fees.4

Petitioner, Sameer Overseas Placement Agency, Inc., is a recruitment and placement agency.5 Responding to
an ad it published, respondent, Joy C. Cabiles, submitted her application for a quality control job in Taiwan.6

Joy’s application was accepted.7 Joy was later asked to sign a oneyear employment contract for a monthly
salary of NT$15,360.00.8 She alleged that Sameer Overseas Agency required her to pay a placement fee of
₱70,000.00 when she signed the employment contract.9

Joy was deployed to work for TaiwanWacoal, Co. Ltd. (Wacoal) on June 26, 1997.10 She alleged that in her
employment contract, she agreed to work as quality control for one year.11 In Taiwan, she was asked to work
as a cutter.12
Sameer Overseas Placement Agencyclaims that on July 14, 1997, a certain Mr. Huwang from Wacoal
informedJoy, without prior notice, that she was terminated and that "she should immediately report to their
office to get her salary and passport."13 She was asked to "prepare for immediate repatriation."14

Joy claims that she was told that from June 26 to July 14, 1997, she only earned a total of NT$9,000.15 According
to her, Wacoal deducted NT$3,000 to cover her plane ticket to Manila.16

On October 15, 1997, Joy filed a complaint17 with the National Labor Relations Commission against petitioner
and Wacoal. She claimed that she was illegally dismissed.18 She asked for the return of her placement fee, the
withheld amount for repatriation costs, payment of her salary for 23 months as well as moral and exemplary
damages.19 She identified Wacoal as Sameer Overseas Placement Agency’s foreign principal.20

Sameer Overseas Placement Agency alleged that respondent's termination was due to her inefficiency,
negligence in her duties, and her "failure to comply with the work requirements [of] her foreign
[employer]."21 The agency also claimed that it did not ask for a placement fee of ₱70,000.00.22 As evidence, it
showedOfficial Receipt No. 14860 dated June 10, 1997, bearing the amount of ₱20,360.00.23 Petitioner added
that Wacoal's accreditation with petitioner had already been transferred to the Pacific Manpower &
Management Services, Inc. (Pacific) as of August 6, 1997.24 Thus, petitioner asserts that it was already
substituted by Pacific Manpower.25

Pacific Manpower moved for the dismissal of petitioner’s claims against it.26 It alleged that there was no
employer-employee relationship between them.27 Therefore, the claims against it were outside the jurisdiction
of the Labor Arbiter.28 Pacific Manpower argued that the employment contract should first be presented so
that the employer’s contractual obligations might be identified.29 It further denied that it assumed liability for
petitioner’s illegal acts.30

On July 29, 1998, the Labor Arbiter dismissed Joy’s complaint.31 Acting Executive Labor Arbiter Pedro C.Ramos
ruled that her complaint was based on mereallegations.32 The Labor Arbiter found that there was no excess
payment of placement fees, based on the official receipt presented by petitioner.33 The Labor Arbiter found
unnecessary a discussion on petitioner’s transfer of obligations to Pacific34 and considered the matter
immaterial in view of the dismissal of respondent’s complaint.35

Joy appealed36 to the National Labor Relations Commission.

In a resolution37 dated March 31, 2004, the National Labor Relations Commission declared that Joy was illegally
dismissed.38 It reiterated the doctrine that the burden of proof to show that the dismissal was based on a just
or valid cause belongs to the employer.39 It found that Sameer Overseas Placement Agency failed to prove that
there were just causes for termination.40 There was no sufficient proofto show that respondent was inefficient
in her work and that she failed to comply with company requirements.41 Furthermore, procedural dueprocess
was not observed in terminating respondent.42

The National Labor Relations Commission did not rule on the issue of reimbursement of placement fees for
lack of jurisdiction.43 It refused to entertain the issue of the alleged transfer of obligations to Pacific.44 It did
not acquire jurisdiction over that issue because Sameer Overseas Placement Agency failed to appeal the Labor
Arbiter’s decision not to rule on the matter.45

The National Labor Relations Commission awarded respondent only three (3) months worth of salaryin the
amount of NT$46,080, the reimbursement of the NT$3,000 withheld from her, and attorney’s fees of NT$300.46

The Commission denied the agency’s motion for reconsideration47 dated May 12, 2004 through a
resolution48 dated July 2, 2004.
Aggrieved by the ruling, Sameer Overseas Placement Agency caused the filing of a petition49 for certiorari with
the Court of Appeals assailing the National Labor Relations Commission’s resolutions dated March 31, 2004
and July 2, 2004.

The Court of Appeals50 affirmed the decision of the National Labor Relations Commission with respect to the
finding of illegal dismissal, Joy’s entitlement to the equivalent of three months worth of salary, reimbursement
of withheld repatriation expense, and attorney’s fees.51 The Court of Appeals remanded the case to the
National Labor Relations Commission to address the validity of petitioner's allegations against Pacific. 52 The
Court of Appeals held, thus: Although the public respondent found the dismissal of the complainant-
respondent illegal, we should point out that the NLRC merely awarded her three (3) months backwages or the
amount of NT$46,080.00, which was based upon its finding that she was dismissed without due process, a
finding that we uphold, given petitioner’s lack of worthwhile discussion upon the same in the proceedings
below or before us. Likewise we sustain NLRC’s finding in regard to the reimbursement of her fare, which is
squarely based on the law; as well as the award of attorney’s fees.

But we do find it necessary to remand the instant case to the public respondent for further proceedings, for
the purpose of addressing the validity or propriety of petitioner’s third-party complaint against the transferee
agent or the Pacific Manpower & Management Services, Inc. and Lea G. Manabat. We should emphasize that
as far as the decision of the NLRC on the claims of Joy Cabiles, is concerned, the same is hereby affirmed with
finality, and we hold petitioner liable thereon, but without prejudice to further hearings on its third party
complaint against Pacific for reimbursement.

WHEREFORE, premises considered, the assailed Resolutions are hereby partly AFFIRMED in accordance with
the foregoing discussion, but subject to the caveat embodied inthe last sentence. No costs.

SO ORDERED.53

Dissatisfied, Sameer Overseas Placement Agency filed this petition.54

We are asked to determine whether the Court of Appeals erred when it affirmed the ruling of the National
Labor Relations Commission finding respondent illegally dismissed and awarding her three months’ worth of
salary, the reimbursement of the cost ofher repatriation, and attorney’s fees despite the alleged existence of
just causes of termination.

Petitioner reiterates that there was just cause for termination because there was a finding of Wacoal that
respondent was inefficient in her work.55

Therefore, it claims that respondent’s dismissal was valid.56

Petitioner also reiterates that since Wacoal’s accreditation was validly transferred to Pacific at the time
respondent filed her complaint, it should be Pacific that should now assume responsibility for Wacoal’s
contractual obligations to the workers originally recruited by petitioner.57

Sameer Overseas Placement Agency’spetition is without merit. We find for respondent.

Sameer Overseas Placement Agency failed to show that there was just cause for causing Joy’s dismissal. The
employer, Wacoal, also failed to accord her due process of law.

Indeed, employers have the prerogative to impose productivity and quality standards at work.58 They may also
impose reasonable rules to ensure that the employees comply with these standards.59 Failure to comply may
be a just cause for their dismissal.60 Certainly, employers cannot be compelled to retain the services of
anemployee who is guilty of acts that are inimical to the interest of the employer.61 While the law
acknowledges the plight and vulnerability of workers, it does not "authorize the oppression or self-destruction
of the employer."62 Management prerogative is recognized in law and in our jurisprudence.

This prerogative, however, should not be abused. It is "tempered with the employee’s right to security of
tenure."63Workers are entitled to substantive and procedural due process before termination. They may not
be removed from employment without a validor just cause as determined by law and without going through
the proper procedure.

Security of tenure for labor is guaranteed by our Constitution.64

Employees are not stripped of their security of tenure when they move to work in a different jurisdiction. With
respect to the rights of overseas Filipino workers, we follow the principle of lex loci contractus.Thus, in Triple
Eight Integrated Services, Inc. v. NLRC,65 this court noted:

Petitioner likewise attempts to sidestep the medical certificate requirement by contending that since Osdana
was working in Saudi Arabia, her employment was subject to the laws of the host country. Apparently,
petitioner hopes tomake it appear that the labor laws of Saudi Arabia do not require any certification by a
competent public health authority in the dismissal of employees due to illness.

Again, petitioner’s argument is without merit.

First, established is the rule that lex loci contractus (the law of the place where the contract is made) governs
in this jurisdiction. There is no question that the contract of employment in this case was perfected here in the
Philippines. Therefore, the Labor Code, its implementing rules and regulations, and other laws affecting labor
apply in this case.Furthermore, settled is the rule that the courts of the forum will not enforce any foreign claim
obnoxious to the forum’s public policy. Herein the Philippines, employment agreements are more than
contractual in nature. The Constitution itself, in Article XIII, Section 3, guarantees the special protection of
workers, to wit:

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.

It shall guarantee the rights of all workers to selforganization, collective bargaining and negotiations, and
peaceful concerted activities, including the right to strike in accordance with law. They shall be entitled to
security of tenure, humane conditions of work, and a living wage. Theyshall also participate in policy and
decision-making processes affecting their rights and benefits as may be provided by law.

....

This public policy should be borne in mind in this case because to allow foreign employers to determine for
and by themselves whether an overseas contract worker may be dismissed on the ground of illness would
encourage illegal or arbitrary pretermination of employment contracts.66 (Emphasis supplied, citation omitted)

Even with respect to fundamental procedural rights, this court emphasized in PCL Shipping Philippines, Inc. v.
NLRC,67 to wit:

Petitioners admit that they did notinform private respondent in writing of the charges against him and that
they failed to conduct a formal investigation to give him opportunity to air his side. However, petitioners
contend that the twin requirements ofnotice and hearing applies strictly only when the employment is within
the Philippines and that these need not be strictly observed in cases of international maritime or overseas
employment.

The Court does not agree. The provisions of the Constitution as well as the Labor Code which afford protection
to labor apply to Filipino employees whether working within the Philippines or abroad. Moreover, the principle
of lex loci contractus (the law of the place where the contract is made) governs in this jurisdiction. In the
present case, it is not disputed that the Contract of Employment entered into by and between petitioners and
private respondent was executed here in the Philippines with the approval of the Philippine Overseas
Employment Administration (POEA). Hence, the Labor Code together with its implementing rules and
regulations and other laws affecting labor apply in this case.68 (Emphasis supplied, citations omitted)

By our laws, overseas Filipino workers (OFWs) may only be terminated for a just or authorized cause and after
compliance with procedural due process requirements.

Article 282 of the Labor Code enumerates the just causes of termination by the employer. Thus:

Art. 282. Termination by employer. An employer may terminate an employment for any of the following
causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his 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 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 representatives; and

(e) Other causes analogous to the foregoing.

Petitioner’s allegation that respondentwas inefficient in her work and negligent in her duties69 may, therefore,
constitute a just cause for termination under Article 282(b), but only if petitioner was able to prove it.

The burden of proving that there is just cause for termination is on the employer. "The employer must
affirmatively show rationally adequate evidence that the dismissal was for a justifiable cause."70 Failure to
show that there was valid or just cause for termination would necessarily mean that the dismissal was illegal.71

To show that dismissal resulting from inefficiency in work is valid, it must be shown that: 1) the employer has
set standards of conduct and workmanship against which the employee will be judged; 2) the standards of
conduct and workmanship must have been communicated tothe employee; and 3) the communication was
made at a reasonable time prior to the employee’s performance assessment.

This is similar to the law and jurisprudence on probationary employees, which allow termination ofthe
employee only when there is "just cause or when [the probationary employee] fails to qualify as a regular
employee in accordance with reasonable standards made known by the employer to the employee at the time
of his [or her] engagement."72

However, we do not see why the application of that ruling should be limited to probationary employment. That
rule is basic to the idea of security of tenure and due process, which are guaranteed to all employees, whether
their employment is probationary or regular.
The pre-determined standards that the employer sets are the bases for determining the probationary
employee’s fitness, propriety, efficiency, and qualifications as a regular employee. Due process requires that
the probationary employee be informed of such standards at the time of his or her engagement so he or she
can adjusthis or her character or workmanship accordingly. Proper adjustment to fit the standards upon which
the employee’s qualifications will be evaluated will increase one’s chances of being positively assessed for
regularization by his or her employer.

Assessing an employee’s work performance does not stop after regularization. The employer, on a regular
basis, determines if an employee is still qualified and efficient, based on work standards. Based on that
determination, and after complying with the due process requirements of notice and hearing, the employer
may exercise its management prerogative of terminating the employee found unqualified.

The regular employee must constantlyattempt to prove to his or her employer that he or she meets all the
standards for employment. This time, however, the standards to be met are set for the purpose of retaining
employment or promotion. The employee cannot be expected to meet any standard of character or
workmanship if such standards were not communicated to him or her. Courts should remain vigilant on
allegations of the employer’s failure to communicatework standards that would govern one’s employment "if
[these are] to discharge in good faith [their] duty to adjudicate."73

In this case, petitioner merely alleged that respondent failed to comply with her foreign employer’s work
requirements and was inefficient in her work.74 No evidence was shown to support such allegations. Petitioner
did not even bother to specify what requirements were not met, what efficiency standards were violated, or
what particular acts of respondent constituted inefficiency.

There was also no showing that respondent was sufficiently informed of the standards against which her work
efficiency and performance were judged. The parties’ conflict as to the position held by respondent showed
that even the matter as basic as the job title was not clear.

The bare allegations of petitioner are not sufficient to support a claim that there is just cause for termination.
There is no proof that respondent was legally terminated.

Petitioner failed to comply with

the due process requirements

Respondent’s dismissal less than one year from hiring and her repatriation on the same day show not
onlyfailure on the partof petitioner to comply with the requirement of the existence of just cause for
termination. They patently show that the employersdid not comply with the due process requirement.

A valid dismissal requires both a valid cause and adherence to the valid procedure of dismissal.75 The employer
is required to give the charged employee at least two written notices before termination.76 One of the written
notices must inform the employee of the particular acts that may cause his or her dismissal.77 The other notice
must "[inform] the employee of the employer’s decision."78 Aside from the notice requirement, the employee
must also be given "an opportunity to be heard."79

Petitioner failed to comply with the twin notices and hearing requirements. Respondent started working on
June 26, 1997. She was told that she was terminated on July 14, 1997 effective on the same day and barely a
month from her first workday. She was also repatriated on the same day that she was informed of her
termination. The abruptness of the termination negated any finding that she was properly notified and given
the opportunity to be heard. Her constitutional right to due process of law was violated.

II
Respondent Joy Cabiles, having been illegally dismissed, is entitled to her salary for the unexpired portion ofthe
employment contract that was violated together with attorney’s fees and reimbursement of amounts withheld
from her salary.

Section 10 of Republic Act No. 8042,otherwise known as the Migrant Workers and Overseas Filipinos Act
of1995, states thatoverseas workers who were terminated without just, valid, or authorized cause "shall be
entitled to the full reimbursement of his placement fee with interest of twelve (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."

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 filing of the complaint, the claims arising out of an employer-
employee relationship or by virtue of any law or contract involving Filipino workers for overseas deployment
including claims for actual, moral, exemplary and other forms of damages.

The liability of the principal/employer and the recruitment/placement agency for any and all claims under this
section shall be joint and several. This provisions [sic] shall be incorporated in the contract for overseas
employment and shall be a condition precedent for its approval. The performance bond to be filed by the
recruitment/placementagency, as provided by law, shall be answerable for all money claims or damages that
may be awarded to the workers. If the recruitment/placement agency is a juridical being, the corporate officers
and directors and partners as the case may be, shall themselves be jointly and solidarily liable with the
corporation orpartnership for the aforesaid claims and damages.

Such liabilities shall continue during the entire period or duration of the employment contract and shall not be
affected by any substitution, amendment or modification made locally or in a foreign country of the said
contract.

Any compromise/amicable settlement or voluntary agreement on money claims inclusive of damages under
this section shall be paid within four (4) months from the approval of the settlement by the appropriate
authority.

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
(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.

....

(Emphasis supplied)

Section 15 of Republic Act No. 8042 states that "repatriation of the worker and the transport of his [or her]
personal belongings shall be the primary responsibility of the agency which recruited or deployed the worker
overseas." The exception is when "termination of employment is due solely to the fault of the worker,"80 which
as we have established, is not the case. It reads: SEC. 15. REPATRIATION OF WORKERS; EMERGENCY
REPATRIATION FUND. – The repatriation of the worker and the transport of his personal belongings shall be
the primary responsibility of the agency which recruited or deployed the worker overseas. All costs attendant
to repatriation shall be borne by or charged to the agency concerned and/or its principal. Likewise, the
repatriation of remains and transport of the personal belongings of a deceased worker and all costs attendant
thereto shall be borne by the principal and/or local agency. However, in cases where the termination of
employment is due solely to the fault of the worker, the principal/employer or agency shall not in any manner
be responsible for the repatriation of the former and/or his belongings.

....

The Labor Code81 also entitles the employee to 10% of the amount of withheld wages as attorney’s feeswhen
the withholding is unlawful.

The Court of Appeals affirmedthe National Labor Relations Commission’s decision to award respondent
NT$46,080.00 or the threemonth equivalent of her salary, attorney’s fees of NT$300.00, and the
reimbursement of the withheld NT$3,000.00 salary, which answered for her repatriation.

We uphold the finding that respondent is entitled to all of these awards. The award of the three-month
equivalent of respondent’s salary should, however, be increased to the amount equivalent to the unexpired
term of the employment contract.

In Serrano v. Gallant Maritime Services, Inc. and Marlow Navigation Co., Inc.,82 this court ruled that the clause
"or for three (3) months for every year of the unexpired term, whichever is less"83 is unconstitutional for
violating the equal protection clause and substantive due process.84

A statute or provision which was declared unconstitutional is not a law. It "confers no rights; it imposes no
duties; it affords no protection; it creates no office; it is inoperative as if it has not been passed at all."85

We are aware that the clause "or for three (3) months for every year of the unexpired term, whichever is
less"was reinstated in Republic Act No. 8042 upon promulgation of Republic Act No. 10022 in 2010. Section 7
of Republic Act No. 10022 provides:

Section 7.Section 10 of Republic Act No. 8042, as amended, is hereby amended to read as follows:

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 any law or contract involving Filipino workers for overseas deployment
including claims for actual, moral, exemplary and other forms of damage. Consistent with this mandate, the
NLRC shall endeavor to update and keep abreast with the developments in the global services industry.

The liability of the principal/employer and the recruitment/placement agency for any and all claims under this
section shall be joint and several. This provision shall be incorporated in the contract for overseas employment
and shall be a condition precedent for its approval. The performance bond to de [sic] filed by the
recruitment/placement agency, as provided by law, shall be answerable for all money claims or damages that
may be awarded to the workers. If the recruitment/placement agency is a juridical being, the corporate officers
and directors and partners as the case may be, shall themselves be jointly and solidarily liable with the
corporation or partnership for the aforesaid claims and damages.

Such liabilities shall continue during the entire period or duration of the employment contract and shall not be
affected by any substitution, amendment or modification made locally or in a foreign country of the said
contract.

Any compromise/amicable settlement or voluntary agreement on money claims inclusive of damages under
this section shall be paid within thirty (30) days from approval of the settlement by the appropriate authority.
In case of termination of overseas employment without just, valid or authorized cause as defined by law or
contract, or any unauthorized deductions from the migrant worker’s salary, the worker shall be entitled to the
full reimbursement if [sic] his placement fee and the deductions made with interest at 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.

In case of a final and executory judgement against a foreign employer/principal, it shall be automatically
disqualified, without further proceedings, from participating in the Philippine Overseas Employment Program
and from recruiting and hiring Filipino workers until and unless it fully satisfies the judgement award.

Noncompliance with the mandatory periods for resolutions of case providedunder this section shall subject
the responsible officials to any or all of the following penalties:

(a) 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;

(b) Suspension for not more than ninety (90) days; or

(c) 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 incured [sic] under other existing laws or rules and regulations as a consequence of violating
the provisions of this paragraph. (Emphasis supplied)

Republic Act No. 10022 was promulgated on March 8, 2010. This means that the reinstatement of the clause
in Republic Act No. 8042 was not yet in effect at the time of respondent’s termination from work in
1997.86 Republic Act No. 8042 before it was amended byRepublic Act No. 10022 governs this case.

When a law is passed, this court awaits an actual case that clearly raises adversarial positions in their proper
context before considering a prayer to declare it as unconstitutional.

However, we are confronted with a unique situation. The law passed incorporates the exact clause already
declared as unconstitutional, without any perceived substantial change in the circumstances.

This may cause confusion on the part of the National Labor Relations Commission and the Court of Appeals.At
minimum, the existence of Republic Act No. 10022 may delay the execution of the judgment in this case, further
frustrating remedies to assuage the wrong done to petitioner.

Hence, there is a necessity to decide this constitutional issue.

Moreover, this court is possessed with the constitutional duty to "[p]romulgate rules concerning the protection
and enforcement of constitutional rights."87 When cases become mootand academic, we do not hesitate to
provide for guidance to bench and bar in situations where the same violations are capable of repetition but
will evade review. This is analogous to cases where there are millions of Filipinos working abroad who are
bound to suffer from the lack of protection because of the restoration of an identical clause in a provision
previously declared as unconstitutional.

In the hierarchy of laws, the Constitution is supreme. No branch or office of the government may exercise its
powers in any manner inconsistent with the Constitution, regardless of the existence of any law that supports
such exercise. The Constitution cannot be trumped by any other law. All laws must be read in light of the
Constitution. Any law that is inconsistent with it is a nullity.
Thus, when a law or a provision of law is null because it is inconsistent with the Constitution,the nullity cannot
be cured by reincorporation or reenactment of the same or a similar law or provision. A law or provision of law
that was already declared unconstitutional remains as such unless circumstances have sochanged as to warrant
a reverse conclusion.

We are not convinced by the pleadings submitted by the parties that the situation has so changed so as to
cause us to reverse binding precedent.

Likewise, there are special reasons of judicial efficiency and economy that attend to these cases. The new law
puts our overseas workers in the same vulnerable position as they were prior to Serrano. Failure to reiterate
the very ratio decidendi of that case will result in the same untold economic hardships that our reading of the
Constitution intended to avoid. Obviously, we cannot countenance added expenses for further litigation
thatwill reduce their hardearned wages as well as add to the indignity of having been deprived of the protection
of our laws simply because our precedents have not been followed. There is no constitutional doctrine that
causes injustice in the face of empty procedural niceties. Constitutional interpretation is complex, but it is never
unreasonable.

Thus, in a resolution88 dated October 22, 2013, we ordered the parties and the Office of the Solicitor General
to comment on the constitutionality of the reinstated clause in Republic Act No. 10022.

In its comment,89 petitioner argued that the clause was constitutional.90 The legislators intended a balance
between the employers’ and the employees’ rights by not unduly burdening the local recruitment
agency.91 Petitioner is also of the view that the clause was already declared as constitutional in Serrano.92

The Office of the Solicitor General also argued that the clause was valid and constitutional.93 However, since
the parties never raised the issue of the constitutionality of the clause asreinstated in Republic Act No. 10022,
its contention is that it is beyond judicial review.94

On the other hand, respondentargued that the clause was unconstitutional because it infringed on workers’
right to contract.95

We observe that the reinstated clause, this time as provided in Republic Act. No. 10022, violates the
constitutional rights to equal protection and due process.96 Petitioner as well as the Solicitor General have
failed to show any compelling changein the circumstances that would warrant us to revisit the precedent.

We reiterate our finding in Serrano v. Gallant Maritime that limiting wages that should be recovered by
anillegally dismissed overseas worker to three months is both a violation of due process and the equal
protection clauses of the Constitution.

Equal protection of the law is a guarantee that persons under like circumstances and falling within the same
class are treated alike, in terms of "privileges conferred and liabilities enforced."97 It is a guarantee against
"undue favor and individual or class privilege, as well as hostile discrimination or the oppression of
inequality."98

In creating laws, the legislature has the power "to make distinctions and classifications."99

In exercising such power, it has a wide discretion.100

The equal protection clause does not infringe on this legislative power.101 A law is void on this basis, only if
classifications are made arbitrarily.102 There is no violation of the equal protection clause if the law applies
equally to persons within the same class and if there are reasonable grounds for distinguishing between those
falling within the class and those who do not fall within the class.103 A law that does not violate the equal
protection clause prescribesa reasonable classification.104

A reasonable classification "(1) must rest on substantial distinctions; (2) must be germane to the purposes of
the law; (3) must not be limited to existing conditions only; and (4) must apply equally to all members of the
same class."105

The reinstated clause does not satisfy the requirement of reasonable classification.

In Serrano, we identified the classifications made by the reinstated clause. It distinguished between fixed-
period overseas workers and fixedperiod local workers.106 It also distinguished between overseas workers with
employment contracts of less than one year and overseas workers with employment contracts of at least one
year.107 Within the class of overseas workers with at least one-year employment contracts, there was a
distinction between those with at least a year left in their contracts and those with less than a year left in their
contracts when they were illegally dismissed.108

The Congress’ classification may be subjected to judicial review. In Serrano, there is a "legislative classification
which impermissibly interferes with the exercise of a fundamental right or operates to the peculiar
disadvantage of a suspect class."109

Under the Constitution, labor is afforded special protection.110 Thus, this court in Serrano, "[i]mbued with the
same sense of ‘obligation to afford protection to labor,’ . . . employ[ed] the standard of strict judicial scrutiny,
for it perceive[d] in the subject clause a suspect classification prejudicial to OFWs."111

We also noted in Serranothat before the passage of Republic Act No. 8042, the money claims of illegally
terminated overseas and local workers with fixed-term employment werecomputed in the same
manner.112 Their money claims were computed based onthe "unexpired portions of their contracts."113 The
adoption of the reinstated clause in Republic Act No. 8042 subjected the money claims of illegally dismissed
overseas workers with an unexpired term of at least a year to a cap of three months worth of their
salary.114 There was no such limitation on the money claims of illegally terminated local workers with fixed-
term employment.115

We observed that illegally dismissed overseas workers whose employment contracts had a term of less than
one year were granted the amount equivalent to the unexpired portion of their employment
contracts.116 Meanwhile, illegally dismissed overseas workers with employment terms of at least a year were
granted a cap equivalent to three months of their salary for the unexpired portions of their contracts.117

Observing the terminologies used inthe clause, we also found that "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 reinstated clause, and their monetary benefits limited to their salaries for three months
only."118

We do not need strict scrutiny to conclude that these classifications do not rest on any real or substantial
distinctions that would justify different treatments in terms of the computation of money claims resulting from
illegal termination.

Overseas workers regardless of their classifications are entitled to security of tenure, at least for the period
agreed upon in their contracts. This means that they cannot be dismissed before the end of their contract
terms without due process. If they were illegally dismissed, the workers’ right to security of tenure is violated.
The rights violated when, say, a fixed-period local worker is illegally terminated are neither greater than norless
than the rights violated when a fixed-period overseas worker is illegally terminated. It is state policy to protect
the rights of workers withoutqualification as to the place of employment.119 In both cases, the workers are
deprived of their expected salary, which they could have earned had they not been illegally dismissed. For both
workers, this deprivation translates to economic insecurity and disparity.120 The same is true for the
distinctions between overseas workers with an employment contract of less than one year and overseas
workers with at least one year of employment contract, and between overseas workers with at least a year left
in their contracts and overseas workers with less than a year left in their contracts when they were illegally
dismissed.

For this reason, we cannot subscribe to the argument that "[overseas workers] are contractual employeeswho
can never acquire regular employment status, unlike local workers"121 because it already justifies
differentiated treatment in terms ofthe computation of money claims.122

Likewise, the jurisdictional and enforcement issues on overseas workers’ money claims do not justify a
differentiated treatment in the computation of their money claims.123 If anything, these issues justify an equal,
if not greater protection and assistance to overseas workers who generally are more prone to exploitation
given their physical distance from our government.

We also find that the classificationsare not relevant to the purpose of the law, which is to "establish a higher
standard of protection and promotion of the welfare of migrant workers, their families and overseas Filipinos
in distress, and for other purposes."124 Further, we find specious the argument that reducing the liability of
placement agencies "redounds to the benefit of the [overseas] workers."125

Putting a cap on the money claims of certain overseas workers does not increase the standard of protection
afforded to them. On the other hand, foreign employers are more incentivizedby the reinstated clause to enter
into contracts of at least a year because it gives them more flexibility to violate our overseas workers’ rights.
Their liability for arbitrarily terminating overseas workers is decreased at the expense of the workers whose
rights they violated. Meanwhile, these overseas workers who are impressed with an expectation of a stable
job overseas for the longer contract period disregard other opportunities only to be terminated earlier. They
are left with claims that are less than what others in the same situation would receive. The reinstated clause,
therefore, creates a situation where the law meant to protect them makes violation of rights easier and simply
benign to the violator.

As Justice Brion said in his concurring opinion in Serrano:

Section 10 of R.A. No. 8042 affects these well-laid rules and measures, and in fact provides a hidden twist
affecting the principal/employer’s liability. While intended as an incentive accruing to recruitment/manning
agencies, the law, as worded, simply limits the OFWs’ recovery in wrongfuldismissal situations. Thus, it
redounds to the benefit of whoever may be liable, including the principal/employer – the direct employer
primarily liable for the wrongful dismissal. In this sense, Section 10 – read as a grant of incentives to
recruitment/manning agencies – oversteps what it aims to do by effectively limiting what is otherwise the full
liability of the foreign principals/employers. Section 10, in short, really operates to benefit the wrong party and
allows that party, without justifiable reason, to mitigate its liability for wrongful dismissals. Because of this
hidden twist, the limitation ofliability under Section 10 cannot be an "appropriate" incentive, to borrow the
term that R.A. No. 8042 itself uses to describe the incentive it envisions under its purpose clause.

What worsens the situation is the chosen mode of granting the incentive: instead of a grant that, to encourage
greater efforts at recruitment, is directly related to extra efforts undertaken, the law simply limits their liability
for the wrongful dismissals of already deployed OFWs. This is effectively a legally-imposed partial condonation
of their liability to OFWs, justified solely by the law’s intent to encourage greater deployment efforts. Thus, the
incentive,from a more practical and realistic view, is really part of a scheme to sell Filipino overseas labor at a
bargain for purposes solely of attracting the market. . . .

The so-called incentive is rendered particularly odious by its effect on the OFWs — the benefits accruing to the
recruitment/manning agencies and their principals are takenfrom the pockets of the OFWs to whom the full
salaries for the unexpired portion of the contract rightfully belong. Thus, the principals/employers and the
recruitment/manning agencies even profit from their violation of the security of tenure that an employment
contract embodies. Conversely, lesser protection is afforded the OFW, not only because of the lessened
recovery afforded him or her by operation of law, but also because this same lessened recovery renders a
wrongful dismissal easier and less onerous to undertake; the lesser cost of dismissing a Filipino will always bea
consideration a foreign employer will take into account in termination of employment decisions. . . .126

Further, "[t]here 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 suchas placement agencies, while the disadvantaged sector is composed ofOFWs whose
protection no less than the Constitution commands. The idea thatprivate business interest can be elevated to
the level of a compelling state interest is odious."127

Along the same line, we held that the reinstated clause violates due process rights. It is arbitrary as it deprives
overseas workers of their monetary claims without any discernable valid purpose.128

Respondent Joy Cabiles is entitled to her salary for the unexpired portion of her contract, in accordance with
Section 10 of Republic Act No. 8042. The award of the three-month equivalence of respondent’s salary must
be modified accordingly. Since she started working on June 26, 1997 and was terminated on July 14, 1997,
respondent is entitled to her salary from July 15, 1997 to June 25, 1998. "To rule otherwise would be iniquitous
to petitioner and other OFWs, and would,in effect, send a wrong signal that principals/employers and
recruitment/manning agencies may violate an OFW’s security of tenure which an employment contract
embodies and actually profit from such violation based on an unconstitutional provision of law."129

III

On the interest rate, the Bangko Sentral ng Pilipinas Circular No. 799 of June 21, 2013, which revised the
interest rate for loan or forbearance from 12% to 6% in the absence of stipulation,applies in this case. The
pertinent portions of Circular No. 799, Series of 2013, read: The Monetary Board, in its Resolution No. 796
dated 16 May 2013, approved the following revisions governing the rate of interest in the absence of
stipulation in loan contracts, thereby amending Section 2 of Circular No. 905, Series of 1982:

Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed
in judgments, in the absence of an express contract as to such rateof interest, shall be six percent (6%) per
annum.

Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations for Banks and Sections
4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions are hereby
amended accordingly.

This Circular shall take effect on 1 July 2013.

Through the able ponencia of Justice Diosdado Peralta, we laid down the guidelines in computing legal interest
in Nacar v. Gallery Frames:130
II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the
rate of interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance
of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest
due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate
of interest shall be 6% per annum to be computed from default, i.e., from judicial or extrajudicial demand
under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount
of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest,
however, shall be adjudged on unliquidated claims or damages, except when or until the demand can be
established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty,
the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code),
but when such certainty cannot be so reasonably established at the time the demand is made, the interest
shall begin to run only from the date the judgment of the court is made (at which time the quantification of
damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal
interest shall, in any case, be on the amount finally adjudged. 3. When the judgment of the court awarding a
sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph
1 or paragraph 2, above, shall be 6% per annum from such finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of credit.

And, in addition to the above, judgments that have become final and executory prior to July 1, 2013, shall not
be disturbed and shall continue to be implemented applying the rate of interest fixed therein.131

Circular No. 799 is applicable only in loans and forbearance of money, goods, or credits, and in judgments when
there is no stipulation on the applicable interest rate. Further, it is only applicable if the judgment did not
become final and executory before July 1, 2013.132

We add that Circular No. 799 is not applicable when there is a law that states otherwise. While the Bangko
Sentral ng Pilipinas has the power to set or limit interest rates,133 these interest rates do not apply when the
law provides that a different interest rate shall be applied. "[A] Central Bank Circular cannot repeal a law. Only
a law can repeal another law."134

For example, Section 10 of Republic Act No. 8042 provides that unlawfully terminated overseas workers are
entitled to the reimbursement of his or her placement fee with an interest of 12% per annum. Since Bangko
Sentral ng Pilipinas circulars cannotrepeal Republic Act No. 8042, the issuance of Circular No. 799 does not
have the effect of changing the interest on awards for reimbursement of placement fees from 12% to 6%. This
is despite Section 1 of Circular No. 799, which provides that the 6% interest rate applies even to judgments.

Moreover, laws are deemed incorporated in contracts. "The contracting parties need not repeat them. They
do not even have to be referred to. Every contract, thus, contains not only what has been explicitly stipulated,
but the statutory provisions that have any bearing on the matter."135 There is, therefore, an implied stipulation
in contracts between the placement agency and the overseasworker that in case the overseas worker is
adjudged as entitled to reimbursement of his or her placement fees, the amount shall be subject to a 12%
interest per annum. This implied stipulation has the effect of removing awards for reimbursement of placement
fees from Circular No. 799’s coverage.
The same cannot be said for awardsof salary for the unexpired portion of the employment contract under
Republic Act No. 8042. These awards are covered by Circular No. 799 because the law does not provide for a
specific interest rate that should apply.

In sum, if judgment did not become final and executory before July 1, 2013 and there was no stipulation in the
contract providing for a different interest rate, other money claims under Section 10 of Republic Act No. 8042
shall be subject to the 6% interest per annum in accordance with Circular No. 799.

This means that respondent is also entitled to an interest of 6% per annum on her money claims from the
finality of this judgment.

IV

Finally, we clarify the liabilities ofWacoal as principal and petitioner as the employment agency that facilitated
respondent’s overseas employment.

Section 10 of the Migrant Workers and Overseas Filipinos Act of 1995 provides that the foreign employer and
the local employment agency are jointly and severally liable for money claims including claims arising out of an
employer-employee relationship and/or damages. This section also provides that the performance bond filed
by the local agency shall be answerable for such money claims or damages if they were awarded to the
employee.

This provision is in line with the state’s policy of affording protection to labor and alleviating workers’ plight.136

In overseas employment, the filing of money claims against the foreign employer is attended by practical and
legal complications.1âwphi1 The distance of the foreign employer alonemakes it difficult for an overseas
worker to reach it and make it liable for violations of the Labor Code. There are also possible conflict of laws,
jurisdictional issues, and procedural rules that may be raised to frustrate an overseas worker’sattempt to
advance his or her claims.

It may be argued, for instance, that the foreign employer must be impleaded in the complaint as an
indispensable party without which no final determination can be had of an action.137

The provision on joint and several liability in the Migrant Workers and Overseas Filipinos Act of 1995 assures
overseas workers that their rights will not be frustrated with these complications. The fundamental effect of
joint and several liability is that "each of the debtors is liable for the entire obligation."138 A final determination
may, therefore, be achieved even if only oneof the joint and several debtors are impleaded in an action. Hence,
in the case of overseas employment, either the local agency or the foreign employer may be sued for all claims
arising from the foreign employer’s labor law violations. This way, the overseas workers are assured that
someone — the foreign employer’s local agent — may be made to answer for violationsthat the foreign
employer may have committed.

The Migrant Workers and Overseas Filipinos Act of 1995 ensures that overseas workers have recourse in law
despite the circumstances of their employment. By providing that the liability of the foreign employer may be
"enforced to the full extent"139 against the local agent,the overseas worker is assured of immediate and
sufficientpayment of what is due them.140

Corollary to the assurance of immediate recourse in law, the provision on joint and several liability in the
Migrant Workers and Overseas Filipinos Act of 1995 shifts the burden of going after the foreign employer from
the overseas worker to the local employment agency. However, it must be emphasized that the local agency
that is held to answer for the overseas worker’s money claims is not leftwithout remedy. The law does not
preclude it from going after the foreign employer for reimbursement of whatever payment it has made to the
employee to answer for the money claims against the foreign employer.

A further implication of making localagencies jointly and severally liable with the foreign employer is thatan
additional layer of protection is afforded to overseas workers. Local agencies, which are businesses by nature,
are inoculated with interest in being always on the lookout against foreign employers that tend to violate labor
law. Lest they risk their reputation or finances, local agenciesmust already have mechanisms for guarding
against unscrupulous foreign employers even at the level prior to overseas employment applications.

With the present state of the pleadings, it is not possible to determine whether there was indeed a transfer of
obligations from petitioner to Pacific. This should not be an obstacle for the respondent overseas worker to
proceed with the enforcement of this judgment. Petitioner is possessed with the resources to determine the
proper legal remedies to enforce its rights against Pacific, if any.

Many times, this court has spoken on what Filipinos may encounter as they travel into the farthest and
mostdifficult reaches of our planet to provide for their families. In Prieto v. NLRC:141

The Court is not unaware of the many abuses suffered by our overseas workers in the foreign land where they
have ventured, usually with heavy hearts, in pursuit of a more fulfilling future. Breach of contract,
maltreatment, rape, insufficient nourishment, sub-human lodgings, insults and other forms of debasement,
are only a few of the inhumane acts towhich they are subjected by their foreign employers, who probably feel
they can do as they please in their own country. Whilethese workers may indeed have relatively little defense
against exploitation while they are abroad, that disadvantage must not continue to burden them when they
return to their own territory to voice their muted complaint. There is no reason why, in their very own land,
the protection of our own laws cannot be extended to them in full measure for the redress of their
grievances.142

But it seems that we have not said enough.

We face a diaspora of Filipinos. Their travails and their heroism can be told a million times over; each of their
stories as real as any other. Overseas Filipino workers brave alien cultures and the heartbreak of families left
behind daily. They would count the minutes, hours, days, months, and years yearning to see their sons and
daughters. We all know of the joy and sadness when they come home to see them all grown up and, being so,
they remember what their work has cost them. Twitter accounts, Facetime, and many other gadgets and online
applications will never substitute for their lost physical presence.

Unknown to them, they keep our economy afloat through the ebb and flow of political and economic crises.
They are our true diplomats, they who show the world the resilience, patience, and creativity of our people.
Indeed, we are a people who contribute much to the provision of material creations of this world.

This government loses its soul if we fail to ensure decent treatment for all Filipinos. We default by limiting the
contractual wages that should be paid to our workers when their contracts are breached by the foreign
employers. While we sit, this court will ensure that our laws will reward our overseas workers with what they
deserve: their dignity.

Inevitably, their dignity is ours as weil.

WHEREFORE, the petition is DENIED. The decision of the Court of Appeals is AFFIRMED with modification.
Petitioner Sameer Overseas Placement Agency is ORDERED to pay respondent Joy C. Cabiles the amount
equivalent to her salary for the unexpired portion of her employment contract at an interest of 6% per annum
from the finality of this judgment. Petitioner is also ORDERED to reimburse respondent the withheld
NT$3,000.00 salary and pay respondent attorney's fees of NT$300.00 at an interest of 6% per annum from the
finality of this judgment.

The clause, "or for three (3) months for every year of the unexpired term, whichever is less" in Section 7 of
Republic Act No. 10022 amending Section 10 of Republic Act No. 8042 is declared unconstitutional and,
therefore, null and void.

SO ORDERED.

G.R. No. 167622 November 7, 2008

GREGORIO V. TONGKO, petitioner

vs.
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A. VERGEL DE DIOS, respondents.

DECISION

VELASCO, JR., J.:

The Case

This Petition for Review on Certiorari under Rule 45 seeks the reversal of the March 29, 2005 Decision 1 of the
Court of Appeals (CA) in CA-G.R. SP No. 88253, entitled The Manufacturers Life Insurance Co. (Phils.), Inc. v.
National Labor Relations Commission and Gregorio V. Tongko. The assailed decision set aside the Decision
dated September 27, 2004 and Resolution dated December 16, 2004 rendered by the National Labor Relations
Commission (NLRC) in NLRC NCR CA No. 040220-04.

The Facts

Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) is a domestic corporation engaged in life insurance
business. Renato A. Vergel De Dios was, during the period material, its President and Chief Executive Officer.
Gregorio V. Tongko started his professional relationship with Manulife on July 1, 1977 by virtue of a Career
Agent's Agreement2 (Agreement) he executed with Manulife.

In the Agreement, it is provided that:

It is understood and agreed that the Agent is an independent contractor and nothing contained herein shall be
construed or interpreted as creating an employer-employee relationship between the Company and the Agent.

xxxx

a) The Agent shall canvass for applications for Life Insurance, Annuities, Group policies and other products
offered by the Company, and collect, in exchange for provisional receipts issued by the Agent, money due or
to become due to the Company in respect of applications or policies obtained by or through the Agent or from
policyholders allotted by the Company to the Agent for servicing, subject to subsequent confirmation of receipt
of payment by the Company as evidenced by an Official Receipt issued by the Company directly to the
policyholder.

xxxx
The Company may terminate this Agreement for any breach or violation of any of the provisions hereof by the
Agent by giving written notice to the Agent within fifteen (15) days from the time of the discovery of the breach.
No waiver, extinguishment, abandonment, withdrawal or cancellation of the right to terminate this Agreement
by the Company shall be construed for any previous failure to exercise its right under any provision of this
Agreement.

Either of the parties hereto may likewise terminate his Agreement at any time without cause, by giving to the
other party fifteen (15) days notice in writing. x x x

In 1983, Tongko was named as a Unit Manager in Manulife's Sales Agency Organization. In 1990, he became a
Branch Manager. As the CA found, Tongko's gross earnings from his work at Manulife, consisting of
commissions, persistency income, and management overrides, may be summarized as follows:

January to December 10, 2002 - P 865,096.07

2001 - 6,214,737.11

2000 - 8,003,180.38

1999 - 6,797,814.05

1998 - 4,805,166.34

1997 - 2,822,620.003

The problem started sometime in 2001, when Manulife instituted manpower development programs in the
regional sales management level. Relative thereto, De Dios addressed a letter dated November 6, 20014 to
Tongko regarding an October 18, 2001 Metro North Sales Managers Meeting. In the letter, De Dios stated:

The first step to transforming Manulife into a big league player has been very clear - to increase the number of
agents to at least 1,000 strong for a start. This may seem diametrically opposed to the way Manulife was run
when you first joined the organization. Since then, however, substantial changes have taken place in the
organization, as these have been influenced by developments both from within and without the company.

xxxx

The issues around agent recruiting are central to the intended objectives hence the need for a Senior Managers'
meeting earlier last month when Kevin O'Connor, SVP - Agency, took to the floor to determine from our senior
agency leaders what more could be done to bolster manpower development. At earlier meetings, Kevin had
presented information where evidently, your Region was the lowest performer (on a per Manager basis) in
terms of recruiting in 2000 and, as of today, continues to remain one of the laggards in this area.

While discussions, in general, were positive other than for certain comments from your end which were
perceived to be uncalled for, it became clear that a one-on-one meeting with you was necessary to ensure that
you and management, were on the same plane. As gleaned from some of your previous comments in prior
meetings (both in group and one-on-one), it was not clear that we were proceeding in the same direction.
Kevin held subsequent series of meetings with you as a result, one of which I joined briefly. In those subsequent
meetings you reiterated certain views, the validity of which we challenged and subsequently found as having
no basis.

With such views coming from you, I was a bit concerned that the rest of the Metro North Managers may be a
bit confused as to the directions the company was taking. For this reason, I sought a meeting with everyone in
your management team, including you, to clear the air, so to speak.

This note is intended to confirm the items that were discussed at the said Metro North Region's Sales Managers
meeting held at the 7/F Conference room last 18 October.

xxxx

Issue # 2: "Some Managers are unhappy with their earnings and would want to revert to the position of agents."

This is an often repeated issue you have raised with me and with Kevin. For this reason, I placed the issue on
the table before the rest of your Region's Sales Managers to verify its validity. As you must have noted, no Sales
Manager came forward on their own to confirm your statement and it took you to name Malou Samson as a
source of the same, an allegation that Malou herself denied at our meeting and in your very presence.

This only confirms, Greg, that those prior comments have no solid basis at all. I now believe what I had thought
all along, that these allegations were simply meant to muddle the issues surrounding the inability of your
Region to meet its agency development objectives!

Issue # 3: "Sales Managers are doing what the company asks them to do but, in the process, they earn less."

xxxx

All the above notwithstanding, we had your own records checked and we found that you made a lot more
money in the Year 2000 versus 1999. In addition, you also volunteered the information to Kevin when you said
that you probably will make more money in the Year 2001 compared to Year 2000. Obviously, your above
statement about making "less money" did not refer to you but the way you argued this point had us almost
believing that you were spouting the gospel of truth when you were not. x x x

xxxx

All of a sudden, Greg, I have become much more worried about your ability to lead this group towards the new
direction that we have been discussing these past few weeks, i.e., Manulife's goal to become a major agency-
led distribution company in the Philippines. While as you claim, you have not stopped anyone from recruiting,
I have never heard you proactively push for greater agency recruiting. You have not been proactive all these
years when it comes to agency growth.

xxxx

I cannot afford to see a major region fail to deliver on its developmental goals next year and so, we are making
the following changes in the interim:

1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks which
can be easily delegated. This assistant should be so chosen as to complement your skills and help you in the
areas where you feel "may not be your cup of tea".

You have stated, if not implied, that your work as Regional Manager may be too taxing for you and for your
health. The above could solve this problem.
xxxx

2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star Branch (NSB)
in autonomous fashion. x x x

I have decided to make this change so as to reduce your span of control and allow you to concentrate more
fully on overseeing the remaining groups under Metro North, your Central Unit and the rest of the Sales
Managers in Metro North. I will hold you solely responsible for meeting the objectives of these remaining
groups.

xxxx

The above changes can end at this point and they need not go any further. This, however, is entirely dependent
upon you. But you have to understand that meeting corporate objectives by everyone is primary and will not
be compromised. We are meeting tough challenges next year and I would want everybody on board. Any
resistance or holding back by anyone will be dealt with accordingly.

Subsequently, De Dios wrote Tongko another letter dated December 18, 2001,5 terminating Tongko's services,
thus:

It would appear, however, that despite the series of meetings and communications, both one-on-one meetings
between yourself and SVP Kevin O'Connor, some of them with me, as well as group meetings with your Sales
Managers, all these efforts have failed in helping you align your directions with Management's avowed agency
growth policy.

xxxx

On account thereof, Management is exercising its prerogative under Section 14 of your Agents Contract as we
are now issuing this notice of termination of your Agency Agreement with us effective fifteen days from the
date of this letter.

Therefrom, Tongko filed a Complaint dated November 25, 2002 with the NLRC against Manulife for illegal
dismissal. The case, docketed as NLRC NCR Case No. 11-10330-02, was raffled to Labor Arbiter Marita V.
Padolina.

In the Complaint, Tongko, in a bid to establish an employer-employee relationship, alleged that De Dios gave
him specific directives on how to manage his area of responsibility in the latter's letter dated November 6,
2001. He further claimed that Manulife exercised control over him as follows:

Such control was certainly exercised by respondents over the herein complainant. It was Manulife who hired,
promoted and gave various assignments to him. It was the company who set objectives as regards productions,
recruitment, training programs and all activities pertaining to its business. Manulife prescribed a Code of
Conduct which would govern in minute detail all aspects of the work to be undertaken by employees, including
the sales process, the underwriting process, signatures, handling of money, policyholder service,
confidentiality, legal and regulatory requirements and grounds for termination of employment. The letter of
Mr. De Dios dated 06 November 2001 left no doubt as to who was in control. The subsequent termination
letter dated 18 December 2001 again established in no uncertain terms the authority of the herein respondents
to control the employees of Manulife. Plainly, the respondents wielded control not only as to the ends to be
achieved but the ways and means of attaining such ends.6
Tongko bolstered his argument by citing Insular Life Assurance Co., Ltd. v. NLRC (4th Division)7 and Great Pacific
Life Assurance Corporation v. NLRC,8 which Tongko claimed to be similar to the instant case.

Tongko further claimed that his dismissal was without basis and that he was not afforded due process. He also
cited the Manulife Code of Conduct by which his actions were controlled by the company.

Manulife then filed a Position Paper with Motion to Dismiss dated February 27, 2003,9 in which it alleged that
Tongko is not its employee, and that it did not exercise "control" over him. Thus, Manulife claimed that the
NLRC has no jurisdiction over the case.

In a Decision dated April 15, 2004, Labor Arbiter Marita V. Padolina dismissed the complaint for lack of an
employer-employee relationship. Padolina found that applying the four-fold test in determining the existence
of an employer-employee relationship, none was found in the instant case. The dispositive portion thereof
states:

WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the instant complaint for lack of
jurisdiction, there being no employer-employee relationship between the parties.

SO ORDERED.

Tongko appealed the arbiter's Decision to the NLRC which reversed the same and rendered a Decision dated
September 27, 2004 finding Tongko to have been illegally dismissed.

The NLRC's First Division, while finding an employer-employee relationship between Manulife and Tongko
applying the four-fold test, held Manulife liable for illegal dismissal. It further stated that Manulife exercised
control over Tongko as evidenced by the letter dated November 6, 2001 of De Dios and wrote:

The above-mentioned letter shows the extent to which respondents controlled complainant's manner and
means of doing his work and achieving the goals set by respondents. The letter shows how respondents
concerned themselves with the manner complainant managed the Metro North Region as Regional Sales
Manager, to the point that respondents even had a say on how complainant interacted with other individuals
in the Metro North Region. The letter is in fact replete with comments and criticisms on how complainant
carried out his functions as Regional Sales Manager.

More importantly, the letter contains an abundance of directives or orders that are intended to directly affect
complainant's authority and manner of carrying out his functions as Regional Sales Manager.10 x x x

Additionally, the First Division also ruled that:

Further evidence of [respondents'] control over complainant can be found in the records of the case. [These]
are the different codes of conduct such as the Agent Code of Conduct, the Manulife Financial Code of Conduct,
and the Manulife Financial Code of Conduct Agreement, which serve as the foundations of the power of control
wielded by respondents over complainant that is further manifested in the different administrative and other
tasks that he is required to perform. These codes of conduct corroborate and reinforce the display of
respondents' power of control in their 06 November 2001 Letter to complainant.11

The fallo of the September 27, 2004 Decision reads:

WHEREFORE, premises considered, the appealed Decision is hereby reversed and set aside. We find
complainant to be a regular employee of respondent Manulife and that he was illegally dismissed from
employment by respondents.
In lieu of reinstatement, respondent Manulife is hereby ordered to pay complainant separation pay as above
set forth. Respondent Manulife is further ordered to pay complainant backwages from the time he was
dismissed on 02 January 2002 up to the finality of this decision also as indicated above.

xxxx

All other claims are hereby dismissed for utter lack of merit.

From this Decision, Manulife filed a motion for reconsideration which was denied by the NLRC First Division in
a Resolution dated December 16, 2004.12

Thus, Manulife filed an appeal with the CA docketed as CA-G.R. SP No. 88253. Thereafter, the CA issued the
assailed Decision dated March 29, 2005, finding the absence of an employer-employee relationship between
the parties and deeming the NLRC with no jurisdiction over the case. The CA arrived at this conclusion while
again applying the four-fold test. The CA found that Manulife did not exercise control over Tongko that would
render the latter an employee of Manulife. The dispositive portion reads:

WHEREFORE, premises considered, the present petition is hereby GRANTED and the writ prayed for accordingly
GRANTED. The assailed Decision dated September 27, 2004 and Resolution dated December 16, 2004 of the
National Labor Relations Commission in NLRC NCR Case No. 00-11-10330-2002 (NLRC NCR CA No. 040220-04)
are hereby ANNULLED and SET ASIDE. The Decision dated April 15, 2004 of Labor Arbiter Marita V. Padolina is
hereby REINSTATED.

Hence, Tongko filed this petition and presented the following issues:

The Court of Appeals committed grave abuse of discretion in granting respondents' petition for certiorari.

The Court of Appeals committed grave abuse of discretion in annulling and setting aside the Decision dated
September 27, 2004 and Resolution dated December 16, 2004 in finding that there is no employer-employee
relationship between petitioner and respondent.

The Court of Appeals committed grave abuse of discretion in annulling and setting aside the Decision dated
September 27, 2004 and Resolution dated December 16, 2004 which found petitioner to have been illegally
dismissed and ordered his reinstatement with payment of backwages.13

Restated, the issues are: (1) Was there an employer-employee relationship between Manulife and Tongko?
and (2) If yes, was Manulife guilty of illegal dismissal?

The Court's Ruling

This petition is meritorious.

Tongko Was An Employee of Manulife

The basic issue of whether or not the NLRC has jurisdiction over the case resolves itself into the question of
whether an employer-employee relationship existed between Manulife and Tongko. If no employer-employee
relationship existed between the two parties, then jurisdiction over the case properly lies with the Regional
Trial Court.
In the determination of whether an employer-employee relationship exists between two parties, this Court
applies the four-fold test to determine the existence of the elements of such relationship. In Pacific Consultants
International Asia, Inc. v. Schonfeld, the Court set out the elements of an employer-employee relationship,
thus:

Jurisprudence is firmly settled that whenever the existence of an employment relationship is in dispute, four
elements constitute the reliable yardstick: (a) the selection and engagement of the employee; (b) the payment
of wages; (c) the power of dismissal; and (d) the employer's power to control the employee's conduct. It is the
so-called "control test" which constitutes the most important index of the existence of the employer-employee
relationship that is, whether the employer controls or has reserved the right to control the employee not only
as to the result of the work to be done but also as to the means and methods by which the same is to be
accomplished. Stated otherwise, an employer-employee relationship exists where the person for whom the
services are performed reserves the right to control not only the end to be achieved but also the means to be
used in reaching such end.14

The NLRC, for its part, applied the four-fold test and found the existence of all the elements and declared
Tongko an employee of Manulife. The CA, on the other hand, found that the element of control as an indicator
of the existence of an employer-employee relationship was lacking in this case. The NLRC and the CA based
their rulings on the same findings of fact but differed in their interpretations.

The NLRC arrived at its conclusion, first, on the basis of the letter dated November 6, 2001 addressed by De
Dios to Tongko. According to the NLRC, the letter contained "an abundance of directives or orders that are
intended to directly affect complainant's authority and manner of carrying out his functions as Regional Sales
Manager." It enumerated these "directives" or "orders" as follows:

1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks which
can be easily delegated. x x x

xxxx

This assistant should be hired immediately.

2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star Branch (NSB)
in autonomous fashion x x x.

xxxx

I have decided to make this change so as to reduce your span of control and allow you to concentrate more
fully on overseeing the remaining groups under Metro North, your Central Unit and the rest of the Sales
Managers in Metro North. x x x

3. Any resistance or holding back by anyone will be dealt with accordingly.

4. I have been straightforward in this my letter and I know that we can continue to work together… but it will
have to be on my terms. Anything else is unacceptable!

The NLRC further ruled that the different codes of conduct that were applicable to Tongko served as the
foundations of the power of control wielded by Manulife over Tongko that is further manifested in the different
administrative and other tasks that he was required to perform.

The NLRC also found that Tongko was required to render exclusive service to Manulife, further bolstering the
existence of an employer-employee relationship.
Finally, the NLRC ruled that Tongko was integrated into a management structure over which Manulife exercised
control, including the actions of its officers. The NLRC held that such integration added to the fact that Tongko
did not have his own agency belied Manulife's claim that Tongko was an independent contractor.

The CA, however, considered the finding of the existence of an employer-employee relationship by the NLRC
as far too sweeping having as its only basis the letter dated November 6, 2001 of De Dios. The CA did not concur
with the NLRC's ruling that the elements of control as pointed out by the NLRC are "sufficient indicia of control
that negates independent contractorship and conclusively establish an employer-employee relationship
between"15 Tongko and Manulife. The CA ruled that there is no employer-employee relationship between
Tongko and Manulife.

An impasse appears to have been reached between the CA and the NLRC on the sole issue of control over an
employee's conduct. It bears clarifying that such control not only applies to the work or goal to be done but
also to the means and methods to accomplish it.16 In Sonza v. ABS-CBN Broadcasting Corporation, we explained
that not all forms of control would establish an employer-employee relationship, to wit:

Further, not every form of control that a party reserves to himself over the conduct of the other party in relation
to the services being rendered may be accorded the effect of establishing an employer-employee relationship.
The facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we
held that:

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement
of the mutually desired result without dictating the means or methods to be employed in attaining it, and
those that control or fix the methodology and bind or restrict the party hired to the use of such means. The
first, which aim only to promote the result, create no employer-employee relationship unlike the second,
which address both the result and the means used to achieve it.17(Emphasis supplied.)

We ruled in Insular Life Assurance Co., Ltd. v. NLRC (Insular) that:

It is, therefore, usual and expected for an insurance company to promulgate a set of rules to guide its
commission agents in selling its policies that they may not run afoul of the law and what it requires or prohibits.
Of such a character are the rules which prescribe the qualifications of persons who may be insured, subject
insurance applications to processing and approval by the Company, and also reserve to the Company the
determination of the premiums to be paid and the schedules of payment. None of these really invades the
agent's contractual prerogative to adopt his own selling methods or to sell insurance at his own time and
convenience, hence cannot justifiably be said to establish an employer-employee relationship between him
and the company.18

Hence, we ruled in Insular that no employer-employee relationship existed therein. However, such ruling was
tempered with the qualification that had there been evidence that the company promulgated rules or
regulations that effectively controlled or restricted an insurance agent's choice of methods or the methods
themselves in selling insurance, an employer-employee relationship would have existed. In other words, the
Court in Insular in no way definitively held that insurance agents are not employees of insurance companies,
but rather made the same a case-to-case basis. We held:

The respondents limit themselves to pointing out that Basiao's contract with the Company bound him to
observe and conform to such rules and regulations as the latter might from time to time prescribe. No showing
has been made that any such rules or regulations were in fact promulgated, much less that any rules existed
or were issued which effectively controlled or restricted his choice of methods or the methods themselves
of selling insurance. Absent such showing, the Court will not speculate that any exceptions or qualifications
were imposed on the express provision of the contract leaving Basiao "... free to exercise his own judgment
as to the time, place and means of soliciting insurance."19 (Emphasis supplied.)

There is no conflict between our rulings in Insular and in Great Pacific Life Assurance Corporation. We said in
the latter case:

[I]t cannot be gain said that Grepalife had control over private respondents' performance as well as the result
of their efforts. A cursory reading of their respective functions as enumerated in their contracts reveals that
the company practically dictates the manner by which their jobs are to be carried out. For instance, the
District Manager must properly account, record and document the company's funds spot-check and audit the
work of the zone supervisors, conserve the company's business in the district through ‘reinstatements', follow
up the submission of weekly remittance reports of the debit agents and zone supervisors, preserve company
property in good condition, train understudies for the position of district manager, and maintain his quota of
sales (the failure of which is a ground for termination). On the other hand, a zone supervisor must direct and
supervise the sales activities of the debit agents under him, conserve company property through
"reinstatements", undertake and discharge the functions of absentee debit agents, spot-check the records of
debit agents, and insure proper documentation of sales and collections by the debit agents.20 (Emphasis
supplied.)

Based on the foregoing cases, if the specific rules and regulations that are enforced against insurance agents
or managers are such that would directly affect the means and methods by which such agents or managers
would achieve the objectives set by the insurance company, they are employees of the insurance company.

In the instant case, Manulife had the power of control over Tongko that would make him its employee. Several
factors contribute to this conclusion.

In the Agreement dated July 1, 1977 executed between Tongko and Manulife, it is provided that:

The Agent hereby agrees to comply with all regulations and requirements of the Company as herein provided
as well as maintain a standard of knowledge and competency in the sale of the Company's products which
satisfies those set by the Company and sufficiently meets the volume of new business required of Production
Club membership.21

Under this provision, an agent of Manulife must comply with three (3) requirements: (1) compliance with the
regulations and requirements of the company; (2) maintenance of a level of knowledge of the company's
products that is satisfactory to the company; and (3) compliance with a quota of new businesses.

Among the company regulations of Manulife are the different codes of conduct such as the Agent Code of
Conduct, Manulife Financial Code of Conduct, and Manulife Financial Code of Conduct Agreement, which
demonstrate the power of control exercised by the company over Tongko. The fact that Tongko was obliged
to obey and comply with the codes of conduct was not disowned by respondents.

Thus, with the company regulations and requirements alone, the fact that Tongko was an employee of Manulife
may already be established. Certainly, these requirements controlled the means and methods by which Tongko
was to achieve the company's goals.

More importantly, Manulife's evidence establishes the fact that Tongko was tasked to perform administrative
duties that establishes his employment with Manulife.
In its Comment (Re: Petition for Review dated 15 April 2005) dated August 5, 2005, Manulife attached affidavits
of its agents purportedly to support its claim that Tongko, as a Regional Sales Manager, did not perform any
administrative functions. An examination of these affidavits would, however, prove the opposite.

In an Affidavit dated April 28, 2003,22 John D. Chua, a Regional Sales Manager of Manulife, stated:

4. On September 1, 1996, my services were engaged by Manulife as an Agency Regional Sales Manager ("RSM")
for Metro South Region pursuant to an Agency Contract. As such RSM, I have the following functions:

1. Refer and recommend prospective agents to Manulife

2. Coach agents to become productive

3. Regularly meet with, and coordinate activities of agents affiliated to my region.

While Amada Toledo, a Branch Manager of Manulife, stated in her Affidavit dated April 29, 200323 that:

3. In January 1997, I was assigned as a Branch Manager ("BM") of Manulife for the Metro North Sector;

4. As such BM, I render the following services:

a. Refer and recommend prospective agents to Manulife;

b. Train and coordinate activities of other commission agents;

c. Coordinate activities of Agency Managers who, in turn, train and coordinate activites of other commission
agents;

d. Achieve agreed production objectives in terms of Net Annualized Commissions and Case Count and
recruitment goals; and

e. Sell the various products of Manulife to my personal clients.

While Ma. Lourdes Samson, a Unit Manager of Manulife, stated in her Affidavit dated April 28, 200324 that:

3. In 1977, I was assigned as a Unit Manager ("UM") of North Peaks Unit, North Star Branch, Metro North
Region;

4. As such UM, I render the following services:

a. To render or recommend prospective agents to be licensed, trained and contracted to sell Manulife products
and who will be part of my Unit;

b. To coordinate activities of the agents under my Unit in their daily, weekly and monthly selling activities,
making sure that their respective sales targets are met;

c. To conduct periodic training sessions for my agents to further enhance their sales skills.

d. To assist my agents with their sales activities by way of joint fieldwork, consultations and one-on- one
evaluation and analysis of particular accounts.

e. To provide opportunities to motivate my agents to succeed like conducting promos to increase sales
activities and encouraging them to be involved in company and industry activities.

f. To provide opportunities for professional growth to my agents by encouraging them to be a member of the
LUCAP (Life Underwriters Association of the Philippines).
A comparison of the above functions and those contained in the Agreement with those cited in Great Pacific
Life Assurance Corporation25 reveals a striking similarity that would more than support a similar finding as in
that case. Thus, there was an employer-employee relationship between the parties.

Additionally, it must be pointed out that the fact that Tongko was tasked with recruiting a certain number of
agents, in addition to his other administrative functions, leads to no other conclusion that he was an employee
of Manulife.

In his letter dated November 6, 2001, De Dios harped on the direction of Manulife of becoming a major agency-
led distribution company whereby greater agency recruitment is required of the managers, including Tongko.
De Dios made it clear that agent recruitment has become the primary means by which Manulife intends to sell
more policies. More importantly, it is Tongko's alleged failure to follow this principle of recruitment that led to
the termination of his employment with Manulife. With this, it is inescapable that Tongko was an employee of
Manulife.

Tongko Was Illegally Dismissed

In its Petition for Certiorari dated January 7, 200526 filed before the CA, Manulife argued that even if Tongko is
considered as its employee, his employment was validly terminated on the ground of gross and habitual neglect
of duties, inefficiency, as well as willful disobedience of the lawful orders of Manulife. Manulife stated:

In the instant case, private respondent, despite the written reminder from Mr. De Dios refused to shape up
and altogether disregarded the latter's advice resulting in his laggard performance clearly indicative of his
willful disobedience of the lawful orders of his superior. x x x

xxxx

As private respondent has patently failed to perform a very fundamental duty, and that is to yield obedience
to all reasonable rules, orders and instructions of the Company, as well as gross failure to reach at least
minimum quota, the termination of his engagement from Manulife is highly warranted and therefore, there is
no illegal dismissal to speak of.

It is readily evident from the above-quoted portions of Manulife's petition that it failed to cite a single iota of
evidence to support its claims. Manulife did not even point out which order or rule that Tongko disobeyed.
More importantly, Manulife did not point out the specific acts that Tongko was guilty of that would constitute
gross and habitual neglect of duty or disobedience. Manulife merely cited Tongko's alleged "laggard
performance," without substantiating such claim, and equated the same to disobedience and neglect of duty.

We cannot, therefore, accept Manulife's position.

In Quebec, Sr. v. National Labor Relations Commission, we ruled that:

When there is no showing of a clear, valid and legal cause for the termination of employment, the law considers
the matter a case of illegal dismissal and the burden is on the employer to prove that the termination was for
a valid or authorized cause. This burden of proof appropriately lies on the shoulders of the employer and not
on the employee because a worker's job has some of the characteristics of property rights and is therefore
within the constitutional mantle of protection. 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 laws.
Apropos thereto, Art. 277, par. (b), of the Labor Code mandates in explicit terms that the burden of proving
the validity of the termination of employment rests on the employer. Failure to discharge this evidential burden
would necessarily mean that the dismissal was not justified, and, therefore, illegal.27

We again ruled in Times Transportation Co., Inc. v. National Labor Relations Commission that:

The law mandates that the burden of proving the validity of the termination of employment rests with the
employer. Failure to discharge this evidentiary burden would necessarily mean that the dismissal was not
justified, and, therefore, illegal. Unsubstantiated suspicions, accusations and conclusions of employers do not
provide for legal justification for dismissing employees. In case of doubt, such cases should be resolved in favor
of labor, pursuant to the social justice policy of our labor laws and Constitution.28

This burden of proof was clarified in Community Rural Bank of San Isidro (N.E.), Inc. v. Paez to mean substantial
evidence, to wit:

The Labor Code provides that an employer may terminate the services of an employee for just cause and this
must be supported by substantial evidence. The settled rule in administrative and quasi-judicial proceedings is
that proof beyond reasonable doubt is not required in determining the legality of an employer's dismissal of
an employee, and not even a preponderance of evidence is necessary as substantial evidence is considered
sufficient. Substantial evidence is more than a mere scintilla of evidence or relevant evidence as a reasonable
mind might accept as adequate to support a conclusion, even if other minds, equally reasonable, might
conceivably opine otherwise.29

Here, Manulife failed to overcome such burden of proof. It must be reiterated that Manulife even failed to
identify the specific acts by which Tongko's employment was terminated much less support the same with
substantial evidence. To repeat, mere conjectures cannot work to deprive employees of their means of
livelihood. Thus, it must be concluded that Tongko was illegally dismissed.

Moreover, as to Manulife's failure to comply with the twin notice rule, it reasons that Tongko not being its
employee is not entitled to such notices. Since we have ruled that Tongko is its employee, however, Manulife
clearly failed to afford Tongko said notices. Thus, on this ground too, Manulife is guilty of illegal dismissal. In
Quebec, Sr., we also stated:

Furthermore, not only does our legal system dictate that the reasons for dismissing a worker must be
pertinently substantiated, it also mandates that the manner of dismissal must be properly done, otherwise,
the termination itself is gravely defective and may be declared unlawful.30

For breach of the due process requirements, Manulife is liable to Tongko in the amount of PhP 30,000 as
indemnity in the form of nominal damages.31

Finally, Manulife raises the issue of the correctness of the computation of the award to Tongko made by the
NLRC by claiming that Songco v. National Labor Relations Commission32 is inapplicable to the instant case,
considering that Songco was dismissed on the ground of retrenchment.

An examination of Songco reveals that it may be applied to the present case. In that case, Jose Songco was a
salesman of F.E. Zuellig (M), Inc. which terminated the services of Songco on the ground of retrenchment due
to financial losses. The issue raised to the Court, however, was whether commissions are considered as part of
wages in order to determine separation pay. Thus, the fact that Songco was dismissed due to retrenchment
does not hamper the application thereof to the instant case. What is pivotal is that we ruled in Songco that
commissions are part of wages for the determination of separation pay.
Article 279 of the Labor Code on security of tenure pertinently provides that:

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.

In Triad Security & Allied Services, Inc. v. Ortega, Jr. (Triad), we thus stated that an illegally dismissed employee
shall be entitled to backwages and separation pay, if reinstatement is no longer viable:

As the law now stands, an illegally dismissed employee is entitled to two reliefs, namely: backwages and
reinstatement. These are separate and distinct from each other. However, separation pay is granted where
reinstatement is no longer feasible because of strained relations between the employee and the employer. In
effect, an illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay if
reinstatement is no longer viable and backwages.33

Taking into consideration the cases of Songco and Triad, we find correct the computation of the NLRC that the
monthly gross wage of Tongko in 2001 was PhP 518,144.76. For having been illegally dismissed, Tongko is
entitled to reinstatement with full backwages under Art. 279 of the Labor Code. Due to the strained relationship
between Manulife and Tongko, reinstatement, however, is no longer advisable. Thus, Tongko will be entitled
to backwages from January 2, 2002 (date of dismissal) up to the finality of this decision. Moreover, Manulife
will pay Tongko separation pay of one (1) month salary for every year of service that is from 1977 to 2001
amounting to PhP 12,435,474.24, considering that reinstatement is not feasible. Tongko shall also be entitled
to an award of attorney's fees in the amount of ten percent (10%) of the aggregate amount of the above
awards.

WHEREFORE, the petition is hereby GRANTED. The assailed March 29, 2005 Decision of the CA in CA-G.R. SP
No. 88253 is REVERSED and SET ASIDE. The Decision dated September 27, 2004 of the NLRC
is REINSTATED with the following modifications:

Manulife shall pay Tongko the following:

(1) Full backwages, inclusive of allowances and other benefits or their monetary equivalent from January 2,
2002 up to the finality of this Decision;

(2) Separation pay of one (1) month salary for every year of service from 1977 up to 2001 amounting to PhP
12,435,474.24;

(3) Nominal damages of PhP 30,000 as indemnity for violation of the due process requirements; and

(4) Attorney's fees equivalent to ten percent (10%) of the aforementioned backwages and separation pay.

Costs against respondent Manulife.

SO ORDERED.
G.R. No. 117040 January 27, 2000

RUBEN SERRANO, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and ISETANN DEPARTMENT STORE, respondents.

MENDOZA, J.:

This is a Petition seeking review of the resolutions, dated March 30, 1994 and August 26, 1994, of the National
Labor Relations Commission (NLRC) which reversed the decision of the Labor Arbiter and dismissed petitioner
Ruben Serrano's complaint for illegal dismissal and denied his motion for reconsideration. The facts are as
follows:

Petitioner was hired by private respondent Isetann Department Store as a security checker to apprehend
shoplifters and prevent pilferage of merchandise.1 Initially hired on October 4, 1984 on contractual basis,
petitioner eventually became a regular employee on April 4, 1985. In 1988, he became head of the Security
Checkers Section of private respondent.2

Sometime in 1991, as a cost-cutting measure, private respondent decided to phase out its entire security
section and engage the services of an independent security agency. For this reason, it wrote petitioner the
following memorandum:3

October 11, 1991

MR. RUBEN SERRANO

PRESENT

Dear Mr. Seranno,

In view of the retrenchment program of the company, we hereby reiterate our verbal notice to you of your
termination as Security Section Head effective October 11, 1991.

Please secure your clearance from this office.

Very truly yours,

[Sgd.] TERESITA A. VILLANUEVA

Human Resources Division Manager

The loss of his employment prompted petitioner to file a complaint on December 3, 1991 for illegal dismissal,
illegal layoff, unfair labor practice, underpayment of wages, and nonpayment of salary and overtime pay.4

The parties were required to submit their position papers, on the basis of which the Labor Arbiter defined the
issues as follows:5

Whether or not there is a valid ground for the dismissal of the complainant.

Whether or not complainant is entitled to his monetary claims for underpayment of wages, nonpayment of
salaries, 13th month pay for 1991 and overtime pay.

Whether or not Respondent is guilty of unfair labor practice.

Thereafter, the case was heard. On April 30, 1993, the Labor Arbiter rendered a decision finding petitioner to
have been illegally dismissed. He ruled that private respondent failed to establish that it had retrenched its
security section to prevent or minimize losses to its business; that private respondent failed to accord due
process to petitioner; that private respondent failed to use reasonable standards in selecting employees whose
employment would be terminated; that private respondent had not shown that petitioner and other
employees in the security section were so inefficient so as to justify their replacement by a security agency, or
that "cost-saving devices [such as] secret video cameras (to monitor and prevent shoplifting) and secret code
tags on the merchandise" could not have been employed; instead, the day after petitioner's dismissal, private
respondent employed a safety and security supervisor with duties and functions similar to those of
petitioner.1âwphi1.nêt

Accordingly, the Labor Arbiter ordered:6

WHEREFORE, above premises considered, judgment is hereby decreed:

(a) Finding the dismissal of the complainant to be illegal and concomitantly, Respondent is ordered to pay
complainant full backwages without qualification or deduction in the amount of P74,740.00 from the time of
his dismissal until reinstatement. (computed till promulgation only) based on his monthly salary of
P4,040.00/month at the time of his termination but limited to (3) three years;

(b) Ordering the Respondent to immediately reinstate the complainant to his former position as security
section head or to a reasonably equivalent supervisorial position in charges of security without loss of seniority
rights, privileges and benefits. This order is immediately executory even pending appeal;

(c) Ordering the Respondent to pay complainant unpaid wages in the amount of P2,020.73 and proportionate
13th month pay in the amount of P3,198.30;

(d) Ordering the Respondent to pay complainant the amount of P7,995.91, representing 10% attorney's fees
based on the total judgment award of P79,959.12.

All other claims of the complainant whether monetary or otherwise is hereby dismissed for lack of merit.

SO ORDERED.

Private respondent appealed to the NLRC which, in its resolution of March 30, 1994; reversed the decision of
the Labor Arbiter and ordered petitioner to be given separation pay equivalent to one month pay for every
year of service, unpaid salary, and proportionate 13th month pay. Petitioner filed a motion for reconsideration,
but his motion was denied.

The NLRC held that the phase-out of private respondent's security section and the hiring of an independent
security agency constituted an exercise by private respondent of "[a] legitimate business decision whose
wisdom we do not intend to inquire into and for which we cannot substitute our judgment"; that the distinction
made by the Labor Arbiter between "retrenchment" and the employment of cost-saving devices" under Art.
283 of the Labor Code was insignificant because the company official who wrote the dismissal letter apparently
used the term "retrenchment" in its "plain and ordinary sense: to layoff or remove from one's job, regardless
of the reason therefor"; that the rule of "reasonable criteria" in the selection of the employees to be retrenched
did not apply because all positions in the security section had been abolished; and that the appointment of a
safety and security supervisor referred to by petitioner to prove bad faith on private respondent's part was of
no moment because the position had long been in existence and was separate from petitioner's position as
head of the Security Checkers Section.
Hence this petition. Petitioner raises the following issue:

IS THE HIRING OF AN INDEPENDENT SECURITY AGENCY BY THE PRIVATE RESPONDENT TO REPLACE ITS
CURRENT SECURITY SECTION A VALID GROUND FOR THE DISMISSAL OF THE EMPLOYEES CLASSED UNDER THE
LATTER?7

Petitioner contends that abolition of private respondent's Security Checkers Section and the employment of
an independent security agency do not fall under any of the authorized causes for dismissal under Art. 283 of
the Labor Code.

Petitioner Laid Off for Cause

Petitioner's contention has no merit. Art. 283 provides:

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 operations of the establishment 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 Department
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 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 at least 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 as one (1) whole
year.

In De Ocampo v. National Labor Relations Commission,8 this Court upheld the termination of employment of
three mechanics in a transportation company and their replacement by a company rendering maintenance and
repair services. It held:

In contracting the services of Gemac Machineries, as part of the company's cost-saving program, the services
rendered by the mechanics became redundant and superfluous, and therefore properly terminable. The
company merely exercised its business judgment or management prerogative. And in the absence of any proof
that the management abused its discretion or acted in a malicious or arbitrary manner, the court will not
interfere with the exercise of such prerogative.9

In Asian Alcohol Corporation v. National Labor Relations Commission,10 the Court likewise upheld the
termination of employment of water pump tenders and their replacement by independent contractors. It ruled
that an employer's good faith in implementing a redundancy program is not necessarily put in doubt by the
availment of the services of an independent contractor to replace the services of the terminated employees to
promote economy and efficiency.

Indeed, as we pointed out in another case, the "[management of a company] cannot be denied the faculty of
promoting efficiency and attaining economy by a study of what units are essential for its operation. To it
belongs the ultimate determination of whether services should be performed by its personnel or contracted
to outside agencies . . . [While there] should be mutual consultation, eventually deference is to be paid to what
management decides."11Consequently, absent proof that management acted in a malicious or arbitrary
manner, the Court will not interfere with the exercise of judgment by an employer.12
In the case at bar, we have only the bare assertion of petitioner that, in abolishing the security section, private
respondent's real purpose was to avoid payment to the security checkers of the wage increases provided in
the collective bargaining agreement approved in 1990.13 Such an assertion is not sufficient basis for concluding
that the termination of petitioner's employment was not a bona fide decision of management to obtain
reasonable return from its investment, which is a right guaranteed to employers under the
Constitution.14 Indeed, that the phase-out of the security section constituted a "legitimate business decision"
is a factual finding of an administrative agency which must be accorded respect and even finality by this Court
since nothing can be found in the record which fairly detracts from such finding.15

Accordingly, we hold that the termination of petitioner's services was for an authorized cause, i.e., redundancy.
Hence, pursuant to Art. 283 of the Labor Code, petitioner should be given separation pay at the rate of one
month pay for every year of service.

Sanctions for Violations of the Notice Requirement

Art. 283 also provides that to terminate the employment of an employee for any of the authorized causes the
employer must serve "a written notice on the workers and the Department of Labor and Employment at least
one (1) month before the intended date thereof." In the case at bar, petitioner was given a notice of
termination on October 11, 1991. On the same day, his services were terminated. He was thus denied his right
to be given written notice before the termination of his employment, and the question is the appropriate
sanction for the violation of petitioner's right.

To be sure, this is not the first time this question has arisen. In Subuguero v. NLRC,16 workers in a garment
factory were temporarily laid off due to the cancellation of orders and a garment embargo. The Labor Arbiter
found that the workers had been illegally dismissed and ordered the company to pay separation pay and
backwages. The NLRC, on the other hand, found that this was a case of retrenchment due to business losses
and ordered the payment of separation pay without backwages. This Court sustained the NLRC's finding.
However, as the company did not comply with the 30-day written notice in Art. 283 of the Labor Code, the
Court ordered the employer to pay the workers P2,000.00 each as indemnity.

The decision followed the ruling in several cases involving dismissals which, although based on any of the just
causes under Art. 282,17 were effected without notice and hearing to the employee as required by the
implementing rules.18 As this Court said: "It is now settled that where the dismissal of one employee is in fact
for a just and valid cause and is so proven to be but he is not accorded his right to due process, i.e., he was not
furnished the twin requirements of notice and opportunity to be heard, the dismissal shall be upheld but the
employer must be sanctioned for non-compliance with the requirements of, or for failure to observe, due
process."19

The rule reversed a long standing policy theretofore followed that even though the dismissal is based on a just
cause or the termination of employment is for an authorized cause, the dismissal or termination is illegal if
effected without notice to the employee. The shift in doctrine took place in 1989 in Wenphil Corp. v. NLRC.20 In
announcing the change, this Court said:21

The Court holds that the policy of ordering the reinstatement to the service of an employee without loss of
seniority and the payment of his wages during the period of his separation until his actual reinstatement but
not exceeding three (3) years without qualification or deduction, when it appears he was not afforded due
process, although his dismissal was found to be for just and authorized cause in an appropriate proceeding in
the Ministry of Labor and Employment, should be re-examined. It will be highly prejudicial to the interests of
the employer to impose on him the services of an employee who has been shown to be guilty of the charges
that warranted his dismissal from employment. Indeed, it will demoralize the rank and file if the undeserving,
if not undesirable, remains in the service.

xxx xxx xxx

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.

The fines imposed for violations of the notice requirement have varied from P1,000.00 22 to P2,000.0023 to
P5,000.0024 to P10,000.00.25

Need for Reexamining the Wenphil Doctrine

Today, we once again consider the question of appropriate sanctions for violations of the notice experience
during the last decade or so with the Wenphil doctrine. The number of cases involving dismissals without the
requisite notice to the employee, although effected for just or authorized causes, suggest that the imposition
of fine for violation of the notice requirement has not been effective in deterring violations of the notice
requirement. Justice Panganiban finds the monetary sanctions "too insignificant, too niggardly, and sometimes
even too late." On the other hand, Justice Puno says there has in effect been fostered a policy of "dismiss now;
pay later" which moneyed employers find more convenient to comply with than the requirement to serve a
30-day written notice (in the case of termination of employment for an authorized cause under Arts. 283-284)
or to give notice and hearing (in the case of dismissals for just causes under Art. 282).

For this reason, they regard any dismissal or layoff without the requisite notice to be null and void even though
there are just or authorized cause for such dismissal or layoff. Consequently, in their view, the employee
concerned should be reinstated and paid backwages.

Validity of Petitioner's Layoff Not Affected by Lack of Notice

We agree with our esteemed colleagues, Justices Puno and Panganiban, that we should rethink the sanction
of fine for an employer's disregard of the notice requirement. We do not agree, however, that disregard of this
requirement by an employer renders the dismissal or termination of employment null and void. Such a stance
is actually a reversion to the discredited pre-Wenphil rule of ordering an employee to be reinstated and paid
backwages when it is shown that he has not been given notice and hearing although his dismissal or layoff is
later found to be for a just or authorized cause. Such rule was abandoned in Wenphil because it is really unjust
to require an employer to keep in his service one who is guilty, for example, of an attempt on the life of the
employer or the latter's family, or when the employer is precisely retrenching in order to prevent losses.

The need is for a rule which, while recognizing the employee's right to notice before he is dismissed or laid off,
at the same time acknowledges the right of the employer to dismiss for any of the just causes enumerated in
Art. 282 or to terminate employment for any of the authorized causes mentioned in Arts. 283-284. If the
Wenphil rule imposing a fine on an employer who is found to have dismissed an employee for cause without
prior notice is deemed ineffective in deterring employer violations of the notice requirement, the remedy is
not to declare the dismissal void if there are just or valid grounds for such dismissal or if the termination is for
an authorized cause. That would be to uphold the right of the employee but deny the right of the employer to
dismiss for cause. Rather, the remedy is to order the payment to the employee of full backwages from the time
of his dismissal until the court finds that the dismissal was for a just cause. But, otherwise, his dismissal must
be upheld and he should not be reinstated. This is because his dismissal is ineffectual.

For the same reason, if an employee is laid off for any of the causes in Arts. 283-284, i.e., installation of a labor-
saving device, but the employer did not give him and the DOLE a 30-day written notice of termination in
advance, then the termination of his employment should be considered ineffectual and he should be paid
backwages. However, the termination of his employment should not be considered void but he should simply
be paid separation pay as provided in Art. 283 in addition to backwages.

Justice Puno argues that an employer's failure to comply with the notice requirement constitutes a denial of
the employee's right to due process. Prescinding from this premise, he quotes the statement of Chief Justice
Concepcion Vda. de Cuaycong v. Vda. de Sengbengco26 that "acts of Congress, as well as of the Executive, can
deny due process only under the pain of nullity, and judicial proceedings suffering from the same flaw are
subject to the same sanction, any statutory provision to the contrary notwithstanding." Justice Puno concludes
that the dismissal of an employee without notice and hearing, even if for a just cause, as provided in Art. 282,
or for an authorized cause, as provided in Arts. 283-284, is a nullity. Hence, even if just or authorized cause
exist, the employee should be reinstated with full back pay. On the other hand, Justice Panganiban quotes from
the statement in People v. Bocar27 that "[w]here the denial of the fundamental right of due process is apparent,
a decision rendered in disregard of that right is void for lack of jurisdiction."

Violation of Notice Requirement Not a Denial of Due Process

The cases cited by both Justices Puno and Panganiban refer, however, to the denial of due process by the State,
which is not the case here. There are three reasons why, on the other hand, violation by the employer of the
notice requirement cannot be considered a denial of due process resulting in the nullity of the employee's
dismissal or layoff.

The first is that the Due Process Clause of the Constitution is a limitation on governmental powers. It does not
apply to the exercise of private power, such as the termination of employment under the Labor Code. This is
plain from the text of Art. III, §1 of the Constitution, viz.: "No person shall be deprived of life, liberty, or property
without due process of law. . . ." The reason is simple: Only the State has authority to take the life, liberty, or
property of the individual. The purpose of the Due Process Clause is to ensure that the exercise of this power
is consistent with what are considered civilized methods.

The second reason is that notice and hearing are required under the Due Process Clause before the power of
organized society are brought to bear upon the individual. This is obviously not the case of termination of
employment under Art. 283. Here the employee is not faced with an aspect of the adversary system. The
purpose for requiring a 30-day written notice before an employee is laid off is not to afford him an opportunity
to be heard on any charge against him, for there is none. The purpose rather is to give him time to prepare for
the eventual loss of his job and the DOLE an opportunity to determine whether economic causes do exist
justifying the termination of his employment.

Even in cases of dismissal under Art. 282, the purpose for the requirement of notice and hearing is not to
comply with Due Process Clause of the Constitution. The time for notice and hearing is at the trial stage. Then
that is the time we speak of notice and hearing as the essence of procedural due process. Thus, compliance by
the employer with the notice requirement before he dismisses an employee does not foreclose the right of the
latter to question the legality of his dismissal. As Art. 277(b) provides, "Any decision taken by the employer
shall be without prejudice to the right of the worker to contest the validity or legality of his dismissal by filing
a complaint with the regional branch of the National Labor Relations Commission."

Indeed, to contend that the notice requirement in the Labor Code is an aspect of due process is to overlook
the fact that Art. 283 had its origin in Art. 302 of the Spanish Code of Commerce of 1882 which gave either
party to the employer-employee relationship the right to terminate their relationship by giving notice to the
other one month in advance. In lieu of notice, an employee could be laid off by paying him a mesada equivalent
to his salary for one month.28 This provision was repealed by Art. 2270 of the Civil Code, which took effect on
August 30, 1950. But on June 12, 1954, R.A. No. 1052, otherwise known as the Termination Pay Law, was
enacted reviving the mesada. On June 21, 1957, the law was amended by R.A. No. 1787 providing for the giving
of advance notice or the payment of compensation at the rate of one-half month for every year of service.29

The Termination Pay Law was held not to be a substantive law but a regulatory measure, the purpose of which
was to give the employer the opportunity to find a replacement or substitute, and the employee the equal
opportunity to look for another job or source of employment. Where the termination of employment was for
a just cause, no notice was required to be given to the, employee.30 It was only on September 4, 1981 that
notice was required to be given even where the dismissal or termination of an employee was for cause. This
was made in the rules issued by the then Minister of Labor and Employment to implement B.P. Blg. 130 which
amended the Labor Code. And it was still much later when the notice requirement was embodied in the law
with the amendment of Art. 277(b) by R.A. No. 6715 on March 2, 1989. It cannot be that the former regime
denied due process to the employee. Otherwise, there should now likewise be a rule that, in case an employee
leaves his job without cause and without prior notice to his employer, his act should be void instead of simply
making him liable for damages.

The third reason why the notice requirement under Art. 283 can not be considered a requirement of the Due
Process Clause is that the employer cannot really be expected to be entirely an impartial judge of his own
cause. This is also the case in termination of employment for a just cause under Art. 282 (i.e., serious
misconduct or willful disobedience by the employee of the lawful orders of the employer, gross and habitual
neglect of duties, fraud or willful breach of trust of the employer, commission of crime against the employer
or the latter's immediate family or duly authorized representatives, or other analogous cases).

Justice Puno disputes this. He says that "statistics in the DOLE will prove that many cases have been won by
employees before the grievance committees manned by impartial judges of the company." The grievance
machinery is, however, different because it is established by agreement of the employer and the employees
and composed of representatives from both sides. That is why, in Batangas Laguna Tayabas Bus Co. ·v. Court
of Appeals,31 which Justice Puno cites, it was held that "Since the right of [an employee] to his labor is in itself
a property and that the labor agreement between him and [his employer] is the law between the parties, his
summary and arbitrary dismissal amounted to deprivation of his property without due process of law." But
here we are dealing with dismissals and layoffs by employers alone, without the intervention of any grievance
machinery. Accordingly in Montemayor v. Araneta University Foundation,32 although a professor was dismissed
without a hearing by his university, his dismissal for having made homosexual advances on a student was
sustained, it appearing that in the NLRC, the employee was fully heard in his defense.

Lack of Notice Only Makes Termination Ineffectual

Not all notice requirements are requirements of due process. Some are simply part of a procedure to be
followed before a right granted to a party can be exercised. Others are simply an application of the Justinian
precept, embodied in the Civil Code,33 to act with justice, give everyone his due, and observe honesty and good
faith toward one's fellowmen. Such is the notice requirement in Arts. 282-283. The consequence of the failure
either of the employer or the employee to live up to this precept is to make him liable in damages, not to
render his act (dismissal or resignation, as the case may be) void. The measure of damages is the amount of
wages the employee should have received were it not for the termination of his employment without prior
notice. If warranted, nominal and moral damages may also be awarded.

We hold, therefore, that, with respect to Art. 283 of the Labor Code, the employer's failure to comply with the
notice requirement does not constitute a denial of due process but a mere failure to observe a procedure for
the termination of employment which makes the termination of employment merely ineffectual. It is similar
to the failure to observe the provisions of Art. 1592, in relation to Art. 1191, of the Civil Code34 in rescinding a
contract for the sale of immovable property. Under these provisions, while the power of a party to rescind a
contract is implied in reciprocal obligations, nonetheless, in cases involving the sale of immovable property,
the vendor cannot exercise this power even though the vendee defaults in the payment of the price, except by
bringing an action in court or giving notice of rescission by means of a notarial demand.35 Consequently, a
notice of rescission given in the letter of an attorney has no legal effect, and the vendee can make payment
even after the due date since no valid notice of rescission has been given.36

Indeed, under the Labor Code, only the absence of a just cause for the termination of employment can make
the dismissal of an employee illegal. This is clear from Art. 279 which provides:

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 dismissedfrom
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.37

Thus, only if the termination of employment is not for any of the causes provided by law is it illegal and,
therefore, the employee should be reinstated and paid backwages. To contend, as Justices Puno and
Panganiban do, that even if the termination is for a just or authorized cause the employee concerned should
be reinstated and paid backwages would be to amend Art. 279 by adding another ground for considering a
dismissal illegal. What is more, it would ignore the fact that under Art. 285, if it is the employee who fails to
give a written notice to the employer that he is leaving the service of the latter, at least one month in advance,
his failure to comply with the legal requirement does not result in making his resignation void but only in
making him liable for damages.38 This disparity in legal treatment, which would result from the adoption of the
theory of the minority cannot simply be explained by invoking resident Ramon Magsaysay's motto that "he
who has less in life should have more in law." That would be a misapplication of this noble phrase originally
from Professor Thomas Reed Powell of the Harvard Law School.

Justice Panganiban cites Pepsi-Cola Bottling Co. v. NLRC,39 in support of his view that an illegal dismissal results
not only from want of legal cause but also from the failure to observe "due process." The Pepsi-Cola case
actually involved a dismissal for an alleged loss of trust and confidence which, as found by the Court, was not
proven. The dismissal was, therefore, illegal, not because there was a denial of due process, but because the
dismissal was without cause. The statement that the failure of management to comply with the notice
requirement "taints the dismissal with illegality" was merely a dictum thrown in as additional grounds for
holding the dismissal to be illegal.

Given the nature of the violation, therefore, the appropriate sanction for the failure to give notice is the
payment of backwages for the period when the employee is considered not to have been effectively dismissed
or his employment terminated. The sanction is not the payment alone of nominal damages as Justice Vitug
contends.
Unjust Results of Considering Dismissals/Layoffs Without Prior Notice As Illegal

The refusal to look beyond the validity of the initial action taken by the employer to terminate employment
either for an authorized or just cause can result in an injustice to the employer. For not giving notice and
hearing before dismissing an employee, who is otherwise guilty of, say, theft, or even of an attempt against
the life of the employer, an employer will be forced to keep in his employ such guilty employee. This is unjust.

It is true the Constitution regards labor as "a primary social economic force."40 But so does it declare that it
"recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives
to needed investment."41 The Constitution bids the State to "afford full protection to labor."42 But it is equally
true that "the law, in protecting the right's of the laborer, authorizes neither oppression nor self-destruction
of the employer."43And it is oppression to compel the employer to continue in employment one who is guilty
or to force the employer to remain in operation when it is not economically in his interest to do so.

In sum, we hold that if in proceedings for reinstatement under Art. 283, it is shown that the termination of
employment was due to an authorized cause, then the employee concerned should not be ordered reinstated
even though there is failure to comply with the 30-day notice requirement. Instead, he must be granted
separation pay in accordance with Art. 283, to wit:

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
month for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of
closures 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 months shall be considered one (1)
whole year.

If the employee's separation is without cause, instead of being given separation pay, he should be reinstated.
In either case, whether he is reinstated or only granted separation pay, he should be paid full backwages if he
has been laid off without written notice at least 30 days in advance.

On the other hand, with respect to dismissals for cause under Art. 282, if it is shown that the employee was
dismissed for any of the just causes mentioned in said Art. 282, then, in accordance with that article, he should
not be reinstated. However, he must be paid backwages from the time his employment was terminated until
it is determined that the termination of employment is for a just cause because the failure to hear him before
he is dismissed renders the termination of his employment without legal effect.

WHEREFORE, the petition is GRANTED and the resolution of the National Labor Relations Commission is
MODIFIED by ordering private respondent Isetann Department Store, Inc. to pay petitioner separation pay
equivalent to one (1) month pay for every year of service, his unpaid salary, and his proportionate 13th month
pay and, in addition, full backwages from the time his employment was terminated on October 11, 1991 up to
the time the decision herein becomes final. For this purpose, this case is REMANDED to the Labor Arbiter for
computation of the separation pay, backwages, and other monetary awards to petitioner.

SO ORDERED.

Davide, Jr., C.J., Melo, Kapunan, Quisumbing, Purisima, Pardo, Buena, Gonzaga-Reyes and De Leon, Jr.,
JJ.,concur.
Bellosillo J., Please see Separate Opinion.
Puno, J., Please see Dissenting Opinion.
Vitug, J., Please see Separate opinion.
Panganiban J., Please see Separate Opinion.
Ynares-Santiago, J., I join the dissenting opinion of J. Puno.

Separate Opinions

BELLOSILLO, J., separate opinion;

We point out at the outset that this Petition for Review which was filed before the promulgation of St. Martin
Funeral Home v. National Labor Relations Commission,1 is not the proper means by which NLRC decisions are
appealed to this Court. Before St. Martin Funeral Home, it was only through a Petition for Certiorari under Rule
65 that NLRC decisions could be reviewed and nullified by us on the ground of lack of jurisdiction or grave
abuse of discretion amounting to lack or excess of jurisdiction. After St. Martin Funeral Home, petitions like
the one at bar are initially filed in the Court of Appeals for proper adjudication.

In the interest of justice, however, and in order to write finis to the instant case which has already dragged on
for so long, we shall treat the petition pro hac vice as one for certiorari under Rule 65 although it is captioned
Petition for Review on Certiorari; after all, it was filed within the reglementary period for the filing of a petition
for certiorari under Rule 65.

Briefly, on 4 April 1985 private respondent Isetann Department Store, Inc. (ISETANN), employed petitioner
Ruben Serrano as Security Checker until his appointment as Security Section Head. On October 1991 ISETANN
through its Human Resource Division Manager Teresita A. Villanueva sent Serrano a memorandum terminating
his employment effective immediately "in view of the retrenchment program of the company," and directing
him to secure clearance from their office.2

Petitioner Serrano filed with the NLRC Adjudication Office a complaint for illegal dismissal and underpayment
of wages against ISETANN. Efforts at amicable settlement proved futile. Ms. Cristina Ramos, Personnel
Administration Manager of ISETANN, testified that the security checkers and their section head were
retrenched due to the installation of a labor saving device, i.e., the hiring of an independent security agency.

Finding the dismissal to be illegal, the Labor Arbiter ordered the immediate reinstatement of Serrano to his
former or to an equivalent position plus payment of back wages, unpaid wages, 13th month pay and attorney's
fees.

On appeal the NLRC reversed the Labor Arbiter and ruled that ISETANN acted within its prerogative when it
phased out its Security Section and retained the services of an independent security agency in order to cut
costs and economize. Upon denial of his motion for reconsideration3 Serrano filed the instant petition imputing
grave abuse of discretion on the part of the NLRC.

Art. 282 of the Labor Code enumerates the just causes for the termination of employment by the employer:
(a) serious misconduct or willful disobedience by the employee of the lawful orders of his employer or the
latter's representative in connection with the employee's 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.

On the other hand, Arts. 283 and 284 of the same Code enumerate the so-called authorized causes: (a)
installation of labor saving devices; (b) redundancy: (b) retrenchment to prevent losses; (d) closure or cessation
of the establishment or undertaking unless the closure or cessation is for the purpose of circumventing the
provisions of the law; and, (e) disease.

The Just causes enumerated under Art. 282 of the Labor Code are provided by the employee who causes the
infraction. The authorized causes are provided by the employer either because of outside factors such as the
general decline in the economy or merely part of its long range plan for business profitability. Corollarily, in
termination for a just cause, the employee is not entitled to separation pay unlike in termination for an
authorized cause. In addition, the basis in computing the amount of separation pay varies depending on
whether the termination is due to the installation of a labor saving device, or redundancy, in which case, the
employee is entitled to receive separation pay equivalent to at least one (1) month pay or to at least one (1)
month pay for every year of service. In case the termination is due to retrenchment in order to prevent losses
or in case of closure or cessation of operation of the establishment or undertaking not due to serious business
losses or financial reverses, the separation pay is lower, i.e., equivalent to one (1) month pay or at least one-
half month pay for every year of service, whichever is higher. As may be gleaned from the foregoing, where
the cause of termination is for the financial advantage or benefit of the employer, the basis in computing for
separation pay is higher compared to termination dictated by necessity with no appreciable financial advantage
to the employer.

In the instant case, we agree with the NLRC that the dismissal of petitioner Serrano was for an authorized
cause, i.e., redundancy, which exists where the services of an employee are in excess of what are reasonably
demanded by the actual requirements of the enterprise. A position is redundant where it is superfluous, and
the superfluity may be the outcome of other factors such as overhiring of workers, decreased volume of other
business, or dropping of a particular product line or service activity previously manufactured or undertaken by
the enterprise.4

The hiring of an independent security agency is a business decision properly within the exercise of management
prerogative. As such, this Court is denied the authority to delve into its wisdom although it is equipped with
the power to determine whether the exercise of such prerogative is in accordance with law. Consequently, the
wisdom or soundness of the management decision is not subject to the discretionary review of the Labor
Arbiter nor of the NLRC unless there is a violation of law or arbitrariness in the exercise thereof, in which case,
this Court will step in.5Specifically, we held in International Harvester Macleod, Inc. v. Intermediate Appellate
Court6 that the determination of whether to maintain or phase out an entire department or section or to
reduce personnel lies with management. The determination of the need for the phasing out of a department
as a labor and cost saving device because it is no longer economical to retain its services is a management
prerogative.

After having established that the termination of petitioner Ruben Serrano was for an authorized cause, we now
address the issue of whether proper procedures were observed in his dismissal.

Since the State affords protection to labor under the Constitution,7 workers enjoy security of tenure and may
only be removed or terminated upon valid reason and through strict observance of proper procedure.8 Article
279 of the Labor Code specifically provides —
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.

Security of tenure however does not guarantee perpetual employment. If there exists a just or an authorized
cause, the employer may terminate the services of an employee but subject always to procedural
requirements. The employer cannot be legally compelled to have in its employ a person whose continued
employment is patently inimical to its interest. The law, while affording protection to the employee, does not
authorize the oppression or destruction of his employer.9

Subject then to the constitutional right of workers to security of tenure and to be protected against dismissal
except for a just or authorized cause, and without prejudice to the requirement of notice under Art. 283 of the
Labor Code, the employer shall furnish the worker whose employment is sought to be terminated a written
notice containing a statement of the cause of termination and shall afford the latter ample opportunity to be
heard and to defend himself with the assistance of his representative, if he so desires, in accordance with
company rules and regulations promulgated pursuant to guidelines set by the DOLE.10

As specifically provided in Art. 283 of the Labor Code, the employer may terminate the employment of any
employee due to redundancy by serving a written notice on the worker and the DOLE at least one (1) month
before the intended date thereof. In the instant case, ISETANN clearly violated the provisions of Art. 283 on
notice.11 It did not send a written notice to DOLE which is essential because the right to terminate an employee
is not an absolute prerogative. The lack of written notice denied DOLE the opportunity to determine the validity
of the termination.

The written notice ISETANN sent to Serrano was dated 11 October 1991 or on the same day the intended
termination was to take effect. This obviously did not comply with the 30-day mandatory requirement.
Although the cause for discharge may be just or authorized, it is still necessary and obligatory to afford the
employee concerned his basic and more important right to notice. Serrano was not given the chance to make
the needed adjustments brought about by his termination. Significantly, the notice is intended to enable the
employee not only to prepare himself for the legal battle to protect his tenure of employment, which can be
long, arduous, expensive and complicated by his own standards, but also to find other means of employment
and ease the impact of the loss of his job and, necessarily, has income.

We are of the view that failure to send notice of termination to Serrano is not tantamount to violation of his
constitutional right to due process but merely constitutes non-compliance with the provision on notice under
Art. 283 of the Labor Code.

The legitimacy of a government is established and its functions delineated in the Constitution. From the
Constitution flows all the powers of government in the same manner that it sets the limits for their proper
exercise. In particular, the Bill of Rights functions primarily as a deterrent to any display of arbitrariness on the
part of the government or any of its instrumentalities. It serves as the general safeguard, as is apparent in its
first section which states, "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 laws."12 Specifically, due process is a requirement
for the validity of any governmental action amounting to deprivation of liberty.13 It is a restraint on state action
not only in terms of what it amounts to but how it is accomplished. Its range thus covers both the ends sough
to be achieved by officialdom as well as the means for their realization.14
Substantive due process is a weapon that may be utilized to challenge acts of the legislative body, whether
national or local, and presumably executive orders of the President and administrative orders and regulations
of a rule-making character. Procedural due process, on the other hand, is available for the purpose of assailing
arbitrariness or unreasonableness in the administration of the law by executive department or the judicial
branch. Procedural due process likewise may aid those appearing before Congressional committees if the
proceedings are arbitrary or otherwise unfair.13

Procedural due process demands that governmental acts, more specifically so in the case of the judiciary, not
be affected with arbitrariness.16 The same disinterestedness required of men on the bench must characterize
the actuations of public officials, not excluding the President, to satisfy the requirements of procedural due
process.17

In his dissent Mr. Justice Puno states that "the new majority opinion limiting violations of due process to
government action alone is a throwback to a regime of law long discarded by more progressive countries." He
opines that "today, private due process is a settled norm in administrative law," citing Schwartz, an authority
in administrative law.

We beg to disagree. A careful reading of Schwartz would reveal that requirements of procedural due process
extended from governmental to private action only in instances where there is "sufficient governmental
involvement" or "the private action was so saturated with governmental incidents."

The cardinal primary requirements of due process in administrative proceedings were highlighted in Ang Tibay
v. Court of Industrial Relations:18 (a) the right to a hearing, which includes the right to present one's case and
submit evidence in support thereof; (b) the tribunal must consider the evidence presented; (c) the decision
must have something to support itself; (d) the evidence must be substantial; (e) the decision must be based on
the evidence presented at the hearing, or at least contained in the record and disclosed to the parties affected;
(f) the tribunal or body or any of its judges must act on its own independent consideration of the law and facts
of the controversy, and not simply accept the views of a subordinate; (g) the board or body should, in all
controversial questions, render its decision in such manner that the parties to the proceeding may know the
various issues involved, and the reason for the decision rendered.

Also in Lumiqued v. Exevea19 it was held —

In administrative proceedings, the essence of due process is simply the opportunity to explain one's side. One
may be heard, not solely by verbal presentation but also, and perhaps even more creditably as it is more
practicable than oral arguments, through pleadings. An actual hearing is not always an indispensable aspect of
due process. As long as a party was given the opportunity to defend his interests in due course, he cannot be
said to have been denied due process of law, for this opportunity to be heard is the very essence of due process.

From the foregoing, it is clear that the observance of due process is demanded in governmental acts.
Particularly in administrative proceedings, due process starts with the tribunal or hearing officer and not with
the employer. In the instant case, what is mandated of the employer to observe is the 30-day notice
requirement. Hence, non-observance of the notice requirement is not denial of due process but merely a
failure to comply with a legal obligation for which we strongly recommend, we impose a disturbance
compensation as discussed hereunder.

In the instant case, we categorically declare that Serrano was not denied his right to due process. Instead, his
employer did not comply with the 30-day notice requirement. However, while Serrano was not given the
required 30-day notice, he was nevertheless given and, in fact, took advantage of every opportunity to be
heard, first, by the Labor Arbiter, second, by the NLRC, and third, by no less than this Court. Before the Labor
Arbiter and the NLRC, petitioner had the opportunity to present his side not only orally but likewise through
proper pleadings and position papers.

It is not correct therefore to say that petitioner was deprived of his right to due process.

We have consistently upheld in the past as valid although irregular the dismissal of an employee for a just or
authorized cause but without notice and have imposed a sanction on the erring employers in the form of
damages for their failure to comply with the notice requirement. We discussed the rationale behind this ruling
in Wenphil Corporation v. NLRC20 thus —

The Court holds that the policy of ordering reinstatement to the service of an employee without loss of
seniority and the payment of his wages during the period of his separation until his actual reinstatement but
not exceeding three years without qualification or deduction, when it appears he was not afforded due process,
although his dismissal was found to be for just and authorized cause in an appropriate proceeding in the
Ministry of Labor and Employment should be re-examined. It will be highly prejudicial to the interests of the
employer to impose on him the services of an employee who has been shown to be guilty of the charges that
warranted his dismissal from employment. Indeed, it will demoralize the rank and file if the undeserving, if not
undesirable, remains in the service . . . . 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 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 (emphasis supplied).

In Sebuguero v. National Labor Relations Commission21 Mr. Justice Davide Jr., now Chief Justice, made this clear
pronouncement —

It is now settled that where the dismissal of an employee is in fact for a just and valid cause and is so proven
to be but he is not accorded his right to due process, i.e. he was not furnished the twin requirements of notice
and the opportunity to be heard, the dismissal shall be upheld but the employer must be sanctioned for non-
compliance with the requirements of or for failure to observe due process. The sanction, in the nature of
indemnification or penalty, depends on the facts of each case and the gravity of the omission committed by
the employer.

This ruling was later ably amplified by Mr. Justice Puno in Nath v. National Labor Relations Commission22 where
he wrote —

The rules require the employer to furnish the worker sought to be dismissed with two written notices before
termination of employment can be legally effected: (1) 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 employer's decision to dismiss him. In the instant case, private respondents have failed to furnish
petitioner with the first of the required two (2) notices and to state plainly the reasons for the dismissal in the
termination letter. Failure to comply with the requirements taints the dismissal with illegality.

Be that as it may, private respondent can dismiss petitioner for just cause . . . . We affirm the finding of the
public respondent that there was just cause to dismiss petitioner, a probationary employee (emphasis supplied).

Also, in Camua v. National Labor Relations Commission23 this Court through Mr. Justice Mendoza decreed —
In the case at bar, both the Labor Arbiter and the NLRC found that no written notice of the charges had been
given to petitioner by the respondent company. . . . Accordingly, in accordance with the well-settled rule,
private respondents should pay petitioner P1,000.00 as indemnity for violation of his right to due process . . . .
Although an employee validy dismissed for cause he may nevertheless be given separation pay as a measure
of social justice provided the cause is not serious misconduct reflecting on his moral character (emphasis
supplied).

Non-observance of this procedural requirement before would cause the employer to be penalized by way of
paying damages to the employee the amounts of which fluctuated through the years. Thus, for just cause the
indemnity ranged from P1,000.00 to P10,000.00.24 For authorized cause, as distinguished from just cause, the
award ranged from P2,000.00 to P5,000.00.25

This Court has also sanctioned the ruling that a dismissal for a just or authorized cause but without observance
of the mandatory 30-day notice requirement was valid although considered irregular. The Court ratiocinated
that employers should not be compelled to keep in their employ undesirable and undeserving laborers. For the
irregularity, i.e., the failure to observe the 30-day notice of termination, the employer was made to pay a
measly sum ranging from P1,000.00 to P10,000.00.

With regard to the indemnity or penalty, which we prefer seriously to be referred to as "disturbance
compensation," the Court has awarded varying amounts depending on the circumstances of each case and the
gravity of the commission. We now propose that the amount of the award be uniform and rational and not
arbitrary. The reason for the proposal or modification is that in their non-compliance with the 30-day notice
requirement the erring employers, regardless of the peculiar circumstances of each case, commit the infraction
only by the single act of not giving any notice to their workers. It cannot be gainfully said that the infraction in
one case is heavier than in the other as the non-observance constitutes one single act. Thus, if the dismissal is
illegal, i.e. there is no just or authorized cause, a disturbance compensation in the amount of P10,000.00 may
be considered reasonable. If the dismissal is for a just cause but without notice, a disturbance compensation
in the amount P5,000.00 may be given. In termination for an authorized cause and the notice requirement was
not complied with, we distinguish further: If it is to save the employer from imminent bankruptcy or business
losses, the disturbance compensation to be given is P5,000.00. If the authorized cause was intended for the
employer to earn more profits, the amount of disturbance compensation is P10,000.00. This disturbance
compensation, again we strongly recommend, should be given to the dismissed employee at the first instance,
the moment it is shown that his employer has committed the infraction — of not complying with the 30-day
written notice requirement — to tide him over during his economic dislocation.

The right of the laborers to be informed of their impending termination cannot be taken lightly, and the award
of any amount below P5,000.00 may be too anemic to satisfy the fundamental protection especially accorded
to labor and the workingman. In fact, it is hardly enough to sustain a family of three; more so if the employee
has five or more children, which seems to be the average size of a Filipino family.

Henceforth, if the dismissal is for a just cause but without observance of the 30-day notice requirement, the
dismissal is deemed improper and irregular. If later the dismissal is ascertained to be without just cause, the
dismissed employee is entitled to reinstatement, if this be feasible, otherwise to separation pay and back wages
plus disturbance compensation of P10,000.00 and moral damages, if warranted. On the other hand, if the
dismissal is ascertained to be with just cause, the dismissed employee is entitled nevertheless to a disturbance
compensation of P5,000.00 if the legal requirement of the 30-day notice to both employee and DOLE has not
been complied with.
In instances where there is obviously a ground for dismissal, as when the employee has become violent and
his presence would cause more harm to his co-workers and the security and serenity of the workplace, the
employee may be suspended in the meantime until he is heard with proper observance of the 30-day notice
requirement. Likewise, if the dismissal is for an authorized cause but without the required notice, the dismissal
is improper and irregular and the employee should be paid separation pay, back wages and disturbance
compensation of P5,000.00 or P10,000.00.00 depending on the cause. As already intimated, if the authorized
cause is for the purpose of saving the employer from imminent bankruptcy or business losses, the disturbance
compensation should be P5,000.00; otherwise, if the authorized cause is for the employer, in the exercise of
management prerogative, to save and earn more profits, the disturbance compensation should be P10,000.00.

In the instant case, Serrano was given his walking papers only on the very same day his termination was to take
effect. DOLE was not served any written notice. In other words, there was non-observance of the 30-day notice
requirement to both Serrano and the DOLE. Serrano was thus terminated for an authorized cause but was not
accorded his right to 30-day notice. Thus, his dismissal being improper and irregular, he is entitled to separation
pay and back wages the amounts of which to be determined by the Labor Arbiter, plus P10,000.00 as
disturbance compensation which, from its very nature, must be paid immediately to cushion the impact of his
economic dislocation.

One last note. This Separate Opinion is definitely not advocating a new concept in imposing the so-called
"disturbance compensation." Since Wenphil Corporation v. NLRC 26 this Court has already recognized the
necessity of imposing a sanction in the form of indemnity or even damages, when proper, not specifically
provided by any law, upon employers who failed to comply with the twin-notice requirement. At the very least,
what is being proposed to be adopted here is merely a change in the terminology used, i.e., from "sanction,"
"indemnity," "damages" or "penalty," to "disturbance compensation" as it is believed to be the more
appropriate term to accurately describe the lamentable situation of our displaced employees.

Indeed, from the time the employee is dismissed from the service without notice — in this case since 11
October 1991 — to the termination of his case, assuming it results in his reinstatement, or his being paid his
back wages and separation pay, as the case may be, how long must he be made to suffer emotionally and bear
his financial burden? Will reinstating him and/or paying his back wages adequately make up for the entire
period that he was indistress for want of any means of livelihood? Petitioner Serrano has been deprived of his
only source of income — his employment — for the past eight (8) years or so. Will his reinstatement and/or
the payment of his back wages and separation pay enable him to pay off his debts incurred in abject usury —
to which he must have succumbed — during his long period of financial distress? Will it be adequate? Will it
be just? Will it be fair? Thus, do we really and truly render justice to the workingman by simply awarding him
full back wages and separation pay without regard for the long period during which he was wallowing in
financial difficulty?

FOR ALL THE FOREGOING, the Decision of respondent National Labor Relations Commission should be
MODIFIED. The termination of petitioner RUBEN SERRANO being based on an authorized cause should be
SUSTAINED AS VALID although DECLARED IRREGULAR for having been effected without the mandatory 30-day
notice.

ISETANN DEPARTMENT STORE INC. should PAY petitioner SERRANO back wages and separation pay the
amounts of which to be determined by the Labor Arbiter, plus P10,000.00 as disturbance compensation which
must be paid immediately. Consequently, except as regards the disturbance compensation, the case should be
REMANDED to the Labor Arbiter for the immediate computation and payment of the back wages and
separation pay due petitioner.
EXCEPT as herein stated, I concur with the majority.

PUNO, J., dissenting opinion;

The rule of audi alteram partem — hear the other side, is the essence of procedural due process. That a "party
is not to suffer in person or in purse without an opportunity of being heard" is the oldest established principle
in administrative law.1 Today, the majority is relies that the all important right of an employee to be notified
before he is dismissed for a just or authorized cause is not a requirement of due process. This is a blow on the
breadbasket of our lowly employees, a considerable erosion of their constitutional right to security of tenure,
hence this humble dissenting opinion.

A review of our law on dismissal is in order.

I. DISMISSAL DUE TO JUST CAUSE

The law allowing dismissal of an employee due to a just cause is provided in Article 282 of the Labor Code:

Art. 282. Termination by employer. — An employer may terminate an employment for any of the following
causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his 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 duly authorized
representative;

(d) Commission of the 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.

The long established jurisprudence2 is that to justify dismissal of an employee for a just cause, he must be given
two kinds of notice by his employer, viz: (1) notice to apprise the employee of the particular acts or omissions
for which the dismissal is sought, and (2) subsequent notice to inform him of the employer's decision to dismiss
him. Similarly, deeply ingrained is our ruling that these pre and post notice requirements are not mere
technicalities but are requirements of due process.3

Then came the case of Wenphil Corporation vs. NLRC and Mallare in 1989.4 It is the majority view that Wenphil
reversed the long standing policy of this Court on dismissal. This is too broad a reading of Wenphil. A careful
statement of the facts of Wenphil and the ruling of this Court is thus proper.

First, the facts. The private respondent Roberto Mallare is the assistant head of the backroom department of
petitioner Wenphil Corporation. At about 2:30 pm on May 20, 1985, Mallare had an altercation with his co-
employee, Job Barrameda, about tending the Salad Bar. He slapped Barrameda's cap, stepped on his foot,
picked up an ice scooper and brandished it against the latter. He refused to be pacified by another employee
who reported the incident to Delilah Hermosura, assistant manager. Hermosura summoned Mallare but the
latter refused to see the former. It took a security guard to bring Mallare to Hermosura. Instead of making an
explanation, Mallare shouted profane words against Hermosura. He declared that their altercation should only
be settled by him and Barrameda.

The following morning, Mallare was suspended. In the afternoon, he was dismissed from the service. He
received an official notice of his dismissal four (4) days later.

Mallare filed with the Labor Arbiter a complaint for illegal suspension, illegal dismissal and unfair labor practice.
No hearing was conducted in view of the repeated absence of the counsel of Mallare. The parties submitted
their respective position papers. On December 3, 1986, the Arbiter denied the complaint as he found Mallare
guilty of grave misconduct and insubordination, which are just causes for dismissal. The Arbiter also ruled that
Mallare was not denied due process. On appeal, the NLRC reversed. It held that Mallare was denied due process
before he was dismissed. It ordered Mallare's reinstatement and the payment of his one (1) year backwages.

On certiorari to this Court, we reversed the NLRC and reinstated the decision of the Arbiter with the
modification that petitioner should pay to Mallare an indemnity of P1,000.00 for dismissing Mallare without
any notice and hearing. We held:

Petitioner insists that private respondent was afforded due process but he refused to avail of his right to the
same; that when the matter was brought to the labor arbiter he was able to submit his position paper although
the hearing cannot proceed due to the non-appearance of his counsel; and that the private respondent is guilty
of serious misconduct in threatening or coercing a co-employee which is a ground for dismissal under Article
283 of the Labor Code.

The failure of petitioner to give private respondent the benefit of a hearing before he was dismissed constitutes
an infringement of his constitutional right to due process of law and equal protection of the laws. The standards
of due process in judicial as well as administrative proceedings have long been established. In its bare minimum
due process of law simply means giving notice and opportunity to be heard before judgment is rendered.

The claim of petitioner that a formal investigation was not necessary because the incident, which gave rise to
the termination of private respondent, was witnessed by his co-employees and supervisors, is without merit.
The basic requirement of due process is that which hears before it condemns, which proceeds upon inquiry
and renders judgment only after trial.

However, it is a matter of fact that when the private respondent filed a complaint against petitioner, he was
afforded the right to an investigation by the labor arbiter. He presented his position paper as did the petitioner.
If no hearing was had, it was the fault of private respondent as his counsel failed to appear at the scheduled
hearings. The labor arbiter concluded that the dismissal of private respondent was for just cause. He was found
guilty of grave misconduct and insubordination. This is borne by the sworn statements of witnesses. The Court
is bound by this finding of the labor arbiter.

By the same token, the conclusion of the public respondent NLRC on appeal that private respondent was not
afforded due process before he was dismissed is binding on this Court. Indeed, it is well taken and supported
by the records. However, it can not justify a ruling that private respondent should be reinstated with back
wages as the public respondent NLRC so decreed. Although belatedly, private respondent was afforded due
process before the labor arbiter wherein the just cause of his dismissal had been established. With such finding,
it would be arbitrary and unfair to order his reinstatement with back wages.

Three member of the Court filed concurring and dissenting opinions. Madam Justice Herrera opined that: (a)
Mallare was dismissed for cause, hence, he is not entitled to reinstatement and backwages; (b) he was not
denied due process; and (c) he has no right to any indemnity but to separation pay to cushion the impact of his
loss of employment Mr. Justice Padilla took the view that: (1) Mallare was not entitled to reinstatement and
backwages as he was guilty of grave misconduct and insubordination; (2) he was denied administrative due
process; and (3) for making such denial, Wenphil should pay "separation pay (instead of indemnity) in the sum
of P1,000.00." Madam Justice Cortes held that: (1) Mallare was not illegally dismissed; (2) he was not denied
due process; (3) he was not entitled to indemnity; and (4) if P1,000.00 was to be imposed on Wenphil as an
administrative sanction, it should form part of the public fund of the government.

I shall discuss later that Wenphil did not change our ruling that violation of the pre-dismissal notice
requirement is an infringement of due process.

II. DISMISSAL DUE TO AUTHORIZED CAUSE

The applicable law on dismissal due to authorized cause is Article 283 of the Labor Code which provides:

Art. 283. Closure of establishment and reduction of personnel. — The employer may also terminate the
employment of any employee due to the installation of labor serving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment 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 [Department] 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 closures
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.

In Sebuguero v. NLRC,5 we held thru our esteemed Chief Justice Davide that "the requirement of notice to both
the employees concerned and the Department of Labor and Employment (DOLE) is mandatory and must be
written and given at least one month before the intended date of retrenchment." We explained that the
"notice to the DOLE is essential because the right to retrench is not an absolute prerogative of an employer
but is subject to the requirement of law that retrenchment be proved to prevent losses. The DOLE is the agency
that will determine whether the planned retrenchment is justified and adequately supported by
fact."6 Nonetheless, we ruled:

The lack of written notice to the petitioners and to the DOLE does not, however, make the petitioners'
retrenchment illegal such that they are entitled to the payment of back wages and separation pay in lieu of
reinstatement as they contend. Their retrenchment, for not having been effected with the required notices, is
merely defective. In those cases where we found the retrenchment to be illegal and ordered the employees'
reinstatement and the payment of backwages, the validity of the cruse for retrenchment, that is the existence
of imminent or actual serious or substantial losses, was not proven. But here, such a cause is present as found
by both the Labor Arbiter and the NLRC. There is only a violation by GTI of the procedure prescribed in Article
283 of the Labor Code in effecting the retrenchment of the petitioners.1âwphi1.nêt

It is now settled that where the dismissal of an employee is in fact for a just and valid cause and is so proven
to be but he is not accorded his right to due process, i.e., he was not furnished the twin requirements of notice
and the opportunity to be heard, the dismissal shall be upheld but the employer must be sanctioned for non-
compliance with the requirements of or for failure to observe due process. The sanction, in the nature of
indemnification or penalty, depends on the facts of each case and the gravity of the omission committed by
the employer and has ranged from P1,000.00 as in the cases of Wenphil vs. National Labor Relations
Commission, Seahorse Maritime Corp. v.National Labor Relations Commission, Shoemart, Inc. vs. National
Labor Relations Commission, Rubberworld (Phils.) Inc. vs. National Labor Relations Commission, Pacific Mills,
Inc. vs. Alonzo, and Aurelio vs. National Labor Relations Commission to P10,000.00 in Reta vs. National Labor
Relations Commission and Alhambra Industries, Inc. vs. National Labor Relations Commission. More recently,
in Worldwide Papermills, Inc. vs. National Labor Relations Commission, the sum of P5,000.00 was awarded to
the employee as indemnification for the employer's failure to comply with the requirements of procedural due
process.

Accordingly, we affirm the deletion by the NLRC of the award of back wages, But because the required notices
of the petitioners' retrenchment were not served upon the petitioners and the DOLE, GTI must be sanctioned
for such failure and thereby required to indemnify each of the petitioners the sum of P20,000.00 which we find
to be just and reasonable under the circumstances of this case.

III. RE-EXAMINATION OF THE WENPHIL DOCTRINE:

FROM BAD TO WORSE

The minority of the Court has asked for a re-examination of Wenphil because as the majority correctly
observed, "the number of cases involving dismissals without the requisite notice to the employee although
effected for just or authorized causes suggests that the imposition of fine for violation of the notice
requirement has not been effective in deterring violations of the notice requirement."

We must immediately set Wenphil in its proper perspective as it is a very exceptional case. Its doctrine must
be limited to its distinct facts. Its facts therefore ought to be carefully examined again. In Wenphil, it was clearly
established that the employee had a violent temper, caused trouble during office hours and even defied his
superiors as they tried to pacify him. The employee was working for a fast food chain that served the public
and where violence has no place. These facts were established only in the proceedings before the Labor Arbiter
after the employee filed a complaint for illegal dismissal. There were no formal investigation proceedings
before the employer as the employment was dismissed without any notice by the employer. Given these facts,
we ruled that the pre-dismissal notice requirement was part of due process; nonetheless, we held that the
employee was given due process as he was heard by the Labor Arbiter; we found that the proceedings before
the Labor Arbiter proved that the employer was guilty of grave misconduct and insubordination; we concluded
with the rule that it would be highly prejudicial to the interest of the employer to reinstate the employee, but
the employer must indemnify the employee the amount of P1,000.00 for dismissing him without notice. We
further held that "the measure of this award depends on the facts or each case and the gravity of the omission
committed by the employer."7

At the outset, I wish to emphasize that Wenphil itself held, and repeatedly held that "the failure of petitioner
to give private respondent the benefit of a hearing before he was dismissed, constitutes an infringement of his
constitutional right to due process of law and equal protection of the laws. The standards of due process of
law in judicial as well as administrative proceedings have long been established. In its bare minimum due
process of law simply means giving notice and opportunity to be heard before judgment is rendered."8 The
Court then satisfied itself with this bare minimum when it held that the post dismissal hearing before the Labor
Arbiter was enough compliance with demands of due process and refused to reinstate an eminently
undesirable employee. Heretofore, the Court was far from satisfied with this bare minimum as it strictly
imposed on an employer compliance with the requirement of pre-dismissal notice, violation of which resulted
in orders of reinstatement of the dismissed employee. This is the only wrinkle wrought by Wenphil in our
jurisprudence on dismissal. Nonetheless, it should be stressed that the Court still punished Wenphil's violation
of the pre-dismissal notice requirement as it was ordered to pay an indemnity of P1,000.00 to the employee.
The indemnity was based on the iterated and reiterated rule that "the dismissal of an employee must be for
just or authorized cause and after due process."9

Our ten (10) years experience with Wenphil is not a happy one. Unscrupulous employers have abused the
Wenphil ruling. They have dismissed without notice employees including those who are not as eminently
undesirable as the Wenphil employee. They dismissed employees without notice as a general rule when it
should be the exception. The purpose of the pre-dismissal notice requirement was entirely defeated by
employers who were just too willing to pay an indemnity for its violation. The result, as the majority concedes,
is that the indemnity we imposed has not been effective to prevent unjust dismissals employees. To be sure,
this is even a supreme understatement. The ugly truth is that Wenphil is the mother of many unjust and
unauthorized dismissals of employees who are too weak to challenge their powerful employees.

As the Wenphil indemnity doctrine has proved to be highly inimical to the interest of our employees, I humbly
submit a return to the pre-Wenphil rule where a reasonless violation of the pre-dismissal notice requirement
makes the dismissal of an employee illegal and results in his reinstatement. In fine, we should strike down as
illegal the dismissal of an employee even if it is for a justified end if it is done thru unjustified means for we
cannot be disciples of the Machiavellian doctrine of the end justifies the means. With due respect, the majority
decision comes too near this mischievous doctrine by giving emphasis on the end and not the means of
dismissal of employees. What grates is that the majority today espouses a doctrine more pernicious than
Wenphil for now it announces that a violation of the pre-dismissal notice requirement does not even concern
due process. The reasons relied upon by the majority for this new ruling against the job security of employees
cannot inspire assent.

FIRST. I would like to emphasize that one undesirable effect of Wenphil is to compel employees to seek relief
against illegal dismissals with the DOLE whereas before, a remedy can be sought before the employer. In
shifting this burden, an employee's uneven fight against his employer has become more uneven. Now, an
illegally dismissed employee often goes to the DOLE without an exact knowledge of the cause of his dismissal.
As a matter of strategy, some employers today dismiss employees without notice. They know that it is more
advantageous for them to litigate with an employee who has no knowledge of the cause of dismissal. The
probability is that said employee will fail to prove the illegality of his dismissal. All that he can prove is that he
was dismissed without notice and the penalty for the omission is a mere fine, a pittance.

The case at bar demonstrates how disastrous Wenphil has been to our helpless employees. In holding that the
petitioner failed to prove his cause of action, the majority held ". . . we have only the bare assertion of
petitioner that, in abolishing the security section, private respondent's real purpose was to avoid payment to
the security checkers of the wage increases provided in the collective bargaining agreement approved in 1990."
The bare assertion of the petitioner is understandable. The notice given to him spoke of a general ground —
retrenchment. No details were given about the employer's sudden retrenchment program. Indeed, the
employee was dismissed on the day he received the notice in violation of the 30-day requirement. He was
given no time, no opportunity to ascertain and verify the real cause of his dismissal. Thus, he filed with the
DOLE a complaint for illegal dismissal with a hazy knowledge of its real cause. Heretofore, it is the employer
whom we blame and penalize if he does not notify his employee of the cause of his dismissal. Today, the
majority puts the blame on the employee for not knowing why he was dismissed when he was not given any
notice of dismissal. In truth, the suspicion of the petitioner in the case at bar that he was dismissed to avoid
payment of their wage increases is not without basis. The DOLE itself found that petitioner has unpaid wages
which were ordered to be paid by the employer. The majority itself affirmed this finding.
What hurts is that while the majority was strict with the petitioner-employee, it was not so with the employer
ISETANN. Immediately, it validated the finding of the NLRC that petitioner was dismissed due to the redundancy
of his position. This is inconsistent with the finding of the Labor Arbiter that the employer failed to prove
retrenchment, the ground it used to dismiss the petitioner. A perusal of the records will show that Ms. Cristina
Ramos, Personnel Administration Manager of the employer ISETANN testified on the cause of dismissal of the
petitioner. She declared that petitioner was retrenched due to the installation of a labor saving device.
Allegedly, the labor saving device was the hiring of an independent security agency, thus:10

xxx xxx xxx

Atty. Perdigon:

You said that your company decided to phase out the position of security checkers . . .

Ms. Ramos:

Yes Sir.

Q: And instead hired the services of a security agency?

A: Yes, sir.

xxx xxx xxx

Q: Did you not retrench the position of security checkers?

A: We installed a labor saving device.

Q: So you did not retrench?

A: No. sir.

Q: How about the position of Section Head of Security Department?

A: It was abolished in 1991.

xxx xxx xxx

Q: Are you aware of the retrenchment program of the company as stated in this letter?

A: Actually it's not a retrenchment program. It's an installation of a labor saving device.

Q: So you are telling this Court now that there was no retrenchment program?

A: It was actually an installation of a labor saving device (emphasis supplied).

xxx xxx xxx

Q: . . . What (is) this labor saving device that you are referring to?

A: The labor saving device is that the services of a security agency were contracted to handle the services of
the security checkers of our company.

Q: Are you sure of what labor saving means, Madam witness?

A: Yes, sir.
Q: You said you installed a labor saving device, and you installed a security agency as a labor saving device?

A: We hired the services of a security agency.

Q: So according to you . . . a security agency is a labor saving device?

Atty. Salonga:

Already answered, your Honor.

Obviously, Ms. Ramos could not even distinguish between retrenchment and redundancy. The Labor Arbiter
thus ruled that petitioner's dismissal was illegal. The NLRC, however, reversed. The majority affirmed the NLRC
ruling that ISETANN's phase out of its security employees is a legitimate business decision, one that is necessary
to obtain reasonable return from its investment. To use the phrase of the majority, this is a "bare assertion."
Nothing in the majority decision shows how the return of ISETANN's investment has been threatened to justify
its so-called business decision as legitimate.

SECOND. The majority holds that "the need is for a rule which, while recognizing the employee's right to notice
before he is dismissed or laid off, at the same time acknowledges the right of the employer to dismiss for any
of the just causes enumerated in Art. 282 or to terminate employment for any of the authorized causes
mentioned in Arts. 283-284. If the Wenphil rule imposing a fine on an employer who is found to have dismissed
an employee for cause without prior notice is deemed ineffective in deterring employer violations of the notice
requirement, the remedy is not to declare the dismissal void if there are just or valid grounds for such dismissal
or if the termination is for an authorized cause. That would be to uphold the right of the employee but deny
the right of the employer to dismiss for cause. Rather, the remedy is to consider the dismissal or termination
to be simply ineffectual for failure of the employer to comply with the procedure for dismissal or termination.

With due respect, I find it most difficult to follow the logic of the majority. Before Wenphil, we protected
employees with the ruling that dismissals without prior notice are illegal and the illegally dismissed employee
must be reinstated with backwages. Wenphil diluted that rule when it held that due process is satisfied if the
employee is given the opportunity to be heard by the Labor Arbiter. It further held that an employee cannot
be reinstated if it is established in the hearing that his dismissal is for a just cause. The failure of the employer
to give a pre-dismissal notice is only to be penalized by payment of an indemnity. The dilution of the rule has
been abused by unscrupulous employers who then followed the "dismiss now, pay later" strategy. This evil
practice of employers was what I expected the majority to address in re-examining the Wenphil doctrine. At
the very least, I thought that the majority would restore the balance of rights between an employee and an
employer by giving back the employee's mandatory right to notice before dismissal. It is disquieting, however,
that the majority re-arranged this balance of right by tilting it more in favor of the employer's right to dismiss.
Thus, instead of weakening a bit the right to dismiss of employers, the majority further strengthens it by
insisting that a dismissal without prior notice is merely "ineffectual" and not illegal.

The stubborn refusal of the majority to appreciate the importance of pre-dismissal notice is difficult to
understand. It is the linchpin of an employee's right against an illegal dismissal. The notice tells him the cause
of his dismissal. It gives him a better chance to contest his dismissal in an appropriate proceeding as laid down
in the parties' collective bargaining agreement or the rules of employment established by the employer, as the
case may be. In addition, it gives to both the employee and employer more cooling time to settle their
differences amicably. In fine, the prior notice requirement and the hearing before the employer give an
employee a distinct, different and effective first level of remedy to protect his job. In the event the employee
is dismissed, he can still file a complaint with the DOLE with better knowledge of the cause of his dismissal,
with longer time to prepare his case, and with greater opportunity to take care of the financial needs of his
family pendente lite. The majority has taken away from employees this effective remedy. This is not to say that
the pre-dismissal notice requirement equalizes the fight between an employee and an employer for the fight
will remain unequal. This notice requirement merely gives an employee a fighting chance but that fighting
chance is now gone.

It is equally puzzling why the majority believes that restoring the employee's right to pre-dismissal notice will
negate the right of an employer to dismiss for cause. The pre-Wenphil rule simply requires that before the right
of the employer to dismiss can be exercised, he must give prior notice to the employee of its cause. There is
nothing strange nor difficult about this requirement. It is no burden to an employer. He is bereft of reason not
to give the simple notice. If he fails to give notice, he can only curse himself. He forfeits his right to dismiss by
failing to follow the procedure for the exercise of his right. Employees in the public sector cannot be dismissed
without prior notice. Equal protection of law demands similar treatment of employees in the private sector.

THIRD. The case at bar specifically involves Article 283 of the Labor Code which lays down four (4) authorized
causes for termination of employment.11 These authorized causes are: (1) installation of labor-saving devices;
(2) redundancy; (3) retrenchment to prevent losses; and (4) closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the law. It also provides
that prior to the dismissal of an employee for an authorized cause, the employer must send two written notices
at least one month before the intended dismissal — one notice to the employee and another notice to the
Department of Labor and Employment (DOLE). We have ruled that the right to dismiss on authorized causes is
not an absolute prerogative of an employer.12 We explained that the notice to the DOLE is necessary to enable
it to ascertain the truth of the cause of termination.13 The DOLE is equipped with men and machines to
determine whether the planned closure or cessation of business or retrenchment or redundancy or installation
of labor saving device is justified by economic facts.14 For this reason too, we have held that notice to the
employee is required to enable him to contest the factual bases of the management decision or good faith of
the retrenchment or redundancy before the DOLE.15 In addition, this notice requirement gives an employee a
little time to adjust to his joblessness.16

The majority insists that if an employee is laid off for an authorized cause under Article 283 in violation of the
prior notice requirement, his dismissal should not be considered void but only ineffectual. He shall not be
reinstated but paid separation pay and some backwages. I respectfully submit that an employee under Article
283 has a stronger claim to the right to a pre-dismissal notice and hearing. To begin with, he is an innocent
party for he has not violated any term or condition of his employment. Moreover, an employee in an Article
283 situation may lose his job simply because of his employer's desire for more profit. Thus, the installation of
a labor saving device is an authorized cause to terminate employment even if its non-installation need not
necessarily result in an over-all loss to an employer possessed by his possessions. In an Article 283 situation, it
is easy to see that there is a greater need to scrutinize the allegations of the employer that he is dismissing an
employee for an authorized cause. The acts involved here are unilateral acts of the employer. Their nature
requires that they should be proved by the employer himself. The need for a labor saving device, the reason
for redundancy, the cause for retrenchment, the necessity for closing or cessation of business are all within the
knowledge of the employer and the employer alone. They involve a constellation of economic facts and factors
usually beyond the ken of knowledge of an ordinary employee. Thus, the burden should be on the employer
to establish and justify these authorized causes. Due to their complexity, the law correctly directs that notice
should be given to the DOLE for it is the DOLE more than the lowly employee that has the expertise to validate
the alleged cause in an appropriate hearing. In fine, the DOLE provides the equalizer to the powers of the
employer in an Article 283 situation. Without the equalizing influence of DOLE, the employee can be abused
by his employer.
Further, I venture the view that the employee's right to security of tenure guaranteed in our Constitution calls
for a pre-dismissal notice and hearing rather than a post facto dismissal hearing. The need for an employee to
be heard before he can be dismissed cannot be overemphasized. As aforestated, in the case at bar, petitioner
was a regular employee of ISETANN. He had the right to continue with his employment. The burden to establish
that this right has ceased is with ISETANN, as petitioner's employer. In fine, ISETANN must be the one to first
show that the alleged authorized cause for dismissing petitioner is real. And on this factual issue, petitioner
must be heard. Before the validity of the alleged authorized cause is established by ISETANN, the petitioner
cannot be separated from employment. This is the simple meaning of security of tenure. With due respect, the
majority opinion will reduce this right of our employees to a mere illusion. It will allow the employer to dismiss
an employee for a cause that is yet to be established. It tells the employee that if he wants to be heard, he can
file a case with the labor arbiter, then the NLRC, and then this Court. Thus, it unreasonably shifts the burden
to the employee to prove that his dismissal is for an unauthorized cause.

The pernicious effects of the majority stance are self-evident in the case at bar. For one, petitioner found
himself immediately jobless and without means to support his family. For another, petitioner was denied the
right to rely on the power of DOLE to inquire whether his dismissal was for a genuine authorized cause. This is
a valuable right for all too often, a lowly employee can only rely on DOLE's vast powers to check employer
abuses on illegal dismissals. Without DOLE, poor employees are preys to the claws of powerful employers. Last
but not the least, it was the petitioner who was forced to file a complaint for illegal dismissal. To a jobless
employee, filing a complaint is an unbearable burden due to its economic cost. He has to hire a lawyer and
defray the other expenses of litigation while already in a state of penury. At this point, the hapless employee
is in a no win position to fight for his right. To use a local adage, "aanhin pa ang damo kung patay na ang
kabayo."

In the case at bar, the job of the petitioner could have been saved if DOLE was given notice of his dismissal.
The records show that petitioner worked in ISETANN as security checker for six (6) years. He served ISETANN
faithfully and well. Nonetheless, in a desire for more profits, and not because of losses, ISETANN contracted
out the security work of the company. There was no effort whatsoever on the part of ISETANN to accommodate
petitioner in an equivalent position. Yet there was the position of Safety and Security Supervisor where
petitioner fitted like a perfect T. Despite petitioner's long and loyal service, he was treated like an outsider,
made to apply for the job, and given a stringent examination which he failed. Petitioner was booted out and
given no chance to contest his dismissal. Neither was the DOLE given the chance to check whether the dismissal
of petitioner was really for an authorized cause. All these because ISETANN did not follow the notice and
hearing requirement of due process.

FOURTH. The majority has inflicted a most serious cut on the job security of employees. The majority did
nothing to restore the pre-Wenphil right of employees but even expanded the right to dismiss of employer by
holding that the pre-dismissal notice requirement is not even a function of due process. This seismic shift in
our jurisprudence ought not to pass.

The key to the new majority ruling is that the "due process clause of the Constitution is a limitation on
governmental powers. It does not apply to the exercise of private power such as the termination of
employment under the Labor Code." The main reason alleged is that "only the State has authority to take the
life, liberty, or property of the individual. The purpose of the Due Process Clause is to ensure that the exercise
of this power is consistent with settled usage of civilized society."

There can be no room for disagreement on the proposition that the due process clause found in the Bill of
Rights of the Constitution is a limitation on governmental powers. Nor can there be any debate that acts of
government violative of due process are null and void. Thus, former Chief Justice Roberto Concepcion
emphasized in Cuaycong v. Senbengco 17 that ". . . acts of Congress as well as those of the Executive, can deny
due process only under pain of nullity, and judicial proceedings suffering from the same flaw are subject to the
same sanction, any statutory provision to the contrary notwithstanding." With due respect to the majority,
however, I part ways with the majority in its new ruling that the due process requirement does not apply to
the exercise of private power. This overly restrictive majority opinion will sap the due process right of
employees of its remaining utility. Indeed, the new majority opinion limiting violations of due process to
government action alone is a throwback to a regime of law long discarded by more progressive countries.
Today, private due process is a settled norm in administrative law. Per Schwartz, a known authority in the
field, viz:18

Private Due Process

As already stressed, procedural due process has proved of an increasingly encroaching nature. Since Goldberg
v. Kelly, the right to be heard has been extended to an ever-widening area, covering virtually all aspects of
agency action, including those previously excluded under the privilege concept. The expansion of due process
has not been limited to the traditional areas of administrative law. We saw how procedural rights have
expanded into the newer field of social welfare, as well as that of education. But due process expansion has
not been limited to these fields. The courts have extended procedural protections to cases involving prisoners
and parolees, as well as the use of established adjudicatory procedures. Important Supreme Court decisions
go further and invalidate prejudgment wage garnishments and seizures of property under replevin statutes
where no provision is made for notice and hearing. But the Court has not gone so far as to lay down an inflexible
rule that due process requires an adversary hearing when an individual may be deprived of any possessory
interest, however brief the dispossession and however slight the monetary interest in the property. Due
process is not violated where state law requires, as a precondition to invoking the state's aid to sequester
property of a defaulting debtor, that the creditor furnish adequate security and make a specific showing of
probable cause before a judge.

In addition, there has been an extension of procedural due process requirements from governmental to private
action. In Section 5.16 we saw that Goldberg v. Kelly has been extended to the eviction of a tenant from a
public housing project. The courts have not limited the right to be heard to tenants who have governmental
agencies as landlords. Due process requirements also govern acts by "private" landlords where there is
sufficient governmental involvement in the rented premises. Such an involvement exists in the case of housing
aided by Federal Housing Administration financing and tax advantages. A tenant may not be summarily evicted
from a building operated by a "private" corporation where the corporation enjoyed substantial tax exemption
and had obtained an FHA-insured mortgage, with governmental subsidies to reduce interest payments. The
"private" corporation was so saturated with governmental incidents as to be limited in its practices by
constitutional process. Hence, it could not terminate tenancies without notice and an opportunity to be heard.

But we need nor rely on foreign jurisprudence to repudiate the new majority ruling that due process restricts
government alone and not private employers like ISETANN. This Court has always protected employees
whenever they are dismissed for an unjust cause by private employers. We have consistently held that before
dismissing an employee for a just cause, he must be given notice and hearing by his private employer.
In Kingsize Manufacturing Corporation vs. NLRC,19 this Court, thru Mr. Justice Mendoza, categorically ruled:

. . . (P)etitioners failure to give notice with warning to the private respondents before their services were
terminated puts in grave doubt petitioners' claim that dismissal was for a just cause. Section 2 Rule XIV of the
Rules implementing the Labor Code provides:
An employer who seeks to dismiss a worker shall furnish him a written notice stating the particular acts or
omission constituting the ground for dismissal. In case of abandonment of work, the notice shall be served on
the worker's last known address.

The notice required, . . ., actually consists of two parts to be separately served on the employee, to wit: (1)
notice to apprise the employee of the particular acts or omissions for which the dismissal is sought; and (2)
subsequent notice to inform him of the employer's decision to dismiss him.

This requirement is not a mere technicality but a requirement of due process to which every employee is
entitled to insure that the employer's prerogative to dismiss or lay off is not abused or exercised in an arbitrary
manner. This rule is clear and unequivocal . . . .20

In other words, we have long adopted in our decisions the doctrine of private due process. This is as it ought
to be. The 1987 Constitution guarantees the rights of workers, especially the right to security of tenure in a
separate article — section 3 of Article XIII entitled Social Justice and Human Rights. Thus, a 20-20 vision of the
Constitution will show that the more specific rights of labor are not in the Bill of Rights which is historically
directed against government acts alone. Needless to state, the constitutional rights of labor should be
safeguarded against assaults from both government and private parties. The majority should not reverse our
settled rulings outlawing violations of due process by employers in just causes cases.

To prop up its new ruling against our employees, the majority relates the evolution of our law on dismissal
starting from Article 302 of the Spanish Code of Commerce, to the New Civil Code of 1950, to R.A. No. 1052
(Termination Pay Law), then to R.A. No. 1787. To complete the picture, let me add that on May 1, 1974, the
Labor Code (PD 442) was signed into law by former President Marcos. It took effect on May 1, 1974 or six
months after its promulgation. The right of the employer to terminate the employment was embodied in
Articles 283,21 284,22 and 285.23 Batas Pambansa Blg. 130 which was enacted on August 21, 1981 amended
Articles 283 and 284, which today are cited as Arts. 282 and 283 of the Labor Code.24

On March 2, 1989, Republic Act No. 6715 was approved which amended, among others, Article 277 of the
Labor Code. Presently, Article 277 (b) reads:

Art. 277. Miscellaneous provisions. — (a) . . . .

(b) Subject to the constitutional right of workers to security of tenure and their right to be protected against
dismissal except for a just or authorized cause and without prejudice to the requirement of notice under Article
283 of this Code, the employer shall furnish the worker whose employment is sought to be terminated a written
notice containing a statement of the causes for termination and shall afford the latter ample opportunity to be
heard and to defend himself with the assistance of his representative if he so desires in accordance with
company rules and regulations promulgated pursuant to the guidelines set by the Department of Labor and
Employment. Any decision taken by the employer shall be without prejudice to the right of the worker to
contest the validity or legality of his dismissal by filing a complaint with the regional branch of the National
Labor Relations Commission. The burden of proving that the termination was for a valid or authorized cause
shall rest on the employer. . . . .

Previous to the amendment, Article 277 (b) read:

Art. 277. Miscellaneous provisions. — (a) . . . .

(b) With or without a collective agreement, no employer may shut down his establishment or dismiss or
terminate the employment of employees with at least one year of service during the last two years, whether
such service is continuous or broken, without prior written authority issued in accordance with the rules and
regulations as the Secretary may promulgate.

Rule XIV, Book V of the 1997 Omnibus Rules Implementing the Labor Code provides:

Termination of Employment

Sec. 1. Security of tenure and due process. — No worker shall be dismissed except for a just or authorized cause
provided by law and after due process.

Sec. 2. Notice of dismissal. — Any employer who seeks to dismiss a worker shall furnish him a written notice
stating the particular acts or omissions constituting the grounds for his dismissal. . . .

xxx xxx xxx

Sec. 5. Answer and hearing. — The worker may answer the allegations stated against him in the notice of
dismissal within a reasonable period from receipt of such notice. The employer shall afford the worker ample
opportunity to be heard and to defend himself with the assistance of his representative, if he so desires.

These laws, rules and regulations should be related to our decisions interpreting them. Let me therefore
emphasize our rulings holding that the pre-dismissal notice requirement is part of due process. In Batangas
Laguna Tayabas Bus Co. vs. Court of Appeals,25 which was decided under the provisions of RA No. 1052 as
amended by RA No. 1787, this Court ruled that "the failure of the employer to give the [employee] the benefit
of a hearing before he was dismissed constitute an infringement on his constitutional right to due process of
law and not to be denied the equal protection of the laws. . . . Since the right of [an employee] to his labor is
in itself a property and that the labor agreement between him and [his employer] is the law between the
parties, his summary and arbitrary dismissal amounted to deprivation of his property without due process."
Since then, we have consistently held that before dismissing an employee for a just cause, he must be given
notice and hearing by his private employer as a matter of due process.

I respectfully submit that these rulings are more in accord with the need to protect the right of employees
against illegal dismissals. Indeed, our laws and our present Constitution are more protective of the rights and
interests of employees than their American counterpart. For one, to justify private due process, we need not
look for the factors of "sufficient governmental involvement" as American courts do. Article 1700 of our Civil
Code explicitly provides:

Art. 1700. The relation 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.

Nor do we have to strain on the distinction made by American courts between property and privilege and
follow their ruling that due process will not apply if what is affected is a mere privilege. It is our hoary ruling
that labor is property within the contemplation of the due process clause of the Constitution. Thus, in Philippine
Movie Pictures Workers Association vs. Premiere Productions, Inc.,26 private respondent-employer filed with
the Court of Industrial Relations (CIR) a petition seeking authority to lay off forty-four of its employees. On the
date of the hearing of the petition, at the request of the counsel of the private respondent, the judge of the
CIR conducted an ocular inspection in the premises of the employer. He interrogated fifteen laborers. On the
basis of the ocular inspection, the judge concluded that the petition for lay off was justified. We did not agree
and we ruled that "the right of a person to his labor is deemed to he property within the meaning of
constitutional guarantees. That is his means of livelihood. He can not be deprived of his labor or work without
due process of law. . . . (T)here are certain cardinal primary rights which the Court of Industrial Relations must
respect in the trial of every labor case. One of them is the right to a hearing which includes the right of the
party interested to present his own case and to submit evidence in support thereof."

I wish also to stress that the 1999 Rules and Regulations implementing the Labor Code categorically
characterize this pre-dismissal notice requirement as a requirement of due process. Rule XXIII provides:

Sec. 2. 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
circumstance, grounds have been established to justify his termination.

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

II. For termination of employment as based on authorized causes defined in Article 283 of the Code, the
requirements of due process shall be deemed complied with upon service of a written notice to the employee
and the appropriate Regional Office of the Department at least thirty (30) days before the effectivity of the
termination, specifying the ground or grounds for termination.

The new ruling of the majority is not in consonance with this Rule XXIII.

If we are really zealous of protecting the rights of labor as called for by the Constitution, we should guard
against every violation of their rights regardless of whether the government or a private party is the culprit.
Section 3 of Article XIII of the Constitution requires the State to give full protection to labor. We cannot be
faithful to this duty if we give no protection to labor when the violator of its rights happens to be private parties
like private employers. A private person does not have a better right than the government to violate an
employee's right to due process. To be sure, violation of the particular right of employees to security of tenure
comes almost always from their private employers. To suggest that we take mere geriatric steps when it comes
to protecting the rights of labor from infringement by private parties is farthest from the intent of the
Constitution. We trivialize the right of the employee if we adopt the rule allowing the employer to dismiss an
employee without any prior hearing and say let him be heard later on. To a dismissed employee that remedy
is too little and too late. The new majority ruling is doubly to be regretted because it comes at a time when
deregulation and privatization are buzzwords in the world being globalized. In such a setting, the new gods will
not be governments but non-governmental corporations. The greater need of the day therefore is protection
from illegal dismissals sans due process by these non-governmental corporations.

The majority also holds that the "third reason why the notice requirement under Art. 283 is not a requirement
of due process is that the employer cannot really be expected to be entirely an impartial judge of his own
cause. This is also the case in termination of employment for a just cause under Art. 282." Again, with due
respect, I beg to disagree. In an Article 283 situation, dismissal due to an authorized cause, the employer is not
called upon to act as an impartial judge. The employer is given the duty to serve a written notice on the worker
and the DOLE at least one month before the intended date of lay-off. It is the DOLE, an impartial agency that
will judge whether or not the employee is being laid off for an authorized caused.27 It is not the employer who
will adjudge whether the alleged authorized cause for dismissing the employee is fact or fiction. On the other
hand, in an Article 282 situation, dismissal for a just cause, it is also incorrect to hold that an employer cannot
be an impartial judge. Today, the procedure on discipline and dismissal of employees is usually defined in the
parties' collective bargaining agreement or in its absence, on the rules and regulations made by the employer
himself. This procedure is carefully designed to be bias free for it is to the interest of both the employee and
the employer that only a guilty employee is disciplined or dismissed. Hence, where the charge against an
employee is serious, it is standard practice to include in the investigating committee an employee
representative to assure the integrity of the process. In addition, it is usual practice to give the aggrieved
employee an appellate body to review an unfavorable decision. Stated otherwise, the investigators are
mandated to act impartially for to do otherwise can bring havoc less to the employee but more to the
employer. For one, if the integrity of the grievance procedure becomes suspect, the employees may shun it
and instead resort to coercive measures like picketing and strikes that can financially bleed employers. For
another, a wrong, especially a biased judgment can always be challenged in the DOLE and the courts and can
result in awards of huge damages against the company. Indeed, the majority ruling that an employer cannot
act as an impartial judge has no empirical evidence to support itself. Statistics in the DOLE will prove the many
cases won by employees before the grievance committees manned by impartial judges of the company.

Next, the majority holds that "the requirement to hear an employee before he is dismissed should be
considered simply as an application of the Justinian precept, embodied in the Civil Code, to act with justice,
give everyone his due, and observe honesty and good faith toward one's fellowmen." It then rules that violation
of this norm will render the employer liable for damages but will not render his act of dismissal void. Again, I
cannot join the majority stance. The faultline of this ruling lies in the refusal to recognize that employer-
employee relationship is governed by special labor laws and not by the Civil Code. The majority has disregarded
the precept that relations between capital and labor are impressed with public interest. For this reason, we
have the Labor Code that specially regulates the relationship between employer-employee including dismissals
of employees. Thus, Article 279 of the Labor Code specifically provides that "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 instatement 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 provision of the Labor Code clearly gives the remedies that an unjustly
dismissed employee deserves. It is not the Civil Code that is the source of his remedies.

The majority also holds that lack of notice in an Article 283 situation merely makes an employee dismissal
"ineffectual" but not illegal. Again, the ruling is sought to be justified by analogy and our attention is called to
Article 1592, in relation to Article 1191 of the Civil Code. It is contended that "under these provisions, while
the power to rescind is implied in reciprocal obligations, nonetheless, in cases involving the sale of immovable
property, the vendor cannot rescind the contract even though the vendee defaults in the payment of the price,
except by bringing an action in court or giving notice of rescission by means of a notarial demand." The analogy
of the majority cannot be allowed both in law and in logic. The legal relationship of an employer to his employee
is not similar to that of a vendor and a vendee. An employee suffers from a distinct disadvantage in his
relationship with an employer, hence, the Constitution and our laws give him extra protection. In contrast, a
vendor and a vendee in a sale of immovable property are at economic par with each other. To consider an
employer-employee relationship as similar to a sale of commodity is an archaic abomination. An employer-
employee relationship involves the common good and labor cannot be treated as a mere commodity. As well-
stated by former Governor General Leonard Wood in his inaugural message before the 6th Philippine
Legislature on October 27, 1922, "it is opportune that we strive to impress upon all the people that labor is
neither a chattel nor a commodity, but human and must be dealt with from the standpoint of human interests."

Next, the majority holds that under the Labor Code, only the absence of a just cause for the termination of
employment can make the dismissal of an employee illegal. Quoting Article 279 which provides:

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.

it is then rationalized that "to hold that the employer's failure to give notice before dismissing an employee . .
. results in the nullity of the dismissal would, in effect, be to amend Article 279 by adding another ground, for
considering a dismissal illegal." With due respect, the majority has misread Article 279. To start with, the article
is entitled "Security of Tenure" and therefore protects an employee against dismissal not only for an unjust
cause but also for an unauthorized cause. Thus, the phrase "unjustly dismissed" refers to employees who are
dismissed without just cause and to employees who are laid off without any authorized cause. As heretofore
shown, we have interpreted dismissals without prior notice as illegal for violating the right to due process of
the employee. These rulings form part of the law of the land and Congress was aware of them when it enacted
the Labor Code and when its implementing rules and regulations were promulgated especially the rule ordering
employers to follow due process when dismissing employees. Needless to state, it is incorrect for the majority
to urge that we are in effect amending Article 279.

In further explication of its ruling, the majority contends "what is more, it would ignore the fact that under Art.
285, if it is the employee who fails to give a written notice to the employer that he is leaving the service of the
latter, at least one month in advance, his failure to comply with the legal requirement does not result in making
his resignation void but only in making him liable for damages." Article 285(a) states: "An employee may
terminate without just cause the employee-employer relationship by serving a written notice on the employer
at least one (1) month in advance. The employer upon whom no such notice was served may hold the employee
liable for damages."

In effect, the majority view is that its new ruling puts at par both the employer and the employee — under
Article 285, the failure of an employee to pre-notify in writing his employer that he is terminating their
relationship does not make his walk-out void; under its new ruling, the failure of an employer to pre-notify an
employee before his dismissal does not also render the dismissal void. By this new ruling, the majority in a
short stroke has rewritten the law on dismissal and tampered its pro-employee philosophy. Undoubtedly,
Article 285 favors the employee as it does not consider void his act of terminating his employment relationship
before giving the required notice. But this favor given to an employee just like the other favors in the Labor
Code and the Constitution are precisely designed to level the playing field between the employer and the
employee. It cannot be gainsaid that employees are the special subject of solicitous laws because they have
been and they continue to be exploited by unscrupulous employers. Their exploitation has resulted in labor
warfare that has broken industrial peace and slowed down economic progress. In the exercise of their wisdom,
the founding fathers of our 1935, 1973 and 1987 Constitutions as well as the members our past and present
Congresses, have decided to give more legal protection and better legal treatment to our employees in their
relationship with their employer. Expressive of this policy is President Magsaysay's call that "he who has less
in life should have more in law." I respectfully submit that the majority cannot revise our laws nor shun the
social justice thrust of our Constitution in the guise of interpretation especially when its result is to favor
employers and disfavor employees. The majority talks of high nobility but the highest nobility it to stoop down
to reach the poor.

IV. NO UNJUST RESULTS OF CONSIDERING DISMISSALS WITHOUT PRIOR NOTICE AS ILLEGAL

The majority further justifies its new ruling by holding:

The refusal to look beyond the validity of the initial action taken by the employer to terminate employment
either for an authorized or just cause can result in an injustice to the employer. For not having been given
notice and hearing before dismissing an employee, who is otherwise guilty of, say, theft, or even of an attempt
against the life of the employer, an employer will be forced to keep in his employ such guilty employee. This is
unjust.

It is true the Constitution regards labor as "a primary social economic force." But so does it declare that it
"recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives
to needed investment." The Constitution bids the State to "afford full protection to labor." But it is equally true
that "the law, in protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the
employer." And it is oppression to compel the employer to continue in employment one who is guilty or to
force the employer to remain in operation when it is not economically in his interest to do so.

With due respect, I cannot understand this total turn around of the majority on the issue of the unjustness of
lack of pre-dismissal notice to an employee. Heretofore, we have always considered this lack of notice as unjust
to the employee. Even under Article 302 of the Spanish Code of Commerce of 1882 as related by the majority,
an employer who opts to dismiss an employee without any notice has to pay a mesada equivalent to his salary
for one month because of its unjustness. This policy was modified by our legislators in favor of a more liberal
treatment of labor as our country came under the influence of the United States whose major labor laws
became the matrix of our own laws like R.A. 875, otherwise known as the Industrial Peace Act. In accord with
these laws, and as aforediscussed, we laid down the case law that dismissals without prior notice offend due
process. This is the case law when the Labor Code was enacted on May 1, 1974 and until now despite its
amendments. The 1935 and the 1973 Constitutions did not change this case law. So with the 1987 Constitution
which even strengthened the rights of employees, especially their right to security of tenure. Mr. Justice Laurel
in his usual inimitable prose expressed this shift in social policy in favor of employees as follows:

It should be observed at the outset that our Constitution was adopted in the midst of surging unrest and
dissatisfaction resulting from economic and social distress which was threatening the stability of governments
the world over. Alive to the social and economic forces at work, the framers of our Constitution boldly met the
problems and difficulties which faced them and endeavored to crystallize, with more or less fidelity, the
political, social and economic propositions of their age, and this they did, with the consciousness that the
political and philosophical aphorism of their generation will, in the language of a great jurist, "be doubted by
the next and perhaps entirely discarded by the third." (Chief Justice Winslow in Gorgnis v. Falk Co., 147 Wis.,
327; 133 N. W., 209). Embodying the spirit of the present epoch, general provisions were inserted in the
Constitution which are intended to bring about the needed social and economic equilibrium between
component elements of society through the application of what may be termed as the justitia
communisadvocated by Grotius and Leibnitz many years ago to be secured through the counter-balancing of
economic and social forces and employers or landlords, and employees or tenants, respectively; and by
prescribing penalties for the violation of the orders" and later, Commonwealth Act No. 213, entitled "An Act to
define and regulate legitimate labor organizations."28
This ingrained social philosophy favoring employees has now been weakened by the new ruling of the majority.
For while this Court has always considered lack of pre-dismissal notice as unjust to employees, the new ruling
of the majority now declares it is unjust to employers as if employers are the ones exploited by employees. In
truth, there is nothing unjust to employers by requiring them to give notice to their employees before denying
them their jobs. There is nothing unjust to the duty to give notice for the duty is a reasonable duty. If the duty
is reasonable, then it is also reasonable to demand its compliance before the right to dismiss on the part of an
employer can be exercised. If it is reasonable for an employer to comply with the duty, then it can never be
unjust if non-compliance therewith is penalized by denying said employer his right to dismiss. In fine, if the
employer's right to dismiss an employee is forfeited for his failure to comply with this simple, reasonable duty
to pre-notify his employee, he has nothing to blame but himself. If the employer is estopped from litigating the
issue of whether or not he is dismissing his employee for a just or an authorized cause, he brought the
consequence on to himself. The new ruling of the majority, however, inexplicably considers this consequence
as unjust to the employer and it merely winks at his failure to give notice.

V. A LAST WORD

The new ruling of the majority erodes the sanctity of the most important right of an employee, his
constitutional right to security of tenure. This right will never be respected by the employer if we merely honor
the right with a price tag. The policy of "dismiss now and pay later" favors monied employers and is a mockery
of the right of employees to social justice. There is no way to justify this pro-employer stance when the 1987
Constitution is undeniably more pro-employee than our previous fundamental laws. Section 18 of Article II
(State Policies) provides that "the State affirms labor as a primary social economic force. It shall protect the
rights of workers and promote their welfare." Section 1, Article XIII (Social Justice and Human Rights) calls for
the reduction of economic inequalities. Section 3, Article XIII (Labor) directs the State to accord full protection
to labor and to guaranty security of tenure. These are constitutional polestars and not mere works of
cosmetology. Our odes to the poor will be meaningless mouthfuls if we cannot protect the employee's right to
due process against the power of the peso of employers.

To an employee, a job is everything. Its loss involves terrible repercussions — stoppage of the schooling of
children, ejectment from leased premises, hunger to the family, a life without any safety net. Indeed, to many
employees, dismissal is their lethal injection. Mere payment of money by way of separation pay and backwages
will not secure food on the mouths of employees who do not even have the right to choose what they will
chew.

I vote to grant the petition.

VITUG, J., separate (concurring and dissenting) opinion;

The lawful severance by an employer of an employer-employee relationship would require a valid cause. There
are, under the Labor Code, two groups of valid causes, and these are the just causes under Article 2821 and the
authorized causes under Article 2832 and Article 284.3

An employee whose employment is terminated for a just cause is not entitled to the payment of separation
benefits.4Separation pay would be due, however, when the lay-off is on account of an authorized cause. The
amount of separation pay would depend on the ground for the termination of employment. A lay-off due to
the installation of a labor saving device, redundancy (Article 283) or disease (Article 284), entitles the worker
to a separation pay equivalent to "one (1) month pay or at least one (1) month pay for every year of service,
whichever is higher." When the termination of employment is due to retrenchment to prevent losses, or to
closure or cessation of operations of an establishment or undertaking not due to serious business losses or
financial reverses, the separation pay is only an equivalent of "one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher." In the above instances, a fraction of at least six (6)
months is considered as one (1) whole year.

Due process of law, in its broad concept, is a principle in our legal system that mandates due protection to the
basic rights, inherent or accorded, of every person against harm or transgression without an intrinsically just
and valid law, as well as an opportunity to be heard before an impartial tribunal, that can warrant such an
impairment. Due process guarantees against arbitrariness and bears on both substance and procedure.
Substantive due process concerns itself with the law, its essence, and its concomitant efficacy; procedural due
process focuses on the rules that are established in order to ensure meaningful adjudications appurtenant
thereto.

In this jurisdiction, the right to due process is constitutional and statutory.

Due process in the context of a termination of employment, particularly, would be two-fold, i.e., substantive
due process which is complied with when the action of the employer is predicated on a just cause or an
authorized cause, and procedural due process which is satisfied when the employee has the opportunity to
contest the existence of the ground invoked by the employer in terminating the contract of employment and
to be heard thereon. I find it difficult to ascribe either a want of wisdom or a lack of legal basis to the early
pronouncements of this Court that sanction the termination of employment when a just or an authorized cause
to warrant the termination is clearly extant. Regrettably, the Court in some of those pronouncements has used,
less than guarded in my view, the term "due process" when referring to the notices prescribed in the Labor
Code5 and its implementing rules6 that could, thereby, albeit unintendedly and without meaning to, confuse
the latter with the notice requirement in adjudicatory proceedings. It is not seldom when the law puts up
various conditions in the juridical relations of parties; it would not be accurate to consider, I believe, an
infraction thereof to ipso-facto raise a problem of due process. The mere failure of notice of the dismissal or
lay-off does not foreclose the right of an employee from disputing the validity, in general, of the termination
of his employment, or the veracity, in particular, of the cause that has been invoked in order to justify that
termination. In assailing the dismissal or lay-off, an employee is entitled to be heard and to be given the
corresponding due notice of the proceedings. It would be when this right is withheld without cogent reasons
that, indeed, it can rightly be claimed that the fundamental demands of procedural due process have been
unduly discarded.

I do appreciate the fact that the prescribed notices can have consequential benefits to an employee who is
dismissed or laid off, as the case may be; its non-observance by an employer, therefore, can verily entitle the
employee to an award of damage but, to repeat, not to the extent of rendering outrightly illegal that dismissal
or lay-off predicated on valid grounds. I would consider the indemnification to the employee not a penalty or
a fine against the employer, the levy of either of which would require an appropriate legislative enactment;
rather, I take the grant of indemnity as justifiable as an award of nominal damages in accordance with the
provisions of Articles 2221-2223 of the Civil Code, viz:

Art. 2221. Nominal damages are 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.

Art. 2222. The court may award nominal damages in every obligation arising from any source enumerated in
article 1157, or in every case where any property right has been invaded.
Art. 2223. The adjudication of nominal damages shall preclude further contest upon the right involved and all
accessory questions, as between the parties to the suit, or their respective heirs and assigns.

There is no fixed formula for determining the precise amount of nominal damages. In fixing the amount of
nominal damages to be awarded, the circumstances of each case should thus be taken into account, such as,
to exemplify, the —

(a) length of service or employment of the dismissed employee;

(b) his salary or compensation at the time termination of employment vis-a-vis the capability of the employer
to pay;

(c) question of whether the employer has deliberately violated the requirements for termination of
employment or has attempted to comply, at least substantially, therewith; and/or

(d) reasons for the termination of employment.

I might stress the rule that the award of nominal damages is not for the purpose of indemnification for a loss
but for the recognition and vindication of a right. The degree of recovery therefor can depend, on the one
hand, on the constitution of the right, and, upon the other hand, on the extent and manner by which that right
is ignored to the prejudice of the holder of that right.

In fine7 —

A. A just cause or an authorized cause and a written notice of dismissal or lay-off, as the case may be, are
required concurrently but not really equipollent in their consequence, in terminating an employer-employee
relationship.

B. Where there is neither just cause nor authorized cause, the reinstatement of the employee and the payment
of back salaries would be proper and should be decreed. If the dismissal or lay-off is attended by bad faith or
if the employer acted in wanton or oppressive manner, moral and exemplary damages might also be a warded.
In this respect, the Civil Code provides:

Art. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find
that, under the circumstances, such damages are just due. The same rule applies to breaches of contract where
the defendant acted fraudulently or in bad faith.

Art. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in
a wanton, fraudulent, reckless, oppressive, or malevolent manner (Civil Code).

Separation pay can substitute for reinstatement if such reinstatement is not feasible, such as in case of a clearly
strained employer-employee relationship (limited to managerial positions and contracts of employment
predicated on trust and confidence) or when the work or position formerly held by the dismissed employee
plainly has since ceased to be available.

C. Where there is just cause or an authorized cause for the dismissal or lay-off but the required written notices
therefor have not been properly observed by an employer, it would neither be light and justifiable nor likely
intended by law to order either the reinstatement of the dismissed or laid-off employee or the payment of
back salaries to him simply for the lack of such notices if, and so long as, the employee is not deprived of an
opportunity to contest that dismissal or lay-off and to accordingly be heard thereon. In the termination of
employment for an authorized cause (this cause being attributable to the employer), the laid-off employee is
statutorily entitled to separation pay, unlike a dismissal for a just cause (a cause attributable to an employee)
where no separation pay is due. In either case, if an employer fails to comply with the requirements of notice
in terminating the services of the employee, the employer must be made to pay, as so hereinabove expressed,
corresponding damages to the employee.

WHEREFORE, I vote to hold (a) that the lay-off in the case at bar is due to redundancy and that, accordingly,
the separation pay to petitioner should be increased to one month, instead of one-half month, pay for every
year of service, and (b) that petitioner is entitled to his unpaid wages, proportionate 13th-month pay, and an
indemnity of P10,000.00 in keeping with the nature and purpose of, as well as the rationale behind, the grant
of nominal damages.

PANGANIBAN, J., separate opinion;

In the case before us, the Court is unanimous in at least two findings: (1) petitioner's dismissal was due to an
authorized cause, redundancy; and (2) petitioner was notified of his dismissal only on the very day his
employment was terminated. The contentious issue arising out of these two findings is as follows: What is the
legal effect and the corresponding sanction for the failure of the employer to give the employee and the
Department of Labor and Employment (DOLE) the 30-day notice of termination required under Article 283 of
the Labor Code?

During the last ten (10) years, the Court has answered the foregoing question by ruling that the dismissal should
be upheld although the employee should be given "indemnity or damages" ranging from P1,000 to P10,000
depending on the circumstances.

The present ponencia of Mr. Justice Mendoza holds that "the termination of his employment should be
considered ineffectual and the [employee] should be paid back wages" from the time of his dismissal until the
Court finds that the dismissal was for a just cause.

Reexamination of the "Indemnity Only" Rule

I am grateful that the Court has decided to reexamine our ten-year doctrine on this question and has at least,
in the process, increased the monetary award that should go to the dismissed employee — from a nominal
sum in the concept "indemnity or damages" to "full back wages." Shortly after my assumption of office on
October 10, 1995, I already questioned this practice of granting "indemnity only" to employees who were
dismissed for cause but without due process.1 I formally registered reservations on this rule in
my ponencia in MGG Marine Services v. NLRC2 and gave it full discussion in my Dissents in Better Buildings
v. NLRC3 and in Del Val v. NLRC.4

Without in any way diminishing my appreciation of this reexamination and of the more financially-generous
treatment the Court has accorded labor, I write to take issue with the legal basis of my esteemed colleague,
Mr. Justice Mendoza, in arriving at his legal conclusion that "the employer's failure to comply with the notice
requirement does not constitute a denial of due process but a mere failure to observe a procedure for the
termination of employment which makes the termination of employment merely ineffectual." In short, he
believes that (1) the 30-day notice requirement finds basis only in the Labor Code, and (2) the sanction for its
violation is only "full back wages."

With due respect, I submit the following counter-arguments:

(1) The notice requirement finds basis not only in the Labor Code but, more important, in the due process
clause of the Constitution.
(2) Consequently, when the employee is dismissed without due process, the legal effect is an illegal dismissal
and the appropriate sanction is full back wages plus reinstatement, not merely full back wages. It is
jurisprudentially settled, as I will show presently, that when procedural due process is violated, the proceedings
— in this case, the dismissal — will be voided, and the parties will have to be returned to their status quo ante;
that is, the employee will have to be given back his old job and paid all benefits as if he were never dismissed.

(3) In any event, contrary to Mr. Justice Mendoza's premise, even the Labor Code expressly grants the
dismissed employee not only the right to be notified but also the right to be heard.

In short, when an employee is dismissed without notice and hearing, the effect is an illegal dismissal and the
appropriate reliefs are reinstatement and full back wages. In ruling that the dismissal should be upheld, the
Court majority has virtually rendered nugatory the employee's right to due process as mandated by law and
the Constitution. It implicitly allows the employer to simply ignore such right and to just pay the employee.
While it increases the payment to "full back wages," it doctrinally denigrates his right to due process to a mere
statutory right to notice.

Let me explain the foregoing by starting with a short background of our jurisprudence on the right to due
process.

Without Due Process, the Proceedings Are Illegal

In the past, this Court has untiringly reiterated that there are two essential requisites for an employer's valid
termination of an employee's services: (1) a just5 or authorized6 cause and (2) due process.7 During the last ten
years, the Court has been quite firm in this doctrinal concept, but it has been less than consistent in declaring
the illegality of a dismissal when due process has not been observed. This is particularly noticeable in the relief
granted. Where there has been no just or authorized cause, the employee is awarded reinstatement or
separation pay, and back wages.8 If only the second requisite (due process) has not been fulfilled, the
employee, as earlier stated, is granted indemnity or damages amounting to a measly P1,000 up to P10,000.9

I respectfully submit that illegal dismissal results not only from the absence of a legal cause (enumerated in
Arts. 282 to 284 of the Labor Code), but likewise from the failure to observe due process. Indeed, many are the
cases, labor or otherwise, in which acts violative of due process are unequivocally voided or declared illegal by
the Supreme Court. In Pepsi-Cola Bottling Co. v. NLRC,10 the Court categorically ruled that the failure of
management to comply with the requirements of due process made its judgment of dismissal "void and non-
existent."

This Court in People v. Bocar 11 emphatically made the following pronouncement, which has been reiterated in
several cases:12

The cardinal precept is that where there is a violation of basis constitutional rights, courts are ousted of their
jurisdiction. Thus the violation of the State's right to due process raises a serious jurisdictional issue (Gumabon
vs. Director of the Bureau of Prisons, L-30026, 37 SCRA 420 [Jan. 30, 1971]) which cannot be glossed over or
disregarded at will. Where the denial of the fundamental right of due process is apparent, a decision rendered
in disregarded of the right is void for lack of jurisdiction (Aducayen vs. Flores, L-30370, [May 25, 1973] 51 SCRA
78; Shell Co. vs. Enage, L-30111-12, 49 SCRA 416 [Feb. 27, 1973]). Any judgment or decision rendered
notwithstanding such violation may be regarded as a "lawless thing, which can be treated as an outlaw and
slain at sight, or ignored wherever it exhibits its head" (Aducayen vs. Flores, supra).

In the earlier case Bacus v. Ople,13 this Court also nullified the then labor minister's clearance to terminate the
employment of company workers who had supposedly staged an illegal strike. The reason for this ruling was
the denial of sufficient opportunity for them to present their evidence and prove their case. The Court
explained:14

A mere finding of the illegality of a strike should not be automatically followed by a wholesale dismissal of the
strikers from their employment. What is more, the finding of the illegality of the strike by respondent Minister
of Labor and Employment is predicated on the evidence ascertained through an irregular procedure conducted
under the semblance of summary methods and speedy disposition of labor disputes involving striking
employees.

While it is true that administrative agencies exercising quasi-judicial functions are free from the rigidities of
procedure, it is equally well-settled in this jurisdiction that avoidance of such technicalities of law or procedure
in ascertaining objectively the facts in each case should not, however, cause a denial of due process. The
relative freedom of the labor arbiter from the rigidities of procedure cannot be invoked to evade what was
clearly emphasized in the landmark case of Ang Tibay v. Court of Industrial Relations that all administrative
bodies cannot ignore or disregard the fundamental and essential requirements of due process.

In the said case, the respondent company was ordered to reinstate the dismissed workers, pending a hearing
"giving them the opportunity to be heard and present their evidence."

In Philippine National Bank v. Apalisok,15 Primitivo Virtudazo, an employee of PNB, was served a Memorandum
stating the finding against him of a prima facie case for dishonesty and violation of bank rules and regulations.
He submitted his Answer denying the charges and explaining his defenses.

Later, two personnel examiners of the bank conducted a fact-finding investigation. They stressed to him that a
formal investigation would follow, in which he could confront and examine the witnesses for the bank, as well
as present his own. What followed, however, was a Memorandum notifying him that he had been found guilty
of the charges and that he was being dismissed. After several futile attempts to secure a copy of the Decision
rendered against him, he instituted against PNB a Complaint for illegal dismissal and prayed for reinstatement
and damages.

The trial court held that Virtudazo had been deprived of his rights to be formally investigated and to cross-
examine the witnesses. This Court sustained the trial court, stating resolutely: "The proceedings having been
conducted without according to Virtudazo the "cardinal primary rights of due process" guaranteed to every
party in an administrative or quasi-judicial proceeding, said proceedings must be pronounced null and void."16

Also in Fabella v. Court of Appeals,17 this Court declared the dismissal of the schoolteachers illegal, because the
administrative body that heard the charges against them had not afforded them their right to procedural due
process. The proceedings were declared void, and the orders for their dismissal set aside. We unqualifiedly
reinstated the schoolteachers, to whom we awarded all monetary benefits that had accrued to them during
the period of their unjustified suspension or dismissal.

In People v. San Diego,18 People v. Sola,19 People v. Dactrdao,20 People v. Calo Jr.21 and People v. Burgos,22 this
Court similarly voided the trial court's grant of bail to the accused upon a finding that the prosecution had been
deprived of procedural due process.

In People v. Sevilleno,23 the Court noted that the trial judge "hardly satisfied the requisite searching inquiry"
due the accused when he pleaded guilty to the capital offense he had been charged with. We thus concluded
that "the accused was not properly accorded his fundamental right to be informed of the precise nature of the
accusation leveled against him." Because of the nonobservance of "the fundamental requirements of fairness
and due process," the appealed Decision was annulled and set aside, and the case was remanded for the proper
arraignment and trial of the accused.

Recently, the Court vacated its earlier Decision24 in People v. Parazo25 upon realizing that the accused — "a
deaf-mute, a mental retardate, whose mental age [was] only seven (7) years and nine (9) months, and with low
IQ of 60 only" — had not been ably assisted by a sign language expert during his arraignment and trial.
Citing People v. Crisologo,26 we ruled that the accused had been deprived of "a full and fair trial and a
reasonable opportunity to defend himself." He had in effect been denied his fundamental right to due process
of law. Hence, we set aside the trial proceedings and granted the accused a re-arraignment and a retrial.

Of late, we also set aside a Comelec Resolution disallowing the use by a candidate of a certain nickname for
the purpose of her election candidacy. The Resolution was issued pursuant to a letter-petition which was
passed upon by the Comelec without affording the candidate the opportunity to explain her side and to counter
the allegations in said letter-petition. In invalidating the said Resolution, we again underscored the necessity
of the observance of the twin requirements of notice and hearing before any decision can be validly rendered
in a case.27

Clearly deducible from our extant jurisprudence is that the denial of a person's fundamental right to due
process amounts to the illegality of the proceedings against him. Consequently, he is brought back to his status
quo ante, not merely awarded nominal damages or indemnity.

Our labor force deserves no less. Indeed, the State recognizes it as its primary social economic force,28 to which
it is constitutionally mandated to afford full protection.29 Yet, refusing to declare the illegality of dismissals
without due process, we have continued to impose upon the erring employer the simplistic penalty of paying
indemnity only. Hence, I submit that it is time for us to denounce these dismissals as null and void and to grant
our workers these proper reliefs: (1) the declaration that the termination or dismissal is illegal and
unconstitutional and (2) the reinstatement of the employee plus full back wages. The present ruling of the
Court is manifestly inconsistent with existing prudence which holds that proceedings held without notice and
hearing are null and void, since they amount to a violation of due process, and therefore bring back the parties
to the status quo ante.

Exception: When Due Process Is Impractical and Futile

I am fully aware that in a long line of cases starting with Wenphil v. NLRC,30 the Court has held: where there is
just cause for the dismissal of an employee but the employer fails to follow the requirements of procedural
due process, the former is not entitled to back wages, reinstatement (or separation pay in case reinstatement
is no longer feasible) or other benefits. Instead, the employee is granted an indemnity (or penalty or damages)
ranging from P1,00031 to as much as P10,000,32 depending on the circumstances of the case and the gravity of
the employer's omission. Since then, Wenphil has perfunctorily been applied in most subsequent
cases33 involving a violation of due process (although just cause has been duly proven), without regard for the
peculiar factual milieu of each case. Indemnity or damages has become an easy substitute for due process.

Be it remembered, however, that the facts in Wenphil clearly showed the impracticality and the futility of
observing the procedure laid down by law and by the Constitution for terminating employment. The employee
involved therein appeared to have exhibited a violent temper and caused trouble during office hours. In an
altercation with a co-employee, he "slapped [the latter's] cap, stepped on his foot and picked up the ice scooper
and brandished it against [him]." When summoned by the assistant manager, the employee "shouted and
uttered profane words" instead of giving an explanation. He was caught virtually in flagrante delicto in the
presence of many people. Under the circumstances action was necessary to preserve order and discipline, as
well as to safeguard the customers' confidence in the employer's business — a fastfood chain catering to the
general public where courtesy is a prized virtue.

However, in most of the succeeding cases, including the present one before us in which the petitioner was
dismissed on the very day he was served notice, there were ample opportunities for the employers to observe
the requisites of due process. There were no exigencies that called for immediate response. And yet, Wenphil
was instantly invoked and due process brushed aside.

I believe that the price that the Court has set for the infringement of the fundamental right to due process is
too insignificant, too niggardly, and sometimes even too late. I believe that imposing a stiffer sanction is the
only way to emphasize to employers the extreme importance of the right to due process in our democratic
system. Such right is too sacred to be taken for granted or glossed over in a cavalier fashion. To hold otherwise,
as by simply imposing an indemnity or even "full back wages," is to allow the rich and powerful to virtually
purchase and to thereby stifle a constitutional right granted to the poor and marginalized.

It may be asked: If the employee is guilty anyway, what difference would it make if he is fired without due
process? By the same token, it may be asked: If in the end, after due hearing, a criminal offender is found guilty
anyway, what difference would it make if he is simply penalized immediately without the trouble and the
expense of trial? The absurdity of this argument is too apparent to deserve further discourse.34

Worker's Right to Notice Is Constitutional, Not Merely Statutory

According to the ponencia of Mr. Justice Mendoza, the "violation of the notice requirement cannot be
considered a denial of due process resulting in the nullity of the employee's dismissal or lay-off." He argues
that the due process clause of the Constitution may be used against the government only. Since the Labor Code
does not accord employees the right to a hearing, ergo, he concludes, they do not have the right to due process.

I disagree. True, as pointed out by Mr. Justice Mendoza, traditional doctrine holds that constitutional rights
may be invoked only against the State. This is because in the past, only the State was in a position to violate
these rights, including the due process clause. However, with the advent of liberalization, deregulation and
privatization, the State tended to cede some of its powers to the "market forces." Hence, corporate behemoths
and even individuals may now be sources of abuses and threats to human rights and liberties. I believe,
therefore, that such traditional doctrine should be modified to enable the judiciary to cope with these new
paradigms and to continue protecting the people from new forms of abuses.34 -a

Indeed the employee is entitled to due process not because of the Labor code, but because of the Constitution.
Elementary is the doctrine that constitutional provisions are deemed written into every statute, contract or
undertaking. Worth noting is that "[o]ne's employment, profession, trade or calling is a property right within
the protection of the constitutional guaranty of due process of law."35

In a long line of cases involving judicial, quasi-judicial and administrative proceedings, some of which I
summarized earlier, the Court has held that the twin requirements of notice and hearing (or, at the very least,
an opportunity to be heard) constitute the essential elements of due process. In labor proceedings, both are
the conditio sine qua non for a dismissal to be validly effected.36 The perceptive Justice Irene Cortes has aptly
stated: "One cannot go without the other, for otherwise the termination would, in the eyes of the law, be
illegal."37

Even the Labor Code Grants the Right to a Hearing

Besides, it is really inaccurate to say that the Labor Code grants "notice alone" to employees being dismissed
due to an authorized cause. Article 277 (b)38 of the said Code explicitly provides that the termination of
employment by the employer is "subject to the constitutional right of workers to security of tenure[;] . . .
without prejudice to the requirement of notice under Article 283 of this Code, the employer shall furnish the
worker whose employment is sought to be terminated a written notice containing a statement of the causes
for termination and shall afford the latter ample opportunity to be heard . . . ." Significantly, the provision
requires the employer "to afford [the employee] ample opportunity to be heard" when the termination is due
to a "just and authorized cause." I submit that this provision on "ample opportunity to be heard" applies to
dismissals under Articles 282, 283 and 284 of the Labor Code.

In addition, to say that the termination is "simply ineffectual" for failure to comply with the 30-day written
notice and, at the same time, to conclude that it has "legal effect" appears to be contradictory. Ineffectual
means "having no legal force."39 If a dismissal has no legal force or effect, the consequence should be the
reinstatement of the dismissed employee and the grant of full back wages thereto, as provided by law — not
the latter only. Limiting the consequence merely to the payment of full back wages has no legal or statutory
basis. No provision in the Labor Code or any other law authorizes such limitation of sanction, which Mr. Justice
Mendoza advocates.

The majority contends that it is not fair to reinstate the employee, because the employer should not be forces
to accommodate an unwanted worker. I believe however that it is not the Court that forces the employer to
rehire the worker. By violating the latter's constitutional right to due process, the former brings this sanction
upon itself. Is it unfair to imprison a criminal? No! By violating the law, one brings the penal sanction upon
oneself. There is nothing unfair or unusual about this inevitable chain of cause and effect, of crime and
punishment, of violation and sanction.

Due Process Begins With Each of Us

To repeat, due process begins with the employer, not with the labor tribunals. An objective reading of the Bill
of Rights clearly shows that the due process protection is not limited to government action alone. The
Constitution does not say that the right cannot be claimed against private individuals and entities. Thus, in PNB
v. Apalisok, which I cited earlier, this Court voided the proceedings conducted by petitioner bank because of
its failure to observe Apalisok's right to due process.

Truly, justice is dispensed not just by the courts and quasi-judicial bodies like public respondent here. The
administration of justice begins with each of us, in our everyday dealings with one another and, as in this case,
in the employers' affording their employees the right to be heard. If we, as a people and as individuals, cannot
or will not deign to act with justice and render unto everyone his or her due in little, everyday things, can we
honestly hope and seriously expect to do so when monumental, life-or-death issues are at stake? Unless each
one is committed to a faithful observance of day-to-day fundamental rights, our ideal of a just society can never
be approximated, not to say attained.

In the final analysis, what is involved here is not simply the amount of monetary award, whether insignificant
or substantial; whether termed indemnity, penalty or "full back wages." Neither is it merely a matter of respect
for workers' rights or adequate protection of labor. The bottom line is really the constitutionally granted right
to due process. And due process is the very essence of justice itself. Where the rule of law is the bedrock of
our free society, justice is its very lifeblood. Denial of due process is thus no less than a denial of justice itself.

In Addition to Reinstatement and Back Wages, Damages May Be Awarded

One last point. Justice Vitug argues in his Separate Opinion that the nonobservance of the prescribed notices
"can verily entitle the employee to an award of damages but . . . not to the extent of rendering outrightly illegal
that dismissal or lay-off . . . ." I, of course, disagree with him insofar as he denies the illegality of the dismissal,
because as I already explained, a termination without due process is unconstitutional and illegal. But I do agree
that, where the employee proves the presence of facts showing liability for damages (moral, exemplary, etc.)
as provided under the Civil Code, the employee could be entitled to such award in addition to reinstatement
and back wages. For instance, where the illegal dismissal has caused the employee "physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and
similar injury" due to the bad faith of the employer, an award for moral damages would be proper, in addition
to reinstatement and back wages.

Summary

To conclude, I believe that even if there may be a just or an authorized cause for termination but due process
is absent, the dismissal proceedings must be declared null and void. The dismissal should still be branded as
illegal. Consequently, the employee must be reinstated and given full back wages.

On the other hand, there is an exception. The employer can adequately prove that under the peculiar
circumstances of the case, there was no opportunity to comply with due process requirements; or doing so
would have been impractical or gravely adverse to the employer, as when the employee is caught in flagrante
delicto. Under any of these circumstances, the dismissal will not be illegal and no award may properly be
granted. Nevertheless, as a measure of compassion, the employee may be given a nominal sum depending on
the circumstances, pursuant to Article 2221 of the Civil Code.

Depending on the facts of each case, damages as provided under applicable articles of the Civil Code may
additionally be awarded.

WHEREFORE, I vote to GRANT the petition. Ruben Serrano should be REINSTATED and PAID FULL BACK WAGES
from date of termination until actual reinstatement, plus all benefits he would have received as if he were
never dismissed.

G.R. No. 158693 November 17, 2004

JENNY M. AGABON and VIRGILIO C. AGABON, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC), RIVIERA HOME IMPROVEMENTS, INC. and VICENTE
ANGELES, respondents.

DECISION

YNARES-SANTIAGO, J.:

This petition for review seeks to reverse the decision1 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, 19922 until February 23, 1999 when they were dismissed for
abandonment of work.

Petitioners then filed a complaint for illegal dismissal and payment of money claims3 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 Agabon's
13th month pay differential amounting to TWO THOUSAND ONE HUNDRED FIFTY (P2,150.00) Pesos, or the
aggregate amount of ONE HUNDRED TWENTY ONE THOUSAND SIX HUNDRED SEVENTY EIGHT & 93/100
(P121,678.93) Pesos for Jenny Agabon, and ONE HUNDRED TWENTY THREE THOUSAND EIGHT HUNDRED
TWENTY EIGHT & 93/100 (P123,828.93) Pesos for Virgilio Agabon, as per attached computation of Julieta C.
Nicolas, OIC, Research and Computation Unit, NCR.

SO ORDERED.4

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

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

The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal because they had
abandoned their employment but ordered the payment of money claims. The dispositive portion of the
decision reads:

WHEREFORE, the decision of the National Labor Relations Commission is REVERSED only insofar as it dismissed
petitioner's 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 Agabon's 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 respondent's 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 latter's representative in connection
with the employee's 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 conduct19 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 employee's 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
employee's 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, albeitwithout due process, did not entitle the employee to reinstatement, backwages, damages and
attorney's 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 employee's one month
salary. This indemnity is intended not to penalize the employer but to vindicate or recognize the employee's
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 Agabon's 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 same43 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 11345 of the same Code from making any deductions
without the employee's 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 Agabon's 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 Agabon's 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 Agabon's 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.

Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Carpio-
Morales, Callejo, Sr., Azcuna, Tinga, Chico-Nazario, and Garcia, JJ., concur.

SEPARATE OPINION

TINGA, J:

I concur in the result, the final disposition of the petition being correct. There is no denying the importance of
the Court's ruling today, which should be considered as definitive as to the effect of the failure to render the
notice and hearing required under the Labor Code when an employee is being dismissed for just causes, as
defined under the same law. The Court emphatically reaffirms the rule that dismissals for just cause are not
invalidated due to the failure of the employer to observe the proper notice and hearing requirements under
the Labor Code. At the same time, The Decision likewise establishes that the Civil Code provisions on damages
serve as the proper framework for the appropriate relief to the employee dismissed for just cause if the notice-
hearing requirement is not met. Serrano v. NLRC,1 insofar as it is controlling in dismissals for unauthorized
causes, is no longer the controlling precedent. Any and all previous rulings and statements of the Court
inconsistent with these determinations are now deemed inoperative.

My views on the questions raised in this petition are comprehensive, if I may so in all modesty. I offer this
opinion to discuss the reasoning behind my conclusions, pertaining as they do to questions of fundamental
importance.

Prologue

The factual backdrop of the present Petition for Review is not novel. Petitioners claim that they were illegally
dismissed by the respondents, who allege in turn that petitioners had actually abandoned their employment.
There is little difficulty in upholding the findings of the NRLC and the Court of Appeals that petitioners are guilty
of abandonment, one of the just causes for termination under the Labor Code. Yet, the records also show that
the employer was remiss in not giving the notice required by the Labor Code; hence, the resultant controversy
as to the legal effect of such failure vis-à-vis the warranted dismissal.

Ostensibly, the matter has been settled by our decision in Serrano2, wherein the Court ruled that the failure to
properly observe the notice requirement did not render the dismissal, whether for just or authorized causes,
null and void, for such violation was not a denial of the constitutional right to due process, and that the measure
of appropriate damages in such cases ought to be the amount of wages the employee should have received
were it not for the termination of his employment without prior notice.3 Still, the Court has, for good reason,
opted to reexamine the so-called Serrano doctrine through the present petition

Antecedent Facts

Respondent Riviera Home Improvements, Inc (Riviera Home) is engaged in the manufacture and installation of
gypsum board and cornice. In January of 1992, the Agabons were hired in January of 1992 as cornice installers
by Riviera Home. According to their personnel file with Riviera Home, the Agabon given address was 3RDS
Tailoring, E. Rodriguez Ave., Moonwalk Subdivision, P-II Parañaque City, Metro Manila.4

It is not disputed that sometime around February 1999, the Agabons stopped rendering services for Riviera
Home. The Agabons allege that beginning on 23 February 1999, they stopped receiving assignments from
Riviera Home.5When they demanded an explanation, the manager of Riviera Homes, Marivic Ventura,
informed them that they would be hired again, but on a "pakyaw" (piece-work) basis. When the Agabons
spurned this proposal, Riviera Homes refused to continue their employment under the original terms and
agreement.6 Taking affront, the Agabons filed a complaint for illegal dismissal with the National Labor Relations
Commission ("NLRC").

Riviera Homes adverts to a different version of events leading to the filing of the complaint for illegal dismissal.
It alleged that in the early quarter of 1999, the Agabons stopped reporting for work with Riviera. Two separate
letters dated 10 March 1999, were sent to the Agabons at the address indicated in their personnel file. In these
notices, the Agabons were directed to report for work immediately.7 However, these notices were returned
unserved with the notation "RTS Moved." Then, in June of 1999, Virgilio Agabon informed Riviera Homes by
telephone that he and Jenny Agabon were ready to return to work for Riviera Homes, on the condition that
their wages be first adjusted. On 18 June 1999, the Agabons went to Riviera Homes, and in a meeting with
management, requested a wage increase of up to Two Hundred Eighty Pesos (P280.00) a day. When no
affirmative response was offered by Riviera Homes, the Agabons initiated the complaint before the NLRC.8

In their Position Paper, the Agabons likewise alleged that they were required to work even on holidays and rest
days, but were never paid the legal holiday pay or the premium pay for holiday or rest day. They also asserted
that they were denied Service Incentive Leave pay, and that Virgilio Agabon was not given his thirteenth (13th)
month pay for the year 1998.9

After due deliberation, Labor Arbiter Daisy G. Cauton-Barcelona rendered a Decision dated 28 December 1999,
finding the termination of the Agabons illegal, and ordering Riviera Homes to pay backwages in the sum of Fifty
Six Thousand Two Hundred Thirty One Pesos and Ninety Three Centavos (P56,231.93) each. The Labor Arbiter
likewise ordered, in lieu of reinstatement, the payment of separation pay of one (1) month pay for every year
of service from date of hiring up to 29 November 1999, as well as the payment of holiday pay, service incentive
leave pay, and premium pay for holiday and restday, plus thirteenth (13th) month differential to Virgilio
Agabon.10

In so ruling, the Labor Arbiter declared that Riviera Homes was unable to satisfactorily refute the Agabons'
claim that they were no longer given work to do after 23 February 1999 and that their rehiring was only on
"pakyaw" basis. The Labor Arbiter also held that Riviera Homes failed to comply with the notice requirement,
noting that Riviera Homes well knew of the change of address of the Agabons, considering that the
identification cards it issued stated a different address from that on the personnel file.11 The Labor Arbiter
asserted the principle that in all termination cases, strict compliance by the employer with the demands of
procedural and substantive due process is a condition sine qua non for the same to be declared valid.12
On appeal, the NLRC Second Division set aside the Labor Arbiter's Decision and ordered the dismissal of the
complaint for lack of merit.13 The NLRC held that the Agabons were not able to refute the assertion that for
the payroll period ending on 15 February 1999, Virgilio and Jenny Agabon worked for only two and one-half
(2½) and three (3) days, respectively. It disputed the earlier finding that Riviera Homes had known of the change
in address, noting that the address indicated in the

identification cards was not the Agabons, but that of the persons who should be notified in case of emergency
concerning the employee.14 Thus, proper service of the notice was deemed to have been accomplished.
Further, the notices evinced good reason to believe that the Agabons had not been dismissed, but had instead
abandoned their jobs by refusing to report for work.

In support of its conclusion that the Agabons had abandoned their work, the NLRC also observed that the
Agabons did not seek reinstatement, but only separation pay. While the choice of relief was premised by the
Agabons on their purported strained relations with Riviera Homes, the NLRC pointed out that such claim was
amply belied by the fact that the Agabons had actually sought a conference with Riviera Homes in June of 1999.
The NLRC likewise found that the failure of the Labor Arbiter to justify the award of extraneous money claims,
such as holiday and service incentive leave pay, confirmed that there was no proof to justify such claims.

A Petition for Certiorari was promptly filed with the Court of Appeals by the Agabons, imputing grave abuse of
discretion on the part of the NLRC in dismissing their complaint for illegal dismissal. In a Decision15 dated 23
January 2003, the Court of Appeals affirmed the finding that the Agabons had abandoned their employment.
It noted that the two elements constituting abandonment had been established, to wit: the failure to report
for work or absence without valid justifiable reason, and; a clear intention to sever the employer-employee
relationship. The intent to sever the employer-employee relationship was buttressed by the Agabon's choice
to seek not reinstatement, but separation pay. The Court of Appeals likewise found that the service of the
notices were valid, as the Agabons did not notify Riviera Homes of their change of address, and thus the failure
to return to work despite notice amounted to abandonment of work.

However, the Court of Appeals reversed the NLRC as regards the denial of the claims for holiday pay, service
incentive leave pay, and the balance of Virgilio Agabon's thirteenth (13th) month pay. It ruled that the failure
to adduce proof in support thereof was not fatal and that the burden of proving that such benefits had already
been paid rested on Riviera Homes.16 Given that Riviera Homes failed to present proof of payment to the
Agabons of their holiday pay and service incentive leave pay for the years 1996, 1997 and 1998, the Court of
Appeals chose to believe that such benefits had not actually been received by the employees. It also ruled that
the apparent deductions made by Riviera Homes on the thirteenth (13th) month pay of Virgilio Agabon violated
Section 10 of the Rules and Regulations Implementing Presidential Decree No. 851.17 Accordingly, Riviera
Homes was ordered to pay the Agabons holiday for four (4) regular holidays in 1996, 1997 and 1998, as well as
their service incentive leave pay for said years, and the balance of Virgilio Agabon's thirteenth (13th) month
pay for 1998 in the amount of Two Thousand One Hundred Fifty Pesos (P2,150.00).18

In their Petition for Review, the Agabons claim that they had been illegally dismissed, reasserting their version
of events, thus: (1) that they had not been given new assignments since 23 February 1999; (2) that they were
told that they would only be re-hired on a "pakyaw" basis, and; (3) that Riviera Homes had knowingly sent the
notices to their old address despite its knowledge of their change of address as indicated in the identification
cards.19 Further, the Agabons note that only one notice was sent to each of them, in violation of the rule that
the employer must furnish two written notices before termination — the first to apprise the employee of the
cause for which dismissal is sought, and the second to notify the employee of the decision of dismissal.20 The
Agabons likewise maintain that they did not seek reinstatement owing to the strained relations between them
and Riviera Homes.
The Agabons present to this Court only one issue, i.e.: whether or not they were illegally dismissed from their
employment.21 There are several dimensions though to this issue which warrant full consideration.

The Abandonment Dimension

Review of Factual Finding of Abandonment

As the Decision points out, abandonment is characterized by the failure to report for work or absence without
valid or justifiable reason, and a clear intention to sever the employer-employee relationship. The question of
whether or not an employee has abandoned employment is essentially a factual issue.22 The NLRC and the
Court of Appeals, both appropriate triers of fact, concluded that the Agabons had actually abandoned their
employment, thus there is little need for deep inquiry into the correctness of this factual finding. There is no
doubt that the Agabons stopped reporting for work sometime in February of 1999. And there is no evidence
to support their assertion that such absence was due to the deliberate failure of Riviera Homes to give them
work. There is also the fact, as noted by the NLRC and the Court of Appeals, that the Agabons did not pray for
reinstatement, but only for separation

pay and money claims.23 This failure indicates their disinterest in maintaining the employer-employee
relationship and their unabated avowed intent to sever it. Their excuse that strained relations between them
and Riviera Homes rendered reinstatement no longer feasible was hardly given credence by the NLRC and the
Court of Appeals.24

The contrary conclusion arrived at by the Labor Arbiter as regards abandonment is of little bearing to the case.
All that the Labor Arbiter said on that point was that Riviera Homes was not able to refute the Agabons' claim
that they were terminated on 23 February 1999.25 The Labor Arbiter did not explain why or how such finding
was reachhy or how such finding was reachhe Agabons was more credible than that of Riviera Homes'. Being
bereft of reasoning, the conclusion deserves scant consideration.

Compliance with Notice Requirement

At the same time, both the NLRC and the Court of Appeals failed to consider the apparent fact that the rules
governing notice of termination were not complied with by Riviera Homes. Section 2, Book V, Rule XXIII of the
Omnibus Rules Implementing the Labor Code (Implementing Rules) specifically provides that for termination
of employment based on just causes as defined in Article 282, there must be: (1) written notice served on the
employee specifying the grounds for termination and giving employee reasonable opportunity to explain
his/her side; (2) a hearing or conference wherein the employee, with the assistance of counsel if so desired, is
given opportunity to respond to the charge, present his evidence or rebut evidence presented against him/her;
and (3) written notice of termination served on the employee indicating that upon due consideration of all the
circumstances, grounds have been established to justify termination.

At the same time, Section 2, Book V, Rule XXIII of the Implementing Rules does not require strict compliance
with the above procedure, but only that the same be "substantially observed."

Riviera Homes maintains that the letters it sent on 10 March 1999 to the Agabons sufficiently complied with
the notice rule. These identically worded letters noted that the Agabons had stopped working without
permission that they failed to return for work despite having been repeatedly told to report to the office and
resume their employment.26 The letters ended with an invitation to the Agabons to report back to the office
and return to work.27

The apparent purpose of these letters was to advise the Agabons that they were welcome to return back to
work, and not to notify them of the grounds of termination. Still, considering that only substantial compliance
with the notice requirement is required, I am prepared to say that the letters sufficiently conform to the first
notice required under the Implementing Rules. The purpose of the first notice is to duly inform the employee
that a particular transgression is being considered against him or her, and that an opportunity is being offered
for him or her to respond to the charges. The letters served the purpose of informing the Agabons of the
pending matters beclouding their employment, and extending them the opportunity to clear the air.

Contrary to the Agabons' claim, the letter-notice was correctly sent to the employee's last known address, in
compliance with the Implementing Rules. There is no dispute that these letters were not actually received by
the Agabons, as they had apparently moved out of the address indicated therein. Still, the letters were sent to
what Riviera Homes knew to be the Agabons' last known address, as indicated in their personnel file. The
Agabons insist that Riviera Homes had known of the change of address, offering as proof their company IDs
which purportedly print out their correct new address. Yet, as pointed out by the NLRC and the Court of
Appeals, the addresses indicated in the IDs are not the Agabons, but that of the person who is to be notified in
case on emergency involve either or both of the Agabons.

The actual violation of the notice requirement by Riviera Homes lies in its failure to serve on the Agabons the
second notice which should inform them of termination. As the Decision notes, Riviera Homes' argument that
sending the second notice was useless due to the change of address is inutile, since the Implementing Rules
plainly require that the notice of termination should be served at the employee's last known address.

The importance of sending the notice of termination should not be trivialized. The termination letter serves as
indubitable proof of loss of employment, and its receipt compels the employee to evaluate his or her next
options. Without such notice, the employee may be left uncertain of his fate; thus, its service is mandated by
the Implementing Rules. Non-compliance with the notice rule, as evident in this case, contravenes the
Implementing Rules. But does the violation serve to invalidate the Agabons' dismissal for just cause?

The So-Called Constitutional Law Dimension

Justices Puno and Panganiban opine that the Agabons should be reinstated as a consequence of the violation
of the notice requirement. I respectfully disagree, for the reasons expounded below.

Constitutional Considerations
Of Due Process and the Notice-Hearing
Requirement in Labor Termination Cases

Justice Puno proposes that the failure to render due notice and hearing prior to dismissal for just cause
constitutes a violation of the constitutional right to due process. This view, as acknowledged by Justice Puno
himself, runs contrary to the Court's pronouncement in Serrano v. NLRC28 that the absence of due notice and
hearing prior to dismissal, if for just cause, violates statutory due process.

The ponencia of Justice Vicente V. Mendoza in Serrano provides this cogent overview of the history of the
doctrine:

Indeed, to contend that the notice requirement in the Labor Code is an aspect of due process is to overlook
the fact that Art. 283 had its origin in Art. 302 of the Spanish Code of Commerce of 1882 which gave either
party to the employer-employee relationship the right to terminate their relationship by giving notice to the
other one month in advance. In lieu of notice, an employee could be laid off by paying him a mesada equivalent
to his salary for one month. This provision was repealed by Art. 2270 of the Civil Code, which took effect on
August 30, 1950. But on June 12, 1954, R.A. No. 1052, otherwise known as the Termination Pay Law, was
enacted reviving the mesada. On June 21, 1957, the law was amended by R.A. No. 1787 providing for the giving
of advance notice for every year of service.29

Under Section 1 of the Termination Pay Law, an employer could dismiss an employee without just cause by
serving written notice on the employee at least one month in advance or one-half month for every year of
service of the employee, whichever was longer.30 Failure to serve such written notice entitled the employee to
compensation equivalent to his salaries or wages corresponding to the required period of notice from the date
of termination of his employment.

However, there was no similar written notice requirement under the Termination Pay Law if the dismissal of
the employee was for just cause. The Court, speaking through Justice JBL Reyes, ruled in Phil. Refining Co. v.
Garcia:31

[Republic] Act 1052, as amended by Republic Act 1787, impliedly recognizes the right of the employer to
dismiss his employees (hired without definite period) whether for just case, as therein defined or enumerated,
or without it. If there be just cause, the employer is not required to serve any notice of discharge nor to
disburse termination pay to the employee. xxx32

Clearly, the Court, prior to the enactment of the Labor Code, was ill-receptive to the notion that termination
for just cause without notice or hearing violated the constitutional right to due process. Nonetheless, the Court
recognized an award of damages as the appropriate remedy. In Galsim v. PNB,33 the Court held:

Of course, the employer's prerogative to dismiss employees hired without a definite period may be with or
without cause. But if the manner in which such right is exercised is abusive, the employer stands to answer to
the dismissed employee for damages.34

The Termination Pay Law was among the repealed laws with the enactment of the Labor Code in 1974.
Significantly, the Labor Code, in its inception, did not require notice or hearing before an employer could
terminate an employee for just cause. As Justice Mendoza explained:

Where the termination of employment was for a just cause, no notice was required to be given to the
employee. It was only on September 4, 1981 that notice was required to be given even where the dismissal or
termination of an employee was for cause. This was made in the rules issued by the then Minister of Labor and
Employment to implement B.P. Blg. 130 which amended the Labor Code. And it was still much later when the
notice requirement was embodied in the law with the amendment of Art. 277(b) by R.A. No. 6715 on March 2,
1989.35

It cannot be denied though that the thinking that absence of notice or hearing prior to termination constituted
a constitutional violation has gained a jurisprudential foothold with the Court. Justice Puno, in his Dissenting
Opinion, cites several cases in support of this theory, beginning with Batangas Laguna Tayabas Bus Co. v. Court
of Appeals36 wherein we held that "the failure of petitioner to give the private respondent the benefit of a
hearing before he was dismissed constitutes an infringement on his constitutional right to due process of law.37

Still, this theory has been refuted, pellucidly and effectively to my mind, by Justice Mendoza's disquisition
in Serrano, thus:

xxx There are three reasons why, on the other hand, violation by the employer of the notice requirement
cannot be considered a denial of due process resulting in the nullity of the employee's dismissal or layoff.

The first is that the Due Process Clause of the Constitution is a limitation on governmental powers. It does not
apply to the exercise of private power, such as the termination of employment under the Labor Code. This is
plain from the text of Art. III, §1 of the Constitution, viz.: "No person shall be deprived of life, liberty, or property
without due process of law. . . ." The reason is simple: Only the State has authority to take the life, liberty, or
property of the individual. The purpose of the Due Process Clause is to ensure that the exercise of this power
is consistent with what are considered civilized methods.

The second reason is that notice and hearing are required under the Due Process Clause before the power of
organized society are brought to bear upon the individual. This is obviously not the case of termination of
employment under Art. 283. Here the employee is not faced with an aspect of the adversary system. The
purpose for requiring a 30-day written notice before an employee is laid off is not to afford him an opportunity
to be heard on any charge against him, for there is none. The purpose rather is to give him time to prepare for
the eventual loss of his job and the DOLE an opportunity to determine whether economic causes do exist
justifying the termination of his employment.

xxx

The third reason why the notice requirement under Art. 283 can not be considered a requirement of the Due
Process Clause is that the employer cannot really be expected to be entirely an impartial judge of his own
cause. This is also the case in termination of employment for a just cause under Art. 282 (i.e., serious
misconduct or willful disobedience by the employee of the lawful orders of the employer, gross and habitual
neglect of duties, fraud or willful breach of trust of the employer, commission of crime against the employer
or the latter's immediate family or duly authorized representatives, or other analogous cases).38

The Court in the landmark case of People v. Marti39 clarified the proper dimensions of the Bill of Rights.

That the Bill of Rights embodied in the Constitution is not meant to be invoked against acts of private individuals
finds support in the deliberations of the Constitutional Commission. True, the liberties guaranteed by the
fundamental law of the land must always be subject to protection. But protection against whom?
Commissioner Bernas in his sponsorship speech in the Bill of Rights answers the query which he himself posed,
as follows:

"First, the general reflections. The protection of fundamental liberties in the essence of constitutional
democracy. Protection against whom? Protection against the state. The Bill of Rights governs the relationship
between the individual and the state. Its concern is not the relation between individuals, between a private
individual and other individuals. What the Bill of Rights does is to declare some forbidden zones in the private
sphere inaccessible to any power holder." (Sponsorship Speech of Commissioner Bernas; Record of the
Constitutional Commission, Vol. 1, p. 674; July 17,1986; Italics supplied)40

I do not doubt that requiring notice and hearing prior to termination for just cause is an admirable sentiment
borne out of basic equity and fairness. Still, it is not a constitutional requirement that can impose itself on the
relations of private persons and entities. Simply put, the Bill of Rights affords protection against possible State
oppression against its citizens, but not against an unjust or repressive conduct by a private party towards
another.

Justice Puno characterizes the notion that constitutional due process limits government action alone
as "passé,"and adverts to nouvelle vague theories which assert that private conduct may be restrained by
constitutional due process. His dissent alludes to the American experience making references to the post-Civil
War/pre-World War II era when the US Supreme Court seemed overly solicitous to the rights of big business
over those of the workers.
Theories, no matter how entrancing, remain theoretical unless adopted by legislation, or more controversially,
by judicial opinion. There were a few decisions of the US Supreme Court that, ostensibly, imposed on private
persons the values of the constitutional guarantees. However, in deciding the cases, the American High Court
found it necessary to link the actors to adequate elements of the "State" since the Fourteenth Amendment
plainly begins with the words "No State shall…"41

More crucially to the American experience, it had become necessary to pass legislation in order to compel
private persons to observe constitutional values. While the equal protection clause was deemed sufficient by
the Warren Court to bar racial segregation in public facilities, it necessitated enactment of the Civil Rights Acts
of 1964 to prohibit segregation as enforced by private persons within their property. In this jurisdiction, I have
trust in the statutory regime that governs the correction of private wrongs. There are thousands of statutes,
some penal or regulatory in nature, that are the source of actionable claims against private persons. There is
even no stopping the State, through the legislative cauldron, from compelling private individuals, under pain
of legal sanction, into observing the norms ordained in the Bill of Rights.

Justice Panganiban's Separate Opinion asserts that corporate behemoths and even individuals may now be
sources of abuses and threats to human rights and liberties.42 The concern is not unfounded, but appropriate
remedies exist within our statutes, and so resort to the constitutional trump card is not necessary. Even if we
were to engage the premise, the proper juristic exercise should be to examine whether an employer has taken
the attributes of the State so that it could be compelled by the Constitution to observe the proscriptions of the
Bill of Rights. But the strained analogy simply does not square since the attributes of an employer are starkly
incongruous with those of the State. Employers plainly do not possess the awesome powers and the
tremendous resources which the State has at its command.

The differences between the State and employers are not merely literal, but extend to their very essences.
Unlike the State, the raison d'etre of employers in business is to accumulate profits. Perhaps the State and the
employer are similarly capacitated to inflict injury or discomfort on persons under their control, but the same
power is also possessed by a school principal, hospital administrator, or a religious leader, among many others.
Indeed, the scope and reach of authority of an employer pales in comparison with that of the State. There is
no basis to conclude that an employer, or even the employer class, may be deemed a de facto state and on
that premise, compelled to observe the Bill of Rights. There is simply no nexus in their functions, distaff as they
are, that renders it necessary to accord the same jurisprudential treatment.

It may be so, as alluded in the dissent of Justice Puno, that a conservative court system overly solicitous to the
concerns of business may consciously gut away at rights or privileges owing to the labor sector. This certainly
happened before in the United States in the early part of the twentieth century, when the progressive labor
legislation such as that enacted during President Roosevelt's New Deal regime — most of them addressing
problems of labor — were struck down by an arch-conservative Court.43 The preferred rationale then was to
enshrine within the constitutional order business prerogatives, rendering them superior to the express
legislative intent. Curiously, following its judicial philosophy at the time the U. S. Supreme Court made due
process guarantee towards employers prevail over the police power to defeat the cause of labor.44

Of course, this Court should not be insensate to the means and methods by which the entrenched powerful
class may maneuver the socio-political system to ensure self-preservation. However, the remedy to rightward
judicial bias is not leftward judicial bias. The more proper judicial attitude is to give due respect to legislative
prerogatives, regardless of the ideological sauce they are dipped in.

While the Bill of Rights maintains a position of primacy in the constitutional hierarchy,45 it has scope and
limitations that must be respected and asserted by the Court, even though they may at times serve somewhat
bitter ends. The dissenting opinions are palpably distressed at the effect of the Decision, which will
undoubtedly provoke those reflexively sympathetic to the labor class. But haphazard legal theory cannot be
used to justify the obverse result. The adoption of the dissenting views would give rise to all sorts of absurd
constitutional claims. An excommunicated Catholic might demand his/her reinstatement into the good graces
of the Church and into communion on the ground that excommunication was violative of the constitutional
right to due process. A celebrity contracted to endorse Pepsi Cola might sue in court to void a stipulation that
prevents him/her from singing the praises of Coca Cola once in a while, on the ground that such stipulation
violates the constitutional right to free speech. An employee might sue to prevent the employer from reading
outgoing e-mail sent through the company server using the company e-mail address, on the ground that the
constitutional right to privacy of communication would be breached.

The above concerns do not in anyway serve to trivialize the interests of labor. But we must avoid overarching
declarations in order to justify an end result beneficial to labor. I dread the doctrinal acceptance of the notion
that the Bill of Rights, on its own, affords protection and sanctuary not just from the acts of State but also from
the conduct of private persons. Natural and juridical persons would hesitate to interact for fear that a misstep
could lead to their being charged in court as a constitutional violator. Private institutions that thrive on their
exclusivity, such as churches or cliquish groups, could be forced to renege on their traditional tenets, including
vows of secrecy and the like, if deemed by the Court as inconsistent with the Bill of Rights. Indeed, that
fundamental right of all private persons to be let alone would be forever diminished because of a questionable
notion that contravenes with centuries of political thought.

It is not difficult to be enraptured by novel legal ideas. Their characterization is susceptible to the same
marketing traps that hook consumers to new products. With the help of unique wrapping, a catchy label, and
testimonials from professed experts from exotic lands, a malodorous idea may gain wide acceptance, even
among those self-possessed with their own heightened senses of perception. Yet before we join the mad rush
in order to proclaim a theory as "brilliant," a rigorous test must first be employed to determine whether it
complements or contradicts our own system of laws and juristic thought. Without such analysis, we run the
risk of abnegating the doctrines we have fostered for decades and the protections they may have implanted
into our way of life.

Should the Court adopt the view that the Bill of Rights may be invoked to invalidate actions by private entities
against private individuals, the Court would open the floodgates to, and the docket would be swamped with,
litigations of the scurrilous sort. Just as patriotism is the last refuge of scoundrels, the broad constitutional
claim is the final resort of the desperate litigant.

Constitutional Protection of Labor

The provisions of the 1987 Constitution affirm the primacy of labor and advocate a multi-faceted state policy
that affords, among others, full protection to labor. Section 18, Article II thereof provides:

The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote
their welfare.

Further, Section 3, Article XIII states:

The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full
employment and equal employment opportunities for all.

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and
peaceful concerted activities, including the right to strike in accordance with law. They shall be entitled to
security to tenure, humane conditions of work, and a living wage. They shall also participate in policy and
decision-making processes affecting their rights and benefits as may be provided by law.

The State shall promote the principle of shared responsibility between workers and employers and the
preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce their mutual
compliance therewith to foster industrial peace.

The State shall regulate the relations between workers and employers, recognizing the right of labor to its just
share in the fruits of production and the right of enterprises to reasonable returns on investments, and to
expansion and growth.

The constitutional enshrinement of the guarantee of full protection of labor is not novel to the 1987
Constitution. Section 6, Article XIV of the 1935 Constitution reads:

The State shall afford protection to labor, especially to working women, and minors, and shall regulate the
relations between the landowner and tenant, and between labor and capital in industry and in agriculture. The
State may provide for compulsory arbitration.

Similarly, among the principles and state policies declared in the 1973 Constitution, is that provided in Section
9, Article II thereof:

The State shall afford full protection to labor, promote full employment and equality in 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. The State may provide for compulsory arbitration.

On the other hand, prior to the 1973 Constitution, the right to security of tenure could only be found in
legislative enactments and their respective implementing rules and regulations. It was only in the 1973
Constitution that security of tenure was elevated as a constitutional right. The development of the concept of
security of tenure as a constitutionally recognized right was discussed by this Court in BPI Credit Corporation v.
NLRC,46 to wit:

The enthronement of the worker's right to security or tenure in our fundamental law was not achieved
overnight. For all its liberality towards labor, our 1935 Constitution did not elevate the right as a constitutional
right. For a long time, the worker's security of tenure had only the protective mantle of statutes and their
interpretative rules and regulations. It was as uncertain protection that sometimes yielded to the political
permutations of the times. It took labor nearly four decades of sweat and tears to persuade our people thru
their leaders, to exalt the worker's right to security of tenure as a sacrosanct constitutional right. It was Article
II, section 2 [9] of our 1973 Constitution that declared as a policy that the State shall assure the right of worker's
to security tenure. The 1987 Constitution is even more solicitous of the welfare of labor. Section 3 of its Article
XIII mandates that the State shall afford full protection to labor and declares that all workers shall be entitled
to security of tenure. Among the enunciated State policies are the

promotion of social justice and a just and dynamic social order. In contrast, the prerogative of management to
dismiss a worker, as an aspect of property right, has never been endowed with a constitutional status.

The unequivocal constitutional declaration that all workers shall be entitled to security of tenure spurred our
lawmakers to strengthen the protective walls around this hard earned right. The right was protected from
undue infringement both by our substantive and procedural laws. Thus, the causes for dismissing employees
were more defined and restricted; on the other hand, the procedure of termination was also more clearly
delineated. These substantive and procedural laws must be strictly complied with before a worker can be
dismissed from his employment.47

It is quite apparent that the constitutional protection of labor was entrenched more than eight decades ago,
yet such did not prevent this Court in the past from affirming dismissals for just cause without valid notice. Nor
was there any pretense made that this constitutional maxim afforded a laborer a positive right against dismissal
for just cause on the ground of lack of valid prior notice. As demonstrated earlier, it was only after the
enactment of the Labor Code that the doctrine relied upon by the dissenting opinions became en vogue. This
point highlights my position that the violation of the notice requirement has statutory moorings, not
constitutional.

It should be also noted that the 1987 Constitution also recognizes the principle of shared responsibility
between workers and employers, and the right of enterprise to reasonable returns, expansion, and growth.
Whatever perceived imbalance there might have been under previous incarnations of the provision have been
obviated by Section 3, Article XIII.

In the case of Manila Prince Hotel v. GSIS,48 we affirmed the presumption that all constitutional provisions are
self-executing. We reasoned that to declare otherwise would result in the pernicious situation wherein by mere
inaction and disregard by the legislature, constitutional mandates would be rendered ineffectual. Thus, we
held:

As against constitutions of the past, modern constitutions have been generally ed upon a different principle
and have often become in effect extensive codes of laws intended to operate directly upon the people in a
manner similar to that of statutory enactments, and the function of constitutional conventions has evolved
into one more like that of a legislative body. Hence, unless it is expressly provided that a legislative act is
necessary to enforce a constitutional mandate, the presumption now is that all provisions of the constitution
are self-executing. If the constitutional provisions are treated as requiring legislation instead of self-executing,
the legislature would have the power to ignore and practically nullify the mandate of the fundamental law.
This can be cataclysmic. That is why the prevailing view is, as it has always been, that —

. . . in case of doubt, the Constitution should be considered self-executing rather than non-self-executing. . . .
Unless the contrary is clearly intended, the provisions of the Constitution should be considered self-executing,
as a contrary rule would give the legislature discretion to determine when, or whether, they shall be effective.
These provisions would be subordinated to the will of the lawmaking body, which could make them entirely
meaningless by simply refusing to pass the needed implementing statute.49

In further discussing self-executing provisions, this Court stated that:

In self-executing constitutional provisions, the legislature may still enact legislation to facilitate the exercise of
powers directly granted by the constitution, further the operation of such a provision, prescribe a practice to
be used for its enforcement, provide a convenient remedy for the protection of the rights secured or the
determination thereof, or place reasonable safeguards around the exercise of the right. The mere fact that
legislation may supplement and add to or prescribe a penalty for the violation of a self-executing constitutional
provision does not render such a provision ineffective in the absence of such legislation. The omission from a
constitution of any express provision for a remedy for enforcing a right or liability is not necessarily an
indication that it was not intended to be self-executing. The rule is that a self-executing provision of the
constitution does not necessarily exhaust legislative power on the subject, but any legislation must be in
harmony with the constitution, further the exercise of constitutional right and make it more available.
Subsequent legislation however does not necessarily mean that the subject constitutional provision is not, by
itself, fully enforceable.50

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. This is reflected in the record of debates on the social justice provisions of
the Constitution:

MS. [FELICITAS S.] AQUINO: We appreciate the concern of the Commissioner. But this Committee [on Social
Justice] has actually become the forum already of a lot of specific grievances and specific demands, such that
understandably, we may have been, at one time or another, dangerously treading into the functions of
legislation. Our only plea to the Commission is to focus our perspective on the matter of social justice and its
rightful place in the Constitution. What we envision here is a mandate specific enough that would give
impetus for statutory implementation. We would caution ourselves in terms of the judicious exercise of self-
censorship against treading into the functions of legislation. (emphasis supplied)51

xxx

[FLORENZ D.] REGALADO: I notice that the 1935 Constitution had only one section on social justice; the same
is true with the 1973 Constitution. But they seem to have stood us in good stead; and I am a little surprised
why, despite that attempt at self-censorship, there are certain provisions here which are properly for
legislation.52

xxx

BISHOP [TEODORO S.] BACANI: [I] think the distinction that was given during the presentation of the provisions
on the Bill of Rights by Commissioner Bernas is very apropos here. He spoke of self-executing rights which
belong properly to the Bill of Rights, and then he spoke of a new body of rights which are more of claims and
that these have come about largely through the works of social philosophers and then the teaching of the
Popes. They focus on the common good and hence, it is not as easy to pinpoint precisely these rights nor the
situs of the rights. And yet, they exist in relation to the common good.53

xxx
MS. [MINDA LUZ M.] QUESADA: I think the nitty-gritty of this kind of collaboration will be left to
legislation but the important thing now is the conservation, utilization or maximization of the very limited
resources. xxx

[RICARDO J.] ROMULO: The other problem is that, by and large, government services are inefficient. So, this is
a problem all by itself. On Section 19, where the report says that people's organizations as a principal means
of empowering the people to pursue and protect through peaceful means…, I do not suppose that the
Committee would like to either preempt or exclude the legislature, because the concept of a representative
and democratic system really is that the legislature is normally the principal means.

[EDMUNDO G.] GARCIA: That is correct. In fact, people cannot even dream of influencing the composition or
the membership of the legislature, if they do not get organized. It is, in fact, a recognition of the principle that
unless a citizenry is organized and mobilized to pursue its ends peacefully, then it cannot really participate
effectively.54

There is no pretense on the part of the framers that the provisions on Social Justice, particularly Section 3 of
Article XIII, are self-executory. Still, considering the rule that provisions should be deemed self-executing if
enforceable without further legislative action, an examination of Section 3 of Article XIII is warranted to
determine whether it is complete in itself as a definitive law, or if it needs future legislation for completion and
enforcement.55 Particularly, we should inquire whether or not the provision voids the dismissal of a laborer for
just cause if no valid notice or hearing is attendant.

Constitutional Commissioner Fr. Joaquin G. Bernas makes a significant comment on Section 3, Article XIII of the
1987 Constitution:

The [cluster] of rights guaranteed in the second paragraph are the right "to security of tenure, humane
conditions of work, and a living wage." Again, although these have been set apart by a period (.) from the next
sentence and are therefore not modified by the final phrase "as may be provided by law," it is not the intention
to place these beyond the reach of valid laws. xxx (emphasis supplied)56

At present, the Labor Code is the primary mechanism to carry out the Constitution's directives. This is clear
from Article 357 under Chapter 1 thereof which essentially restates the policy on the protection of labor as
worded in the 1973 Constitution, which was in force at the time of enactment of the Labor Code. It crystallizes
the fundamental law's policies on labor, defines the parameters of the rights granted to labor such as the right
to security of tenure, and prescribes the standards for the enforcement of such rights in concrete terms. While
not infallible, the measures provided therein tend to ensure the achievement of the constitutional aims.

The necessity for laws concretizing the constitutional principles on the protection of labor is evident in the
reliance placed upon such laws by the Court in resolving the issue of the validity of a worker's dismissal. In
cases where that was the issue confronting the Court, it consistently recognized the constitutional right to
security of tenure and employed the standards laid down by prevailing laws in determining whether such right
was violated.58 The Court's reference to laws other than the Constitution in resolving the issue of dismissal is
an implicit acknowledgment that the right to security of tenure, while recognized in the Constitution, cannot
be implemented uniformly absent a law prescribing concrete standards for its enforcement.

As discussed earlier, the validity of an employee's dismissal in previous cases was examined by the Court in
accordance with the standards laid down by Congress in the Termination Pay Law, and subsequently, the Labor
Code and the amendments thereto. At present, the validity of an employee's dismissal is weighed against the
standards laid down in Article 279, as well as Article 282 in relation to Article 277(b) of the Labor Code, for a
dismissal for just cause, and Article 283 for a dismissal for an authorized cause.
The Effect of Statutory Violation

Of Notice and Hearing

There is no doubt that the dismissal of an employee even for just cause, without prior notice or hearing, violates
the Labor Code. However, does such violation necessarily void the dismissal?

Before I proceed with my discussion on dismissals for just causes, a brief comment regarding dismissals for
authorized cause under Article 283 of the Labor Code. While the justiciable question in Serrano pertained to a
dismissal for unauthorized cause, the ruling therein was crafted as definitive to dismissals for just cause.
Happily, the Decision today does not adopt the same unwise tack. It should be recognized that dismissals for
just cause and dismissals for authorized cause are governed by different provisions, entail divergent requisites,
and animated by distinct rationales. The language of Article 283 expressly effects the termination for
authorized cause to the service of written notice on the workers and the Ministry of Labor at least one (1)
month before the intended date of termination. This constitutes an eminent difference than dismissals for just
cause, wherein the causal relation between the notice and the dismissal is not expressly stipulated. The
circumstances distinguishing just and authorized causes are too markedly different to be subjected to the same
rules and reasoning in interpretation.

Since the present petition is limited to a question arising from a dismissal for just cause, there is no reason for
making any pronouncement regarding authorized causes. Such declaration would be merely obiter, since they
are neither the law of the case nor dispositive of the present petition. When the question becomes justiciable
before this Court, we will be confronted with an appropriate factual milieu on which we can render a more
judicious disposition of this admittedly important question.

B. Dismissal for Just Cause

There is no express provision in the Labor Code that voids a dismissal for just cause on the ground that there
was no notice or hearing. Under Section 279, the employer is precluded from dismissing an employee except
for a just cause as provided in Section 282, or an authorized cause under Sections 283 and 284. Based on
reading Section 279 alone, the existence of just cause by itself is sufficient to validate the termination.

Just cause is defined by Article 282, which unlike Article 283, does not condition the termination on the service
of written notices. Still, the dissenting opinions propound that even if there is just cause, a termination may be
invalidated due to the absence of notice or hearing. This view is anchored mainly on constitutional moorings,
the basis of which I had argued against earlier. For determination now is whether there is statutory basis under
the Labor Code to void a dismissal for just cause due to the absence of notice or hearing.

As pointed out by Justice Mendoza in Serrano, it was only in 1989 that the Labor Code was amended to enshrine
into statute the twin requirements of notice and hearing.59 Such requirements are found in Article 277 of the
Labor Code, under the heading "Miscellaneous Provisions." Prior to the amendment, the notice-hearing
requirement was found under the implementing rules issued by the then Minister of Labor in 1981. The
present-day implementing rules likewise mandate that the standards of due process, including the requirement
of written notice and hearing, "be substantially observed."60

Indubitably, the failure to substantially comply with the standards of due process, including the notice and
hearing requirement, may give rise to an actionable claim against the employer. Under Article 288, penalties
may arise from violations of any provision of the Labor Code. The Secretary of Labor likewise enjoys broad
powers to inquire into existing relations between employers and employees. Systematic violations by
management of the statutory right to due process would fall under the broad grant of power to the Secretary
of Labor to investigate under Article 273.

However, the remedy of reinstatement despite termination for just cause is simply not authorized by the Labor
Code. Neither the Labor Code nor its implementing rules states that a termination for just cause is voided
because the requirement of notice and hearing was not observed. This is not simply an inadvertent semantic
failure, but a conscious effort to protect the prerogatives of the employer to dismiss an employee for just
cause. Notably, despite the several pronouncements by this Court in the past equating the notice-hearing
requirement in labor cases to a constitutional maxim, neither the legislature nor the executive has adopted the
same tack, even gutting the protection to provide that substantial compliance with due process suffices.

The Labor Code significantly eroded management prerogatives in the hiring and firing of employees. Whereas
employees could be dismissed even without just cause under the Termination Pay Law61, the Labor Code
affords workers broad security of tenure. Still, the law recognizes the right of the employer to terminate for
just cause. The just causes enumerated under the Labor Code ¾ serious misconduct or willful disobedience,
gross and habitual neglect, fraud or willful breach of trust, commission of a crime by the employee against the
employer, and other analogous causes ¾ are characterized by the harmful behavior of an employee against
the business or the person of the employer.

These just causes for termination are not negated by the absence of notice or hearing. An employee who tries
to kill the employer cannot be magically absolved of trespasses just because the employer forgot to serve due
notice. Or a less extreme example, the gross and habitual neglect of an employee will not be improved upon
just because the employer failed to conduct a hearing prior to termination.

In fact, the practical purpose of requiring notice and hearing is to afford the employee the opportunity to
dispute the contention that there was just cause in the dismissal. Yet it must be understood – if a dismissed
employee is deprived of the right to notice and hearing, and thus denied the opportunity to present
countervailing evidence that disputes the finding of just cause, reinstatement will be valid not because the
notice and hearing requirement was not observed, but because there was no just cause in the dismissal. The
opportunity to dispute the finding of the just cause is readily available before the Labor Arbiter, and the
subsequent levels of appellate review. Again, as held in Serrano:

Even in cases of dismissal under Art. 282, the purpose for the requirement of notice and hearing is not to
comply with the Due Process Clause of the Constitution. The time for notice and hearing is at the trial stage.
Then that is the time we speak of notice and hearing as the essence of procedural due process. Thus,
compliance by the employer with the notice requirement before he dismisses an employee does not foreclose
the right of the latter to question the legality of his dismissal. As Art. 277(b) provides, "Any decision taken by
the employer shall be without prejudice to the right of the worker to contest the validity or legality of his
dismissal by filing a complaint with the regional branch of the National Labor Relations Commission.62

The Labor Code presents no textually demonstrable commitment to invalidate a dismissal for just cause due to
the absence of notice or hearing. This is not surprising, as such remedy will not restore the employer or
employee into equity. Absent a showing of integral causation, the mutual infliction of wrongs does not negate
either injury, but instead enforces two independent rights of relief.

The Damages' Dimensions

Award for Damages Must Have Statutory Basis

The Court has grappled with the problem of what should be the proper remedial relief of an employee
dismissed with just cause, but not afforded either notice or hearing. In a long line of cases, beginning
with Wenphil Corp. v. NLRC63 and up until Serrano in 2000, the Court had deemed an indemnification award as
sufficient to answer for the violation by the employer against the employee. However, the doctrine was
modified in Serrano.

I disagree with Serrano insofar as it held that employees terminated for just cause are to be paid backwages
from the time employment was terminated "until it is determined that the termination is for just cause because
the failure to hear him before he is dismissed renders the termination of his employment without legal
effect."64 Article 279 of the Labor Code clearly authorizes the payment of backwages only if an employee is
unjustly dismissed. A dismissal for just cause is obviously antithetical to an unjust dismissal. An award for
backwages is not clearly warranted by the law.

The Impropriety of Award for Separation Pay

The formula of one month's pay for every year served does have statutory basis. It is found though in the Labor
Code though, not the Civil Code. Even then, such computation is made for separation pay under the Labor
Code. But separation pay is not an appropriate as a remedy in this case, or in any case wherein an employee is
terminated for just cause. As Justice Vitug noted in his separate opinion in Serrano, an employee whose
employment is terminated for a just cause is not entitled to the payment of separation benefits.65 Separation
pay is traditionally a monetary award paid as an alternative to reinstatement which can no longer be effected
in view of the long passage of time or because of the realities of the situation.66 However, under Section 7, Rule
1, Book VI of the Omnibus Rules Implementing the Labor Code, "[t]he separation from work of an employee
for a just cause does not entitle him to the termination pay provided in the Code."67 Neither does the Labor
Code itself provide instances wherein separation pay is warranted for dismissals with just cause. Separation
pay is warranted only for dismissals for authorized causes, as enumerated in Article 283 and 284 of the Labor
Code.

The Impropriety of Equity Awards

Admittedly, the Court has in the past authorized the award of separation pay for duly terminated employees
as a measure of social justice, provided that the employee is not guilty of serious misconduct reflecting on
moral character.68 This doctrine is inapplicable in this case, as the Agabons are guilty of abandonment, which
is the deliberate and unjustified refusal of an employee to resume his employment. Abandonment is
tantamount to serious misconduct, as it constitutes a willful breach of the employer-employee relationship
without cause.

The award of separation pay as a measure of social justice has no statutory basis, but clearly emanates from
the Court's so-called "equity jurisdiction." The Court's equity jurisdiction as a basis for award, no matter what
form it may take, is likewise unwarranted in this case. Easy resort to equity should be avoided, as it should yield
to positive rules which pre-empt and prevail over such persuasions.69 Abstract as the concept is, it does not
admit to definite and objective standards.

I consider the pronouncement regarding the proper monetary awards in such cases as Wenphil Corp. v.
NLRC,70Reta,71 and to a degree, even Serrano as premised in part on equity. This decision is premised in part
due to the absence of cited statutory basis for these awards. In these cases, the Court deemed an indemnity
award proper without exactly saying where in statute could such award be derived at. Perhaps, equity or social
justice can be invoked as basis for the award. However, this sort of arbitrariness, indeterminacy and judicial
usurpation of legislative prerogatives is precisely the source of my discontent. Social justice should be the
aspiration of all that we do, yet I think it the more mature attitude to consider that it ebbs and flows within our
statutes, rather than view it as an independent source of funding.

Article 288 of the Labor Code as a Source of Liability

Another putative source of liability for failure to render the notice requirement is Article 288 of the Labor Code,
which states:

Article 288 states:

Penalties. — Except as otherwise provided in this Code, or unless the acts complained of hinges on a question
of interpretation or implementation of ambiguous provisions of an existing collective bargaining agreement,
any violation of the provisions of this Code declared to be unlawful or penal in nature shall be punished with a
fine of not less than One Thousand Pesos (P1,000.00) nor more than Ten Thousand Pesos (P10,000.00), or
imprisonment of not less than three months nor more than three years, or both such fine and imprisonment
at the discretion of the court.

It is apparent from the provision that the penalty arises due to contraventions of the provisions of the Labor
Code. It is also clear that the provision comes into play regardless of who the violator may be. Either the
employer or the employee may be penalized, or perhaps even officials tasked with implementing the Labor
Code.

However, it is apparent that Article 288 is a penal provision; hence, the prescription for penalties such as fine
and imprisonment. The Article is also explicit that the imposition of fine or imprisonment is at the "discretion
of the court." Thus, the proceedings under the provision is penal in character. The criminal case has to be
instituted before the proper courts, and the Labor Code violation subject thereof duly proven in an adversarial
proceeding. Hence, Article 288 cannot apply in this case and serve as basis to impose a penalty on Riviera
Homes.

I also maintain that under Article 288 the penalty should be paid to the State, and not to the person or persons
who may have suffered injury as a result of the violation. A penalty is a sum of money which the law requires
to be paid by way of punishment for doing some act which is prohibited or for not doing some act which is
required to be done.72 A penalty should be distinguished from damages which is the pecuniary compensation
or indemnity to a person who has suffered loss, detriment, or injury, whether to his person, property, or rights,
on account of the unlawful act or omission or negligence of another. Article 288 clearly serves as a punitive
fine, rather than a compensatory measure, since the provision penalizes an act that violates the Labor Code
even if such act does not cause actual injury to any private person.

Independent of the employee's interests protected by the Labor Code is the interest of the State in seeing to
it that its regulatory laws are complied with. Article 288 is intended to satiate the latter interest. Nothing in the
language of Article 288 indicates an intention to compensate or remunerate a private person for injury he may
have sustained.

It should be noted though that in Serrano, the Court observed that since the promulgation of Wenphil Corp. v.
NLRC73 in 1989, "fines imposed for violations of the notice requirement have varied from P1,000.00
to P2,000.00 to P5,000.00 to P10,000.00."74 Interestingly, this range is the same range of the penalties imposed
by Article 288. These "fines" adverted to in Serrano were paid to the dismissed employee. The use of the term
"fines," as well as the terminology employed a few other cases,75 may have left an erroneous impression that
the award implemented beginning with Wenphil was based on Article 288 of the Labor Code. Yet, an
examination of Wenphil reveals that what the Court actually awarded to the employee was an "indemnity",
dependent on the facts of each case and the gravity of the omission committed by the employer. There is no
mention in Wenphil of Article 288 of the Labor Code, or indeed, of any statutory basis for the award.

The Proper Basis: Employer's Liability under the Civil Code

As earlier stated, Wenphil allowed the payment of indemnity to the employee dismissed for just cause is
dependent on the facts of each case and the gravity of the omission committed by the employer. However, I
considered Wenphil flawed insofar as it is silent as to the statutory basis for the indemnity award. This failure,
to my mind, renders it unwise for to reinstate the Wenphil rule, and foster the impression that it is the judicial
business to invent awards for damages without clear statutory basis.

The proper legal basis for holding the employer liable for monetary damages to the employee dismissed for
just cause is the Civil Code. The award of damages should be measured against the loss or injury suffered by
the employee by reason of the employer's violation or, in case of nominal damages, the right vindicated by
the award. This is the proper paradigm authorized by our law, and designed to obtain the fairest possible
relief.

Under Section 217(4) of the Labor Code, the Labor Arbiter has jurisdiction over claims for actual, moral,
exemplary and other forms of damages arising from the employer-employee relations. It is thus the duty of
Labor Arbiters to adjudicate claims for damages, and they should disabuse themselves of any inhibitions if it
does appear that an award for damages is warranted. As triers of facts in a specialized field, they should attune
themselves to the particular conditions or problems attendant to employer-employee relationships, and thus
be in the best possible position as to the nature and amount of damages that may be warranted in this case.

The damages referred under Section 217(4) of the Labor Code are those available under the Civil Code. It is but
proper that the Civil Code serve as the basis for the indemnity, it being the law that regulates the private
relations of the members of civil society, determining their respective rights and obligations with reference to
persons, things, and civil acts.76 No matter how impressed with the public interest the relationship between a
private employer and employee is, it still is ultimately a relationship between private individuals. Notably, even
though the Labor Code could very well have provided set rules for damages arising from the employer-
employee relationship, referral was instead made to the concept of damages as enumerated and defined under
the Civil Code.

Given the long controversy that has dogged this present issue regarding dismissals for just cause, it is wise to
lay down standards that would guide the proper award of damages under the Civil Code in cases wherein the
employer failed to comply with statutory due process in dismissals for just cause.

First. I believe that it can be maintained as a general rule, that failure to comply with the statutory requirement
of notice automatically gives rise to nominal damages, at the very least, even if the dismissal was sustained for
just cause.

Nominal damages are adjudicated in order that a right of a plaintiff which has been violated or invaded by
another may be vindicated or recognized without having to indemnify the plaintiff for any loss suffered by
him.77 Nominal damages may likewise be awarded in every obligation arising from law, contracts, quasi-
contracts, acts or omissions punished by law, and quasi-delicts, or where any property right has been invaded.

Clearly, the bare act of failing to observe the notice requirement gives rise to nominal damages assessable
against the employer and due the employee. The Labor Code indubitably entitles the employee to notice even
if dismissal is for just cause, even if there is no apparent intent to void such dismissals deficiently implemented.
It has also been held that one's employment, profession, trade, or calling is a "property right" and the wrongful
interference therewith gives rise to an actionable wrong.78

In Better Buildings, Inc. v. NLRC,79 the Court ruled that the while the termination therein was for just and valid
cause, the manner of termination was done in complete disregard of the necessary procedural
safeguards.80 The Court found nominal damages as the proper form of award, as it was purposed to vindicate
the right to procedural due process violated by the employer.81 A similar holding was maintained in Iran v.
NLRC82 and Malaya Shipping v. NLRC.83 The doctrine has express statutory basis, duly recognizes the existence
of the right to notice, and vindicates the violation of such right. It is sound, logical, and should be adopted as a
general rule.

The assessment of nominal damages is left to the discretion of the court,84 or in labor cases, of the Labor Arbiter
and the successive appellate levels. The authority to nominate standards governing the award of nominal
damages has clearly been delegated to the judicial branch, and it will serve good purpose for this Court to
provide such guidelines. Considering that the affected right is a property right, there is justification in basing
the amount of nominal damages on the particular characteristics attaching to the claimant's employment.
Factors such as length of service, positions held, and received salary may be considered to obtain the proper
measure of nominal damages. After all, the degree by which a property right should be vindicated is affected
by the estimable value of such right.

At the same time, it should be recognized that nominal damages are not meant to be compensatory, and should
not be computed through a formula based on actual losses. Consequently, nominal damages usually limited in
pecuniary value.85 This fact should be impressed upon the prospective claimant, especially one who is
contemplating seeking actual/compensatory damages.

Second. Actual or compensatory damages are not available as a matter of right to an employee dismissed for
just cause but denied statutory due process. They must be based on clear factual and legal bases,86 and
correspond to such pecuniary loss suffered by the employee as duly proven.87 Evidently, there is less degree of
discretion to award actual or compensatory damages.

I recognize some inherent difficulties in establishing actual damages in cases for terminations validated for just
cause. The dismissed employee retains no right to continued employment from the moment just cause for
termination exists, and such time most likely would have arrived even before the employer is liable to send the
first notice. As a result, an award of backwages disguised as actual damages would almost never be justified if
the employee was dismissed for just cause. The possible exception would be if it can be proven the ground for
just cause came into being only after the dismissed employee had stopped receiving wages from the employer.

Yet it is not impossible to establish a case for actual damages if dismissal was for just cause. Particularly
actionable, for example, is if the notices are not served on the employee, thus hampering his/her opportunities
to obtain new employment. For as long as it can be demonstrated that the failure of the employer to observe
procedural due process mandated by the Labor Code is the proximate cause of pecuniary loss or injury to the
dismissed employee, then actual or compensatory damages may be awarded.

Third. If there is a finding of pecuniary loss arising from the employer violation, but the amount cannot be
proved with certainty, then temperate or moderate damages are available under Article 2224 of the Civil Code.
Again, sufficient discretion is afforded to the adjudicator as regards the proper award, and the award must be
reasonable under the circumstances.88 Temperate or nominal damages may yet prove to be a plausible
remedy, especially when common sense dictates that pecuniary loss was suffered, but incapable of precise
definition.
Fourth. Moral and exemplary damages may also be awarded in the appropriate circumstances. As pointed out
by the Decision, moral damages are recoverable where the dismissal of the employee was attended by bad
faith, fraud, or was done in a manner contrary to morals, good customs or public policy, or the employer
committed an act oppressive to labor.89 Exemplary damages may avail if the dismissal was effected in a wanton,
oppressive or malevolent manner.

Appropriate Award of Damages to the Agabons

The records indicate no proof exists to justify the award of actual or compensatory damages, as it has not been
established that the failure to serve the second notice on the Agabons was the proximate cause to any loss or
injury. In fact, there is not even any showing that such violation caused any sort of injury or discomfort to the
Agabons. Nor do they assert such causal relation. Thus, the only appropriate award of damages is nominal
damages. Considering the circumstances, I agree that an award of Fifteen Thousand Pesos (P15,000.00) each
for the Agabons is sufficient.

All premises considered, I VOTE to:

(1) DENY the PETITION for lack of merit, and AFFIRM the Decision of the Court of Appeals dated 23 January
2003, with the MODIFICATION that in addition, Riviera Homes be

ORDERED to pay the petitioners the sum of Fifteen Thousand Pesos (P15,000.00) each, as nominal damages.

(2) HOLD that henceforth, dismissals for just cause may not be invalidated due to the failure to observe the
due process requirements under the Labor Code, and that the only indemnity award available to the employee
dismissed for just cause are damages under the Civil Code as duly proven. Any and all previous rulings and
statements of the Court inconsistent with this holding are now deemed INOPERATIVE.

G.R. No. 164662 February 18, 2013

MARIA LOURDES C. DE JESUS, Petitioner,

vs.
HON. RAUL T. AQUINO, PRESIDING COMMISSIONER, NATIONAL LABOR RELATIONS COMMISSION, SECOND
DIVISION, QUEZON CITY, and SUPERSONIC SERVICES, INC., Respondents.

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

G.R. No. 165787

SUPERSONIC SERVICES, INC., Petitioner

vs.
MARIA LOURDES C. DE JESUS, Respondent.

DECISION

BERSAMIN, J.:

The dismissal of an employee for a just or authorized cause is valid despite the employer's non-observance of
the due process of law the Labor Code has guaranteed to the employee. The dismissal is effective against the
employee subject to the payment by the employer of an indemnity.
Under review on certiorariis the July 23, 2004 Decision promulgated in C.A.-G.R. SP No. 81798 entitled Maria
Lourdes C. De Jesus v. Hon. Raul T. Aquino, Presiding Commissioner, NLRC, Second Division, Quezon City, and
Supersonic Services, Inc.,1whereby the Court of Appeals (CA) affirmed the validity of the dismissal from her
employment of Maria Lourdes C. De Jesus(petitionerin G.R. No. 164622), but directedher employer, Supersonic
Services, Inc. (Supersonic), to pay her full backwages from the time her employment was terminated until the
finality of the decision because of the failure of Supersonic to comply with the two-written notice rule, citing
the rulinginSerrano v. National Labor Relations Commission.2

Antecedents

The antecedent facts, as summarized by the CA, follow:

On February 20, 2002, petitioner Ma. Lourdes De Jesus (De Jesus for brevity) filed with the Labor Arbiter a
complaint for illegal dismissal against private respondents Supersonic Services Inc., (Supersonic for brevity),
Pakistan Airlines, Gil Puyat, Jr. and Divina Abad Santos praying for the payment of separation pay, full
backwages, moral and exemplary damages, etc.

De Jesus alleged that: she was employed by Supersonic since February 1976 until her illegal dismissal of March
15, 2001; from 1976 to 1992, she held the position of eservation staff, and from 1992 until her illegal dismissal
on March 15, 2001, she held the position of Sales Promotion Officer where she solicited clients for Supersonic
and sold plane tickets to various travel agencies on credit; on March 12, 2001, she had an emergency
hysterectomy operation preceded by continuous bleeding; she stayed at the Makati Medical Center for three
(3) days and applied for a sixty-(60) day leave in the meantime; on June 1, 2001, she went to Supersonic and
found the drawers of her desk opened and her personal belongings packed, without her knowledge and
consent; while there, Divina Abad Santos (Santos for brevity), the company’s general manager, asked her to
sign a promissory note and directed her secretary, Cora Malubay (Malubay for brevity) not to allow her to leave
unless she execute a promissory note; she was later forced to execute a promissory note which she merely
copied from the draft prepared by Santos and Malubay; she was also forced to indorse to Supersonic her SSS
check in the amount of ₱25,000.00 which represents her benefits from the hysterectomy operation; there was
no notice and hearing nor any opportunity given her to explain her side prior to the termination of her
employment; Supersonic even filed a case for Estafa against her for her alleged failure to remit collections
despite the fact that she had completely remitted all her collections; and the termination was done in bad faith
and in violation of due process.

Supersonic countered that: as Sales Promotion Officer, De Jesus was fully authorized to solicit clients and
receive payments for and in its behalf, and as such, she occupied a highly confidential and financially sensitive
position in the company; De Jesus was able to solicit several ticket purchases for Pakistan International Airlines
(PIA) routed from Manila to various destinations abroad and received all payments for the PIA tickets in its
behalf; for the period starting May 30, 2000 until September 28, 2000, De Jesus issued PIA tickets to Monaliza
Placement Agency, a client under her special solicitation and account, in the amount of U.S.$15,085.00; on
January 24, 2001, the company’s general manager sent a memorandum to De Jesus informing her of the official
endorsement of collectibles from clients under her account; in March 2001, another memorandum was issued
to De Jesus reminding her to collect payments of accounts guaranteed by her and which had been past due
since the year 2000; based on the company records, an outstanding balance of U.S.$36,168.39 accumulated
under the account of De Jesus; after verifications with its clients, it discovered that the amount of U.S.$36,
168.39 were already paid to De Jesus but this was not turned over and duly accounted for by her; hence,
another memorandum was issued to De Jesus directing her to explain in writing why she should not be
dismissed for cause for failure to account for the total amount of U.S.$36, 168.39; De Jesus was informed that
her failure to explain in writing shall be construed that she misappropriated said amount for her own use and
benefit to the damage of the company; De Jesus was likewise verbally notified of the company’s intention to
dismiss her for cause; after due investigation and confrontation, De Jesus admitted that she received the
U.S.$36,168.39 from their clients and even executed a promissory note in her own handwriting acknowledging
her obligation; she was fully aware of her dismissal and even obligated herself to offset her obligation with any
amount she would receive from her retirement; when De Jesus failed to comply with her promise to settle her
obligation, a demand letter was sent to her; because of her persistent failure to settle the unremitted
collections, it was constrained to suspend her as a precautionary measure and to protect its interests; despite
demands, De Jesus failed to fulfill her promise, hence, a criminal case for estafa was filed against her; and in
retaliation to the criminal case filed against her, she filed this illegal dismissal case.3

After due proceedings, on October 30, 2002, the Labor Arbiterruled against De Jesus,4 declaring her dismissal
to be for just cause and finding that she had been accorded due process of law.

Aggrieved, De Jesusappealed to the National Labor Relations Commission (NLRC), insisting that she had not
been afforded the opportunity to explain her side.

On July 31, 2003, however, the NLRC rendered its Resolution,5 affirming the Labor Arbiter’s Decision and
dismissing De Jesus’ appeal for its lack of merit, stating:

Records show that pursuant to a Memorandum dated May 12, 2001, complainant was required to explain in
writing why she should not be dismissed from employment for her failure to account for the cash collections
in her custody (Records, p. 37). In a letter dated June 1, 2001, complainant acknowledged her failure to effect
a turn-over of the amount of US$36,168.39 to the respondent (Records, p. 40). More than this, she offered no
explanation for her failure to immediately account for her collections. Further, her allegation of duress may
not be accorded credence, there being no evidence as to the circumstances under which her consent was
allegedly vitiated. Having been given the opportunity to explain her side, complainant may not successfully
claim that she was denied due process. Further, her admission and other related evidence, particularly the
finding of a prima facie case for estafa against her, and corroborative statements from respondent’s client,
sufficiently controvert complainant’s assertion that no just cause existed for the dismissal.

WHEREFORE, premises considered, the decision under review is AFFIRMED, and complainant’s appeal,
DISMISSED, for lack of merit.

SO ORDERED.

The NLRC denied the Motion for Reconsideration filed by De Jesus on October 30, 2003.6

De Jesusbrought a petition for certiorari to the CA, charging the NLRC with committing grave abuse of
discretion amounting to lack or excess of jurisdiction in finding that she had not been denied due process; and
in finding that her dismissal had been for just cause.

On July 23, 2004, the CA promulgated its assailed decision,7 relevantly stating as follows:

The petition is partly meritorious.

In termination of employment based on just cause , it is not enough that the employee is guilty of misfeasance
towards his employer, or that his continuance in service is patently inimical to the employer’s interest. The law
requires the employer to furnish the employee concerned with two written notices – one, specifying the
ground or grounds for termination and giving said employee reasonable opportunity within which to explain
his side, and another, indicating that upon due consideration of all the circumstances, rounds have been
established to justify his termination. In addition to this, a hearing or conference is also required, whereby the
employee may present evidence to rebut the accusations against him.

There appears to be no dispute upon the fact that De Jesus failed to remit and account for some of her
collections. This she admitted and explained in her letters dated April 5, 2001 and May 15, 2001 to Santos, the
company’s general manager. Without totally disregarding her allegations of duress in executing the promissory
note, the facts disclose therein also coincide with the fact that De Jesus was somehow remiss in her duties.
Considering that she occupied a confidential and sensitive position in the company, the circumstances
presented fairly justified her termination from employment based on just cause. De Jesus’ failure to fully
account her collections is sufficient justification for the company to lose its trust and confidence in her. Loss of
trust and confidence as a ground for dismissing an employee does not require proof beyond reasonable doubt.
It is sufficient if there is "some basis" for such loss of confidence, or if the employer has reasonable grounds to
believe that the employee concerned is responsible for the misconduct, as to be unworthy of the trust and
confidence demanded by his position.

Nonetheless, while this Court is inclined to rule that De Jesus’ dismissal was for just cause, the manner by which
the same was effected does not comply with the procedure outlined under the Labor Code and as enunciated
in the landmark case of Serrano vs. NLRC.

The evidence on record is bereft of any indicia that the two written notices were furnished to De Jesus prior to
her dismissal. The various memoranda given her were not the same notices required by law, as they were mere
internal correspondence intended to remind De Jesus of her outstanding accountabilities to the company.
Assuming for the sake of argument that the memoranda furnished to De Jesus may have satisfied the minimum
requirements of due process, still, the same did not satisfy the notice requirement under the Labor Code
because the intention to sever the employee’s services must be made clear in the notice. Such was not
apparent from the memoranda. As the Supreme Court held in Serrano, the violation of the notice requirement
is not strictly a denial of due process. This is because such notice is precisely intended to enable the employee
not only to prepare himself for the legal battle to protect his tenure of employment, but also to find other
means of employment and ease the impact of the loss of his job and, necessarily, his income.

Conformably with the doctrine laid down in Serrano vs. NLRC, the dismissal of De Jesus should therefore be
struck as ineffectual.

WHEREFORE, premises considered, the Resolutions dated July 31, 2003 and October 30, 2003 of the NLRC,
Second Division in NLRC NCR 30-02-01058-02 (CA NO. 033714-02) are herebyMODIFIED, in that while the
dismissal is hereby held to be valid, the same must declaredineffectual. As a consequence thereof, Supersonic
is hereby required to pay petitioner Maria Lourdes De Jesus full backwages from the time her employment was
terminated up to the finality of this decision.

SO ORDERED.

De Jesusappealed by petition for review on certiorari to the Court (G.R. No. 164662), while Supersonic first
sought the reconsideration of the Decision in the CA.Upon the denial of its motion for reconsideration on
October 21, 2004, Supersonic likewise appealed to the Court by petition for review on certiorari(G.R. No.
165787).Theappeals were consolidated on October 5, 2005.8

In G.R. No. 164662, De Jesus avers that:

I. The Honorable Court of Appeals erred in finding that respondent Supersonic is liable only on the backwages
and not for the damages prayed for.
II. The Honorable Court of Appeals erred in finding that the dismissal was valid and at the same time, declaring
it ineffectual.9

In G.R. No. 165787,Supersonic ascribes the following errors to the CA, to wit:

I. Respondent Court of Appeals committed serious errors which are not in accordance with law and applicable
decisions of the Honorable Supreme Court when it concluded that the two-notice requirement has not been
complied with when respondent De Jesus was terminated from service.

II. Respondent Court of Appeals committed serious errors by concluding that the Serrano Doctrine applies
squarely to the facts and legal issues of the present case which are contrary to the law and jurisprudence.

III. Serrano Doctrine has already been abandoned in the case of Agabon v. NLRC, which is prevailing and
landmark doctrine applicable in the resolution of the present case.

IV. Respondent Court of Appeals committed serious errors by disregarding the law and jurisprudence when it
awarded damages to private respondent which is excessive and unduly penalized petitioner SSI.10

Based on the foregoing, thedecisive issues to be passed upon are: (1) Whether or not Supersonic was justified
in terminating De Jesus’ employment; (2) Whether or not Supersonic complied with the two-written notice
rule; and (3) Whether or not De Jesus was entitled to full backwages and damages.

Ruling

We partially grant the petition for review of Supersonic in G.R. No. 165787.

Anent the first issue, Supersonic substantially proved that De Jesus had failed to remit and had misappropriated
the amounts she had collected in behalf of Supersonic. In that regard, the factual findings of the Labor Arbiter
and NLRC on the presence of the just cause for terminating her employment, being already affirmed by the CA,
are binding if not conclusive upon this Court. There being no cogent reason to disturb such findings, the
dismissal of De Jesus was valid.

Article 282 of the Labor Code enumerates the causes by which the employer may validly terminate the
employment of the employee, viz:

Article 282.Termination by employer. - An employer may terminate an employment for any of the following
causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his 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 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 representatives; and

(e) Other causes analogous to the foregoing.

The CA observed that De Jesus had not disputed her failure to remit and account for some of her collections,
for, in fact, she herself had expressly admitted her failure to do so through her letters dated April 5, 2001 and
May 15, 2001 sent to Supersonic’s general manager. Thereby, the CA concluded, she defrauded her employer
or willfully violated the trust reposed in her by Supersonic. In that regard, the CA rightly observed that proof
beyond reasonable doubt of her violation of the trust was not required, for it was sufficient that the employer
had "reasonable grounds to believe that the employee concerned is responsible for the misconduct as to be
unworthy of the trust and confidence demanded by [her] position."11

Concerning the second issue, the NLRC and the CA differed from each other, with the CA concluding, unlike the
NLRC, that Supersonic did not comply with the two-written notice rule. In the exercise of its equity jurisdiction,
then, this Court should now re-evaluate and re-examine the relevant findings.12

A careful consideration of the records persuades us to affirm the decision of the CA holding that Supersonic
had not complied with the twowritten notice rule.

It ought to be without dispute that the betrayal of the trust the employer reposed in De Jesus was the essence
of the offense for which she was to be validly penalized with the supreme penalty of dismissal.13 Nevertheless,
she was still entitled to due processin order to effectivelysafeguard her security of tenure. The law affording
to her due process as an employee imposed on Supersonic as the employer the obligation to send to her two
written notices before finally dismissing her. This requirement of two written notices is enunciated in Article
277of the Labor Code, as amended, which relevantly states:

Article 277.Miscellaneous provisions.–xxx

xxxx

(b) Subject to the constitutional right of workers to security of tenure and their right to be protected against
dismissal except for a just and authorized cause and without prejudice to the requirement of notice under
Article 283 of this Code, the employer shall furnish the worker whose employment is sought to be
terminateda written notice containing a statement of the causes for termination and shall afford the latter
ample opportunity to be heard and to defend himself with the assistance of his representative if he so desires
in accordance with company rules and regulations promulgated pursuant to guidelines set by the
Department of Labor and Employment. Any decision taken by the employer shall be without prejudice to the
right of the worker to contest the validity or legality of his dismissal by filing a complaint with the regional
branch of the National Labor Relations Commission. The burden of proving that the termination was for a valid
or authorized cause shall rest on the employer. The Secretary of the Department of Labor and Employment
may suspend the effects of the termination pending resolution of the dispute in the event of a prima
facie finding by the appropriate official of the Department of Labor and Employment before whom such dispute
is pending that the termination may cause a serious labor dispute or is in implementation of a mass lay-off.14

xxxx

and in Section 215 and Section7,16 Rule I, Book VI of the Implementing Rules of the Labor Code. The firstwritten
notice would inform her of the particular acts or omissions for which her dismissal was being sought. The
second written notice would notify her of the employer’s decision to dismiss her. But the second written notice
must not be made until after she was given a reasonable period after receiving the first written notice within
which to answer the charge, and after she was given the ample opportunity to be heard and to defend herself
with the assistance of her representative, if she so desired.17 The requirement was mandatory.18

Did Supersonic observe due process before dismissing De Jesus?

Supersonic contends that it gave the two written notices to De Jesus in the form of the memoranda dated
March 26, 2001 and May 12, 2001, to wit:
Memorandum dated March 26, 2001

26 March 2001

MEMORANDUM

TO : MA LOURDES DE JESUS SALES PROMOTION OFFICER

FROM : DIVINA S. ABAD SANTOS

SUBJECT : PAST DUE ACCOUNTS

We have repeatedly reminded you to collect payment of accounts guaranteed by you and which have been
past due since last year. You have assured us that these will be settled by the end of February 2001.

Our books show, that as of today, March 26, 2001, the following accounts have outstanding balances:

Wafa $6,585

Monaliza/Ragab 4,326.39

Salah 1,950

Jerico 1,300

Rafat 4,730

Mahmood/Alhirsh 3,205

Amina 2,000

MMML 1,653

RDRI 361

HMD 2,100

Amru 1,388

Iyad Ali 97

Ali 740

Maher 675
 Sharikat 350

Imad 905

Rubies 2,678

Adel 1,125

$36,168.39

Please give us an updated report on your collection efforts and the status of each of the above accounts to
enable us to take necessary actions. This would be submitted on or before April 2, 2001

(SGD) DIVINA ABAD SANTOS

General Manager19

Memorandum dated May 12, 2001

12 May 2001

MEMORANDUM

TO : MA. LOURDES DE JESUS SALES PROMOTION OFFICER

FROM : DIVINA S. ABAD SANTOS GENERAL MANAGER

SUBJECT : PAST DUE ACCOUNTS

You are asked to refer to my memorandum dated 26 March 2001. We were informed that the following
accounts have been paid to you but not accounted/turned over to the office:

NAME AMOUNTS

Wafa $6,585

Monaliza/Ragab 4,326.39

Salah 1,950

Jerico 1,300

Rafat 4,730

Mahmood/Alhirsh 3,205

Amina 2,000
 MMML 1,653

RDRI 361

HMD 2,100

Amru 1,388

Iyad Ali 97

Ali 740

Maher 675

Sharikat 350

Imad 905

Rubies 2,678

Adel 1,125

$36,168.39

You are hereby directed to explain in writing within 72 hours from receipt of this memorandum, why you
should not be dismissed for cause for failure to account for above amounts.

By your failure to explain in writing the above accountabilities, within the set deadline, we shall assume that
you have misappropriated the same for your own use and benefit to the damage of the office.

(SGD.)DIVINA S. ABAD SANTOS

General Manager20

Contrary to Supersonic’s contention, however, the aforequotedmemoranda did not satisfy the requirement
for the two written notices under the law. The March 26, 2001 memorandum did not specify the grounds for
which her dismissal would be sought, and for that reasonwas at best a mere reminder to De Jesus to submit
her report on the status of her accounts. The May 12, 2001 memorandumdid not provide the notice of dismissal
under the law because itonly directed her to explain why she should not be dismissed for cause. The latter
memorandum was apparently only the first written noticeunder the requirement.The insufficiency of the two
memoranda as compliance with the two-written notices requirement of due process was, indeed, indubitable
enough to impelthe CA to hold:

The evidence on record is bereft of any indicia that the two written notices were furnished to De Jesus prior to
her dismissal. The various memoranda given her were not the same notices required by law, as they were mere
internal correspondences intended to remind De Jesus of her outstanding accountabilities to the company.
Assuming for the sake of argument that the memoranda furnished to De Jesus may have satisfied the minimum
requirements of due process, still, the same did not satisfy the notice requirement under the Labor Code
because the intention to sever the employee’s services must be made clear in the notice. Such was not
apparent from the memoranda. As the Supreme Court held in Serrano, the violation of the notice requirement
is not strictly a denial of due process. This is because such notice is precisely intended to enable the employee
not only to prepare himself for the legal battle to protect his tenure of employment, but also to find other
means of employment and ease the impact of the loss of his job and, necessarily, his income.

Conformably with the doctrine laid down in Serrano vs. NLRC, the dismissal of De Jesus should therefore be
struck (down) as ineffectual.21

On the third issue, Supersonicposits that the CA gravely erred in declaring the dismissal of De Jesus ineffectual
pursuant to the ruling inSerrano v. National Labor Relations Commission;andinsiststhat the CA should have
instead applied the ruling in Agabonv. National Labor Relations Commission,22 which meanwhile
abandoned Serrano.

InSerrano, the Court pronounced as follows:

x xx, with respect to dismissals for cause under Art. 282, if it is shown that the employee was dismissed for any
of the just causes mentioned in said Art. 282, then, in accordance with that article, he should not be reinstated.
However, he must be paid backwages from the time his employment was terminated until it is determined that
the termination of employment is for a just cause because the failure to hear him before he is dismissed renders
the termination of his employment without legal effect.

WHEREFORE, the petition is GRANTED and the resolution of the National Labor Relations Commission is
MODIFIED by ordering private respondent Isetann Department Store, Inc. to pay petitioner separation pay
equivalent to one (1) month pay for every year of service, his unpaid salary, and his proportionate 13th month
pay and, in addition, full backwages from the time his employment was terminated on October 11, 1991 up to
the time the decision herein becomes final. For this purpose, this case is REMANDED to the Labor Arbiter for
computation of the separation pay, backwages, and other monetary awards to petitioner.

SO ORDERED.23

The CA did not err. Relying on Serrano,the CA precisely ruled that the violation by Supersonic of the two-written
notice requirement renderedineffectual the dismissal of De Jesus for just cause under Article 282 of the Labor
Code, and entitled her to be paid full backwages from the time of her dismissal until the finality of its
decision.The Court cannot ignore thatthe applicable case law when the CA promulgated its decision on July 23,
2004, and when it denied Supersonic’s motion for reconsideration on October 21, 2004 was still Serrano.
Considering that the Court determines in this appeal by petition for review on certiorarionly whether or not
the CA committed an error of law in promulgating its assailed decision of July 23, 2004,the CA cannot be
declared to have erred on the basis of Serrano being meanwhile abandoned through Agabonif all thatthe CA
did was to fully apply the law and jurisprudence applicable at the time of its rendition of the judgment.As a
rule, a judicial interpretation becomes a part of the law as of the date that the law was originally passed, subject
only to the qualification that when a doctrine of the Court is overruled and the Court adoptsa different view,
and more so when there is a reversal ofthe doctrine, the new doctrine should be applied prospectively and
should not apply to parties who relied on the old doctrine and acted in good faith.24 To hold otherwise would
be to deprive the law of its quality of fairness and justice, for, then, there is no recognition of what had
transpired prior to such adjudication.25
Although Agabon,being promulgatedonly on November 17, 2004, ought to be prospective, not retroactive, in
its operation because its language did not expressly state that it would also operate retroactively,26 the Court
has already deemed it to be the wise judicial course to let its abandonment of Serranobe retroactive as its
means of giving effect to its recognition of the unfairness of declaring illegal or ineffectual dismissals for valid
or authorized causes but not complying with statutory due process.27 Under Agabon, the new doctrine is that
the failure of the employer to observe the requirements of due process in favor of the dismissed employee
(that is, the two-written notices rule) should not invalidate or render ineffectual the dismissal for just or
authorized cause. The Agabon Court plainly saw the likelihood of Serrano producing unfair butfar-reaching
consequences, such as, but not limited to, encouraging frivolous suits where even the most notorious violators
of company policies would be rewarded by invoking due process; to having the constitutional policy of
providing protection to labor be used as a sword to oppress the employers; and to compelling the employers
to continue employing persons who were admittedly guilty of misfeasance or malfeasance and whose
continued employment would be patently inimical to the interest of employers.28

Even so, the Agabon Court still deplored the employer's violation of the employee's right to statutory due
process by directing the payment of indemnity in the form of nominal damages, the amount of which would
be addressed to the sound discretion of the labor tribunal upon taking into account the relevant circumstances.
Thus, the Agabon Court designed such form of damages as a deterrent to employers from committing in the
future violations of the statutory due process rights of employees, and, at the same time, as at the very least a
vindication or recognition of the fundamental right granted to the employees under the Labor Code and its
implementing rules.29 Accordingly, consistent with precedent30 the amount of ₱50,000.00 as nominal damages
is hereby fixed for the purpose of indemnifying De Jesus for the violation of her right to due process.1âwphi1

WHEREFORE, the Court DENIES the petition for review on certiorari in G.R. No. 164662 entitled Maria Lourdes
C. De Jesus v. Han. Raul T Aquino, Presiding Commissioner, NLRC, Second Division, Quezon City, and Supersonic
Services, Inc.; PARTIALLY GRANTS the petition for review on certiorari in G.R. No. 165787 entitled Supersonic
Services, Inc. v. Maria Lourdes C. De Jesus and, accordingly, DECLARES the dismissal of Maria Lourdes C. De
Jesus for just or authorized cause as valid and effectual; and ORDERS Supersonic Services, Inc. to pay to Maria
Lourdes C. De Jesus ₱50,000.00 as nominal damages to indemnify her for the violation of her right to due
process.

No pronouncements on costs of suit.

SO ORDERED.

G.R. No. 192571 April 22, 2014

ABBOTT LABORATORIES, PHILIPPINES, CECILLE A. TERRIBLE, EDWIN D. FEIST, MARIA OLIVIA T. YABUT-MISA,
TERESITA C. BERNARDO, AND ALLAN G. ALMAZAR, Petitioners,
vs.
PEARLIE ANN F. ALCARAZ, Respondent.

RESOLUTION

PERLAS-BERNABE, J.:
For resolution is respondent Pearlie Ann Alcaraz's (Alcaraz) Motion for Reconsideration dated August 23, 2013
of the Court's Decision dated July 23, 2013 (Decision).1

At the outset, there appears to be no substantial argument in the said motion sufficient for the Court to depart
from the pronouncements made in the initial ruling. But if only to address Akaraz's novel assertions, and to so
placate any doubt or misconception in the resolution of this case, the Court proceeds to shed light on the
matters indicated below.

A. Manner of review.

Alcaraz contends that the Court should not have conducted a re-weighing of evidence since a petition for
review on certiorari under Rule 45 of the Rules of Court (Rules) is limited to the review of questions of law. She
submits that since what was under review was a ruling of the Court of Appeals (CA) rendered via a petition for
certiorari under Rule 65 of the Rules, the Court should only determine whether or not the CA properly
determined that the National Labor Relations Commission (NLRC) committed a grave abuse of discretion.

The assertion does not justify the reconsideration of the assailed Decision.

A careful perusal of the questioned Decision will reveal that the Court actually resolved the controversy under
the above-stated framework of analysis. Essentially, the Court found the CA to have committed an error in
holding that no grave abuse of discretion can be ascribed to the NLRC since the latter arbitrarily disregarded
the legal implication of the attendant circumstances in this case which should have simply resulted in the
finding that Alcaraz was apprised of the performance standards for her regularization and hence, was properly
a probationary employee. As the Court observed, an employee’s failure to perform the duties and
responsibilities which have been clearly made known to him constitutes a justifiable basis for a probationary
employee’s non-regularization. As detailed in the Decision, Alcaraz was well-apprised of her duties and
responsibilities as well as the probationary status of her employment:

(a) On June 27, 2004, [Abbott Laboratories, Philippines (Abbott)] caused the publication in a major broadsheet
newspaper of its need for a Regulatory Affairs Manager, indicating therein the job description for as well as the
duties and responsibilities attendant to the aforesaid position; this prompted Alcaraz to submit her application
to Abbott on October 4, 2004;

(b) In Abbott’s December 7, 2004 offer sheet, it was stated that Alcaraz was to be employed on a probationary
status;

(c) On February 12, 2005, Alcaraz signed an employment contract which specifically stated, inter alia, that she
was to be placed on probation for a period of six (6) months beginning February 15, 2005 to August 14, 2005;

(d) On the day Alcaraz accepted Abbott’s employment offer, Bernardo sent her copies of Abbott’s
organizational structure and her job description through e-mail;

(e) Alcaraz was made to undergo a pre-employment orientation where [Allan G. Almazar] informed her that
she had to implement Abbott’s Code of Conduct and office policies on human resources and finance and that
she would be reporting directly to [Kelly Walsh];

(f) Alcaraz was also required to undergo a training program as part of her orientation;

(g) Alcaraz received copies of Abbott’s Code of Conduct and Performance Modules from [Maria Olivia T. Yabut-
Misa] who explained to her the procedure for evaluating the performance of probationary employees; she was
further notified that Abbott had only one evaluation system for all of its employees; and
(h) Moreover, Alcaraz had previously worked for another pharmaceutical company and had admitted to have
an "extensive training and background" to acquire the necessary skills for her job.2

Considering the foregoing incidents which were readily observable from the records, the Court reached the
conclusion that the NLRC committed grave abuse of discretion, viz.:

[I]n holding that Alcaraz was illegally dismissed due to her status as a regular and not a probationary employee,
the Court finds that the NLRC committed a grave abuse of discretion.

To elucidate, records show that the NLRC based its decision on the premise that Alcaraz’s receipt of her job
description and Abbott’s Code of Conduct and Performance Modules was not equivalent to being actually
informed of the performance standards upon which she should have been evaluated on. It, however,
overlooked the legal implication of the other attendant circumstances as detailed herein which should have
warranted a contrary finding that Alcaraz was indeed a probationary and not a regular employee – more
particularly the fact that she was well-aware of her duties and responsibilities and that her failure to adequately
perform the same would lead to her non-regularization and eventually, her termination.3

Consequently, since the CA found that the NLRC did not commit grave abuse of discretion and denied the
certiorari petition before it, the reversal of its ruling was thus in order.

At this juncture, it bears exposition that while NLRC decisions are, by their nature, final and executory4 and,
hence, not subject to appellate review,5 the Court is not precluded from considering other questions of law
aside from the CA’s finding on the NLRC’s grave abuse of discretion. While the focal point of analysis revolves
on this issue, the Court may deal with ancillary issues – such as, in this case, the question of how a probationary
employee is deemed to have been informed of the standards of his regularization – if only to determine if the
concepts and principles of labor law were correctly applied or misapplied by the NLRC in its decision. In other
words, the Court’s analysis of the NLRC’s interpretation of the environmental principles and concepts of labor
law is not completely prohibited in – as it is complementary to – a Rule 45 review of labor cases.

Finally, if only to put to rest Alcaraz’s misgivings on the manner in which this case was reviewed, it bears
pointing out that no "factual appellate review" was conducted by the Court in the Decision. Rather, the Court
proceeded to interpret the relevant rules on probationary employment as applied to settled factual findings.
Besides, even on the assumption that a scrutiny of facts was undertaken, the Court is not altogether barred
from conducting the same. This was explained in the case of Career Philippines Shipmanagement, Inc. v.
Serna6 wherein the Court held as follows:

Accordingly, we do not re-examine conflicting evidence, re-evaluate the credibility of witnesses, or substitute
the findings of fact of the NLRC, an administrative body that has expertise in its specialized field. Nor do we
substitute our "own judgment for that of the tribunal in determining where the weight of evidence lies or what
evidence is credible." The factual findings of the NLRC, when affirmed by the CA, are generally conclusive on
this Court.

Nevertheless, there are exceptional cases where we, in the exercise of our discretionary appellate jurisdiction
may be urged to look into factual issues raised in a Rule 45 petition. For instance, when the petitioner
persuasively alleges that there is insufficient or insubstantial evidence on record to support the factual findings
of the tribunal or court a quo, as Section 5, Rule 133 of the Rules of Court states in express terms that in cases
filed before administrative or quasi-judicial bodies, a fact may be deemed established only if supported by
substantial evidence.7(Emphasis supplied)
B. Standards for regularization;
conceptual underpinnings.

Alcaraz posits that, contrary to the Court’s Decision, one’s job description cannot by and of itself be treated as
a standard for regularization as a standard denotes a measure of quantity or quality. By way of example, Alcaraz
cites the case of a probationary salesperson and asks how does such employee achieve regular status if he does
not know how much he needs to sell to reach the same.

The argument is untenable.

First off, the Court must correct Alcaraz’s mistaken notion: it is not the probationary employee’s job description
but the adequate performance of his duties and responsibilities which constitutes the inherent and implied
standard for regularization. To echo the fundamental point of the Decision, if the probationary employee had
been fully apprised by his employer of these duties and responsibilities, then basic knowledge and common
sense dictate that he must adequately perform the same, else he fails to pass the probationary trial and may
therefore be subject to termination.8

The determination of "adequate performance" is not, in all cases, measurable by quantitative specification,
such as that of a sales quota in Alcaraz’s example. It is also hinged on the qualitative assessment of the
employee’s work; by its nature, this largely rests on the reasonable exercise of the employer’s management
prerogative. While in some instances the standards used in measuring the quality of work may be conveyed –
such as workers who construct tangible products which follow particular metrics, not all standards of quality
measurement may be reducible to hard figures or are readily articulable in specific pre-engagement
descriptions. A good example would be the case of probationary employees whose tasks involve the application
of discretion and intellect, such as – to name a few – lawyers, artists, and journalists. In these kinds of
occupation, the best that the employer can do at the time of engagement is to inform the probationary
employee of his duties and responsibilities and to orient him on how to properly proceed with the same. The
employer cannot bear out in exacting detail at the beginning of the engagement what he deems as "quality
work" especially since the probationary employee has yet to submit the required output. In the ultimate
analysis, the communication of performance standards should be perceived within the context of the nature
of the probationary employee’s duties and responsibilities.

The same logic applies to a probationary managerial employee who is tasked to supervise a particular
department, as Alcaraz in this case.1âwphi1 It is hardly possible for the employer, at the time of the employee’s
engagement, to map into technical indicators, or convey in precise detail the quality standards by which the
latter should effectively manage the department. Factors which gauge the ability of the managerial employee
to either deal with his subordinates (e.g., how to spur their performance, or command respect and obedience
from them), or to organize office policies, are hardly conveyable at the outset of the engagement since the
employee has yet to be immersed into the work itself. Given that a managerial role essentially connotes an
exercise of discretion, the quality of effective management can only be determined through subsequent
assessment. While at the time of engagement, reason dictates that the employer can only inform the
probationary managerial employee of his duties and responsibilities as such and provide the allowable
parameters for the same. Verily, as stated in the Decision, the adequate performance of such duties and
responsibilities is, by and of itself, an implied standard of regularization.

In this relation, it bears mentioning that the performance standard contemplated by law should not, in all
cases, be contained in a specialized system of feedbacks or evaluation. The Court takes judicial notice of the
fact that not all employers, such as simple businesses or small-scale enterprises, have a sophisticated form of
human resource management, so much so that the adoption of technical indicators as utilized through
"comment cards" or "appraisal" tools should not be treated as a prerequisite for every case of probationary
engagement. In fact, even if a system of such kind is employed and the procedures for its implementation are
not followed, once an employer determines that the probationary employee fails to meet the standards
required for his regularization, the former is not precluded from dismissing the latter. The rule is that when a
valid cause for termination exists, the procedural infirmity attending the termination only warrants the
payment of nominal damages. This was the principle laid down in the landmark cases of Agabon v.
NLRC9 (Agabon) and Jaka Food Processing Corporation v. Pacot10 (Jaka). In the assailed Decision, the Court
actually extended the application of the Agabon and Jaka rulings to breaches of company procedure,
notwithstanding the employer’s compliance with the statutory requirements under the Labor Code.11 Hence,
although Abbott did not comply with its own termination procedure, its non-compliance thereof would not
detract from the finding that there subsists a valid cause to terminate Alcaraz’s employment. Abbott, however,
was penalized for its contractual breach and thereby ordered to pay nominal damages.

As a final point, Alcaraz cannot take refuge in Aliling v. Feliciano12 (Aliling) since the same is not squarely
applicable to the case at bar. The employee in Aliling, a sales executive, was belatedly informed of his quota
requirement. Thus, considering the nature of his position, the fact that he was not informed of his sales quota
at the time of his engagement changed the complexion of his employment. Contrarily, the nature of Alcaraz's
duties and responsibilities as Regulatory Affairs Manager negates the application of the foregoing. Records
show that Alcaraz was terminated because she (a) did not manage her time effectively; (b) failed to gain the
trust of her staff and to build an effective rapport with them; (c) failed to train her staff effectively; and (d) was
not able to obtain the knowledge and ability to make sound judgments on case processing and article review
which were necessary for the proper performance of her duties.13 Due to the nature and variety of these
managerial functions, the best that Abbott could have done, at the time of Alcaraz's engagement, was to inform
her of her duties and responsibilities, the adequate performance of which, to repeat, is an inherent and implied
standard for regularization; this is unlike the circumstance in Aliling where a quantitative regularization
standard, in the term of a sales quota, was readily articulable to the employee at the outset. Hence, since the
reasonableness of Alcaraz's assessment clearly appears from the records, her termination was justified. Bear
in mind that the quantum of proof which the employer must discharge is only substantial evidence which, as
defined in case law, means that amount of relevant evidence as a reasonable mind might accept as adequate
to support a conclusion, even if other minds, equally reasonable, might conceivably opine otherwise.14 To the
Court's mind, this threshold of evidence Abbott amply overcame in this case.

All told, the Court hereby denies the instant motion for reconsideration and thereby upholds the Decision in
the main case.

WHEREFORE, the motion for reconsideration dated August 23, 2013 of the Court's Decision dated July 23, 2013
in this case is hereby DENIED.

SO ORDERED.
G.R. No. 162994 September 17, 2004

DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A. TECSON, petitioners,

vs.
GLAXO WELLCOME PHILIPPINES, INC., Respondent.

RESOLUTION

TINGA, J.:

Confronting the Court in this petition is a novel question, with constitutional overtones, involving the validity
of the policy of a pharmaceutical company prohibiting its employees from marrying employees of any
competitor company.

This is a Petition for Review on Certiorari assailing the Decision1 dated May 19, 2003 and the Resolution dated
March 26, 2004 of the Court of Appeals in CA-G.R. SP No. 62434.2

Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome Philippines, Inc. (Glaxo) as
medical representative on October 24, 1995, after Tecson had undergone training and orientation.

Thereafter, Tecson signed a contract of employment which stipulates, among others, that he agrees to study
and abide by existing company rules; to disclose to management any existing or future relationship by
consanguinity or affinity with co-employees or employees of competing drug companies and should
management find that such relationship poses a possible conflict of interest, to resign from the company.

The Employee Code of Conduct of Glaxo similarly provides that an employee is expected to inform
management of any existing or future relationship by consanguinity or affinity with co-employees or employees
of competing drug companies. If management perceives a conflict of interest or a potential conflict between
such relationship and the employee’s employment with the company, the management and the employee will
explore the possibility of a "transfer to another department in a non-counterchecking position" or preparation
for employment outside the company after six months.

Tecson was initially assigned to market Glaxo’s products in the Camarines Sur-Camarines Norte sales area.

Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of Astra
Pharmaceuticals3(Astra), a competitor of Glaxo. Bettsy was Astra’s Branch Coordinator in Albay. She supervised
the district managers and medical representatives of her company and prepared marketing strategies for Astra
in that area.

Even before they got married, Tecson received several reminders from his District Manager regarding the
conflict of interest which his relationship with Bettsy might engender. Still, love prevailed, and Tecson married
Bettsy in September 1998.

In January 1999, Tecson’s superiors informed him that his marriage to Bettsy gave rise to a conflict of interest.
Tecson’s superiors reminded him that he and Bettsy should decide which one of them would resign from their
jobs, although they told him that they wanted to retain him as much as possible because he was performing
his job well.

Tecson requested for time to comply with the company policy against entering into a relationship with an
employee of a competitor company. He explained that Astra, Bettsy’s employer, was planning to merge with
Zeneca, another drug company; and Bettsy was planning to avail of the redundancy package to be offered by
Astra. With Bettsy’s separation from her company, the potential conflict of interest would be eliminated. At
the same time, they would be able to avail of the attractive redundancy package from Astra.

In August 1999, Tecson again requested for more time resolve the problem. In September 1999, Tecson applied
for a transfer in Glaxo’s milk division, thinking that since Astra did not have a milk division, the potential conflict
of interest would be eliminated. His application was denied in view of Glaxo’s "least-movement-possible"
policy.

In November 1999, Glaxo transferred Tecson to the Butuan City-Surigao City-Agusan del Sur sales area. Tecson
asked Glaxo to reconsider its decision, but his request was denied.

Tecson sought Glaxo’s reconsideration regarding his transfer and brought the matter to Glaxo’s Grievance
Committee. Glaxo, however, remained firm in its decision and gave Tescon until February 7, 2000 to comply
with the transfer order. Tecson defied the transfer order and continued acting as medical representative in the
Camarines Sur-Camarines Norte sales area.

During the pendency of the grievance proceedings, Tecson was paid his salary, but was not issued samples of
products which were competing with similar products manufactured by Astra. He was also not included in
product conferences regarding such products.

Because the parties failed to resolve the issue at the grievance machinery level, they submitted the matter for
voluntary arbitration. Glaxo offered Tecson a separation pay of one-half (½) month pay for every year of
service, or a total of ₱50,000.00 but he declined the offer. On November 15, 2000, the National Conciliation
and Mediation Board (NCMB) rendered its Decision declaring as valid Glaxo’s policy on relationships between
its employees and persons employed with competitor companies, and affirming Glaxo’s right to transfer Tecson
to another sales territory.

Aggrieved, Tecson filed a Petition for Review with the Court of Appeals assailing the NCMB Decision.

On May 19, 2003, the Court of Appeals promulgated its Decision denying the Petition for Review on the ground
that the NCMB did not err in rendering its Decision. The appellate court held that Glaxo’s policy prohibiting its
employees from having personal relationships with employees of competitor companies is a valid exercise of
its management prerogatives.4

Tecson filed a Motion for Reconsideration of the appellate court’s Decision, but the motion was denied by the
appellate court in its Resolution dated March 26, 2004.5

Petitioners filed the instant petition, arguing therein that (i) the Court of Appeals erred in affirming the NCMB’s
finding that the Glaxo’s policy prohibiting its employees from marrying an employee of a competitor company
is valid; and (ii) the Court of Appeals also erred in not finding that Tecson was constructively dismissed when
he was transferred to a new sales territory, and deprived of the opportunity to attend products seminars and
training sessions.6

Petitioners contend that Glaxo’s policy against employees marrying employees of competitor companies
violates the equal protection clause of the Constitution because it creates invalid distinctions among
employees on account only of marriage. They claim that the policy restricts the employees’ right to marry.7

They also argue that Tecson was constructively dismissed as shown by the following circumstances: (1) he was
transferred from the Camarines Sur-Camarines Norte sales area to the Butuan-Surigao-Agusan sales area, (2)
he suffered a diminution in pay, (3) he was excluded from attending seminars and training sessions for medical
representatives, and (4) he was prohibited from promoting respondent’s products which were competing with
Astra’s products.8

In its Comment on the petition, Glaxo argues that the company policy prohibiting its employees from having a
relationship with and/or marrying an employee of a competitor company is a valid exercise of its management
prerogatives and does not violate the equal protection clause; and that Tecson’s reassignment from the
Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao City and Agusan del Sur sales area does
not amount to constructive dismissal.9

Glaxo insists that as a company engaged in the promotion and sale of pharmaceutical products, it has a genuine
interest in ensuring that its employees avoid any activity, relationship or interest that may conflict with their
responsibilities to the company. Thus, it expects its employees to avoid having personal or family interests in
any competitor company which may influence their actions and decisions and consequently deprive Glaxo of
legitimate profits. The policy is also aimed at preventing a competitor company from gaining access to its
secrets, procedures and policies.10

It likewise asserts that the policy does not prohibit marriage per se but only proscribes existing or future
relationships with employees of competitor companies, and is therefore not violative of the equal protection
clause. It maintains that considering the nature of its business, the prohibition is based on valid grounds.11

According to Glaxo, Tecson’s marriage to Bettsy, an employee of Astra, posed a real and potential conflict of
interest. Astra’s products were in direct competition with 67% of the products sold by Glaxo. Hence, Glaxo’s
enforcement of the foregoing policy in Tecson’s case was a valid exercise of its management prerogatives.12 In
any case, Tecson was given several months to remedy the situation, and was even encouraged not to resign
but to ask his wife to resign form Astra instead.13

Glaxo also points out that Tecson can no longer question the assailed company policy because when he signed
his contract of employment, he was aware that such policy was stipulated therein. In said contract, he also
agreed to resign from respondent if the management finds that his relationship with an employee of a
competitor company would be detrimental to the interests of Glaxo.14

Glaxo likewise insists that Tecson’s reassignment to another sales area and his exclusion from seminars
regarding respondent’s new products did not amount to constructive dismissal.

It claims that in view of Tecson’s refusal to resign, he was relocated from the Camarines Sur-Camarines Norte
sales area to the Butuan City-Surigao City and Agusan del Sur sales area. Glaxo asserts that in effecting the
reassignment, it also considered the welfare of Tecson’s family. Since Tecson’s hometown was in Agusan del
Sur and his wife traces her roots to Butuan City, Glaxo assumed that his transfer from the Bicol region to the
Butuan City sales area would be favorable to him and his family as he would be relocating to a familiar territory
and minimizing his travel expenses.15

In addition, Glaxo avers that Tecson’s exclusion from the seminar concerning the new anti-asthma drug was
due to the fact that said product was in direct competition with a drug which was soon to be sold by Astra, and
hence, would pose a potential conflict of interest for him. Lastly, the delay in Tecson’s receipt of his sales
paraphernalia was due to the mix-up created by his refusal to transfer to the Butuan City sales area (his
paraphernalia was delivered to his new sales area instead of Naga City because the supplier thought he already
transferred to Butuan).16

The Court is tasked to resolve the following issues: (1) Whether the Court of Appeals erred in ruling that Glaxo’s
policy against its employees marrying employees from competitor companies is valid, and in not holding that
said policy violates the equal protection clause of the Constitution; (2) Whether Tecson was constructively
dismissed.

The Court finds no merit in the petition.

The stipulation in Tecson’s contract of employment with Glaxo being questioned by petitioners provides:

10. You agree to disclose to management any existing or future relationship you may have, either by
consanguinity or affinity with co-employees or employees of competing drug companies. Should it pose a
possible conflict of interest in management discretion, you agree to resign voluntarily from the Company as a
matter of Company policy.

…17

The same contract also stipulates that Tescon agrees to abide by the existing company rules of Glaxo, and to
study and become acquainted with such policies.18 In this regard, the Employee Handbook of Glaxo expressly
informs its employees of its rules regarding conflict of interest:

1. Conflict of Interest

Employees should avoid any activity, investment relationship, or interest that may run counter to the
responsibilities which they owe Glaxo Wellcome.

Specifically, this means that employees are expected:

a. To avoid having personal or family interest, financial or otherwise, in any competitor supplier or other
businesses which may consciously or unconsciously influence their actions or decisions and thus deprive Glaxo
Wellcome of legitimate profit.

b. To refrain from using their position in Glaxo Wellcome or knowledge of Company plans to advance their
outside personal interests, that of their relatives, friends and other businesses.

c. To avoid outside employment or other interests for income which would impair their effective job
performance.

d. To consult with Management on such activities or relationships that may lead to conflict of interest.

1.1. Employee Relationships

Employees with existing or future relationships either by consanguinity or affinity with co-employees of
competing drug companies are expected to disclose such relationship to the Management. If management
perceives a conflict or potential conflict of interest, every effort shall be made, together by management and
the employee, to arrive at a solution within six (6) months, either by transfer to another department in a non-
counter checking position, or by career preparation toward outside employment after Glaxo Wellcome.
Employees must be prepared for possible resignation within six (6) months, if no other solution is feasible.19

No reversible error can be ascribed to the Court of Appeals when it ruled that Glaxo’s policy prohibiting an
employee from having a relationship with an employee of a competitor company is a valid exercise of
management prerogative.
Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other
confidential programs and information from competitors, especially so that it and Astra are rival companies in
the highly competitive pharmaceutical industry.

The prohibition against personal or marital relationships with employees of competitor companies upon
Glaxo’s employees is reasonable under the circumstances because relationships of that nature might
compromise the interests of the company. In laying down the assailed company policy, Glaxo only aims to
protect its interests against the possibility that a competitor company will gain access to its secrets and
procedures.

That Glaxo possesses the right to protect its economic interests cannot be denied. No less than the Constitution
recognizes the right of enterprises to adopt and enforce such a policy to protect its right to reasonable returns
on investments and to expansion and growth.20 Indeed, while our laws endeavor to give life to the
constitutional policy on social justice and the protection of labor, it does not mean that every labor dispute will
be decided in favor of the workers. The law also recognizes that management has rights which are also entitled
to respect and enforcement in the interest of fair play.21

As held in a Georgia, U.S.A case,22 it is a legitimate business practice to guard business confidentiality and
protect a competitive position by even-handedly disqualifying from jobs male and female applicants or
employees who are married to a competitor. Consequently, the court ruled than an employer that discharged
an employee who was married to an employee of an active competitor did not violate Title VII of the Civil Rights
Act of 1964.23 The Court pointed out that the policy was applied to men and women equally, and noted that
the employer’s business was highly competitive and that gaining inside information would constitute a
competitive advantage.

The challenged company policy does not violate the equal protection clause of the Constitution as petitioners
erroneously suggest. It is a settled principle that the commands of the equal protection clause are addressed
only to the state or those acting under color of its authority.24 Corollarily, it has been held in a long array of
U.S. Supreme Court decisions that the equal protection clause erects no shield against merely private conduct,
however, discriminatory or wrongful.25 The only exception occurs when the state29 in any of its manifestations
or actions has been found to have become entwined or involved in the wrongful private conduct.27 Obviously,
however, the exception is not present in this case. Significantly, the company actually enforced the policy after
repeated requests to the employee to comply with the policy. Indeed, the application of the policy was made
in an impartial and even-handed manner, with due regard for the lot of the employee.

In any event, from the wordings of the contractual provision and the policy in its employee handbook, it is clear
that Glaxo does not impose an absolute prohibition against relationships between its employees and those of
competitor companies. Its employees are free to cultivate relationships with and marry persons of their own
choosing. What the company merely seeks to avoid is a conflict of interest between the employee and the
company that may arise out of such relationships. As succinctly explained by the appellate court, thus:

The policy being questioned is not a policy against marriage. An employee of the company remains free to
marry anyone of his or her choosing. The policy is not aimed at restricting a personal prerogative that belongs
only to the individual. However, an employee’s personal decision does not detract the employer from
exercising management prerogatives to ensure maximum profit and business success. . .28

The Court of Appeals also correctly noted that the assailed company policy which forms part of respondent’s
Employee Code of Conduct and of its contracts with its employees, such as that signed by Tescon, was made
known to him prior to his employment. Tecson, therefore, was aware of that restriction when he signed his
employment contract and when he entered into a relationship with Bettsy. Since Tecson knowingly and
voluntarily entered into a contract of employment with Glaxo, the stipulations therein have the force of law
between them and, thus, should be complied with in good faith."29 He is therefore estopped from questioning
said policy.

The Court finds no merit in petitioners’ contention that Tescon was constructively dismissed when he was
transferred from the Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao City-Agusan del Sur
sales area, and when he was excluded from attending the company’s seminar on new products which were
directly competing with similar products manufactured by Astra. Constructive dismissal is defined as a quitting,
an involuntary resignation resorted to when continued employment becomes impossible, unreasonable, or
unlikely; when there is a demotion in rank or diminution in pay; or when a clear discrimination, insensibility or
disdain by an employer becomes unbearable to the employee.30 None of these conditions are present in the
instant case. The record does not show that Tescon was demoted or unduly discriminated upon by reason of
such transfer. As found by the appellate court, Glaxo properly exercised its management prerogative in
reassigning Tecson to the Butuan City sales area:

. . . In this case, petitioner’s transfer to another place of assignment was merely in keeping with the policy of
the company in avoidance of conflict of interest, and thus valid…Note that [Tecson’s] wife holds a sensitive
supervisory position as Branch Coordinator in her employer-company which requires her to work in close
coordination with District Managers and Medical Representatives. Her duties include monitoring sales of Astra
products, conducting sales drives, establishing and furthering relationship with customers, collection,
monitoring and managing Astra’s inventory…she therefore takes an active participation in the market war
characterized as it is by stiff competition among pharmaceutical companies. Moreover, and this is significant,
petitioner’s sales territory covers Camarines Sur and Camarines Norte while his wife is supervising a branch of
her employer in Albay. The proximity of their areas of responsibility, all in the same Bicol Region, renders the
conflict of interest not only possible, but actual, as learning by one spouse of the other’s market strategies in
the region would be inevitable. [Management’s] appreciation of a conflict of interest is therefore not merely
illusory and wanting in factual basis…31

In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission,32 which involved a complaint filed
by a medical representative against his employer drug company for illegal dismissal for allegedly terminating
his employment when he refused to accept his reassignment to a new area, the Court upheld the right of the
drug company to transfer or reassign its employee in accordance with its operational demands and
requirements. The ruling of the Court therein, quoted hereunder, also finds application in the instant case:

By the very nature of his employment, a drug salesman or medical representative is expected to travel. He
should anticipate reassignment according to the demands of their business. It would be a poor drug
corporation which cannot even assign its representatives or detail men to new markets calling for opening or
expansion or to areas where the need for pushing its products is great. More so if such reassignments are part
of the employment contract.33

As noted earlier, the challenged policy has been implemented by Glaxo impartially and disinterestedly for a
long period of time. In the case at bar, the record shows that Glaxo gave Tecson several chances to eliminate
the conflict of interest brought about by his relationship with Bettsy. When their relationship was still in its
initial stage, Tecson’s supervisors at Glaxo constantly reminded him about its effects on his employment with
the company and on the company’s interests. After Tecson married Bettsy, Glaxo gave him time to resolve the
conflict by either resigning from the company or asking his wife to resign from Astra. Glaxo even expressed its
desire to retain Tecson in its employ because of his satisfactory performance and suggested that he ask Bettsy
to resign from her company instead. Glaxo likewise acceded to his repeated requests for more time to resolve
the conflict of interest. When the problem could not be resolved after several years of waiting, Glaxo was
constrained to reassign Tecson to a sales area different from that handled by his wife for Astra. Notably, the
Court did not terminate Tecson from employment but only reassigned him to another area where his home
province, Agusan del Sur, was included. In effecting Tecson’s transfer, Glaxo even considered the welfare of
Tecson’s family. Clearly, the foregoing dispels any suspicion of unfairness and bad faith on the part of Glaxo.34

WHEREFORE, the Petition is DENIED for lack of merit. Costs against petitioners.

SO ORDERED.

G.R. No. 168081 October 17, 2008

ARMANDO G. YRASUEGUI, petitioners,

vs.
PHILIPPINE AIRLINES, INC., respondents.

DECISION

REYES, R.T., J.:

THIS case portrays the peculiar story of an international flight steward who was dismissed because of his failure
to adhere to the weight standards of the airline company.

He is now before this Court via a petition for review on certiorari claiming that he was illegally dismissed. To
buttress his stance, he argues that (1) his dismissal does not fall under 282(e) of the Labor Code; (2) continuing
adherence to the weight standards of the company is not a bona fide occupational qualification; and (3) he was
discriminated against because other overweight employees were promoted instead of being disciplined.

After a meticulous consideration of all arguments pro and con, We uphold the legality of dismissal. Separation
pay, however, should be awarded in favor of the employee as an act of social justice or based on equity. This
is so because his dismissal is not for serious misconduct. Neither is it reflective of his moral character.

The Facts

Petitioner Armando G. Yrasuegui was a former international flight steward of Philippine Airlines, Inc. (PAL). He
stands five feet and eight inches (5’8") with a large body frame. The proper weight for a man of his height and
body structure is from 147 to 166 pounds, the ideal weight being 166 pounds, as mandated by the Cabin and
Crew Administration Manual1 of PAL.

The weight problem of petitioner dates back to 1984. Back then, PAL advised him to go on an extended vacation
leave from December 29, 1984 to March 4, 1985 to address his weight concerns. Apparently, petitioner failed
to meet the company’s weight standards, prompting another leave without pay from March 5, 1985 to
November 1985.

After meeting the required weight, petitioner was allowed to return to work. But petitioner’s weight problem
recurred. He again went on leave without pay from October 17, 1988 to February 1989.

On April 26, 1989, petitioner weighed 209 pounds, 43 pounds over his ideal weight. In line with company policy,
he was removed from flight duty effective May 6, 1989 to July 3, 1989. He was formally requested to trim down
to his ideal weight and report for weight checks on several dates. He was also told that he may avail of the
services of the company physician should he wish to do so. He was advised that his case will be evaluated on
July 3, 1989.2

On February 25, 1989, petitioner underwent weight check. It was discovered that he gained, instead of losing,
weight. He was overweight at 215 pounds, which is 49 pounds beyond the limit. Consequently, his off-duty
status was retained.

On October 17, 1989, PAL Line Administrator Gloria Dizon personally visited petitioner at his residence to check
on the progress of his effort to lose weight. Petitioner weighed 217 pounds, gaining 2 pounds from his previous
weight. After the visit, petitioner made a commitment3 to reduce weight in a letter addressed to Cabin Crew
Group Manager Augusto Barrios. The letter, in full, reads:

Dear Sir:

I would like to guaranty my commitment towards a weight loss from 217 pounds to 200 pounds from today
until 31 Dec. 1989.

From thereon, I promise to continue reducing at a reasonable percentage until such time that my ideal weight
is achieved.

Likewise, I promise to personally report to your office at the designated time schedule you will set for my
weight check.

Respectfully Yours,

F/S Armando Yrasuegui4

Despite the lapse of a ninety-day period given him to reach his ideal weight, petitioner remained overweight.
On January 3, 1990, he was informed of the PAL decision for him to remain grounded until such time that he
satisfactorily complies with the weight standards. Again, he was directed to report every two weeks for weight
checks.

Petitioner failed to report for weight checks. Despite that, he was given one more month to comply with the
weight requirement. As usual, he was asked to report for weight check on different dates. He was reminded
that his grounding would continue pending satisfactory compliance with the weight standards.5

Again, petitioner failed to report for weight checks, although he was seen submitting his passport for
processing at the PAL Staff Service Division.

On April 17, 1990, petitioner was formally warned that a repeated refusal to report for weight check would be
dealt with accordingly. He was given another set of weight check dates.6 Again, petitioner ignored the directive
and did not report for weight checks. On June 26, 1990, petitioner was required to explain his refusal to
undergo weight checks.7

When petitioner tipped the scale on July 30, 1990, he weighed at 212 pounds. Clearly, he was still way over his
ideal weight of 166 pounds.

From then on, nothing was heard from petitioner until he followed up his case requesting for leniency on the
latter part of 1992. He weighed at 219 pounds on August 20, 1992 and 205 pounds on November 5, 1992.
On November 13, 1992, PAL finally served petitioner a Notice of Administrative Charge for violation of company
standards on weight requirements. He was given ten (10) days from receipt of the charge within which to file
his answer and submit controverting evidence.8

On December 7, 1992, petitioner submitted his Answer.9 Notably, he did not deny being overweight. What he
claimed, instead, is that his violation, if any, had already been condoned by PAL since "no action has been taken
by the company" regarding his case "since 1988." He also claimed that PAL discriminated against him because
"the company has not been fair in treating the cabin crew members who are similarly situated."

On December 8, 1992, a clarificatory hearing was held where petitioner manifested that he was undergoing a
weight reduction program to lose at least two (2) pounds per week so as to attain his ideal weight.10

On June 15, 1993, petitioner was formally informed by PAL that due to his inability to attain his ideal weight,
"and considering the utmost leniency" extended to him "which spanned a period covering a total of almost five
(5) years," his services were considered terminated "effective immediately."11

His motion for reconsideration having been denied,12 petitioner filed a complaint for illegal dismissal against
PAL.

Labor Arbiter, NLRC and CA Dispositions

On November 18, 1998, Labor Arbiter Valentin C. Reyes ruled13 that petitioner was illegally dismissed. The
dispositive part of the Arbiter ruling runs as follows:

WHEREFORE, in view of the foregoing, judgment is hereby rendered, declaring the complainant’s dismissal
illegal, and ordering the respondent to reinstate him to his former position or substantially equivalent one, and
to pay him:

a. Backwages of Php10,500.00 per month from his dismissal on June 15, 1993 until reinstated, which for
purposes of appeal is hereby set from June 15, 1993 up to August 15, 1998 at ₱651,000.00;

b. Attorney’s fees of five percent (5%) of the total award.

SO ORDERED.14

The Labor Arbiter held that the weight standards of PAL are reasonable in view of the nature of the job of
petitioner.15 However, the weight standards need not be complied with under pain of dismissal since his weight
did not hamper the performance of his duties.16 Assuming that it did, petitioner could be transferred to other
positions where his weight would not be a negative factor.17 Notably, other overweight employees, i.e., Mr.
Palacios, Mr. Cui, and Mr. Barrios, were promoted instead of being disciplined.18

Both parties appealed to the National Labor Relations Commission (NLRC).19

On October 8, 1999, the Labor Arbiter issued a writ of execution directing the reinstatement of petitioner
without loss of seniority rights and other benefits.20

On February 1, 2000, the Labor Arbiter denied21 the Motion to Quash Writ of Execution22 of PAL.

On March 6, 2000, PAL appealed the denial of its motion to quash to the NLRC.23

On June 23, 2000, the NLRC rendered judgment24 in the following tenor:

WHEREFORE, premises considered[,] the Decision of the Arbiter dated 18 November 1998 as modified by our
findings herein, is hereby AFFIRMED and that part of the dispositive portion of said decision concerning
complainant’s entitlement to backwages shall be deemed to refer to complainant’s entitlement to his full
backwages, inclusive of allowances and to his other benefits or their monetary equivalent instead of simply
backwages, from date of dismissal until his actual reinstatement or finality hereof. Respondent is enjoined to
manifests (sic) its choice of the form of the reinstatement of complainant, whether physical or through payroll
within ten (10) days from notice failing which, the same shall be deemed as complainant’s reinstatement
through payroll and execution in case of non-payment shall accordingly be issued by the Arbiter. Both appeals
of respondent thus, are DISMISSED for utter lack of merit.25

According to the NLRC, "obesity, or the tendency to gain weight uncontrollably regardless of the amount of
food intake, is a disease in itself."26 As a consequence, there can be no intentional defiance or serious
misconduct by petitioner to the lawful order of PAL for him to lose weight.27

Like the Labor Arbiter, the NLRC found the weight standards of PAL to be reasonable. However, it found as
unnecessary the Labor Arbiter holding that petitioner was not remiss in the performance of his duties as flight
steward despite being overweight. According to the NLRC, the Labor Arbiter should have limited himself to the
issue of whether the failure of petitioner to attain his ideal weight constituted willful defiance of the weight
standards of PAL.28

PAL moved for reconsideration to no avail.29 Thus, PAL elevated the matter to the Court of Appeals (CA) via a
petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure.30

By Decision dated August 31, 2004, the CA reversed31 the NLRC:

WHEREFORE, premises considered, we hereby GRANT the petition. The assailed NLRC decision is declared NULL
and VOID and is hereby SET ASIDE. The private respondent’s complaint is hereby DISMISSED. No costs.

SO ORDERED.32

The CA opined that there was grave abuse of discretion on the part of the NLRC because it "looked at wrong
and irrelevant considerations"33 in evaluating the evidence of the parties. Contrary to the NLRC ruling, the
weight standards of PAL are meant to be a continuing qualification for an employee’s position.34 The failure to
adhere to the weight standards is an analogous cause for the dismissal of an employee under Article 282(e) of
the Labor Code in relation to Article 282(a). It is not willful disobedience as the NLRC seemed to suggest.35 Said
the CA, "the element of willfulness that the NLRC decision cites is an irrelevant consideration in arriving at a
conclusion on whether the dismissal is legally proper."36 In other words, "the relevant question to ask is not
one of willfulness but one of reasonableness of the standard and whether or not the employee qualifies or
continues to qualify under this standard."37

Just like the Labor Arbiter and the NLRC, the CA held that the weight standards of PAL are reasonable.38 Thus,
petitioner was legally dismissed because he repeatedly failed to meet the prescribed weight standards.39 It is
obvious that the issue of discrimination was only invoked by petitioner for purposes of escaping the result of
his dismissal for being overweight.40

On May 10, 2005, the CA denied petitioner’s motion for reconsideration.41 Elaborating on its earlier ruling, the
CA held that the weight standards of PAL are a bona fide occupational qualification which, in case of violation,
"justifies an employee’s separation from the service."42

Issues

In this Rule 45 petition for review, the following issues are posed for resolution:
I.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PETITIONER’S OBESITY CAN BE
A GROUND FOR DISMISSAL UNDER PARAGRAPH (e) OF ARTICLE 282 OF THE LABOR CODE OF THE PHILIPPINES;

II.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PETITIONER’S DISMISSAL FOR
OBESITY CAN BE PREDICATED ON THE "BONA FIDE OCCUPATIONAL QUALIFICATION (BFOQ) DEFENSE";

III.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PETITIONER WAS NOT UNDULY
DISCRIMINATED AGAINST WHEN HE WAS DISMISSED WHILE OTHER OVERWEIGHT CABIN ATTENDANTS WERE
EITHER GIVEN FLYING DUTIES OR PROMOTED;

IV.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT BRUSHED ASIDE PETITIONER’S CLAIMS
FOR REINSTATEMENT [AND] WAGES ALLEGEDLY FOR BEING MOOT AND ACADEMIC.43 (Underscoring supplied)

Our Ruling

I. The obesity of petitioner is a ground for dismissal under Article 282(e) 44 of the Labor Code.

A reading of the weight standards of PAL would lead to no other conclusion than that they constitute a
continuing qualification of an employee in order to keep the job. Tersely put, an employee may be dismissed
the moment he is unable to comply with his ideal weight as prescribed by the weight standards. The dismissal
of the employee would thus fall under Article 282(e) of the Labor Code. As explained by the CA:

x x x [T]he standards violated in this case were not mere "orders" of the employer; they were the "prescribed
weights" that a cabin crew must maintain in order to qualify for and keep his or her position in the company.
In other words, they were standards that establish continuing qualifications for an employee’s position. In this
sense, the failure to maintain these standards does not fall under Article 282(a) whose express terms require
the element of willfulness in order to be a ground for dismissal. The failure to meet the employer’s qualifying
standards is in fact a ground that does not squarely fall under grounds (a) to (d) and is therefore one that falls
under Article 282(e) – the "other causes analogous to the foregoing."

By its nature, these "qualifying standards" are norms that apply prior to and after an employee is hired. They
apply prior to employment because these are the standards a job applicant must initially meet in order to be
hired. They apply after hiring because an employee must continue to meet these standards while on the job
in order to keep his job. Under this perspective, a violation is not one of the faults for which an employee can
be dismissed pursuant to pars. (a) to (d) of Article 282; the employee can be dismissed simply because he no
longer "qualifies" for his job irrespective of whether or not the failure to qualify was willful or intentional. x x
x45

Petitioner, though, advances a very interesting argument. He claims that obesity is a "physical abnormality
and/or illness."46 Relying on Nadura v. Benguet Consolidated, Inc.,47 he says his dismissal is illegal:

Conscious of the fact that Nadura’s case cannot be made to fall squarely within the specific causes enumerated
in subparagraphs 1(a) to (e), Benguet invokes the provisions of subparagraph 1(f) and says that Nadura’s illness
– occasional attacks of asthma – is a cause analogous to them.
Even a cursory reading of the legal provision under consideration is sufficient to convince anyone that, as the
trial court said, "illness cannot be included as an analogous cause by any stretch of imagination."

It is clear that, except the just cause mentioned in sub-paragraph 1(a), all the others expressly enumerated in
the law are due to the voluntary and/or willful act of the employee. How Nadura’s illness could be considered
as "analogous" to any of them is beyond our understanding, there being no claim or pretense that the same
was contracted through his own voluntary act.48

The reliance on Nadura is off-tangent. The factual milieu in Nadura is substantially different from the case at
bar. First, Nadura was not decided under the Labor Code. The law applied in that case was Republic Act (RA)
No. 1787. Second, the issue of flight safety is absent in Nadura, thus, the rationale there cannot apply
here. Third, in Nadura, the employee who was a miner, was laid off from work because of illness, i.e., asthma.
Here, petitioner was dismissed for his failure to meet the weight standards of PAL. He was not dismissed due
to illness. Fourth, the issue in Nadura is whether or not the dismissed employee is entitled to separation pay
and damages. Here, the issue centers on the propriety of the dismissal of petitioner for his failure to meet the
weight standards of PAL. Fifth, in Nadura, the employee was not accorded due process. Here, petitioner was
accorded utmost leniency. He was given more than four (4) years to comply with the weight standards of PAL.

In the case at bar, the evidence on record militates against petitioner’s claims that obesity is a disease. That he
was able to reduce his weight from 1984 to 1992 clearly shows that it is possible for him to lose weight given
the proper attitude, determination, and self-discipline. Indeed, during the clarificatory hearing on December
8, 1992, petitioner himself claimed that "[t]he issue is could I bring my weight down to ideal weight which is
172, then the answer is yes. I can do it now."49

True, petitioner claims that reducing weight is costing him "a lot of expenses."50 However, petitioner has only
himself to blame. He could have easily availed the assistance of the company physician, per the advice of
PAL.51 He chose to ignore the suggestion. In fact, he repeatedly failed to report when required to undergo
weight checks, without offering a valid explanation. Thus, his fluctuating weight indicates absence of willpower
rather than an illness.

Petitioner cites Bonnie Cook v. State of Rhode Island, Department of Mental Health, Retardation and
Hospitals,52decided by the United States Court of Appeals (First Circuit). In that case, Cook worked from 1978
to 1980 and from 1981 to 1986 as an institutional attendant for the mentally retarded at the Ladd Center that
was being operated by respondent. She twice resigned voluntarily with an unblemished record. Even
respondent admitted that her performance met the Center’s legitimate expectations. In 1988, Cook re-applied
for a similar position. At that time, "she stood 5’2" tall and weighed over 320 pounds." Respondent claimed
that the morbid obesity of plaintiff compromised her ability to evacuate patients in case of emergency and it
also put her at greater risk of serious diseases.

Cook contended that the action of respondent amounted to discrimination on the basis of a handicap. This was
in direct violation of Section 504(a) of the Rehabilitation Act of 1973,53 which incorporates the remedies
contained in Title VI of the Civil Rights Act of 1964. Respondent claimed, however, that morbid obesity could
never constitute a handicap within the purview of the Rehabilitation Act. Among others, obesity is a mutable
condition, thus plaintiff could simply lose weight and rid herself of concomitant disability.

The appellate Court disagreed and held that morbid obesity is a disability under the Rehabilitation Act and that
respondent discriminated against Cook based on "perceived" disability. The evidence included expert
testimony that morbid obesity is a physiological disorder. It involves a dysfunction of both the metabolic system
and the neurological appetite – suppressing signal system, which is capable of causing adverse effects within
the musculoskeletal, respiratory, and cardiovascular systems. Notably, the Court stated that "mutability is
relevant only in determining the substantiality of the limitation flowing from a given impairment," thus
"mutability only precludes those conditions that an individual can easily and quickly reverse by behavioral
alteration."

Unlike Cook, however, petitioner is not morbidly obese. In the words of the District Court for the District of
Rhode Island, Cook was sometime before 1978 "at least one hundred pounds more than what is considered
appropriate of her height." According to the Circuit Judge, Cook weighed "over 320 pounds" in 1988. Clearly,
that is not the case here. At his heaviest, petitioner was only less than 50 pounds over his ideal weight.

In fine, We hold that the obesity of petitioner, when placed in the context of his work as flight attendant,
becomes an analogous cause under Article 282(e) of the Labor Code that justifies his dismissal from the service.
His obesity may not be unintended, but is nonetheless voluntary. As the CA correctly puts it, "[v]oluntariness
basically means that the just cause is solely attributable to the employee without any external force influencing
or controlling his actions. This element runs through all just causes under Article 282, whether they be in the
nature of a wrongful action or omission. Gross and habitual neglect, a recognized just cause, is considered
voluntary although it lacks the element of intent found in Article 282(a), (c), and (d)."54

II. The dismissal of petitioner can be predicated on the bona fide occupational qualification defense.

Employment in particular jobs may not be limited to persons of a particular sex, religion, or national origin
unless the employer can show that sex, religion, or national origin is an actual qualification for performing the
job. The qualification is called a bona fide occupational qualification (BFOQ).55 In the United States, there are
a few federal and many state job discrimination laws that contain an exception allowing an employer to engage
in an otherwise unlawful form of prohibited discrimination when the action is based on a BFOQ necessary to
the normal operation of a business or enterprise.56

Petitioner contends that BFOQ is a statutory defense. It does not exist if there is no statute providing for
it.57 Further, there is no existing BFOQ statute that could justify his dismissal.58

Both arguments must fail.

First, the Constitution,59 the Labor Code,60 and RA No. 727761 or the Magna Carta for Disabled
Persons62 contain provisions similar to BFOQ.

Second, in British Columbia Public Service Employee Commission (BSPSERC) v. The British Columbia Government
and Service Employee’s Union (BCGSEU),63 the Supreme Court of Canada adopted the so-called "Meiorin Test"
in determining whether an employment policy is justified. Under this test, (1) the employer must show that it
adopted the standard for a purpose rationally connected to the performance of the job;64 (2) the employer
must establish that the standard is reasonably necessary65 to the accomplishment of that work-related
purpose; and (3) the employer must establish that the standard is reasonably necessary in order to accomplish
the legitimate work-related purpose. Similarly, in Star Paper Corporation v. Simbol,66 this Court held that in
order to justify a BFOQ, the employer must prove that (1) the employment qualification is reasonably related
to the essential operation of the job involved; and (2) that there is factual basis for believing that all or
substantially all persons meeting the qualification would be unable to properly perform the duties of the job.67

In short, the test of reasonableness of the company policy is used because it is parallel to BFOQ.68 BFOQ is valid
"provided it reflects an inherent quality reasonably necessary for satisfactory job performance."69

In Duncan Association of Detailman-PTGWTO v. Glaxo Wellcome Philippines, Inc.,70 the Court did not hesitate
to pass upon the validity of a company policy which prohibits its employees from marrying employees of a rival
company. It was held that the company policy is reasonable considering that its purpose is the protection of
the interests of the company against possible competitor infiltration on its trade secrets and procedures.

Verily, there is no merit to the argument that BFOQ cannot be applied if it has no supporting statute. Too, the
Labor Arbiter,71 NLRC,72 and CA73 are one in holding that the weight standards of PAL are reasonable. A
common carrier, from the nature of its business and for reasons of public policy, is bound to observe
extraordinary diligence for the safety of the passengers it transports.74 It is bound to carry its passengers safely
as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due
regard for all the circumstances.75

The law leaves no room for mistake or oversight on the part of a common carrier. Thus, it is only logical to hold
that the weight standards of PAL show its effort to comply with the exacting obligations imposed upon it by
law by virtue of being a common carrier.

The business of PAL is air transportation. As such, it has committed itself to safely transport its passengers. In
order to achieve this, it must necessarily rely on its employees, most particularly the cabin flight deck crew who
are on board the aircraft. The weight standards of PAL should be viewed as imposing strict norms of discipline
upon its employees.

In other words, the primary objective of PAL in the imposition of the weight standards for cabin crew is flight
safety. It cannot be gainsaid that cabin attendants must maintain agility at all times in order to inspire
passenger confidence on their ability to care for the passengers when something goes wrong. It is not
farfetched to say that airline companies, just like all common carriers, thrive due to public confidence on their
safety records. People, especially the riding public, expect no less than that airline companies transport their
passengers to their respective destinations safely and soundly. A lesser performance is unacceptable.

The task of a cabin crew or flight attendant is not limited to serving meals or attending to the whims and
caprices of the passengers. The most important activity of the cabin crew is to care for the safety of passengers
and the evacuation of the aircraft when an emergency occurs. Passenger safety goes to the core of the job of
a cabin attendant. Truly, airlines need cabin attendants who have the necessary strength to open emergency
doors, the agility to attend to passengers in cramped working conditions, and the stamina to withstand grueling
flight schedules.

On board an aircraft, the body weight and size of a cabin attendant are important factors to consider in case
of emergency. Aircrafts have constricted cabin space, and narrow aisles and exit doors. Thus, the arguments
of respondent that "[w]hether the airline’s flight attendants are overweight or not has no direct relation to its
mission of transporting passengers to their destination"; and that the weight standards "has nothing to do with
airworthiness of respondent’s airlines," must fail.

The rationale in Western Air Lines v. Criswell76 relied upon by petitioner cannot apply to his case. What was
involved there were two (2) airline pilots who were denied reassignment as flight engineers upon reaching the
age of 60, and a flight engineer who was forced to retire at age 60. They sued the airline company, alleging that
the age-60 retirement for flight engineers violated the Age Discrimination in Employment Act of 1967. Age-
based BFOQ and being overweight are not the same. The case of overweight cabin attendants is another
matter. Given the cramped cabin space and narrow aisles and emergency exit doors of the airplane, any
overweight cabin attendant would certainly have difficulty navigating the cramped cabin area.

In short, there is no need to individually evaluate their ability to perform their task. That an obese cabin
attendant occupies more space than a slim one is an unquestionable fact which courts can judicially recognize
without introduction of evidence.77 It would also be absurd to require airline companies to reconfigure the
aircraft in order to widen the aisles and exit doors just to accommodate overweight cabin attendants like
petitioner.

The biggest problem with an overweight cabin attendant is the possibility of impeding passengers from
evacuating the aircraft, should the occasion call for it. The job of a cabin attendant during emergencies is to
speedily get the passengers out of the aircraft safely. Being overweight necessarily impedes mobility. Indeed, in
an emergency situation, seconds are what cabin attendants are dealing with, not minutes. Three lost seconds
can translate into three lost lives. Evacuation might slow down just because a wide-bodied cabin attendant is
blocking the narrow aisles. These possibilities are not remote.

Petitioner is also in estoppel. He does not dispute that the weight standards of PAL were made known to him
prior to his employment. He is presumed to know the weight limit that he must maintain at all times.78 In fact,
never did he question the authority of PAL when he was repeatedly asked to trim down his weight. Bona fides
exigit ut quod convenit fiat. Good faith demands that what is agreed upon shall be done. Kung ang tao ay tapat
kanyang tutuparin ang napagkasunduan.

Too, the weight standards of PAL provide for separate weight limitations based on height and body frame for
both male and female cabin attendants. A progressive discipline is imposed to allow non-compliant cabin
attendants sufficient opportunity to meet the weight standards. Thus, the clear-cut rules obviate any possibility
for the commission of abuse or arbitrary action on the part of PAL.

III. Petitioner failed to substantiate his claim that he was discriminated against by PAL.

Petitioner next claims that PAL is using passenger safety as a convenient excuse to discriminate against
him.79 We are constrained, however, to hold otherwise. We agree with the CA that "[t]he element of
discrimination came into play in this case as a secondary position for the private respondent in order to escape
the consequence of dismissal that being overweight entailed. It is a confession-and-avoidance position that
impliedly admitted the cause of dismissal, including the reasonableness of the applicable standard and the
private respondent’s failure to comply."80It is a basic rule in evidence that each party must prove his affirmative
allegation.81

Since the burden of evidence lies with the party who asserts an affirmative allegation, petitioner has to prove
his allegation with particularity. There is nothing on the records which could support the finding of
discriminatory treatment. Petitioner cannot establish discrimination by simply naming the supposed cabin
attendants who are allegedly similarly situated with him. Substantial proof must be shown as to how and why
they are similarly situated and the differential treatment petitioner got from PAL despite the similarity of his
situation with other employees.

Indeed, except for pointing out the names of the supposed overweight cabin attendants, petitioner miserably
failed to indicate their respective ideal weights; weights over their ideal weights; the periods they were allowed
to fly despite their being overweight; the particular flights assigned to them; the discriminating treatment they
got from PAL; and other relevant data that could have adequately established a case of discriminatory
treatment by PAL. In the words of the CA, "PAL really had no substantial case of discrimination to meet."82

We are not unmindful that findings of facts of administrative agencies, like the Labor Arbiter and the NLRC, are
accorded respect, even finality.83 The reason is simple: administrative agencies are experts in matters within
their specific and specialized jurisdiction.84 But the principle is not a hard and fast rule. It only applies if the
findings of facts are duly supported by substantial evidence. If it can be shown that administrative bodies
grossly misappreciated evidence of such nature so as to compel a conclusion to the contrary, their findings of
facts must necessarily be reversed. Factual findings of administrative agencies do not have infallibility and must
be set aside when they fail the test of arbitrariness.85

Here, the Labor Arbiter and the NLRC inexplicably misappreciated evidence. We thus annul their findings.

To make his claim more believable, petitioner invokes the equal protection clause guaranty86 of the
Constitution. However, in the absence of governmental interference, the liberties guaranteed by the
Constitution cannot be invoked.87 Put differently, the Bill of Rights is not meant to be invoked against acts of
private individuals.88 Indeed, the United States Supreme Court, in interpreting the Fourteenth
Amendment,89 which is the source of our equal protection guarantee, is consistent in saying that the equal
protection erects no shield against private conduct, however discriminatory or wrongful.90 Private actions, no
matter how egregious, cannot violate the equal protection guarantee.91

IV. The claims of petitioner for reinstatement and wages are moot.

As his last contention, petitioner avers that his claims for reinstatement and wages have not been mooted. He
is entitled to reinstatement and his full backwages, "from the time he was illegally dismissed" up to the time
that the NLRC was reversed by the CA.92

At this point, Article 223 of the Labor Code finds relevance:

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the
reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The employee shall
either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or
separation or, at the option of the employer, merely reinstated in the payroll. The posting of a bond by the
employer shall not stay the execution for reinstatement provided herein.

The law is very clear. Although an award or order of reinstatement is self-executory and does not require a writ
of execution,93 the option to exercise actual reinstatement or payroll reinstatement belongs to the employer.
It does not belong to the employee, to the labor tribunals, or even to the courts.

Contrary to the allegation of petitioner that PAL "did everything under the sun" to frustrate his "immediate
return to his previous position,"94 there is evidence that PAL opted to physically reinstate him to a substantially
equivalent position in accordance with the order of the Labor Arbiter.95 In fact, petitioner duly received the
return to work notice on February 23, 2001, as shown by his signature.96

Petitioner cannot take refuge in the pronouncements of the Court in a case97 that "[t]he unjustified refusal of
the employer to reinstate the dismissed employee entitles him to payment of his salaries effective from the
time the employer failed to reinstate him despite the issuance of a writ of execution"98 and ""even if the order
of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to
reinstate and pay the wages of the employee during the period of appeal until reversal by the higher
court."99 He failed to prove that he complied with the return to work order of PAL. Neither does it appear on
record that he actually rendered services for PAL from the moment he was dismissed, in order to insist on the
payment of his full backwages.

In insisting that he be reinstated to his actual position despite being overweight, petitioner in effect wants to
render the issues in the present case moot. He asks PAL to comply with the impossible. Time and again, the
Court ruled that the law does not exact compliance with the impossible.100

V. Petitioner is entitled to separation pay.

Be that as it may, all is not lost for petitioner.

Normally, a legally dismissed employee is not entitled to separation pay. This may be deduced from the
language of Article 279 of the Labor Code that "[a]n 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." Luckily for petitioner, this is
not an ironclad rule.

Exceptionally, separation pay is granted to a legally dismissed employee as an act "social justice,"101 or based
on "equity."102 In both instances, it is required that the dismissal (1) was not for serious misconduct; and (2)
does not reflect on the moral character of the employee.103

Here, We grant petitioner separation pay equivalent to one-half (1/2) month’s pay for every year of
service.104 It should include regular allowances which he might have been receiving.105 We are not blind to the
fact that he was not dismissed for any serious misconduct or to any act which would reflect on his moral
character. We also recognize that his employment with PAL lasted for more or less a decade.

WHEREFORE, the appealed Decision of the Court of Appeals is AFFIRMED but MODIFIED in that petitioner
Armando G. Yrasuegui is entitled to separation pay in an amount equivalent to one-half (1/2) month’s pay for
every year of service, which should include his regular allowances.

SO ORDERED.

G.R. No. 196573 October 16, 2013

VICTORINO OPINALDO, Petitioner,

vs.
NARCISA RAVINA, Respondent.

DECISION

VILLARAMA, JR., J.:

On appeal under Rule 45 is the Decision1 dated October 19, 2010 and Resolution2 dated March 17, 2011 of the
Court of Appeals (CA), Cebu City, in CA-G.R. SP No. 04479 which reversed and set aside the Decision3 and
Resolution4 of the National Labor Relations Commission (NLRC), Cebu City, and dismissed petitioner s
complaint for illegal dismissal against respondent.

The facts follow.

Respondent Narcisa Ravina (Ravina) is the general manager and sole proprietor of St. Louisse Security Agency
(the Agency). Petitioner Victorino Opinaldo (Opinaldo) is a security guard who had worked for the Agency until
his alleged illegal dismissal by respondent on December 22, 2006.

Agency hired the services of petitioner on October 5, 2005, with a daily salary of ₱176.66 and detailed him to
PAIJR Furniture Accessories (PAIJR) in Mandaue City.5
In a letter dated August 15, 2006, however, the owner of PAIJR submitted a written complaint to respondent
stating as follows:

I have two guards assigned here in my company, namely, SG. Opinaldo and SGT. Sosmenia. Hence, ... I hereby
formalize our request to relieve one of our company guards and I choose SG. VICTORINO B. OPINALDO,
detailed/assigned at PAIJR FURNITURE ACCESSORIES located at TAWASON, MANDAUE CITY. For the reason: He
is no longer physically fit to perform his duties and responsibilities as a company guard because of his health
condition.

Looking forward to your immediate action. Thank you.6

Acceding to PAIJR’s request, respondent relieved petitioner from his work. Respondent also required petitioner
to submit a medical certificate to prove that he is physically and mentally fit for work as security guard.

On September 6, 2006, respondent reassigned petitioner to Gomez Construction at Mandaue City. After
working for a period of two weeks for Gomez Construction and upon receipt of his salary for services rendered
within the said two-week period, petitioner ceased to report for work.7 The records show that petitioner’s post
at Gomez Construction was the last assignment given to him by respondent.

On November 7, 2006, petitioner filed a complaint8 against respondent with the Department of Labor and
Employment (DOLE) Regional Office in Cebu City for underpayment of salary and nonpayment of other labor
standard benefits. The parties agreed to settle and reached a compromise agreement. On November 27, 2006,
petitioner signed a Quitclaim and Release9 before the DOLE Regional Office in Cebu City for the amount of
₱5,000.10

After almost four weeks from the settlement of the case, petitioner returned to respondent’s office on
December 22, 2006. Petitioner claims that when he asked respondent to sign an SSS11 Sickness Notification
which he was going to use in order to avail of the discounted fees for a medical check-up, respondent allegedly
refused and informed him that he was no longer an employee of the Agency. Respondent allegedly told him
that when he signed the quitclaim and release form at the DOLE Regional Office, she already considered him
to have quit his employment.12Respondent, on the other hand, counterclaims that she did not illegally dismiss
petitioner and that it was a valid exercise of management prerogative that he was not given any assignment
pending the submission of the required medical certificate of his fitness to work.13

On January 26, 2007, petitioner filed a Complaint14 for Illegal Dismissal with a prayer for the payment of
separation pay in lieu of reinstatement against respondent and the Agency before the NLRC Regional
Arbitration Branch No. VII, Cebu City. After trial and hearing, Labor Arbiter Maria Christina S. Sagmit rendered
a Decision15 on June 18, 2008 holding respondent and the Agency liable for illegal dismissal and ordering them
to pay petitioner separation pay and back wages. The Labor Arbiter ruled,

In the instant case, respondents failed to establish that complainant was dismissed for valid causes. For one,
there is no evidence that complainant was suffering from physical illness which will explain his lack of
assignment. Further, there is no admissible proof that Ravina even required complainant to submit a medical
certificate. Thus, complainant could not be deemed to have refused or neglected to comply with this order.

xxxx

Considering that there is no evidence that complainant was physically unfit to perform his duties, respondents
must be held liable for illegal dismissal. Ordinarily, complainant will be entitled to reinstatement and full
backwages. However, complainant has expressed his preference not to be reinstated. Hence, respondents
must be ordered to give complainant separation pay in lieu of reinstatement equivalent to one month’s salary
for every year of service. Complainant is also entitled to full backwages from the time he was terminated until
the date of this Decision. WHEREFORE, respondents Narcisa Ravina and/or St. Louisse Security Agency are
ordered to pay complainant the total amount EIGHTY-TWO THOUSAND THREE HUNDRED FORTY PESOS
(₱82,340.00), consisting of ₱22,500.00 in separation pay and ₱59,840.00 in full backwages.

SO ORDERED.16

Respondent appealed to the NLRC which, however, affirmed the decision of the Labor Arbiter and dismissed
the appeal for lack of merit.17 The NLRC ruled that there was no just and authorized cause for dismissal and
held that "without a certification from a competent public authority that petitioner suffers from a disease of
such nature or stage that cannot be cured within a period of six (6) months even with proper medical
attendance, respondents are not justified in refusing petitioner’s presence in the workplace."18 The NLRC also
ruled that neither did petitioner abandon his job as his failure to work was due to "respondents turning him
down."19 Respondent moved for reconsideration but the motion was denied in a Resolution 20 dated June 30,
2009 where the NLRC reiterated its finding of illegal dismissal given the absence of any just or authorized cause
for the termination of petitioner and the failure to prove abandonment on his part.

Respondent elevated the case to the CA on a Petition for Certiorari.21 On October 19, 2010, the appellate court
ruled for respondent and reversed and set aside the decision and resolution of the NLRC. Ruling on the issue
raised by petitioner that respondent’s petition should have been dismissed outright as her motion for
reconsideration before the NLRC was filed out of time, the appellate court held that the issue was rendered
moot and academic when the NLRC gave due course to the motion and decided the case on the merits. The
appellate court further held that petitioner should have filed his comment or opposition upon the filing of the
subject motion for reconsideration and not after the termination of the proceedings before the NLRC. As to
the issue of illegal dismissal, the appellate court ruled that it was petitioner himself who failed to report for
work and therefore severed his employment with the Agency. The CA further held that petitioner’s claims
relative to his alleged illegal dismissal were not substantiated. The pertinent portions of the assailed Decision
reads,

Based from the evidence on record, the chain of events started when PAIJR sent to Ravina its 15 August 2006
letter-complaint to relieve Opinaldo. This led to Opinaldo’s reassignment to work for Engr. Gomez on 06
September 2006. Upon his failure to continue working for Engr. Gomez due to his refusal to obtain a medical
certificate, Opinaldo filed the complaint for money claims on 07 November 2006. This was however settled
when Opinaldo and Ravina signed a quitclaim on 27 November 2006. Still, Opinaldo did not obtain the medical
certificate required by Ravina. Then, Opinaldo’s hasty filing of a complaint for illegal dismissal against Ravina
on 26 January 2007.

xxxx

The requirement to undergo a medical examination is a lawful exercise of management prerogative on Ravina’s
part considering the charges that Opinaldo was not only suffering from hypertension but was also sleeping
while on duty. The management is free to regulate, according to its own discretion and judgment, all aspects
of employment, including hiring, work assignments, working methods, time, place and manner of work,
processes to be followed, supervision of workers, working regulations, transfer of employees, work
supervision, lay off of workers and discipline, dismissal and recall of workers.

Besides, as a security guard, the need to be physically fit cannot be downplayed. If at all, Opinaldo’s obstinate
refusal to submit his medical certificate is equivalent to willful disobedience to a lawful order. x x x.

xxxx
Verily, the totality of Opinaldo’s acts justifies the dismissal of his complaint for illegal dismissal against Ravina.
While it is true that the state affirms labor as a primary social economic force, we are also mindful that the
management has rights which must also be respected and enforced.22

Petitioner moved for reconsideration of the Decision but his motion was denied in the questioned Resolution
of March 17, 2011 on the ground that there are neither cogent reasons nor new and substantial grounds which
would warrant a reversal of the appellate court’s findings. Hence, petitioner filed this petition alleging that:

I THE HONORABLE COURT OF APPEALS ERRED AND DECIDED THE CASE NOT IN ACCORDANCE WITH LAW AND
ESTABLISHED JURISPRUDENCE WHEN IT GAVE DUE COURSE TO THE RESPONDENT’S PETITION FOR CERTIORARI
UNDER RULE 65 DESPITE BEING FILED OUT OF TIME AND NOT PROPERLY VERIFIED

II THE HONORABLE COURT OF APPEALS ERRED AND DECIDED THE CASE NOT IN ACCORDANCE WITH LAW AND
ESTABLISHED JURISPRUDENCE WHEN IT REVERSED AND SET ASIDE THE DECISION AND RESOLUTION OF THE
HONORABLE NATIONAL LABOR RELATIONS COMMISSION, FOURTH DIVISION, BY DECLARING THAT THE
DISMISSAL OF PETITIONER WAS LEGAL AND PROPER23

We first rule on the procedural issue.

Petitioner questions the appellate court for ruling that the issue of the timeliness of the filing of respondent’s
motion for reconsideration of the NLRC decision has become moot and academic when the NLRC dismissed
the said motion based on the merits and affirmed its decision. It is the opinion of petitioner that "this should
not and cannot be understood to mean that the motion for reconsideration was filed within the period
allowed," and that "the Commission may have accommodated the motion for reconsideration although
belatedly filed and had chosen to decide it based on its merits x x x but it does not change the fact that the
motion for reconsideration before the Commission was filed beyond the reglementary period."24 Petitioner
believes that respondent’s filing of the motion for reconsideration on time is a precondition to the application
of the rule that a petition for certiorari must be filed within 60 days from the notice of the denial of the motion
for reconsideration. As petitioner puts it, "the counting of the sixty (60)-day period from the notice of the denial
of the motion for reconsideration is proper only when the motion was filed on time."25

The CA, ruling that the procedural issue is already moot and academic, ratiocinated as follows:

Anent the first issue, Ravina argues that the issue of timeliness of filing a Motion for Reconsideration with the
NLRC has been dispensed with when it resolved to dismiss said Motion based on the merits and not on the
mere technical issue of timeliness. Ravina further insists that had the NLRC denied said Motion based on the
issue of timeliness, it would have just outrightly dismissed it based on said ground and not on the merits she
raised in her Motion for Reconsideration.

The period within which to file a certiorari petition is 60 days as provided under Section 4, Rule 65 of the 1997
Rules of Civil Procedure as amended by Circular No. 39-98 and further amended by A.M. No. 00-2-03-SC, thusly:

SECTION 4. When and where petition filed. – The petition shall be filed not later than sixty (60) days from notice
of the judgment, order or resolution. In case a motion for reconsideration or new trial is timely filed, whether
such motion is required or not, the sixty (60) day period shall be counted from notice of the denial of said
motion.

xxxx

xxxx
To reiterate, the NLRC promulgated its challenged Decision on 24 April 2009. Ravina alleged that her former
counsel received a copy of said decision on 08 June 2009. However, she changed her counsel who, in turn,
obtained a copy of the decision on 17 June 2009. The NLRC then promulgated its assailed Resolution on 30
June 2009 which Ravina received on 29 July 2009. Ravina’s Petition for Certiorari, dated 28 August 2009, was
filed on 09 September 2009.

The reckoning period for the filing of a certiorari petition is sixty (60) days counted from notice of the denial of
said motion. Prescinding from the foregoing, the Petition for Certiorari was filed within the 60-day period.

At this stage of the proceeding, it is futile to belabor on the timeliness of the Motion for Reconsideration. This
is due to the fact that the issue of timeliness has become moot and academic considering that Ravina’s Motion
for Reconsideration was given due course by the NLRC. In fact, the NLRC even decided the motion on the merits
and not merely on technicality. Moreover, Opinaldo should have filed a Comment or Opposition as soon as the
Motion for Reconsideration was filed. Opinaldo should not have waited for the termination of the proceedings
before the NLRC. In point of fact, the belated questioning of the issue of timeliness even operated to estop
Opinaldo.26(Emphasis ours.)

Time and again, we have ruled and it has become doctrine that the perfection of an appeal within the statutory
or reglementary period and in the manner prescribed by law is mandatory and jurisdictional. Failure to do so
renders the questioned decision final and executory and deprives the appellate court of jurisdiction to alter
the final judgment, much less to entertain the appeal.27 In labor cases, the underlying purpose of this principle
is to prevent needless delay, a circumstance which would allow the employer to wear out the efforts and
meager resources of the worker to the point that the latter is constrained to settle for less than what is due
him.28

In the case at bar, the applicable rule on the perfection of an appeal from the decision of the NLRC is Section
15, Rule VII of the 2005 Revised Rules of Procedure of the National Labor Relations Commission:

Section 15. Motions for Reconsideration. – Motion for reconsideration of any decision, resolution or order of
the Commission shall not be entertained except when based on palpable or patent errors; provided that the
motion is under oath and filed within ten (10) calendar days from receipt of decision, resolution or order, with
proof of service that a copy of the same has been furnished, within the reglementary period, the adverse party;
and provided further, that only one such motion from the same party shall be entertained.

Should a motion for reconsideration be entertained pursuant to this SECTION, the resolution shall be executory
after ten (10) calendar days from receipt thereof.

We are not, however, unmindful that the NLRC is not bound by the technical rules of procedure and is allowed
to be liberal in the application of its rules in deciding labor cases. Thus, under Section 2, Rule I of the 2005
Revised Rules of Procedure of the National Labor Relations Commission it is stated:

Section 2. Construction. – These Rules shall be liberally construed to carry out the objectives of the
Constitution, the Labor Code of the Philippines and other relevant legislations, and to assist the parties in
obtaining just, expeditious and inexpensive resolution and settlement of labor disputes.

It is significant that the 2011 NLRC Rules of Procedure, under Section 2, Rule I thereof, also carries exactly the
same provision. Further, the 2005 Revised Rules and the 2011 Rules carry identical provisions appearing under
Section 10, Rule VII of both laws:

Section 10. Technical rules not binding. – The rules of procedure and evidence prevailing in courts of law and
equity shall not be controlling and the Commission shall use every and all reasonable means to ascertain the
facts in each case speedily and objectively, without regard to technicalities of law or procedure, all in the
interest of due process.

In any proceeding before the Commission, the parties may be represented by legal counsel but it shall be the
duty of the Chairman, any Presiding Commissioner or Commissioner to exercise complete control of the
proceedings at all stages.

All said, despite this jurisdiction’s stance towards the exercise of liberality, the rules should not be relaxed
when it would render futile the very purpose for which the principle of liberality is adopted.29 The liberal
interpretation stems from the mandate that the workingman’s welfare should be the primordial and
paramount consideration.30 We are convinced that the circumstances in the case at bar warranted the NLRC’s
exercise of liberality when it decided respondent’s motion for reconsideration on the merits.

The subject motion for reconsideration of the NLRC decision was filed on June 25, 2009. The evidence on record
shows that the decision of the NLRC dated April 24, 2009 was received by respondent herself on June 17, 2009.
The same decision was, however, earlier received on June 8, 2009 by respondent’s former counsel who
allegedly did not inform respondent of the receipt of such decision until respondent went to his office on June
23, 2009 to get the files of the case. If we follow a strict construction of the ten-day rule under the 2005 Revised
Rules of Procedure of the National Labor Relations Commission and consider notice to respondent’s former
counsel as notice to respondent herself, the expiration of the period to file a motion for reconsideration should
have been on June 18, 2009. The NLRC, however, chose a liberal application of its rules: it decided the motion
on the merits. Nevertheless, it denied reconsideration.

We defer to the exercise of discretion by the NLRC and uphold its judgment in applying a liberal construction
of its procedural and technical rules to this case in order to ventilate and resolve the issues raised by
respondent in the motion for reconsideration and fully resolve the case on the merits. It would be purely
conjectural to challenge the NLRC’s exercise of such liberality for being tainted with grave abuse of discretion
especially that it did not reverse, but even affirmed, its questioned decision – which sustained the ruling of the
Labor Arbiter – that respondent illegally dismissed petitioner. In view of such disposition, that the NLRC gave
due course to the motion in the interest of due process and to render a full resolution of the case on the merits
is the more palpable explanation for the liberal application of its rules. It is significant to note that neither did
petitioner ever raise the issue of the NLRC’s ruling on the merits of the subject motion for reconsideration. And
the reason is clear: the motion for reconsideration was resolved in favor of petitioner. Furthermore, if the NLRC
accorded credibility to the explanation proffered by respondent for its belated filing of the motion, we cannot
now second-guess the NLRC’s judgment in view of the circumstances of the case and in the absence of any
showing that it gravely abused its discretion.

In light of the foregoing, we cannot uphold the stand of petitioner that the petition for certiorari before the CA
was filed out of time, and at the same time rule that the NLRC acted in the proper exercise of its jurisdiction
when it liberally applied its rules and resolved the motion for reconsideration on the merits. To so hold would
nullify the latitude of discretion towards liberal construction granted to the NLRC under the 2005 Revised Rules
of Procedure of the National Labor Relations Commission – including the decisions and resolutions rendered
in the exercise of such discretion.

Petitioner also claims that the verification in respondent’s petition for certiorari before the CA suffers from
infirmity because it was based only on "personal belief and information." As it is, petitioner argues that it does
not comply with Section 4,31 Rule 7 of the 1997 Rules on Civil Procedure, as amended, which requires a pleading
to be verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and
correct of his personal knowledge or based on authentic records.32 The petition must therefore be considered
as an unsigned pleading producing no legal effect under Section 3,33 Rule 7 of the Rules and should have
resulted in the outright dismissal of the petition.

It is a matter of procedural consequence in the case at bar that whether we strictly or liberally apply the
technical rules on the requirement of verification in pleadings, the disposition of the case will be the same. If
we sustain petitioner’s stance that the petition before the CA should have been outrightly dismissed, the NLRC
decision finding the dismissal of petitioner as illegal would have reached finality. On the other hand, if we adopt
respondent’s view that the defect in the verification of the petition is merely a formal defect and is neither
jurisdictional nor fatal, we will be sustaining the appellate court’s giving due course to the petition. However,
on substantive grounds, we reverse the appellate court’s decision and reinstate the finding of illegal dismissal
by the NLRC and the Labor Arbiter.

The appellate court reversed both the NLRC and the Labor Arbiter in consideration of the following factors:
that petitioner did not counter respondent’s receipt of the letter-complaint of PAIJR relative to his work
performance; that petitioner did not refute the fact that respondent required him to submit a medical
certificate; and, that petitioner failed to comply with the requirement to submit the medical certificate. Hence,
when petitioner failed to submit the required medical certificate, the appellate court found it to be a valid
exercise of management prerogative on the part of respondent not to give petitioner any work assignment
pending its submission.

We do not agree.

Jurisprudence is replete with cases recognizing the right of the employer to have free reign and enjoy sufficient
discretion to regulate all aspects of employment, including the prerogative to instill discipline in its employees
and to impose penalties, including dismissal, upon erring employees. This is a management prerogative where
the free will of management to conduct its own affairs to achieve its purpose takes form.34 Even labor laws
discourage interference with the exercise of such prerogative and the Court often declines to interfere in
legitimate business decisions of employers.35 However, the exercise of management prerogative is not
unlimited. Managerial prerogatives are subject to limitations provided by law, collective bargaining
agreements, and general principles of fair play and justice.36 Hence, in the exercise of its management
prerogative, an employer must ensure that the policies, rules and regulations on work-related activities of the
employees must always be fair and reasonable and the corresponding penalties, when prescribed,
commensurate to the offense involved and to the degree of the infraction.37

In the case at bar, we recognize, as did the appellate court, that respondent’s act of requiring petitioner to
undergo a medical examination and submit a medical certificate is a valid exercise of management prerogative.
This is further justified in view of the letter-complaint from one of respondent’s clients, PAIJR, opining that
petitioner was "no longer physically fit to perform his duties and responsibilities as a company guard because
of his health condition."38 To be sure, petitioner’s job as security guard naturally requires physical and mental
fitness under Section 5 of Republic Act No. 5487,39 as amended by Presidential Decree No. 100.40

While the necessity to prove one’s physical and mental fitness to be a security guard could not be more
emphasized, the question to be settled is whether it is a valid exercise of respondent’s management
prerogative to prevent petitioner’s continued employment with the Agency unless he presents the required
medical certificate. Respondent argues, viz.:

Thus, respondents in the exercise of their MANAGEMENT PREROGATIVE required Complainant to submit a
Medical Certificate to prove that he is "PHYSICALLY AND MENTALLY FIT" for work as Security Guard.
Unfortunately, however, up to the present time, complainant failed to submit said Medical Examination and
Findings giving him clean bill of health, to respondents. Herein respondents are ready and willing to accept him
as such Security Guard once he could submit said Medical Examination and Findings.

The requirement anent the presentation of such MEDICAL CERTIFICATE by Complainant to Respondents is but
a Management Measure of ensuring Respondents including Complainant that Complainant is physically and
mentally fit for continued Employment and will not in any manner pose a danger or, threat to the respondents’
properties and lives of their customers and other employees as well as to the person and life of Complainant
himself.41

It is utterly significant in the case at bar that a considerably long period has lapsed from petitioner’s last day of
recorded work on September 21, 2006 until he was informed by respondent on December 22, 2006 that he
was no longer an employee of the Agency. In the words of petitioner, he had been on a "floating status" 42 for
three months. Within this period, petitioner did not have any work assignment from respondent who proffers
the excuse that he has not submitted the required medical certificate. While it is a management prerogative
to require petitioner to submit a medical certificate, we hold that respondent cannot withhold petitioner’s
employment without observing the principles of due process and fair play. The Labor Arbiter and the CA have
conflicting findings with respect to the submission of the medical certificate.

The Labor Arbiter observed that "there is no admissible proof that respondent even required petitioner to
submit a medical certificate. Thus, petitioner could not be deemed to have refused or neglected to comply
with this order."43The CA countered that while there is no documentary evidence to prove it, the admission of
both parties establishes that there is a pending requirement for a medical certificate and it was not complied
with by petitioner. We agree with the appellate court that despite the lack of documentary evidence, both
parties have admitted to respondent’s medical certificate requirement. We so hold despite petitioner’s
protestations that what respondent required of him was to submit himself to a medical check-up, and not to
submit a medical certificate. Even if petitioner’s allegation is to be believed, the fact remains that he did not
undergo the medical check-up which he himself claims to have been required by respondent.

All said, what behooves the Court is the lack of evidence on record which establishes that respondent informed
petitioner that his failure to submit the required medical certificate will result in his lack of work assignment.
It is a basic principle of labor protection in this jurisdiction that a worker cannot be deprived of his job without
satisfying the requirements of due process.44 Labor is property and the right to make it available is next in
importance to the rights of life and liberty.45 As enshrined under the Bill of Rights, no person shall be deprived
of life, liberty or property without due process of law.46 The due process requirement in the deprivation of
one’s employment is transcendental that it limits the exercise of the management prerogative of the employer
to control and regulate the affairs of the business. In the case at bar, all that respondent employer needed to
prove was that petitioner employee was notified that his failure to submit the required medical certificate will
result in his lack of work assignment – and eventually the termination of his employment – as a security guard.
There is no iota of evidence in the records, save for the bare allegations of respondent, that petitioner was
notified of such consequence for non-submission. In truth, the facts of the case clearly show that respondent
even reassigned petitioner to Gomez Construction from his PAIJR post despite the non-submission of a medical
certificate. If it was indeed the policy of respondent not to give petitioner any work assignment without the
medical certificate, why was petitioner reassigned despite his noncompliance?

That is not all. In addition to invoking management prerogative as a defense, respondent also alleges
abandonment.1âwphi1 Respondent claims that after petitioner received his last salary from his assignment
with Gomez Construction, he no longer reported for work. The assailed Decision found that petitioner indeed
abandoned his work, viz.:
It was only when Opinaldo refused to report for work on his assignment for Engr. Gomez after having received
his salary for work rendered starting on 06 September 2006 that Ravina became firm that the medical
certificate should be submitted. But, Opinaldo did not heed Ravina’s order. It was Opinaldo who altogether
failed to report for work.47

We disagree.

Abandonment is the deliberate and unjustified refusal of an employee to resume his employment.48 To
constitute abandonment of work, two elements must concur: (1) the employee must have failed to report for
work or must have been absent without valid or justifiable reason; and, (2) there must have been a clear
intention on the part of the employee to sever the employer-employee relationship manifested by some overt
act.49 None of these elements is present in the case at bar. As succinctly stated by the NLRC:

From respondents’ own admission in their position paper, it is clear that they prevented petitioner’s continued
employment with them unless the latter presents a medical certificate that he is physically and mentally fit for
work x x x.

xxxx

Moreover, if it was really true that complainant abandoned his work, then why have not respondents sent him
a notice to report back for work? It is evident then that respondents found an excuse to decline complainant’s
continued stay with them on the pretext that he has to submit first a medical certificate before he could be
allowed to resume employment.50

Finally, respondent harps that she could not be held liable for illegal dismissal because, in the first place, she
did not dismiss petitioner. Respondent maintains that she merely refused to give petitioner any work
assignment until the submission of a medical certificate. On this issue, the CA concurred with respondent and
ruled that petitioner failed to "establish the facts which would paint the picture that respondent terminated
him."51

We need not reiterate that respondent did not properly exercise her management prerogative when she
withheld petitioner’s employment without due process. Respondent failed to prove that she has notified
petitioner that her continuous refusal to provide him any work assignment was due to his non-submission of
the medical certificate. Had respondent exercised the rules of fair play, petitioner would have had the option
of complying or not complying with the medical certificate requirement – having full knowledge of the
consequences of his actions. Respondent failed to do so and she cannot now hide behind the defense that
there was no illegal termination because petitioner cannot show proof that he had been illegally dismissed. It
is a time-honored legal principle that the employer has the onus probandi to show that the dismissal or
termination was for a just and authorized cause under the Labor Code. Respondent failed to show that the
termination was justified and authorized, nor was it done as a valid exercise of management prerogative. Given
the circumstances in the case at bar, it is not fair to shift the burden to petitioner, and rule that he failed to
prove his claim, when respondent had successfully terminated the employer-employee relationship without
leaving a paper trail in a clear case o illegal dismissal.

WHEREFORE, the petition for review on certiorari is GRANTED. The assailed Decision dated October 19 2010
and Resolution dated March 17 2011 o the Court o Appeals in CA-G.R. SP No. 04479 dismissing petitioner s
Complaint for Illegal Dismissal are hereby REVERSED and SET ASIDE. The Decision and Resolution dated April24,
2009 and June 30, 2009, respectively, o the NLRC in NLRC Case No. VAC 01-000081-2009 (RAB Case No. Vll-01-
0208-2007) requiring respondent Narcisa Ravina and/or St. Louisse Security Agency to pay petitioner Victorino
Opinaldo the total amount o ₱82,340 consisting o ₱22,500 in separation pay and ₱59,840 in full back wages,
are hereby REINSTATED and UPHELD.

No costs.

SO ORDERED.

G.R. No. 170830 August 11, 2010

PHIMCO INDUSTRIES, INC., Petitioner,

vs.
PHIMCO INDUSTRIES LABOR ASSOCIATION (PILA), and ERLINDA VAZQUEZ, RICARDO SACRISTAN, LEONIDA
CATALAN, MAXIMO PEDRO, NATHANIELA DIMACULANGAN,* RODOLFO MOJICO, ROMEO CARAMANZA,
REYNALDO GANITANO, ALBERTO BASCONCILLO,** and RAMON FALCIS, in their capacity as officers of PILA,
and ANGELITA BALOSA,*** DANILO BANAAG, ABRAHAM CADAY, ALFONSO CLAUDIO, FRANCISCO
DALISAY,**** ANGELITO DEJAN,***** PHILIP GARCES, NICANOR ILAGAN, FLORENCIO
****** *******
LIBONGCOGON, NEMESIO MAMONONG, TEOFILO MANALILI, ALFREDO PEARSON,* MARIO
PEREA,******** RENATO RAMOS, MARIANO ROSALES, PABLO SARMIENTO, RODOLFO TOLENTINO, FELIPE
VILLAREAL, ARSENIO ZAMORA, DANILO BALTAZAR, ROGER CABER,********* REYNALDO CAMARIN, BERNARDO
CUADRA,**********ANGELITO DE GUZMAN, GERARDO FELICIANO,*********** ALEX IBAÑEZ, BENJAMIN JUAN,
SR., RAMON MACAALAY, GONZALO MANALILI, RAUL MICIANO, HILARIO PEÑA, TERESA
PERMOCILLO,************ERNESTO RIO, RODOLFO SANIDAD, RAFAEL STA. ANA, JULIAN TUGUIN and AMELIA
ZAMORA, as members of PILA, Respondents.

DECISION

BRION, J.:

Before us is the petition for review on certiorari1 filed by petitioner Phimco Industries, Inc. (PHIMCO), seeking
to reverse and set aside the decision,2 dated February 10, 2004, and the resolution,3 dated December 12, 2005,
of the Court of Appeals (CA) in CA-G.R. SP No. 70336. The assailed CA decision dismissed PHIMCO’s petition for
certiorari that challenged the resolution, dated December 29, 1998, and the decision, dated February 20, 2002,
of the National Labor Relations Commission (NLRC); the assailed CA resolution denied PHIMCO’s subsequent
motion for reconsideration.

FACTUAL BACKGROUND

The facts of the case, gathered from the records, are briefly summarized below.

PHIMCO is a corporation engaged in the production of matches, with principal address at Phimco Compound,
Felix Manalo St., Sta. Ana, Manila. Respondent Phimco Industries Labor Association (PILA) is the duly authorized
bargaining representative of PHIMCO’s daily-paid workers. The 47 individually named respondents are PILA
officers and members.
When the last collective bargaining agreement was about to expire on December 31, 1994, PHIMCO and PILA
negotiated for its renewal. The negotiation resulted in a deadlock on economic issues, mainly due to
disagreements on salary increases and benefits.

On March 9, 1995, PILA filed with the National Conciliation and Mediation Board (NCMB) a Notice of Strike on
the ground of the bargaining deadlock. Seven (7) days later, or on March 16, 1995, the union conducted a strike
vote; a majority of the union members voted for a strike as its response to the bargaining impasse. On March
17, 1995, PILA filed the strike vote results with the NCMB. Thirty-five (35) days later, or on April 21, 1995, PILA
staged a strike.

On May 3, 1995, PHIMCO filed with the NLRC a petition for preliminary injunction and temporary restraining
order (TRO), to enjoin the strikers from preventing – through force, intimidation and coercion – the ingress and
egress of non-striking employees into and from the company premises. On May 15, 1995, the NLRC issued an
ex-parte TRO, effective for a period of twenty (20) days, or until June 5, 1995.

On June 23, 1995, PHIMCO sent a letter to thirty-six (36) union members, directing them to explain within
twenty-four (24) hours why they should not be dismissed for the illegal acts they committed during the strike.
Three days later, or on June 26, 1995, the thirty-six (36) union members were informed of their dismissal.

On July 6, 1995, PILA filed a complaint for unfair labor practice and illegal dismissal (illegal dismissal case) with
the NLRC. The case was docketed as NLRC NCR Case No. 00-07-04705-95, and raffled to Labor Arbiter (LA) Pablo
C. Espiritu, Jr.

On July 7, 1995, then Acting Labor Secretary Jose S. Brillantes assumed jurisdiction over the labor dispute, and
ordered all the striking employees (except those who were handed termination papers on June 26, 1995) to
return to work within twenty-four (24) hours from receipt of the order. The Secretary ordered PHIMCO to
accept the striking employees, under the same terms and conditions prevailing prior to the strike.4 On the same
day, PILA ended its strike.

On August 28, 1995, PHIMCO filed a Petition to Declare the Strike Illegal (illegal strike case) with the NLRC, with
a prayer for the dismissal of PILA officers and members who knowingly participated in the illegal strike. PHIMCO
claimed that the strikers prevented ingress to and egress from the PHIMCO compound, thereby paralyzing
PHIMCO’s operations. The case was docketed as NLRC NCR Case No. 00-08-06031-95, and raffled to LA Jovencio
Ll. Mayor.

On March 14, 1996, the respondents filed their Position Paper in the illegal strike case. They countered that
they complied with all the legal requirements for the staging of the strike, they put up no barricade, and
conducted their strike peacefully, in an orderly and lawful manner, without incident.

LA Mayor decided the case on February 4, 1998,5 and found the strike illegal; the respondents committed
prohibited acts during the strike by blocking the ingress to and egress from PHIMCO’s premises and preventing
the non-striking employees from reporting for work. He observed that it was not enough that the picket of the
strikers was a moving picket, since the strikers should allow the free passage to the entrance and exit points of
the company premises. Thus, LA Mayor declared that the respondent employees, PILA officers and members,
have lost their employment status.

On March 5, 1998, PILA and its officers and members appealed LA Mayor’s decision to the NLRC.

THE NLRC RULING

The NLRC decided the appeal on December 29, 1998, and set aside LA Mayor’s decision.6 The NLRC did not give
weight to PHIMCO’s evidence, and relied instead on the respondents’ evidence showing that the union
conducted a peaceful moving picket.

On January 28, 1999, PHIMCO filed a motion for reconsideration in the illegal strike case.7

In a parallel development, LA Espiritu decided the union’s illegal dismissal case on March 2, 1999. He ruled the
respondents’ dismissal as illegal, and ordered their reinstatement with payment of backwages. PHIMCO
appealed LA Espiritu’s decision to the NLRC.

Pending the resolution of PHIMCO’s motion for reconsideration in the illegal strike case and the appeal of the
illegal dismissal case, PHIMCO moved for the consolidation of the two (2) cases. The NLRC acted favorably on
the motion and consolidated the two (2) cases in its Order dated August 5, 1999.

On February 20, 2002, the NLRC rendered its Decision in the consolidated cases, ruling totally in the union’s
favor.8It dismissed the appeal of the illegal dismissal case, and denied PHIMCO’s motion for reconsideration in
the illegal strike case. The NLRC found that the picket conducted by the striking employees was not an illegal
blockade and did not obstruct the points of entry to and exit from the company’s premises; the pictures
submitted by the respondents revealed that the picket was moving, not stationary. With respect to the illegal
dismissal charge, the NLRC observed that the striking employees were not given ample opportunity to explain
their side after receipt of the June 23, 1995 letter. Thus, the NLRC affirmed the Decision of LA Espiritu with
respect to the payment of backwages until the promulgation of the decision, plus separation pay at one (1)
month salary per year of service in lieu of reinstatement, and 10% of the monetary award as attorney’s fees. It
ruled out reinstatement because of the damages sustained by the company brought about by the strike.

On March 14, 2002, PHIMCO filed a motion for reconsideration of the consolidated decision.

On April 26, 2002, without waiting for the result of its motion for reconsideration, PHIMCO elevated its case to
the CA through a petition for certiorari under Rule 65 of the Rules of Court.9

THE CA RULING

In a Decision10 promulgated on February 10, 2004, the CA dismissed PHIMCO’s petition for certiorari. The CA
noted that the NLRC findings, that the picket was peaceful and that PHIMCO’s evidence failed to show that the
picket constituted an illegal blockade or that it obstructed the points of entry to and exit from the company
premises, were supported by substantial evidence.

PHIMCO came to us through the present petition after the CA denied11 PHIMCO’s motion for reconsideration.12

THE PETITION

The petitioner argues that the strike was illegal because the respondents committed the prohibited acts under
Article 264(e) of the Labor Code, such as blocking the ingress and egress of the company premises, threat,
coercion, and intimidation, as established by the evidence on record.

THE CASE FOR THE RESPONDENTS

The respondents, on the other hand, submit that the issues raised in this case are factual in nature that we
cannot generally touch in a petition for review, unless compelling reasons exist; the company has not shown
any such compelling reason as the picket was peaceful and uneventful, and no human barricade blocked the
company premises.
THE ISSUE

In Montoya v. Transmed Manila Corporation,13 we laid down the basic approach that should be followed in the
review of CA decisions in labor cases, thus:

In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast with the review for
jurisdictional error that we undertake under Rule 65. Furthermore, Rule 45 limits us to the review of questions
of law raised against the assailed CA decision. In ruling for legal correctness, we have to view the CA decision
in the same context that the petition for certiorari it ruled upon was presented to it; we have to examine the
CA decision from the prism of whether it correctly determined the presence or absence of grave abuse of
discretion in the NLRC decision before it, not on the basis of whether the NLRC decision on the merits of the
case was correct. In other words, we have to be keenly aware that the CA undertook a Rule 65 review, not a
review on appeal, of the NLRC decision challenged before it. This is the approach that should be basic in a Rule
45 review of a CA ruling in a labor case. In question form, the question to ask is: Did the CA correctly determine
whether the NLRC committed grave abuse of discretion in ruling on the case?

In this light, the core issue in the present case is whether the CA correctly ruled that the NLRC did not act with
grave abuse of discretion in ruling that the union’s strike was legal.

OUR RULING

We find the petition partly meritorious.

Requisites of a valid strike

A strike is the most powerful weapon of workers in their struggle with management in the course of setting
their terms and conditions of employment. Because it is premised on the concept of economic war between
labor and management, it is a weapon that can either breathe life to or destroy the union and its members,
and one that must also necessarily affect management and its members.14

In light of these effects, the decision to declare a strike must be exercised responsibly and must always rest on
rational basis, free from emotionalism, and unswayed by the tempers and tantrums of hot heads; it must focus
on legitimate union interests. To be legitimate, a strike should not be antithetical to public welfare, and must
be pursued within legal bounds. The right to strike as a means of attaining social justice is never meant to
oppress or destroy anyone, least of all, the employer.15

Since strikes affect not only the relationship between labor and management but also the general peace and
progress of the community, the law has provided limitations on the right to strike. Procedurally, for a strike to
be valid, it must comply with Article 26316 of the Labor Code, which requires that: (a) a notice of strike be filed
with the Department of Labor and Employment (DOLE) 30 days before the intended date thereof, or 15 days
in case of unfair labor practice; (b) a strike vote be approved by a majority of the total union membership in
the bargaining unit concerned, obtained by secret ballot in a meeting called for that purpose; and (c) a notice
be given to the DOLE of the results of the voting at least seven days before the intended strike.

These requirements are mandatory, and the union’s failure to comply renders the strike illegal.17 The 15 to 30-
day cooling-off period is designed to afford the parties the opportunity to amicably resolve the dispute with
the assistance of the NCMB conciliator/mediator, while the seven-day strike ban is intended to give the DOLE
an opportunity to verify whether the projected strike really carries the imprimatur of the majority of the union
members.18
In the present case, the respondents fully satisfied the legal procedural requirements; a strike notice was filed
on March 9, 1995; a strike vote was reached on March 16, 1995; notification of the strike vote was filed with
the DOLE on March 17, 1995; and the actual strike was launched only on April 25, 1995.

Strike may be illegal for commission of prohibited acts

Despite the validity of the purpose of a strike and compliance with the procedural requirements, a strike may
still be held illegal where the means employed are illegal.19 The means become illegal when they come within
the prohibitions under Article 264(e) of the Labor Code which provides:

No person engaged in picketing shall commit any act of violence, coercion or intimidation or obstruct the free
ingress to or egress from the employer's premises for lawful purposes, or obstruct public thoroughfares.

Based on our examination of the evidence which the LA viewed differently from the NLRC and the CA, we
find the PILA strike illegal. We intervene and rule even on the evidentiary and factual issues of this case as
both the NLRC and the CA grossly misread the evidence, leading them to inordinately incorrect conclusions,
both factual and legal. While the strike undisputably had not been marred by actual violence and patent
intimidation, the picketing that respondent PILA officers and members undertook as part of their strike
activities effectively blocked the free ingress to and egress from PHIMCO’s premises, thus preventing non-
striking employees and company vehicles from entering the PHIMCO compound. In this manner, the picketers
violated Article 264(e) of the Labor Code.

The Evidence

We gather from the case record the following pieces of relevant evidence adduced in the compulsory
arbitration proceedings.20

For the Company

1. Pictures taken during the strike, showing that the respondents prevented free ingress to and egress from
the company premises;21

2. Affidavit of PHIMCO Human Resources Manager Francis Ferdinand Cinco, stating that he was one of the
employees prevented by the strikers from entering the PHIMCO premises;22

3. Affidavit of Cinco, identifying Erlinda Vazquez, Ricardo Sacristan, Leonida Catalan, Maximo Pedro, Nathaniela
R. Dimaculangan, Rodolfo Mojico, Romeo Caramanza, Reynaldo Ganitano, Alberto Basconcillo, and Ramon
Falcis as PILA officers;23

4. Affidavit of Cinco identifying other members of PILA;24

5. Folder 1, containing pictures taken during the strike identifying and showing Leonida Catalan, Renato Ramos,
Arsenio Zamora, Reynaldo Ganitano, Amelia Zamora, Angelito Dejan, Teresa Permocillo, and Francisco Dalisay
as the persons preventing Cinco and his group from entering the company premises;25

6. Folder 2, with pictures taken on May 30, 1995, showing Cinco, together with non-striking PHIMCO
employees, reporting for work but being refused entry by strikers Teofilo Manalili, Nathaniela Dimaculangan,
Bernando Cuadra, Maximo Pedro, Nicanor Ilagan, Julian Tuguin, Nemesio Mamonong, Abraham Caday, Ernesto
Rio, Benjamin Juan, Sr., Ramon Macaalay, Gerardo Feliciano, Alberto Basconcillo, Rodolfo Sanidad, Mariano
Rosales, Roger Caber, Angelito de Guzman, Angelito Balosa and Philip Garces who blocked the company gate;26
7. Folder 3, with pictures taken on May 30, 1995, showing the respondents denying free ingress to and egress
from the company premises;27

8. Folder 4, with pictures taken during the strike, showing that non-striking employees failed to enter the
company premises as a result of the respondents’ refusal to let them in;28

9. Affidavit of Joaquin Aguilar stating that the pictures presented by Cinco were taken during the strike;29

10. Pictures taken by Aguilar during the strike, showing non-striking employees being refused entry by the
respondents;30

11. Joint affidavit of Orlando Marfil and Rodolfo Digo, identifying the pictures they took during the strike,
showing that the respondents blocked ingress to and egress from the company premises;31 and,

12. Testimonies of PHIMCO employees Rodolfo Eva, Aguilar and Cinco, as well as those of PILA officers Maximo
Pedro and Leonida Catalan.

For the Respondents

1. Affidavit of Leonida Catalan, stating that the PILA strike complied with all the legal requirements, and the
strike/picket was conducted peacefully with no incident of any illegality;32

2. Affidavit of Maximo Pedro, stating that the strike/picket was conducted peacefully; the picket was always
moving with no acts of illegality having been committed during the strike;33

3. Certification of Police Station Commander Bienvenido de los Reyes that during the strike there was no report
of any untoward incident;34

4. Certification of Rev. Father Erick Adeviso of Dambanang Bayan Parish Church that the strike was peaceful
and without any untoward incident;35

5. Certification of Priest-In-Charge Angelito Fausto of the Philippine Independent Church in Punta, Santa Ana,
that the strike complied with all the requirements for a lawful strike, and the strikers conducted themselves in
a peaceful manner;36

6. Clearance issued by Punong Barangay Mario O. dela Rosa and Barangay Secretary Pascual Gesmundo, Jr.
that the strike from April 21 to July 7, 1995 was conducted in an orderly manner with no complaints filed;37and,

7. Testimonies at the compulsory arbitration proceedings.

In its resolution of December 29, 1998,38 the NLRC declared that "the string of proofs" the company presented
was "overwhelmingly counterbalanced by the numerous pieces of evidence adduced by respondents x x x all
depicting a common story that respondents put up a peaceful moving picket, and did not commit any illegal
acts x x x specifically obstructing the ingress to and egress from the company premises[.]"39

We disagree with this finding as the purported "peaceful moving picket" upon which the NLRC resolution was
anchored was not an innocuous picket, contrary to what the NLRC said it was; the picket, under the evidence
presented, did effectively obstruct the entry and exit points of the company premises on various occasions.

To strike is to withhold or to stop work by the concerted action of employees as a result of an industrial or
labor dispute.40 The work stoppage may be accompanied by picketing by the striking employees outside of the
company compound. While a strike focuses on stoppage of work, picketing focuses on publicizing the labor
dispute and its incidents to inform the public of what is happening in the company struck against. A picket
simply means to march to and from the employer’s premises, usually accompanied by the display of placards
and other signs making known the facts involved in a labor dispute.41 It is a strike activity separate and different
from the actual stoppage of work.

grievances,43 these rights are by no means absolute. Protected picketing does not extend to blocking ingress
to and egress from the company premises.44 That the picket was moving, was peaceful and was not attended
by actual violence may not free it from taints of illegality if the picket effectively blocked entry to and exit from
the company premises.

In this regard, PHIMCO employees Rodolfo Eva and Joaquin Aguilar, and the company’s Human Resources
Manager Francis Ferdinand Cinco testified during the compulsory arbitration hearings:

ATTY. REYES: this incident on May 22, 1995, when a coaster or bus attempted to enter PHIMCO compound,
you mentioned that it was refused entry. Why was this (sic) it refused entry?

WITNESS: Because at that time, there was a moving picket at the gate that is why the bus was not able to
enter.45

xxxx

Q: Despite this TRO, which was issued by the NLRC, were you allowed entry by the strikers?

A: We made several attempts to enter the compound, I remember on May 7, 1995, we tried to enter the
PHIMCO compound but we were not allowed entry.

Q: Aside from May 27, 1995, were there any other instances wherein you were not allowed entry at PHIMCO
compound?

A: On May 29, I recall I was riding with our Production Manager with the Pick-up. We tried to enter but we
were not allowed by the strikers.46

xxxx

ARBITER MAYOR: How did the strikers block the ingress of the company?

A: They hold around, joining hands, moving picket.47

xxxx

ARBITER MAYOR: Reform the question, and because of that moving picket conducted by the strikers, no
employees or vehicles can come in or go out of the premises?

A: None, sir.48

These accounts were confirmed by the admissions of respondent PILA officers Maximo Pedro and Leonida
Catalan that the strikers prevented non-striking employees from entering the company premises. According to
these union officers:

ATTY. CHUA: Mr. witness, do you recall an incident when a group of managers of PHIMCO, with several of the
monthly paid employees who tried to enter the PHIMCO compound during the strike?

MR. PEDRO: Yes, sir.

ATTY. CHUA: Can you tell us if these (sic) group of managers headed by Francis Cinco entered the compound
of PHIMCO on that day, when they tried to enter?

MR. PEDRO: No, sir. They were not able to enter.49

xxxx

ATTY. CHUA: Despite having been escorted by police Delos Reyes, you still did not give way, and instead
proceeded with your moving picket?

MR. PEDRO: Yes, sir.

ATTY. CHUA: In short, these people were not able to enter the premises of PHIMCO, Yes or No.

MR. PEDRO: Yes, sir. 50

xxxx

ATTY. CHUA: Madam witness, even if Major Delos Reyes instructed you to give way so as to allow the
employees and managers to enter the premises, you and your co-employees did not give way?

MS. CATALAN: No sir.

ATTY. CHUA: the managers and the employees were not able to enter the premises?

MS. CATALAN: Yes, sir.51

The NLRC resolution itself noted the above testimonial evidence, "all building up a scenario that the moving
picket put up by [the] respondents obstructed the ingress to and egress from the company premises[,]"52 yet
it ignored the clear import of the testimonies as to the true nature of the picket. Contrary to the NLRC
characterization that it was a "peaceful moving picket," it stood, in fact, as an obstruction to the company’s
points of ingress and egress.

Significantly, the testimonies adduced were validated by the photographs taken of the strike area, capturing
the strike in its various stages and showing how the strikers actually conducted the picket. While the picket
was moving, it was maintained so close to the company gates that it virtually constituted an obstruction,
especially when the strikers joined hands, as described by Aguilar, or were moving in circles, hand-to-shoulder,
as shown by the photographs, that, for all intents and purposes, blocked the free ingress to and egress from
the company premises. In fact, on closer examination, it could be seen that the respondents were conducting
the picket right at the company gates.53

The obstructive nature of the picket was aggravated by the placement of benches, with strikers standing on
top, directly in front of the open wing of the company gates, clearly obstructing the entry and exit points of the
company compound.54

With a virtual human blockade and real physical obstructions (benches and makeshift structures both outside
and inside the gates),55 it was pure conjecture on the part of the NLRC to say that "[t]he non-strikers and their
vehicles were x x x free to get in and out of the company compound undisturbed by the picket line."56 Notably,
aside from non-strikers who wished to report for work, company vehicles likewise could not enter and get out
of the factory because of the picket and the physical obstructions the respondents installed. The blockade went
to the point of causing the build up of traffic in the immediate vicinity of the strike area, as shown by
photographs.57 This, by itself, renders the picket a prohibited activity. Pickets may not aggressively interfere
with the right of peaceful ingress to and egress from the employer’s shop or obstruct public thoroughfares;
picketing is not peaceful where the sidewalk or entrance to a place of business is obstructed by picketers
parading around in a circle or lying on the sidewalk.58

What the records reveal belies the NLRC observation that "the evidence x x x tends to show that what
respondents actually did was walking or patrolling to and fro within the company vicinity and by word of mouth,
banner or placard, informing the public concerning the dispute."59

The "peaceful moving picket" that the NLRC noted, influenced apparently by the certifications (Mayor delos
Reyes, Fr. Adeviso, Fr. Fausto and Barangay Secretary Gesmundo presented in evidence by the respondents,
was "peaceful" only because of the absence of violence during the strike, but the obstruction of the entry and
exit points of the company premises caused by the respondents’ picket was by no means a "petty blocking act"
or an "insignificant obstructive act."60

As we have stated, while the picket was moving, the movement was in circles, very close to the gates, with the
strikers in a hand-to-shoulder formation without a break in their ranks, thus preventing non-striking workers
and vehicles from coming in and getting out. Supported by actual blocking benches and obstructions, what the
union demonstrated was a very persuasive and quietly intimidating strategy whose chief aim was to paralyze
the operations of the company, not solely by the work stoppage of the participating workers, but by excluding
the company officials and non-striking employees from access to and exit from the company premises. No
doubt, the strike caused the company operations considerable damage, as the NLRC itself recognized when it
ruled out the reinstatement of the dismissed strikers.61

Intimidation

Article 264(e) of the Labor Code tells us that picketing carried on with violence, coercion or intimidation is
unlawful.62 According to American jurisprudence, what constitutes unlawful intimidation depends on the
totality of the circumstances.63 Force threatened is the equivalent of force exercised. There may be unlawful
intimidation without direct threats or overt acts of violence. Words or acts which are calculated and intended
to cause an ordinary person to fear an injury to his person, business or property are equivalent to threats.64

The manner in which the respondent union officers and members conducted the picket in the present case
had created such an intimidating atmosphere that non-striking employees and even company vehicles did not
dare cross the picket line, even with police intervention. Those who dared cross the picket line were stopped.
The compulsory arbitration hearings bear this out.

Maximo Pedro, a PILA officer, testified, on July 30, 1997, that a group of PHIMCO managers led by Cinco,
together with several monthly-paid employees, tried to enter the company premises on May 27, 1995 with
police escort; even then, the picketers did not allow them to enter.65Leonida Catalan, another union officer,
testified that she and the other picketers did not give way despite the instruction of Police Major de los Reyes
to the picketers to allow the group to enter the company premises.66 (To be sure, police intervention and
participation are, as a rule, prohibited acts in a strike, but we note this intervention solely as indicators of how
far the union and its members have gone to block ingress to and egress from the company premises.)

Further, PHIMCO employee Rodolfo Eva testified that on May 22, 1995, a company coaster or bus attempted
to enter the PHIMCO compound but it was refused entry by the "moving picket."67 Cinco, the company
personnel manager, also testified that on May 27, 1995, when the NLRC TRO was in force, he and other
employees tried to enter the PHIMCO compound, but they were not allowed entry; on May 29, 1995, Cinco
was with the PHIMCO production manager in a pick-up and they tried to enter the company compound but,
again, they were not allowed by the strikers.68 Another employee, Joaquin Aguilar, when asked how the strikers
blocked the ingress of the company, replied that the strikers "hold around, joining hands, moving picket" and,
because of the moving picket, no employee or vehicle could come in and go out of the premises.69

The evidence adduced in the present case cannot be ignored. On balance, it supports the company’s
submission that the respondent PILA officers and members committed acts during the strike prohibited under
Article 264(e) of the Labor Code. The testimonies of non-striking employees, who were prevented from gaining
entry into the company premises, and confirmed no less by two officers of the union, are on record.

The photographs of the strike scene, also on record, depict the true character of the picket; while moving, it,
in fact, constituted a human blockade, obstructing free ingress to and egress from the company premises,
reinforced by benches planted directly in front of the company gates. The photographs do not lie – these
photographs clearly show that the picketers were going in circles, without any break in their ranks or closely
bunched together, right in front of the gates. Thus, company vehicles were unable to enter the company
compound, and were backed up several meters into the street leading to the company gates.

Despite all these clear pieces of evidence of illegal obstruction, the NLRC looked the other way and chose not
to see the unmistakable violations of the law on strikes by the union and its respondent officers and members.
Needless to say, while the law protects the rights of the laborer, it authorizes neither the oppression nor the
destruction of the employer.70 For grossly ignoring the evidence before it, the NLRC committed grave abuse of
discretion; for supporting these gross NLRC errors, the CA committed its own reversible error.

Liabilities of union officers and members

In the determination of the liabilities of the individual respondents, the applicable provision is Article 264(a) of
the Labor Code:

Art. 264. Prohibited activities. – (a) x x x

xxxx

Any union officer who knowingly participates in an illegal strike and any worker or union officer who knowingly
participates in the commission of illegal acts during a strike may be declared to have lost his employment
status: Provided, That mere participation of a worker in a lawful strike shall not constitute sufficient ground for
termination of his employment, even if a replacement had been hired by the employer during such lawful
strike.

We explained in Samahang Manggagawa sa Sulpicio Lines, Inc.-NAFLU v. Sulpicio Lines, Inc.71 that the effects
of illegal strikes, outlined in Article 264 of the Labor Code, make a distinction between participating workers
and union officers. The services of an ordinary striking worker cannot be terminated for mere participation in
an illegal strike; proof must be adduced showing that he or she committed illegal acts during the strike. The
services of a participating union officer, on the other hand, may be terminated, not only when he actually
commits an illegal act during a strike, but also if he knowingly participates in an illegal strike.72

In all cases, the striker must be identified. But proof beyond reasonable doubt is not required; substantial
evidence, available under the attendant circumstances, suffices to justify the imposition of the penalty of
dismissal on participating workers and union officers as above described.73

In the present case, respondents Erlinda Vazquez, Ricardo Sacristan, Leonida Catalan, Maximo Pedro,
Nathaniela Dimaculangan, Rodolfo Mojico, Romeo Caramanza, Reynaldo Ganitano, Alberto Basconcillo, and
Ramon Falcis stand to be dismissed as participating union officers, pursuant to Article 264(a), paragraph 3, of
the Labor Code. This provision imposes the penalty of dismissal on "any union officer who knowingly
participates in an illegal strike." The law grants the employer the option of declaring a union officer who
participated in an illegal strike as having lost his employment.74

PHIMCO was able to individually identify the participating union members thru the affidavits of PHIMCO
employees Martimer Panis75 and Rodrigo A. Ortiz,76 and Personnel Manager Francis Ferdinand Cinco,77 and the
photographs78 of Joaquin Aguilar. Identified were respondents Angelita Balosa, Danilo Banaag, Abraham
Caday, Alfonso Claudio, Francisco Dalisay, Angelito Dejan, Philip Garces, Nicanor Ilagan, Florencio Libongcogon,
Nemesio Mamonong, Teofilo Manalili, Alfredo Pearson, Mario Perea, Renato Ramos, Mariano Rosales, Pablo
Sarmiento, Rodolfo Tolentino, Felipe Villareal, Arsenio Zamora, Danilo Baltazar, Roger Caber, Reynaldo
Camarin, Bernardo Cuadra, Angelito de Guzman, Gerardo Feliciano, Alex Ibañez, Benjamin Juan, Sr., Ramon
Macaalay, Gonzalo Manalili, Raul Miciano, Hilario Peña, Teresa Permocillo, Ernesto Rio, Rodolfo Sanidad, Rafael
Sta. Ana, Julian Tuguin and Amelia Zamora as the union members who actively participated in the strike by
blocking the ingress to and egress from the company premises and preventing the passage of non-striking
employees. For participating in illegally blocking ingress to and egress from company premises, these union
members stand to be dismissed for their illegal acts in the conduct of the union’s strike.

PHIMCO failed to observe due process

We find, however, that PHIMCO violated the requirements of due process of the Labor Code when it dismissed
the respondents.

Under Article 277(b)79 of the Labor Code, the employer must send the employee, who is about to be
terminated, a written notice stating the cause/s for termination and must give the employee the opportunity
to be heard and to defend himself.

We explained in Suico v. National Labor Relations Commission,80 that Article 277(b), in relation to Article 264(a)
and (e) of the Labor Code recognizes the right to due process of all workers, without distinction as to the cause
of their termination, even if the cause was their supposed involvement in strike-related violence prohibited
under Article 264(a) and (e) of the Labor Code.

To meet the requirements of due process in the dismissal of an employee, an employer must furnish him or
her with two (2) written notices: (1) a written notice specifying the grounds for termination and giving the
employee a reasonable opportunity to explain his side and (2) another written notice indicating that, upon due
consideration of all circumstances, grounds have been established to justify the employer's decision to dismiss
the employee.81

In the present case, PHIMCO sent a letter, on June 23, 1995, to thirty-six (36) union members, generally
directing them to explain within twenty-four (24) hours why they should not be dismissed for the illegal acts
they committed during the strike; three days later, or on June 26, 1995, the thirty-six (36) union members were
informed of their dismissal from employment.1avvphi1

We do not find this company procedure to be sufficient compliance with the due process requirements that
the law guards zealously. It does not appear from the evidence that the union officers were specifically
informed of the charges against them and given the chance to explain and present their side. Without the
specifications they had to respond to, they were arbitrarily separated from work in total disregard of their
rights to due process and security of tenure.

As to the union members, only thirty-six (36) of the thirty-seven (37) union members included in this case were
notified of the charges against them thru the letters dated June 23, 1995, but they were not given an ample
opportunity to be heard and to defend themselves; the notice of termination came on June 26, 1995, only
three (3) days from the first notice - a perfunctory and superficial attempt to comply with the notice
requirement under the Labor Code. The short interval of time between the first and second notice speaks for
itself under the circumstances of this case; mere token recognition of the due process requirements was made,
indicating the company’s intent to dismiss the union members involved, without any meaningful resort to the
guarantees accorded them by law.

Under the circumstances, where evidence sufficient to justify the penalty of dismissal has been adduced but
the workers concerned were not accorded their essential due process rights, our ruling in Agabon v.
NLRC82 finds full application; the employer, despite the just cause for dismissal, must pay the dismissed workers
nominal damages as indemnity for the violation of the workers’ right to statutory due process. Prevailing
jurisprudence sets the amount of nominal damages at ₱30,000.00, which same amount we find sufficient and
appropriate in the present case.83

WHEREFORE, in light of all the foregoing, we hereby REVERSE and SET ASIDE the decision dated February 10,
2004 and the resolution dated December 12, 2005 of the Court of Appeals in CA-G.R. SP No. 70336, upholding
the rulings of the National Labor Relations Commission.

The Decision, dated February 4, 1998, of Labor Arbiter Jovencio Ll. Mayor should prevail and is REINSTATED
with the MODIFICATION that Erlinda Vazquez, Ricardo Sacristan, Leonida Catalan, Maximo Pedro, Nathaniela
Dimaculangan, Rodolfo Mojico, Romeo Caramanza, Reynaldo Ganitano, Alberto Basconcillo, Ramon Falcis,
Angelita Balosa, Danilo Banaag, Abraham Caday, Alfonso Claudio, Francisco Dalisay, Angelito Dejan, Philip
Garces, Nicanor Ilagan, Florencio Libongcogon, Nemesio Mamonong, Teofilo Manalili, Alfredo Pearson, Mario
Perea, Renato Ramos, Mariano Rosales, Pablo Sarmiento, Rodolfo Tolentino, Felipe Villareal, Arsenio Zamora,
Danilo Baltazar, Roger Caber, Reynaldo Camarin, Bernardo Cuadra, Angelito de Guzman, Gerardo Feliciano,
Alex Ibañez, Benjamin Juan, Sr., Ramon Macaalay, Gonzalo Manalili, Raul Miciano, Hilario Peña, Teresa
Permocillo, Ernesto Rio, Rodolfo Sanidad, Rafael Sta. Ana, Julian Tuguin, and Amelia Zamora are each awarded
nominal damages in the amount of ₱30,000.00. No pronouncement as to costs.

SO ORDERED.

G.R. No. 164301 August 10, 2010

BANK OF THE PHILIPPINE ISLANDS, Petitioner,

vs.
BPI EMPLOYEES UNION-DAVAO CHAPTER-FEDERATION OF UNIONS IN BPI UNIBANK, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

May a corporation invoke its merger with another corporation as a valid ground to exempt its "absorbed
employees" from the coverage of a union shop clause contained in its existing Collective Bargaining Agreement
(CBA) with its own certified labor union? That is the question we shall endeavor to answer in this petition for
review filed by an employer after the Court of Appeals decided in favor of respondent union, which is the
employees’ recognized collective bargaining representative.
At the outset, we should call to mind the spirit and the letter of the Labor Code provisions on union security
clauses, specifically Article 248 (e), which states, "x x x Nothing in this Code or in any other law shall stop the
parties from requiring membership in a recognized collective bargaining agent as a condition for employment,
except those employees who are already members of another union at the time of the signing of the collective
bargaining agreement."1 This case which involves the application of a collective bargaining agreement with a
union shop clause should be resolved principally from the standpoint of the clear provisions of our labor laws,
and the express terms of the CBA in question, and not by inference from the general consequence of the
merger of corporations under the Corporation Code, which obviously does not deal with and, therefore, is
silent on the terms and conditions of employment in corporations or juridical entities.

This issue must be resolved NOW, instead of postponing it to a future time when the CBA is renegotiated as
suggested by the Honorable Justice Arturo D. Brion because the same issue may still be resurrected in the
renegotiation if the absorbed employees insist on their privileged status of being exempt from any union shop
clause or any variant thereof.

We find it significant to note that it is only the employer, Bank of the Philippine Islands (BPI), that brought the
case up to this Court via the instant petition for review; while the employees actually involved in the case did
not pursue the same relief, but had instead chosen in effect to acquiesce to the decision of the Court of Appeals
which effectively required them to comply with the union shop clause under the existing CBA at the time of
the merger of BPI with Far East Bank and Trust Company (FEBTC), which decision had already become final and
executory as to the aforesaid employees. By not appealing the decision of the Court of Appeals, the aforesaid
employees are bound by the said Court of Appeals’ decision to join BPI’s duly certified labor union. In view of
the apparent acquiescence of the affected FEBTC employees in the Court of Appeals’ decision, BPI should not
have pursued this petition for review. However, even assuming that BPI may do so, the same still cannot
prosper.

What is before us now is a petition for review under Rule 45 of the Rules of Court of the Decision2 dated
September 30, 2003 of the Court of Appeals, as reiterated in its Resolution3 of June 9, 2004, reversing and
setting aside the Decision4 dated November 23, 2001 of Voluntary Arbitrator Rosalina Letrondo-Montejo, in
CA-G.R. SP No. 70445, entitled BPI Employees Union-Davao Chapter-Federation of Unions in BPI Unibank v.
Bank of the Philippine Islands, et al.

The antecedent facts are as follows:

On March 23, 2000, the Bangko Sentral ng Pilipinas approved the Articles of Merger executed on January 20,
2000 by and between BPI, herein petitioner, and FEBTC.5 This Article and Plan of Merger was approved by the
Securities and Exchange Commission on April 7, 2000.6

Pursuant to the Article and Plan of Merger, all the assets and liabilities of FEBTC were transferred to and
absorbed by BPI as the surviving corporation. FEBTC employees, including those in its different branches across
the country, were hired by petitioner as its own employees, with their status and tenure recognized and
salaries and benefits maintained.

Respondent BPI Employees Union-Davao Chapter - Federation of Unions in BPI Unibank (hereinafter the
"Union," for brevity) is the exclusive bargaining agent of BPI’s rank and file employees in Davao City. The former
FEBTC rank-and-file employees in Davao City did not belong to any labor union at the time of the merger. Prior
to the effectivity of the merger, or on March 31, 2000, respondent Union invited said FEBTC employees to a
meeting regarding the Union Shop Clause (Article II, Section 2) of the existing CBA between petitioner BPI and
respondent Union.7
The parties both advert to certain provisions of the existing CBA, which are quoted below:

ARTICLE I

Section 1. Recognition and Bargaining Unit – The BANK recognizes the UNION as the sole and exclusive
collective bargaining representative of all the regular rank and file employees of the Bank offices in Davao City.

Section 2. Exclusions

Section 3. Additional Exclusions

Section 4. Copy of Contract

ARTICLE II

Section 1. Maintenance of Membership – All employees within the bargaining unit who are members of the
Union on the date of the effectivity of this Agreement as well as employees within the bargaining unit who
subsequently join or become members of the Union during the lifetime of this Agreement shall as a condition
of their continued employment with the Bank, maintain their membership in the Union in good standing.

Section 2. Union Shop - New employees falling within the bargaining unit as defined in Article I of this
Agreement, who may hereafter be regularly employed by the Bank shall, within thirty (30) days after they
become regular employees, join the Union as a condition of their continued employment. It is understood that
membership in good standing in the Union is a condition of their continued employment with the
Bank.8 (Emphases supplied.)

After the meeting called by the Union, some of the former FEBTC employees joined the Union, while others
refused. Later, however, some of those who initially joined retracted their membership.9

Respondent Union then sent notices to the former FEBTC employees who refused to join, as well as those who
retracted their membership, and called them to a hearing regarding the matter. When these former FEBTC
employees refused to attend the hearing, the president of the Union requested BPI to implement the Union
Shop Clause of the CBA and to terminate their employment pursuant thereto.10

After two months of management inaction on the request, respondent Union informed petitioner BPI of its
decision to refer the issue of the implementation of the Union Shop Clause of the CBA to the Grievance
Committee. However, the issue remained unresolved at this level and so it was subsequently submitted for
voluntary arbitration by the parties.11

Voluntary Arbitrator Rosalina Letrondo-Montejo, in a Decision12 dated November 23, 2001, ruled in favor of
petitioner BPI’s interpretation that the former FEBTC employees were not covered by the Union Security Clause
of the CBA between the Union and the Bank on the ground that the said employees were not new employees
who were hired and subsequently regularized, but were absorbed employees "by operation of law" because
the "former employees of FEBTC can be considered assets and liabilities of the absorbed corporation." The
Voluntary Arbitrator concluded that the former FEBTC employees could not be compelled to join the Union, as
it was their constitutional right to join or not to join any organization.

Respondent Union filed a Motion for Reconsideration, but the Voluntary Arbitrator denied the same in an
Order dated March 25, 2002.13

Dissatisfied, respondent then appealed the Voluntary Arbitrator’s decision to the Court of Appeals. In the
herein assailed Decision dated September 30, 2003, the Court of Appeals reversed and set aside the Decision
of the Voluntary Arbitrator.14 Likewise, the Court of Appeals denied herein petitioner’s Motion for
Reconsideration in a Resolution dated June 9, 2004.

The Court of Appeals pertinently ruled in its Decision:

A union-shop clause has been defined as a form of union security provision wherein non-members may be
hired, but to retain employment must become union members after a certain period.

There is no question as to the existence of the union-shop clause in the CBA between the petitioner-union and
the company. The controversy lies in its application to the "absorbed" employees.

This Court agrees with the voluntary arbitrator that the ABSORBED employees are distinct and different from
NEW employees BUT only in so far as their employment service is concerned. The distinction ends there. In the
case at bar, the absorbed employees’ length of service from its former employer is tacked with their
employment with BPI. Otherwise stated, the absorbed employees service is continuous and there is no gap in
their service record.

This Court is persuaded that the similarities of "new" and "absorbed" employees far outweighs
the distinction between them. The similarities lies on the following, to wit: (a) they have a new employer; (b)
new working conditions; (c) new terms of employment and; (d) new company policy to follow. As such, they
should be considered as "new" employees for purposes of applying the provisions of the CBA regarding the
"union-shop" clause.

To rule otherwise would definitely result to a very awkward and unfair situation wherein the "absorbed"
employees shall be in a different if not, better situation than the existing BPI employees. The existing BPI
employees by virtue of the "union-shop" clause are required to pay the monthly union dues, remain as
members in good standing of the union otherwise, they shall be terminated from the company, and other
union-related obligations. On the other hand, the "absorbed" employees shall enjoy the "fruits of labor" of the
petitioner-union and its members for nothing in exchange. Certainly, this would disturb industrial peace in the
company which is the paramount reason for the existence of the CBA and the union.

The voluntary arbitrator’s interpretation of the provisions of the CBA concerning the coverage of the "union-
shop" clause is at war with the spirit and the rationale why the Labor Code itself allows the existence of such
provision.

The Supreme Court in the case of Manila Mandarin Employees Union vs. NLRC (G.R. No. 76989, September 29,
1987) rule, to quote:

"This Court has held that a valid form of union security, and such a provision in a collective bargaining
agreement is not a restriction of the right of freedom of association guaranteed by the Constitution.

A closed-shop agreement is an agreement whereby an employer binds himself to hire only members of the
contracting union who must continue to remain members in good standing to keep their jobs. It is "THE MOST
PRIZED ACHIEVEMENT OF UNIONISM." IT ADDS MEMBERSHIP AND COMPULSORY DUES. By holding out to
loyal members a promise of employment in the closed-shop, it wields group solidarity." (Emphasis supplied)

Hence, the voluntary arbitrator erred in construing the CBA literally at the expense of industrial peace in the
company.
With the foregoing ruling from this Court, necessarily, the alternative prayer of the petitioner to require the
individual respondents to become members or if they refuse, for this Court to direct respondent BPI to dismiss
them, follows.15

Hence, petitioner’s present recourse, raising the following issues:

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE FORMER FEBTC EMPLOYEES
SHOULD BE CONSIDERED ‘NEW’ EMPLOYEES OF BPI FOR PURPOSES OF APPLYING THE UNION SHOP CLAUSE OF
THE CBA

II

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE VOLUNTARY ARBITRATOR’S
INTERPRETATION OF THE COVERAGE OF THE UNION SHOP CLAUSE IS "AT WAR WITH THE SPIRIT AND THE
RATIONALE WHY THE LABOR CODE ITSELF ALLOWS THE EXISTENCE OF SUCH PROVISION"16

In essence, the sole issue in this case is whether or not the former FEBTC employees that were absorbed by
petitioner upon the merger between FEBTC and BPI should be covered by the Union Shop Clause found in the
existing CBA between petitioner and respondent Union.

Petitioner is of the position that the former FEBTC employees are not new employees of BPI for purposes of
applying the Union Shop Clause of the CBA, on this note, petitioner points to Section 2, Article II of the CBA,
which provides:

New employees falling within the bargaining unit as defined in Article I of this Agreement, who may hereafter
be regularly employed by the Bank shall, within thirty (30) days after they become regular employees, join the
Union as a condition of their continued employment. It is understood that membership in good standing in the
Union is a condition of their continued employment with the Bank.17 (Emphases supplied.)

Petitioner argues that the term "new employees" in the Union Shop Clause of the CBA is qualified by the
phrases "who may hereafter be regularly employed" and "after they become regular employees" which led
petitioner to conclude that the "new employees" referred to in, and contemplated by, the Union Shop Clause
of the CBA were only those employees who were "new" to BPI, on account of having been hired initially on a
temporary or probationary status for possible regular employment at some future date. BPI argues that the
FEBTC employees absorbed by BPI cannot be considered as "new employees" of BPI for purposes of applying
the Union Shop Clause of the CBA.18

According to petitioner, the contrary interpretation made by the Court of Appeals of this particular CBA
provision ignores, or even defies, what petitioner assumes as its clear meaning and scope which allegedly
contradicts the Court’s strict and restrictive enforcement of union security agreements.

We do not agree.

Section 2, Article II of the CBA is silent as to how one becomes a "regular employee" of the BPI for the first
time. There is nothing in the said provision which requires that a "new" regular employee first undergo a
temporary or probationary status before being deemed as such under the union shop clause of the CBA.

"Union security" is a generic term which is applied to and comprehends "closed shop," "union shop,"
"maintenance of membership" or any other form of agreement which imposes upon employees the obligation
to acquire or retain union membership as a condition affecting employment. There is union shop when all new
regular employees are required to join the union within a certain period for their continued employment. There
is maintenance of membership shop when employees, who are union members as of the effective date of the
agreement, or who thereafter become members, must maintain union membership as a condition for
continued employment until they are promoted or transferred out of the bargaining unit or the agreement is
terminated. A closed-shop, on the other hand, may be defined as an enterprise in which, by agreement
between the employer and his employees or their representatives, no person may be employed in any or
certain agreed departments of the enterprise unless he or she is, becomes, and, for the duration of the
agreement, remains a member in good standing of a union entirely comprised of or of which the employees in
interest are a part.19

In the case of Liberty Flour Mills Employees v. Liberty Flour Mills, Inc.,20 we ruled that:

It is the policy of the State to promote unionism to enable the workers to negotiate with management on
the same level and with more persuasiveness than if they were to individually and independently bargain
for the improvement of their respective conditions. To this end, the Constitution guarantees to them the
rights "to self-organization, collective bargaining and negotiations and peaceful concerted actions including the
right to strike in accordance with law." There is no question that these purposes could be thwarted if every
worker were to choose to go his own separate way instead of joining his co-employees in planning collective
action and presenting a united front when they sit down to bargain with their employers. It is for this reason
that the law has sanctioned stipulations for the union shop and the closed shop as a means of encouraging the
workers to join and support the labor union of their own choice as their representative in the negotiation of
their demands and the protection of their interest vis-à-vis the employer. (Emphasis ours.)

In other words, the purpose of a union shop or other union security arrangement is to guarantee the continued
existence of the union through enforced membership for the benefit of the workers.

All employees in the bargaining unit covered by a Union Shop Clause in their CBA with management are subject
to its terms. However, under law and jurisprudence, the following kinds of employees are exempted from its
coverage, namely, employees who at the time the union shop agreement takes effect are bona fide members
of a religious organization which prohibits its members from joining labor unions on religious
grounds;21 employees already in the service and already members of a union other than the majority at the
time the union shop agreement took effect;22 confidential employees who are excluded from the rank and file
bargaining unit;23 and employees excluded from the union shop by express terms of the agreement.

When certain employees are obliged to join a particular union as a requisite for continued employment, as in
the case of Union Security Clauses, this condition is a valid restriction of the freedom or right not to join any
labor organization because it is in favor of unionism. This Court, on occasion, has even held that a union security
clause in a CBA is not a restriction of the right of freedom of association guaranteed by the Constitution.24

Moreover, a closed shop agreement is an agreement whereby an employer binds himself to hire only members
of the contracting union who must continue to remain members in good standing to keep their jobs. It is "the
most prized achievement of unionism." It adds membership and compulsory dues. By holding out to loyal
members a promise of employment in the closed shop, it wields group solidarity.25

Indeed, the situation of the former FEBTC employees in this case clearly does not fall within the first three
exceptions to the application of the Union Shop Clause discussed earlier. No allegation or evidence of religious
exemption or prior membership in another union or engagement as a confidential employee was presented by
both parties. The sole category therefore in which petitioner may prove its claim is the fourth recognized
exception or whether the former FEBTC employees are excluded by the express terms of the existing CBA
between petitioner and respondent.

To reiterate, petitioner insists that the term "new employees," as the same is used in the Union Shop Clause of
the CBA at issue, refers only to employees hired by BPI as non-regular employees who later qualify for regular
employment and become regular employees, and not those who, as a legal consequence of a merger, are
allegedly automatically deemed regular employees of BPI. However, the CBA does not make a distinction as to
how a regular employee attains such a status. Moreover, there is nothing in the Corporation Law and the
merger agreement mandating the automatic employment as regular employees by the surviving corporation
in the merger.

It is apparent that petitioner hinges its argument that the former FEBTC employees were absorbed by BPI
merely as a legal consequence of a merger based on the characterization by the Voluntary Arbiter of these
absorbed employees as included in the "assets and liabilities" of the dissolved corporation - assets because
they help the Bank in its operation and liabilities because redundant employees may be terminated and
company benefits will be paid to them, thus reducing the Bank’s financial status. Based on this ratiocination,
she ruled that the same are not new employees of BPI as contemplated by the CBA at issue, noting that the
Certificate of Filing of the Articles of Merger and Plan of Merger between FEBTC and BPI stated that "x x x the
entire assets and liabilities of FAR EASTERN BANK & TRUST COMPANY will be transferred to and absorbed by
the BANK OF THE PHILIPPINE ISLANDS x x x (underlining supplied)."26 In sum, the Voluntary Arbiter upheld the
reasoning of petitioner that the FEBTC employees became BPI employees by "operation of law" because they
are included in the term "assets and liabilities."

Absorbed FEBTC Employees are Neither Assets nor Liabilities

In legal parlance, however, human beings are never embraced in the term "assets and liabilities." Moreover,
BPI’s absorption of former FEBTC employees was neither by operation of law nor by legal consequence of
contract. There was no government regulation or law that compelled the merger of the two banks or the
absorption of the employees of the dissolved corporation by the surviving corporation. Had there been such
law or regulation, the absorption of employees of the non-surviving entities of the merger would have been
mandatory on the surviving corporation.27 In the present case, the merger was voluntarily entered into by both
banks presumably for some mutually acceptable consideration. In fact, the Corporation Code does not also
mandate the absorption of the employees of the non-surviving corporation by the surviving corporation in the
case of a merger. Section 80 of the Corporation Code provides:

SEC. 80. Effects of merger or consolidation. – The merger or consolidation, as provided in the preceding sections
shall have the following effects:

1. The constituent corporations shall become a single corporation which, in case of merger, shall be the
surviving corporation designated in the plan of merger; and, in case of consolidation, shall be the consolidated
corporation designated in the plan of consolidation;

2. The separate existence of the constituent corporations shall cease, except that of the surviving or the
consolidated corporation;

3. The surviving or the consolidated corporation shall possess all the rights, privileges, immunities and powers
and shall be subject to all the duties and liabilities of a corporation organized under this Code;

4. The surviving or the consolidated corporation shall thereupon and thereafter possess all the rights,
privileges, immunities and franchises of each of the constituent corporations; and all property, real or personal,
and all receivables due on whatever account, including subscriptions to shares and other choses in action, and
all and every other interest of, or belonging to, or due to each constituent corporation, shall be taken and
deemed to be transferred to and vested in such surviving or consolidated corporation without further act or
deed; and

5. The surviving or the consolidated corporation shall be responsible and liable for all the liabilities and
obligations of each of the constituent corporations in the same manner as if such surviving or consolidated
corporation had itself incurred such liabilities or obligations; and any claim, action or proceeding pending by or
against any of such constituent corporations may be prosecuted by or against the surviving or consolidated
corporation, as the case may be. Neither the rights of creditors nor any lien upon the property of any of such
constituent corporations shall be impaired by such merger or consolidated.

Significantly, too, the Articles of Merger and Plan of Merger dated April 7, 2000 did not contain any specific
stipulation with respect to the employment contracts of existing personnel of the non-surviving entity which is
FEBTC. Unlike the Voluntary Arbitrator, this Court cannot uphold the reasoning that the general stipulation
regarding transfer of FEBTC assets and liabilities to BPI as set forth in the Articles of Merger necessarily includes
the transfer of all FEBTC employees into the employ of BPI and neither BPI nor the FEBTC employees allegedly
could do anything about it. Even if it is so, it does not follow that the absorbed employees should not be
subject to the terms and conditions of employment obtaining in the surviving corporation.

The rule is that unless expressly assumed, labor contracts such as employment contracts and collective
bargaining agreements are not enforceable against a transferee of an enterprise, labor contracts being in
personam, thus binding only between the parties. A labor contract merely creates an action in personam and
does not create any real right which should be respected by third parties. This conclusion draws its force from
the right of an employer to select his employees and to decide when to engage them as protected under our
Constitution, and the same can only be restricted by law through the exercise of the police power.28

Furthermore, this Court believes that it is contrary to public policy to declare the former FEBTC employees as
forming part of the assets or liabilities of FEBTC that were transferred and absorbed by BPI in the Articles of
Merger. Assets and liabilities, in this instance, should be deemed to refer only to property rights and obligations
of FEBTC and do not include the employment contracts of its personnel. A corporation cannot unilaterally
transfer its employees to another employer like chattel. Certainly, if BPI as an employer had the right to choose
who to retain among FEBTC’s employees, FEBTC employees had the concomitant right to choose not to be
absorbed by BPI. Even though FEBTC employees had no choice or control over the merger of their employer
with BPI, they had a choice whether or not they would allow themselves to be absorbed by BPI. Certainly
nothing prevented the FEBTC’s employees from resigning or retiring and seeking employment elsewhere
instead of going along with the proposed absorption.

Employment is a personal consensual contract and absorption by BPI of a former FEBTC employee without the
consent of the employee is in violation of an individual’s freedom to contract. It would have been a different
matter if there was an express provision in the articles of merger that as a condition for the merger, BPI was
being required to assume all the employment contracts of all existing FEBTC employees with the conformity of
the employees. In the absence of such a provision in the articles of merger, then BPI clearly had the business
management decision as to whether or not employ FEBTC’s employees. FEBTC employees likewise retained
the prerogative to allow themselves to be absorbed or not; otherwise, that would be tantamount to involuntary
servitude.

There appears to be no dispute that with respect to FEBTC employees that BPI chose not to employ or FEBTC
employees who chose to retire or be separated from employment instead of "being absorbed," BPI’s assumed
liability to these employees pursuant to the merger is FEBTC’s liability to them in terms of separation
pay,29retirement pay30 or other benefits that may be due them depending on the circumstances.

Legal Consequences of Mergers

Although not binding on this Court, American jurisprudence on the consequences of voluntary mergers on the
right to employment and seniority rights is persuasive and illuminating. We quote the following pertinent
discussion from the American Law Reports:

Several cases have involved the situation where as a result of mergers, consolidations, or shutdowns, one
group of employees, who had accumulated seniority at one plant or for one employer, finds that their jobs
have been discontinued except to the extent that they are offered employment at the place or by the employer
where the work is to be carried on in the future. Such cases have involved the question whether such
transferring employees should be entitled to carry with them their accumulated seniority or whether they are
to be compelled to start over at the bottom of the seniority list in the "new" job. It has been recognized in
some cases that the accumulated seniority does not survive and cannot be transferred to the "new" job.

In Carver v Brien (1942) 315 Ill App 643, 43 NE2d 597, the shop work of three formerly separate railroad
corporations, which had previously operated separate facilities, was consolidated in the shops of one of the
roads. Displaced employees of the other two roads were given preference for the new jobs created in the shops
of the railroad which took over the work. A controversy arose between the employees as to whether the
displaced employees were entitled to carry with them to the new jobs the seniority rights they had
accumulated with their prior employers, that is, whether the rosters of the three corporations, for seniority
purposes, should be "dovetailed" or whether the transferring employees should go to the bottom of the roster
of their new employer. Labor representatives of the various systems involved attempted to work out an
agreement which, in effect, preserved the seniority status obtained in the prior employment on other roads,
and the action was for specific performance of this agreement against a demurring group of the original
employees of the railroad which was operating the consolidated shops. The relief sought was denied, the court
saying that, absent some specific contract provision otherwise, seniority rights were ordinarily limited to the
employment in which they were earned, and concluding that the contract for which specific performance was
sought was not such a completed and binding agreement as would support such equitable relief, since the
railroad, whose concurrence in the arrangements made was essential to their effectuation, was not a party to
the agreement.

Where the provisions of a labor contract provided that in the event that a trucker absorbed the business of
another private contractor or common carrier, or was a party to a merger of lines, the seniority of the
employees absorbedor affected thereby should be determined by mutual agreement between the trucker and
the unions involved, it was held in Moore v International Brotherhood of Teamsters, etc. (1962, Ky) 356 SW2d
241, that the trucker was not required to absorb the affected employees as well as the business, the court
saying that they could find no such meaning in the above clause, stating that it dealt only with seniority, and
not with initial employment. Unless and until the absorbing company agreed to take the employees of the
company whose business was being absorbed, no seniority problem was created, said the court, hence the
provision of the contract could have no application. Furthermore, said the court, it did not require that the
absorbing company take these employees, but only that if it did take them the question of seniority between
the old and new employees would be worked out by agreement or else be submitted to the grievance
procedure.31 (Emphasis ours.)

Indeed, from the tenor of local and foreign authorities, in voluntary mergers, absorption of the dissolved
corporation’s employees or the recognition of the absorbed employees’ service with their previous employer
may be demanded from the surviving corporation if required by provision of law or contract. The dissent of
Justice Arturo D. Brion tries to make a distinction as to the terms and conditions of employment of the absorbed
employees in the case of a corporate merger or consolidation which will, in effect, take away from corporate
management the prerogative to make purely business decisions on the hiring of employees or will give it an
excuse not to apply the CBA in force to the prejudice of its own employees and their recognized collective
bargaining agent. In this regard, we disagree with Justice Brion.

Justice Brion takes the position that because the surviving corporation continues the personality of the
dissolved corporation and acquires all the latter’s rights and obligations, it is duty-bound to absorb the
dissolved corporation’s employees, even in the absence of a stipulation in the plan of merger. He proposes that
this interpretation would provide the necessary protection to labor as it spares workers from being "left in legal
limbo."

However, there are instances where an employer can validly discontinue or terminate the employment of an
employee without violating his right to security of tenure. Among others, in case of redundancy, for example,
superfluous employees may be terminated and such termination would be authorized under Article 283 of the
Labor Code.32

Moreover, assuming for the sake of argument that there is an obligation to hire or absorb all employees of the
non-surviving corporation, there is still no basis to conclude that the terms and conditions of employment
under a valid collective bargaining agreement in force in the surviving corporation should not be made to apply
to the absorbed employees.

The Corporation Code and the Subject Merger Agreement are Silent on Efficacy, Terms and Conditions of
Employment Contracts

The lack of a provision in the plan of merger regarding the transfer of employment contracts to the surviving
corporation could have very well been deliberate on the part of the parties to the merger, in order to grant the
surviving corporation the freedom to choose who among the dissolved corporation’s employees to retain, in
accordance with the surviving corporation’s business needs. If terminations, for instance due to redundancy or
labor-saving devices or to prevent losses, are done in good faith, they would be valid. The surviving corporation
too is duty-bound to protect the rights of its own employees who may be affected by the merger in terms of
seniority and other conditions of their employment due to the merger. Thus, we are not convinced that in the
absence of a stipulation in the merger plan the surviving corporation was compelled, or may be judicially
compelled, to absorb all employees under the same terms and conditions obtaining in the dissolved
corporation as the surviving corporation should also take into consideration the state of its business and its
obligations to its own employees, and to their certified collective bargaining agent or labor union.

Even assuming we accept Justice Brion’s theory that in a merger situation the surviving corporation should be
compelled to absorb the dissolved corporation’s employees as a legal consequence of the merger and as a
social justice consideration, it bears to emphasize his dissent also recognizes that the employee may choose to
end his employment at any time by voluntarily resigning. For the employee to be "absorbed" by BPI, it requires
the employees’ implied or express consent. It is because of this human element in employment contracts and
the personal, consensual nature thereof that we cannot agree that, in a merger situation, employment
contracts are automatically transferable from one entity to another in the same manner that a contract
pertaining to purely proprietary rights – such as a promissory note or a deed of sale of property – is perfectly
and automatically transferable to the surviving corporation.
That BPI is the same entity as FEBTC after the merger is but a legal fiction intended as a tool to adjudicate rights
and obligations between and among the merged corporations and the persons that deal with them. Although
in a merger it is as if there is no change in the personality of the employer, there is in reality a change in the
situation of the employee. Once an FEBTC employee is absorbed, there are presumably changes in his condition
of employment even if his previous tenure and salary rate is recognized by BPI. It is reasonable to assume that
BPI would have different rules and regulations and company practices than FEBTC and it is incumbent upon
the former FEBTC employees to obey these new rules and adapt to their new environment. Not the least of
the changes in employment condition that the absorbed FEBTC employees must face is the fact that prior to
the merger they were employees of an unorganized establishment and after the merger they became
employees of a unionized company that had an existing collective bargaining agreement with the certified
union. This presupposes that the union who is party to the collective bargaining agreement is the certified
union that has, in the appropriate certification election, been shown to represent a majority of the members
of the bargaining unit.

Likewise, with respect to FEBTC employees that BPI chose to employ and who also chose to be absorbed, then
due to BPI’s blanket assumption of liabilities and obligations under the articles of merger, BPI was bound to
respect the years of service of these FEBTC employees and to pay the same, or commensurate salaries and
other benefits that these employees previously enjoyed with FEBTC.

As the Union likewise pointed out in its pleadings, there were benefits under the CBA that the former FEBTC
employees did not enjoy with their previous employer. As BPI employees, they will enjoy all these CBA
benefits upon their "absorption." Thus, although in a sense BPI is continuing FEBTC’s employment of these
absorbed employees, BPI’s employment of these absorbed employees was not under exactly the same terms
and conditions as stated in the latter’s employment contracts with FEBTC. This further strengthens the view
that BPI and the former FEBTC employees voluntarily contracted with each other for their employment in the
surviving corporation.

Proper Appreciation of the Term "New Employees" Under the CBA

In any event, it is of no moment that the former FEBTC employees retained the regular status that they
possessed while working for their former employer upon their absorption by petitioner. This fact would not
remove them from the scope of the phrase "new employees" as contemplated in the Union Shop Clause of the
CBA, contrary to petitioner’s insistence that the term "new employees" only refers to those who are initially
hired as non-regular employees for possible regular employment.

The Union Shop Clause in the CBA simply states that "new employees" who during the effectivity of the CBA
"may be regularly employed" by the Bank must join the union within thirty (30) days from their regularization.
There is nothing in the said clause that limits its application to only new employees who possess non-regular
status, meaning probationary status, at the start of their employment. Petitioner likewise failed to point to any
provision in the CBA expressly excluding from the Union Shop Clause new employees who are "absorbed" as
regular employees from the beginning of their employment. What is indubitable from the Union Shop Clause
is that upon the effectivity of the CBA, petitioner’s new regular employees (regardless of the manner by which
they became employees of BPI) are required to join the Union as a condition of their continued employment.

The dissenting opinion of Justice Brion dovetails with Justice Carpio’s view only in their restrictive
interpretation of who are "new employees" under the CBA. To our dissenting colleagues, the phrase "new
employees" (who are covered by the union shop clause) should only include new employees who were hired
as probationary during the life of the CBA and were later granted regular status. They propose that the former
FEBTC employees who were deemed regular employees from the beginning of their employment with BPI
should be treated as a special class of employees and be excluded from the union shop clause.

Justice Brion himself points out that there is no clear, categorical definition of "new employee" in the CBA. In
other words, the term "new employee" as used in the union shop clause is used broadly without any
qualification or distinction. However, the Court should not uphold an interpretation of the term "new
employee" based on the general and extraneous provisions of the Corporation Code on merger that would
defeat, rather than fulfill, the purpose of the union shop clause. To reiterate, the provision of the Article 248(e)
of the Labor Code in point mandates that nothing in the said Code or any other law should stop the parties
from requiring membership in a recognized collective bargaining agent as a condition of employment.

Significantly, petitioner BPI never stretches its arguments so far as to state that the absorbed employees should
be deemed "old employees" who are not covered by the Union Shop Clause. This is not surprising.

By law and jurisprudence, a merger only becomes effective upon approval by the Securities and Exchange
Commission (SEC) of the articles of merger. In Associated Bank v. Court of Appeals,33 we held:

The procedure to be followed is prescribed under the Corporation Code. Section 79 of said Code requires the
approval by the Securities and Exchange Commission (SEC) of the articles of merger which, in turn, must have
been duly approved by a majority of the respective stockholders of the constituent corporations. The same
provision further states that the merger shall be effective only upon the issuance by the SEC of a certificate of
merger. The effectivity date of the merger is crucial for determining when the merged or absorbed corporation
ceases to exist; and when its rights, privileges, properties as well as liabilities pass on to the surviving
corporation. (Emphasis ours.)

In other words, even though BPI steps into the shoes of FEBTC as the surviving corporation, BPI does so at a
particular point in time, i.e., the effectivity of the merger upon the SEC’s issuance of a certificate of merger. In
fact, the articles of merger themselves provided that both BPI and FEBTC will continue their respective business
operations until the SEC issues the certificate of merger and in the event SEC does not issue such a certificate,
they agree to hold each other blameless for the non-consummation of the merger.

Considering the foregoing principle, BPI could have only become the employer of the FEBTC employees it
absorbed after the approval by the SEC of the merger. If the SEC did not approve the merger, BPI would not be
in the position to absorb the employees of FEBTC at all. Indeed, there is evidence on record that BPI made the
assignments of its absorbed employees in BPI effective April 10, 2000, or after the SEC’s approval of the
merger.34 In other words, BPI became the employer of the absorbed employees only at some point after the
effectivity of the merger, notwithstanding the fact that the absorbed employees’ years of service with FEBTC
were voluntarily recognized by BPI.

Even assuming for the sake of argument that we consider the absorbed FEBTC employees as "old employees"
of BPI who are not members of any union (i.e., it is their date of hiring by FEBTC and not the date of their
absorption that is considered), this does not necessarily exclude them from the union security clause in the
CBA. The CBA subject of this case was effective from April 1, 1996 until March 31, 2001. Based on the allegations
of the former FEBTC employees themselves, there were former FEBTC employees who were hired by FEBTC
after April 1, 1996 and if their date of hiring by FEBTC is considered as their date of hiring by BPI, they would
undeniably be considered "new employees" of BPI within the contemplation of the Union Shop Clause of the
said CBA. Otherwise, it would lead to the absurd situation that we would discriminate not only between new
BPI employees (hired during the life of the CBA) and former FEBTC employees (absorbed during the life of the
CBA) but also among the former FEBTC employees themselves. In other words, we would be treating
employees who are exactly similarly situated (i.e., the group of absorbed FEBTC employees) differently. This
hardly satisfies the demands of equality and justice.

Petitioner limited itself to the argument that its absorbed employees do not fall within the term "new
employees" contemplated under the Union Shop Clause with the apparent objective of excluding all, and not
just some, of the former FEBTC employees from the application of the Union Shop Clause.

However, in law or even under the express terms of the CBA, there is no special class of employees called
"absorbed employees." In order for the Court to apply or not apply the Union Shop Clause, we can only classify
the former FEBTC employees as either "old" or "new." If they are not "old" employees, they are necessarily
"new" employees. If they are new employees, the Union Shop Clause did not distinguish between new
employees who are non-regular at their hiring but who subsequently become regular and new employees who
are "absorbed" as regular and permanent from the beginning of their employment. The Union Shop Clause did
not so distinguish, and so neither must we.

No Substantial Distinction Under the CBA Between Regular Employees Hired After Probationary Status and
Regular Employees Hired After the Merger

Verily, we agree with the Court of Appeals that there are no substantial differences between a newly hired
non-regular employee who was regularized weeks or months after his hiring and a new employee who was
absorbed from another bank as a regular employee pursuant to a merger, for purposes of applying the Union
Shop Clause. Both employees were hired/employed only after the CBA was signed. At the time they are being
required to join the Union, they are both already regular rank and file employees of BPI. They belong to the
same bargaining unit being represented by the Union. They both enjoy benefits that the Union was able to
secure for them under the CBA. When they both entered the employ of BPI, the CBA and the Union Shop Clause
therein were already in effect and neither of them had the opportunity to express their preference for unionism
or not. We see no cogent reason why the Union Shop Clause should not be applied equally to these two types
of new employees, for they are undeniably similarly situated.

The effect or consequence of BPI’s so-called "absorption" of former FEBTC employees should be limited to
what they actually agreed to, i.e. recognition of the FEBTC employees’ years of service, salary rate and other
benefits with their previous employer. The effect should not be stretched so far as to exempt former FEBTC
employees from the existing CBA terms, company policies and rules which apply to employees similarly
situated. If the Union Shop Clause is valid as to other new regular BPI employees, there is no reason why the
same clause would be a violation of the "absorbed" employees’ freedom of association.

Non-Application of Union Shop Clause Contrary to the Policy of the Labor Code and Inimical to Industrial
Peace

It is but fair that similarly situated employees who enjoy the same privileges of a CBA should be likewise subject
to the same obligations the CBA imposes upon them. A contrary interpretation of the Union Shop Clause will
be inimical to industrial peace and workers’ solidarity. This unfavorable situation will not be sufficiently
addressed by asking the former FEBTC employees to simply pay agency fees to the Union in lieu of union
membership, as the dissent of Justice Carpio suggests. The fact remains that other new regular employees, to
whom the "absorbed employees" should be compared, do not have the option to simply pay the agency fees
and they must join the Union or face termination.

Petitioner’s restrictive reading of the Union Shop Clause could also inadvertently open an avenue, which an
employer could readily use, in order to dilute the membership base of the certified union in the collective
bargaining unit (CBU). By entering into a voluntary merger with a non-unionized company that employs more
workers, an employer could get rid of its existing union by the simple expedient of arguing that the "absorbed
employees" are not new employees, as are commonly understood to be covered by a CBA’s union security
clause. This could then lead to a new majority within the CBU that could potentially threaten the majority
status of the existing union and, ultimately, spell its demise as the CBU’s bargaining representative. Such a
dreaded but not entirely far-fetched scenario is no different from the ingenious and creative "union-busting"
schemes that corporations have fomented throughout the years, which this Court has foiled time and again in
order to preserve and protect the valued place of labor in this jurisdiction consistent with the Constitution’s
mandate of insuring social justice.

There is nothing in the Labor Code and other applicable laws or the CBA provision at issue that requires that a
new employee has to be of probationary or non-regular status at the beginning of the employment
relationship. An employer may confer upon a new employee the status of regular employment even at the
onset of his engagement. Moreover, no law prohibits an employer from voluntarily recognizing the length of
service of a new employee with a previous employer in relation to computation of benefits or seniority but it
should not unduly be interpreted to exclude them from the coverage of the CBA which is a binding contractual
obligation of the employer and employees.

Indeed, a union security clause in a CBA should be interpreted to give meaning and effect to its purpose, which
is to afford protection to the certified bargaining agent and ensure that the employer is dealing with a union
that represents the interests of the legally mandated percentage of the members of the bargaining unit.

The union shop clause offers protection to the certified bargaining agent by ensuring that future regular
employees who (a) enter the employ of the company during the life of the CBA; (b) are deemed part of the
collective bargaining unit; and (c) whose number will affect the number of members of the collective bargaining
unit will be compelled to join the union. Such compulsion has legal effect, precisely because the employer by
voluntarily entering in to a union shop clause in a CBA with the certified bargaining agent takes on the
responsibility of dismissing the new regular employee who does not join the union.

Without the union shop clause or with the restrictive interpretation thereof as proposed in the dissenting
opinions, the company can jeopardize the majority status of the certified union by excluding from union
membership all new regular employees whom the Company will "absorb" in future mergers and all new regular
employees whom the Company hires as regular from the beginning of their employment without undergoing
a probationary period. In this manner, the Company can increase the number of members of the collective
bargaining unit and if this increase is not accompanied by a corresponding increase in union membership, the
certified union may lose its majority status and render it vulnerable to attack by another union who wishes to
represent the same bargaining unit.35

Or worse, a certified union whose membership falls below twenty percent (20%) of the total members of the
collective bargaining unit may lose its status as a legitimate labor organization altogether, even in a situation
where there is no competing union.36 In such a case, an interested party may file for the cancellation of the
union’s certificate of registration with the Bureau of Labor Relations.37

Plainly, the restrictive interpretation of the union shop clause would place the certified union’s very existence
at the mercy and control of the employer. Relevantly, only BPI, the employer appears to be interested in
pursuing this case. The former FEBTC employees have not joined BPI in this appeal.

For the foregoing reasons, Justice Carpio’s proposal to simply require the former FEBTC to pay agency fees is
wholly inadequate to compensate the certified union for the loss of additional membership supposedly
guaranteed by compliance with the union shop clause. This is apart from the fact that treating these "absorbed
employees" as a special class of new employees does not encourage worker solidarity in the company since
another class of new employees (i.e. those whose were hired as probationary and later regularized during the
life of the CBA) would not have the option of substituting union membership with payment of agency fees.

Justice Brion, on the other hand, appears to recognize the inherent unfairness of perpetually excluding the
"absorbed" employees from the ambit of the union shop clause. He proposes that this matter be left to
negotiation by the parties in the next CBA. To our mind, however, this proposal does not sufficiently address
the issue. With BPI already taking the position that employees "absorbed" pursuant to its voluntary mergers
with other banks are exempt from the union shop clause, the chances of the said bank ever agreeing to the
inclusion of such employees in a future CBA is next to nil – more so, if BPI’s narrow interpretation of the union
shop clause is sustained by this Court.

Right of an Employee not to Join a Union is not Absolute and Must Give Way to the Collective Good of All
Members of the Bargaining Unit

The dissenting opinions place a premium on the fact that even if the former FEBTC employees are not old
employees, they nonetheless were employed as regular and permanent employees without a gap in their
service. However, an employee’s permanent and regular employment status in itself does not necessarily
exempt him from the coverage of a union shop clause.

In the past this Court has upheld even the more stringent type of union security clause, i.e., the closed shop
provision, and held that it can be made applicable to old employees who are already regular and permanent
but have chosen not to join a union. In the early case of Juat v. Court of Industrial Relations,38 the Court held
that an old employee who had no union may be compelled to join the union even if the collective bargaining
agreement (CBA) imposing the closed shop provision was only entered into seven years after of the hiring of
the said employee. To quote from that decision:

A closed-shop agreement has been considered as one form of union security whereby only union members can
be hired and workers must remain union members as a condition of continued employment. The requirement
for employees or workers to become members of a union as a condition for employment redounds to the
benefit and advantage of said employees because by holding out to loyal members a promise of employment
in the closed-shop the union wields group solidarity. In fact, it is said that "the closed-shop contract is the most
prized achievement of unionism."

xxxx

This Court had categorically held in the case of Freeman Shirt Manufacturing Co., Inc., et al. vs. Court of
Industrial Relations, et al., G.R. No. L-16561, Jan. 28, 1961, that the closed-shop proviso of a collective
bargaining agreement entered into between an employer and a duly authorized labor union is applicable not
only to the employees or laborers that are employed after the collective bargaining agreement had been
entered into but also to old employees who are not members of any labor union at the time the said collective
bargaining agreement was entered into. In other words, if an employee or laborer is already a member of a
labor union different from the union that entered into a collective bargaining agreement with the employer
providing for a closed-shop, said employee or worker cannot be obliged to become a member of that union
which had entered into a collective bargaining agreement with the employer as a condition for his continued
employment. (Emphasis and underscoring supplied.)

Although the present case does not involve a closed shop provision that included even old employees, the Juat
example is but one of the cases that laid down the doctrine that the right not to join a union is not absolute.
Theoretically, there is nothing in law or jurisprudence to prevent an employer and a union from stipulating that
existing employees (who already attained regular and permanent status but who are not members of any
union) are to be included in the coverage of a union security clause. Even Article 248(e) of the Labor Code only
expressly exempts old employees who already have a union from inclusion in a union security clause.39

Contrary to the assertion in the dissent of Justice Carpio, Juat has not been overturned by Victoriano v. Elizalde
Rope Workers’ Union40 nor by Reyes v. Trajano.41 The factual milieus of these three cases are vastly different.

In Victoriano, the issue that confronted the Court was whether or not employees who were members of the
Iglesia ni Kristo (INK) sect could be compelled to join the union under a closed shop provision, despite the fact
that their religious beliefs prohibited them from joining a union. In that case, the Court was asked to balance
the constitutional right to religious freedom against a host of other constitutional provisions including the
freedom of association, the non-establishment clause, the non-impairment of contracts clause, the equal
protection clause, and the social justice provision. In the end, the Court held that "religious freedom, although
not unlimited, is a fundamental personal right and liberty, and has a preferred position in the hierarchy of
values."42

However, Victoriano is consistent with Juat since they both affirm that the right to refrain from joining a union
is not absolute. The relevant portion of Victoriano is quoted below:

The right to refrain from joining labor organizations recognized by Section 3 of the Industrial Peace Act is,
however, limited. The legal protection granted to such right to refrain from joining is withdrawn by operation
of law, where a labor union and an employer have agreed on a closed shop, by virtue of which the employer
may employ only member of the collective bargaining union, and the employees must continue to be members
of the union for the duration of the contract in order to keep their jobs. Thus Section 4 (a) (4) of the Industrial
Peace Act, before its amendment by Republic Act No. 3350, provides that although it would be an unfair labor
practice for an employer "to discriminate in regard to hire or tenure of employment or any term or condition
of employment to encourage or discourage membership in any labor organization" the employer is, however,
not precluded "from making an agreement with a labor organization to require as a condition of employment
membership therein, if such labor organization is the representative of the employees." By virtue, therefore,
of a closed shop agreement, before the enactment of Republic Act No. 3350, if any person, regardless of his
religious beliefs, wishes to be employed or to keep his employment, he must become a member of the
collective bargaining union. Hence, the right of said employee not to join the labor union is curtailed and
withdrawn.43 (Emphases supplied.)

If Juat exemplified an exception to the rule that a person has the right not to join a union, Victoriano merely
created an exception to the exception on the ground of religious freedom.

Reyes, on the other hand, did not involve the interpretation of any union security clause. In that case, there
was no certified bargaining agent yet since the controversy arose during a certification election. In Reyes, the
Court highlighted the idea that the freedom of association included the right not to associate or join a union in
resolving the issue whether or not the votes of members of the INK sect who were part of the bargaining unit
could be excluded in the results of a certification election, simply because they were not members of the two
contesting unions and were expected to have voted for "NO UNION" in view of their religious affiliation. The
Court upheld the inclusion of the votes of the INK members since in the previous case of Victoriano we held
that INK members may not be compelled to join a union on the ground of religious freedom and even without
Victoriano every employee has the right to vote "no union" in a certification election as part of his freedom of
association. However, Reyes is not authority for Justice Carpio’s proposition that an employee who is not a
member of any union may claim an exemption from an existing union security clause because he already has
regular and permanent status but simply prefers not to join a union.
The other cases cited in Justice Carpio’s dissent on this point are likewise inapplicable. Basa v. Federacion
Obrera de la Industria Tabaquera y Otros Trabajadores de Filipinas,44 Anucension v. National Labor
Union,45 and Gonzales v. Central Azucarera de Tarlac Labor Union46 all involved members of the INK. In line
with Victoriano, these cases upheld the INK members’ claimed exemption from the union security clause on
religious grounds. In the present case, the former FEBTC employees never claimed any religious grounds for
their exemption from the Union Shop Clause. As for Philips Industrial Development, Inc. v. National Labor
Relations Corporation47 and Knitjoy Manufacturing, Inc. v. Ferrer-Calleja,48 the employees who were exempted
from joining the respondent union or who were excluded from participating in the certification election were
found to be not members of the bargaining unit represented by respondent union and were free to form/join
their own union. In the case at bar, it is undisputed that the former FEBTC employees were part of the
bargaining unit that the Union represented. Thus, the rulings in Philips and Knitjoy have no relevance to the
issues at hand.

Time and again, this Court has ruled that the individual employee’s right not to join a union may be validly
restricted by a union security clause in a CBA49 and such union security clause is not a violation of the
employee’s constitutional right to freedom of association.50

It is unsurprising that significant provisions on labor protection of the 1987 Constitution are found in Article
XIII on Social Justice. The constitutional guarantee given the right to form unions51 and the State policy to
promote unionism52 have social justice considerations. In People’s Industrial and Commercial Employees and
Workers Organization v. People’s Industrial and Commercial Corporation,53 we recognized that "[l]abor, being
the weaker in economic power and resources than capital, deserve protection that is actually substantial and
material."

The rationale for upholding the validity of union shop clauses in a CBA, even if they impinge upon the individual
employee’s right or freedom of association, is not to protect the union for the union’s sake. Laws and
jurisprudence promote unionism and afford certain protections to the certified bargaining agent in a unionized
company because a strong and effective union presumably benefits all employees in the bargaining unit since
such a union would be in a better position to demand improved benefits and conditions of work from the
employer. This is the rationale behind the State policy to promote unionism declared in the Constitution, which
was elucidated in the above-cited case of Liberty Flour Mills Employees v. Liberty Flour Mills, Inc.54

In the case at bar, since the former FEBTC employees are deemed covered by the Union Shop Clause, they are
required to join the certified bargaining agent, which supposedly has gathered the support of the majority of
workers within the bargaining unit in the appropriate certification proceeding. Their joining the certified union
would, in fact, be in the best interests of the former FEBTC employees for it unites their interests with the
majority of employees in the bargaining unit. It encourages employee solidarity and affords sufficient
protection to the majority status of the union during the life of the CBA which are the precisely the objectives
of union security clauses, such as the Union Shop Clause involved herein. We are indeed not being called to
balance the interests of individual employees as against the State policy of promoting unionism, since the
employees, who were parties in the court below, no longer contested the adverse Court of Appeals’ decision.
Nonetheless, settled jurisprudence has already swung the balance in favor of unionism, in recognition that
ultimately the individual employee will be benefited by that policy. In the hierarchy of constitutional values,
this Court has repeatedly held that the right to abstain from joining a labor organization is subordinate to the
policy of encouraging unionism as an instrument of social justice.

Also in the dissenting opinion of Justice Carpio, he maintains that one of the dire consequences to the former
FEBTC employees who refuse to join the union is the forfeiture of their retirement benefits. This is clearly not
the case precisely because BPI expressly recognized under the merger the length of service of the absorbed
employees with FEBTC. Should some refuse to become members of the union, they may still opt to retire if
they are qualified under the law, the applicable retirement plan, or the CBA, based on their combined length
of service with FEBTC and BPI. Certainly, there is nothing in the union shop clause that should be read as to
curtail an employee’s eligibility to apply for retirement if qualified under the law, the existing retirement plan,
or the CBA as the case may be.

In sum, this Court finds it reasonable and just to conclude that the Union Shop Clause of the CBA covers the
former FEBTC employees who were hired/employed by BPI during the effectivity of the CBA in a manner which
petitioner describes as "absorption." A contrary appreciation of the facts of this case would, undoubtedly, lead
to an inequitable and very volatile labor situation which this Court has consistently ruled against.1avvphi1

In the case of former FEBTC employees who initially joined the union but later withdrew their membership,
there is even greater reason for the union to request their dismissal from the employer since the CBA also
contained a Maintenance of Membership Clause.

A final point in relation to procedural due process, the Court is not unmindful that the former FEBTC employees’
refusal to join the union and BPI’s refusal to enforce the Union Shop Clause in this instance may have been
based on the honest belief that the former FEBTC employees were not covered by said clause. In the interest
of fairness, we believe the former FEBTC employees should be given a fresh thirty (30) days from notice of
finality of this decision to join the union before the union demands BPI to terminate their employment under
the Union Shop Clause, assuming said clause has been carried over in the present CBA and there has been no
material change in the situation of the parties.

WHEREFORE, the petition is hereby DENIED, and the Decision dated September 30, 2003 of the Court of
Appeals is AFFIRMED, subject to the thirty (30) day notice requirement imposed herein. Former FEBTC
employees who opt not to become union members but who qualify for retirement shall receive their
retirement benefits in accordance with law, the applicable retirement plan, or the CBA, as the case may be.

SO ORDERED.

G.R. No. 172302 February 18, 2014

PRYCE CORPORATION, Petitioner,

vs.
CHINA BANKING CORPORATION, Respondent.

RESOLUTION

LEONEN, J.:

This case resolves conflicting decisions between two divisions. Only one may serve as res judicata or a bar for
the other to proceed. This case also settles the doctrine as to whether a hearing is needed prior to the issuance
of a stay order in corporate rehabilitation proceedings.

The present case originated from a petition for corporate rehabilitation filed by petitioner Pryce Corporation
on July 9, 2004 with the Regional Trial Court of Makati, Branch 138.1
The rehabilitation court found the petition sufficient in form and substance and issued a stay order on July 13,
2004 appointing Gener T. Mendoza as rehabilitation receiver.2

On September 13, 2004, the rehabilitation court gave due course to the petition and directed the rehabilitation
receiver to evaluate and give recommendations on petitioner Pryce Corporation’s proposed rehabilitation plan
attached to its petition.3

The rehabilitation receiver did not approve this plan and submitted instead an amended rehabilitation plan,
which the rehabilitation court approved by order dated January 17, 2005.4 In its disposition, the court found
petitioner Pryce Corporation "eligible to be placed in a state of corporate rehabilitation." 5 The disposition
likewise identified the assets to be held and disposed of by petitioner Pryce Corporation and the manner by
which its liabilities shall be paid and liquidated.6

On February 23, 2005, respondent China Banking Corporation elevated the case to the Court of Appeals. Its
petition questioned the January 17, 2005 order that included the following terms:

1. The indebtedness to China Banking Corporation and Bank of the Philippine Islands as well as the long term
commercial papers will be paid through a dacion en pago of developed real estate assets of the petitioner.

xxxx

4. All accrued penalties are waived[.]

5. Interests shall accrue only up to July 13, 2004, the date of issuance of the stay order[.]

6. No interest will accrue during the pendency of petitioner’s corporate rehabilitation[.]

7. Dollar-denominated loans will be converted to Philippine Pesos on the date of the issuance of this Order
using the reference rate of the Philippine Dealing System as of this date.7

Respondent China Banking Corporation contended that the rehabilitation plan’s approval impaired the
obligations of contracts. It argued that neither the provisions of Presidential Decree No. 902-A nor the Interim
Rules of Procedure on Corporate Rehabilitation (Interim Rules) empowered commercial courts "to render
without force and effect valid contractual stipulations."8 Moreover, the plan’s approval authorizing dacion en
pago of petitioner Pryce Corporation’s properties without respondent China Banking Corporation’s consent
not only violated "mutuality of contract and due process, but [was] also antithetical to the avowed policies of
the state to maintain a competitive financial system."9

The Bank of the Philippine Islands (BPI), another creditor of petitioner Pryce Corporation, filed a separate
petition with the Court of Appeals assailing the same order by the rehabilitation court. BPI called the attention
of the court "to the non-impairment clause and the mutuality of contracts purportedly ran roughshod by the
[approved rehabilitation plan]."10

On July 28, 2005, the Court of Appeals Seventh (7th) Division11 granted respondent China Banking
Corporation's petition, and reversed and set aside the rehabilitation court’s: (1) July 13, 2004 stay order that
also appointed Gener T. Mendoza as rehabilitation receiver; (2) September 13, 2004 order giving due course
to the petition and directing the rehabilitation receiver to evaluate and give recommendations on petitioner
Pryce Corporation’s proposed rehabilitation plan; and (3) January 17, 2005 order finding petitioner Pryce
Corporation eligible to be placed in a state of corporate rehabilitation, identifying assets to be disposed of, and
determining the manner of liquidation to pay the liabilities.12
With respect to BPI’s separate appeal, the Court of Appeals First (1st) Division13 granted its petition initially and
set aside the January 17, 2005 order of the rehabilitation court in its decision dated May 3, 2006. 14 On
reconsideration, the court issued a resolution dated May 23, 2007 setting aside its original decision and
dismissing the petition.15 BPI elevated the case to this court, docketed as G.R. No. 180316. By resolution dated
January 30, 2008, the First (1st) Division of this court denied the petition.16 By resolution dated April 28, 2008,
this court denied reconsideration with finality.17

Meanwhile, petitioner Pryce Corporation also appealed to this court assailing the July 28, 2005 decision of the
Court of Appeals Seventh (7th) Division granting respondent China Banking Corporation’s petition as well as
the resolution denying its motion for reconsideration.

In the decision dated February 4, 2008,18 the First (1st) Division of this court denied its petition with the
dispositive portion as follows:

WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 88479 is
AFFIRMED with the modification discussed above. Let the records of this case be REMANDED to the RTC, Branch
138, Makati City, sitting as Commercial Court, for further proceedings with dispatch to determine the merits
of the petition for rehabilitation. No costs.19

Petitioner Pryce Corporation filed an omnibus motion for (1) reconsideration or (2) partial reconsideration and
(3) referral to the court En Banc dated February 29, 2008. Respondent China Banking Corporation also filed a
motion for reconsideration on even date, praying that the February 4, 2008 decision be set aside and
reconsidered only insofar as it ordered the remand of the case for further proceedings "to determine whether
petitioner's financial condition is serious and whether there is clear and imminent danger that it will lose its
corporate assets."20

By resolution dated June 16, 2008, this court denied with finality the separate motions for reconsideration filed
by the parties.

On September 10, 2008, petitioner Pryce Corporation filed a second motion for reconsideration praying that
the Court of Appeals’ decision dated February 4, 2008 be set aside.

The First Division of this court referred this case to the En Banc en consulta by resolution dated June 22,
2009.21The court En Banc, in its resolution dated April 13, 2010, resolved to accept this case.22

On July 30, 2013, petitioner Pryce Corporation and respondent China Banking Corporation, through their
respective counsel, filed a joint manifestation and motion to suspend proceedings. The parties requested this
court to defer its ruling on petitioner Pryce Corporation’s second motion for reconsideration "so as to enable
the parties to work out a mutually acceptable arrangement."23

By resolution dated August 6, 2013, this court granted the motion but only for two (2) months. The registry
receipts showed that counsel for respondent China Banking Corporation and counsel for petitioner Pryce
Corporation received their copies of this resolution on September 5, 2013.24

More than two months had lapsed since September 5, 2013, but no agreement was filed by the parties. Thus,
we proceed to rule on petitioner Pryce Corporation’s second motion for reconsideration.

This motion raises two grounds.

First, petitioner Pryce Corporation argues that the issue on the validity of the rehabilitation court orders is now
res judicata. Petitioner Pryce Corporation submits that the ruling in BPI v. Pryce Corporation docketed as G.R.
No. 180316 contradicts the present case, and it has rendered the issue on the validity and regularity of the
rehabilitation court orders as res judicata.25

Second, petitioner Pryce Corporation contends that Rule 4, Section 6 of the Interim Rules of Procedure on
Corporate Rehabilitation26 does not require the rehabilitation court to hold a hearing before issuing a stay
order. Considering that the Interim Rules was promulgated later than Rizal Commercial Banking Corp. v.
IAC27 that enunciated the "serious situations" test,28 petitioner Pryce Corporation argues that the test has
effectively been abandoned by the "sufficiency in form and substance test" under the Interim Rules.29

The present second motion for reconsideration involves the following issues:

I. WHETHER THE ISSUE ON THE VALIDITY OF THE REHABILITATION ORDER DATED JANUARY 17, 2005 IS NOW
RES JUDICATA IN LIGHT OF BPI V. PRYCE CORPORATION DOCKETED AS G.R. NO. 180316;

II. WHETHER THE REHABILITATION COURT IS REQUIRED TO HOLD A HEARING TO COMPLY WITH THE "SERIOUS
SITUATIONS" TEST LAID DOWN IN THE CASE OF RIZAL COMMERCIAL BANKING CORP. V. IAC BEFORE ISSUING A
STAY ORDER.

We proceed to discuss the first issue.

BPI v. Pryce Corporation docketed as G.R. No. 180316 rendered the issue on the validity of the rehabilitation
court’s January 17, 2005 order approving the amended rehabilitation plan as res judicata.

In BPI v. Pryce Corporation, the Court of Appeals set aside initially the January 17, 2005 order of the
rehabilitation court.30 On reconsideration, the court set aside its original decision and dismissed the
petition.31 On appeal, this court denied the petition filed by BPI with finality. An entry of judgment was made
for BPI v. Pryce Corporation on June 2, 2008.32 In effect, this court upheld the January 17, 2005 order of the
rehabilitation court.

According to the doctrine of res judicata, "a final judgment or decree on the merits by a court of competent
jurisdiction is conclusive of the rights of the parties or their privies in all later suits on all points and matters
determined in the former suit."33

The elements for res judicata to apply are as follows: (a) the former judgment was final; (b) the court that
rendered it had jurisdiction over the subject matter and the parties; (c) the judgment was based on the merits;
and (d) between the first and the second actions, there was an identity of parties, subject matters, and causes
of action.34

Res judicata embraces two concepts: (1) bar by prior judgment35 and (2) conclusiveness of judgment.36

Bar by prior judgment exists "when, as between the first case where the judgment was rendered and the
second case that is sought to be barred, there is identity of parties, subject matter, and causes of action."37

On the other hand, the concept of conclusiveness of judgment finds application "when a fact or question has
been squarely put in issue, judicially passed upon, and adjudged in a former suit by a court of competent
jurisdiction."38This principle only needs identity of parties and issues to apply.39

The elements of res judicata through bar by prior judgment are present in this case.

On the element of identity of parties, res judicata does not require absolute identity of parties as substantial
identity is enough.40 Substantial identity of parties exists "when there is a community of interest between a
party in the first case and a party in the second case, even if the latter was not impleaded in the first
case."41 Parties that represent the same interests in two petitions are, thus, considered substantial identity of
parties for purposes of res judicata.42Definitely, one test to determine substantial identity of interest would be
to see whether the success or failure of one party materially affects the other.

In the present case, respondent China Banking Corporation and BPI are creditors of petitioner Pryce
Corporation and are both questioning the rehabilitation court’s approval of the amended rehabilitation plan.
Thus, there is substantial identity of parties since they are litigating for the same matter and in the same
capacity as creditors of petitioner Pryce Corporation.

There is no question that both cases deal with the subject matter of petitioner Pryce Corporation’s
rehabilitation. The element of identity of causes of action also exists.

In separate appeals, respondent China Banking Corporation and BPI questioned the same January 17, 2005
order of the rehabilitation court before the Court of Appeals.

Since the January 17, 2005 order approving the amended rehabilitation plan was affirmed and made final in
G.R. No. 180316, this plan binds all creditors, including respondent China Banking Corporation.

In any case, the Interim Rules or the rules in effect at the time the petition for corporate rehabilitation was
filed in 2004 adopts the cram-down principle which "consists of two things: (i) approval despite opposition and
(ii) binding effect of the approved plan x x x."43

First, the Interim Rules allows the rehabilitation court44 to "approve a rehabilitation plan even over the
opposition of creditors holding a majority of the total liabilities of the debtor if, in its judgment, the
rehabilitation of the debtor is feasible and the opposition of the creditors is manifestly unreasonable."45

Second, it also provides that upon approval by the court, the rehabilitation plan and its provisions "shall be
binding upon the debtor and all persons who may be affected by it, including the creditors, whether or not
such persons have participated in the proceedings or opposed the plan or whether or not their claims have
been scheduled."46

Thus, the January 17, 2005 order approving the amended rehabilitation plan, now final and executory resulting
from the resolution of BPI v. Pryce Corporation docketed as G.R. No. 180316, binds all creditors including
respondent China Banking Corporation.

This judgment in BPI v. Pryce Corporation covers necessarily the rehabilitation court’s September 13, 2004
order giving due course to the petition. The general rule precluding relitigation of issues extends to questions
implied necessarily in the final judgment, viz:

The general rule precluding the relitigation of material facts or questions which were in issue and adjudicated
in former action are commonly applied to all matters essentially connected with the subject matter of the
litigation. Thus, it extends to questions necessarily implied in the final judgment, although no specific finding
may have been made in reference thereto and although such matters were directly referred to in the pleadings
and were not actually or formally presented. x x x.47

The dispositive portion of the Court of Appeals’ decision in BPI v. Pryce Corporation, reversed on
reconsideration, only mentioned the January 17, 2005 order of the rehabilitation court approving the amended
rehabilitation plan. Nevertheless, the affirmation of its validity necessarily included the September 13, 2004
order as this earlier order gave due course to the petition and directed the rehabilitation receiver to evaluate
and give recommendations on the rehabilitation plan proposed by petitioner.48
In res judicata, the primacy given to the first case is related to the principle of immutability of final judgments
essential to an effective and efficient administration of justice, viz:

x x x [W]ell-settled is the principle that a decision that has acquired finality becomes immutable and unalterable
and may no longer be modified in any respect even if the modification is meant to correct erroneous
conclusions of fact or law and whether it will be made by the court that rendered it or by the highest court of
the land.

The reason for this is that litigation must end and terminate sometime and somewhere, and it is essential to
an effective and efficient administration of justice that, once a judgment has become final, the winning party
be not deprived of the fruits of the verdict. Courts must guard against any scheme calculated to bring about
that result and must frown upon any attempt to prolong the controversies.

The only exceptions to the general rule are the correction of clerical errors, the so-called nunc pro tunc entries
which cause no prejudice to any party, void judgments, and whenever circumstances transpire after the finality
of the decision rendering its execution unjust and inequitable.49 (Emphasis provided)

Generally, the later case is the one abated applying the maxim qui prior est tempore, potior est jure (he who
is before in time is the better in right; priority in time gives preference in law).50 However, there are limitations
to this rule as discussed in Victronics Computers, Inc. v. Regional Trial Court, Branch 63, Makati:51

In our jurisdiction, the law itself does not specifically require that the pending action which would hold in
abatement the other must be a pending prior action. Thus, in Teodoro vs. Mirasol, this Court observed:

It is to be noted that the Rules do not require as a ground for dismissal of a complaint that there is a prior
pending action. They provide that there is a pending action, not a pending prior action. The fact that the
unlawful detainer suit was of a later date is no bar to the dismissal of the present action. We find, therefore,
no error in the ruling of the court a quo that plaintiff's action should be dismissed on the ground of the
pendency of another more appropriate action between the same parties and for the same cause.

In Roa-Magsaysay vs. Magsaysay, wherein it was the first case which was abated, this Court ruled:

In any event, since We are not really dealing with jurisdiction but mainly with venue, considering both courts
concerned do have jurisdiction over the causes of action of the parties herein against each other, the better
rule in the event of conflict between two courts of concurrent jurisdiction as in the present case, is to allow the
litigation to be tried and decided by the court which, under the circumstances obtaining in the controversy,
would, in the mind of this Court, be in a better position to serve the interests of justice, considering the nature
of the controversy, the comparative accessibility of the court to the parties, having in view their peculiar
positions and capabilities, and other similar factors. Without in any manner casting doubt as to the capacity of
the Court of First Instance of Zambales to adjudicate properly cases involving domestic relations, it is easy to
see that the Juvenile and Domestic Relations Court of Quezon City which was created in order to give
specialized attention to family problems, armed as it is with adequate and corresponding facilities not available
to ordinary courts of first instance, would be able to attend to the matters here in dispute with a little more
degree of expertise and experience, resulting in better service to the interests of justice. A reading of the causes
of action alleged by the contending spouses and a consideration of their nature, cannot but convince Us that,
since anyway, there is an available Domestic Court that can legally take cognizance of such family issues, it is
better that said Domestic Court be the one chosen to settle the same as the facts and the law may warrant.

We made the same pronouncement in Ramos vs. Peralta:

Finally, the rule on litis pendentia does not require that the later case should yield to the earlier case. What is
required merely is that there be another pending action, not a prior pending action. Considering the broader
scope of inquiry involved in Civil Case No. 4102 and the location of the property involved, no error was
committed by the lower court in deferring to the Bataan court's jurisdiction.

An analysis of these cases unravels the ratio for the rejection of the priority-in-time rule and establishes the
criteria to determine which action should be upheld and which is to be abated. In Teodoro, this Court used the
criterion of the more appropriate action. We ruled therein that the unlawful detainer case, which was filed
later, was the more appropriate action because the earlier case — for specific performance or declaratory relief
— filed by the lessee (Teodoro) in the Court of First Instance (CFI) to seek the extension of the lease for another
two (2) years or the fixing of a longer term for it, was "prompted by a desire on plaintiff's part to anticipate the
action for unlawful detainer, the probability of which was apparent from the letter of the defendant to the
plaintiff advising the latter that the contract of lease expired on October 1, 1954." The real issue between the
parties therein was whether or not the lessee should be allowed to continue occupying the leased premises
under a contract the terms of which were also the subject matter of the unlawful detainer case. Consonant
with the doctrine laid down in Pue vs. Gonzales and Lim Si vs. Lim, the right of the lessee to occupy the land
leased against the lessor should be decided under Rule 70 of the Rules of Court; the fact that the unlawful
detainer case was filed later then of no moment. Thus, the latter was the more appropriate action.

xxxx

In Roa-Magsaysay[,] the criterion used was the consideration of the interest of justice. In applying this standard,
what was asked was which court would be "in a better position to serve the interests of justice," taking into
account (a) the nature of the controversy, (b) the comparative accessibility of the court to the parties and (c)
other similar factors. While such a test was enunciated therein, this Court relied on its constitutional authority
to change venue to avoid a miscarriage of justice.

It is interesting to note that in common law, as earlier adverted to, and pursuant to the Teodoro vs. Mirasol
case, the bona fides or good faith of the parties is a crucial element. In the former, the second case shall not
be abated if not brought to harass or vex; in the latter, the first case shall be abated if it is merely an anticipatory
action or, more appropriately, an anticipatory defense against an expected suit — a clever move to steal the
march from the aggrieved party.52 (Emphasis provided and citations omitted)

None of these situations are present in the facts of this instant suit. In any case, it is the better part of wisdom
in protecting the creditors if the corporation is rehabilitated.

We now proceed to the second issue on whether the rehabilitation court is required to hold a hearing to comply
with the "serious situations" test laid down in Rizal Commercial Banking Corp. v. IAC before issuing a stay order.

The rehabilitation court complied with the Interim Rules in its order dated July 13, 2004 on the issuance of a
stay order and appointment of Gener T. Mendoza as rehabilitation receiver.53

The 1999 Rizal Commercial Banking Corp. v. IAC54 case provides for the "serious situations" test in that the
suspension of claims is counted only upon the appointment of a rehabilitation receiver,55 and certain situations
serious in nature must be shown to exist before one is appointed, viz:

Furthermore, as relevantly pointed out in the dissenting opinion, a petition for rehabilitation does not always
result in the appointment of a receiver or the creation of a management committee. The SEC has to initially
determine whether such appointment is appropriate and necessary under the circumstances. Under Paragraph
(d), Section 6 of Presidential Decree No. 902-A, certain situations must be shown to exist before a management
committee may be created or appointed, such as:

1. when there is imminent danger of dissipation, loss, wastage or destruction of assets or other properties; or

2. when there is paralization of business operations of such corporations or entities which may be prejudicial
to the interest of minority stockholders, parties-litigants or to the general public.

On the other hand, receivers may be appointed whenever:

1. necessary in order to preserve the rights of the parties-litigants; and/or

2. protect the interest of the investing public and creditors. (Section 6 [c], P.D. 902-A.)

These situations are rather serious in nature, requiring the appointment of a management committee or a
receiver to preserve the existing assets and property of the corporation in order to protect the interests of its
investors and creditors. Thus, in such situations, suspension of actions for claims against a corporation as
provided in Paragraph (c) of Section 6, of Presidential Decree No. 902-A is necessary, and here we borrow the
words of the late Justice Medialdea, "so as not to render the SEC management Committee irrelevant and inutile
and to give it unhampered ‘rescue efforts’ over the distressed firm" (Rollo, p. 265)."

Otherwise, when such circumstances are not obtaining or when the SEC finds no such imminent danger of
losing the corporate assets, a management committee or rehabilitation receiver need not be appointed and
suspension of actions for claims may not be ordered by the SEC. When the SEC does not deem it necessary to
appoint a receiver or to create a management committee, it may be assumed, that there are sufficient assets
to sustain the rehabilitation plan, and that the creditors and investors are amply protected.56

However, this case had been promulgated prior to the effectivity of the Interim Rules that took effect on
December 15, 2000.

Section 6 of the Interim Rules states explicitly that "[i]f the court finds the petition to be sufficient in form and
substance, it shall, not later than five (5) days from the filing of the petition, issue an Order (a) appointing a
Rehabilitation Receiver and fixing his bond; (b) staying enforcement of all claims x x x."57

Compliant with the rules, the July 13, 2004 stay order was issued not later than five (5) days from the filing of
the petition on July 9, 2004 after the rehabilitation court found the petition sufficient in form and substance.

We agree that when a petition filed by a debtor "alleges all the material facts and includes all the documents
required by Rule 4-2 [of the Interim Rules],"58 it is sufficient in form and substance.

Nowhere in the Interim Rules does it require a comprehensive discussion in the stay order on the court’s
findings of sufficiency in form and substance.

The stay order and appointment of a rehabilitation receiver dated July 13, 2004 is an "extraordinary,
preliminary, ex parte remed[y]."59 The effectivity period of a stay order is only "from the date of its issuance
until dismissal of the petition or termination of the rehabilitation proceedings."60 It is not a final disposition of
the case. It is an interlocutory order defined as one that "does not finally dispose of the case, and does not end
the Court’s task of adjudicating the parties’ contentions and determining their rights and liabilities as regards
each other, but obviously indicates that other things remain to be done by the Court."61

Thus, it is not covered by the requirement under the Constitution that a decision must include a discussion of
the facts and laws on which it is based.62
Neither does the Interim Rules require a hearing before the issuance of a stay order. What it requires is an
initial hearing before it can give due course to63 or dismiss64 a petition.

Nevertheless, while the Interim Rules does not require the holding of a hearing before the issuance of a stay
order, neither does it prohibit the holding of one. Thus, the trial court has ample discretion to call a hearing
when it is not confident that the allegations in the petition are sufficient in form and substance, for so long as
this hearing is held within the five (5)-day period from the filing of the petition — the period within which a
stay order may issue as provided in the Interim Rules.

One of the important objectives of the Interim Rules is "to promote a speedy disposition of corporate
rehabilitation cases[,] x x x apparent from the strict time frames, the non-adversarial nature of the proceedings,
and the prohibition of certain kinds of pleadings."65 It is in light of this objective that a court with basis to issue
a stay order must do so not later than five (5) days from the date the petition was filed.66

Moreover, according to the November 17, 2000 memorandum submitted by the Supreme Court Committee
on the Interim Rules of Procedure on Corporate Rehabilitation:

The Proposed Rules remove the concept of the Interim Receiver and replace it with a rehabilitation receiver.
This is to justify the immediate issuance of the stay order because under Presidential Decree No. 902-A, as
amended, the suspension of actions takes effect only upon appointment of the rehabilitation
receiver.67 (Emphasis provided)

Even without this court going into the procedural issues, addressing the substantive merits of the case will yield
the same result.

Respondent China Banking Corporation mainly argues the violation of the constitutional proscription against
impairment of contractual obligations68 in that neither the provisions of Pres. Dec. No. 902-A as amended nor
the Interim Rules empower commercial courts "to render without force and effect valid contractual
stipulations."69

The non-impairment clause first appeared in the United States Constitution as a safeguard against the issuance
of worthless paper money that disturbed economic stability after the American Revolution.70 This
constitutional provision was designed to promote commercial stability.71 At its core is "a prohibition of state
interference with debtor-creditor relationships."72

This clause first became operative in the Philippines through the Philippine Bill of 1902, the fifth paragraph of
Section 5 which states "[t]hat no law impairing the obligation of contracts shall be enacted." It was consistently
adopted in subsequent Philippine fundamental laws, namely, the Jones Law of 1916,73 the 1935
Constitution,74 the 1973 Constitution,75 and the present Constitution.76

Nevertheless, this court has brushed aside invocations of the non-impairment clause to give way to a valid
exercise of police power77 and afford protection to labor.78

In Pacific Wide Realty and Development Corporation v. Puerto Azul Land, Inc.79 which similarly involved
corporate rehabilitation, this court found no merit in Pacific Wide’s invocation of the non-impairment clause,
explaining as follows:

We also find no merit in PWRDC’s contention that there is a violation of the impairment clause. Section 10,
Article III of the Constitution mandates that no law impairing the obligations of contract shall be passed. This
case does not involve a law or an executive issuance declaring the modification of the contract among debtor
PALI, its creditors and its accommodation mortgagors. Thus, the non-impairment clause may not be invoked.
Furthermore, as held in Oposa v. Factoran, Jr. even assuming that the same may be invoked, the non-
impairment clause must yield to the police power of the State. Property rights and contractual rights are not
absolute. The constitutional guaranty of non-impairment of obligations is limited by the exercise of the police
power of the State for the common good of the general public.

Successful rehabilitation of a distressed corporation will benefit its debtors, creditors, employees, and the
economy in general. The court may approve a rehabilitation plan even over the opposition of creditors holding
a majority of the total liabilities of the debtor if, in its judgment, the rehabilitation of the debtor is feasible and
the opposition of the creditors is manifestly unreasonable. The rehabilitation plan, once approved, is binding
upon the debtor and all persons who may be affected by it, including the creditors, whether or not such persons
have participated in the proceedings or have opposed the plan or whether or not their claims have been
scheduled.80

Corporate rehabilitation is one of many statutorily provided remedies for businesses that experience a
downturn. Rather than leave the various creditors unprotected, legislation now provides for an orderly
procedure of equitably and fairly addressing their concerns. Corporate rehabilitation allows a court-supervised
process to rejuvenate a corporation. Its twin, insolvency, provides for a system of liquidation and a procedure
of equitably settling various debts owed by an individual or a business. It provides a corporation’s owners a
sound chance to re-engage the market, hopefully with more vigor and enlightened services, having learned
from a painful experience.

Necessarily, a business in the red and about to incur tremendous losses may not be able to pay all its creditors.
Rather than leave it to the strongest or most resourceful amongst all of them, the state steps in to equitably
distribute the corporation’s limited resources.

The cram-down principle adopted by the Interim Rules does, in effect, dilute contracts. When it permits the
approval of a rehabilitation plan even over the opposition of creditors,81 or when it imposes a binding effect of
the approved plan on all parties including those who did not participate in the proceedings,82 the burden of
loss is shifted to the creditors to allow the corporation to rehabilitate itself from insolvency.

Rather than let struggling corporations slip and vanish, the better option is to allow commercial courts to come
in and apply the process for corporate rehabilitation.

This option is preferred so as to avoid what Garrett Hardin called the Tragedy of Commons. Here, Hardin
submits that "coercive government regulation is necessary to prevent the degradation of common-pool
resources [since] individual resource appropriators receive the full benefit of their use and bear only a share of
their cost."83 By analogy to the game theory, this is the prisoner’s dilemma: "Since no individual has the right
to control or exclude others, each appropriator has a very high discount rate [with] little incentive to efficiently
manage the resource in order to guarantee future use."84 Thus, the cure is an exogenous policy to equitably
distribute scarce resources. This will incentivize future creditors to continue lending, resulting in something
productive rather than resulting in nothing.

In fact, these corporations exist within a market. The General Theory of Second Best holds that "correction for
one market imperfection will not necessarily be efficiency-enhancing unless [there is also] simultaneous
[correction] for all other market imperfections."85 The correction of one market imperfection may adversely
affect market efficiency elsewhere, for instance, "a contract rule that corrects for an imperfection in the market
for consensual agreements may [at the same time] induce welfare losses elsewhere."86 This theory is one
justification for the passing of corporate rehabilitation laws allowing the suspension of payments so that
corporations can get back on their feet.
As in all markets, the environment is never guaranteed. There are always risks.1avvphi1 Contracts are indeed
sacred as the law between the parties. However, these contracts exist within a society where nothing is risk-
free, and the government is constantly being called to attend to the realities of the times.

Corporate rehabilitation is preferred for addressing social costs.1âwphi1 Allowing the corporation room to get
back on its feet will retain if not increase employment opportunities for the market as a whole. Indirectly, the
services offered by the corporation will also benefit the market as "[t]he fundamental impulse that sets and
keeps the capitalist engine in motion comes from [the constant entry of] new consumers’ goods, the new
methods of production or transportation, the new markets, [and] the new forms of industrial organization that
capitalist enterprise creates."87

As a final note, this is not the first time this court was made to review two separate petitions appealed from
two conflicting decisions, rendered by two divisions of the Court of Appeals, and originating from the same
case. In Serrano v. Ambassador Hotel, Inc.,88 we ordered the Court of Appeals to adopt immediately a more
efficient system in its Internal Rules to avoid situations as this.

In this instance, it is fortunate that this court had the opportunity to correct the situation and prevent
conflicting judgments from reaching impending finality with the referral to the En Banc.

We reiterate the need for our courts to be "constantly vigilant in extending their judicial gaze to cases related
to the matters submitted for their resolution"89 as to "ensure against judicial confusion and [any] seeming
conflict in the judiciary’s decisions."90

WHEREFORE, petitioner Pryce Corporation's motion is GRANTED. This court's February 4, 2008 decision is
RECONSIDERED and SET ASIDE.

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.

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.

G.R. No. 170054 January 21, 2013

GOYA, INC., Petitioner,

vs.
GOYA, INC. EMPLOYEES UNION-FFW, Respondent.

DECISION

PERALTA, J.:

This petition for review on certiorari under Rule 45 of the Rules of Civil Procedure seeks to reverse and set
aside the June 16, 2005 Decision1 and October 12, 2005 Resolution2 of the Court of Appeals in CA-G.R. SP No.
87335, which sustained the October 26, 2004 Decision3 of Voluntary Arbitrator Bienvenido E. Laguesma, the
dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered declaring that the Company is NOT guilty of unfair labor practice in
engaging the services of PESO.

The company is, however, directed to observe and comply with its commitment as it pertains to the hiring of
casual employees when necessitated by business circumstances.4

The facts are simple and appear to be undisputed.

Sometime in January 2004, petitioner Goya, Inc. (Company), a domestic corporation engaged in the
manufacture, importation, and wholesale of top quality food products, hired contractual employees from PESO
Resources Development Corporation (PESO) to perform temporary and occasional services in its factory in
Parang, Marikina City. This prompted respondent Goya, Inc. Employees Union–FFW (Union) to request for a
grievance conference on the ground that the contractual workers do not belong to the categories of employees
stipulated in the existing Collective Bargaining Agreement (CBA).5 When the matter remained unresolved, the
grievance was referred to the National Conciliation and Mediation Board (NCMB) for voluntary arbitration.

During the hearing on July 1, 2004, the Company and the Union manifested before Voluntary Arbitrator (VA)
Bienvenido E. Laguesma that amicable settlement was no longer possible; hence, they agreed to submit for
resolution the solitary issue of "[w]hether or not the Company is guilty of unfair labor acts in engaging the
services of PESO, a third party service provider, under the existing CBA, laws, and jurisprudence."6 Both parties
thereafter filed their respective pleadings.

The Union asserted that the hiring of contractual employees from PESO is not a management prerogative and
in gross violation of the CBA tantamount to unfair labor practice (ULP). It noted that the contractual workers
engaged have been assigned to work in positions previously handled by regular workers and Union members,
in effect violating Section 4, Article I of the CBA, which provides for three categories of employees in the
Company, to wit:

Section 4. Categories of Employees.– The parties agree on the following categories of employees:

(a) Probationary Employee. – One hired to occupy a regular rank-and-file position in the Company and is serving
a probationary period. If the probationary employee is hired or comes from outside the Company (non-Goya,
Inc. employee), he shall be required to undergo a probationary period of six (6) months, which period, in the
sole judgment of management, may be shortened if the employee has already acquired the knowledge or skills
required of the job. If the employee is hired from the casual pool and has worked in the same position at any
time during the past two (2) years, the probationary period shall be three (3) months.

(b) Regular Employee. – An employee who has satisfactorily completed his probationary period and
automatically granted regular employment status in the Company.

(c) Casual Employee, – One hired by the Company to perform occasional or seasonal work directly connected
with the regular operations of the Company, or one hired for specific projects of limited duration not connected
directly with the regular operations of the Company.

It was averred that the categories of employees had been a part of the CBA since the 1970s and that due to
this provision, a pool of casual employees had been maintained by the Company from which it hired workers
who then became regular workers when urgently necessary to employ them for more than a year. Likewise,
the Company sometimes hired probationary employees who also later became regular workers after passing
the probationary period. With the hiring of contractual employees, the Union contended that it would no
longer have probationary and casual employees from which it could obtain additional Union members; thus,
rendering inutile Section 1, Article III (Union Security) of the CBA, which states:

Section 1. Condition of Employment. – As a condition of continued employment in the Company, all regular
rank-and-file employees shall remain members of the Union in good standing and that new employees covered
by the appropriate bargaining unit shall automatically become regular employees of the Company and shall
remain members of the Union in good standing as a condition of continued employment.

The Union moreover advanced that sustaining the Company’s position would easily weaken and ultimately
destroy the former with the latter’s resort to retrenchment and/or retirement of employees and not filling up
the vacant regular positions through the hiring of contractual workers from PESO, and that a possible scenario
could also be created by the Company wherein it could "import" workers from PESO during an actual strike.

In countering the Union’s allegations, the Company argued that: (a) the law expressly allows contracting and
subcontracting arrangements through Department of Labor and Employment (DOLE) Order No. 18-02; (b) the
engagement of contractual employees did not, in any way, prejudice the Union, since not a single employee
was terminated and neither did it result in a reduction of working hours nor a reduction or splitting of the
bargaining unit; and (c) Section 4, Article I of the CBA merely provides for the definition of the categories of
employees and does not put a limitation on the Company’s right to engage the services of job contractors or
its management prerogative to address temporary/occasional needs in its operation.

On October 26, 2004, VA Laguesma dismissed the Union’s charge of ULP for being purely speculative and for
lacking in factual basis, but the Company was directed to observe and comply with its commitment under the
CBA. The VA opined:

We examined the CBA provision Section 4, Article I of the CBAallegedly violated by the Company and indeed
the agreement prescribes three (3) categories of employees in the Company and provides for the definition,
functions and duties of each. Material to the case at hand is the definition as regards the functions of a casual
employee described as follows:

Casual Employee – One hired by the COMPANY to perform occasional or seasonal work directly connected with
the regular operations of the COMPANY, or one hired for specific projects of limited duration not connected
directly with the regular operations of the COMPANY.

While the foregoing agreement between the parties did eliminate management’s prerogative of outsourcing
parts of its operations, it serves as a limitation on such prerogative particularly if it involves functions or duties
specified under the aforequoted agreement. It is clear that the parties agreed that in the event that the
Company needs to engage the services of additional workers who will perform "occasional or seasonal work
directly connected with the regular operations of the COMPANY," or "specific projects of limited duration not
connected directly with the regular operations of the COMPANY", the Company can hire casual employees
which is akin to contractual employees. If we note the Company’s own declaration that PESO was engaged to
perform "temporary or occasional services" (See the Company’s Position Paper, at p. 1), then it should have
directly hired the services of casual employees rather than do it through PESO.

It is evident, therefore, that the engagement of PESO is not in keeping with the intent and spirit of the CBA
provision in question. It must, however, be stressed that the right of management to outsource parts of its
operations is not totally eliminated but is merely limited by the CBA. Given the foregoing, the Company’s
engagement of PESO for the given purpose is indubitably a violation of the CBA.7
While the Union moved for partial reconsideration of the VA Decision,8 the Company immediately filed a
petition for review9 before the Court of Appeals (CA) under Rule 43 of the Revised Rules of Civil Procedure to
set aside the directive to observe and comply with the CBA commitment pertaining to the hiring of casual
employees when necessitated by business circumstances. Professing that such order was not covered by the
sole issue submitted for voluntary arbitration, the Company assigned the following errors:

THE HONORABLE VOLUNTARY ARBITRATOR EXCEEDED HIS POWER WHICH WAS EXPRESSLY GRANTED AND
LIMITED BY BOTH PARTIES IN RULING THAT THE ENGAGEMENT OF PESO IS NOT IN KEEPING WITH THE INTENT
AND SPIRIT OF THE CBA.10

THE HONORABLE VOLUNTARY ARBITRATOR COMMITTED A PATENT AND PALPABLE ERROR IN DECLARING THAT
THE ENGAGEMENT OF PESO IS NOT IN KEEPING WITH THE INTENT AND SPIRIT OF THE CBA.11

On June 16, 2005, the CA dismissed the petition. In dispensing with the merits of the controversy, it held:

This Court does not find it arbitrary on the part of the Hon. Voluntary Arbitrator in ruling that "the engagement
of PESO is not in keeping with the intent and spirit of the CBA." The said ruling is interrelated and intertwined
with the sole issue to be resolved that is, "Whether or not the Company is guilty of unfair labor practice in
engaging the services of PESO, a third party service provider, under existing CBA, laws, and jurisprudence."
Both issues concern the engagement of PESO by the Company which is perceived as a violation of the CBA and
which constitutes as unfair labor practice on the part of the Company. This is easily discernible in the decision
of the Hon. Voluntary Arbitrator when it held:

x x x x While the engagement of PESO is in violation of Section 4, Article I of the CBA, it does not constitute
unfair labor practice as it (sic) not characterized under the law as a gross violation of the CBA. Violations of a
CBA, except those which are gross in character, shall no longer be treated as unfair labor practice. Gross
violations of a CBA means flagrant and/or malicious refusal to comply with the economic provisions of such
agreement. x x x

Anent the second assigned error, the Company contends that the Hon. Voluntary Arbitrator erred in declaring
that the engagement of PESO is not in keeping with the intent and spirit of the CBA. The Company justified its
engagement of contractual employees through PESO as a management prerogative, which is not prohibited by
law. Also, it further alleged that no provision under the CBA limits or prohibits its right to contract out certain
services in the exercise of management prerogatives.

Germane to the resolution of the above issue is the provision in their CBA with respect to the categories of the
employees:

xxxx

A careful reading of the above-enumerated categories of employees reveals that the PESO contractual
employees do not fall within the enumerated categories of employees stated in the CBA of the parties.
Following the said categories, the Company should have observed and complied with the provision of their
CBA. Since the Company had admitted that it engaged the services of PESO to perform temporary or occasional
services which is akin to those performed by casual employees, the Company should have tapped the services
of casual employees instead of engaging PESO.

In justifying its act, the Company posits that its engagement of PESO was a management prerogative. It bears
stressing that a management prerogative refers to the right of the employer to regulate all aspects of
employment, such as the freedom to prescribe work assignments, working methods, processes to be followed,
regulation regarding transfer of employees, supervision of their work, lay-off and discipline, and dismissal and
recall of work, presupposing the existence of employer-employee relationship. On the basis of the foregoing
definition, the Company’s engagement of PESO was indeed a management prerogative. This is in consonance
with the pronouncement of the Supreme Court in the case of Manila Electric Company vs. Quisumbing where
it ruled that contracting out of services is an exercise of business judgment or management prerogative.

This management prerogative of contracting out services, however, is not without limitation. In contracting
out services, the management must be motivated by good faith and the contracting out should not be resorted
to circumvent the law or must not have been the result of malicious arbitrary actions. In the case at bench, the
CBA of the parties has already provided for the categories of the employees in the Company’sestablishment.
These categories of employees particularly with respect to casual employees serve as limitation to the
Company’s prerogative to outsource parts of its operations especially when hiring contractual employees. As
stated earlier, the work to be performed by PESO was similar to that of the casual employees. With the
provision on casual employees, the hiring of PESO contractual employees, therefore, is not in keeping with the
spirit and intent of their CBA. (Citations omitted)12

The Company moved to reconsider the CA Decision,13 but it was denied;14 hence, this petition.

Incidentally, on July 16, 2009, the Company filed a Manifestation15 informing this Court that its stockholders
and directors unanimously voted to shorten the Company’s corporate existence only until June 30, 2006, and
that the three-year period allowed by law for liquidation of the Company’s affairs already expired on June 30,
2009. Referring to Gelano v. Court of Appeals,16 Public Interest Center, Inc. v. Elma,17 and Atienza v.
Villarosa,18 it urged Us, however, to still resolve the case for future guidance of the bench and the bar as the
issue raised herein allegedly calls for a clarification of a legal principle, specifically, whether the VA is
empowered to rule on a matter not covered by the issue submitted for arbitration.

Even if this Court would brush aside technicality by ignoring the supervening event that renders this case moot
and academic19 due to the permanent cessation of the Company’s business operation on June 30, 2009, the
arguments raised in this petition still fail to convince Us.

We confirm that the VA ruled on a matter that is covered by the sole issue submitted for voluntary arbitration.
Resultantly, the CA did not commit serious error when it sustained the ruling that the hiring of contractual
employees from PESO was not in keeping with the intent and spirit of the CBA. Indeed, the opinion of the VA
is germane to, or, in the words of the CA, "interrelated and intertwined with," the sole issue submitted for
resolution by the parties. This being said, the Company’s invocation of Sections 4 and 5, Rule IV20 and Section
5, Rule VI21 of the Revised Procedural Guidelines in the Conduct of Voluntary Arbitration Proceedings dated
October 15, 2004 issued by the NCMB is plainly out of order.

Likewise, the Company cannot find solace in its cited case of Ludo & Luym Corporation v. Saornido.22 In Ludo,
the company was engaged in the manufacture of coconut oil, corn starch, glucose and related products. In the
course of its business operations, it engaged the arrastre services of CLAS for the loading and unloading of its
finished products at the wharf. The arrastre workers deployed by CLAS to perform the services needed were
subsequently hired, on different dates, as Ludo’s regular rank-and-file employees. Thereafter, said employees
joined LEU, which acted as the exclusive bargaining agent of the rank-and-file employees. When LEU entered
into a CBA with Ludo, providing for certain benefits to the employees (the amount of which vary according to
the length of service rendered), it requested to include in its members’ period of service the time during which
they rendered arrastre services so that they could get higher benefits. The matter was submitted for voluntary
arbitration when Ludo failed to act. Per submission agreement executed by both parties, the sole issue for
resolution was the date of regularization of the workers. The VA Decision ruled that: (1) the subject employees
were engaged in activities necessary and desirable to the business of Ludo, and (2) CLAS is a labor-only
contractor of Ludo. It then disposed as follows: (a) the complainants were considered regular employees six
months from the first day of service at CLAS; (b) the complainants, being entitled to the CBA benefits during
the regular employment, were awarded sick leave, vacation leave, and annual wage and salary increases during
such period; (c) respondents shall pay attorney’s fees of 10% of the total award; and (d) an interest of 12% per
annum or 1% per month shall be imposed on the award from the date of promulgation until fully paid. The VA
added that all separation and/or retirement benefits shall be construed from the date of regularization subject
only to the appropriate government laws and other social legislation. Ludo filed a motion for reconsideration,
but the VA denied it. On appeal, the CA affirmed in toto the assailed decision; hence, a petition was brought
before this Court raising the issue, among others, of whether a voluntary arbitrator can award benefits not
claimed in the submission agreement. In denying the petition, We ruled:

Generally, the arbitrator is expected to decide only those questions expressly delineated by the submission
agreement. Nevertheless, the arbitrator can assume that he has the necessary power to make a final
settlement since arbitration is the final resort for the adjudication of disputes. The succinct reasoning
enunciated by the CA in support of its holding, that the Voluntary Arbitrator in a labor controversy has
jurisdiction to render the questioned arbitral awards, deserves our concurrence, thus:

In general, the arbitrator is expected to decide those questions expressly stated and limited in the submission
agreement. However, since arbitration is the final resort for the adjudication of disputes, the arbitrator can
assume that he has the power to make a final settlement. Thus, assuming that the submission empowers the
arbitrator to decide whether an employee was discharged for just cause, the arbitrator in this instance can
reasonably assume that his powers extended beyond giving a yes-or-no answer and included the power to
reinstate him with or without back pay.

In one case, the Supreme Court stressed that "xxx the Voluntary Arbitrator had plenary jurisdiction and
authority to interpret the agreement to arbitrate and to determine the scope of his own authority subject only,
in a proper case, to the certiorari jurisdiction of this Court. The Arbitrator, as already indicated, viewed his
authority as embracing not merely the determination of the abstract question of whether or not a performance
bonus was to be granted but also, in the affirmative case, the amount thereof.

By the same token, the issue of regularization should be viewed as two-tiered issue. While the submission
agreement mentioned only the determination of the date or regularization, law and jurisprudence give the
voluntary arbitrator enough leeway of authority as well as adequate prerogative to accomplish the reason for
which the law on voluntary arbitration was created – speedy labor justice. It bears stressing that the underlying
reason why this case arose is to settle, once and for all, the ultimate question of whether respondent
employees are entitled to higher benefits. To require them to file another action for payment of such benefits
would certainly undermine labor proceedings and contravene the constitutional mandate providing full
protection to labor.23

Indubitably, Ludo fortifies, not diminishes, the soundness of the questioned VA Decision. Said case reaffirms
the plenary jurisdiction and authority of the voluntary arbitrator to interpret the CBA and to determine the
scope of his/her own authority. Subject to judicial review, the leeway of authority as well as adequate
prerogative is aimed at accomplishing the rationale of the law on voluntary arbitration – speedy labor justice.
In this case, a complete and final adjudication of the dispute between the parties necessarily called for the
resolution of the related and incidental issue of whether the Company still violated the CBA but without being
guilty of ULP as, needless to state, ULP is committed only if there is gross violation of the agreement.

Lastly, the Company kept on harping that both the VA and the CA conceded that its engagement of contractual
workers from PESO was a valid exercise of management prerogative. It is confused. To emphasize, declaring
that a particular act falls within the concept of management prerogative is significantly different from
acknowledging that such act is a valid exercise thereof. What the VA and the CA correctly ruled was that the
Company’s act of contracting out/outsourcing is within the purview of management prerogative. Both did not
say, however, that such act is a valid exercise thereof. Obviously, this is due to the recognition that the CBA
provisions agreed upon by the Company and the Union delimit the free exercise of management prerogative
pertaining to the hiring of contractual employees. Indeed, the VA opined that "the right of the management to
outsource parts of its operations is not totally eliminated but is merely limited by the CBA," while the CA held
that "this management prerogative of contracting out services, however, is not without limitation. x x x These
categories of employees particularly with respect to casual employees serve as limitation to the Company’s
prerogative to outsource parts of its operations especially when hiring contractual employees."

A collective bargaining agreement is the law between the parties:

It is familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they are
obliged to comply with its provisions. We said so in Honda Phils., Inc. v. Samahan ng Malayang Manggagawa
sa Honda:

A collective bargaining agreement or CBA refers to the 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.1âwphi1 As in all contracts, the parties in 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.

Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of their stipulations shall control. x x x.24

In this case, Section 4, Article I (on categories of employees) of the CBA between the Company and the Union
must be read in conjunction with its Section 1, Article III (on union security). Both are interconnected and must
be given full force and effect. Also, these provisions are clear and unambiguous. The terms are explicit and the
language of the CBA is not susceptible to any other interpretation. Hence, the literal meaning should prevail.
As repeatedly held, the exercise of management prerogative is not unlimited; it is subject to the limitations
found in law, collective bargaining agreement or the general principles of fair play and justice25 Evidently, this
case has one of the restrictions- the presence of specific CBA provisions-unlike in San Miguel Corporation
Employees Union-PTGWO v. Bersamira,26 De Ocampo v. NLRC,27 Asian Alcohol Corporation v. NLRC,28 and
Serrano v. NLRC29cited by the Company. To reiterate, the CBA is the norm of conduct between the parties and
compliance therewith is mandated by the express policy of the law.30

WHEREFORE, the petition is DENIED. The assailed June 16, 2005 Decision, as well as the October 12, 2005
Resolution of the Court of Appeals, which sustained the October 26, 2004 Decision of the Voluntary Arbitrator,
are hereby AFFIRMED.

SO ORDERED.

G.R. No. 204819 April 8, 2014

JAMES M. IMBONG and LOVELY-ANN C. IMBONG, for themselves and in behalf of their minor children, LUCIA
CARLOS IMBONG and BERNADETTE CARLOS IMBONG and MAGNIFICAT CHILD DEVELOPMENT CENTER,
INC., Petitioners,
vs.
HON. PAQUITO N. OCHOA, JR., Executive Secretary, HON. FLORENCIO B. ABAD, Secretary, Department of
Budget and Management, HON. ENRIQUE T. ONA, Secretary, Department of Health, HON. ARMIN A.
LUISTRO, Secretary, Department of Education, Culture and Sports and HON. MANUELA. ROXAS II, Secretary,
Department of Interior and Local Government, Respondents.

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

G.R. No. 204934

ALLIANCE FOR THE FAMILY FOUNDATION PHILIPPINES, INC. [ALFI], represented by its President, Maria
Concepcion S. Noche, Spouses Reynaldo S. Luistro & Rosie B . Luistro, Jose S. Sandejas & Elenita S.A.
Sandejas, Arturo M. Gorrez & Marietta C. Gorrez, Salvador S. Mante, Jr. & Hazeleen L. Mante, Rolando M.
Bautista & Maria Felisa S. Bautista, Desiderio Racho & Traquilina Racho, F emand Antonio A. Tansingco &
Carol Anne C. Tansingco for themselves and on behalf of their minor children, Therese Antonette C.
Tansingco, Lorenzo Jose C. Tansingco, Miguel F emando C. Tangsingco, Carlo Josemaria C. Tansingco & Juan
Paolo C. Tansingco, Spouses Mariano V. Araneta & Eileen Z. Araneta for themselves and on behalf of their
minor children, Ramon Carlos Z. Araneta & Maya Angelica Z. Araneta, Spouses Renato C. Castor & Mildred
C. Castor for themselves and on behalf of their minor children, Renz Jeffrey C. Castor, Joseph Ramil C. Castor,
John Paul C. Castor & Raphael C. Castor, Spouses Alexander R. Racho & Zara Z. Racho for themselves and on
behalf of their minor children Margarita Racho, Mikaela Racho, Martin Racho, Mari Racho & Manolo Racho,
Spouses Alfred R. Racho & Francine V. Racho for themselves and on behalf of their minor children Michael
Racho, Mariana Racho, Rafael Racho, Maxi Racho, Chessie Racho & Laura Racho, Spouses David R. Racho &
Armilyn A. Racho for themselves and on behalf of their minor child Gabriel Racho, Mindy M. Juatas and on
behalf of her minor children Elijah Gerald Juatas and Elian Gabriel Juatas, Salvacion M. Monteiro, Emily R.
Laws, Joseph R . Laws & Katrina R. Laws, Petitioners,
vs.
HON. PAQUITO N. OCHOA, JR., Executive Secretary, HON. ENRIQUE T. ONA, Secretary, Department of Health,
HON. ARMIN A. LUISTRO, Secretary, Department of Education, Culture and Sports, HON. CORAZON
SOLIMAN, Secretary, Department of Social Welfare and Development, HON. MANUELA. ROXAS II, Secretary,
Department of Interior and Local Government, HON. FLORENCIO B. ABAD, Secretary, Department of Budget
and Management, HON. ARSENIO M. BALISACAN, Socio-Economic Planning Secretary and NEDA Director-
General, THE PHILIPPINE COMMISSION ON WOMEN, represented by its Chairperson, Remedios lgnacio-
Rikken, THE PHILIPPINE HEALTH INSURANCE CORPORATION, represented by its President Eduardo Banzon,
THE LEAGUE OF PROVINCES OF THE PHILIPPINES, represented by its President Alfonso Umali, THE LEAGUE
OF CITIES OF THE PHILIPPINES, represented by its President Oscar Rodriguez, and THE LEAGUE OF
MUNICIPALITIES OF THE PHILIPPINES, represented by its President Donato Marcos,Respondents.

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

G.R. No. 204957

TASK FORCE FOR FAMILY AND LIFE VISAYAS, INC. and VALERIANO S. AVILA, Petitioners,
vs.
HON. PAQUITO N. OCHOA, JR., Executive Secretary; HON. FLORENCIO B. ABAD, Secretary, Department of
Budget and Management; HON. ENRIQUE T. ONA, Secretary, Department of Education; and HON. MANUELA.
ROXAS II, Secretary, Department of Interior and Local Government, Respondents.

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

G.R. No. 204988

SERVE LIFE CAGAYAN DE ORO CITY, INC., represented by Dr. Nestor B. Lumicao, M.D., as President and in his
personal capacity, ROSEVALE FOUNDATION INC., represented by Dr. Rodrigo M. Alenton, M.D., as member
of the school board and in his personal capacity, ROSEMARIE R. ALENTON, IMELDA G. IBARRA, CPA,
LOVENIAP. NACES, Phd., ANTHONY G. NAGAC, EARL ANTHONY C. GAMBE and MARLON I. YAP,Petitioners,
vs.
OFFICE OF THE PRESIDENT, SENATE OF THE PHILIPPINES, HOUSE OF REPRESENTATIVES, HON. PAQUITO N.
OCHOA, JR., Executive Secretary, HON. FLORENCIO B. ABAD, Secretary, Department of Budget and
Management; HON. ENRIQUE T. ONA, Secretary, Department of Health; HON. ARMIN A. LUISTRO, Secretary,
Department of Education and HON. MANUELA. ROXAS II, Secretary, Department of Interior and Local
Government, Respondents.

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

G.R. No. 205003

EXPEDITO A. BUGARIN, JR., Petitioner,

vs.
OFFICE OF THE PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES, HON. SENATE PRESIDENT, HON. SPEAKER
OF THE HOUSE OF REPRESENTATIVES and HON. SOLICITOR GENERAL, Respondents.

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

G.R. No. 205043

EDUARDO B. OLAGUER and THE CATHOLIC XYBRSPACE APOSTOLATE OF THE PHILIPPINES, Petitioners,
vs.
DOH SECRETARY ENRIQUE T. ONA, FDA DIRECTOR SUZETTE H. LAZO, DBM SECRETARY FLORENCIO B. ABAD,
DILG SECRETARY MANUELA. ROXAS II, DECS SECRETARY ARMIN A. LUISTRO, Respondents.

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

G.R. No. 205138

PHILIPPINE ALLIANCE OF XSEMINARIANS, INC. (PAX), herein represented by its National President, Atty.
Ricardo M . Ribo, and in his own behalf, Atty. Lino E.A. Dumas, Romeo B. Almonte, Osmundo C. Orlanes,
Arsenio Z. Menor, Samuel J. Yap, Jaime F. Mateo, Rolly Siguan, Dante E. Magdangal, Michael Eugenio O.
Plana, Bienvenido C. Miguel, Jr., Landrito M. Diokno and Baldomero Falcone, Petitioners,
vs.
HON. PAQUITO N. OCHOA, JR., Executive Secretary, HON. FLORENCIO B. ABAD, Secretary, Department of
Budget and Management, HON. ENRIQUE T. ONA, Secretary, Department of Health, HON. ARMIN A.
LUISTRO, Secretary, Department of Education, HON. MANUELA. ROXAS II, Secretary, Department of Interior
and Local Government, HON. CORAZON J. SOLIMAN, Secretary, Department of Social Welfare and
Development, HON. ARSENIO BALISACAN, Director-General, National Economic and Development
Authority, HON. SUZETTE H. LAZO, Director-General, Food and Drugs Administration, THE BOARD OF
DIRECTORS, Philippine Health Insurance Corporation, and THE BOARD OF COMMISSIONERS, Philippine
Commission on Women, Respondents.

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

G.R. No. 205478

REYNALDO J. ECHAVEZ, M.D., JACQUELINE H. KING, M.D., CYNTHIA T. DOMINGO, M.D., AND JOSEPHINE
MILLADO-LUMITAO, M.D., collectively known as Doctors For Life, and ANTHONY PEREZ, MICHAEL ANTHONY
G. MAPA, CARLOS ANTONIO PALAD, WILFREDO JOSE, CLAIRE NAVARRO, ANNA COSIO, and GABRIEL DY
LIACCO collectively known as Filipinos For Life, Petitioners,
vs.
HON. PAQUITO N. OCHOA, JR., Executive Secretary; HON. FLORENCIO B. ABAD, Secretary of the Department
of Budget and Management; HON. ENRIQUE T. ONA, Secretary of the Department of Health; HON. ARMIN
A. LUISTRO, Secretary of the Department of Education; and HON. MANUELA. ROXAS II, Secretary of the
Department of Interior and Local Government, Respondents.

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

G.R. No. 205491

SPOUSES FRANCISCO S. TATAD AND MARIA FENNY C. TATAD & ALA F. PAGUIA, for themselves, their
Posterity, and the rest of Filipino posterity, Petitioners,
vs.
OFFICE OF THE PRESIDENT of the Republic of the Philippines, Respondent.

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

G.R. No. 205720

PRO-LIFE PHILIPPINES FOUNDATION, Inc., represented by Loma Melegrito, as Executive Director, and in her
personal capacity, JOSELYN B. BASILIO, ROBERT Z. CORTES, ARIEL A. CRISOSTOMO, JEREMY I. GATDULA,
CRISTINA A. MONTES, RAUL ANTONIO A. NIDOY, WINSTON CONRAD B. PADOJINOG, RUFINO L. POLICARPIO
III, Petitioners,
vs.
OFFICE OF THE PRESIDENT, SENATE OF THE PHILIPPINES, HOUSE OF REPRESENTATIVES, HON. PAQUITO N.
OCHOA, JR., Executive Secretary, HON. FLORENCIO B. ABAD, Secretary, Department of Budget and
Management, HON. ENRIQUE T. ONA, Secretary, Department of Health, HON. ARMIN A. LUISTRO, Secretary,
Department of Education and HON. MANUEL A. ROXAS II, Secretary, Department of Interior and Local
Government, Respondents.

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

G.R. No. 206355

MILLENNIUM SAINT FOUNDATION, INC., ATTY. RAMON PEDROSA, ATTY. CITA BORROMEO-GARCIA,
STELLAACEDERA, ATTY. BERTENI CATALUNA CAUSING, Petitioners,
vs.
OFFICE OF THE PRESIDENT, OFFICE OF THE EXECUTIVE SECRETARY, DEPARTMENT OF HEALTH, DEPARTMENT
OF EDUCATION, Respondents.

x---------------------------------x
G.R. No. 207111

JOHN WALTER B. JUAT, MARY M. IMBONG, ANTHONY VICTORIO B. LUMICAO, JOSEPH MARTIN Q. VERDEJO,
ANTONIA EMMA R. ROXAS and LOTA LAT-GUERRERO, Petitioners,
vs.
HON. PAQUITO N. OCHOA, JR., Executive Secretary, HON. FLORENCIO ABAD, Secretary, Department of
Budget and Management, HON. ENRIQUE T. ONA, Secretary, Department of Health, HON. ARMIN A.
LUISTRO, Secretary, Department of Education, Culture and Sports and HON. MANUEL A. ROXAS II, Secretary,
Department of Interior and Local Government, Respondents.

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

G.R. No. 207172

COUPLES FOR CHRIST FOUNDATION, INC., SPOUSES JUAN CARLOS ARTADI SARMIENTO AND FRANCESCA
ISABELLE BESINGA-SARMIENTO, AND SPOUSES LUIS FRANCIS A. RODRIGO, JR. and DEBORAH MARIE
VERONICA N. RODRIGO, Petitioners,
vs.
HON. PAQUITO N. OCHOA, JR., Executive Secretary, HON. FLORENCIO B. ABAD, Secretary, Department of
Budget and Management, HON. ENRIQUE T. ONA, Secretary, Department of Health, HON. ARMIN A.
LUISTRO, Secretary, Department of Education, Culture and Sports and HON. MANUELA. ROXAS II, Secretary,
Department of Interior and Local Government, Respondents.

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

G.R. No. 207563

ALMARIM CENTI TILLAH and ABDULHUSSEIN M. KASHIM, Petitioners,

vs.
HON. PAQUITO N. OCHOA, JR., Executive Secretary, HON. ENRIQUE T. ONA, Secretary of the Department of
Health, and HON. ARMIN A. LUISTRO,Secretary of the Department of Budget and Management,Respondents.

DECISION

MENDOZA, J.:

Freedom of religion was accorded preferred status by the framers of our fundamental law. And this Court has
consistently affirmed this preferred status, well aware that it is "designed to protect the broadest possible
liberty of conscience, to allow each man to believe as his conscience directs, to profess his beliefs , and to live
as he believes he ought to live, consistent with the liberty of others and with the common good."1

To this day, poverty is still a major stumbling block to the nation's emergence as a developed country, leaving
our people beleaguered in a state of hunger, illiteracy and unemployment. While governmental policies have
been geared towards the revitalization of the economy, the bludgeoning dearth in social services remains to
be a problem that concerns not only the poor, but every member of society. The government continues to
tread on a trying path to the realization of its very purpose, that is, the general welfare of the Filipino people
and the development of the country as a whole. The legislative branch, as the main facet of a representative
government, endeavors to enact laws and policies that aim to remedy looming societal woes, while the
executive is closed set to fully implement these measures and bring concrete and substantial solutions within
the reach of Juan dela Cruz. Seemingly distant is the judicial branch, oftentimes regarded as an inert
governmental body that merely casts its watchful eyes on clashing stakeholders until it is called upon to
adjudicate. Passive, yet reflexive when called into action, the Judiciary then willingly embarks on its solemn
duty to interpret legislation vis-a-vis the most vital and enduring principle that holds Philippine society together
- the supremacy of the Philippine Constitution.

Nothing has polarized the nation more in recent years than the issues of population growth control, abortion
and contraception. As in every democratic society, diametrically opposed views on the subjects and their
perceived consequences freely circulate in various media. From television debates2 to sticker campaigns,3 from
rallies by socio-political activists to mass gatherings organized by members of the clergy4 - the clash between
the seemingly antithetical ideologies of the religious conservatives and progressive liberals has caused a deep
division in every level of the society. Despite calls to withhold support thereto, however, Republic Act (R.A.)
No. 10354, otherwise known as the Responsible Parenthood and Reproductive Health Act of 2012 (RH Law),
was enacted by Congress on December 21, 2012.

Shortly after the President placed his imprimatur on the said law, challengers from various sectors of society
came knocking on the doors of the Court, beckoning it to wield the sword that strikes down constitutional
disobedience. Aware of the profound and lasting impact that its decision may produce, the Court now faces
the iuris controversy, as presented in fourteen (14) petitions and two (2) petitions- in-intervention, to wit:

(1) Petition for Certiorari and Prohibition,5 filed by spouses Attys. James M. Imbong and Lovely Ann C. Imbong,
in their personal capacities as citizens, lawyers and taxpayers and on behalf of their minor children; and the
Magnificat Child Leaming Center, Inc., a domestic, privately-owned educational institution (Jmbong);

(2) Petition for Prohibition,6 filed by the Alliance for the Family Foundation Philippines, Inc., through its
president, Atty. Maria Concepcion S. Noche7 and several others8 in their personal capacities as citizens and on
behalf of the generations unborn (ALFI);

(3) Petition for Certiorari,9 filed by the Task Force for Family and Life Visayas, Inc., and Valeriano S. Avila, in
their capacities as citizens and taxpayers (Task Force Family);

(4) Petition for Certiorari and Prohibition,10 filed by Serve Life Cagayan De Oro City, Inc.,11 Rosevale Foundation,
Inc.,12 a domestic, privately-owned educational institution, and several others,13 in their capacities as citizens
(Serve Life);

(5) Petition,14 filed by Expedito A. Bugarin, Jr. in his capacity as a citizen (Bugarin);

(6) Petition for Certiorari and Prohibition,15 filed by Eduardo Olaguer and the Catholic Xybrspace Apostolate of
the Philippines,16 in their capacities as a citizens and taxpayers (Olaguer);

(7) Petition for Certiorari and Prohibition,17 filed by the Philippine Alliance of Xseminarians Inc.,18 and several
others19 in their capacities as citizens and taxpayers (PAX);

(8) Petition,20 filed by Reynaldo J. Echavez, M.D. and several others,21 in their capacities as citizens and
taxpayers (Echavez);

(9) Petition for Certiorari and Prohibition,22 filed by spouses Francisco and Maria Fenny C. Tatad and Atty. Alan
F. Paguia, in their capacities as citizens, taxpayers and on behalf of those yet unborn. Atty. Alan F. Paguia is also
proceeding in his capacity as a member of the Bar (Tatad);

(10) Petition for Certiorari and Prohibition,23 filed by Pro-Life Philippines Foundation Inc.24 and several
others,25 in their capacities as citizens and taxpayers and on behalf of its associates who are members of the
Bar (Pro-Life);
(11) Petition for Prohibition,26 filed by Millennium Saint Foundation, Inc.,27 Attys. Ramon Pedrosa, Cita
Borromeo-Garcia, Stella Acedera, and Berteni Catalufia Causing, in their capacities as citizens, taxpayers and
members of the Bar (MSF);

(12) Petition for Certiorari and Prohibition,28 filed by John Walter B. Juat and several others,29 in their capacities
as citizens (Juat) ;

(13) Petition for Certiorari and Prohibition,30 filed by Couples for Christ Foundation, Inc. and several others,31in
their capacities as citizens (CFC);

(14) Petition for Prohibition32 filed by Almarim Centi Tillah and Abdulhussein M. Kashim in their capacities as
citizens and taxpayers (Tillah); and

(15) Petition-In-Intervention,33 filed by Atty. Samson S. Alcantara in his capacity as a citizen and a taxpayer
(Alcantara); and

(16) Petition-In-Intervention,34 filed by Buhay Hayaang Yumabong (B UHAY) , an accredited political party.

A perusal of the foregoing petitions shows that the petitioners are assailing the constitutionality of RH Law on
the following GROUNDS:

• The RH Law violates the right to life of the unborn. According to the petitioners, notwithstanding its declared
policy against abortion, the implementation of the RH Law would authorize the purchase of hormonal
contraceptives, intra-uterine devices and injectables which are abortives, in violation of Section 12, Article II of
the Constitution which guarantees protection of both the life of the mother and the life of the unborn from
conception.35

• The RH Law violates the right to health and the right to protection against hazardous products. The petitioners
posit that the RH Law provides universal access to contraceptives which are hazardous to one's health, as it
causes cancer and other health problems.36

• The RH Law violates the right to religious freedom. The petitioners contend that the RH Law violates the
constitutional guarantee respecting religion as it authorizes the use of public funds for the procurement of
contraceptives. For the petitioners, the use of public funds for purposes that are believed to be contrary to
their beliefs is included in the constitutional mandate ensuring religious freedom.37

It is also contended that the RH Law threatens conscientious objectors of criminal prosecution, imprisonment
and other forms of punishment, as it compels medical practitioners 1] to refer patients who seek advice on
reproductive health programs to other doctors; and 2] to provide full and correct information on reproductive
health programs and service, although it is against their religious beliefs and convictions.38

In this connection, Section 5 .23 of the Implementing Rules and Regulations of the RH Law (RH-IRR),39 provides
that skilled health professionals who are public officers such as, but not limited to, Provincial, City, or Municipal
Health Officers, medical officers, medical specialists, rural health physicians, hospital staff nurses, public health
nurses, or rural health midwives, who are specifically charged with the duty to implement these Rules, cannot
be considered as conscientious objectors.40

It is also argued that the RH Law providing for the formulation of mandatory sex education in schools should
not be allowed as it is an affront to their religious beliefs.41
While the petit10ners recognize that the guarantee of religious freedom is not absolute, they argue that the
RH Law fails to satisfy the "clear and present danger test" and the "compelling state interest test" to justify the
regulation of the right to free exercise of religion and the right to free speech.42

• The RH Law violates the constitutional provision on involuntary servitude. According to the petitioners, the
RH Law subjects medical practitioners to involuntary servitude because, to be accredited under the PhilHealth
program, they are compelled to provide forty-eight (48) hours of pro bona services for indigent women, under
threat of criminal prosecution, imprisonment and other forms of punishment.43

The petitioners explain that since a majority of patients are covered by PhilHealth, a medical practitioner would
effectively be forced to render reproductive health services since the lack of PhilHealth accreditation would
mean that the majority of the public would no longer be able to avail of the practitioners services.44

• The RH Law violates the right to equal protection of the law. It is claimed that the RH Law discriminates
against the poor as it makes them the primary target of the government program that promotes contraceptive
use. The petitioners argue that, rather than promoting reproductive health among the poor, the RH Law seeks
to introduce contraceptives that would effectively reduce the number of the poor.45

• The RH Law is "void-for-vagueness" in violation of the due process clause of the Constitution. In imposing the
penalty of imprisonment and/or fine for "any violation," it is vague because it does not define the type of
conduct to be treated as "violation" of the RH Law.46

In this connection, it is claimed that "Section 7 of the RH Law violates the right to due process by removing
from them (the people) the right to manage their own affairs and to decide what kind of health facility they
shall be and what kind of services they shall offer."47 It ignores the management prerogative inherent in
corporations for employers to conduct their affairs in accordance with their own discretion and judgment.

• The RH Law violates the right to free speech. To compel a person to explain a full range of family planning
methods is plainly to curtail his right to expound only his own preferred way of family planning. The petitioners
note that although exemption is granted to institutions owned and operated by religious groups, they are still
forced to refer their patients to another healthcare facility willing to perform the service or procedure.48

• The RH Law intrudes into the zone of privacy of one's family protected by the Constitution. It is contended
that the RH Law providing for mandatory reproductive health education intrudes upon their constitutional right
to raise their children in accordance with their beliefs.49

It is claimed that, by giving absolute authority to the person who will undergo reproductive health procedure,
the RH Law forsakes any real dialogue between the spouses and impedes the right of spouses to mutually
decide on matters pertaining to the overall well-being of their family. In the same breath, it is also claimed that
the parents of a child who has suffered a miscarriage are deprived of parental authority to determine whether
their child should use contraceptives.50

• The RH Law violates the constitutional principle of non-delegation of legislative authority. The petitioners
question the delegation by Congress to the FDA of the power to determine whether a product is non-
abortifacient and to be included in the Emergency Drugs List (EDL).51

• The RH Law violates the one subject/one bill rule provision under Section 26( 1 ), Article VI of the
Constitution.52

• The RH Law violates Natural Law.53

• The RH Law violates the principle of Autonomy of Local Government Units (LGUs) and the Autonomous
Region of Muslim Mindanao {ARMM). It is contended that the RH Law, providing for reproductive health
measures at the local government level and the ARMM, infringes upon the powers devolved to LGUs and the
ARMM under the Local Government Code and R.A . No. 9054.54

Various parties also sought and were granted leave to file their respective comments-in-intervention in defense
of the constitutionality of the RH Law. Aside from the Office of the Solicitor General (OSG) which commented
on the petitions in behalf of the respondents,55 Congressman Edcel C. Lagman,56 former officials of the
Department of Health Dr. Esperanza I. Cabral, Jamie Galvez-Tan, and Dr. Alberto G. Romualdez,57 the Filipino
Catholic Voices for Reproductive Health (C4RH),58 Ana Theresa "Risa" Hontiveros,59 and Atty. Joan De
Venecia60 also filed their respective Comments-in-Intervention in conjunction with several others. On June 4,
2013, Senator Pia Juliana S. Cayetano was also granted leave to intervene.61

The respondents, aside from traversing the substantive arguments of the petitioners, pray for the dismissal of
the petitions for the principal reasons that 1] there is no actual case or controversy and, therefore, the issues
are not yet ripe for judicial determination.; 2] some petitioners lack standing to question the RH Law; and 3]
the petitions are essentially petitions for declaratory relief over which the Court has no original jurisdiction.

Meanwhile, on March 15, 2013, the RH-IRR for the enforcement of the assailed legislation took effect.

On March 19, 2013, after considering the issues and arguments raised, the Court issued the Status Quo Ante
Order (SQAO), enjoining the effects and implementation of the assailed legislation for a period of one hundred
and twenty (120) days, or until July 17, 2013.62

On May 30, 2013, the Court held a preliminary conference with the counsels of the parties to determine and/or
identify the pertinent issues raised by the parties and the sequence by which these issues were to be discussed
in the oral arguments. On July 9 and 23, 2013, and on August 6, 13, and 27, 2013, the cases were heard on oral
argument. On July 16, 2013, the SQAO was ordered extended until further orders of the Court.63

Thereafter, the Court directed the parties to submit their respective memoranda within sixty (60) days and, at
the same time posed several questions for their clarification on some contentions of the parties.64

The Status Quo Ante

(Population, Contraceptive and Reproductive Health Laws

Prior to the RH Law

Long before the incipience of the RH Law, the country has allowed the sale, dispensation and distribution of
contraceptive drugs and devices. As far back as June 18, 1966, the country enacted R.A. No. 4729 entitled "An
Act to Regu,late the Sale, Dispensation, and/or Distribution of Contraceptive Drugs and Devices." Although
contraceptive drugs and devices were allowed, they could not be sold, dispensed or distributed "unless such
sale, dispensation and distribution is by a duly licensed drug store or pharmaceutical company and with the
prescription of a qualified medical practitioner."65

In addition, R.A. No. 5921,66 approved on June 21, 1969, contained provisions relative to "dispensing of
abortifacients or anti-conceptional substances and devices." Under Section 37 thereof, it was provided that
"no drug or chemical product or device capable of provoking abortion or preventing conception as classified
by the Food and Drug Administration shall be delivered or sold to any person without a proper prescription by
a duly licensed physician."
On December 11, 1967, the Philippines, adhering to the UN Declaration on Population, which recognized that
the population problem should be considered as the principal element for long-term economic development,
enacted measures that promoted male vasectomy and tubal ligation to mitigate population growth.67 Among
these measures included R.A. No. 6365, approved on August 16, 1971, entitled "An Act Establishing a National
Policy on Population, Creating the Commission on Population and for Other Purposes. " The law envisioned
that "family planning will be made part of a broad educational program; safe and effective means will be
provided to couples desiring to space or limit family size; mortality and morbidity rates will be further reduced."

To further strengthen R.A. No. 6365, then President Ferdinand E . Marcos issued Presidential Decree. (P.D.) No.
79,68 dated December 8, 1972, which, among others, made "family planning a part of a broad educational
program," provided "family planning services as a part of over-all health care," and made "available all
acceptable methods of contraception, except abortion, to all Filipino citizens desirous of spacing, limiting or
preventing pregnancies."

Through the years, however, the use of contraceptives and family planning methods evolved from being a
component of demographic management, to one centered on the promotion of public health, particularly,
reproductive health.69 Under that policy, the country gave priority to one's right to freely choose the method
of family planning to be adopted, in conformity with its adherence to the commitments made in the
International Conference on Population and Development.70 Thus, on August 14, 2009, the country enacted
R.A. No. 9710 or "The Magna Carta for Women, " which, among others, mandated the State to provide for
comprehensive health services and programs for women, including family planning and sex education.71

The RH Law

Despite the foregoing legislative measures, the population of the country kept on galloping at an uncontrollable
pace. From a paltry number of just over 27 million Filipinos in 1960, the population of the country reached over
76 million in the year 2000 and over 92 million in 2010.72 The executive and the legislative, thus, felt that the
measures were still not adequate. To rein in the problem, the RH Law was enacted to provide Filipinos,
especially the poor and the marginalized, access and information to the full range of modem family planning
methods, and to ensure that its objective to provide for the peoples' right to reproductive health be achieved.
To make it more effective, the RH Law made it mandatory for health providers to provide information on the
full range of modem family planning methods, supplies and services, and for schools to provide reproductive
health education. To put teeth to it, the RH Law criminalizes certain acts of refusals to carry out its mandates.

Stated differently, the RH Law is an enhancement measure to fortify and make effective the current laws on
contraception, women's health and population control.

Prayer of the Petitioners - Maintain the Status Quo

The petitioners are one in praying that the entire RH Law be declared unconstitutional. Petitioner ALFI, in
particular, argues that the government sponsored contraception program, the very essence of the RH Law,
violates the right to health of women and the sanctity of life, which the State is mandated to protect and
promote. Thus, ALFI prays that "the status quo ante - the situation prior to the passage of the RH Law - must
be maintained."73 It explains:

x x x. The instant Petition does not question contraception and contraceptives per se. As provided under
Republic Act No. 5921 and Republic Act No. 4729, the sale and distribution of contraceptives are prohibited
unless dispensed by a prescription duly licensed by a physician. What the Petitioners find deplorable and
repugnant under the RH Law is the role that the State and its agencies - the entire bureaucracy, from the
cabinet secretaries down to the barangay officials in the remotest areas of the country - is made to play in the
implementation of the contraception program to the fullest extent possible using taxpayers' money. The State
then will be the funder and provider of all forms of family planning methods and the implementer of the
program by ensuring the widespread dissemination of, and universal access to, a full range of family planning
methods, devices and supplies.74

ISSUES

After a scrutiny of the various arguments and contentions of the parties, the Court has synthesized and refined
them to the following principal issues:

I. PROCEDURAL: Whether the Court may exercise its power of judicial review over the controversy.

1] Power of Judicial Review

2] Actual Case or Controversy

3] Facial Challenge

4] Locus Standi

5] Declaratory Relief

6] One Subject/One Title Rule

II. SUBSTANTIVE: Whether the RH law is unconstitutional:

1] Right to Life

2] Right to Health

3] Freedom of Religion and the Right to Free Speech

4] The Family

5] Freedom of Expression and Academic Freedom

6] Due Process

7] Equal Protection

8] Involuntary Servitude

9] Delegation of Authority to the FDA

10] Autonomy of Local Govemments/ARMM

DISCUSSION

Before delving into the constitutionality of the RH Law and its implementing rules, it behooves the Court to
resolve some procedural impediments.

I. PROCEDURAL ISSUE: Whether the Court can exercise its power of judicial review over the controversy.

The Power of Judicial Review

In its attempt to persuade the Court to stay its judicial hand, the OSG asserts that it should submit to the
legislative and political wisdom of Congress and respect the compromises made in the crafting of the RH Law,
it being "a product of a majoritarian democratic process"75 and "characterized by an inordinate amount of
transparency."76 The OSG posits that the authority of the Court to review social legislation like the RH Law by
certiorari is "weak," since the Constitution vests the discretion to implement the constitutional policies and
positive norms with the political departments, in particular, with Congress.77 It further asserts that in view of
the Court's ruling in Southern Hemisphere v. Anti-Terrorism Council,78 the remedies of certiorari and
prohibition utilized by the petitioners are improper to assail the validity of the acts of the legislature.79

Moreover, the OSG submits that as an "as applied challenge," it cannot prosper considering that the assailed
law has yet to be enforced and applied to the petitioners, and that the government has yet to distribute
reproductive health devices that are abortive. It claims that the RH Law cannot be challenged "on its face" as
it is not a speech-regulating measure.80

In many cases involving the determination of the constitutionality of the actions of the Executive and the
Legislature, it is often sought that the Court temper its exercise of judicial power and accord due respect to the
wisdom of its co-equal branch on the basis of the principle of separation of powers. To be clear, the separation
of powers is a fundamental principle in our system of government, which obtains not through express provision
but by actual division in our Constitution. Each department of the government has exclusive cognizance of
matters within its jurisdiction and is supreme within its own sphere.81

Thus, the 1987 Constitution provides that: (a) the legislative power shall be vested in the Congress of the
Philippines;82 (b) the executive power shall be vested in the President of the Philippines;83 and (c) the judicial
power shall be vested in one Supreme Court and in such lower courts as may be established by law.84 The
Constitution has truly blocked out with deft strokes and in bold lines, the allotment of powers among the three
branches of government.85

In its relationship with its co-equals, the Judiciary recognizes the doctrine of separation of powers which
imposes upon the courts proper restraint, born of the nature of their functions and of their respect for the
other branches of government, in striking down the acts of the Executive or the Legislature as unconstitutional.
Verily, the policy is a harmonious blend of courtesy and caution.86

It has also long been observed, however, that in times of social disquietude or political instability, the great
landmarks of the Constitution are apt to be forgotten or marred, if not entirely obliterated.87 In order to
address this, the Constitution impresses upon the Court to respect the acts performed by a co-equal branch
done within its sphere of competence and authority, but at the same time, allows it to cross the line of
separation - but only at a very limited and specific point - to determine whether the acts of the executive and
the legislative branches are null because they were undertaken with grave abuse of discretion.88 Thus, while
the Court may not pass upon questions of wisdom, justice or expediency of the RH Law, it may do so where an
attendant unconstitutionality or grave abuse of discretion results.89 The Court must demonstrate its
unflinching commitment to protect those cherished rights and principles embodied in the Constitution.

In this connection, it bears adding that while the scope of judicial power of review may be limited, the
Constitution makes no distinction as to the kind of legislation that may be subject to judicial scrutiny, be it in
the form of social legislation or otherwise. The reason is simple and goes back to the earlier point. The Court
may pass upon the constitutionality of acts of the legislative and the executive branches, since its duty is not
to review their collective wisdom but, rather, to make sure that they have acted in consonance with their
respective authorities and rights as mandated of them by the Constitution. If after said review, the Court finds
no constitutional violations of any sort, then, it has no more authority of proscribing the actions under
review.90 This is in line with Article VIII, Section 1 of the Constitution which expressly provides:
Section 1. The judicial power shall be vested in one Supreme Court and in such lower courts as may be
established by law.

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are
legally demandable and enforceable, and to determine whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government. [Emphases supplied]

As far back as Tanada v. Angara,91 the Court has unequivocally declared that certiorari, prohibition and
mandamus are appropriate remedies to raise constitutional issues and to review and/or prohibit/nullify, when
proper, acts of legislative and executive officials, as there is no other plain, speedy or adequate remedy in the
ordinary course of law. This ruling was later on applied in Macalintal v. COMELEC,92 Aldaba v.
COMELEC,93 Magallona v. Ermita,94 and countless others. In Tanada, the Court wrote:

In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the Constitution, the
petition no doubt raises a justiciable controversy. Where an action of the legislative branch is seriously alleged
to have infringed the Constitution, it becomes not only the right but in fact the duty of the judiciary to settle
the dispute. "The question thus posed is judicial rather than political. The duty (to adjudicate) remains to assure
that the supremacy of the Constitution is upheld. " Once a "controversy as to the application or interpretation
of constitutional provision is raised before this Court (as in the instant case), it becomes a legal issue which the
Court is bound by constitutional mandate to decide. [Emphasis supplied]

In the scholarly estimation of former Supreme Court Justice Florentino Feliciano, "judicial review is essential
for the maintenance and enforcement of the separation of powers and the balancing of powers among the
three great departments of government through the definition and maintenance of the boundaries of authority
and control between them. To him, judicial review is the chief, indeed the only, medium of participation - or
instrument of intervention - of the judiciary in that balancing operation.95

Lest it be misunderstood, it bears emphasizing that the Court does not have the unbridled authority to rule on
just any and every claim of constitutional violation. Jurisprudence is replete with the rule that the power of
judicial review is limited by four exacting requisites, viz : (a) there must be an actual case or controversy; (b)
the petitioners must possess locus standi; (c) the question of constitutionality must be raised at the earliest
opportunity; and (d) the issue of constitutionality must be the lis mota of the case.96

Actual Case or Controversy

Proponents of the RH Law submit that the subj ect petitions do not present any actual case or controversy
because the RH Law has yet to be implemented.97 They claim that the questions raised by the petitions are not
yet concrete and ripe for adjudication since no one has been charged with violating any of its provisions and
that there is no showing that any of the petitioners' rights has been adversely affected by its operation.98 In
short, it is contended that judicial review of the RH Law is premature.

An actual case or controversy means an existing case or controversy that is appropriate or ripe for
determination, not conjectural or anticipatory, lest the decision of the court would amount to an advisory
opinion.99 The rule is that courts do not sit to adjudicate mere academic questions to satisfy scholarly interest,
however intellectually challenging. The controversy must be justiciable-definite and concrete, touching on the
legal relations of parties having adverse legal interests. In other words, the pleadings must show an active
antagonistic assertion of a legal right, on the one hand, and a denial thereof, on the other; that is, it must
concern a real, tangible and not merely a theoretical question or issue. There ought to be an actual and
substantial controversy admitting of specific relief through a decree conclusive in nature, as distinguished from
an opinion advising what the law would be upon a hypothetical state of facts.100

Corollary to the requirement of an actual case or controversy is the requirement of ripeness.101 A question is
ripe for adjudication when the act being challenged has had a direct adverse effect on the individual challenging
it. For a case to be considered ripe for adjudication, it is a prerequisite that something has then been
accomplished or performed by either branch before a court may come into the picture, and the petitioner must
allege the existence of an immediate or threatened injury to himself as a result of the challenged action. He
must show that he has sustained or is immediately in danger of sustaining some direct injury as a result of the
act complained of102

In The Province of North Cotabato v. The Government of the Republic of the Philippines,103 where the
constitutionality of an unimplemented Memorandum of Agreement on the Ancestral Domain (MOA-AD) was
put in question, it was argued that the Court has no authority to pass upon the issues raised as there was yet
no concrete act performed that could possibly violate the petitioners' and the intervenors' rights. Citing
precedents, the Court ruled that the fact of the law or act in question being not yet effective does not negate
ripeness. Concrete acts under a law are not necessary to render the controversy ripe. Even a singular violation
of the Constitution and/or the law is enough to awaken judicial duty.

In this case, the Court is of the view that an actual case or controversy exists and that the same is ripe for
judicial determination. Considering that the RH Law and its implementing rules have already taken effect and
that budgetary measures to carry out the law have already been passed, it is evident that the subject petitions
present a justiciable controversy. As stated earlier, when an action of the legislative branch is seriously alleged
to have infringed the Constitution, it not only becomes a right, but also a duty of the Judiciary to settle the
dispute.104

Moreover, the petitioners have shown that the case is so because medical practitioners or medical providers
are in danger of being criminally prosecuted under the RH Law for vague violations thereof, particularly public
health officers who are threatened to be dismissed from the service with forfeiture of retirement and other
benefits. They must, at least, be heard on the matter NOW.

Facial Challenge

The OSG also assails the propriety of the facial challenge lodged by the subject petitions, contending that the
RH Law cannot be challenged "on its face" as it is not a speech regulating measure.105

The Court is not persuaded.

In United States (US) constitutional law, a facial challenge, also known as a First Amendment Challenge, is one
that is launched to assail the validity of statutes concerning not only protected speech, but also all other rights
in the First Amendment.106 These include religious freedom, freedom of the press, and the right of the people
to peaceably assemble, and to petition the Government for a redress of grievances.107 After all, the
fundamental right to religious freedom, freedom of the press and peaceful assembly are but component rights
of the right to one's freedom of expression, as they are modes which one's thoughts are externalized.

In this jurisdiction, the application of doctrines originating from the U.S. has been generally maintained, albeit
with some modifications. While this Court has withheld the application of facial challenges to strictly penal
statues,108 it has expanded its scope to cover statutes not only regulating free speech, but also those involving
religious freedom, and other fundamental rights.109 The underlying reason for this modification is simple. For
unlike its counterpart in the U.S., this Court, under its expanded jurisdiction, is mandated by the Fundamental
Law not only to settle actual controversies involving rights which are legally demandable and enforceable, but
also to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the Government.110 Verily, the framers of Our
Constitution envisioned a proactive Judiciary, ever vigilant with its duty to maintain the supremacy of the
Constitution.

Consequently, considering that the foregoing petitions have seriously alleged that the constitutional human
rights to life, speech and religion and other fundamental rights mentioned above have been violated by the
assailed legislation, the Court has authority to take cognizance of these kindred petitions and to determine if
the RH Law can indeed pass constitutional scrutiny. To dismiss these petitions on the simple expedient that
there exist no actual case or controversy, would diminish this Court as a reactive branch of government, acting
only when the Fundamental Law has been transgressed, to the detriment of the Filipino people.

Locus Standi

The OSG also attacks the legal personality of the petitioners to file their respective petitions. It contends that
the "as applied challenge" lodged by the petitioners cannot prosper as the assailed law has yet to be enforced
and applied against them,111 and the government has yet to distribute reproductive health devices that are
abortive.112

The petitioners, for their part, invariably invoke the "transcendental importance" doctrine and their status as
citizens and taxpayers in establishing the requisite locus standi.

Locus standi or legal standing is defined as a personal and substantial interest in a case such that the party has
sustained or will sustain direct injury as a result of the challenged governmental act.113 It requires a personal
stake in the outcome of the controversy as to assure the concrete adverseness which sharpens the
presentation of issues upon which the court so largely depends for illumination of difficult constitutional
questions.114

In relation to locus standi, the "as applied challenge" embodies the rule that one can challenge the
constitutionality of a statute only if he asserts a violation of his own rights. The rule prohibits one from
challenging the constitutionality of the statute grounded on a violation of the rights of third persons not before
the court. This rule is also known as the prohibition against third-party standing.115

Transcendental Importance

Notwithstanding, the Court leans on the doctrine that "the rule on standing is a matter of procedure, hence,
can be relaxed for non-traditional plaintiffs like ordinary citizens, taxpayers, and legislators when the public
interest so requires, such as when the matter is of transcendental importance, of overreaching significance to
society, or of paramount public interest."116

In Coconut Oil Refiners Association, Inc. v. Torres,117 the Court held that in cases of paramount importance
where serious constitutional questions are involved, the standing requirement may be relaxed and a suit may
be allowed to prosper even where there is no direct injury to the party claiming the right of judicial review. In
the first Emergency Powers Cases,118 ordinary citizens and taxpayers were allowed to question the
constitutionality of several executive orders although they had only an indirect and general interest shared in
common with the public.

With these said, even if the constitutionality of the RH Law may not be assailed through an "as-applied
challenge, still, the Court has time and again acted liberally on the locus s tandi requirement. It has accorded
certain individuals standing to sue, not otherwise directly injured or with material interest affected by a
Government act, provided a constitutional issue of transcendental importance is invoked. The rule on locus
standi is, after all, a procedural technicality which the Court has, on more than one occasion, waived or relaxed,
thus allowing non-traditional plaintiffs, such as concerned citizens, taxpayers, voters or legislators, to sue in
the public interest, albeit they may not have been directly injured by the operation of a law or any other
government act. As held in Jaworski v. PAGCOR:119

Granting arguendo that the present action cannot be properly treated as a petition for prohibition, the
transcendental importance of the issues involved in this case warrants that we set aside the technical defects
and take primary jurisdiction over the petition at bar. One cannot deny that the issues raised herein have
potentially pervasive influence on the social and moral well being of this nation, specially the youth; hence,
their proper and just determination is an imperative need. This is in accordance with the well-entrenched
principle that rules of procedure are not inflexible tools designed to hinder or delay, but to facilitate and
promote the administration of justice. Their strict and rigid application, which would result in technicalities
that tend to frustrate, rather than promote substantial justice, must always be eschewed. (Emphasis supplied)

In view of the seriousness, novelty and weight as precedents, not only to the public, but also to the bench and
bar, the issues raised must be resolved for the guidance of all. After all, the RH Law drastically affects the
constitutional provisions on the right to life and health, the freedom of religion and expression and other
constitutional rights. Mindful of all these and the fact that the issues of contraception and reproductive health
have already caused deep division among a broad spectrum of society, the Court entertains no doubt that the
petitions raise issues of transcendental importance warranting immediate court adjudication. More
importantly, considering that it is the right to life of the mother and the unborn which is primarily at issue, the
Court need not wait for a life to be taken away before taking action.

The Court cannot, and should not, exercise judicial restraint at this time when rights enshrined in the
Constitution are being imperilled to be violated. To do so, when the life of either the mother or her child is at
stake, would lead to irreparable consequences.

Declaratory Relief

The respondents also assail the petitions because they are essentially petitions for declaratory relief over which
the Court has no original jurisdiction.120 Suffice it to state that most of the petitions are praying for injunctive
reliefs and so the Court would just consider them as petitions for prohibition under Rule 65, over which it has
original jurisdiction. Where the case has far-reaching implications and prays for injunctive reliefs, the Court
may consider them as petitions for prohibition under Rule 65.121

One Subject-One Title

The petitioners also question the constitutionality of the RH Law, claiming that it violates Section 26(1 ), Article
VI of the Constitution,122 prescribing the one subject-one title rule. According to them, being one for
reproductive health with responsible parenthood, the assailed legislation violates the constitutional standards
of due process by concealing its true intent - to act as a population control measure.123

To belittle the challenge, the respondents insist that the RH Law is not a birth or population control
measure,124 and that the concepts of "responsible parenthood" and "reproductive health" are both
interrelated as they are inseparable.125

Despite efforts to push the RH Law as a reproductive health law, the Court sees it as principally a population
control measure. The corpus of the RH Law is geared towards the reduction of the country's population. While
it claims to save lives and keep our women and children healthy, it also promotes pregnancy-preventing
products. As stated earlier, the RH Law emphasizes the need to provide Filipinos, especially the poor and the
marginalized, with access to information on the full range of modem family planning products and methods.
These family planning methods, natural or modem, however, are clearly geared towards the prevention of
pregnancy.

For said reason, the manifest underlying objective of the RH Law is to reduce the number of births in the
country.

It cannot be denied that the measure also seeks to provide pre-natal and post-natal care as well. A large portion
of the law, however, covers the dissemination of information and provisions on access to medically-safe, non-
abortifacient, effective, legal, affordable, and quality reproductive health care services, methods, devices, and
supplies, which are all intended to prevent pregnancy.

The Court, thus, agrees with the petitioners' contention that the whole idea of contraception pervades the
entire RH Law. It is, in fact, the central idea of the RH Law.126 Indeed, remove the provisions that refer to
contraception or are related to it and the RH Law loses its very foundation.127 As earlier explained, "the other
positive provisions such as skilled birth attendance, maternal care including pre-and post-natal services,
prevention and management of reproductive tract infections including HIV/AIDS are already provided for in
the Magna Carta for Women."128

Be that as it may, the RH Law does not violate the one subject/one bill rule. In Benjamin E. Cawaling, Jr. v. The
Commission on Elections and Rep. Francis Joseph G Escudero, it was written:

It is well-settled that the "one title-one subject" rule does not require the Congress to employ in the title of the
enactment language of such precision as to mirror, fully index or catalogue all the contents and the minute
details therein. The rule is sufficiently complied with if the title is comprehensive enough as to include the
general object which the statute seeks to effect, and where, as here, the persons interested are informed of
the nature, scope and consequences of the proposed law and its operation. Moreover, this Court has invariably
adopted a liberal rather than technical construction of the rule "so as not to cripple or impede legislation."
[Emphases supplied]

In this case, a textual analysis of the various provisions of the law shows that both "reproductive health" and
"responsible parenthood" are interrelated and germane to the overriding objective to control the population
growth. As expressed in the first paragraph of Section 2 of the RH Law:

SEC. 2. Declaration of Policy. - The State recognizes and guarantees the human rights of all persons including
their right to equality and nondiscrimination of these rights, the right to sustainable human development, the
right to health which includes reproductive health, the right to education and information, and the right to
choose and make decisions for themselves in accordance with their religious convictions, ethics, cultural
beliefs, and the demands of responsible parenthood.

The one subject/one title rule expresses the principle that the title of a law must not be "so uncertain that the
average person reading it would not be informed of the purpose of the enactment or put on inquiry as to its
contents, or which is misleading, either in referring to or indicating one subject where another or different one
is really embraced in the act, or in omitting any expression or indication of the real subject or scope of the
act."129

Considering the close intimacy between "reproductive health" and "responsible parenthood" which bears to
the attainment of the goal of achieving "sustainable human development" as stated under its terms, the Court
finds no reason to believe that Congress intentionally sought to deceive the public as to the contents of the
assailed legislation.

II - SUBSTANTIVE ISSUES:

1-The Right to Life

Position of the Petitioners

The petitioners assail the RH Law because it violates the right to life and health of the unborn child under
Section 12, Article II of the Constitution. The assailed legislation allowing access to abortifacients/abortives
effectively sanctions abortion.130

According to the petitioners, despite its express terms prohibiting abortion, Section 4(a) of the RH Law
considers contraceptives that prevent the fertilized ovum to reach and be implanted in the mother's womb as
an abortifacient; thus, sanctioning contraceptives that take effect after fertilization and prior to implantation,
contrary to the intent of the Framers of the Constitution to afford protection to the fertilized ovum which
already has life.

They argue that even if Section 9 of the RH Law allows only "non-abortifacient" hormonal contraceptives,
intrauterine devices, injectables and other safe, legal, non-abortifacient and effective family planning products
and supplies, medical research shows that contraceptives use results in abortion as they operate to kill the
fertilized ovum which already has life.131

As it opposes the initiation of life, which is a fundamental human good, the petitioners assert that the State
sanction of contraceptive use contravenes natural law and is an affront to the dignity of man.132

Finally, it is contended that since Section 9 of the RH Law requires the Food and Drug Administration (FDA) to
certify that the product or supply is not to be used as an abortifacient, the assailed legislation effectively
confirms that abortifacients are not prohibited. Also considering that the FDA is not the agency that will actually
supervise or administer the use of these products and supplies to prospective patients, there is no way it can
truthfully make a certification that it shall not be used for abortifacient purposes.133

Position of the Respondents

For their part, the defenders of the RH Law point out that the intent of the Framers of the Constitution was
simply the prohibition of abortion. They contend that the RH Law does not violate the Constitution since the
said law emphasizes that only "non-abortifacient" reproductive health care services, methods, devices
products and supplies shall be made accessible to the public.134

According to the OSG, Congress has made a legislative determination that contraceptives are not abortifacients
by enacting the RH Law. As the RH Law was enacted with due consideration to various studies and consultations
with the World Health Organization (WHO) and other experts in the medical field, it is asserted that the Court
afford deference and respect to such a determination and pass judgment only when a particular drug or device
is later on determined as an abortive.135

For his part, respondent Lagman argues that the constitutional protection of one's right to life is not violated
considering that various studies of the WHO show that life begins from the implantation of the fertilized ovum.
Consequently, he argues that the RH Law is constitutional since the law specifically provides that only
contraceptives that do not prevent the implantation of the fertilized ovum are allowed.136

The Court's Position

It is a universally accepted principle that every human being enjoys the right to life.137

Even if not formally established, the right to life, being grounded on natural law, is inherent and, therefore, not
a creation of, or dependent upon a particular law, custom, or belief. It precedes and transcends any authority
or the laws of men.

In this jurisdiction, the right to life is given more than ample protection. Section 1, Article III of the Constitution
provides:

Section 1. 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 laws.

As expounded earlier, the use of contraceptives and family planning methods in the Philippines is not of recent
vintage. From the enactment of R.A. No. 4729, entitled "An Act To Regulate The Sale, Dispensation, and/or
Distribution of Contraceptive Drugs and Devices "on June 18, 1966, prescribing rules on contraceptive drugs
and devices which prevent fertilization,138 to the promotion of male vasectomy and tubal ligation,139 and the
ratification of numerous international agreements, the country has long recognized the need to promote
population control through the use of contraceptives in order to achieve long-term economic development.
Through the years, however, the use of contraceptives and other family planning methods evolved from being
a component of demographic management, to one centered on the promotion of public health, particularly,
reproductive health.140

This has resulted in the enactment of various measures promoting women's rights and health and the overall
promotion of the family's well-being. Thus, aside from R.A. No. 4729, R.A. No. 6365 or "The Population Act of
the Philippines" and R.A. No. 9710, otherwise known as the "The Magna Carta of Women" were legislated.
Notwithstanding this paradigm shift, the Philippine national population program has always been grounded
two cornerstone principles: "principle of no-abortion" and the "principle of non-coercion."141 As will be
discussed later, these principles are not merely grounded on administrative policy, but rather, originates from
the constitutional protection expressly provided to afford protection to life and guarantee religious freedom.

When Life Begins*

Majority of the Members of the Court are of the position that the question of when life begins is a scientific
and medical issue that should not be decided, at this stage, without proper hearing and evidence. During the
deliberation, however, it was agreed upon that the individual members of the Court could express their own
views on this matter.

In this regard, the ponente, is of the strong view that life begins at fertilization.

In answering the question of when life begins, focus should be made on the particular phrase of Section 12
which reads:

Section 12. The State recognizes the sanctity of family life and shall protect and strengthen the family as a basic
autonomous social institution. It shall equally protect the life of the mother and the life of the unborn from
conception. The natural and primary right and duty of parents in the rearing of the youth for civic efficiency
and the development of moral character shall receive the support of the Government.

Textually, the Constitution affords protection to the unborn from conception. This is undisputable because
before conception, there is no unborn to speak of. For said reason, it is no surprise that the Constitution is
mute as to any proscription prior to conception or when life begins. The problem has arisen because, amazingly,
there are quarters who have conveniently disregarded the scientific fact that conception is reckoned from
fertilization. They are waving the view that life begins at implantation. Hence, the issue of when life begins.

In a nutshell, those opposing the RH Law contend that conception is synonymous with "fertilization" of the
female ovum by the male sperm.142 On the other side of the spectrum are those who assert that conception
refers to the "implantation" of the fertilized ovum in the uterus.143

Plain and Legal Meaning

It is a canon in statutory construction that the words of the Constitution should be interpreted in their plain
and ordinary meaning. As held in the recent case of Chavez v. Judicial Bar Council:144

One of the primary and basic rules in statutory construction is that where the words of a statute are clear,
plain, and free from ambiguity, it must be given its literal meaning and applied without attempted
interpretation. It is a well-settled principle of constitutional construction that the language employed in the
Constitution must be given their ordinary meaning except where technical terms are employed. As much as
possible, the words of the Constitution should be understood in the sense they have in common use. What it
says according to the text of the provision to be construed compels acceptance and negates the power of the
courts to alter it, based on the postulate that the framers and the people mean what they say. Verba legis non
est recedendum - from the words of a statute there should be no departure.

The raison d' etre for the rule is essentially two-fold: First, because it is assumed that the words in which
constitutional provisions are couched express the objective sought to be attained; and second, because the
Constitution is not primarily a lawyer's document but essentially that of the people, in whose consciousness it
should ever be present as an important condition for the rule of law to prevail.

In conformity with the above principle, the traditional meaning of the word "conception" which, as described
and defined by all reliable and reputable sources, means that life begins at fertilization.

Webster's Third New International Dictionary describes it as the act of becoming pregnant, formation of a
viable zygote; the fertilization that results in a new entity capable of developing into a being like its parents.145

Black's Law Dictionary gives legal meaning to the term "conception" as the fecundation of the female ovum by
the male spermatozoon resulting in human life capable of survival and maturation under normal conditions.146

Even in jurisprudence, an unborn child has already a legal personality. In Continental Steel Manufacturing
Corporation v. Hon. Accredited Voluntary Arbitrator Allan S. Montano,147 it was written:

Life is not synonymous with civil personality. One need not acquire civil personality first before he/she could
die. Even a child inside the womb already has life. No less than the Constitution recognizes the life of the unborn
from conception, that the State must protect equally with the life of the mother. If the unborn already has life,
then the cessation thereof even prior to the child being delivered, qualifies as death. [Emphases in the original]

In Gonzales v. Carhart,148 Justice Anthony Kennedy, writing for the US Supreme Court, said that the State "has
respect for human life at all stages in the pregnancy" and "a legitimate and substantial interest in preserving
and promoting fetal life." Invariably, in the decision, the fetus was referred to, or cited, as a baby or a child.149

Intent of the Framers

Records of the Constitutional Convention also shed light on the intention of the Framers regarding the term
"conception" used in Section 12, Article II of the Constitution. From their deliberations, it clearly refers to the
moment of "fertilization." The records reflect the following:
Rev. Rigos: In Section 9, page 3, there is a sentence which reads:

"The State shall equally protect the life of the mother and the life of the unborn from the moment of
conception."

When is the moment of conception?

xxx

Mr. Villegas: As I explained in the sponsorship speech, it is when the ovum is fertilized by the sperm that there
is human life. x x x.150

xxx

As to why conception is reckoned from fertilization and, as such, the beginning of human life, it was explained:

Mr. Villegas: I propose to review this issue in a biological manner. The first question that needs to be answered
is: Is the fertilized ovum alive? Biologically categorically says yes, the fertilized ovum is alive. First of all, like all
living organisms, it takes in nutrients which it processes by itself. It begins doing this upon fertilization.
Secondly, as it takes in these nutrients, it grows from within. Thirdly, it multiplies itself at a geometric rate in
the continuous process of cell division. All these processes are vital signs of life. Therefore, there is no question
that biologically the fertilized ovum has life.

The second question: Is it human? Genetics gives an equally categorical "yes." At the moment of conception,
the nuclei of the ovum and the sperm rupture. As this happens 23 chromosomes from the ovum combine with
23 chromosomes of the sperm to form a total of 46 chromosomes. A chromosome count of 46 is found only -
and I repeat, only in human cells. Therefore, the fertilized ovum is human.

Since these questions have been answered affirmatively, we must conclude that if the fertilized ovum is both
alive and human, then, as night follows day, it must be human life. Its nature is human.151

Why the Constitution used the phrase "from the moment of conception" and not "from the moment of
fertilization" was not because of doubt when human life begins, but rather, because:

Mr. Tingson: x x x x the phrase from the moment of conception" was described by us here before with the
scientific phrase "fertilized ovum" may be beyond the comprehension of some people; we want to use the
simpler phrase "from the moment of conception."152

Thus, in order to ensure that the fertilized ovum is given ample protection under the Constitution, it was
discussed:

Rev. Rigos: Yes, we think that the word "unborn" is sufficient for the purpose of writing a Constitution, without
specifying "from the moment of conception."

Mr. Davide: I would not subscribe to that particular view because according to the Commissioner's own
admission, he would leave it to Congress to define when life begins. So, Congress can define life to begin from
six months after fertilization; and that would really be very, very, dangerous. It is now determined by science
that life begins from the moment of conception. There can be no doubt about it. So we should not give any
doubt to Congress, too.153

Upon further inquiry, it was asked:

Mr. Gascon: Mr. Presiding Officer, I would like to ask a question on that point. Actually, that is one of the
questions I was going to raise during the period of interpellations but it has been expressed already. The
provision, as proposed right now states:

The State shall equally protect the life of the mother and the life of the unborn from the moment of conception.

When it speaks of "from the moment of conception," does this mean when the egg meets the sperm?

Mr. Villegas: Yes, the ovum is fertilized by the sperm.

Mr. Gascon: Therefore that does not leave to Congress the right to determine whether certain contraceptives
that we know today are abortifacient or not because it is a fact that some of the so-called contraceptives deter
the rooting of the ovum in the uterus. If fertilization has already occurred, the next process is for the fertilized
ovum to travel towards the uterus and to take root. What happens with some contraceptives is that they stop
the opportunity for the fertilized ovum to reach the uterus. Therefore, if we take the provision as it is proposed,
these so called contraceptives should be banned.

Mr. Villegas: Yes, if that physical fact is established, then that is what is called abortifacient and, therefore,
would be unconstitutional and should be banned under this provision.

Mr. Gascon: Yes. So my point is that I do not think it is up to Congress to state whether or not these certain
contraceptives are abortifacient. Scientifically and based on the provision as it is now proposed, they are
already considered abortifacient.154

From the deliberations above-quoted, it is apparent that the Framers of the Constitution emphasized that the
State shall provide equal protection to both the mother and the unborn child from the earliest opportunity of
life, that is, upon fertilization or upon the union of the male sperm and the female ovum. It is also apparent is
that the Framers of the Constitution intended that to prohibit Congress from enacting measures that would
allow it determine when life begins.

Equally apparent, however, is that the Framers of the Constitution did not intend to ban all contraceptives for
being unconstitutional. In fact, Commissioner Bernardo Villegas, spearheading the need to have a
constitutional provision on the right to life, recognized that the determination of whether a contraceptive
device is an abortifacient is a question of fact which should be left to the courts to decide on based on
established evidence.155

From the discussions above, contraceptives that kill or destroy the fertilized ovum should be deemed an
abortive and thus prohibited. Conversely, contraceptives that actually prevent the union of the male sperm
and the female ovum, and those that similarly take action prior to fertilization should be deemed non-abortive,
and thus, constitutionally permissible.

As emphasized by the Framers of the Constitution:

xxx xxx xxx

Mr. Gascon: xx xx. As I mentioned in my speech on the US bases, I am pro-life, to the point that I would like not
only to protect the life of the unborn, but also the lives of the millions of people in the world by fighting for a
nuclear-free world. I would just like to be assured of the legal and pragmatic implications of the term
"protection of the life of the unborn from the moment of conception." I raised some of these implications this
afternoon when I interjected in the interpellation of Commissioner Regalado. I would like to ask that question
again for a categorical answer.
I mentioned that if we institutionalize the term "the life of the unborn from the moment of conception" we are
also actually saying "no," not "maybe," to certain contraceptives which are already being encouraged at this
point in time. Is that the sense of the committee or does it disagree with me?

Mr. Azcuna: No, Mr. Presiding Officer, because contraceptives would be preventive. There is no unborn yet.
That is yet unshaped.

Mr. Gascon: Yes, Mr. Presiding Officer, but I was speaking more about some contraceptives, such as the intra-
uterine device which actually stops the egg which has already been fertilized from taking route to the uterus.
So if we say "from the moment of conception," what really occurs is that some of these contraceptives will
have to be unconstitutionalized.

Mr. Azcuna: Yes, to the extent that it is after the fertilization.

Mr. Gascon: Thank you, Mr. Presiding Officer.156

The fact that not all contraceptives are prohibited by the 1987 Constitution is even admitted by petitioners
during the oral arguments. There it was conceded that tubal ligation, vasectomy, even condoms are not
classified as abortifacients.157

Atty. Noche:

Before the union of the eggs, egg and the sperm, there is no life yet.

Justice Bersamin:

There is no life.

Atty. Noche:

So, there is no life to be protected.

Justice Bersamin:

To be protected.

Atty. Noche:

Under Section 12, yes.

Justice Bersamin:

So you have no objection to condoms?

Atty. Noche:

Not under Section 12, Article II.

Justice Bersamin:

Even if there is already information that condoms sometimes have porosity?

Atty. Noche:

Well, yes, Your Honor, there are scientific findings to that effect, Your Honor, but I am discussing here Section
12, Article II, Your Honor, yes.
Justice Bersamin:

Alright.

Atty. Noche:

And it's not, I have to admit it's not an abortifacient, Your Honor.158

Medical Meaning

That conception begins at fertilization is not bereft of medical foundation. Mosby s Medical, Nursing, and Allied
Health Dictionary defines conception as "the beginning of pregnancy usually taken to be the instant a
spermatozoon enters an ovum and forms a viable zygote."159

It describes fertilization as "the union of male and female gametes to form a zygote from which the embryo
develops."160

The Textbook of Obstetrics (Physiological & Pathological Obstetrics),161 used by medical schools in the
Philippines, also concludes that human life (human person) begins at the moment of fertilization with the union
of the egg and the sperm resulting in the formation of a new individual, with a unique genetic composition that
dictates all developmental stages that ensue.

Similarly, recent medical research on the matter also reveals that: "Human development begins after the union
of male and female gametes or germ cells during a process known as fertilization (conception). Fertilization is
a sequence of events that begins with the contact of a sperm (spermatozoon) with a secondary oocyte (ovum)
and ends with the fusion of their pronuclei (the haploid nuclei of the sperm and ovum) and the mingling of
their chromosomes to form a new cell. This fertilized ovum, known as a zygote, is a large diploid cell that is the
beginning, or primordium, of a human being."162

The authors of Human Embryology & Teratology163 mirror the same position. They wrote: "Although life is a
continuous process, fertilization is a critical landmark because, under ordinary circumstances, a new,
genetically distinct human organism is thereby formed.... The combination of 23 chromosomes present in each
pronucleus results in 46 chromosomes in the zygote. Thus the diploid number is restored and the embryonic
genome is formed. The embryo now exists as a genetic unity."

In support of the RH Bill, The Philippine Medical Association came out with a "Paper on the Reproductive Health
Bill (Responsible Parenthood Bill)" and therein concluded that:

CONCLUSION

The PMA throws its full weight in supporting the RH Bill at the same time that PMA maintains its strong position
that fertilization is sacred because it is at this stage that conception, and thus human life, begins. Human lives
are sacred from the moment of conception, and that destroying those new lives is never licit, no matter what
the purported good outcome would be. In terms of biology and human embryology, a human being begins
immediately at fertilization and after that, there is no point along the continuous line of human embryogenesis
where only a "potential" human being can be posited. Any philosophical, legal, or political conclusion cannot
escape this objective scientific fact.

The scientific evidence supports the conclusion that a zygote is a human organism and that the life of a new
human being commences at a scientifically well defined "moment of conception." This conclusion is objective,
consistent with the factual evidence, and independent of any specific ethical, moral, political, or religious view
of human life or of human embryos.164
Conclusion: The Moment of Conception is Reckoned from
Fertilization

In all, whether it be taken from a plain meaning, or understood under medical parlance, and more importantly,
following the intention of the Framers of the Constitution, the undeniable conclusion is that a zygote is a human
organism and that the life of a new human being commences at a scientifically well-defined moment of
conception, that is, upon fertilization.

For the above reasons, the Court cannot subscribe to the theory advocated by Hon. Lagman that life begins at
implantation.165 According to him, "fertilization and conception are two distinct and successive stages in the
reproductive process. They are not identical and synonymous."166 Citing a letter of the WHO, he wrote that
"medical authorities confirm that the implantation of the fertilized ovum is the commencement of conception
and it is only after implantation that pregnancy can be medically detected."167

This theory of implantation as the beginning of life is devoid of any legal or scientific mooring. It does not
pertain to the beginning of life but to the viability of the fetus. The fertilized ovum/zygote is not an inanimate
object - it is a living human being complete with DNA and 46 chromosomes.168 Implantation has been
conceptualized only for convenience by those who had population control in mind. To adopt it would constitute
textual infidelity not only to the RH Law but also to the Constitution.

Not surprisingly, even the OSG does not support this position.

If such theory would be accepted, it would unnervingly legitimize the utilization of any drug or device that
would prevent the implantation of the fetus at the uterine wall. It would be provocative and further aggravate
religious-based divisiveness.

It would legally permit what the Constitution proscribes - abortion and abortifacients.

The RH Law and Abortion

The clear and unequivocal intent of the Framers of the 1987 Constitution in protecting the life of the unborn
from conception was to prevent the Legislature from enacting a measure legalizing abortion. It was so clear
that even the Court cannot interpret it otherwise. This intent of the Framers was captured in the record of the
proceedings of the 1986 Constitutional Commission. Commissioner Bernardo Villegas, the principal proponent
of the protection of the unborn from conception, explained:

The intention .. .is to make sure that there would be no pro-abortion laws ever passed by Congress or any pro-
abortion decision passed by the Supreme Court.169

A reading of the RH Law would show that it is in line with this intent and actually proscribes abortion. While
the Court has opted not to make any determination, at this stage, when life begins, it finds that the RH Law
itself clearly mandates that protection be afforded from the moment of fertilization. As pointed out by Justice
Carpio, the RH Law is replete with provisions that embody the policy of the law to protect to the fertilized ovum
and that it should be afforded safe travel to the uterus for implantation.170

Moreover, the RH Law recognizes that abortion is a crime under Article 256 of the Revised Penal Code, which
penalizes the destruction or expulsion of the fertilized ovum. Thus:

1] xx x.

Section 4. Definition of Terms. - For the purpose of this Act, the following terms shall be defined as follows:
xxx.

(q) Reproductive health care refers to the access to a full range of methods, facilities, services and supplies that
contribute to reproductive health and well-being by addressing reproductive health-related problems. It also
includes sexual health, the purpose of which is the enhancement of life and personal relations. The elements
of reproductive health care include the following:

xxx.

(3) Proscription of abortion and management of abortion complications;

xxx.

2] xx x.

Section 4. x x x.

(s) Reproductive health rights refers to the rights of individuals and couples, to decide freely and responsibly
whether or not to have children; the number, spacing and timing of their children; to make other decisions
concerning reproduction, free of discrimination, coercion and violence; to have the information and means to
do so; and to attain the highest standard of sexual health and reproductive health: Provided, however, That
reproductive health rights do not include abortion, and access to abortifacients.

3] xx x.

SEC. 29. Repealing Clause. - Except for prevailing laws against abortion, any law, presidential decree or
issuance, executive order, letter of instruction, administrative order, rule or regulation contrary to or is
inconsistent with the provisions of this Act including Republic Act No. 7392, otherwise known as the Midwifery
Act, is hereby repealed, modified or amended accordingly.

The RH Law and Abortifacients

In carrying out its declared policy, the RH Law is consistent in prohibiting abortifacients. To be clear, Section
4(a) of the RH Law defines an abortifacient as:

Section 4. Definition of Terms - x x x x

(a) Abortifacient refers to any drug or device that induces abortion or the destruction of a fetus inside the
mother's womb or the prevention of the fertilized ovum to reach and be implanted in the mother's womb upon
determination of the FDA.

As stated above, the RH Law mandates that protection must be afforded from the moment of fertilization. By
using the word " or," the RH Law prohibits not only drugs or devices that prevent implantation, but also those
that induce abortion and those that induce the destruction of a fetus inside the mother's womb. Thus, an
abortifacient is any drug or device that either:

(a) Induces abortion; or

(b) Induces the destruction of a fetus inside the mother's womb; or

(c) Prevents the fertilized ovum to reach and be implanted in the mother's womb, upon determination of the
FDA.
Contrary to the assertions made by the petitioners, the Court finds that the RH Law, consistent with the
Constitution, recognizes that the fertilized ovum already has life and that the State has a bounden duty to
protect it. The conclusion becomes clear because the RH Law, first, prohibits any drug or device that induces
abortion (first kind), which, as discussed exhaustively above, refers to that which induces the killing or the
destruction of the fertilized ovum, and, second, prohibits any drug or device the fertilized ovum to reach and
be implanted in the mother's womb (third kind).

By expressly declaring that any drug or device that prevents the fertilized ovum to reach and be implanted in
the mother's womb is an abortifacient (third kind), the RH Law does not intend to mean at all that life only
begins only at implantation, as Hon. Lagman suggests. It also does not declare either that protection will only
be given upon implantation, as the petitioners likewise suggest. Rather, it recognizes that: one, there is a need
to protect the fertilized ovum which already has life, and two, the fertilized ovum must be protected the
moment it becomes existent - all the way until it reaches and implants in the mother's womb. After all, if life is
only recognized and afforded protection from the moment the fertilized ovum implants - there is nothing to
prevent any drug or device from killing or destroying the fertilized ovum prior to implantation.

From the foregoing, the Court finds that inasmuch as it affords protection to the fertilized ovum, the RH Law
does not sanction abortion. To repeat, it is the Court's position that life begins at fertilization, not at
implantation. When a fertilized ovum is implanted in the uterine wall , its viability is sustained but that instance
of implantation is not the point of beginning of life. It started earlier. And as defined by the RH Law, any drug
or device that induces abortion, that is, which kills or destroys the fertilized ovum or prevents the fertilized
ovum to reach and be implanted in the mother's womb, is an abortifacient.

Proviso Under Section 9 of the RH Law

This notwithstanding, the Court finds that the proviso under Section 9 of the law that "any product or supply
included or to be included in the EDL must have a certification from the FDA that said product and supply is
made available on the condition that it is not to be used as an abortifacient" as empty as it is absurd. The FDA,
with all its expertise, cannot fully attest that a drug or device will not all be used as an abortifacient, since the
agency cannot be present in every instance when the contraceptive product or supply will be used.171

Pursuant to its declared policy of providing access only to safe, legal and non-abortifacient contraceptives,
however, the Court finds that the proviso of Section 9, as worded, should bend to the legislative intent and
mean that "any product or supply included or to be included in the EDL must have a certification from the FDA
that said product and supply is made available on the condition that it cannot be used as abortifacient." Such
a construction is consistent with the proviso under the second paragraph of the same section that provides:

Provided, further, That the foregoing offices shall not purchase or acquire by any means emergency
contraceptive pills, postcoital pills, abortifacients that will be used for such purpose and their other forms or
equivalent.

Abortifacients under the RH-IRR

At this juncture, the Court agrees with ALFI that the authors of the RH-IRR gravely abused their office when
they redefined the meaning of abortifacient. The RH Law defines "abortifacient" as follows:

SEC. 4. Definition of Terms. - For the purpose of this Act, the following terms shall be defined as follows:

(a) Abortifacient refers to any drug or device that induces abortion or the destruction of a fetus inside the
mother's womb or the prevention of the fertilized ovum to reach and be implanted in the mother's womb upon
determination of the FDA.
Section 3.0l (a) of the IRR, however, redefines "abortifacient" as:

Section 3.01 For purposes of these Rules, the terms shall be defined as follows:

a) Abortifacient refers to any drug or device that primarily induces abortion or the destruction of a fetus inside
the mother's womb or the prevention of the fertilized ovum to reach and be implanted in the mother's womb
upon determination of the Food and Drug Administration (FDA). [Emphasis supplied]

Again in Section 3.0lG) of the RH-IRR, "contraceptive," is redefined, viz:

j) Contraceptive refers to any safe, legal, effective and scientifically proven modern family planning method,
device, or health product, whether natural or artificial, that prevents pregnancy but does not primarily destroy
a fertilized ovum or prevent a fertilized ovum from being implanted in the mother's womb in doses of its
approved indication as determined by the Food and Drug Administration (FDA).

The above-mentioned section of the RH-IRR allows "contraceptives" and recognizes as "abortifacient" only
those that primarily induce abortion or the destruction of a fetus inside the mother's womb or the prevention
of the fertilized ovum to reach and be implanted in the mother's womb.172

This cannot be done.

In this regard, the observations of Justice Brion and Justice Del Castillo are well taken. As they pointed out, with
the insertion of the word "primarily," Section 3.0l(a) and G) of the RH-IRR173 must be struck down for being
ultra vires.

Evidently, with the addition of the word "primarily," in Section 3.0l(a) and G) of the RH-IRR is indeed ultra vires.
It contravenes Section 4(a) of the RH Law and should, therefore, be declared invalid. There is danger that the
insertion of the qualifier "primarily" will pave the way for the approval of contraceptives which may harm or
destroy the life of the unborn from conception/fertilization in violation of Article II, Section 12 of the
Constitution. With such qualification in the RH-IRR, it appears to insinuate that a contraceptive will only be
considered as an "abortifacient" if its sole known effect is abortion or, as pertinent here, the prevention of the
implantation of the fertilized ovum.

For the same reason, this definition of "contraceptive" would permit the approval of contraceptives which are
actually abortifacients because of their fail-safe mechanism.174

Also, as discussed earlier, Section 9 calls for the certification by the FDA that these contraceptives cannot act
as abortive. With this, together with the definition of an abortifacient under Section 4 (a) of the RH Law and its
declared policy against abortion, the undeniable conclusion is that contraceptives to be included in the PNDFS
and the EDL will not only be those contraceptives that do not have the primary action of causing abortion or
the destruction of a fetus inside the mother's womb or the prevention of the fertilized ovum to reach and be
implanted in the mother's womb, but also those that do not have the secondary action of acting the same way.

Indeed, consistent with the constitutional policy prohibiting abortion, and in line with the principle that laws
should be construed in a manner that its constitutionality is sustained, the RH Law and its implementing rules
must be consistent with each other in prohibiting abortion. Thus, the word " primarily" in Section 3.0l(a) and
G) of the RH-IRR should be declared void. To uphold the validity of Section 3.0l(a) and G) of the RH-IRR and
prohibit only those contraceptives that have the primary effect of being an abortive would effectively "open
the floodgates to the approval of contraceptives which may harm or destroy the life of the unborn from
conception/fertilization in violation of Article II, Section 12 of the Constitution."175
To repeat and emphasize, in all cases, the "principle of no abortion" embodied in the constitutional protection
of life must be upheld.

2-The Right to Health

The petitioners claim that the RH Law violates the right to health because it requires the inclusion of hormonal
contraceptives, intrauterine devices, injectables and family products and supplies in the National Drug
Formulary and the inclusion of the same in the regular purchase of essential medicines and supplies of all
national hospitals.176Citing various studies on the matter, the petitioners posit that the risk of developing breast
and cervical cancer is greatly increased in women who use oral contraceptives as compared to women who
never use them. They point out that the risk is decreased when the use of contraceptives is discontinued.
Further, it is contended that the use of combined oral contraceptive pills is associated with a threefold
increased risk of venous thromboembolism, a twofold increased risk of ischematic stroke, and an
indeterminate effect on risk of myocardial infarction.177 Given the definition of "reproductive health" and
"sexual health" under Sections 4(p)178 and (w)179 of the RH Law, the petitioners assert that the assailed
legislation only seeks to ensure that women have pleasurable and satisfying sex lives.180

The OSG, however, points out that Section 15, Article II of the Constitution is not self-executory, it being a mere
statement of the administration's principle and policy. Even if it were self-executory, the OSG posits that
medical authorities refute the claim that contraceptive pose a danger to the health of women.181

The Court's Position

A component to the right to life is the constitutional right to health. In this regard, the Constitution is replete
with provisions protecting and promoting the right to health. Section 15, Article II of the Constitution provides:

Section 15. The State shall protect and promote the right to health of the people and instill health
consciousness among them.

A portion of Article XIII also specifically provides for the States' duty to provide for the health of the people,
viz:

HEALTH

Section 11. The State shall adopt an integrated and comprehensive approach to health development which
shall endeavor to make essential goods, health and other social services available to all the people at affordable
cost. There shall be priority for the needs of the underprivileged, sick, elderly, disabled, women, and children.
The State shall endeavor to provide free medical care to paupers.

Section 12. The State shall establish and maintain an effective food and drug regulatory system and undertake
appropriate health, manpower development, and research, responsive to the country's health needs and
problems.

Section 13. The State shall establish a special agency for disabled person for their rehabilitation, self-
development, and self-reliance, and their integration into the mainstream of society.

Finally, Section 9, Article XVI provides:

Section 9. The State shall protect consumers from trade malpractices and from substandard or hazardous
products.
Contrary to the respondent's notion, however, these provisions are self-executing. Unless the provisions clearly
express the contrary, the provisions of the Constitution should be considered self-executory. There is no need
for legislation to implement these self-executing provisions.182 In Manila Prince Hotel v. GSIS,183 it was stated:

x x x Hence, unless it is expressly provided that a legislative act is necessary to enforce a constitutional mandate,
the presumption now is that all provisions of the constitution are self-executing. If the constitutional provisions
are treated as requiring legislation instead of self-executing, the legislature would have the power to ignore
and practically nullify the mandate of the fundamental law. This can be cataclysmic. That is why the prevailing
view is, as it has always been, that –

... in case of doubt, the Constitution should be considered self-executing rather than non-self-executing. . . .
Unless the contrary is clearly intended, the provisions of the Constitution should be considered self-executing,
as a contrary rule would give the legislature discretion to determine when, or whether, they shall be effective.
These provisions would be subordinated to the will of the lawmaking body, which could make them entirely
meaningless by simply refusing to pass the needed implementing statute. (Emphases supplied)

This notwithstanding, it bears mentioning that the petitioners, particularly ALFI, do not question contraception
and contraceptives per se.184 In fact, ALFI prays that the status quo - under R.A. No. 5921 and R.A. No. 4729,
the sale and distribution of contraceptives are not prohibited when they are dispensed by a prescription of a
duly licensed by a physician - be maintained.185

The legislative intent in the enactment of the RH Law in this regard is to leave intact the provisions of R.A. No.
4729. There is no intention at all to do away with it. It is still a good law and its requirements are still in to be
complied with. Thus, the Court agrees with the observation of respondent Lagman that the effectivity of the
RH Law will not lead to the unmitigated proliferation of contraceptives since the sale, distribution and
dispensation of contraceptive drugs and devices will still require the prescription of a licensed physician. With
R.A. No. 4729 in place, there exists adequate safeguards to ensure the public that only contraceptives that are
safe are made available to the public. As aptly explained by respondent Lagman:

D. Contraceptives cannot be
dispensed and used without
prescription

108. As an added protection to voluntary users of contraceptives, the same cannot be dispensed and used
without prescription.

109. Republic Act No. 4729 or "An Act to Regulate the Sale, Dispensation, and/ or Distribution of Contraceptive
Drugs and Devices" and Republic Act No. 5921 or "An Act Regulating the Practice of Pharmacy and Setting
Standards of Pharmaceutical Education in the Philippines and for Other Purposes" are not repealed by the RH
Law and the provisions of said Acts are not inconsistent with the RH Law.

110. Consequently, the sale, distribution and dispensation of contraceptive drugs and devices are particularly
governed by RA No. 4729 which provides in full:

"Section 1. It shall be unlawful for any person, partnership, or corporation, to sell, dispense or otherwise
distribute whether for or without consideration, any contraceptive drug or device, unless such sale,
dispensation or distribution is by a duly licensed drug store or pharmaceutical company and with the
prescription of a qualified medical practitioner.

"Sec. 2 . For the purpose of this Act:

"(a) "Contraceptive drug" is any medicine, drug, chemical, or portion which is used exclusively for the purpose
of preventing fertilization of the female ovum: and

"(b) "Contraceptive device" is any instrument, device, material, or agent introduced into the female
reproductive system for the primary purpose of preventing conception.

"Sec. 3 Any person, partnership, or corporation, violating the provisions of this Act shall be punished with a
fine of not more than five hundred pesos or an imprisonment of not less than six months or more than one
year or both in the discretion of the Court.

"This Act shall take effect upon its approval.

"Approved: June 18, 1966"

111. Of the same import, but in a general manner, Section 25 of RA No. 5921 provides:

"Section 25. Sale of medicine, pharmaceuticals, drugs and devices. No medicine, pharmaceutical, or drug of
whatever nature and kind or device shall be compounded, dispensed, sold or resold, or otherwise be made
available to the consuming public except through a prescription drugstore or hospital pharmacy, duly
established in accordance with the provisions of this Act.

112. With all of the foregoing safeguards, as provided for in the RH Law and other relevant statutes, the
pretension of the petitioners that the RH Law will lead to the unmitigated proliferation of contraceptives,
whether harmful or not, is completely unwarranted and baseless.186 [Emphases in the Original. Underlining
supplied.]

In Re: Section 10 of the RH Law:

The foregoing safeguards should be read in connection with Section 10 of the RH Law which provides:

SEC. 10. Procurement and Distribution of Family Planning Supplies. - The DOH shall procure, distribute to LGUs
and monitor the usage of family planning supplies for the whole country. The DOH shall coordinate with all
appropriate local government bodies to plan and implement this procurement and distribution program. The
supply and budget allotments shall be based on, among others, the current levels and projections of the
following:

(a) Number of women of reproductive age and couples who want to space or limit their children;

(b) Contraceptive prevalence rate, by type of method used; and

(c) Cost of family planning supplies.

Provided, That LGUs may implement its own procurement, distribution and monitoring program consistent
with the overall provisions of this Act and the guidelines of the DOH.

Thus, in the distribution by the DOH of contraceptive drugs and devices, it must consider the provisions of R.A.
No. 4729, which is still in effect, and ensure that the contraceptives that it will procure shall be from a duly
licensed drug store or pharmaceutical company and that the actual dispensation of these contraceptive drugs
and devices will done following a prescription of a qualified medical practitioner. The distribution of
contraceptive drugs and devices must not be indiscriminately done. The public health must be protected by all
possible means. As pointed out by Justice De Castro, a heavy responsibility and burden are assumed by the
government in supplying contraceptive drugs and devices, for it may be held accountable for any injury, illness
or loss of life resulting from or incidental to their use.187
At any rate, it bears pointing out that not a single contraceptive has yet been submitted to the FDA pursuant
to the RH Law. It behooves the Court to await its determination which drugs or devices are declared by the
FDA as safe, it being the agency tasked to ensure that food and medicines available to the public are safe for
public consumption. Consequently, the Court finds that, at this point, the attack on the RH Law on this ground
is premature. Indeed, the various kinds of contraceptives must first be measured up to the constitutional
yardstick as expounded herein, to be determined as the case presents itself.

At this point, the Court is of the strong view that Congress cannot legislate that hormonal contraceptives and
intra-uterine devices are safe and non-abortifacient. The first sentence of Section 9 that ordains their inclusion
by the National Drug Formulary in the EDL by using the mandatory "shall" is to be construed as operative only
after they have been tested, evaluated, and approved by the FDA. The FDA, not Congress, has the expertise to
determine whether a particular hormonal contraceptive or intrauterine device is safe and non-abortifacient.
The provision of the third sentence concerning the requirements for the inclusion or removal of a particular
family planning supply from the EDL supports this construction.

Stated differently, the provision in Section 9 covering the inclusion of hormonal contraceptives, intra-uterine
devices, injectables, and other safe, legal, non-abortifacient and effective family planning products and
supplies by the National Drug Formulary in the EDL is not mandatory. There must first be a determination by
the FDA that they are in fact safe, legal, non-abortifacient and effective family planning products and supplies.
There can be no predetermination by Congress that the gamut of contraceptives are "safe, legal, non-
abortifacient and effective" without the proper scientific examination.

3 -Freedom of Religion
and the Right to Free Speech

Position of the Petitioners:

1. On Contraception

While contraceptives and procedures like vasectomy and tubal ligation are not covered by the constitutional
proscription, there are those who, because of their religious education and background, sincerely believe that
contraceptives, whether abortifacient or not, are evil. Some of these are medical practitioners who essentially
claim that their beliefs prohibit not only the use of contraceptives but also the willing participation and
cooperation in all things dealing with contraceptive use. Petitioner PAX explained that "contraception is gravely
opposed to marital chastity, it is contrary to the good of the transmission of life, and to the reciprocal self-
giving of the spouses; it harms true love and denies the sovereign rule of God in the transmission of Human
life."188

The petitioners question the State-sponsored procurement of contraceptives, arguing that the expenditure of
their taxes on contraceptives violates the guarantee of religious freedom since contraceptives contravene their
religious beliefs.189

2. On Religious Accommodation and

The Duty to Refer

Petitioners Imbong and Luat note that while the RH Law attempts to address religious sentiments by making
provisions for a conscientious objector, the constitutional guarantee is nonetheless violated because the law
also imposes upon the conscientious objector the duty to refer the patient seeking reproductive health services
to another medical practitioner who would be able to provide for the patient's needs. For the petitioners, this
amounts to requiring the conscientious objector to cooperate with the very thing he refuses to do without
violating his/her religious beliefs.190

They further argue that even if the conscientious objector's duty to refer is recognized, the recognition is
unduly limited, because although it allows a conscientious objector in Section 23 (a)(3) the option to refer a
patient seeking reproductive health services and information - no escape is afforded the conscientious objector
in Section 23 (a)(l) and (2), i.e. against a patient seeking reproductive health procedures. They claim that the
right of other individuals to conscientiously object, such as: a) those working in public health facilities referred
to in Section 7; b) public officers involved in the implementation of the law referred to in Section 23(b ); and c)
teachers in public schools referred to in Section 14 of the RH Law, are also not recognize.191

Petitioner Echavez and the other medical practitioners meanwhile, contend that the requirement to refer the
matter to another health care service provider is still considered a compulsion on those objecting healthcare
service providers. They add that compelling them to do the act against their will violates the Doctrine of
Benevolent Neutrality. Sections 9, 14 and 1 7 of the law are too secular that they tend to disregard the religion
of Filipinos. Authorizing the use of contraceptives with abortive effects, mandatory sex education, mandatory
pro-bono reproductive health services to indigents encroach upon the religious freedom of those upon whom
they are required.192

Petitioner CFC also argues that the requirement for a conscientious objector to refer the person seeking
reproductive health care services to another provider infringes on one's freedom of religion as it forces the
objector to become an unwilling participant in the commission of a serious sin under Catholic teachings. While
the right to act on one's belief may be regulated by the State, the acts prohibited by the RH Law are passive
acts which produce neither harm nor injury to the public.193

Petitioner CFC adds that the RH Law does not show compelling state interest to justify regulation of religious
freedom because it mentions no emergency, risk or threat that endangers state interests. It does not explain
how the rights of the people (to equality, non-discrimination of rights, sustainable human development, health,
education, information, choice and to make decisions according to religious convictions, ethics, cultural beliefs
and the demands of responsible parenthood) are being threatened or are not being met as to justify the
impairment of religious freedom.194

Finally, the petitioners also question Section 15 of the RH Law requiring would-be couples to attend family
planning and responsible parenthood seminars and to obtain a certificate of compliance. They claim that the
provision forces individuals to participate in the implementation of the RH Law even if it contravenes their
religious beliefs.195 As the assailed law dangles the threat of penalty of fine and/or imprisonment in case of
non-compliance with its provisions, the petitioners claim that the RH Law forcing them to provide, support and
facilitate access and information to contraception against their beliefs must be struck down as it runs afoul to
the constitutional guarantee of religious freedom.

The Respondents' Positions

The respondents, on the other hand, contend that the RH Law does not provide that a specific mode or type
of contraceptives be used, be it natural or artificial. It neither imposes nor sanctions any religion or
belief.196 They point out that the RH Law only seeks to serve the public interest by providing accessible,
effective and quality reproductive health services to ensure maternal and child health, in line with the State's
duty to bring to reality the social justice health guarantees of the Constitution,197 and that what the law only
prohibits are those acts or practices, which deprive others of their right to reproductive health.198 They assert
that the assailed law only seeks to guarantee informed choice, which is an assurance that no one will be
compelled to violate his religion against his free will.199

The respondents add that by asserting that only natural family planning should be allowed, the petitioners are
effectively going against the constitutional right to religious freedom, the same right they invoked to assail the
constitutionality of the RH Law.200 In other words, by seeking the declaration that the RH Law is
unconstitutional, the petitioners are asking that the Court recognize only the Catholic Church's sanctioned
natural family planning methods and impose this on the entire citizenry.201

With respect to the duty to refer, the respondents insist that the same does not violate the constitutional
guarantee of religious freedom, it being a carefully balanced compromise between the interests of the religious
objector, on one hand, who is allowed to keep silent but is required to refer -and that of the citizen who needs
access to information and who has the right to expect that the health care professional in front of her will act
professionally. For the respondents, the concession given by the State under Section 7 and 23(a)(3) is sufficient
accommodation to the right to freely exercise one's religion without unnecessarily infringing on the rights of
others.202

Whatever burden is placed on the petitioner's religious freedom is minimal as the duty to refer is limited in
duration, location and impact.203

Regarding mandatory family planning seminars under Section 15 , the respondents claim that it is a reasonable
regulation providing an opportunity for would-be couples to have access to information regarding parenthood,
family planning, breastfeeding and infant nutrition. It is argued that those who object to any information
received on account of their attendance in the required seminars are not compelled to accept information
given to them. They are completely free to reject any information they do not agree with and retain the
freedom to decide on matters of family life without intervention of the State.204

For their part, respondents De Venecia et al., dispute the notion that natural family planning is the only method
acceptable to Catholics and the Catholic hierarchy. Citing various studies and surveys on the matter, they
highlight the changing stand of the Catholic Church on contraception throughout the years and note the
general acceptance of the benefits of contraceptives by its followers in planning their families.

The Church and The State

At the outset, it cannot be denied that we all live in a heterogeneous society. It is made up of people of diverse
ethnic, cultural and religious beliefs and backgrounds. History has shown us that our government, in law and
in practice, has allowed these various religious, cultural, social and racial groups to thrive in a single society
together. It has embraced minority groups and is tolerant towards all - the religious people of different sects
and the non-believers. The undisputed fact is that our people generally believe in a deity, whatever they
conceived Him to be, and to whom they call for guidance and enlightenment in crafting our fundamental law.
Thus, the preamble of the present Constitution reads:

We, the sovereign Filipino people, imploring the aid of Almighty God, in order to build a just and humane
society, and establish a Government that shall embody our ideals and aspirations, promote the common good,
conserve and develop our patrimony, and secure to ourselves and our posterity, the blessings of independence
and democracy under the rule of law and a regime of truth, justice, freedom, love, equality, and peace, do
ordain and promulgate this Constitution.

The Filipino people in "imploring the aid of Almighty God " manifested their spirituality innate in our nature
and consciousness as a people, shaped by tradition and historical experience. As this is embodied in the
preamble, it means that the State recognizes with respect the influence of religion in so far as it instills into the
mind the purest principles of morality.205 Moreover, in recognition of the contributions of religion to society,
the 1935, 1973 and 1987 constitutions contain benevolent and accommodating provisions towards religions
such as tax exemption of church property, salary of religious officers in government institutions, and optional
religious instructions in public schools.

The Framers, however, felt the need to put up a strong barrier so that the State would not encroach into the
affairs of the church, and vice-versa. The principle of separation of Church and State was, thus, enshrined in
Article II, Section 6 of the 1987 Constitution, viz:

Section 6. The separation of Church and State shall be inviolable.

Verily, the principle of separation of Church and State is based on mutual respect.1âwphi1 Generally, the State
cannot meddle in the internal affairs of the church, much less question its faith and dogmas or dictate upon it.
It cannot favor one religion and discriminate against another. On the other hand, the church cannot impose its
beliefs and convictions on the State and the rest of the citizenry. It cannot demand that the nation follow its
beliefs, even if it sincerely believes that they are good for the country.

Consistent with the principle that not any one religion should ever be preferred over another, the Constitution
in the above-cited provision utilizes the term "church" in its generic sense, which refers to a temple, a mosque,
an iglesia, or any other house of God which metaphorically symbolizes a religious organization. Thus, the
"Church" means the religious congregations collectively.

Balancing the benefits that religion affords and the need to provide an ample barrier to protect the State from
the pursuit of its secular objectives, the Constitution lays down the following mandate in Article III, Section 5
and Article VI, Section 29 (2), of the 1987 Constitution:

Section. 5. No law shall be made respecting an establishment of religion, or prohibiting the free exercise
thereof. The free exercise and enjoyment of religious profession and worship, without discrimination or
preference, shall forever be allowed. No religious test shall be required for the exercise of civil or political
rights.

Section 29.

xxx.

No public money or property shall be appropriated, applied, paid, or employed, directly or indirectly, for the
use, benefit, or support of any sect, church, denomination, sectarian institution, or system of religion, or of any
priest, preacher, minister, other religious teacher, or dignitary as such, except when such priest, preacher,
minister, or dignitary is assigned to the armed forces, or to any penal institution, or government orphanage or
leprosarium.

In short, the constitutional assurance of religious freedom provides two guarantees: the Establishment Clause
and the Free Exercise Clause.

The establishment clause "principally prohibits the State from sponsoring any religion or favoring any religion
as against other religions. It mandates a strict neutrality in affairs among religious groups."206 Essentially, it
prohibits the establishment of a state religion and the use of public resources for the support or prohibition of
a religion.
On the other hand, the basis of the free exercise clause is the respect for the inviolability of the human
conscience.207 Under this part of religious freedom guarantee, the State is prohibited from unduly interfering
with the outside manifestations of one's belief and faith.208 Explaining the concept of religious freedom, the
Court, in Victoriano v. Elizalde Rope Workers Union209 wrote:

The constitutional provisions not only prohibits legislation for the support of any religious tenets or the modes
of worship of any sect, thus forestalling compulsion by law of the acceptance of any creed or the practice of
any form of worship (U.S. Ballard, 322 U.S. 78, 88 L. ed. 1148, 1153), but also assures the free exercise of one's
chosen form of religion within limits of utmost amplitude. It has been said that the religion clauses of the
Constitution are all designed to protect the broadest possible liberty of conscience, to allow each man to
believe as his conscience directs, to profess his beliefs, and to live as he believes he ought to live, consistent
with the liberty of others and with the common good. Any legislation whose effect or purpose is to impede the
observance of one or all religions, or to discriminate invidiously between the religions, is invalid, even though
the burden may be characterized as being only indirect. (Sherbert v. Verner, 374 U.S. 398, 10 L.ed.2d 965, 83
S. Ct. 1970) But if the state regulates conduct by enacting, within its power, a general law which has for its
purpose and effect to advance the state's secular goals, the statute is valid despite its indirect burden on
religious observance, unless the state can accomplish its purpose without imposing such burden. (Braunfeld v.
Brown, 366 U.S. 599, 6 Led. 2d. 563, 81 S. Ct. 144; McGowan v. Maryland, 366 U.S. 420, 444-5 and 449).

As expounded in Escritor,

The establishment and free exercise clauses were not designed to serve contradictory purposes. They have a
single goal-to promote freedom of individual religious beliefs and practices. In simplest terms, the free exercise
clause prohibits government from inhibiting religious beliefs with penalties for religious beliefs and practice,
while the establishment clause prohibits government from inhibiting religious belief with rewards for religious
beliefs and practices. In other words, the two religion clauses were intended to deny government the power
to use either the carrot or the stick to influence individual religious beliefs and practices.210

Corollary to the guarantee of free exercise of one's religion is the principle that the guarantee of religious
freedom is comprised of two parts: the freedom to believe, and the freedom to act on one's belief. The first
part is absolute. As explained in Gerona v. Secretary of Education:211

The realm of belief and creed is infinite and limitless bounded only by one's imagination and thought. So is the
freedom of belief, including religious belief, limitless and without bounds. One may believe in most anything,
however strange, bizarre and unreasonable the same may appear to others, even heretical when weighed in
the scales of orthodoxy or doctrinal standards. But between the freedom of belief and the exercise of said
belief, there is quite a stretch of road to travel.212

The second part however, is limited and subject to the awesome power of the State and can be enjoyed only
with proper regard to the rights of others. It is "subject to regulation where the belief is translated into external
acts that affect the public welfare."213

Legislative Acts and the

Free Exercise Clause

Thus, in case of conflict between the free exercise clause and the State, the Court adheres to the doctrine of
benevolent neutrality. This has been clearly decided by the Court in Estrada v. Escritor, (Escritor)214 where it
was stated "that benevolent neutrality-accommodation, whether mandatory or permissive, is the spirit, intent
and framework underlying the Philippine Constitution."215 In the same case, it was further explained that"
The benevolent neutrality theory believes that with respect to these governmental actions, accommodation of
religion may be allowed, not to promote the government's favored form of religion, but to allow individuals
and groups to exercise their religion without hindrance. "The purpose of accommodation is to remove a burden
on, or facilitate the exercise of, a person's or institution's religion."216 "What is sought under the theory of
accommodation is not a declaration of unconstitutionality of a facially neutral law, but an exemption from its
application or its 'burdensome effect,' whether by the legislature or the courts."217

In ascertaining the limits of the exercise of religious freedom, the compelling state interest test is
proper.218Underlying the compelling state interest test is the notion that free exercise is a fundamental right
and that laws burdening it should be subject to strict scrutiny.219 In Escritor, it was written:

Philippine jurisprudence articulates several tests to determine these limits. Beginning with the first case on the
Free Exercise Clause, American Bible Society, the Court mentioned the "clear and present danger" test but did
not employ it. Nevertheless, this test continued to be cited in subsequent cases on religious liberty. The Gerona
case then pronounced that the test of permissibility of religious freedom is whether it violates the established
institutions of society and law. The Victoriano case mentioned the "immediate and grave danger" test as well
as the doctrine that a law of general applicability may burden religious exercise provided the law is the least
restrictive means to accomplish the goal of the law. The case also used, albeit inappropriately, the "compelling
state interest" test. After Victoriano , German went back to the Gerona rule. Ebralinag then employed the
"grave and immediate danger" test and overruled the Gerona test. The fairly recent case of Iglesia ni Cristo
went back to the " clear and present danger" test in the maiden case of A merican Bible Society. Not
surprisingly, all the cases which employed the "clear and present danger" or "grave and immediate danger"
test involved, in one form or another, religious speech as this test is often used in cases on freedom of
expression. On the other hand, the Gerona and German cases set the rule that religious freedom will not prevail
over established institutions of society and law. Gerona, however, which was the authority cited by German
has been overruled by Ebralinag which employed the "grave and immediate danger" test . Victoriano was the
only case that employed the "compelling state interest" test, but as explained previously, the use of the test
was inappropriate to the facts of the case.

The case at bar does not involve speech as in A merican Bible Society, Ebralinag and Iglesia ni Cristo where the
"clear and present danger" and "grave and immediate danger" tests were appropriate as speech has easily
discernible or immediate effects. The Gerona and German doctrine, aside from having been overruled, is not
congruent with the benevolent neutrality approach, thus not appropriate in this jurisdiction. Similar to
Victoriano, the present case involves purely conduct arising from religious belief. The "compelling state
interest" test is proper where conduct is involved for the whole gamut of human conduct has different effects
on the state's interests: some effects may be immediate and short-term while others delayed and far-reaching.
A test that would protect the interests of the state in preventing a substantive evil, whether immediate or
delayed, is therefore necessary. However, not any interest of the state would suffice to prevail over the right
to religious freedom as this is a fundamental right that enjoys a preferred position in the hierarchy of rights -
"the most inalienable and sacred of all human rights", in the words of Jefferson. This right is sacred for an
invocation of the Free Exercise Clause is an appeal to a higher sovereignty. The entire constitutional order of
limited government is premised upon an acknowledgment of such higher sovereignty, thus the Filipinos
implore the "aid of Almighty God in order to build a just and humane society and establish a government." As
held in Sherbert, only the gravest abuses, endangering paramount interests can limit this fundamental right. A
mere balancing of interests which balances a right with just a colorable state interest is therefore not
appropriate. Instead, only a compelling interest of the state can prevail over the fundamental right to religious
liberty. The test requires the state to carry a heavy burden, a compelling one, for to do otherwise would allow
the state to batter religion, especially the less powerful ones until they are destroyed. In determining which
shall prevail between the state's interest and religious liberty, reasonableness shall be the guide. The
"compelling state interest" serves the purpose of revering religious liberty while at the same time affording
protection to the paramount interests of the state. This was the test used in Sherbert which involved conduct,
i.e. refusal to work on Saturdays. In the end, the "compelling state interest" test, by upholding the paramount
interests of the state, seeks to protect the very state, without which, religious liberty will not be preserved.
[Emphases in the original. Underlining supplied.]

The Court's Position

In the case at bench, it is not within the province of the Court to determine whether the use of contraceptives
or one's participation in the support of modem reproductive health measures is moral from a religious
standpoint or whether the same is right or wrong according to one's dogma or belief. For the Court has declared
that matters dealing with "faith, practice, doctrine, form of worship, ecclesiastical law, custom and rule of a
church ... are unquestionably ecclesiastical matters which are outside the province of the civil courts."220 The
jurisdiction of the Court extends only to public and secular morality. Whatever pronouncement the Court
makes in the case at bench should be understood only in this realm where it has authority. Stated otherwise,
while the Court stands without authority to rule on ecclesiastical matters, as vanguard of the Constitution, it
does have authority to determine whether the RH Law contravenes the guarantee of religious freedom.

At first blush, it appears that the RH Law recognizes and respects religion and religious beliefs and convictions.
It is replete with assurances the no one can be compelled to violate the tenets of his religion or defy his religious
convictions against his free will. Provisions in the RH Law respecting religious freedom are the following:

1. The State recognizes and guarantees the human rights of all persons including their right to equality and
nondiscrimination of these rights, the right to sustainable human development, the right to health which
includes reproductive health, the right to education and information, and the right to choose and make
decisions for themselves in accordance with their religious convictions, ethics, cultural beliefs, and the
demands of responsible parenthood. [Section 2, Declaration of Policy]

2 . The State recognizes marriage as an inviolable social institution and the foundation of the family which in
turn is the foundation of the nation. Pursuant thereto, the State shall defend:

(a) The right of spouses to found a family in accordance with their religious convictions and the demands of
responsible parenthood." [Section 2, Declaration of Policy]

3. The State shall promote and provide information and access, without bias, to all methods of family planning,
including effective natural and modern methods which have been proven medically safe, legal, non-
abortifacient, and effective in accordance with scientific and evidence-based medical research standards such
as those registered and approved by the FDA for the poor and marginalized as identified through the NHTS-PR
and other government measures of identifying marginalization: Provided, That the State shall also provide
funding support to promote modern natural methods of family planning, especially the Billings Ovulation
Method, consistent with the needs of acceptors and their religious convictions. [Section 3(e), Declaration of
Policy]

4. The State shall promote programs that: (1) enable individuals and couples to have the number of children
they desire with due consideration to the health, particularly of women, and the resources available and
affordable to them and in accordance with existing laws, public morals and their religious convictions. [Section
3CDJ
5. The State shall respect individuals' preferences and choice of family planning methods that are in accordance
with their religious convictions and cultural beliefs, taking into consideration the State's obligations under
various human rights instruments. [Section 3(h)]

6. Active participation by nongovernment organizations (NGOs) , women's and people's organizations, civil
society, faith-based organizations, the religious sector and communities is crucial to ensure that reproductive
health and population and development policies, plans, and programs will address the priority needs of
women, the poor, and the marginalized. [Section 3(i)]

7. Responsible parenthood refers to the will and ability of a parent to respond to the needs and aspirations of
the family and children. It is likewise a shared responsibility between parents to determine and achieve the
desired number of children, spacing and timing of their children according to their own family life aspirations,
taking into account psychological preparedness, health status, sociocultural and economic concerns consistent
with their religious convictions. [Section 4(v)] (Emphases supplied)

While the Constitution prohibits abortion, laws were enacted allowing the use of contraceptives. To some
medical practitioners, however, the whole idea of using contraceptives is an anathema. Consistent with the
principle of benevolent neutrality, their beliefs should be respected.

The Establishment Clause

and Contraceptives

In the same breath that the establishment clause restricts what the government can do with religion, it also
limits what religious sects can or cannot do with the government. They can neither cause the government to
adopt their particular doctrines as policy for everyone, nor can they not cause the government to restrict other
groups. To do so, in simple terms, would cause the State to adhere to a particular religion and, thus, establishing
a state religion.

Consequently, the petitioners are misguided in their supposition that the State cannot enhance its population
control program through the RH Law simply because the promotion of contraceptive use is contrary to their
religious beliefs. Indeed, the State is not precluded to pursue its legitimate secular objectives without being
dictated upon by the policies of any one religion. One cannot refuse to pay his taxes simply because it will cloud
his conscience. The demarcation line between Church and State demands that one render unto Caesar the
things that are Caesar's and unto God the things that are God's.221

The Free Exercise Clause and the Duty to Refer

While the RH Law, in espousing state policy to promote reproductive health manifestly respects diverse
religious beliefs in line with the Non-Establishment Clause, the same conclusion cannot be reached with respect
to Sections 7, 23 and 24 thereof. The said provisions commonly mandate that a hospital or a medical
practitioner to immediately refer a person seeking health care and services under the law to another accessible
healthcare provider despite their conscientious objections based on religious or ethical beliefs.

In a situation where the free exercise of religion is allegedly burdened by government legislation or practice,
the compelling state interest test in line with the Court's espousal of the Doctrine of Benevolent Neutrality in
Escritor, finds application. In this case, the conscientious objector's claim to religious freedom would warrant
an exemption from obligations under the RH Law, unless the government succeeds in demonstrating a more
compelling state interest in the accomplishment of an important secular objective. Necessarily so, the plea of
conscientious objectors for exemption from the RH Law deserves no less than strict scrutiny.
In applying the test, the first inquiry is whether a conscientious objector's right to religious freedom has been
burdened. As in Escritor, there is no doubt that an intense tug-of-war plagues a conscientious objector. One
side coaxes him into obedience to the law and the abandonment of his religious beliefs, while the other entices
him to a clean conscience yet under the pain of penalty. The scenario is an illustration of the predicament of
medical practitioners whose religious beliefs are incongruent with what the RH Law promotes.

The Court is of the view that the obligation to refer imposed by the RH Law violates the religious belief and
conviction of a conscientious objector. Once the medical practitioner, against his will, refers a patient seeking
information on modem reproductive health products, services, procedures and methods, his conscience is
immediately burdened as he has been compelled to perform an act against his beliefs. As Commissioner
Joaquin A. Bernas (Commissioner Bernas) has written, "at the basis of the free exercise clause is the respect
for the inviolability of the human conscience.222

Though it has been said that the act of referral is an opt-out clause, it is, however, a false compromise because
it makes pro-life health providers complicit in the performance of an act that they find morally repugnant or
offensive. They cannot, in conscience, do indirectly what they cannot do directly. One may not be the principal,
but he is equally guilty if he abets the offensive act by indirect participation.

Moreover, the guarantee of religious freedom is necessarily intertwined with the right to free speech, it being
an externalization of one's thought and conscience. This in turn includes the right to be silent. With the
constitutional guarantee of religious freedom follows the protection that should be afforded to individuals in
communicating their beliefs to others as well as the protection for simply being silent. The Bill of Rights
guarantees the liberty of the individual to utter what is in his mind and the liberty not to utter what is not in
his mind.223 While the RH Law seeks to provide freedom of choice through informed consent, freedom of choice
guarantees the liberty of the religious conscience and prohibits any degree of compulsion or burden, whether
direct or indirect, in the practice of one's religion.224

In case of conflict between the religious beliefs and moral convictions of individuals, on one hand, and the
interest of the State, on the other, to provide access and information on reproductive health products, services,
procedures and methods to enable the people to determine the timing, number and spacing of the birth of
their children, the Court is of the strong view that the religious freedom of health providers, whether public or
private, should be accorded primacy. Accordingly, a conscientious objector should be exempt from compliance
with the mandates of the RH Law. If he would be compelled to act contrary to his religious belief and conviction,
it would be violative of "the principle of non-coercion" enshrined in the constitutional right to free exercise of
religion.

Interestingly, on April 24, 2013, Scotland's Inner House of the Court of Session, found in the case of Doogan
and Wood v. NHS Greater Glasgow and Clyde Health Board,225 that the midwives claiming to be conscientious
objectors under the provisions of Scotland's Abortion Act of 1967, could not be required to delegate, supervise
or support staff on their labor ward who were involved in abortions.226 The Inner House stated "that if
'participation' were defined according to whether the person was taking part 'directly' or ' indirectly' this would
actually mean more complexity and uncertainty."227

While the said case did not cover the act of referral, the applicable principle was the same - they could not be
forced to assist abortions if it would be against their conscience or will.

Institutional Health Providers

The same holds true with respect to non-maternity specialty hospitals and hospitals owned and operated by a
religious group and health care service providers. Considering that Section 24 of the RH Law penalizes such
institutions should they fail or refuse to comply with their duty to refer under Section 7 and Section 23(a)(3),
the Court deems that it must be struck down for being violative of the freedom of religion. The same applies
to Section 23(a)(l) and (a)(2) in relation to Section 24, considering that in the dissemination of information
regarding programs and services and in the performance of reproductive health procedures, the religious
freedom of health care service providers should be respected.

In the case of Islamic Da'wah Council of the Philippines, Inc. v. Office of the Executive Secretary228 it was
stressed:

Freedom of religion was accorded preferred status by the framers of our fundamental law. And this Court has
consistently affirmed this preferred status, well aware that it is "designed to protect the broadest possible
liberty of conscience, to allow each man to believe as his conscience directs, to profess his beliefs, and to live
as he believes he ought to live, consistent with the liberty of others and with the common good."10

The Court is not oblivious to the view that penalties provided by law endeavour to ensure compliance. Without
set consequences for either an active violation or mere inaction, a law tends to be toothless and ineffectual.
Nonetheless, when what is bartered for an effective implementation of a law is a constitutionally-protected
right the Court firmly chooses to stamp its disapproval. The punishment of a healthcare service provider, who
fails and/or refuses to refer a patient to another, or who declines to perform reproductive health procedure
on a patient because incompatible religious beliefs, is a clear inhibition of a constitutional guarantee which the
Court cannot allow.

The Implementing Rules and Regulation (RH-IRR)

The last paragraph of Section 5.24 of the RH-IRR reads:

Provided, That skilled health professional such as provincial, city or municipal health officers, chiefs of hospital,
head nurses, supervising midwives, among others, who by virtue of their office are specifically charged with
the duty to implement the provisions of the RPRH Act and these Rules, cannot be considered as conscientious
objectors.

This is discriminatory and violative of the equal protection clause. The conscientious objection clause should
be equally protective of the religious belief of public health officers. There is no perceptible distinction why
they should not be considered exempt from the mandates of the law. The protection accorded to other
conscientious objectors should equally apply to all medical practitioners without distinction whether they
belong to the public or private sector. After all, the freedom to believe is intrinsic in every individual and the
protective robe that guarantees its free exercise is not taken off even if one acquires employment in the
government.

It should be stressed that intellectual liberty occupies a place inferior to none in the hierarchy of human values.
The mind must be free to think what it wills, whether in the secular or religious sphere, to give expression to
its beliefs by oral discourse or through the media and, thus, seek other candid views in occasions or gatherings
or in more permanent aggrupation. Embraced in such concept then are freedom of religion, freedom of speech,
of the press, assembly and petition, and freedom of association.229

The discriminatory provision is void not only because no such exception is stated in the RH Law itself but also
because it is violative of the equal protection clause in the Constitution. Quoting respondent Lagman, if there
is any conflict between the RH-IRR and the RH Law, the law must prevail.

Justice Mendoza:
I'll go to another point. The RH law .. .in your Comment- in-Intervention on page 52, you mentioned RH Law is
replete with provisions in upholding the freedom of religion and respecting religious convictions. Earlier, you
affirmed this with qualifications. Now, you have read, I presumed you have read the IRR-Implementing Rules
and Regulations of the RH Bill?

Congressman Lagman:

Yes, Your Honor, I have read but I have to admit, it's a long IRR and I have not thoroughly dissected the nuances
of the provisions.

Justice Mendoza:

I will read to you one provision. It's Section 5.24. This I cannot find in the RH Law. But in the IRR it says: " ....
skilled health professionals such as provincial, city or municipal health officers, chief of hospitals, head nurses,
supervising midwives, among others, who by virtue of their office are specifically charged with the duty to
implement the provisions of the RPRH Act and these Rules, cannot be considered as conscientious objectors."
Do you agree with this?

Congressman Lagman:

I will have to go over again the provisions, Your Honor.

Justice Mendoza:

In other words, public health officers in contrast to the private practitioners who can be conscientious
objectors, skilled health professionals cannot be considered conscientious objectors. Do you agree with this?
Is this not against the constitutional right to the religious belief?

Congressman Lagman:

Your Honor, if there is any conflict between the IRR and the law, the law must prevail.230

Compelling State Interest

The foregoing discussion then begets the question on whether the respondents, in defense of the subject
provisions, were able to: 1] demonstrate a more compelling state interest to restrain conscientious objectors
in their choice of services to render; and 2] discharge the burden of proof that the obligatory character of the
law is the least intrusive means to achieve the objectives of the law.

Unfortunately, a deep scrutiny of the respondents' submissions proved to be in vain. The OSG was curiously
silent in the establishment of a more compelling state interest that would rationalize the curbing of a
conscientious objector's right not to adhere to an action contrary to his religious convictions. During the oral
arguments, the OSG maintained the same silence and evasion. The Transcripts of the Stenographic Notes
disclose the following:

Justice De Castro:

Let's go back to the duty of the conscientious objector to refer. ..

Senior State Solicitor Hilbay:

Yes, Justice.

Justice De Castro:
... which you are discussing awhile ago with Justice Abad. What is the compelling State interest in imposing this
duty to refer to a conscientious objector which refuses to do so because of his religious belief?

Senior State Solicitor Hilbay:

Ahh, Your Honor, ..

Justice De Castro:

What is the compelling State interest to impose this burden?

Senior State Solicitor Hilbay:

In the first place, Your Honor, I don't believe that the standard is a compelling State interest, this is an ordinary
health legislation involving professionals. This is not a free speech matter or a pure free exercise matter. This
is a regulation by the State of the relationship between medical doctors and their patients.231

Resultantly, the Court finds no compelling state interest which would limit the free exercise clause of the
conscientious objectors, however few in number. Only the prevention of an immediate and grave danger to
the security and welfare of the community can justify the infringement of religious freedom. If the government
fails to show the seriousness and immediacy of the threat, State intrusion is constitutionally unacceptable.232

Freedom of religion means more than just the freedom to believe. It also means the freedom to act or not to
act according to what one believes. And this freedom is violated when one is compelled to act against one's
belief or is prevented from acting according to one's belief.233

Apparently, in these cases, there is no immediate danger to the life or health of an individual in the perceived
scenario of the subject provisions. After all, a couple who plans the timing, number and spacing of the birth of
their children refers to a future event that is contingent on whether or not the mother decides to adopt or use
the information, product, method or supply given to her or whether she even decides to become pregnant at
all. On the other hand, the burden placed upon those who object to contraceptive use is immediate and occurs
the moment a patient seeks consultation on reproductive health matters.

Moreover, granting that a compelling interest exists to justify the infringement of the conscientious objector's
religious freedom, the respondents have failed to demonstrate "the gravest abuses, endangering paramount
interests" which could limit or override a person's fundamental right to religious freedom. Also, the
respondents have not presented any government effort exerted to show that the means it takes to achieve its
legitimate state objective is the least intrusive means.234 Other than the assertion that the act of referring
would only be momentary, considering that the act of referral by a conscientious objector is the very action
being contested as violative of religious freedom, it behooves the respondents to demonstrate that no other
means can be undertaken by the State to achieve its objective without violating the rights of the conscientious
objector. The health concerns of women may still be addressed by other practitioners who may perform
reproductive health-related procedures with open willingness and motivation. Suffice it to say, a person who
is forced to perform an act in utter reluctance deserves the protection of the Court as the last vanguard of
constitutional freedoms.

At any rate, there are other secular steps already taken by the Legislature to ensure that the right to health is
protected. Considering other legislations as they stand now, R.A . No. 4 729 or the Contraceptive Act, R.A. No.
6365 or "The Population Act of the Philippines" and R.A. No. 9710, otherwise known as "The Magna Carta of
Women," amply cater to the needs of women in relation to health services and programs. The pertinent
provision of Magna Carta on comprehensive health services and programs for women, in fact, reads:
Section 17. Women's Right to Health. - (a) Comprehensive Health Services. - The State shall, at all times, provide
for a comprehensive, culture-sensitive, and gender-responsive health services and programs covering all stages
of a woman's life cycle and which addresses the major causes of women's mortality and morbidity: Provided,
That in the provision for comprehensive health services, due respect shall be accorded to women's religious
convictions, the rights of the spouses to found a family in accordance with their religious convictions, and the
demands of responsible parenthood, and the right of women to protection from hazardous drugs, devices,
interventions, and substances.

Access to the following services shall be ensured:

(1) Maternal care to include pre- and post-natal services to address pregnancy and infant health and nutrition;

(2) Promotion of breastfeeding;

(3) Responsible, ethical, legal, safe, and effective methods of family planning;

(4) Family and State collaboration in youth sexuality education and health services without prejudice to the
primary right and duty of parents to educate their children;

(5) Prevention and management of reproductive tract infections, including sexually transmitted diseases, HIV,
and AIDS;

(6) Prevention and management of reproductive tract cancers like breast and cervical cancers, and other
gynecological conditions and disorders;

(7) Prevention of abortion and management of pregnancy-related complications;

(8) In cases of violence against women and children, women and children victims and survivors shall be
provided with comprehensive health services that include psychosocial, therapeutic, medical, and legal
interventions and assistance towards healing, recovery, and empowerment;

(9) Prevention and management of infertility and sexual dysfunction pursuant to ethical norms and medical
standards;

(10) Care of the elderly women beyond their child-bearing years; and

(11) Management, treatment, and intervention of mental health problems of women and girls. In addition,
healthy lifestyle activities are encouraged and promoted through programs and projects as strategies in the
prevention of diseases.

(b) Comprehensive Health Information and Education. - The State shall provide women in all sectors with
appropriate, timely, complete, and accurate information and education on all the above-stated aspects of
women's health in government education and training programs, with due regard to the following:

(1) The natural and primary right and duty of parents in the rearing of the youth and the development of moral
character and the right of children to be brought up in an atmosphere of morality and rectitude for the
enrichment and strengthening of character;

(2) The formation of a person's sexuality that affirms human dignity; and

(3) Ethical, legal, safe, and effective family planning methods including fertility awareness.
As an afterthought, Asst. Solicitor General Hilbay eventually replied that the compelling state interest was
"Fifteen maternal deaths per day, hundreds of thousands of unintended pregnancies, lives changed, x x
x."235 He, however, failed to substantiate this point by concrete facts and figures from reputable sources.

The undisputed fact, however, is that the World Health Organization reported that the Filipino maternal
mortality rate dropped to 48 percent from 1990 to 2008, 236 although there was still no RH Law at that time.
Despite such revelation, the proponents still insist that such number of maternal deaths constitute a compelling
state interest.

Granting that there are still deficiencies and flaws in the delivery of social healthcare programs for Filipino
women, they could not be solved by a measure that puts an unwarrantable stranglehold on religious beliefs in
exchange for blind conformity.

Exception: Life Threatening Cases

All this notwithstanding, the Court properly recognizes a valid exception set forth in the law. While generally
healthcare service providers cannot be forced to render reproductive health care procedures if doing it would
contravene their religious beliefs, an exception must be made in life-threatening cases that require the
performance of emergency procedures. In these situations, the right to life of the mother should be given
preference, considering that a referral by a medical practitioner would amount to a denial of service, resulting
to unnecessarily placing the life of a mother in grave danger. Thus, during the oral arguments, Atty. Liban,
representing CFC, manifested: "the forced referral clause that we are objecting on grounds of violation of
freedom of religion does not contemplate an emergency."237

In a conflict situation between the life of the mother and the life of a child, the doctor is morally obliged always
to try to save both lives. If, however, it is impossible, the resulting death to one should not be deliberate. Atty.
Noche explained:

Principle of Double-Effect. - May we please remind the principal author of the RH Bill in the House of
Representatives of the principle of double-effect wherein intentional harm on the life of either the mother of
the child is never justified to bring about a "good" effect. In a conflict situation between the life of the child
and the life of the mother, the doctor is morally obliged always to try to save both lives. However, he can act
in favor of one (not necessarily the mother) when it is medically impossible to save both, provided that no
direct harm is intended to the other. If the above principles are observed, the loss of the child's life or the
mother's life is not intentional and, therefore, unavoidable. Hence, the doctor would not be guilty of abortion
or murder. The mother is never pitted against the child because both their lives are equally valuable.238

Accordingly, if it is necessary to save the life of a mother, procedures endangering the life of the child may be
resorted to even if is against the religious sentiments of the medical practitioner. As quoted above, whatever
burden imposed upon a medical practitioner in this case would have been more than justified considering the
life he would be able to save.

Family Planning Seminars

Anent the requirement imposed under Section 15239 as a condition for the issuance of a marriage license, the
Court finds the same to be a reasonable exercise of police power by the government. A cursory reading of the
assailed provision bares that the religious freedom of the petitioners is not at all violated. All the law requires
is for would-be spouses to attend a seminar on parenthood, family planning breastfeeding and infant nutrition.
It does not even mandate the type of family planning methods to be included in the seminar, whether they be
natural or artificial. As correctly noted by the OSG, those who receive any information during their attendance
in the required seminars are not compelled to accept the information given to them, are completely free to
reject the information they find unacceptable, and retain the freedom to decide on matters of family life
without the intervention of the State.

4-The Family and the Right to Privacy

Petitioner CFC assails the RH Law because Section 23(a) (2) (i) thereof violates the provisions of the Constitution
by intruding into marital privacy and autonomy. It argues that it cultivates disunity and fosters animosity in the
family rather than promote its solidarity and total development.240

The Court cannot but agree.

The 1987 Constitution is replete with provisions strengthening the family as it is the basic social institution. In
fact, one article, Article XV, is devoted entirely to the family.

ARTICLE XV
THE FAMILY

Section 1. The State recognizes the Filipino family as the foundation of the nation. Accordingly, it shall
strengthen its solidarity and actively promote its total development.

Section 2. Marriage, as an inviolable social institution, is the foundation of the family and shall be protected by
the State.

Section 3. The State shall defend:

The right of spouses to found a family in accordance with their religious convictions and the demands of
responsible parenthood;

The right of children to assistance, including proper care and nutrition, and special protection from all forms of
neglect, abuse, cruelty, exploitation and other conditions prejudicial to their development;

The right of the family to a family living wage and income; and

The right of families or family assoc1at1ons to participate in the planning and implementation of policies and
programs that affect them.

In this case, the RH Law, in its not-so-hidden desire to control population growth, contains provisions which
tend to wreck the family as a solid social institution. It bars the husband and/or the father from participating
in the decision making process regarding their common future progeny. It likewise deprives the parents of their
authority over their minor daughter simply because she is already a parent or had suffered a miscarriage.

The Family and Spousal Consent

Section 23(a) (2) (i) of the RH Law states:

The following acts are prohibited:

(a) Any health care service provider, whether public or private, who shall: ...

(2) refuse to perform legal and medically-safe reproductive health procedures on any person of legal age on
the ground of lack of consent or authorization of the following persons in the following instances:
(i) Spousal consent in case of married persons: provided, That in case of disagreement, the decision of the one
undergoing the procedures shall prevail. [Emphasis supplied]

The above provision refers to reproductive health procedures like tubal litigation and vasectomy which, by
their very nature, should require mutual consent and decision between the husband and the wife as they affect
issues intimately related to the founding of a family. Section 3, Art. XV of the Constitution espouses that the
State shall defend the "right of the spouses to found a family." One person cannot found a family. The right,
therefore, is shared by both spouses. In the same Section 3, their right "to participate in the planning and
implementation of policies and programs that affect them " is equally recognized.

The RH Law cannot be allowed to infringe upon this mutual decision-making. By giving absolute authority to
the spouse who would undergo a procedure, and barring the other spouse from participating in the decision
would drive a wedge between the husband and wife, possibly result in bitter animosity, and endanger the
marriage and the family, all for the sake of reducing the population. This would be a marked departure from
the policy of the State to protect marriage as an inviolable social institution.241

Decision-making involving a reproductive health procedure is a private matter which belongs to the couple,
not just one of them. Any decision they would reach would affect their future as a family because the size of
the family or the number of their children significantly matters. The decision whether or not to undergo the
procedure belongs exclusively to, and shared by, both spouses as one cohesive unit as they chart their own
destiny. It is a constitutionally guaranteed private right. Unless it prejudices the State, which has not shown
any compelling interest, the State should see to it that they chart their destiny together as one family.

As highlighted by Justice Leonardo-De Castro, Section 19( c) of R.A. No. 9710, otherwise known as the "Magna
Carta for Women," provides that women shall have equal rights in all matters relating to marriage and family
relations, including the joint decision on the number and spacing of their children. Indeed, responsible
parenthood, as Section 3(v) of the RH Law states, is a shared responsibility between parents. Section 23(a)(2)(i)
of the RH Law should not be allowed to betray the constitutional mandate to protect and strengthen the family
by giving to only one spouse the absolute authority to decide whether to undergo reproductive health
procedure.242

The right to chart their own destiny together falls within the protected zone of marital privacy and such state
intervention would encroach into the zones of spousal privacy guaranteed by the Constitution. In our
jurisdiction, the right to privacy was first recognized in Marje v. Mutuc,243 where the Court, speaking through
Chief Justice Fernando, held that "the right to privacy as such is accorded recognition independently of its
identification with liberty; in itself, it is fully deserving of constitutional protection."244 Marje adopted the ruling
of the US Supreme Court in Griswold v. Connecticut,245 where Justice William O. Douglas wrote:

We deal with a right of privacy older than the Bill of Rights -older than our political parties, older than our
school system. Marriage is a coming together for better or for worse, hopefully enduring, and intimate to the
degree of being sacred. It is an association that promotes a way of life, not causes; a harmony in living, not
political faiths; a bilateral loyalty, not commercial or social projects. Yet it is an association for as noble a
purpose as any involved in our prior decisions.

Ironically, Griswold invalidated a Connecticut statute which made the use of contraceptives a criminal offense
on the ground of its amounting to an unconstitutional invasion of the right to privacy of married persons.
Nevertheless, it recognized the zone of privacy rightfully enjoyed by couples. Justice Douglas in Grisworld wrote
that "specific guarantees in the Bill of Rights have penumbras, formed by emanations from those guarantees
that help give them life and substance. Various guarantees create zones of privacy."246
At any rate, in case of conflict between the couple, the courts will decide.

The Family and Parental Consent

Equally deplorable is the debarment of parental consent in cases where the minor, who will be undergoing a
procedure, is already a parent or has had a miscarriage. Section 7 of the RH law provides:

SEC. 7. Access to Family Planning. – x x x.

No person shall be denied information and access to family planning services, whether natural or artificial:
Provided, That minors will not be allowed access to modern methods of family planning without written
consent from their parents or guardian/s except when the minor is already a parent or has had a miscarriage.

There can be no other interpretation of this provision except that when a minor is already a parent or has had
a miscarriage, the parents are excluded from the decision making process of the minor with regard to family
planning. Even if she is not yet emancipated, the parental authority is already cut off just because there is a
need to tame population growth.

It is precisely in such situations when a minor parent needs the comfort, care, advice, and guidance of her own
parents. The State cannot replace her natural mother and father when it comes to providing her needs and
comfort. To say that their consent is no longer relevant is clearly anti-family. It does not promote unity in the
family. It is an affront to the constitutional mandate to protect and strengthen the family as an inviolable social
institution.

More alarmingly, it disregards and disobeys the constitutional mandate that "the natural and primary right and
duty of parents in the rearing of the youth for civic efficiency and the development of moral character shall
receive the support of the Government."247 In this regard, Commissioner Bernas wrote:

The 1987 provision has added the adjective "primary" to modify the right of parents. It imports the assertion
that the right of parents is superior to that of the State.248 [Emphases supplied]

To insist on a rule that interferes with the right of parents to exercise parental control over their minor-child
or the right of the spouses to mutually decide on matters which very well affect the very purpose of marriage,
that is, the establishment of conjugal and family life, would result in the violation of one's privacy with respect
to his family. It would be dismissive of the unique and strongly-held Filipino tradition of maintaining close family
ties and violative of the recognition that the State affords couples entering into the special contract of marriage
to as one unit in forming the foundation of the family and society.

The State cannot, without a compelling state interest, take over the role of parents in the care and custody of
a minor child, whether or not the latter is already a parent or has had a miscarriage. Only a compelling state
interest can justify a state substitution of their parental authority.

First Exception: Access to Information

Whether with respect to the minor referred to under the exception provided in the second paragraph of
Section 7 or with respect to the consenting spouse under Section 23(a)(2)(i), a distinction must be made. There
must be a differentiation between access to information about family planning services, on one hand, and
access to the reproductive health procedures and modern family planning methods themselves, on the other.
Insofar as access to information is concerned, the Court finds no constitutional objection to the acquisition of
information by the minor referred to under the exception in the second paragraph of Section 7 that would
enable her to take proper care of her own body and that of her unborn child. After all, Section 12, Article II of
the Constitution mandates the State to protect both the life of the mother as that of the unborn child.
Considering that information to enable a person to make informed decisions is essential in the protection and
maintenance of ones' health, access to such information with respect to reproductive health must be allowed.
In this situation, the fear that parents might be deprived of their parental control is unfounded because they
are not prohibited to exercise parental guidance and control over their minor child and assist her in deciding
whether to accept or reject the information received.

Second Exception: Life Threatening Cases

As in the case of the conscientious objector, an exception must be made in life-threatening cases that require
the performance of emergency procedures. In such cases, the life of the minor who has already suffered a
miscarriage and that of the spouse should not be put at grave risk simply for lack of consent. It should be
emphasized that no person should be denied the appropriate medical care urgently needed to preserve the
primordial right, that is, the right to life.

In this connection, the second sentence of Section 23(a)(2)(ii)249 should be struck down. By effectively limiting
the requirement of parental consent to "only in elective surgical procedures," it denies the parents their right
of parental authority in cases where what is involved are "non-surgical procedures." Save for the two
exceptions discussed above, and in the case of an abused child as provided in the first sentence of Section
23(a)(2)(ii), the parents should not be deprived of their constitutional right of parental authority. To deny them
of this right would be an affront to the constitutional mandate to protect and strengthen the family.

5 - Academic Freedom

It is asserted that Section 14 of the RH Law, in relation to Section 24 thereof, mandating the teaching of Age-
and Development-Appropriate Reproductive Health Education under threat of fine and/or imprisonment
violates the principle of academic freedom . According to the petitioners, these provisions effectively force
educational institutions to teach reproductive health education even if they believe that the same is not
suitable to be taught to their students.250 Citing various studies conducted in the United States and statistical
data gathered in the country, the petitioners aver that the prevalence of contraceptives has led to an increase
of out-of-wedlock births; divorce and breakdown of families; the acceptance of abortion and euthanasia; the
"feminization of poverty"; the aging of society; and promotion of promiscuity among the youth.251

At this point, suffice it to state that any attack on the validity of Section 14 of the RH Law is premature because
the Department of Education, Culture and Sports has yet to formulate a curriculum on age-appropriate
reproductive health education. One can only speculate on the content, manner and medium of instruction that
will be used to educate the adolescents and whether they will contradict the religious beliefs of the petitioners
and validate their apprehensions. Thus, considering the premature nature of this particular issue, the Court
declines to rule on its constitutionality or validity.

At any rate, Section 12, Article II of the 1987 Constitution provides that the natural and primary right and duty
of parents in the rearing of the youth for civic efficiency and development of moral character shall receive the
support of the Government. Like the 1973 Constitution and the 1935 Constitution, the 1987 Constitution
affirms the State recognition of the invaluable role of parents in preparing the youth to become productive
members of society. Notably, it places more importance on the role of parents in the development of their
children by recognizing that said role shall be "primary," that is, that the right of parents in upbringing the
youth is superior to that of the State.252

It is also the inherent right of the State to act as parens patriae to aid parents in the moral development of the
youth. Indeed, the Constitution makes mention of the importance of developing the youth and their important
role in nation building.253 Considering that Section 14 provides not only for the age-appropriate-reproductive
health education, but also for values formation; the development of knowledge and skills in self-protection
against discrimination; sexual abuse and violence against women and children and other forms of gender based
violence and teen pregnancy; physical, social and emotional changes in adolescents; women's rights and
children's rights; responsible teenage behavior; gender and development; and responsible parenthood, and
that Rule 10, Section 11.01 of the RH-IRR and Section 4(t) of the RH Law itself provides for the teaching of
responsible teenage behavior, gender sensitivity and physical and emotional changes among adolescents - the
Court finds that the legal mandate provided under the assailed provision supplements, rather than supplants,
the rights and duties of the parents in the moral development of their children.

Furthermore, as Section 14 also mandates that the mandatory reproductive health education program shall be
developed in conjunction with parent-teacher-community associations, school officials and other interest
groups, it could very well be said that it will be in line with the religious beliefs of the petitioners. By imposing
such a condition, it becomes apparent that the petitioners' contention that Section 14 violates Article XV,
Section 3(1) of the Constitution is without merit.254

While the Court notes the possibility that educators might raise their objection to their participation in the
reproductive health education program provided under Section 14 of the RH Law on the ground that the same
violates their religious beliefs, the Court reserves its judgment should an actual case be filed before it.

6 - Due Process

The petitioners contend that the RH Law suffers from vagueness and, thus violates the due process clause of
the Constitution. According to them, Section 23 (a)(l) mentions a "private health service provider" among those
who may be held punishable but does not define who is a "private health care service provider." They argue
that confusion further results since Section 7 only makes reference to a "private health care institution."

The petitioners also point out that Section 7 of the assailed legislation exempts hospitals operated by religious
groups from rendering reproductive health service and modern family planning methods. It is unclear,
however, if these institutions are also exempt from giving reproductive health information under Section
23(a)(l), or from rendering reproductive health procedures under Section 23(a)(2).

Finally, it is averred that the RH Law punishes the withholding, restricting and providing of incorrect
information, but at the same time fails to define "incorrect information."

The arguments fail to persuade.

A statute or act suffers from the defect of vagueness when it lacks comprehensible standards that men of
common intelligence must necessarily guess its meaning and differ as to its application. It is repugnant to the
Constitution in two respects: (1) it violates due process for failure to accord persons, especially the parties
targeted by it, fair notice of the conduct to avoid; and (2) it leaves law enforcers unbridled discretion in carrying
out its provisions and becomes an arbitrary flexing of the Government muscle.255 Moreover, in determining
whether the words used in a statute are vague, words must not only be taken in accordance with their plain
meaning alone, but also in relation to other parts of the statute. It is a rule that every part of the statute must
be interpreted with reference to the context, that is, every part of it must be construed together with the other
parts and kept subservient to the general intent of the whole enactment.256

As correctly noted by the OSG, in determining the definition of "private health care service provider," reference
must be made to Section 4(n) of the RH Law which defines a "public health service provider," viz:
(n) Public health care service provider refers to: (1) public health care institution, which is duly licensed and
accredited and devoted primarily to the maintenance and operation of facilities for health promotion, disease
prevention, diagnosis, treatment and care of individuals suffering from illness, disease, injury, disability or
deformity, or in need of obstetrical or other medical and nursing care; (2) public health care professional, who
is a doctor of medicine, a nurse or a midvvife; (3) public health worker engaged in the delivery of health care
services; or (4) barangay health worker who has undergone training programs under any accredited
government and NGO and who voluntarily renders primarily health care services in the community after having
been accredited to function as such by the local health board in accordance with the guidelines promulgated
by the Department of Health (DOH) .

Further, the use of the term "private health care institution" in Section 7 of the law, instead of "private health
care service provider," should not be a cause of confusion for the obvious reason that they are used
synonymously.

The Court need not belabor the issue of whether the right to be exempt from being obligated to render
reproductive health service and modem family planning methods, includes exemption from being obligated to
give reproductive health information and to render reproductive health procedures. Clearly, subject to the
qualifications and exemptions earlier discussed, the right to be exempt from being obligated to render
reproductive health service and modem family planning methods, necessarily includes exemption from being
obligated to give reproductive health information and to render reproductive health procedures. The terms
"service" and "methods" are broad enough to include the providing of information and the rendering of
medical procedures.

The same can be said with respect to the contention that the RH Law punishes health care service providers
who intentionally withhold, restrict and provide incorrect information regarding reproductive health programs
and services. For ready reference, the assailed provision is hereby quoted as follows:

SEC. 23. Prohibited Acts. - The following acts are prohibited:

(a) Any health care service provider, whether public or private, who shall:

(1) Knowingly withhold information or restrict the dissemination thereof, and/ or intentionally provide
incorrect information regarding programs and services on reproductive health including the right to informed
choice and access to a full range of legal, medically-safe, non-abortifacient and effective family planning
methods;

From its plain meaning, the word "incorrect" here denotes failing to agree with a copy or model or with
established rules; inaccurate, faulty; failing to agree with the requirements of duty, morality or propriety; and
failing to coincide with the truth. 257 On the other hand, the word "knowingly" means with awareness or
deliberateness that is intentional.258 Used together in relation to Section 23(a)(l), they connote a sense of
malice and ill motive to mislead or misrepresent the public as to the nature and effect of programs and services
on reproductive health. Public health and safety demand that health care service providers give their honest
and correct medical information in accordance with what is acceptable in medical practice. While health care
service providers are not barred from expressing their own personal opinions regarding the programs and
services on reproductive health, their right must be tempered with the need to provide public health and
safety. The public deserves no less.

7-Egual Protection
The petitioners also claim that the RH Law violates the equal protection clause under the Constitution as it
discriminates against the poor because it makes them the primary target of the government program that
promotes contraceptive use . They argue that, rather than promoting reproductive health among the poor, the
RH Law introduces contraceptives that would effectively reduce the number of the poor. Their bases are the
various provisions in the RH Law dealing with the poor, especially those mentioned in the guiding
principles259 and definition of terms260 of the law.

They add that the exclusion of private educational institutions from the mandatory reproductive health
education program imposed by the RH Law renders it unconstitutional.

In Biraogo v. Philippine Truth Commission,261 the Court had the occasion to expound on the concept of equal
protection. Thus:

One of the basic principles on which this government was founded is that of the equality of right which is
embodied in Section 1, Article III of the 1987 Constitution. The equal protection of the laws is embraced in the
concept of due process, as every unfair discrimination offends the requirements of justice and fair play. It has
been embodied in a separate clause, however, to provide for a more specific guaranty against any form of
undue favoritism or hostility from the government. Arbitrariness in general may be challenged on the basis of
the due process clause. But if the particular act assailed partakes of an unwarranted partiality or prejudice, the
sharper weapon to cut it down is the equal protection clause.

"According to a long line of decisions, equal protection simply requires that all persons or things similarly
situated should be treated alike, both as to rights conferred and responsibilities imposed." It "requires public
bodies and inst itutions to treat similarly situated individuals in a similar manner." "The purpose of the equal
protection clause is to secure every person within a state's jurisdiction against intentional and arbitrary
discrimination, whether occasioned by the express terms of a statue or by its improper execution through the
state's duly constituted authorities." "In other words, the concept of equal justice under the law requires the
state to govern impartially, and it may not draw distinctions between individuals solely on differences that are
irrelevant to a legitimate governmental objective."

The equal protection clause is aimed at all official state actions, not just those of the legislature. Its inhibitions
cover all the departments of the government including the political and executive departments, and extend to
all actions of a state denying equal protection of the laws, through whatever agency or whatever guise is taken.

It, however, does not require the universal application of the laws to all persons or things without distinction.
What it simply requires is equality among equals as determined according to a valid classification. Indeed, the
equal protection clause permits classification. Such classification, however, to be valid must pass the test of
reasonableness. The test has four requisites: (1) The classification rests on substantial distinctions; (2) It is
germane to the purpose of the law; (3) It is not limited to existing conditions only; and (4) It applies equally to
all members of the same class. "Superficial differences do not make for a valid classification."

For a classification to meet the requirements of constitutionality, it must include or embrace all persons who
naturally belong to the class. "The classification will be regarded as invalid if all the members of the class are
not similarly treated, both as to rights conferred and obligations imposed. It is not necessary that the
classification be made with absolute symmetry, in the sense that the members of the class should possess the
same characteristics in equal degree. Substantial similarity will suffice; and as long as this is achieved, all those
covered by the classification are to be treated equally. The mere fact that an individual belonging to a class
differs from the other members, as long as that class is substantially distinguishable from all others, does not
justify the non-application of the law to him."
The classification must not be based on existing circumstances only, or so constituted as to preclude addition
to the number included in the class. It must be of such a nature as to embrace all those who may thereafter be
in similar circumstances and conditions. It must not leave out or "underinclude" those that should otherwise
fall into a certain classification. [Emphases supplied; citations excluded]

To provide that the poor are to be given priority in the government's reproductive health care program is not
a violation of the equal protection clause. In fact, it is pursuant to Section 11, Article XIII of the Constitution
which recognizes the distinct necessity to address the needs of the underprivileged by providing that they be
given priority in addressing the health development of the people. Thus:

Section 11. The State shall adopt an integrated and comprehensive approach to health development which
shall endeavor to make essential goods, health and other social services available to all the people at affordable
cost. There shall be priority for the needs of the underprivileged, sick, elderly, disabled, women, and children.
The State shall endeavor to provide free medical care to paupers.

It should be noted that Section 7 of the RH Law prioritizes poor and marginalized couples who are suffering
from fertility issues and desire to have children. There is, therefore, no merit to the contention that the RH Law
only seeks to target the poor to reduce their number. While the RH Law admits the use of contraceptives, it
does not, as elucidated above, sanction abortion. As Section 3(1) explains, the "promotion and/or stabilization
of the population growth rate is incidental to the advancement of reproductive health."

Moreover, the RH Law does not prescribe the number of children a couple may have and does not impose
conditions upon couples who intend to have children. While the petitioners surmise that the assailed law seeks
to charge couples with the duty to have children only if they would raise them in a truly humane way, a deeper
look into its provisions shows that what the law seeks to do is to simply provide priority to the poor in the
implementation of government programs to promote basic reproductive health care.

With respect to the exclusion of private educational institutions from the mandatory reproductive health
education program under Section 14, suffice it to state that the mere fact that the children of those who are
less fortunate attend public educational institutions does not amount to substantial distinction sufficient to
annul the assailed provision. On the other hand, substantial distinction rests between public educational
institutions and private educational institutions, particularly because there is a need to recognize the academic
freedom of private educational institutions especially with respect to religious instruction and to consider their
sensitivity towards the teaching of reproductive health education.

8-Involuntary Servitude

The petitioners also aver that the RH Law is constitutionally infirm as it violates the constitutional prohibition
against involuntary servitude. They posit that Section 17 of the assailed legislation requiring private and non-
government health care service providers to render forty-eight (48) hours of pro bono reproductive health
services, actually amounts to involuntary servitude because it requires medical practitioners to perform acts
against their will.262

The OSG counters that the rendition of pro bono services envisioned in Section 17 can hardly be considered as
forced labor analogous to slavery, as reproductive health care service providers have the discretion as to the
manner and time of giving pro bono services. Moreover, the OSG points out that the imposition is within the
powers of the government, the accreditation of medical practitioners with PhilHealth being a privilege and not
a right.

The point of the OSG is well-taken.

It should first be mentioned that the practice of medicine is undeniably imbued with public interest that it is
both a power and a duty of the State to control and regulate it in order to protect and promote the public
welfare. Like the legal profession, the practice of medicine is not a right but a privileged burdened with
conditions as it directly involves the very lives of the people. A fortiori, this power includes the power of
Congress263 to prescribe the qualifications for the practice of professions or trades which affect the public
welfare, the public health, the public morals, and the public safety; and to regulate or control such professions
or trades, even to the point of revoking such right altogether.264

Moreover, as some petitioners put it, the notion of involuntary servitude connotes the presence of force,
threats, intimidation or other similar means of coercion and compulsion.265 A reading of the assailed provision,
however, reveals that it only encourages private and non- government reproductive healthcare service
providers to render pro bono service. Other than non-accreditation with PhilHealth, no penalty is imposed
should they choose to do otherwise. Private and non-government reproductive healthcare service providers
also enjoy the liberty to choose which kind of health service they wish to provide, when, where and how to
provide it or whether to provide it all. Clearly, therefore, no compulsion, force or threat is made upon them to
render pro bono service against their will. While the rendering of such service was made a prerequisite to
accreditation with PhilHealth, the Court does not consider the same to be an unreasonable burden, but rather,
a necessary incentive imposed by Congress in the furtherance of a perceived legitimate state interest.

Consistent with what the Court had earlier discussed, however, it should be emphasized that conscientious
objectors are exempt from this provision as long as their religious beliefs and convictions do not allow them to
render reproductive health service, pro bona or otherwise.

9-Delegation of Authority to the FDA

The petitioners likewise question the delegation by Congress to the FDA of the power to determine whether
or not a supply or product is to be included in the Essential Drugs List (EDL).266

The Court finds nothing wrong with the delegation. The FDA does not only have the power but also the
competency to evaluate, register and cover health services and methods. It is the only government entity
empowered to render such services and highly proficient to do so. It should be understood that health services
and methods fall under the gamut of terms that are associated with what is ordinarily understood as "health
products."

In this connection, Section 4 of R.A. No. 3 720, as amended by R.A. No. 9711 reads:

SEC. 4. To carry out the provisions of this Act, there is hereby created an office to be called the Food and Drug
Administration (FDA) in the Department of Health (DOH). Said Administration shall be under the Office of the
Secretary and shall have the following functions, powers and duties:

"(a) To administer the effective implementation of this Act and of the rules and regulations issued pursuant to
the same;

"(b) To assume primary jurisdiction in the collection of samples of health products;

"(c) To analyze and inspect health products in connection with the implementation of this Act;

"(d) To establish analytical data to serve as basis for the preparation of health products standards, and to
recommend standards of identity, purity, safety, efficacy, quality and fill of container;
"(e) To issue certificates of compliance with technical requirements to serve as basis for the issuance of
appropriate authorization and spot-check for compliance with regulations regarding operation of
manufacturers, importers, exporters, distributors, wholesalers, drug outlets, and other establishments and
facilities of health products, as determined by the FDA;

"x x x

"(h) To conduct appropriate tests on all applicable health products prior to the issuance of appropriate
authorizations to ensure safety, efficacy, purity, and quality;

"(i) To require all manufacturers, traders, distributors, importers, exporters, wholesalers, retailers, consumers,
and non-consumer users of health products to report to the FDA any incident that reasonably indicates that
said product has caused or contributed to the death, serious illness or serious injury to a consumer, a patient,
or any person;

"(j) To issue cease and desist orders motu propio or upon verified complaint for health products, whether or
not registered with the FDA Provided, That for registered health products, the cease and desist order is valid
for thirty (30) days and may be extended for sixty ( 60) days only after due process has been observed;

"(k) After due process, to order the ban, recall, and/or withdrawal of any health product found to have caused
death, serious illness or serious injury to a consumer or patient, or is found to be imminently injurious, unsafe,
dangerous, or grossly deceptive, and to require all concerned to implement the risk management plan which
is a requirement for the issuance of the appropriate authorization;

x x x.

As can be gleaned from the above, the functions, powers and duties of the FDA are specific to enable the
agency to carry out the mandates of the law. Being the country's premiere and sole agency that ensures the
safety of food and medicines available to the public, the FDA was equipped with the necessary powers and
functions to make it effective. Pursuant to the principle of necessary implication, the mandate by Congress to
the FDA to ensure public health and safety by permitting only food and medicines that are safe includes
"service" and "methods." From the declared policy of the RH Law, it is clear that Congress intended that the
public be given only those medicines that are proven medically safe, legal, non-abortifacient, and effective in
accordance with scientific and evidence-based medical research standards. The philosophy behind the
permitted delegation was explained in Echagaray v. Secretary of Justice,267 as follows:

The reason is the increasing complexity of the task of the government and the growing inability of the
legislature to cope directly with the many problems demanding its attention. The growth of society has
ramified its activities and created peculiar and sophisticated problems that the legislature cannot be expected
reasonably to comprehend. Specialization even in legislation has become necessary. To many of the problems
attendant upon present day undertakings, the legislature may not have the competence, let alone the interest
and the time, to provide the required direct and efficacious, not to say specific solutions.

10- Autonomy of Local Governments and the Autonomous Region

of Muslim Mindanao (ARMM)

As for the autonomy of local governments, the petitioners claim that the RH Law infringes upon the powers
devolved to local government units (LGUs) under Section 17 of the Local Government Code. Said Section 17
vested upon the LGUs the duties and functions pertaining to the delivery of basic services and facilities, as
follows:
SECTION 17. Basic Services and Facilities. –

(a) Local government units shall endeavor to be self-reliant and shall continue exercising the powers and
discharging the duties and functions currently vested upon them. They shall also discharge the functions and
responsibilities of national agencies and offices devolved to them pursuant to this Code. Local government
units shall likewise exercise such other powers and discharge such other functions and responsibilities as are
necessary, appropriate, or incidental to efficient and effective provision of the basic services and facilities
enumerated herein.

(b) Such basic services and facilities include, but are not limited to, x x x.

While the aforementioned provision charges the LGUs to take on the functions and responsibilities that have
already been devolved upon them from the national agencies on the aspect of providing for basic services and
facilities in their respective jurisdictions, paragraph (c) of the same provision provides a categorical exception
of cases involving nationally-funded projects, facilities, programs and services.268 Thus:

(c) Notwithstanding the provisions of subsection (b) hereof, public works and infrastructure projects and other
facilities, programs and services funded by the National Government under the annual General Appropriations
Act, other special laws, pertinent executive orders, and those wholly or partially funded from foreign sources,
are not covered under this Section, except in those cases where the local government unit concerned is duly
designated as the implementing agency for such projects, facilities, programs and services. [Emphases
supplied]

The essence of this express reservation of power by the national government is that, unless an LGU is
particularly designated as the implementing agency, it has no power over a program for which funding has
been provided by the national government under the annual general appropriations act, even if the program
involves the delivery of basic services within the jurisdiction of the LGU.269 A complete relinquishment of
central government powers on the matter of providing basic facilities and services cannot be implied as the
Local Government Code itself weighs against it.270

In this case, a reading of the RH Law clearly shows that whether it pertains to the establishment of health care
facilities,271 the hiring of skilled health professionals,272 or the training of barangay health workers,273 it will be
the national government that will provide for the funding of its implementation. Local autonomy is not
absolute. The national government still has the say when it comes to national priority programs which the local
government is called upon to implement like the RH Law.

Moreover, from the use of the word "endeavor," the LG Us are merely encouraged to provide these services.
There is nothing in the wording of the law which can be construed as making the availability of these services
mandatory for the LGUs. For said reason, it cannot be said that the RH Law amounts to an undue encroachment
by the national government upon the autonomy enjoyed by the local governments.

The ARMM

The fact that the RH Law does not intrude in the autonomy of local governments can be equally applied to the
ARMM. The RH Law does not infringe upon its autonomy. Moreover, Article III, Sections 6, 10 and 11 of R.A.
No. 9054, or the organic act of the ARMM, alluded to by petitioner Tillah to justify the exemption of the
operation of the RH Law in the autonomous region, refer to the policy statements for the guidance of the
regional government. These provisions relied upon by the petitioners simply delineate the powers that may be
exercised by the regional government, which can, in no manner, be characterized as an abdication by the State
of its power to enact legislation that would benefit the general welfare. After all, despite the veritable
autonomy granted the ARMM, the Constitution and the supporting jurisprudence, as they now stand, reject
the notion of imperium et imperio in the relationship between the national and the regional
governments.274 Except for the express and implied limitations imposed on it by the Constitution, Congress
cannot be restricted to exercise its inherent and plenary power to legislate on all subjects which extends to all
matters of general concern or common interest.275

11 - Natural Law

With respect to the argument that the RH Law violates natural law,276 suffice it to say that the Court does not
duly recognize it as a legal basis for upholding or invalidating a law. Our only guidepost is the Constitution.
While every law enacted by man emanated from what is perceived as natural law, the Court is not obliged to
see if a statute, executive issuance or ordinance is in conformity to it. To begin with, it is not enacted by an
acceptable legitimate body. Moreover, natural laws are mere thoughts and notions on inherent rights
espoused by theorists, philosophers and theologists. The jurists of the philosophical school are interested in
the law as an abstraction, rather than in the actual law of the past or present.277 Unless, a natural right has
been transformed into a written law, it cannot serve as a basis to strike down a law. In Republic v.
Sandiganbayan,278 the very case cited by the petitioners, it was explained that the Court is not duty-bound to
examine every law or action and whether it conforms with both the Constitution and natural law. Rather,
natural law is to be used sparingly only in the most peculiar of circumstances involving rights inherent to man
where no law is applicable.279

At any rate, as earlier expounded, the RH Law does not sanction the taking away of life. It does not allow
abortion in any shape or form. It only seeks to enhance the population control program of the government by
providing information and making non-abortifacient contraceptives more readily available to the public,
especially to the poor.

Facts and Fallacies

and the Wisdom of the Law

In general, the Court does not find the RH Law as unconstitutional insofar as it seeks to provide access to
medically-safe, non-abortifacient, effective, legal, affordable, and quality reproductive healthcare services,
methods, devices, and supplies. As earlier pointed out, however, the religious freedom of some sectors of
society cannot be trampled upon in pursuit of what the law hopes to achieve. After all, the Constitutional
safeguard to religious freedom is a recognition that man stands accountable to an authority higher than the
State.

In conformity with the principle of separation of Church and State, one religious group cannot be allowed to
impose its beliefs on the rest of the society. Philippine modem society leaves enough room for diversity and
pluralism. As such, everyone should be tolerant and open-minded so that peace and harmony may continue to
reign as we exist alongside each other.

As healthful as the intention of the RH Law may be, the idea does not escape the Court that what it seeks to
address is the problem of rising poverty and unemployment in the country. Let it be said that the cause of
these perennial issues is not the large population but the unequal distribution of wealth. Even if population
growth is controlled, poverty will remain as long as the country's wealth remains in the hands of the very few.

At any rate, population control may not be beneficial for the country in the long run. The European and Asian
countries, which embarked on such a program generations ago , are now burdened with ageing populations.
The number of their young workers is dwindling with adverse effects on their economy. These young workers
represent a significant human capital which could have helped them invigorate, innovate and fuel their
economy. These countries are now trying to reverse their programs, but they are still struggling. For one,
Singapore, even with incentives, is failing.

And in this country, the economy is being propped up by remittances from our Overseas Filipino Workers. This
is because we have an ample supply of young able-bodied workers. What would happen if the country would
be weighed down by an ageing population and the fewer younger generation would not be able to support
them? This would be the situation when our total fertility rate would go down below the replacement level of
two (2) children per woman.280

Indeed, at the present, the country has a population problem, but the State should not use coercive measures
(like the penal provisions of the RH Law against conscientious objectors) to solve it. Nonetheless, the policy of
the Court is non-interference in the wisdom of a law.

x x x. But this Court cannot go beyond what the legislature has laid down. Its duty is to say what the law is as
enacted by the lawmaking body. That is not the same as saying what the law should be or what is the correct
rule in a given set of circumstances. It is not the province of the judiciary to look into the wisdom of the law
nor to question the policies adopted by the legislative branch. Nor is it the business of this Tribunal to remedy
every unjust situation that may arise from the application of a particular law. It is for the legislature to enact
remedial legislation if that would be necessary in the premises. But as always, with apt judicial caution and cold
neutrality, the Court must carry out the delicate function of interpreting the law, guided by the Constitution
and existing legislation and mindful of settled jurisprudence. The Court's function is therefore limited, and
accordingly, must confine itself to the judicial task of saying what the law is, as enacted by the lawmaking
body.281

Be that as it may, it bears reiterating that the RH Law is a mere compilation and enhancement of the prior
existing contraceptive and reproductive health laws, but with coercive measures. Even if the Court decrees the
RH Law as entirely unconstitutional, there will still be the Population Act (R.A. No. 6365), the Contraceptive Act
(R.A. No. 4729) and the reproductive health for women or The Magna Carta of Women (R.A. No. 9710), sans
the coercive provisions of the assailed legislation. All the same, the principle of "no-abortion" and "non-
coercion" in the adoption of any family planning method should be maintained.

WHEREFORE, the petitions are PARTIALLY GRANTED. Accordingly, the Court declares R.A. No. 10354 as NOT
UNCONSTITUTIONAL except with respect to the following provisions which are declared UNCONSTITUTIONAL:

1) Section 7 and the corresponding provision in the RH-IRR insofar as they: a) require private health facilities
and non-maternity specialty hospitals and hospitals owned and operated by a religious group to refer patients,
not in an emergency or life-threatening case, as defined under Republic Act No. 8344, to another health facility
which is conveniently accessible; and b) allow minor-parents or minors who have suffered a miscarriage access
to modem methods of family planning without written consent from their parents or guardian/s;

2) Section 23(a)(l) and the corresponding provision in the RH-IRR, particularly Section 5 .24 thereof, insofar as
they punish any healthcare service provider who fails and or refuses to disseminate information regarding
programs and services on reproductive health regardless of his or her religious beliefs.

3) Section 23(a)(2)(i) and the corresponding provision in the RH-IRR insofar as they allow a married individual,
not in an emergency or life-threatening case, as defined under Republic Act No. 8344, to undergo reproductive
health procedures without the consent of the spouse;
4) Section 23(a)(2)(ii) and the corresponding provision in the RH-IRR insofar as they limit the requirement of
parental consent only to elective surgical procedures.

5) Section 23(a)(3) and the corresponding provision in the RH-IRR, particularly Section 5.24 thereof, insofar as
they punish any healthcare service provider who fails and/or refuses to refer a patient not in an emergency or
life-threatening case, as defined under Republic Act No. 8344, to another health care service provider within
the same facility or one which is conveniently accessible regardless of his or her religious beliefs;

6) Section 23(b) and the corresponding provision in the RH-IRR, particularly Section 5 .24 thereof, insofar as
they punish any public officer who refuses to support reproductive health programs or shall do any act that
hinders the full implementation of a reproductive health program, regardless of his or her religious beliefs;

7) Section 17 and the corresponding prov1s10n in the RH-IRR regarding the rendering of pro bona reproductive
health service in so far as they affect the conscientious objector in securing PhilHealth accreditation; and

8) Section 3.0l(a) and Section 3.01 G) of the RH-IRR, which added the qualifier "primarily" in defining
abortifacients and contraceptives, as they are ultra vires and, therefore, null and void for contravening Section
4(a) of the RH Law and violating Section 12, Article II of the Constitution.

The Status Quo Ante Order issued by the Court on March 19, 2013 as extended by its Order, dated July 16,
2013 , is hereby LIFTED, insofar as the provisions of R.A. No. 10354 which have been herein declared as
constitutional.

SO ORDERED.

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.

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.1âwphi1.nêt

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.1avvphi1 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 along 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 applications 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 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 Constitution8 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;

xxx xxx xxx

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. 27These 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.1avvphi1

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.

G.R. No. 167614 March 24, 2009

ANTONIO M. SERRANO, Petitioner,

vs.
Gallant MARITIME SERVICES, INC. and MARLOW NAVIGATION CO., INC., Respondents.

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, 20071

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
Decision3 and April 1, 2005 Resolution4 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

Position Chief Officer

Basic monthly salary US$1,400.00

Hours of work 48.0 hours per week

Overtime US$700.00 per month

Vacation leave with pay 7.00 days per month5

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 Complaint9 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 US$ 413.90

 June 01/30, 1998 2,590.00

July 01/31, 1998 2,590.00

August 01/31, 1998 2,590.00

Sept. 01/30, 1998 2,590.00

Oct. 01/31, 1998 2,590.00

Nov. 01/30, 1998 2,590.00

Dec. 01/31, 1998 2,590.00

Jan. 01/31, 1999 2,590.00

Feb. 01/28, 1999 2,590.00

Mar. 1/19, 1999 (19 days) incl. leave pay 1,640.00

-----------------------------
-----------------------------
----------------------

25,382.23

Amount adjusted to chief mate's salary

(March 19/31, 1998 to April 1/30, 1998) + 1,060.5010

-----------------------------
-----------------------------
-----------------------------
-------

TOTAL CLAIM US$ 26,442.7311

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 complainant’s salary for three (3) months of the
unexpired portion of the aforesaid contract of employment.1avvphi1

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 complainant’s 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 complainant’s (petitioner's) claim for attorney’s 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 appealed15 to the National Labor Relations Commission (NLRC) to question the finding of the LA
that petitioner was illegally dismissed.

Petitioner also appealed16 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 Commission17 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

$1,400 x 3 US$4,200.00

2. Salary differential 45.00

US$4,245.00

3. 10% Attorney’s fees 424.50

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 Certiorari23 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 Reconsideration26 having been denied by the CA,27 petitioner brings his cause to this Court on
the following grounds:

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 petitioner’s 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;33and 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.38
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 Commission43 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 party48 and at the earliest opportunity;49 and (3) that the constitutional question is the very lis mota of
the case,50otherwise 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.54Nonetheless, 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 receive57 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,58and 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.61Police 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 scrutiny69 in
which a legislative classification which impermissibly interferes with the exercise of a fundamental right70 or
operates to the peculiar disadvantage of a suspect class71 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 classifications73 based on race74 or
gender75 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.

xxxx

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.

xxxx

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 Court’s 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.

xxxx

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-à-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-à-vis local workers with fixed-period employment;

OFWs with employment contracts of less than one year vis-à-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
Commission79(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 respondent’s 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 of Unexpired Period Period Applied in

Period Service the Computation of
the Monetary
Award

Skippers v. 6 months 2 months 4 months 4 months

Maguad84

Bahia Shipping v. 9 months 8 months 4 months 4 months

Reynaldo Chua 85

Centennial 9 months 4 months 5 months 5 months

Transmarine v.
dela Cruz l86

Talidano v. 12 months 3 months 9 months 3 months

Falcon87
 Univan v. CA 88 12 months 3 months 9 months 3 months

Oriental v. CA 89 12 months more than 2 10 months 3 months

months

PCL v. NLRC90 12 months more than 2 more or less 9 3 months

months months

Olarte v. 12 months 21 days 11 months and 9 3 months

Nayona91 days

JSS v.Ferrer92 12 months 16 days 11 months and 24 3 months

days

Pentagon v. 12 months 9 months and 7 2 months and 23 2 months and 23

Adelantar93 days days days

Phil. Employ v. 12 months 10 months 2 months Unexpired portion

Paramio, et al.94

Flourish 2 years 26 days 23 months and 4 6 months or 3

Maritime v. days months for each year
Almanzor 95 of contract

Athenna 1 year, 10 1 month 1 year, 9 months 6 months or 3

Manpower v. months and and 28 days months for each year
Villanos 96 28 days of contract

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 Contract Period of Unexpired Period Applied in the

Period Service Period Computation of the
Monetary Award

ATCI v. CA, et 2 years 2 months 22 months 22 months

al.98

Phil. Integrated 2 years 7 days 23 months and 23 months and 23 days

v. NLRC99 23 days

JGB v. NLC100 2 years 9 months 15 months 15 months

Agoy v. NLRC101 2 years 2 months 22 months 22 months

EDI v. NLRC, et 2 years 5 months 19 months 19 months

al.102

Barros v. NLRC, 12 months 4 months 8 months 8 months

et al.103

Philippine 12 months 6 months and 5 months and 5 months and 18 days

Transmarine v. 22 days 18 days
Carilla104

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-à-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 Compañia 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. Alkan112 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. Gay114 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,119involving 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 state125 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-vistheir 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.1avvphi1

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
3,131Article 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 DECLAREDUNCONSTITUTIONAL; 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.

G.R. No. 190161 October 13, 2014

ANITA N. CANUEL, for herself and on behalf of her minor children, namely: CHARMAINE, CHARLENE, and
CHARL SMITH, all surnamed CANUEL, Petitioners,
vs.
MAGSAYSAY MARITIME CORPORATION, EDUARDO U. MANESE, and KOTANI SHIPMANAGEMENT
LIMITED, Respondents.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated May 19, 2009 and the
Resolution3 dated October 30, 2009 of the Court of Appeals (CA) in CA-G.R. SP. No. 104479 which dismissed
petitioners' complaint for death benefits.

The Facts

On July 14, 2006, Nancing R. Canuel (Nancing) was hired by respondent Magsaysay Maritime Corporation
(Magsaysay) as Third Assistant Engineer for its foreign principal, respondent Kotani Ship management Limited
(Kotani), to be deployed on board the vessel M/V North Sea (vessel) for a period of twelve (12) months, with a
basic salary of US$640.00 a month.4 He underwent the required pre-employment medical examination, and
was declared fit to work by the company-designated physician.5 Thereafter, he joined the vessel and
commenced his work on July 19, 2006.6

On February 20, 2007, Nancing figured in an accident while in the performance of his duties on board the
vessel, and, as a result, injured the right side of his body.7 On March 5, 2007, he was brought to Shanghai
Seamen’s Hospital in Shanghai, China where he was diagnosed to have suffered "bilateral closed traumatic
hemothorax."8 On March 12, 2007, Nancing informed his wife, herein petitioner Anita N. Canuel (Anita), about
the accident and his confinement.9 On March 24, 2007, he was medically repatriated and immediately
admitted to the Manila Doctor’s Hospital under the care of a team of medical doctors led by Dr. Benigno A.
Agbayani, Jr., Magsaysay’s Medical Coordinator.10 Due to his worsening condition, Nancing was placed at the
hospital’s intensive care unit on April 8, 2007.11 He eventually died on April 25, 2007.12 Nancing’s death
certificate13 indicated the immediate cause of his death as acute respiratory failure, with lung metastasis and
r/o bone cancer as antecedent cause and underlying cause, respectively.

On May 23, 2007, Nancing’s widow, Anita, for herself and on behalf of their children, Charmaine, Charlene, and
Charl Smith, all surnamed Canuel (petitioners) filed a complaint14 against Magsaysay and Kotani, as well as
Magsaysay’s Manager/President, Eduardo U. Manese (respondents), before the National Labor Relations
Commission (NLRC), docketed as NLRC-OFW Case No. (M)-07-05-01423-00, seeking to recover death benefits,
death compensation of minor children, burial allowance, damages, and attorney’s fees.

In their defense, respondents denied any liability and contended that while Nancing died of acute respiratory
failure, the real cause of his death, as shown in the autopsy conducted by the National Bureau of Investigation,
was "moderately differentiated andenocarcinoma, pneumonia and pulmonary edema, lung tissue" or lung
cancer.15 The said illness is not work-related per advise of their company doctor, Dr. Marie Cherry Lyn Samson-
Fernando, hence, not compensable.16

The LA Ruling

In a Decision17 dated December 27, 2007, the Labor Arbiter (LA) ruled in favor of petitioners and thereby
ordered respondents to pay them: (a) the aggregate sum of US$72,000.00 consisting of US$50,000.00 as death
benefits, US$21,000.00 as death compensation for the three minor children (US$7,000.00 each), and
US$1,000.00 for burial expenses; (b) illness allowance from March 5, 2007 to April 25, 2007; (c) _100,000.00 as
moral damages; (d) _100,000.00 as exemplary damages; and (e) 10% of the total award as attorney’s fees.18
The LA found that Nancing’s death on April 25, 2007 occurred during the term of his twelve-month employment
contract.19 Moreover, the evidence on record supports the conclusion that his demise was caused by the injury
he sustained in an accident while performing his job on board the vessel. Hence, his death was the result of a
work-related injury that occurred during the term of his employment.20 Corollary thereto, the LA disregarded
respondents’ contention that lung cancer, a non-work related illness, caused Nancing’s death as it was
apparent that it was the injury he sustained while working on board the vessel that triggered the deterioration
of his resistance against the said illness or any other affliction that he may have had.21

At odds with the LA Ruling, respondents appealed to the NLRC.

The NLRC Ruling

Respondents’ appeal22 was denied by the NLRC in a Decision23 dated April 30, 2008.

The NLRC ruled that while respondents correctly argued that Nancing’s death did not occur during the term of
his employment pursuant to Section 18 of the Philippine Overseas Employment Administration Standard
Employment Contract (POEA-SEC) as his employment was deemed terminated after his medical repatriation,
still, it cannot be doubted that his death was brought about by the same or similar cause or illness which caused
him to be repatriated.24 Thus, it sustained the findings of the LA that petitioners are entitled to receive
compensation for Nancing’s death.25 It further affirmed the award of damages and attorney’s fees in
petitioners’ favor but found respondents not liable for sickness allowance and burial benefits since the same
were already paid by respondents.26

Dissatisfied, respondents sought reconsideration27 but were denied by the NLRC in a Resolution28 dated June
18, 2008, prompting them to elevate the case to the CA on certiorari.29

The CA Ruling

In a Decision30 dated May 19, 2009, the CA found that the NLRC Ruling was tainted with grave abuse of
discretion and, thus, rendered a new judgment dismissing petitioners’ complaint for death benefits.31 Citing
the case of Klaveness Maritime Agency, Inc. v. Beneficiaries of the Late Second Officer Anthony S. Allas
(Klaveness),32 it held that the death of the seafarer after the termination of his contract is not compensable,
even if the death is caused by the same illness which prompted the repatriation of the seafarer and the
termination of his contract.33

Petitioners’ motion for reconsideration34 therefrom was denied by the CA in a Resolution35 dated October 30,
2009, hence, the instant petition.

The Issue Before the Court

The core issue for the Court’s resolution is whether or not the CA committed reversible error in holding that
the NLRC committed grave abuse of discretion in granting petitioners’ complaint for death benefits.

Petitioners claim that the death of Nancing after his repatriation is compensable because it was the accident
he suffered on board the vessel that triggered his traumatic hemothorax,36 eventually leading to his acute
respiratory failure, the immediate cause of his death.37

Echoing the CA, respondents aver that since the Nancing’s employment contract was deemed terminated when
he was medically repatriated on March 24, 2007, petitioners are not entitled to death and other
benefits.38 They also maintain that Nancing died of lung cancer which is not a work-related illness.39

The Court’s Ruling

The terms and conditions of a seafarer’s employment are governed by the provisions of the contract he signs
with the employer at the time of his hiring. Deemed integrated in his employment contract is a set of standard
provisions determined and implemented by the POEA, called the "Standard Terms and Conditions Governing
the Employment of Filipino Seafarers on Board Ocean-Going Vessels," which provisions are considered to be
the minimum requirements acceptable to the government for the employment of Filipino seafarers on board
foreign ocean-going vessels.40

The provisions currently governing the entitlement of the seafarer’s beneficiaries to death benefits are found
in Section 20 of the 2000 POEASEC.

Part A (1) thereof states that the seafarer’s beneficiaries may successfully claim death benefits if they are able
to establish that the seafarer’s death is (a) work-related, and (b) had occurred during the term of his
employment contract, viz.:

SECTION 20. COMPENSATION AND BENEFITS

A. COMPENSATION AND BENEFITS FOR DEATH

1. In case of work-related death of the seafarer, during the term of his contract, the employer shall pay his
beneficiaries the Philippine Currency equivalent to the amount of Fifty Thousand US dollars (US$50,000) and
an additional amount of Seven Thousand US dollars (US$7,000) to each child under the age of twenty-one (21)
but not exceeding four (4) children, at the exchange rate prevailing during the time of payment. (Emphases
supplied)

Part A (4) of the same provision further complements Part A (1) by stating the "other liabilities" of the employer
to the seafarer’s beneficiaries if the seafarer dies (a) as a result of work-related injury or illness, and (b) during
the term of his employment, viz.:

SECTION 20. COMPENSATION AND BENEFITS

A. COMPENSATION AND BENEFITS FOR DEATH

xxxx

4. The other liabilities of the employer when the seafarer dies as a result of work-related injury or illness during
the term of employment are as follows:

a. The employer shall pay the deceased’s beneficiary all outstanding obligations due the seafarer under this
Contract.

b. The employer shall transport the remains and personal effects of the seafarer to the Philippines at
employer’s expense except if the death occurred in a port where local government laws or regulations do not
permit the transport of such remains. In case death occurs at sea, the disposition of the remains shall be
handled or dealt with in accordance with the master’s best judgment. In all cases, the employer/master shall
communicate with the manning agency to advise for disposition of seafarer’s remains.

c. The employer shall pay the beneficiaries of the seafarer the Philippines currency equivalent to the amount
of One Thousand US dollars (US$1,000) for burial expenses at the exchange rate prevailing during the time of
payment. (Emphasis and underscoring supplied)

Integral as they are for a valid claim for death compensation, the Court examines this case according to the
above-stated dual requirements.
First Requirement:

The Seafarer’s Death Should Be Work-Related.

While the 2000 POEA-SEC does not expressly define what a "work related death" means, it is palpable from
Part A (4) as above-cited that the said term refers to the seafarer’s death resulting from a work-related injury
or illness. This denotation complements the definitions accorded to the terms "work-related injury" and "work-
related illness" under the 2000 POEA-SEC as follows:

Definition of Terms:

For purposes of this contract, the following terms are defined as follows:

xxxx

11. Work-Related Injury – injury(ies) resulting in disability or death arising out of and in the course of
employment.

12. Work-Related Illness – any sickness resulting to disability or death as a result of an occupational disease
listed under Section 32-A of this contract with the conditions set therein satisfied. (Emphases supplied)

Given that the seafarer’s death in this case resulted from a work-related injury as defined in the 2000 POEA-
SEC above, it is clear that the first requirement for death compensability is present.

As the records show, Nancing suffered a work-related injury within the term of his employment contract when
he figured in an accident while performing his duties as Third Assistant Engineer at cylinder number 7 of the
vessel on February 20, 2007.41 The foregoing circumstances aptly fit the legal attribution of the phrase "arising
out of and in the course of employment" which the Court, in the early case of Iloilo Dock & Engineering Co. v.
Workmen’s Compensation Commission,42 pronounced as follows:

The two components of the coverage formula – "arising out of" and "in the course of employment" – are said
to be separate tests which must be independently satisfied; however, it should not be forgotten that the basic
concept of compensation coverage is unitary, not dual, and is best expressed in the word, "work-connection,"
because an uncompromising insistence on an independent application of each of the two portions of the test
can, in certain cases, exclude clearly work-connected injuries. The words "arising out of" refer to the origin or
cause of the accident, and are descriptive of its character, while the words "in the course of" refer to the time,
place, and circumstances under which the accident takes place.

As a matter of general proposition, an injury or accident is said to arise "in the course of employment" when it
takes place within the period of the employment, at a place where the employee reasonably may be, and while
he is fulfilling his duties or is engaged in doing something incidental thereto. 43 (Emphases supplied; citations
omitted)

That Nancing was suffering from lung cancer, which was found to have been pre-existing, hardly impels a
contrary conclusion since – as the LA herein earlier noted – the February 20, 2007 injury actually led to the
deterioration of his condition.44 As held in More Maritime Agencies, Inc. v. NLRC,45 "[i]f the injury is the
proximate cause of [the seafarer’s] death or disability for which compensation is sought, [his] previous physical
condition x x x is unimportant and recovery may be had for injury independent of any pre-existing weakness
or disease," viz.:

Compensability x x x does not depend on whether the injury or disease was pre-existing at the time of the
employment but rather if the disease or injury is work-related or aggravated his condition. It is indeed safe to
presume that, at the very least, the arduous nature of [the seafarer’s] employment had contributed to the
aggravation of his injury, if indeed it was pre-existing at the time of his employment. Therefore, it is but just
that he be duly compensated for it. It is not necessary, in order for an employee to recover compensation, that
he must have been in perfect condition or health at the time he received the injury, or that he be free from
disease. Every workman brings with him to his employment certain infirmities, and while the employer is not
the insurer of the health of his employees, he takes them as he finds them, and assumes the risk of having a
weakened condition aggravated by some injury which might not hurt or bother a perfectly normal, healthy
person. If the injury is the proximate cause of his death or disability for which compensation is sought, the
previous physical condition of the employee is unimportant and recovery may be had for injury independent
of any pre-existing weakness or disease. 46 (Emphases and underscoring supplied)

Clearly, Nancing’s injury was the proximate cause of his death considering that the same, unbroken by any
efficient, intervening cause, triggered the following sequence of events: (a) Nancing’s hospitalization at the
Shanghai Seamen’s Hospital47 where he was diagnosed with "bilateral closed traumatic haemothorax";48 (b)
his repatriation and eventual admission to the Manila Doctor’s Hospital;49 and (c) his acute respiratory failure,
which was declared to be the immediate cause of his death.50

Thus, for the foregoing reasons, it cannot be seriously disputed that the first requirement for death
compensability concurs in this case.

Second Requirement:

The Seafarer’s Death Should Occur During The Term Of Employment.

With respect to the second requirement for death compensability, the Court takes this opportunity to clarify
that while the general rule is that the seafarer’s death should occur during the term of his employment, the
seafarer’s death occurring after the termination of his employment due to his medical repatriation on account
of a work-related injury or illness constitutes an exception thereto. This is based on a liberal construction of
the 2000 POEA-SEC as impelled by the plight of the bereaved heirs who stand to be deprived of a just and
reasonable compensation for the seafarer’s death, notwithstanding its evident work-connection. The present
petition is a case in point.

Here, Nancing’s repatriation occurred during the eighth (8th) month of his one (1) year employment contract.
Were it not for his injury, which had been earlier established as work-related, he would not have been
repatriated for medical reasons and his contract consequently terminated pursuant to Part 1 of Section 18 (B)
of the 2000 POEA-SEC as hereunder quoted:

SECTION 18. TERMINATION OF EMPLOYMENT

xxxx

B. The employment of the seafarer is also terminated when the seafarer arrives at the point of hire for any of
the following reasons:

1. when the seafarer signs-off and is disembarked for medical reasons pursuant to Section 20 (B)[5] of this
Contract.

The terminative consequence of a medical repatriation case then appears to present a rather prejudicial
quandary to the seafarer and his heirs. Particularly, if the Court were to apply the provisions of Section 20 of
the 2000 POEA-SEC as above-cited based on a strict and literal construction thereof, then the heirs of Nancing
would stand to be barred from receiving any compensation for the latter’s death despite its obvious work-
relatedness. Again, this is for the reason that the work-related death would, by mere legal technicality, be
considered to have occurred after the term of his employment on account of his medical repatriation. It equally
bears stressing that neither would the heirs be able to receive any disability compensation since the seafarer’s
death in this case precluded the determination of a disability grade, which, following Section 20 (B)51 in relation
to Section 3252 of the 2000 POEA-SEC, stands as the basis therefor.

However, a strict and literal construction of the 2000 POEA-SEC, especially when the same would result into
inequitable consequences against labor, is not subscribed to in this jurisdiction. Concordant with the State’s
avowed policy to give maximum aid and full protection to labor as enshrined in Article XIII of the 1987 Philippine
Constitution,53 contracts of labor, such as the 2000 POEA-SEC, are deemed to be so impressed with public
interest that the more beneficial conditions must be endeavoured in favor of the laborer.54 The rule therefore
is one of liberal construction. As enunciated in the case of Philippine Transmarine Carriers, Inc. v. NLRC:55

The POEA Standard Employment Contract for Seamen is designed primarily for the protection and benefit of
Filipino seamen in the pursuit of their employment on board ocean-going vessels. Its provisions must
[therefore] be construed and applied fairly, reasonably and liberally in their favor [as it is only] then can its
beneficent provisions be fully carried into effect.56 (Emphasis supplied)

Applying the rule on liberal construction, the Court is thus brought to the recognition that medical repatriation
cases should be considered as an exception to Section 20 of the 2000 POEA-SEC. Accordingly, the phrase "work-
related death of the seafarer, during the term of his employment contract" under Part A (1) of the said
provision should not be strictly and literally construed to mean that the seafarer’s work-related death should
have precisely occurred during the term of his employment. Rather, it is enough that the seafarer’s work-
related injury or illness which eventually causes his death should have occurred during the term of his
employment. Taking all things into account, the Court reckons that it is by this method of construction that
undue prejudice to the laborer and his heirs may be obviated and the State policy on labor protection be
championed. For if the laborer’s death was brought about (whether fully or partially) by the work he had
harbored for his master’s profit, then it is but proper that his demise be compensated. Here, since it has been
established that (a) the seafarer had been suffering from a work-related injury or illness during the term of his
employment, (b) his injury or illness was the cause for his medical repatriation, and (c) it was later determined
that the injury or illness for which he was medically repatriated was the proximate cause of his actual death
although the same occurred after the term of his employment, the above-mentioned rule should squarely
apply. Perforce, the present claim for death benefits should be granted.

To quell any confusion, it is but fitting to make clear that a liberal construction of Section 20 of the 2000 POEA-
SEC as above-discussed would not offend the Court’s ruling in Klaveness,57 which was inaccurately relied upon
by the CA to justify its decision. The inaccuracy so recognized stems from the glaring factual and legal variance
between Klaveness and the present case. Upon careful scrutiny, the seafarer in Klaveness was not medically
repatriated but was actually signed off from the vessel after the completion of his contract. He was
subsequently diagnosed to have urinary bladder cancer, which was not proven to be work-related, and died
almost two (2) years after the termination of his contract of employment. Hence, since the employment
contract was terminated without any connection to a work-related cause, but rather because of its mere lapse,
death benefits were denied to the seafarer’s heirs. In contrast, the seafarer in this case was medically
repatriated due to a work-related injury which resulted to his death a month after his confinement in a local
hospital. Again, were it not for said injury, the seafarer would not have been medically repatriated and his
employment contract, in turn, terminated. By these circumstances, it is clear that the termination of the
employment contract was forced upon by a work-related cause. As alluded earlier, it would then be antithetical
to the State’s policy on labor to deprive the seafarer’s heirs of death compensation despite its palpable work-
connection. Based on the foregoing, it is, hence, apparent that the Court’s pronouncement herein would not
conflict that in Klaveness. Truth be told, the defining parameter in workers’ compensation cases should be the
element of work-relatedness which was clearly absent in the "contract-completion" situation in Klaveness.58 To
reiterate, if the death is work-related, as herein ascribed, then the seafarer’s heirs should not be denied
compensation.

To reinforce the point, a survey of previous Court rulings wherein death compensability had been denied the
heirs of the seafarer actually demonstrates the significance of the work-relatedness element in workers’
compensation cases. For instance, in Gau Sheng Phils., Inc. v. Joaquin,59 the illness of the seafarer therein, who
was terminated based on mutual consent, was found to be non-compensable since he died of chronic renal
failure which was not listed as a compensable illness. Likewise, in Aya-ay, Sr. v. Arpaphil Shipping Corp.,60 the
Court denied the claim for death compensation because the seafarer therein was repatriated due to an eye
injury but subsequently died of a stroke, which was not listed as a compensable illness under the POEA-SEC.
Death compensation was also denied to the claimants in Hermogenes v. Osco Shipping Services, Inc.,61 since
no evidence was offered to prove the cause of the termination of the contract of employment, whereas it was
found that the seafarer therein died three (3) years after his disembarkation of an illness which was not shown
to have been contracted during his employment. An identical ruling was rendered in Prudential Shipping and
Management Corp. v. Sta. Rita,62 wherein the seafarer in said case was repatriated due to umbilical hernia but
died one (1) year after of cardiopulmonary arrest, which was not, however, established as work-related.
Similarly, death compensation was denied the claimants in Ortega v. CA,63 considering that the seafarer therein
died of lung cancer which was not found to be work-related.

Meanwhile, on the opposite end of the jurisprudential spectrum, the Court, in a number of cases, granted
claims for death benefits although the seafarers’ death therein had occurred after their repatriation primarily
because of the causal connection between their work and the illness which had eventually resulted in their
death.

In the 1999 case of Wallem Maritime Service, Inc. v. NLRC,64 the death benefit claims of the heirs of the seafarer
who had died after having been repatriated on account of "mutual consent" between him and his employer
was allowed by the Court because of the "reasonable connection" between his job and his illness. As pertinently
stated in that case:

It is not required that the employment be the sole factor in the growth, development or acceleration of the
illness to entitle the claimant to the benefits provided therefor. It is enough that the employment had
contributed, even in a small degree, to the development of the disease and in bringing about his death.

It is indeed safe to presume that, at the very least, the nature of Faustino Inductivo’s employment had
contributed to the aggravation of his illness — if indeed it was pre-existing at the time of his employment —
and therefore it is but just that he be duly compensated for it. It cannot be denied that there was at least a
reasonable connection between his job and his lung infection, which eventually developed into septicemia and
ultimately caused his death. As a [utility man] on board the vessel, he was exposed to harsh sea weather,
chemical irritants, dusts, etc., all of which invariably contributed to his illness.

Neither is it necessary, in order to recover compensation, that the employee must have been in perfect
condition or health at the time he contracted the disease. Every workingman brings with him to his
employment certain infirmities, and while the employer is not the insurer of the health of the employees, he
takes them as he finds them and assumes the risk of liability.1âwphi1 If the disease is the proximate cause of
the employee’s death for which compensation is sought, the previous physical condition of the employee is
unimportant and recovery may be had therefor independent of any pre-existing disease.65 (Emphases and
underscoring supplied)

Later, the Court, in Seagull Shipmanagement and Transport, Inc. v. NLRC66 – a sickness and permanent disability
claims case decided under the auspices of the 1984 version of the POEA-SEC (which, unlike the present
standard contract, only requires that the illness of death occur during the term of the employment whether
work-related or not) – significantly observed that:

Even assuming that the ailment of the worker was contracted prior to his employment, this still would not
deprive him of compensation benefits. For what matters is that his work had contributed, even in a small
degree, to the development of the disease and in bringing about his eventual death. Neither is it necessary, in
order to recover compensation, that the employee must have been in perfect health at the time he contracted
the disease. A worker brings with him possible infirmities in the course of his employment, and while the
employer is not the insurer of the health of the employees, he takes them as he finds them and assumes the
risk of liability. If the disease is the proximate cause of the employee’s death for which compensation is sought,
the previous physical condition of the employee is unimportant, and recovery may be had for said death,
independently of any pre-existing disease. 67(Emphases and underscoring supplied; citations omitted)

The Court similarly took into account the work-relatedness element in granting the death benefits claim in
Interorient Maritime Enterprises, Inc. v. Remo,68 a 2010 case decided under the 1996 POEA-SEC which
operated under parameters identical to the 1984 POEA-SEC. Quoted hereunder are the pertinent portions of
that ruling:

It was established on record that before the late Lutero Remo signed his last contract with private respondents
as Cook-Steward of the vessel "M/T Captain Mitsos L," he was required to undergo a series of medical
examinations. Yet, he was declared "fit to work" by private respondents’ company designated-physician. On
April 19, 1999, Remo was discharged from his vessel after he was hospitalized in Fujairah for atrial fibrillation
and congestive heart failure. His death on August 28, 2000, even if it occurred months after his repatriation,
due to hypertensive cardio-vascular disease, could clearly have been work related. Declared as "fit to work" at
the time of hiring, and hospitalized while on service onaccount of "atrial fibrillation and congestive heart
failure," his eventual death due to "hypertensive cardio-vascular disease" could only be work related. The
death due to "hypertensive cardio-vascular disease" could in fact be traced to Lutero Remo’s being the "Cook-
Steward." As Cook-Steward of an ocean going vessel, Remo had no choice but to prepare and eat hypertension
inducing food, a kind of food that eventually caused his "hypertensive cardio-vascular disease," a disease which
in turn admittedly caused his death.

Private respondents cannot deny liability for the subject death by claiming that the seafarer’s death occurred
beyond the term of his employment and worsely, that there has been misrepresentation on the part of the
seafarer. For, as employer, the private respondents had all the opportunity to pre-qualify, thoroughly screen
and choose their applicants to determine if they are medically, psychologically and mentally fit for
employment. That the seafarer here was subjected to the required prequalification standards before he was
admitted as Cook-Steward, it thus has to be safely presumed that the late Remo was in a good state of health
when he boarded the vessel.69 (Emphases and underscoring supplied; citation omitted)

More recently, in the 2013 case of Inter-Orient Maritime, Incorporated v. Candava,70 also decided under the
framework of the 1996 POEA-SEC, the Court pronounced that the seafarer’s death therein, despite occurring
after his repatriation, remains "compensable for having been caused by an illness duly established to have
been contracted in the course of his employment."71
Thus, considering the constitutional mandate on labor as well as relative jurisprudential context, the rule,
restated for a final time, should be as follows: if the seafarer’s work-related injury or illness (that eventually
causes his medical repatriation and, thereafter, his death, as in this case) occurs during the term of his
employment, then the employer becomes liable for death compensation benefits under Section 20 (A) of the
2000 POEA-SEC. The provision cannot be construed otherwise for to do so would not only transgress prevailing
constitutional policy and deride the bearings of relevant case law but also result in a travesty of fairness and
an indifference to social justice.

For all these reasons, the Court hereby grants the petition.

WHEREFORE, the petition is GRANTED. The Decision dated May 19, 2009 and the Resolution dated October 30,
2009 of the Court of Appeals in CA-G.R. SP No. 104479 are hereby REVERSED and SET ASIDE and the Decision
dated April 30, 2008 of the National Labor Relations Commission is REINSTATED.

SO ORDERED.

G.R. Nos. 171594-96 September 18, 2013

ASIA BREWERY, INC., Petitioner,

vs.
TUNAY NA PAGKAKAISA NG MGA MANGGAGAWA SA ASIA (TPMA), Respondent.

DECISION

DEL CASTILLO, J.:

In cases of compulsory arbitration before the Secretary of Labor pursuant to Article 263(g) of the Labor Code,
the financial statements of the employer must be properly audited by an external and independent auditor in
order to be admissible in evidence for purposes of determining the proper wage award.

This Petition for Review on Certiorari assails the Court of Appeal’s (CA) October 6, 2005 Decision1 and the
February 17, 2006 Amended Decision2 in CA-G.R. SP Nos. 80839, and 83168 which modified the January 19,
2004 Decision3 of the Secretary of Labor in OS-AJ-0042-2003.

Factual Antecedents

The antecedents are aptly summarized by the CA:

Respondent union Tunay Na Pagkakaisa ng mga Manggagawa sa Asia (TPMA) is a legitimate labor organization,
certified as the sole and exclusive bargaining agent of all regular rank and file employees of petitioner
corporation Asia Brewery, Incorporated (ABI). The petitioner corporation, on the other hand, is a company
engaged in the manufacture, sale and distribution of beer, shandy, glass and bottled water products. It employs
about 1,500 workers and has existing distributorship agreements with at least 13 companies.

Respondent union and petitioner corporation had been negotiating for a new collective bargaining agreement
(CBA) for the years 2003-2006 since the old CBA expired last July 2003. After about 18 sessions or negotiations,
the parties were still unable to reconcile their differences on their respective positions on most items,
particularly on wages and other economic benefits.
On October 21, 2003, the Respondent union declared a deadlock. On October 27, 2003, Respondent union filed
a notice of strike with the National Conciliation and Mediation Board (NCMB), docketed as NCMB-RB-IV-LAG-
NS-10-064-03. However, the parties did not come to terms even before the NCMB.

On November 18, 2003, Respondent union conducted a strike vote. Out of the 840 union members, 768 voted
in favor of holding a strike.

On November 20, 2003, petitioner corporation then petitioned the Secretary of the Department of Labor and
Employment (DOLE) to assume jurisdiction over the parties’ labor dispute, invoking Article 263 (g) of the Labor
Code. In answer, Respondent union opposed the assumption of jurisdiction, reasoning therein that the
business of petitioner corporation is not in dispensable to the national interest.

On December 2, 2003, Respondent union filed before the Court of Appeals a petition for injunction, docketed
as CA-G.R. SP No. 80839, which sought to enjoin the respondent Secretary of Labor from assuming jurisdiction
over the labor dispute, or in the alternative, to issue a temporary restraining order, likewise to enjoin the
former from assuming jurisdiction.

On December 19, 2003, the public respondent, through Undersecretary/Acting Secretary Manuel G. Imson,
issued an order assuming jurisdiction over the labor dispute between the Respondent union and petitioner
corporation. The pertinent portions of the said order read:

xxxx

"WHEREFORE, based on our considered determination that the current labor dispute is likely to adversely affect
national interest, this Office hereby ASSUMES JURISDICTION over the labor dispute between the ASIA
BREWERY, INCORPORATED and the TUNAY NA PAGKAKAISA NGMANGGAGAWA SA ASIA pursuant to Article
263 (g) of the Labor Code, as amended. Accordingly, any strike or lockout in the Company, whether actual or
impending, is hereby enjoined. Parties are hereby directed to cease and desist from taking any action that
might exacerbate the situation.

xxxx

"To expedite the resolution of this dispute, the parties are directed to submit in three (3) copies, their Position
Papers within ten (10) days from receipt of this Order and another five (5) days from receipt of the said position
papers to submit their Reply.

"1. The Company shall be required to provide:

"a. Complete Audited Financial Statements for the past five (5) years certified as to its completeness by the
Chief Financial Comptroller or Accountant;

"b. Projected Financial Statements of the Company for the next three (3) years;

"c. CBA history as to economic issues; and

"d. The average monthly salary of the employees in this bargaining unit.

"2. The Union is required to provide an itemized summary of their CBA demands with financial costing and
sample CBA’s (if any) in similarly situated or comparable bargaining units.

"In the interest of speedy labor justice, this Office will entertain no motion for extension or postponement.
"The appropriate police authority is hereby deputized to enforce this Order in case of defiance or the same is
not forthwith obeyed.

"SO ORDERED."

xxxx

On January 19, 2004, respondent union filed another petition for certiorari with the Court of Appeals, docketed
as CA-G.R. SP No. 81639,imputing bad faith and grave abuse of discretion to the Secretary of Labor. Respondent
union prayed therein for the nullification of the order of assumption of jurisdiction and the declaration that
petitioner corporation is not an industry indispensable to the national interest.

In the meantime, in a decision dated January 19, 2004, Secretary of Labor Patricia Sto. Tomas resolved the
deadlock between the parties. As summarized in a later resolution, the public respondent granted the following
arbitral awards:

(1) WAGE INCREASES as follows:

First Year = ₱18.00

Second Year = 15.00

Third Year = 12.00

Total = ₱45.00

(2) HEALTH CARE (HMO)

₱1,300 premium to be shouldered by Asia Brewery, Inc., for each covered employee and ₱1,800 contribution
for each Union member-dependent.

xxxx

The respondent union moved for a reconsideration of the decision on the ground that the ruling lacks
evidentiary proof to sufficiently justify the same. It also filed a "Paglilinaw o Pagwawasto" of the Decision.
Similarly, petitioner corporation also filed a motion for clarification/reconsideration. The respondent Secretary
of Labor resolved all three motions in a resolution dated January 29, 2004 x x x.

xxxx

Thereafter, on February 9, 2004, the parties executed and signed the Collective Bargaining Agreement with a
term from August 1, 2003 to July 31,2006.

Subsequently, on April 1, 2004, respondent union filed another petition for certiorari before the Court of
Appeals, which was docketed as SP-83168, assailing the arbitral award and imputing grave abuse of discretion
upon the public respondent.

x x x x4

Court of Appeal’s Ruling

On October 6, 2005, the CA rendered the first assailed Decision affirming with modification the arbitral award
of the Secretary of Labor, viz:

WHEREFORE, judgment is hereby rendered with the following rulings:

1) The assailed order dated December 19, 2003 of public respondent Secretary of Labor is AFFIRMED . The
petitions for injunction and certiorari in CA-G.R. SP Nos. 80839 and 81639 are denied and accordingly
DISMISSED.

2) In CA-G.R. SP No. 81368, the assailed decision dated January 19,2004 and the order dated January 29, 2004
of the public respondent are hereby MODIFIED to read as follows:

a) The present CBA is declared effective as of August 1, 2003;

b) Consequently, the employees are entitled to the arbitral awards or benefits from August 1, 2003 on top of
the ₱2,500.00 signing bonus;

c) The computation of the wage increase is REMANDED to the public respondent; and

d) The health benefit of the employees shall be ₱1,390.00.

SO ORDERED.5

In modifying the arbitral award of the Secretary of Labor, the CA ruled that: (1)The effectivity of the CBA should
be August 1, 2003 because this is the date agreed upon by the parties and not January 1, 2004 as decreed by
the Secretary of Labor; (2) The computation of wage increase should be remanded to the Secretary of Labor
because the computation was based on petitioner corporation’s unaudited financial statements, which have
no probative value pursuant to the ruling in Restaurante Las Conchas v. Llego,6 and was done in contravention
of DOLE Advisory No. 1, Series of 2004, which contained the guidelines in resolving bargaining deadlocks; and
(3) The health benefits should be ₱1,390.00 per covered employee because petitioner corporation had already
agreed to this amount and the same cannot be altered or reduced by the Secretary of Labor.

Aggrieved, respondent union and petitioner corporation moved for reconsideration and partial
reconsideration, respectively. On February 17, 2006,the CA issued an Amended Decision, viz :

WHEREFORE , the foregoing considered, the Motion for Reconsideration of respondent union is DENIED and
the Partial Motion for Reconsideration of petitioner corporation is PARTIALLY GRANTED .Accordingly, Our
Decision is MODIFIED and the signing bonus previously awarded is hereby DELETED . The assailed Decision of
the respondent Secretary with respect to the issue on salary increases is REMANDED to her office for a definite
resolution within one month from the finality of this Court’s Decision using as basis the externally audited
financial statements to be submitted by petitioner corporation.

SO ORDERED.7

The CA partially modified its previous Decision by deleting the award of the signing bonus. It ruled that,
pursuant to the express provisions of the CBA, the signing bonus is over and beyond what the parties agreed
upon in the said CBA.

From this Amended Decision, only petitioner corporation appealed to this Court via this Petition for Review on
Certiorari.

Issues
Petitioner corporation raises the following issues for our resolution:

I. Whether the CA erred when it failed to dismiss CA-G.R. SP No.83168 despite the lack of authority of those
who instituted it.

II. Whether the CA erred when it remanded to the Secretary of Labor the issue on wage increase.

III. Whether the CA erred when it awarded ₱1,390.00 as premium payment for each covered employee.8

Our Ruling

The Petition lacks merit.

The authority of Rodrigo Perez (Perez)

to file the petition before the CA was not
sufficiently refuted.

Petitioner corporation claims that Perez, the person who verified the Petition in CA-G.R. SP No. 83168
questioning the propriety of the arbitral award issued by the Secretary of Labor, was without authority to
represent respondent union. While there was a Secretary’s Certificate attached to the aforesaid Petition
purportedly authorizing Perez to file the Petition on behalf of the union, there was no showing that the union
president, Jose Manuel Miranda (Miranda), called for and presided over the meeting when the said resolution
was adopted as required by the union’s constitution and by-laws. Moreover, the aforesaid resolution was
adopted on March 23, 2004 while the Petition was filed on April 1, 2004 or nine days from the adoption of the
resolution. Under the union’s constitution and by-laws, the decision of the board of directors becomes effective
only after two weeks from its issuance. Thus, at the time of the filing of the aforesaid Petition, the resolution
authorizing Perez to file the same was still ineffective. Petitioner corporation also adverts to two labor cases
allegedly divesting Perez of authority to represent the union in the case before the appellate court.

We disagree.

The Secretary’s Certificate9 attached to the Petition in CA-G.R. SP No.83168 stated that the union’s board of
directors held a special meeting on March23, 2004 and unanimously passed a resolution authorizing Perez to
file a Petition before the CA to question the Secretary of Labor’s arbitral award.10 While petitioner corporation
claims that the proper procedure for calling such a meeting was not followed, it presented no proof to establish
the same. Miranda, the union president who allegedly did not call for and preside over the said meeting, did
not come out to contest the validity of the aforesaid resolution or Secretary’s Certificate. Similarly, petitioner
corporation’s claim that the aforesaid resolution was still ineffective at the time of the filing of the subject
Petition is unsubstantiated. A fair reading of the provisions which petitioner corporation cited in the union’s
constitution and by-laws, particularly Article VIII, Section 211 thereof, would show that the same refers to
decisions of the board of directors regarding the laws or rules that would govern the union, hence, the necessity
of a two-week prior notice to the affected parties before they become effective. These provisions have not
been shown to apply to resolutions granting authority to individuals to represent the union in court cases.
Besides, even if we assume that these provisions in the union’s constitution and by-laws apply to the subject
resolution, the continuing silence of the union, from the time of its adoption to the filing of the Petition with
the CA and up to this point in these proceedings, would indicate that such defect, if at all present, in the
authority of Perez to file the subject Petition, was impliedly ratified by respondent union itself.

As to the two labor cases allegedly divesting Perez of the authority to file the subject Petition, an examination
of the same would show that they did not affect the legal capacity of Perez to file the subject Petition. The first
labor case (i.e., RO400-0407-AU-002,12 RO400-0409-AU-006,13 and RO400-0412-AU-00114) involved the move
of Perez and other union members to amend the union’s Constitution and By-Laws in order to include a
provision on recall elections and to conduct a recall elections on June 26, 2004. In that case, the Med-Arbiter,
in his January 25, 2005 Order,15 ruled that the amendment sought to be introduced was not validly ratified by
the requisite two-thirds vote from the union membership. As a result, the recall elections held on June 26,
2004 was annulled.16 The second labor case (

i.e. , NLRC NCR CC No. 000282-0417 and NLRC-RAB IV-12-20200-04-L18) involved the strike staged by Perez and
other union members on October 4, 2004. There, the National Labor Relations Commission, in its March
2006Decision,19 ruled that the strike was illegal and, as a consequence, Perez and the other union members
were declared to have lost their employment status.20

These two labor cases had no bearing on the legal capacity of Perez to represent the union in CA-G.R. SP No.
83168 because (1) they did not nullify the authority granted to Perez in the March 23, 2004 resolution of the
union’s board of directors to file the subject Petition, and (2) the material facts of these cases occurred and the
Decisions thereon were rendered after the subject Petition was already filed with the CA on April 1, 2004.

The remand of this case to the Secretary

of Labor as to the issue of wage increase
was proper.

Petitioner corporation admits that what it submitted to the Secretary of Labor were unaudited financial
statements which were then used as one of the bases in fixing the wage award. However, petitioner
corporation argues that these financial statements were duly signed and certified by its chief financial officer.
These statements have also been allegedly submitted to various government agencies and should, thus, be
considered official and public documents. Moreover, respondent union did not object to the subject financial
statements in the proceedings before the Secretary of Labor and even used the same in formulating its (the
union’s) arguments in said proceedings. Thus, petitioner corporation contends that although the subject
financial statements were not audited by an external and independent auditor, the same should be considered
substantial compliance with the order of the Secretary of Labor to produce the petitioner corporation’s
complete audited financial statements for the past five years. Furthermore, the Decision of the Secretary of
Labor was not solely based on the subject financial statements as the CBA history, costing of the proposals,
and wages in other similarly situated bargaining units were considered. Finally, petitioner corporation claims
that the demands of respondent union on wage increase are unrealistic and will cause the former to close
shop.

The contention is untenable.

In Restaurante Las Conchas v. Llego,21 several employees filed a case for illegal dismissal after the employer
closed its restaurant business. The employer sought to justify the closure through unaudited financial
statements showing the alleged losses of the business. We ruled that such financial statements are mere self-
serving declarations and inadmissible in evidence even if the employees did not object to their presentation
before the Labor Arbiter.22 Similarly, in Uichico v. National Labor Relations Commission,23 the services of
several employees were terminated on the ground of retrenchment due to alleged serious business losses
suffered by the employer. We ruled that by submitting unaudited financial statements, the employer failed to
prove the alleged business losses, viz :

x x x It is true that administrative and quasi-judicial bodies like the NLRC are not bound by the technical rules
of procedure in the adjudication of cases. However, this procedural rule should not be construed as a license
to disregard certain fundamental evidentiary rules. While the rules of evidence prevailing in the courts of law
or equity are not controlling in proceedings before the NLRC, the evidence presented before it must at least
have a modicum of admissibility for it to be given some probative value. The Statement of Profit and Losses
submitted by Crispa, Inc. to prove its alleged losses, without the accompanying signature of a certified public
accountant or audited by an independent auditor, are nothing but self-serving documents which ought to be
treated as a mere scrap of paper devoid of any probative value. For sure, this is not the kind of sufficient and
convincing evidence necessary to discharge the burden of proof required of petitioners to establish the alleged
losses suffered by Crispa, Inc. in the years immediately preceding 1990 that would justify the retrenchment of
respondent employees. x x x24

While the above-cited cases involve proof necessary to establish losses in cases of business closure or
retrenchment, we see no reason why this rule should not equally apply to the determination of the proper
level of wage award in cases where the Secretary of Labor assumes jurisdiction in a labor dispute pursuant to
Article 263(g)25 of the Labor Code.

In MERALCO v. Sec. Quisumbing,26 we had occasion to expound on the extent of our review powers over the
arbitral award of the Secretary of Labor, in general, and the factors that the Secretary of Labor must consider
in determining the proper wage award, in particular, viz:

The extent of judicial review over the Secretary of Labor's arbitral award is not limited to a determination of
grave abuse in the manner of the secretary's exercise of his statutory powers. This Court is entitled to, and
must — in the exercise of its judicial power — review the substance of the Secretary's award when grave abuse
of discretion is alleged to exist in the award, i.e., in the appreciation of and the conclusions the Secretary drew
from the evidence presented.

xxxx

In this case we believe that the more appropriate and available standard — and one does not require a
constitutional interpretation — is simply the standard of reasonableness. In layman's terms, reasonableness
implies the absence of arbitrariness; in legal parlance, this translates into the exercise of proper discretion and
to the observance of due process. Thus, the question we have to answer in deciding this case is whether the
Secretary's actions have been reasonable in light of the parties' positions and the evidence they presented.

xxxx

This Court has recognized the Secretary of Labor's distinct expertise in the study and settlement of labor
disputes falling under his power of compulsory arbitration. It is also well-settled that factual findings of labor
administrative officials, if supported by substantial evidence, are entitled not only to great respect but even to
finality. x x x

But at the same time, we also recognize the possibility that abuse of discretion may attend the exercise of the
Secretary's arbitral functions; his findings in an arbitration case are usually based on position papers and their
supporting documents (as they are in the present case), and not on the thorough examination of the parties'
contending claims that may be present in a court trial and in the face-to-face adversarial process that better
insures the proper presentation and appreciation of evidence. There may also be grave abuse of discretion
where the board, tribunal or officer exercising judicial function fails to consider evidence adduced by the
parties. Given the parties' positions on the justiciability of the issues before us, the question we have to answer
is one that goes into the substance of the Secretary's disputed orders: Did the Secretary properly consider and
appreciate the evidence presented before him?

xxxx
While We do not seek to enumerate in this decision the factors that should affect wage determination, we
must emphasize that a collective bargaining dispute such as this one requires due consideration and proper
balancing of the interests of the parties to the dispute and of those who might be affected by the dispute. To
our mind, the best way in approaching this task holistically is to consider the available objective facts, including,
where applicable, factors such as the bargaining history of the company, the trends and amounts of arbitrated
and agreed wage awards and the company's previous CBAs, and industry trends in general. As a rule,
affordability or capacity to pay should be taken into account but cannot be the sole yardstick in determining
the wage award, especially in a public utility like MERALCO.1âwphi1 In considering a public utility, the decision
maker must always take into account the "public interest" aspects of the case; MERALCO's income and the
amount of money available for operating expenses — including labor costs — are subject to State regulation.
We must also keep in mind that high operating costs will certainly and eventually be passed on to the
consuming public as MERALCO has bluntly warned in its pleadings.

We take note of the "middle ground" approach employed by the Secretary in this case which we do not
necessarily find to be the best method of resolving a wage dispute. Merely finding the midway point between
the demands of the company and the union, and "splitting the difference" is a simplistic solution that fails to
recognize that the parties may already be at the limits of the wage levels they can afford. It may lead to the
danger too that neither of the parties will engage in principled bargaining; the company may keep its position
artificially low while the union presents an artificially high position, on the fear that a "Solomonic" solution
cannot be avoided. Thus, rather than encourage agreement, a "middle ground approach" instead promotes a
"play safe" attitude that leads to more deadlocks than to successfully negotiated CBAs.27

Thus, we rule that the Secretary of Labor gravely abused her discretion when she relied on the unaudited
financial statements of petitioner corporation in determining the wage award because such evidence is self-
serving and inadmissible. Not only did this violate the December 19, 2003 Order28 of the Secretary of Labor
herself to petitioner corporation to submit its complete audited financial statements, but this may have
resulted to a wage award that is based on an inaccurate and biased picture of petitioner corporation's capacity
to pay — one of the more significant factors in making a wage award. Petitioner corporation has offered no
reason why it failed and/or refused to submit its audited financial statements for the past five years relevant
to this case. This only further casts doubt as to the veracity and accuracy of the unaudited financial statements
it submitted to the Secretary of Labor. Verily, we cannot countenance this procedure because this could unduly
deprive labor of its right to a just share in the fruits of production29 and provide employers with a means to
understate their profitability in order to defeat the right of labor to a just wage.

We also note with disapproval the manner by which the Secretary of Labor issued the wage award in this case,
effectively paying lip service to the guidelines we laid down in Meralco. To elaborate, the Secretary of Labor
held:

Based on such factors as BARGAINING HISTORY, TRENDS OFARBITRATED AND AGREED AWARDS AND
INDUSTRY TRENDS, in general, we hold that vis-à-vis the Union’s demands and the Company’s offers, as follows:

UNION[’S] DEMANDS COMPANY’S OFFERS

For the FIRST YEAR: ₱36 For the First 18 months: ₱18

For the SECOND YEAR: 36 For the Second 18 months: 18

 For the THIRD YEAR: 36

======= =======
TOTAL: ₱108 for ₱36
three (3) years for 36 months

this Office awards the following wage increases:

For the FIRST YEAR: ₱18

For the SECOND YEAR: 15

12P
For the THIRD YEAR: ===
=

45 for three (3) years30

As can be seen, the Secretary of Labor failed to indicate the actual data upon which the wage award was
based.1âwphi1 It even appears that she utilized the "middle ground" approach which we precisely warned
against in Meralco . Factors such as the actual and projected net operating income, impact of the wage increase
on net operating income, the company's previous CBAs, and industry trends were not discussed in detail so
that the precise bases of the wage award are not discernible on the face of the Decision. The contending parties
are effectively precluded from seeking a review of the wage award, even if proper under our ruling in Meralco
, because of the general but unsubstantiated statement in the Decision that the wage award was based on
factors like the bargaining history, trends of arbitrated and agreed awards, and industry trends. In fine, there
is no way of determining if the Secretary of Labor utilized the proper evidence, figures or data in arriving at the
subject wage award as well as the reasonableness thereof. This falls short of the requirement of administrative
due process obligating the decision-maker to adjudicate the rights of the parties in such a manner that they
can know the various issues involved and the reasons for the decision rendered.31

Based on the foregoing, we hold that the Secretary of Labor gravely abused her discretion in making the subject
wage award. The appellate court, thus, correctly remanded this case to the Secretary of Labor for the proper
determination of the wage award which should utilize, among others, the audited financial statements of
petitioner corporation and state with sufficient clarity the facts and law on which the wage award is based.

The modification of the arbitral award

on health benefits from ₱1,300.00 to
₱1,390.00 was proper.

The CA held that the Secretary of Labor gravely abused her discretion when the latter awarded ₱1,300.00 as
premium payment for each covered employee because the minutes of the October 17, 2003 collective
bargaining negotiations between the parties showed that they had previously agreed to a higher ₱1,390.00
premium payment for each covered employee. However, petitioner corporation claims that it never agreed to
this higher amount as borne out by the same minutes. The final offer of petitioner corporation on this item
was allegedly to provide only ₱1,300.00 (not ₱1,390.00) as premium payment for each covered employee.
We have reviewed the minutes32 of the October 17, 2003 collective bargaining negotiations adverted to by
both parties. A fair reading thereof indicates that the issue of premium payments underwent several proposals
and counter-proposals from petitioner corporation and respondent union, respectively. The last proposal of
petitioner corporation relative thereto was to allot ₱1,390.00 as premium payment per covered employee
provided that it (petitioner corporation) would not shoulder the premium payments of the employee’s
dependents. For its part, respondent union accepted the proposal provided that the premium payment would
be renegotiated on the second and third years of the CBA. Consequently, both parties agreed at the minimum
that the premium payment shall be ₱1,390.00 per covered employee and the remaining point of contention
was whether the premium payment could be renegotiated on the second and third years of the CBA. It was,
thus, grave abuse of discretion on the part of the Secretary of Labor to reduce the award to ₱1,300.00 which
is below the minimum of ₱1,390.00 previously agreed upon by the parties. We also note that in the proceedings
before the CA, respondent union only pleaded for the award of the ₱1,390.00 premium payment per covered
employee33 thereby effectively waiving its proposal on the renegotiation of the premium payment on the
second and third years of the CBA.

WHEREFORE, the Petition is DENIED. The February 17, 2006 Amended Decision of the Court of Appeals in CA-
G.R. SP Nos. 80839, 81639, and 83168 is AFFIRMED.

Costs against petitioner.

SO ORDERED.

G.R. No. 163431 August 28, 2013

NATHANIEL N. DONGON, PETITIONER,

vs.
RAPID MOVERS AND FORWARDERS CO., INC., AND/OR NICANOR E. JAO, JR., RESPONDENTS.

DECISION

BERSAMIN, J.:

The prerogative of the employer to dismiss an employee on the ground of willful disobedience to company
policies must be exercised in good faith and with due regard to the rights of labor.

The Case

By petition for review on certiorari, petitioner appeals the adverse decision promulgated on October 24,
2003,1whereby the Court of Appeals (CA) set aside the decision dated June 17, 2002 of the National Labor
Relations Commission (NLRC) in his favor.2 The NLRC had thereby reversed the ruling dated September 10,
2001 of the Labor Arbiter dismissing his complaint for illegal dismissal.3

Antecedents

The following background facts of this case are stated in the CA’s assailed decision, viz:

From the records, it appears that petitioner Rapid is engaged in the hauling and trucking business while private
respondent Nathaniel T. Dongon is a former truck helper leadman.
Private respondent’s area of assignment is the Tanduay Otis Warehouse where he has a job of facilitating the
loading and unloading [of the] petitioner’s trucks. On 23 April 2001, private respondent and his driver, Vicente
Villaruz, were in the vicinity of Tanduay as they tried to get some goods to be distributed to their clients.

Tanduay’s security guard called the attention of private respondent as to the fact that Mr. Villaruz’[s] was not
wearing an Identification Card (I.D. Card). Private respondent, then, assured the guard that he will secure a
special permission from the management to warrant the orderly release of goods.

Instead of complying with his compromise, private respondent lent his I.D. Card to Villaruz; and by reason of
such misrepresentation , private respondent and Mr. Villaruz got a clearance from Tanduay for the release of
the goods. However, the security guard, who saw the misrepresentation committed by private respondent and
Mr. Villaruz, accosted them and reported the matter to the management of Tanduay.

On 23 May 2001, after conducting an administrative investigation, private respondent was dismissed from the
petitioning Company.

On 01 June 2001, private respondent filed a Complaint for Illegal Dismissal. x x x4

In his decision, the Labor Arbiter dismissed the complaint, and ruled that respondent Rapid Movers and
Forwarders Co., Inc. (Rapid Movers) rightly exercised its prerogative to dismiss petitioner, considering that: (1)
he had admitted lending his company ID to driver Vicente Villaruz; (2) his act had constituted mental dishonesty
and deceit amounting to breach of trust; (3) Rapid Movers’ relationship with Tanduay had been jeopardized by
his act; and (4) he had been banned from all the warehouses of Tanduay as a result, leaving Rapid Movers with
no available job for him.5

On appeal, however, the NLRC reversed the Labor Arbiter, and held that Rapid Movers had not discharged its
burden to prove the validity of petitioner’s dismissal from his employment. It opined that Rapid Movers did
not suffer any pecuniary damage from his act; and that his dismissal was a penalty disproportionate to the act
of petitioner complained of. It awarded him backwages and separation pay in lieu of reinstatement, to wit:

WHEREFORE, the decision appealed from is REVERSED and SET ASIDE and a new one ENTERED ordering the
payment of his backwages from April 25, 2001 up to the finality of this decision and in lieu of reinstatement,
he should be paid his separation pay from date of hire on May 2, 1994 up to the finality hereof.

SO ORDERED.6

Rapid Movers brought a petition for certiorari in the CA, averring grave abuse of discretion on the part of the
NLRC, to wit:

I.

x x x IN STRIKING DOWN THE DISMISSAL OF THE PRIVATE RESPONDENT [AS] ILLEGAL ALLEGEDLY FOR BEING
GROSSLY DISPROPORTIONATE TO THE OFFENSE COMMITTED IN THAT NEITHER THE PETITIONERS NOR ITS
CLIENT TANDUAY SUFFERED ANY PECUNIARY DAMAGE THEREFROM THEREBY IMPLYING THAT FOR A
DISHONEST ACT/MISCONDUCT TO BE A GROUND FOR DISMISSAL OF AN EMPLOYEE, THE SAME MUST AT LEAST
HAVE RESULTED IN PECUNIARY DAMAGE TO THE EMPLOYER;

II.

x x x IN EXPRESSING RESERVATION ON THE GUILT OF THE PRIVATE RESPONDENT IN THE LIGHT OF ITS
PERCEIVED CONFLICTING DATES OF THE LETTER OF TANDUAY TO RAPID MOVERS (JANUARY 25, 2001) AND THE
OCCURRENCE OF THE INCIDENT ON APRIL 25, 2001 WHEN SAID CONFLICT OF DATES CONSIDERING THE
EVIDENCE ON RECORD, WAS MORE APPARENT THAN REAL.7

Ruling of the CA

On October 24, 2003, the CA promulgated its assailed decision reinstating the decision of the Labor Arbiter,
and upholding the right of Rapid Movers to discipline its workers, holding thusly:

There is no dispute that the private respondent lent his I.D. Card to another employee who used the same in
entering the compound of the petitioner customer, Tanduay. Considering that this amounts to dishonesty and
is provided for in the petitioning Company’s Manual of Discipline, its imposition is but proper and appropriate.

It is basic in any enterprise that an employee has the obligation of following the rules and regulations of its
employer. More basic further is the elementary obligation of an employee to be honest and truthful in his
work. It should be noted that honesty is one of the foremost criteria of an employer when hiring a prospective
employee. Thus, we see employers requiring an NBI clearance or police clearance before formally accepting an
applicant as their employee. Such rules and regulations are necessary for the efficient operation of the
business.

Employees who violate such rules and regulations are liable for the penalties and sanctions so provided, e.g.,
the Company’s Manual of Discipline (as in this case) and the Labor Code.

The argument of the respondent commission that no pecuniary damage was sustained is off-tangent with the
facts of the case. The act of lending an ID is an act of dishonesty to which no pecuniary estimate can be ascribed
for the simple reason that no monetary equation is involved. What is involved is plain and simple adherence
to truth and violation of the rules. The act of uttering or the making of a falsehood does not need any pecuniary
estimate for the act to gestate to one punishable under the labor laws. In this case, the illegal use of the I.D.
Card while it may appear to be initially trivial is of crucial relevance to the petitioner’s customer, Tanduay,
which deals with drivers and leadmen withdrawing goods and merchandise from its warehouse. For those with
criminal intentions can use another’s ID to asport goods and merchandise.

Hence, while it can be conceded that there is no pecuniary damage involved, the fact remains that the offense
does not only constitute dishonesty but also willful disobedience to the lawful order of the Company, e.g., to
observe at all time the terms and conditions of the Manual of Discipline. Article 282 of the Labor Code provides:

"Termination by Employer – An employer may terminate an employment for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;

x x x." (Emphasis, supplied)

The constitutional protection afforded to labor does not condone wrongdoings by the employee; and an
employer’s power to discipline its workers is inherent to it. As honesty is always the best policy, the Court is
convinced that the ruling of the Labor Arbiter is more in accord with the spirit of the Labor Code. "The
Constitutional policy of providing full protection to labor is not intended to oppress or destroy management
(Capili vs. NLRC, 270 SCRA 488[1997]." Also, in Atlas Fertilizer Corporation vs. NLRC, 273 SCRA 549 [1997], the
Highest Magistrate declared that "The law, in protecting the rights of the laborers, authorizes neither
oppression nor self-destruction of the employer."
WHEREFORE, premises considered, the Petition is GRANTED. The assailed 17 June 2002 Decision of respondent
Commission in NLRC CA-029937-01 is hereby SET ASIDE and the 10 September 2001 Decision of Labor Arbiter
Vicente R. Layawen is ordered REINSTATED. No costs.

SO ORDERED.8

Petitioner moved for a reconsideration, but the CA denied his motion on March 22, 2004.9

Undaunted, the petitioner is now on appeal.

Issue

Petitioner still asserts the illegality of his dismissal, and denies being guilty of willful disobedience. He contends
that:

THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN SUSTAINING THE DECISION DATED
10 SEPTEMBER 2001 OF LABOR ARBITER VICENTE R. LAYAWEN WHERE THE LATTER RULED THAT BY LENDING
HIS ID TO VILLARUZ, PETITIONER (COMPLAINANT) COMMITTED MISREPRESENTATION AND DECEIT
CONSTITUTING MENTAL DISHONESTY WHICH CANNOT BE DISCARDED AS INSIGNIFICANT OR TRIVIAL.10

Petitioner argues that his dismissal was discriminatory because Villaruz was retained in his employment as
driver; and that the CA gravely abused its discretion in disregarding his showing that he did not violate Rapid
Movers’ rules and regulations but simply performed his work in line with the duties entrusted to him, and in
not appreciating his good faith and lack of any intention to willfully disobey the company’s rules.

In its comment,11 Rapid Movers prays that the petition for certiorari be dismissed for being an improper
remedy and apparently resorted to as a substitute for a lost appeal; and insists that the CA did not commit
grave abuse of discretion.1âwphi1

In his reply,12 petitioner submits that his dismissal was a penalty too harsh and disproportionate to his
supposed violation; and that his dismissal was inappropriate due to the violation being his first infraction that
was even committed in good faith and without malice.

Based on the parties’ foregoing submissions, the issues to be resolved are, firstly: Was the petition improper
and dismissible?; and, secondly: If the petition could prosper, was the dismissal of petitioner on the ground of
willful disobedience to the company regulation lawful?

Ruling

The petition has merit.

1.

Petition should not be dismissed

In St. Martin Funeral Home v. National Labor Relations Commission,13 the Court has clarified that parties
seeking the review of decisions of the NLRC should file a petition for certiorari in the CA on the ground of grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of the NLRC. Thereafter, the remedy
of the aggrieved party from the CA decision is an appeal via petition for review on certiorari.14

The petition filed here is self-styled as a petition for review on certiorari, but Rapid Movers points out that the
petition was really one for certiorari under Rule 65 of the Rules of Court due to its basis being the commission
by the CA of a grave abuse of its discretion and because the petition was filed beyond the reglementary period
of appeal under Rule 45. Hence, Rapid Movers insists that the Court should dismiss the petition because
certiorari under Rule 65 could not be a substitute of a lost appeal under Rule 45.

Ordinarily, an original action for certiorari will not prosper if the remedy of appeal is available, for an appeal
by petition for review on certiorari under Rule 45 of the Rules of Court and an original action for certiorari
under Rule 65 of the Rules of Court are mutually exclusive, not alternative nor successive, remedies.15 On
several occasions, however, the Court has treated a petition for certiorari as a petition for review on certiorari
when: (a) the petition has been filed within the 15-day reglementary period;16 (b) public welfare and the
advancement of public policy dictate such treatment; (c) the broader interests of justice require such
treatment; (d) the writs issued were null and void; or (e) the questioned decision or order amounts to an
oppressive exercise of judicial authority.17

The Court deems it proper to allow due course to the petition as one for certiorari under Rule 65 in the broader
interest of substantial justice, particularly because the NLRC’s appellate adjudication was set aside by the CA,
and in order to put at rest the doubt that the CA, in so doing, exercised its judicial authority oppressively.
Whether the petition was proper or not should be of less importance than whether the CA gravely erred in
undoing and setting aside the determination of the NLRC as a reviewing forum vis-à-vis the Labor Arbiter. We
note in this regard that the NLRC had declared the dismissal of petitioner to be harsh and not commensurate
to the infraction committed. Given the spirit and intention underlying our labor laws of resolving a doubtful
situation in favor of the working man, we will have to review the judgment of the CA to ascertain whether the
NLRC had really committed grave abuse of its discretion. This will settle the doubts on the propriety of
terminating petitioner, and at the same time ensure that justice is served to the parties.18

2.

Petitioner was not guilty of willful disobedience; hence, his dismissal was illegal

Petitioner maintains that willful disobedience could not be a ground for his dismissal because he had acted in
good faith and with the sole intention of facilitating deliveries for Rapid Movers when he allowed Villaruz to
use his company ID.

Willful disobedience to the lawful orders of an employer is one of the valid grounds to terminate an employee
under Article 296 (formerly Article 282) of the Labor Code.19 For willful disobedience to be a ground, it is
required that: (a) the conduct of the employee must be willful or intentional; and (b) the order the employee
violated must have been reasonable, lawful, made known to the employee, and must pertain to the duties that
he had been engaged to discharge.20 Willfulness must be attended by a wrongful and perverse mental attitude
rendering the employee’s act inconsistent with proper subordination.21 In any case, the conduct of the
employee that is a valid ground for dismissal under the Labor Code constitutes harmful behavior against the
business interest or person of his employer.22 It is implied that in every act of willful disobedience, the erring
employee obtains undue advantage detrimental to the business interest of the employer.

Under the foregoing standards, the disobedience attributed to petitioner could not be justly characterized as
willful within the contemplation of Article 296 of the Labor Code. He neither benefitted from it, nor thereby
prejudiced the business interest of Rapid Movers. His explanation that his deed had been intended to benefit
Rapid Movers was credible. There could be no wrong or perversity on his part that warranted the termination
of his employment based on willful disobedience.

Rapid Movers argues, however, that the strict implementation of company rules and regulations should be
accorded respect as a valid exercise of its management prerogative. It posits that it had the prerogative to
terminate petitioner for violating its following company rules and regulations, to wit:
(a) "Pagpayag sa paggamit ng iba o paggamit ng maling rekord ng kumpanya kaugnay sa operations,
maintenance or materyales o trabaho" (Additional Rules and Regulations No. 2); and

(b) "Pagkutsaba sa pagplano o pagpulong sa ibang tao upang labagin ang anumang alituntunin ng kumpanya"
(Article 5.28).23

We cannot sustain the argument of Rapid Movers.

It is true that an employer is given a wide latitude of discretion in managing its own affairs. The broad discretion
includes the implementation of company rules and regulations and the imposition of disciplinary measures on
its employees. But the exercise of a management prerogative like this is not limitless, but hemmed in by good
faith and a due consideration of the rights of the worker.24 In this light, the management prerogative will be
upheld for as long as it is not wielded as an implement to circumvent the laws and oppress labor.25

To us, dismissal should only be a last resort, a penalty to be meted only after all the relevant circumstances
have been appreciated and evaluated with the goal of ensuring that the ground for dismissal was not only
serious but true. The cause of termination, to be lawful, must be a serious and grave malfeasance to justify the
deprivation of a means of livelihood. This requirement is in keeping with the spirit of our Constitution and laws
to lean over backwards in favor of the working class, and with the mandate that every doubt must be resolved
in their favor.26

Although we recognize the inherent right of the employer to discipline its employees, we should still ensure
that the employer exercises the prerogative to discipline humanely and considerately, and that the sanction
imposed is commensurate to the offense involved and to the degree of the infraction. The discipline exacted
by the employer should further consider the employee’s length of service and the number of infractions during
his employment.27The employer should never forget that always at stake in disciplining its employee are not
only his position but also his livelihood,28 and that he may also have a family entirely dependent on his
earnings.29

Considering that petitioner’s motive in lending his company ID to Villaruz was to benefit Rapid Movers as their
employer by facilitating the loading of goods at the Tanduay Otis Warehouse for distribution to Rapid Movers’
clients, and considering also that petitioner had rendered seven long unblemished years of service to Rapid
Movers, his dismissal was plainly unwarranted. The NLRC’s reversal of the decision of the Labor Arbiter by
holding that penalty too harsh and disproportionate to the wrong attributed to him was legally and factually
justified, not arbitrary or whimsical. Consequently, for the CA to pronounce that the NLRC had thereby gravely
abused its discretion was not only erroneous but was itself a grave abuse of discretion amounting to lack of
jurisdiction for not being in conformity with the pertinent laws and jurisprudence. We have held that a
conclusion or finding derived from erroneous considerations is not a mere error of judgment but one tainted
with grave abuse of discretion.30

WHEREFORE, the Court GRANTS the petition; REVERSES and SETS ASIDE the decision promulgated by the Court
of Appeals on October 24, 2003; REINSTATES the decision of the National Labor Relations Commission rendered
on June 17, 2002; and ORDERS respondents to pay the costs of suit.

SO ORDERED.
G.R. No. 190515 June 6, 2011

CIRTEK EMPLOYEES LABOR UNION-FEDERATION OF FREE WORKERS Petitioner,

vs.
CIRTEK ELECTRONICS, INC., Respondent.

RESOLUTION

CARPIO MORALES, J.:

This resolves the motion for reconsideration and supplemental motion for reconsideration filed by respondent,
Cirtek Electronics, Inc., of the Court’s Decision dated November 15, 2010.

Respondent-movant avers that petitioner, in filing the petition for certiorari under Rule 65, availed of the
wrong remedy, hence, the Court should have dismissed the petition outright. It goes on to aver that the Court
erred in resolving a factual issue – whether the August 24, 2005 Memorandum of Agreement (MOA) was validly
entered into –, which is not the office of a petition for certiorari.

Respondent-movant further avers that the MOA1 signed by the remaining officers of petitioner Union and
allegedly ratified by its members should have been given credence by the Court.

Furthermore, respondent-movant maintains that the Secretary of Labor cannot insist on a ruling beyond the
compromise agreement entered into by the parties; and that, as early as February 5, 2010, petitioner Union
had already filed with the Department of Labor and Employment (DOLE) a resolution of disaffiliation from the
Federation of Free Workers resulting in the latter’s lack of personality to represent the workers in the present
case.

The motion is bereft of merit.

Respondent indeed availed of the wrong remedy of certiorari under Rule 65. Due, however, to the nature of
the case, one involving workers’ wages and benefits, and the fact that whether the petition was filed under
Rule 65 or appeal by certiorari under Rule 45 it was filed within 15 days (the reglementary period under Rule
45) from petitioner’s receipt of the resolution of the Court of Appeals’ Resolution denying its motion for
reconsideration, the Court resolved to give it due course. As Almelor v. RTC of Las Piñas, et al. 2 restates:

Generally, an appeal taken either to the Supreme Court or the CA by the wrong or inappropriate mode shall be
dismissed. This is to prevent the party from benefiting from one’s neglect and mistakes. However, like most
rules, it carries certain exceptions. After all, the ultimate purpose of all rules of procedures is to achieve
substantial justice as expeditiously as possible. (emphasis and underscoring supplied)

Respecting the attribution of error to the Court in ruling on a question of fact, it bears recalling that a QUESTION
OF FACT arises when the doubt or difference arises as to the truth or falsehood of alleged facts,3 while a
QUESTION OF LAW exists when the doubt or difference arises as to what the law is on a certain set of facts.

The present case presents the primordial issue of whether the Secretary of Labor is empowered to give arbitral
awards in the exercise of his authority to assume jurisdiction over labor disputes.

Ineluctably, the issue involves a determination and application of existing law, the provisions of the Labor Code,
and prevailing jurisprudence. Intertwined with the issue, however, is the question of validity of the MOA and
its ratification which, as movant correctly points out, is a question of fact and one which is not appropriate for
a petition for review on certiorari under Rule 45. The rule, however, is not without exceptions, viz:
This rule provides that the parties may raise only questions of law, because the Supreme Court is not a trier of
facts. Generally, we are not duty-bound to analyze again and weigh the evidence introduced in and considered
by the tribunals below. When supported by substantial evidence, the findings of fact of the CA are conclusive
and binding on the parties and are not reviewable by this Court, unless the case falls under any of the
following recognized exceptions:

(1) When the conclusion is a finding grounded entirely on speculation, surmises and conjectures;

(2) When the inference made is manifestly mistaken, absurd or impossible;

(3) Where there is a grave abuse of discretion;

(4) When the judgment is based on a misapprehension of facts;

(5) When the findings of fact are conflicting;

(6) When the Court of Appeals, in making its findings, went beyond the issues of the case and the same is
contrary to the admissions of both appellant and appellee;

(7) When the findings are contrary to those of the trial court;

(8) When the findings of fact are conclusions without citation of specific evidence on which they are based;

(9) When the facts set forth in the petition as well as in the petitioners' main and reply briefs are not disputed
by the respondents; and

(10) When the findings of fact of the Court of Appeals are premised on the supposed absence of evidence and
contradicted by the evidence on record. (emphasis and underscoring supplied)

In the present case, the findings of the Secretary of Labor and the appellate court on whether the MOA is valid
and binding are conflicting, the former giving scant consideration thereon, and the latter affording it more
weight.

As found by the Secretary of Labor, the MOA came about as a result of the constitution, at respondent’s behest,
of the Labor-Management Council (LMC) which, he reminded the parties, should not be used as an avenue for
bargaining but for the purpose of affording workers to participate in policy and decision-making. Hence, the
agreements embodied in the MOA were not the proper subject of the LMC deliberation or procedure but of
CBA negotiations and, therefore, deserving little weight.

The appellate court, held, however, that the Secretary did not have the authority to give an arbitral award
higher than what was stated in the MOA. The conflicting views drew the Court to re-evaluate the facts as borne
by the records, an exception to the rule that only questions of law may be dealt with in an appeal by certiorari
under Rule 45.

As discussed in the Decision under reconsideration, the then Acting Secretary of Labor Manuel G. Imson acted
well within his jurisdiction in ruling that the wage increases to be given are ₱10 per day effective January 1,
2004 and ₱15 per day effective January 1, 2005, pursuant to his power to assume jurisdiction under Art. 263
(g)4 of the Labor Code.

While an arbitral award cannot per se be categorized as an agreement voluntarily entered into by the parties
because it requires the interference and imposing power of the State thru the Secretary of Labor when he
assumes jurisdiction, the award can be considered as an approximation of a collective bargaining agreement
which would otherwise have been entered into by the parties. Hence, it has the force and effect of a valid
contract obligation between the parties.5

In determining arbitral awards then, aside from the MOA, courts considered other factors and documents
including, as in this case, the financial documents6 submitted by respondent as well as its previous bargaining
history and financial outlook and improvements as stated in its own website.7

The appellate court’s ruling that giving credence to the "Pahayag" and the minutes of the meeting which were
not verified and notarized would violate the rule on parol evidence is erroneous. The parol evidence rule, like
other rules on evidence, should not be strictly applied in labor cases. Interphil Laboratories Employees Union-
FFW v. Interphil Laboratories, Inc. 8 teaches:

[R]eliance on the parol evidence rule is misplaced. In labor cases pending before the Commission or the Labor
Arbiter, the rules of evidence prevailing in courts of law or equity are not controlling. Rules of procedure and
evidence are not applied in a very rigid and technical sense in labor cases. Hence, the Labor Arbiter is not
precluded from accepting and evaluating evidence other than, and even contrary to, what is stated in the CBA.
(emphasis and underscoring supplied)

On the contention that the MOA should have been given credence because it was validly entered into by the
parties, the Court notes that even those who signed it expressed reservations thereto. A CBA (assuming in this
case that the MOA can be treated as one) is a contract imbued with public interest. It must thus be given a
liberal, practical and realistic, rather than a narrow and technical construction, with due consideration to the
context in which it is negotiated and the purpose for which it is intended.9

As for the contention that the alleged disaffiliation of the Union from the FFW during the pendency of the case
resulted in the FFW losing its personality to represent the Union, the same does not affect the Court’s
upholding of the authority of the Secretary of Labor to impose arbitral awards higher than what was supposedly
agreed upon in the MOA. Contrary to respondent’s assertion, the "unavoidable issue of disaffiliation" bears no
significant legal repercussions to warrant the reversal of the Court’s Decision.

En passant, whether there was a valid disaffiliation is a factual issue. Besides, the alleged disaffiliation of the
Union from the FFW was by virtue of a Resolution signed on February 23, 2010 and submitted to the DOLE
Laguna Field Office on March 5, 2010 – two months after the present petition was filed on December 22, 2009,
– hence, it did not affect FFW and its Legal Center’s standing to file the petition nor this Court’s jurisdiction to
resolve the same.

At all events, the issue of disaffiliation is an intra-union dispute which must be resolved in a different forum in
an action at the instance of either or both the FFW and the Union or a rival labor
organization, not the employer.

An intra-union dispute refers to any conflict between and among union members, including grievances arising
from any violation of the rights and conditions of membership, violation of or disagreement over any provision
of the union’s constitution and by-laws, or disputes arising from chartering or disaffiliation of the union.
Sections 1 and 2, Rule XI of Department Order No. 40-03, Series of 2003 of the DOLE enumerate the following
circumstances as inter/intra-union disputes, viz:

RULE XI
INTER/INTRA-UNION DISPUTES AND
OTHER RELATED LABOR RELATIONS DISPUTES

Section 1. Coverage. - Inter/intra-union disputes shall include:

(a) cancellation of registration of a labor organization filed by its members or by another labor organization;

(b) conduct of election of union and workers’ association officers/nullification of election of union and workers’
association officers;

(c) audit/accounts examination of union or workers’ association funds;

(d) deregistration of collective bargaining agreements;

(e) validity/invalidity of union affiliation or disaffiliation;

(f) validity/invalidity of acceptance/non-acceptance for union membership;

(g) validity/invalidity of impeachment/expulsion of union and workers’ association officers and members;

(h) validity/invalidity of voluntary recognition;

(i) opposition to application for union and CBA registration;

(j) violations of or disagreements over any provision in a union or workers’ association constitution and by-
laws;

(k) disagreements over chartering or registration of labor organizations and collective bargaining agreements;

(l) violations of the rights and conditions of union or workers’ association membership;

(m) violations of the rights of legitimate labor organizations, except interpretation of collective bargaining
agreements;

(n) such other disputes or conflicts involving the rights to self-organization, union membership and collective
bargaining –

(1) between and among legitimate labor organizations;

(2) between and among members of a union or workers’ association.

Section 2. Coverage. – Other related labor relations disputes shall include any conflict between a labor union
and the employer or any individual, entity or group that is not a labor organization or workers’ association. This
includes: (1) cancellation of registration of unions and workers’ associations; and (2) a petition for
interpleader.10 (emphasis supplied)

Indeed, as respondent-movant itself argues, a local union may disaffiliate at any time from its mother
federation, absent any showing that the same is prohibited under its constitution or rule. Such, however, does
not result in it losing its legal personality altogether. Verily, Anglo-KMU v. Samahan Ng Mga Manggagawang
Nagkakaisa Sa Manila Bay Spinning Mills At J.P. Coats11 enlightens:

A local labor union is a separate and distinct unit primarily designed to secure and maintain an equality of
bargaining power between the employer and their employee-members. A local union does not owe its
existence to the federation with which it is affiliated. It is a separate and distinct voluntary association owing
its creation to the will of its members. The mere act of affiliation does not divest the local union of its own
personality, neither does it give the mother federation the license to act independently of the local union. It
only gives rise to a contract of agency where the former acts in representation of the latter. (emphasis and
underscoring supplied)1avvphi1
Whether then, as respondent claims, FFW "went against the will and wishes of its principal" (the member-
employees) by pursuing the case despite the signing of the MOA, is not for the Court, nor for respondent to
determine, but for the Union and FFW to resolve on their own pursuant to their principal-agent relationship.

WHEREFORE, the motion for reconsideration of this Court’s Decision of November 15, 2010 is DENIED.

SO ORDERED.

G.R. No. 171231 February 17, 2010

PNCC SKYWAY TRAFFIC MANAGEMENT AND SECURITY DIVISION WORKERS ORGANIZATION (PSTMSDWO),
represented by its President, RENE SORIANO, Petitioner,
vs.
PNCC SKYWAY CORPORATION, Respondent.

DECISION

PERALTA, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to set aside
the Decision1 and the Resolution2 of the Court of Appeals (CA) in CA-G.R. SP. No. 87069, which annulled and
set aside the Decision and Order of the Voluntary Arbitrator dated July 12, 2004 and August 11, 2004,
respectively.

The factual antecedents are as follows:

Petitioner PNCC Skyway Corporation Traffic Management and Security Division Workers' Organization
(PSTMSDWO) is a labor union duly registered with the Department of Labor and Employment (DOLE).
Respondent PNCC Skyway Corporation is a corporation duly organized and operating under and by virtue of
the laws of the Philippines.

On November 15, 2002, petitioner and respondent entered into a Collective Bargaining Agreement (CBA)
incorporating the terms and conditions of their agreement which included vacation leave and expenses for
security license provisions.

The pertinent provisions of the CBA relative to vacation leave and sick leave are as follows:

ARTICLE VIII
VACATION LEAVE AND SICK LEAVE

Section 1. Vacation Leave.

[a] Regular Employees covered by the bargaining unit who have completed at least one [1] year of continuous
service shall be entitled to vacation leave with pay depending on the length of service as follows:

1-9 years of service - 15 working days

10-15 years of service - 16 working days

16-20 years of service - 17 working days

21-25 years of service - 18 working days

26 and above years of service - 19 working days.

[b] The company shall schedule the vacation leave of employees during the year taking into consideration
the request of preference of the employees.(emphasis supplied)

[c] Any unused vacation leave shall be converted to cash and shall be paid to the employees on the first week
of December each year."

ARTICLE XXI

Section 6. Security License – All covered employees must possess a valid License [Security Guard License] issued
by the Chief, Philippine National Police or his duly authorized representative, to perform his duties as security
guard. All expenses of security guard in securing/renewing their licenses shall be for their personal account.
Guards, securing/renewing their license must apply for a leave of absence and/or a change of schedule. Any
guard who fails to renew his security guard license should be placed on forced leave until such time that he
can present a renewed security license.

In a Memorandum dated December 29, 2003,3 respondent's Head of the Traffic Management and Security
Department (TMSD) published the scheduled vacation leave of its TMSD personnel for the year 2004.
Thereafter, the Head of the TMSD issued a Memorandum4 dated January 9, 2004 to all TMSD personnel. In the
said memorandum, it was provided that:

SCHEDULED VACATION LEAVE WITH PAY.

The 17 days (15 days SVL plus 2-day-off) scheduled vacation leave (SVL) with pay for the year 2004 had been
published for everyone to take a vacation with pay which will be our opportunity to enjoy quality time with our
families and perform our other activities requiring our personal attention and supervision. Swapping of SVL
schedule is allowed on a one-on-one basis by submitting a written request at least 30 days before the actual
schedule of SVL duly signed by the concerned parties. However, the undersigned may consider the re-
scheduling of the SVL upon the written request of concerned TMSD personnel at least 30 days before the
scheduled SVL. Re-scheduling will be evaluated taking into consideration the TMSDs operational requirement.

Petitioner objected to the implementation of the said memorandum. It insisted that the individual members
of the union have the right to schedule their vacation leave. It opined that the unilateral scheduling of the
employees' vacation leave was done to avoid the monetization of their vacation leave in December 2004. This
was allegedly apparent in the memorandum issued by the Head HRD,5addressed to all department heads,
which provides:

FOR : All Dept. Heads

FROM : Head, HRD

SUBJECT : Leave Balances as of January 01, 2004

DATE : January 9, 2004

We are furnishing all the departments the leave balances of their respective staff as of January 01, 2004, so as
to have them monitor and program the schedule of such leave.
Please consider the leave credit they earned each month [1-2-0], one day and two hours in anticipation of the
later schedule. As we are targeting the zero conversion comes December 2004, it is suggested that the leave
balances as of to date be given preferential scheduling.

x x x.

Petitioner also demanded that the expenses for the required in-service training of its member security guards,
as a requirement for the renewal of their license, be shouldered by the respondent. However, the respondent
did not accede to petitioner's demands and stood firm on its decision to schedule all the vacation leave of
petitioner's members.

Due to the disagreement between the parties, petitioner elevated the matter to the DOLE-NCMB for preventive
mediation. For failure to settle the issue amicably, the parties agreed to submit the issue before the voluntary
arbitrator.

The voluntary arbitrator issued a Decision dated July 12, 2004, the dispositive portion of which reads:

WHEREFORE, premises all considered, declaring that:

a) The scheduling of all vacation leaves under Article VIII, Section 6, thereof, shall be under the discretion of
the union members entitled thereto, and the management to convert them into cash all the leaves which the
management compelled them to use.

b) To pay the expenses for the in-service-training of the company security guards, as a requirement for renewal
of licenses, shall not be their personal account but that of the company.

All other claims are dismissed for lack of merit.

SO ORDERED.6

Respondent filed a motion for reconsideration, which the voluntary arbitrator denied in the Order7 dated
August 11, 2004.

Aggrieved, on October 22, 2004, respondent filed a Petition for Certiorari with Prayer for Temporary
Restraining Order and/or Writ of Preliminary Injunction with the CA, and the CA rendered a Decision dated
October 4, 2005,8annulling and setting aside the decision and order of the voluntary arbitrator. The CA ruled
that since the provisions of the CBA were clear, the voluntary arbitrator has no authority to interpret the same
beyond what was expressly written.

Petitioner filed a motion for reconsideration, which the CA denied through a Resolution dated January 23,
2006.9Hence, the instant petition assigning the following errors:

WITH ALL DUE RESPECT, THE HONORABLE PUBLIC RESPONDENT COURT OF APPEALS [THIRTEENTH DIVISION]
ERRED IN HOLDING THAT:

A) THE MANAGEMENT HAS THE SOLE DISCRETION TO SCHEDULE THE VACATION LEAVE OF HEREIN PETITIONER.

B) THE MANAGEMENT IS NOT LIABLE FOR THE IN-SERVICE-TRAINING OF THE SECURITY GUARDS.

II
THE HONORABLE PUBLIC RESPONDENT ERRED IN OVERSEEING THE CONVERSION ASPECT OF THE UNUSED
LEAVE.

Before considering the merits of the petition, We shall first address the objection based on technicality raised
by respondent.

Respondent alleged that the petition was fatally defective due to the lack of authority of its union president,
Rene Soriano, to sign the certification and verification against forum shopping on petitioner's behalf. It alleged
that the authority of Rene Soriano to represent the union was only conferred on June 30, 2006 by virtue of a
board resolution,10 while the Petition for Review had long been filed on February 27, 2006. Thus, Rene Soriano
did not possess the required authority at the time the petition was filed on February 27, 2006.

The petitioner countered that the Board Resolution11 dated June 30, 2006 merely reiterated the authority given
to the union president to represent the union, which was conferred as early as October 2005. The resolution
provides in part that:

WHEREAS, in a meeting duly called for October 2005, the Union decided to file a Motion for Reconsideration
and if the said motion be denied, to file a petition before the Supreme Court. (Emphasis supplied)

Thus, the union president, representing the union, was clothed with authority to file the petition on February
27, 2006.

The purpose of requiring verification is to secure an assurance that the allegations in the petition have been
made in good faith; or are true and correct, not merely speculative. This requirement is simply a condition
affecting the form of pleadings, and non-compliance therewith does not necessarily render it fatally defective.
Truly, verification is only a formal, not a jurisdictional, requirement.

With respect to the certification of non-forum shopping, it has been held that the certification requirement is
rooted in the principle that a party-litigant shall not be allowed to pursue simultaneous remedies in different
fora, as this practice is detrimental to an orderly judicial procedure. However, this Court has relaxed, under
justifiable circumstances, the rule requiring the submission of such certification considering that, although it is
obligatory, it is not jurisdictional. Not being jurisdictional, it can be relaxed under the rule of substantial
compliance.12

In Cagayan Valley Drug Corporation v. Commissioner of Internal Revenue,13 We said that:

In a slew of cases, however, we have recognized the authority of some corporate officers to sign the verification
and certification against forum shopping. In Mactan-Cebu International Airport Authority v. CA, we recognized
the authority of a general manager or acting general manager to sign the verification and certificate against
forum shopping; in Pfizer v. Galan, we upheld the validity of a verification signed by an "employment specialist"
who had not even presented any proof of her authority to represent the company; in Novelty Philippines, Inc.,
v. CA, we ruled that a personnel officer who signed the petition but did not attach the authority from the
company is authorized to sign the verification and non-forum shopping certificate; and in Lepanto Consolidated
Mining Company v. WMC Resources International Pty. Ltd. (Lepanto), we ruled that the Chairperson of the
Board and President of the Company can sign the verification and certificate against non-forum shopping even
without the submission of the board’s authorization.

In sum, we have held that the following officials or employees of the company can sign the verification and
certification without need of a board resolution: (1) the Chairperson of the Board of Directors, (2) the President
of a corporation, (3) the General Manager or Acting General Manager, (4) Personnel Officer, and (5) an
Employment Specialist in a labor case.
While the above cases do not provide a complete listing of authorized signatories to the verification and
certification required by the rules, the determination of the sufficiency of the authority was done on a case to
case basis. The rationale applied in the foregoing cases is to justify the authority of corporate officers or
representatives of the corporation to sign the verification or certificate against forum shopping, being "in a
position to verify the truthfulness and correctness of the allegations in the petition."

In the case at bar, We rule that Rene Soriano has sufficient authority to sign the verification and certification
against forum shopping for the following reasons: First, the resolution dated June 30, 2006 was merely a
reiteration of the authority given to the Union President to file a case before this Court assailing the CBA
violations committed by the management, which was previously conferred during a meeting held on October
5, 2005. Thus, it can be inferred that even prior to the filing of the petition before Us on February 27, 2006, the
president of the union was duly authorized to represent the union and to file a case on its behalf. Second, being
the president of the union, Rene Soriano is in a position to verify the truthfulness and correctness of the
allegations in the petition. Third, assuming that Mr. Soriano has no authority to file the petition on February
27, 2006, the passing on June 30, 2006 of a Board Resolution authorizing him to represent the union is deemed
a ratification of his prior execution, on February 27, 2006, of the verification and certificate of non-forum
shopping, thus curing any defects thereof. Ratification in agency is the adoption or confirmation by one person
of an act performed on his behalf by another without authority.14

We now go to the merits of the case.

Petitioner insisted that their union members have the preference in scheduling their vacation leave. On the
other hand, respondent argued that Article VIII, Section 1 (b) gives the management the final say regarding the
vacation leave schedule of its employees. Respondent may take into consideration the employees' preferred
schedule, but the same is not controlling.

Petitioner also requested the respondent to provide and/or shoulder the expenses for the in-service training
of their members as a requirement for the renewal of the security guards' license. Respondent did not accede
to the union's request invoking the CBA provision which states that all expenses of security guards in securing
/renewing their license shall be for their personal account. The petitioner further argued that any doubts or
ambiguity in the interpretation of the CBA should be resolved in favor of the laborer.

As to the issue on vacation leaves, the same has no merit.

The rule is that where the language of a contract is plain and unambiguous, its meaning should be determined
without reference to extrinsic facts or aids. The intention of the parties must be gathered from that language,
and from that language alone. Stated differently, where the language of a written contract is clear and
unambiguous, the contract must be taken to mean that which, on its face, it purports to mean, unless some
good reason can be assigned to show that the words used should be understood in a different sense.15

In the case at bar, the contested provision of the CBA is clear and unequivocal. Article VIII, Section 1 (b) of the
CBA categorically provides that the scheduling of vacation leave shall be under the option of the employer. The
preference requested by the employees is not controlling because respondent retains its power and
prerogative to consider or to ignore said request.

Thus, if the terms of a CBA are clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulation shall prevail.16 In fine, the CBA must be strictly adhered to and respected if its ends
have to be achieved, being the law between the parties. In Faculty Association of Mapua Institute of Technology
(FAMIT) v. Court of Appeals,17 this Court held that the CBA during its lifetime binds all the parties. The provisions
of the CBA must be respected since its terms and conditions constitute the law between the parties. The parties
cannot be allowed to change the terms they agreed upon on the ground that the same are not favorable to
them.

As correctly found by the CA:

The words of the CBA were unequivocal when it provided that "The company shall schedule the vacation leave
of employees during the year taking into consideration the request of preference of the employees." The word
shall in this instance connotes an imperative command, there being nothing to show a different intention. The
only concession given under the subject clause was that the company should take into consideration the
preferences of the employees in scheduling the vacations; but certainly, the concession never diminished the
positive right of management to schedule the vacation leaves in accordance with what had been agreed and
stipulated upon in the CBA.

There is, thus, no basis for the Voluntary Arbitrator to interpret the subject provision relating to the schedule
of vacation leaves as being subject to the discretion of the union members. There is simply nothing in the CBA
which grants the union members this right.

It must be noted the grant to management of the right to schedule vacation leaves is not without good reason.
Indeed, if union members were given the unilateral discretion to schedule their vacation leaves, the same may
result in significantly crippling the number of key employees of the petitioner manning the toll ways on holidays
and other peak seasons, where union members may wittingly or unwittingly choose to have a vacation. Put
another way, the grant to management of the right to schedule vacation leaves ensures that there would
always be enough people manning and servicing the toll ways, which in turn assures the public plying the same
orderly and efficient toll way service.

Indeed, the multitude or scarcity of personnel manning the tollways should not rest upon the option of the
employees, as the public using the skyway system should be assured of its safety, security and convenience.

Although the preferred vacation leave schedule of petitioner's members should be given priority, they cannot
demand, as a matter of right, that their request be automatically granted by the respondent. If the petitioners
were given the exclusive right to schedule their vacation leave then said right should have been incorporated
in the CBA. In the absence of such right and in view of the mandatory provision in the CBA giving respondent
the right to schedule the vacation leave of its employees, compliance therewith is mandated by law.

In the grant of vacation leave privileges to an employee, the employer is given the leeway to impose conditions
on the entitlement to and commutation of the same, as the grant of vacation leave is not a standard of law,
but a prerogative of management.18 It is a mere concession or act of grace of the employer and not a matter
of right on the part of the employee.19 Thus, it is well within the power and authority of an employer to impose
certain conditions, as it deems fit, on the grant of vacation leaves, such as having the option to schedule the
same.

Along that line, since the grant of vacation leave is a prerogative of the employer, the latter can compel its
employees to exhaust all their vacation leave credits. Of course, any vacation leave credits left unscheduled by
the employer, or any scheduled vacation leave that was not enjoyed by the employee upon the employer's
directive, due to exigencies of the service, must be converted to cash, as provided in the CBA. However, it is
incorrect to award payment of the cash equivalent of vacation leaves that were already used and enjoyed by
the employees. By directing the conversion to cash of all utilized and paid vacation leaves, the voluntary
arbitrator has licensed unjust enrichment in favor of the petitioner and caused undue financial burden on the
respondent. Evidently, the Court cannot tolerate this.
It would seem that petitioner's goal in relentlessly arguing that its members preferred vacation leave schedule
should be given preference is not allowed to them to avail themselves of their respective vacation leave credits
at all but, instead, to convert these into cash.

In Cuajo v. Chua Lo Tan,20 We said that the purpose of a vacation leave is to afford a laborer a chance to get a
much-needed rest to replenish his worn-out energy and acquire a new vitality to enable him to efficiently
perform his duties, and not merely to give him additional salary and bounty.

This purpose is manifest in the Memorandum dated January 9, 200421 addressed to all TMSD Personnel which
provides that:

SCHEDULED VACATION LEAVE WITH PAY

The 17 days (15 days SVL plus 2-Day-Off) scheduled vacation leave (SVL) with pay for the year 2004 had been
published for everyone to take a vacation with pay which will be our opportunity to enjoy quality time with
our families and perform our other activities requiring our personal attention and supervision.(Emphasis
ours.)

Accordingly, the vacation leave privilege was not intended to serve as additional salary, but as a non-monetary
benefit. To give the employees the option not to consume it with the aim of converting it to cash at the end of
the year would defeat the very purpose of vacation leave.

Petitioner's contention that labor contracts should be construed in favor of the laborer is without basis and,
therefore, inapplicable to the present case. This rule of construction does not benefit petitioners because, as
stated, there is here no room for interpretation. Since the CBA is clear and unambiguous, its terms should be
implemented as they are written.

This brings Us to the issue of who is accountable for the in-service training of the security guards. On this point,
We find the petition meritorious.

Although it is a rule that a contract freely entered into between the parties should be respected, since a
contract is the law between the parties, there are, however, certain exceptions to the rule, specifically Article
1306 of the Civil Code, which provides:

The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.

Moreover, 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 x x x."22 The supremacy of the law over
contracts is explained by the fact that labor contracts are not ordinary contracts; they are imbued with public
interest and therefore are subject to the police power of the state.23 However, it should not be taken to mean
that provisions agreed upon in the CBA are absolutely beyond the ambit of judicial review and nullification. If
the provisions in the CBA run contrary to law, public morals, or public policy, such provisions may very well be
voided.

In the present case, Article XXI, Section 6 of the CBA provides that "All expenses of security guards in securing
/renewing their licenses shall be for their personal account." A reading of the provision would reveal that it
encompasses all possible expenses a security guard would pay or incur in order to secure or renew his license.
In-service training is a requirement for the renewal of a security guard’s license.24 Hence, following the
aforementioned CBA provision, the expenses for the same must be on the personal account of the employee.
However, the 1994 Revised Rules and Regulations Implementing Republic Act No. 5487 provides the following:
Section 17. Responsibility for Training and Progressive Development. It is the primary responsibility of all
operators private security agency and company security forces to maintain and upgrade the standards of
efficiency, discipline, performance and competence of their personnel. To attain this end, each duly licensed
private security agency and company security force shall establish a staff position for training and appoint a
training officer whose primary functions are to determine the training needs of the agency/guards in relation
to the needs of the client/ market/ industry, and to supervise and conduct appropriate training requirements.
All private security personnel shall be re-trained at least once very two years.1avvphi1

Section 12. In service training. - a. To maintain and/or upgrade the standard of efficiency, discipline and
competence of security guards and detectives, company security force and private security agencies upon prior
authority shall conduct-in-service training at least two (2) weeks duration for their organic members by
increments of at least two percent (2%) of their total strength. Where the quality of training is better served
by centralization, the CSFD Directors may activate a training staff from local talents to assist. The cost of
training shall be pro-rated among the participating agencies/private companies. All security officer must
undergo in-service training at least once every two (2) years preferably two months before his or her birth
month.

Since it is the primary responsibility of operators of company security forces to maintain and upgrade the
standards of efficiency, discipline, performance and competence of their personnel, it follows that the
expenses to be incurred therein shall be for the personal account of the company. Further, the intent of the
law to impose upon the employer the obligation to pay for the cost of its employees’ training is manifested in
the aforementioned law’s provision that Where the quality of training is better served by centralization, the
CFSD Directors may activate a training staff from local talents to assist. The cost of training shall be pro-rated
among the participating agencies/private companies. It can be gleaned from the said provision that cost of
training shall be pro-rated among participating agencies and companies if the training is best served by
centralization. The law mandates pro-rating of expenses because it would be impracticable and unfair to
impose the burden of expenses suffered by all participants on only one participating agency or company. Thus,
it follows that if there is no centralization, there can be no pro-rating, and the company that has its own security
forces shall shoulder the entire cost for such training. If the intent of the law were to impose upon individual
employees the cost of training, the provision on the pro-rating of expenses would not have found print in the
law.

Further, petitioner alleged that prior to the inking of the CBA, it was the respondent company providing for the
in-service training of the guards.25 Respondent never controverted the said allegation and is thus deemed to
have admitted the same.26 Implicit from respondent's actuations was its acknowledgment of its legally
mandated responsibility to shoulder the expenses for in-service training.

WHEREFORE, the petition is PARTIALLY GRANTED. The Decision and Resolution of the Court of Appeals, dated
October 4, 2005 and January 23, 2006, respectively, in CA-G.R. SP. No. 87069 is MODIFIED. The cost of in-
service training of the respondent company's security guards shall be at the expense of the respondent
company. This case is remanded to the voluntary arbitrator for the computation of the expenses incurred by
the security guards for their in-service training, and respondent company is directed to reimburse its security
guards for the expenses incurred.

SO ORDERED.
G.R. No. 178835 February 13, 2009

MAGIS YOUNG ACHIEVERS' LEARNING CENTER and MRS. VIOLETA T. CARIÑO, Petitioners,
vs.
ADELAIDA P. MANALO, Respondent.

DECISION

NACHURA, J.:

This is a petition for review on certiorari of the Decision dated January 31, 2007 and of the Resolution dated
June 29, 2007 of the Court of Appeals (CA) in CA-G.R. SP No. 93917 entitled Magis Young Achievers’ Learning
Center and Violeta T. Cariño v. National Labor Relations Commission, 3rd Division, Quezon City, and Adelaida P.
Manalo.

The pertinent facts are as follows:

On April 18, 2002, respondent Adelaida P. Manalo was hired as a teacher and acting principal of petitioner
Magis Young Achievers’ Learning Center with a monthly salary of ₱15,000.00.

It appears on record that respondent, on March 29, 2003, wrote a letter of resignation addressed to Violeta T.
Cariño, directress of petitioner, which reads:

Dear Madame:

I am tendering my irrevocable resignation effective April 1, 2003 due to personal and family reasons.

I would like to express my thanks and gratitude for the opportunity, trust and confidence given to me as an
Acting Principal in your prestigious school.

God bless and more power to you.

Sincerely yours,

(Signed)
Mrs. ADELAIDA P. MANALO1

On March 31, 2003, respondent received a letter of termination from petitioner, viz.:

Dear Mrs. Manalo:

Greetings of Peace!

The Board of Trustees of the Cariño Group of Companies, particularly that of Magis Young Achievers’ Learning
Center convened, deliberated and came up with a Board Resolution that will strictly impose all means possible
to come up with a cost-cutting scheme. Part of that scheme is a systematic reorganization which will entail
streamlining of human resources.

As agreed upon by the Board of Directors, the position of PRINCIPAL will be abolished next school year.
Therefore, we regret to inform you that we can no longer renew your contract, which will expire on March 31,
2003. Thus, thank you for the input you have given to Magis during your term of office as Acting Principal. The
function of the said position shall be delegated to other staff members in the organization.
Hoping for your understanding on this matter and we pray for your future endeavors.

Very truly yours,

(Signed)
Mrs. Violeta T. Cariño
School Directress

Noted by:

(Signed)
Mr. Severo Cariño
President2

On April 4, 2003, respondent instituted against petitioner a Complaint3 for illegal dismissal and non-payment
of 13th month pay, with a prayer for reinstatement, award of full backwages and moral and exemplary
damages.

In her position paper,4 respondent claimed that her termination violated the provisions of her employment
contract, and that the alleged abolition of the position of Principal was not among the grounds for termination
by an employer under Article 2825 of the Labor Code. She further asserted that petitioner infringed Article
2836 of the Labor Code, as the required 30-day notice to the Department of Labor and Employment (DOLE) and
to her as the employee, and the payment of her separation pay were not complied with. She also claimed that
she was terminated from service for the alleged expiration of her employment, but that her contract did not
provide for a fixed term or period. She likewise prayed for the payment of her 13th month pay under
Presidential Decree (PD) No. 851.

Petitioner, in its position paper,7 countered that respondent was legally terminated because the one-year
probationary period, from April 1, 2002 to March 3, 2003, had already lapsed and she failed to meet the criteria
set by the school pursuant to the Manual of Regulation for Private Schools, adopted by the then Department
of Education, Culture and Sports (DECS), paragraph 75 of which provides that:

(75) Full-time teachers who have rendered three years of satisfactory service shall be considered permanent.

On December 3, 2003, Labor Arbiter (LA) Renell Joseph R. dela Cruz rendered a Decision8 dismissing the
complaint for illegal dismissal, including the other claims of respondent, for lack of merit, except that it ordered
the payment of her 13th month pay in the amount of ₱3,750.00. The LA ratiocinated in this wise:

It is our considered opinion [that] complainant was not dismissed, much less, illegally. On the contrary, she
resigned. It is hard for us to imagine complainant would accede to sign a resignation letter as a precondition to
her hiring considering her educational background. Thus, in the absence of any circumstance tending to show
she was probably coerced her resignation must be upheld. x x x

x x x The agreement (Annex "1" to Respondent’s [petitioner’s] Position Paper; Annex "A" to Complainant’s
Position Paper) by its very nature and terms is a contract of employment with a period (from 01 April 2002 to
31 March 2003, Annex ‘1’ to Respondent’s Position Paper). Complainant’s observation that the space reserved
for the duration and effectivity of the contract was left blank (Annex ‘A’ to Complainant’s [respondent’s]
Position Paper) to our mind is plain oversight. Read in its entirety, it is a standard contract which by its very
terms and conditions speaks of a definite period of employment. The parties could have not thought otherwise.
The notification requirement in the contract in case of "termination before the expiration of the period"
confirms it. x x x
On appeal, on October 28, 2005, the National Labor Relations Commission (NLRC), Third Division, 9 in its
Decision10 dated October 28, 2005, reversed the Arbiter’s judgment. Petitioner was ordered to reinstate
respondent as a teacher, who shall be credited with one-year service of probationary employment, and to pay
her the amounts of ₱3,750.00 and ₱325,000.00 representing her 13th month pay and backwages, respectively.
Petitioner’s motion for reconsideration was denied in the NLRC’s Resolution11 dated January 31, 2006.

Imputing grave abuse of discretion on the part of the NLRC, petitioner went up to the CA via a petition for
certiorari. The CA, in its Decision dated January 31, 2007, affirmed the NLRC decision and dismissed the
petition. It likewise denied petitioner’s motion for reconsideration in the Resolution dated June 29, 2007.
Hence, this petition anchored on the following grounds—

I. THE COURT OF APPEALS ERRED WHEN IT CONCLUDED THAT THE RESIGNATION OF RESPONDENT MANALO
DID NOT BECOME EFFECTIVE DUE TO ALLEGED LACK OF ACCEPTANCE;

II. THE COURT OF APPEALS ERRED WHEN IT RULED THAT RESPONDENT MANALO IS A PERMANENT EMPLOYEE;

III. THE COURT OF APPEALS ERRED WHEN IT RULED THAT THE CONTRACT OF EMPLOYMENT BETWEEN
PETITIONER AND RESPONDENT DID NOT STIPULATE A PERIOD.12

Before going to the core issues of the controversy, we would like to restate basic legal principles governing
employment of secondary school teachers in private schools, specifically, on the matter of probationary
employment.

A probationary employee or probationer is one who is on trial for an employer, during which the latter
determines whether or not he is qualified for permanent employment. The probationary employment is
intended to afford the employer an opportunity to observe the fitness of a probationary employee while at
work, and to ascertain whether he will become an efficient and productive employee. While the employer
observes the fitness, propriety and efficiency of a probationer to ascertain whether he is qualified for
permanent employment, the probationer, on the other hand, seeks to prove to the employer that he has the
qualifications to meet the reasonable standards for permanent employment. Thus, the word probationary, as
used to describe the period of employment, implies the purpose of the term or period, not its length.13

Indeed, the employer has the right, or is at liberty, to choose who will be hired and who will be declined. As a
component of this right to select his employees, the employer may set or fix a probationary period within which
the latter may test and observe the conduct of the former before hiring him permanently.14

But the law regulates the exercise of this prerogative to fix the period of probationary employment. While
there is no statutory cap on the minimum term of probation, the law sets a maximum "trial period" during
which the employer may test the fitness and efficiency of the employee.

The general rule on the maximum allowable period of probationary employment is found in Article 281 of the
Labor Code, which states:

Art. 281. Probationary Employment. – Probationary employment shall not exceed six (6) months from the date
the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period.
The services of an employee who has been engaged on a probationary basis may be terminated for a just cause
or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the
employer at the time of his engagement. An employee who is allowed to work after a probationary period shall
be considered a regular employee.1avvphi1.zw+
This upper limit on the term of probationary employment, however, does not apply to all classes of
occupations.

For "academic personnel" in private schools, colleges and universities, probationary employment is governed
by Section 92 of the 1992 Manual of Regulations for Private Schools15 (Manual), which reads:

Section 92. Probationary Period. – Subject in all instances to compliance with the Department and school
requirements, the probationary period for academic personnel shall not be more than three (3) consecutive
years of satisfactory service for those in the elementary and secondary levels, six (6) consecutive regular
semesters of satisfactory service for those in the tertiary level, and nine (9) consecutive trimesters of
satisfactory service for those in the tertiary level where collegiate courses are offered on a trimester basis.16

This was supplemented by DOLE-DECS-CHED-TESDA Order No. 1 dated February 7, 1996, which provides that
the probationary period for academic personnel shall not be more than three (3) consecutive school years of
satisfactory service for those in the elementary and secondary levels.17 By this supplement, it is made clear
that the period of probation for academic personnel shall be counted in terms of "school years," and not
"calendar years."18Then, Section 4.m(4)[c] of the Manual delineates the coverage of Section 92, by defining the
term "academic personnel" to include:

(A)ll school personnel who are formally engaged in actual teaching service or in research assignments, either
on full-time or part-time basis; as well as those who possess certain prescribed academic functions directly
supportive of teaching, such as registrars, librarians, guidance counselors, researchers, and other similar
persons. They include school officials responsible for academic matters, and may include other school
officials.19

The reason for this disparate treatment was explained many years ago in Escudero v. Office of the President of
the Philippines,20 where the Court declared:

However, the six-month probationary period prescribed by the Secretary of Labor is merely the general rule. x
xx

It is, thus, clear that the Labor Code authorizes different probationary periods, according to the requirements
of the particular job. For private school teachers, the period of probation is governed by the 1970 Manual of
Regulations for Private Schools x x x.21

The probationary period of three years for private school teachers was, in fact, confirmed earlier in Labajo v.
Alejandro,22 viz.:

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

Over the years, even with the enactment of a new Labor Code and the revision of the Manual, the rule has not
changed.

Thus, for academic personnel in private elementary and secondary schools, it is only after one has satisfactorily
completed the probationary period of three (3) school years and is rehired that he acquires full tenure as a
regular or permanent employee. In this regard, Section 93 of the Manual pertinently provides:
Sec. 93. Regular or Permanent Status. - Those who have served the probationary period shall be made regular
or permanent. Full-time teachers who have satisfactorily completed their probationary period shall be
considered regular or permanent.

Accordingly, as held in Escudero, no vested right to a permanent appointment shall accrue until the employee
has completed the prerequisite three-year period necessary for the acquisition of a permanent status. Of
course, the mere rendition of service for three consecutive years does not automatically ripen into a
permanent appointment. It is also necessary that the employee be a full-time teacher, and that the services he
rendered are satisfactory.23

The common practice is for the employer and the teacher to enter into a contract, effective for one school
year. At the end of the school year, the employer has the option not to renew the contract, particularly
considering the teacher’s performance. If the contract is not renewed, the employment relationship
terminates. If the contract is renewed, usually for another school year, the probationary employment
continues. Again, at the end of that period, the parties may opt to renew or not to renew the contract. If
renewed, this second renewal of the contract for another school year would then be the last year – since it
would be the third school year – of probationary employment. At the end of this third year, the employer may
now decide whether to extend a permanent appointment to the employee, primarily on the basis of the
employee having met the reasonable standards of competence and efficiency set by the employer. For the
entire duration of this three-year period, the teacher remains under probation. Upon the expiration of his
contract of employment, being simply on probation, he cannot automatically claim security of tenure and
compel the employer to renew his employment contract.24 It is when the yearly contract is renewed for the
third time that Section 93 of the Manual becomes operative, and the teacher then is entitled to regular or
permanent employment status.

It is important that the contract of probationary employment specify the period or term of its effectivity. The
failure to stipulate its precise duration could lead to the inference that the contract is binding for the full three-
year probationary period.25

All this does not mean that academic personnel cannot acquire permanent employment status earlier than
after the lapse of three years. The period of probation may be reduced if the employer, convinced of the fitness
and efficiency of a probationary employee, voluntarily extends a permanent appointment even before the
three-year period ends. Conversely, if the purpose sought by the employer is neither attained nor attainable
within the said period, the law does not preclude the employer from terminating the probationary employment
on justifiable ground;26 or, a shorter probationary period may be incorporated in a collective bargaining
agreement.27 But absent any circumstances which unmistakably show that an abbreviated probationary period
has been agreed upon, the three-year probationary term governs.

Be that as it may, teachers on probationary employment enjoy security of tenure. In Biboso v. Victorias Milling
Co., Inc.,28 we made the following pronouncement:

This is, by no means, to assert that the security of tenure protection of the Constitution does not apply to
probationary employees. x x x During such period, they could remain in their positions and any circumvention
of their rights, in accordance with the statutory scheme, is subject to inquiry and thereafter correction by the
Department of Labor.

The ruling in Biboso simply signifies that probationary employees enjoy security of tenure during the term of
their probationary employment. As such, they cannot be removed except for cause as provided by law, or if at
the end of every yearly contract during the three-year period, the employee does not meet the reasonable
standards set by the employer at the time of engagement. But this guarantee of security of tenure applies only
during the period of probation. Once that period expires, the constitutional protection can no longer be
invoked.29

All these principles notwithstanding, we do not discount the validity of fixed-term employment where –

the fixed period of employment 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, or where it satisfactorily appears that the employer and employee dealt with each other
on more or less equal terms with no moral dominance whatever being exercised by the former over the latter.30

It does not necessarily follow that where the duties of the employees consist of activities usually necessary or
desirable in the usual business of the employer, the parties are forbidden from agreeing on a period of time
for the performance of such activities.31 Thus, in St. Theresa’s School of Novaliches Foundation v. NLRC,32 we
held that a contractual stipulation providing for a fixed term of nine (9) months, not being contrary to law,
morals, good customs, public order and public policy, is valid, binding and must be respected, as it is the
contract of employment that governs the relationship of the parties.

Now, to the issues in the case at bench.

There should be no question that the employment of the respondent, as teacher, in petitioner school on April
18, 2002 is probationary in character, consistent with standard practice in private schools. In light of our
disquisition above, we cannot subscribe to the proposition that the respondent has acquired regular or
permanent tenure as teacher. She had rendered service as such only from April 18, 2002 until March 31, 2003.
She has not completed the requisite three-year period of probationary employment, as provided in the
Manual. She cannot, by right, claim permanent status.lawphil.net

There should also be no doubt that respondent’s appointment as Acting Principal is merely temporary, or one
that is good until another appointment is made to take its place.33 An "acting" appointment is essentially a
temporary appointment, revocable at will. The undisturbed unanimity of cases shows that one who holds a
temporary appointment has no fixed tenure of office; his employment can be terminated any time at the
pleasure of the appointing power without need to show that it is for cause.34 Further, in La Salette of Santiago
v. NLRC,35 we acknowledged the customary arrangement in private schools to rotate administrative positions,
e.g., Dean or Principal, among employees, without the employee so appointed attaining security of tenure with
respect to these positions.

We are also inclined to agree with the CA that the resignation of the respondent36 is not valid, not only because
there was no express acceptance thereof by the employer, but because there is a cloud of doubt as to the
voluntariness of respondent’s resignation.

Resignation is the voluntary act of an employee who finds himself in a situation where he believes that personal
reasons cannot be sacrificed in favor of the exigency of the service, and that he has no other choice but to
dissociate himself from employment.37 Voluntary resignation is made with the intention of relinquishing an
office, accompanied by the act of abandonment.38 It is the acceptance of an employee’s resignation that
renders it operative.39

Furthermore, well-entrenched is the rule that resignation is inconsistent with the filing of a complaint for illegal
dismissal.40 To be valid, the resignation must be unconditional, with the intent to operate as such; there must
be a clear intention to relinquish the position.41 In this case, respondent actively pursued her illegal dismissal
case against petitioner, such that she cannot be said to have voluntarily resigned from her job.
What is truly contentious is whether the probationary appointment of the respondent on April 18, 2002 was
for a fixed period of one (1) year, or without a fixed term, inasmuch as the parties presented different versions
of the employment agreement. As articulated by the CA:

In plain language, We are confronted with two (2) copies of an agreement, one with a negative period and one
provided for a one (1) year period for its effectivity. Ironically, none among the parties offered corroborative
evidence as to which of the two (2) discrepancies is the correct one that must be given effect. x x x.42

The CA resolved the impassé in this wise:

Under this circumstance, We can only apply Article 1702 of the Civil Code which provides that, in case of doubt,
all labor contracts shall be construed in favor of the laborer. Then, too, settled is the rule that any ambiguity in
a contract whose terms are susceptible of different interpretations must be read against the party who drafted
it. In the case at bar, the drafter of the contract is herein petitioners and must, therefore, be read against their
contention.43

We agree with the CA.

In this case, there truly existed a doubt as to which version of the employment agreement should be given
weight. In respondent’s copy, the period of effectivity of the agreement remained blank. On the other hand,
petitioner’s copy provided for a one-year period, surprisingly from April 1, 2002 to March 31, 2003, even
though the pleadings submitted by both parties indicated that respondent was hired on April 18, 2002. What
is noticeable even more is that the handwriting indicating the one-year period in petitioner’s copy is different
from the handwriting that filled up the other needed information in the same agreement.44

Thus, following Article 1702 of the Civil Code that all doubts regarding labor contracts should be construed in
favor of labor, then it should be respondent’s copy which did not provide for an express period which should
be upheld, especially when there are circumstances that render the version of petitioner suspect. This is in line
with the State policy of affording protection to labor, such that the lowly laborer, who is usually at the mercy
of the employer, must look up to the law to place him on equal footing with his employer.45

In addition, the employment agreement may be likened into a contract of adhesion considering that it is
petitioner who insists that there existed an express period of one year from April 1, 2002 to March 31, 2003,
using as proof its own copy of the agreement. While contracts of adhesion are valid and binding, in cases of
doubt which will cause a great imbalance of rights against one of the parties, the contract shall be construed
against the party who drafted the same. Hence, in this case, where the very employment of respondent is at
stake, the doubt as to the period of employment must be construed in her favor.

The other issue to resolve is whether respondent, even as a probationary employee, was illegally dismissed.
We rule in the affirmative.

As above discussed, probationary employees enjoy security of tenure during the term of their probationary
employment such that they may only be terminated for cause as provided for by law, or if at the end of the
probationary period, the employee failed to meet the reasonable standards set by the employer at the time of
the employee’s engagement. Undeniably, respondent was hired as a probationary teacher and, as such, it was
incumbent upon petitioner to show by competent evidence that she did not meet the standards set by the
school. This requirement, petitioner failed to discharge. To note, the termination of respondent was effected
by that letter stating that she was being relieved from employment because the school authorities allegedly
decided, as a cost-cutting measure, that the position of "Principal" was to be abolished. Nowhere in that letter
was respondent informed that her performance as a school teacher was less than satisfactory.
Thus, in light of our ruling of Espiritu Santo Parochial School v. NLRC46 that, in the absence of an express period
of probation for private school teachers, the three-year probationary period provided by the Manual of
Regulations for Private Schools must apply likewise to the case of respondent. In other words, absent any
concrete and competent proof that her performance as a teacher was unsatisfactory from her hiring on April
18, 2002 up to March 31, 2003, respondent is entitled to continue her three-year period of probationary period,
such that from March 31, 2003, her probationary employment is deemed renewed for the following two school
years.47

Finally, we rule on the propriety of the monetary awards. Petitioner, as employer, is entitled to decide whether
to extend respondent a permanent status by renewing her contract beyond the three-year period. Given the
acrimony between the parties which must have been generated by this controversy, it can be said
unequivocally that petitioner had opted not to extend respondent’s employment beyond this period.
Therefore, the award of backwages as a consequence of the finding of illegal dismissal in favor of respondent
should be confined to the three-year probationary period. Computing her monthly salary of ₱15,000.00 for the
next two school years (₱15,000.00 x 10 months x 2), respondent already having received her full salaries for
the year 2002-2003, she is entitled to a total amount of ₱300,000.00.48 Moreover, respondent is also entitled
to receive her 13th month pay correspondent to the said two school years, computed as yearly salary, divided
by 12 months in a year, multiplied by 2, corresponding to the school years 2003-2004 and 2004-2005, or
₱150,000.00 / 12 months x 2 = ₱25,000.00. Thus, the NLRC was correct in awarding respondent the amount of
₱325,000.00 as backwages, inclusive of 13th month pay for the school years 2003-2004 and 2004-2005, and
the amount of ₱3,750.00 as pro-rated 13th month pay.

WHEREFORE, the petition is DENIED. The assailed Decision dated January 31, 2007 and the Resolution dated
June 29, 2007 of the Court of Appeals are AFFIRMED.

SO ORDERED.

G.R. No. 175170 September 5, 2012

MISAMIS ORIENTAL II ELECTRIC SERVICE COOPERATIVE (MORESCO II), Petitioner,

vs.
VIRGILIO M. CAGALAWAN, Respondent.

DECISION

DEL CASTILLO, J.:

In labor cases, strict adherence with the technical rules is not required.1 This literal policy, however, should still
conform with the rudiments of equitable principles of law. For instance, belated submission of evidence may
only be allowed if the delay is adequately justified and the evidence is clearly material to establish the party's
cause.2

By this Petition for Review on Certiorari,3 petitioner Misamis Oriental II Electric Service Cooperative (MORESCO
II) assails the Decision4 dated July 26, 2005 of the Court of Appeals (CA) in CA-G.R. SP No. 84991, which reversed
and set aside the Resolutions dated February 27, 20045 and April 26, 20046 of the National Labor Relations
Commission (NLRC), and thereby reinstated the Labor Arbiter’s Decision7 dated September 30, 2003
pronouncing respondent Virgilio M. Cagalawan (Cagalawan) to have been constructively dismissed from
employment. Also assailed is the CA Resolution8 dated September 6, 2006 which denied MORESCO II’s Motion
for Reconsideration and granted Cagalawan’s Partial Motion for Reconsideration.

Factual Antecedents

On September 1, 1993, MORESCO II, a rural electric cooperative, hired Cagalawan as a Disconnection Lineman
on a probationary basis. On March 1, 1994 Cagalawan was appointed to the same post this time on a
permanent basis.9 On July 17, 2001, he was designated as Acting Head of the disconnection crew in Area III
sub-office of MORESCO II in Balingasag, Misamis Oriental (Balingasag sub-office).10 In a Memorandum11 dated
May 9, 2002, MORESCO II General Manager Amado B. Ke-e (Ke-e) transferred Cagalawan to Area I sub-office
in Gingoog City, Misamis Oriental (Gingoog sub-office) as a member of the disconnection crew. Said
memorandum stated that the transfer was done "in the exigency of the service."

In a letter12 dated May 15, 2002, Cagalawan assailed his transfer claiming he was effectively demoted from his
position as head of the disconnection crew to a mere member thereof. He also averred that his transfer to the
Gingoog sub-office is inconvenient and prejudicial to him as it would entail additional travel expenses to and
from work. He likewise sought clarification on what kind of exigency exists as to justify his transfer and why he
was the one chosen to be transferred.

In a Memorandum13 dated May 16, 2002, Ke-e explained that Cagalawan’s transfer was not a demotion since
he was holding the position of Disconnection Head only by mere designation and not by appointment. Ke-e did
not, however, state the basis of the transfer but instead advised Cagalawan to just comply with the order and
not to question management’s legitimate prerogative to reassign him.

In reply, Cagalawan claimed that he was transferred because he executed an Affidavit14 in support of his co-
employee Jessie Rances, who filed an illegal dismissal case against MORESCO II.15 He emphasized though that
his action was not an act of disloyalty to MORESCO II, contrary to what was being accused of him. Nonetheless,
Cagalawan still reported for work at Gingoog sub-office on May 27, 2002 but reserved his right to contest the
legality of such transfer.16

Meanwhile and in view of Cagalawan’s transfer, Ke-e issued an order17 recalling the former’s previous
designation as Acting Head of the disconnection crew of the Balingasag sub-office.

Cagalawan eventually stopped reporting for work. On July 1, 2002, he filed a Complaint for constructive
dismissal before the Arbitration branch of the NLRC against MORESCO II and its officers, Ke-e and Danilo
Subrado (Subrado), in their capacities as General Manager and Board Chairman, respectively.

Proceedings before the Labor Arbiter

When the Labor Arbiter, in an Order18 dated September 13, 2002, directed the parties to submit their
respective verified position papers, only Cagalawan complied.19 He alleged that his transfer was unnecessary
and was made only in retaliation for his having executed an affidavit in favor of a co-worker and against
MORESCO II. In support of his contention, Cagalawan submitted a certification20 executed by the Head of the
disconnection crew of the Gingoog sub-office, Teodoro Ortiz (Ortiz), attesting that the said sub-office was not
undermanned. In fact, when Cagalawan stopped working, no other employee was transferred or hired in his
stead, a proof that there were enough disconnection crew members in Gingoog sub-office who can very well
handle the assigned tasks. Moreover, Cagalawan claimed that his transfer constituted a demotion from his
position as Acting Head of the disconnection crew which he had occupied for almost 10 months. As such, he
should be considered regular in that position and entitled to its corresponding salary.
Cagalawan further alleged that his transfer from Balingasag to Gingoog sub-office was tantamount to illegal
constructive dismissal for being prejudicial and inconvenient as he had to spend an additional amount of ₱
197.0021a day, leaving him nothing of his salary. He therefore had no choice but to stop working.

Aside from reinstatement and backwages, Cagalawan sought to recover damages and attorney’s fees because
to him, his transfer was effected in a wanton, fraudulent, oppressive or malevolent manner. Apart from
MORESCO II, he averred that Ke-e and Subrado should also be held personally liable for damages since the two
were guilty of bad faith in effecting his transfer. He believed that Subrado had a hand in his arbitrary transfer
considering that he is the son-in-law of Subrado’s opponent in the recent election for directorship in the electric
cooperative. In fact, Subrado even asked a certain Cleopatra Moreno Manuel to file a baseless complaint
against him as borne out by the declaration of Bob Abao in an affidavit.22

In view of MORESCO II’s failure to file a position paper, Cagalawan filed a Motion23 for the issuance of an order
to declare the case submitted for decision. This was granted in an Order24 dated March 14, 2003.

On September 30, 2003, the Labor Arbiter rendered a Decision25 declaring that Cagalawan’s transfer
constituted illegal constructive dismissal. Aside from finding merit in Cagalawan’s uncontroverted allegation
that the transfer became grossly inconvenient for him, the Labor Arbiter found no sufficient reason for his
transfer and that the same was calculated to rid him of his employment, impelled by a vindictive motive after
he executed an Affidavit in favor of a colleague and against MORESCO II.

Thus, the Labor Arbiter ordered Cagalawan’s reinstatement to the position of Collector and awarded him
backwages from the date of his transfer on May 16, 2002 up to his actual reinstatement. However, the Labor
Arbiter denied his prayer for regularization as head of the disconnection crew since the period of six months
which he claimed as sufficient to acquire regular status applies only to probationary employment. Hence, the
fact that he was acting as head of the disconnection crew for 10 months did not entitle him to such position
on a permanent basis. Moreover, the decision to promote him to the said position should only come from the
management.

With respect to damages, the Labor Arbiter found Ke-e to have acted capriciously in effecting the transfer,
hence, he awarded moral and exemplary damages to Cagalawan. Attorney’s fees was likewise adjudged in his
favor.

The dispositive portion of the Decision reads:

WHEREFORE, premises considered, judgment is rendered declaring the transfer of complainant as tantamount
to constructive dismissal and ordering respondents to reinstate complainant to his position as collector in
Balingasag, Misamis Oriental without loss of seniority rights and to pay complainant the following:

1. Backwages - ₱ 189,096.00

2. Exemplary damages - P 10,000.00

3. Moral damages - P 20,000.00

4. Attorney's fee 10% - P 21,909.60

GRAND TOTAL AWARD ₱ 241,005.60

SO ORDERED.26
Proceedings before the National Labor Relations Commission

MORESCO II and Cagalawan both appealed the Labor Arbiter’s Decision.

In its Memorandum on Appeal,27 MORESCO II invoked the liberal application of the rules and prayed for the
NLRC to admit its evidence on appeal. MORESCO II denied that Cagalawan’s transfer was done in retaliation
for executing an affidavit in favor of a co-worker. MORESCO II explained that the transfer was in response to
the request of the area manager in Gingoog sub-office for additional personnel in his assigned area. To
substantiate this, it submitted a letter28 dated May 8, 2002 from Gingoog sub-office Area Manager, Engr. Ronel
B. Canada (Engr. Canada), addressed to Ke-e. In said letter, Engr. Canada requested for two additional
disconnection linemen in order to attain the collection quota allocated in his area. MORESCO II then averred
that as against this letter of Engr. Canada who is a managerial employee, the certification issued by Ortiz should
be considered as incompetent since the latter is a mere disconnection crew.

Moreover, Cagalawan’s claim of additional expenses brought about by his transfer, specifically for meal and
transportation, deserves no appreciation at all since he would still incur these expenses regardless of his place
of assignment and also considering that he was provided with a rented motorcycle with fuel and oil allowance.

Also, MORESCO II intimated that it has no intention of removing Cagalawan from its employ especially since
his father-in-law was its previous Board Member. In fact, it was Cagalawan himself who committed an act of
insubordination when he abandoned his job.

In his Reply29 to MORESCO II’s Memorandum of Appeal, Cagalawan averred that the latter cannot present any
evidence for the first time on appeal without giving any valid reason for its failure to submit its evidence before
the Labor Arbiter as provided under the NLRC rules. Further, the evidence sought to be presented by MORESCO
II is not newly discovered evidence as to warrant its admission on appeal. In particular, he claimed that the
May 8, 2002 letter of Engr. Canada should have been submitted at the earliest opportunity, that is, before the
Labor Arbiter. MORESCO II’s failure to present the same at such time thus raises suspicion that the document
was merely fabricated for the purpose of appeal. Moreover, Cagalawan claimed that if there was indeed a
request from the Area Manager of Gingoog sub-office for additional personnel as required by the exigency of
the service, such reason should have been mentioned in Ke-e’s May 16, 2002 Memorandum. In this way, the
transfer would appear to have a reasonable basis at the outset. However, no such mention was made precisely
because the transfer was without any valid reason.

Anent Cagalawan’s partial appeal,30 he prayed that the decision be modified in that he should be reinstated as
Disconnection Lineman and not as Collector.

The NLRC, through a Resolution31 dated February 27, 2004, set aside and vacated the Decision of the Labor
Arbiter and dismissed Cagalawan’s complaint against MORESCO II. The NLRC admitted MORESCO II’s evidence
even if submitted only on appeal in the interest of substantial justice. It then found said evidence credible in
showing that Cagalawan’s transfer to Gingoog sub-office was required in the exigency of the cooperative’s
business interest. It also ruled that the transfer did not entail a demotion in rank and diminution of pay as to
constitute constructive dismissal and thus upheld the right of MORESCO II to transfer Cagalawan in the exercise
of its sound business judgment.

Cagalawan filed a Motion for Reconsideration32 but the same was denied by the NLRC in a Resolution33 dated
April 26, 2004.

Proceedings before the Court of Appeals

Cagalawan thus filed a Petition for Certiorari34 with the CA. In a Decision35 dated July 26, 2005, the CA found
the NLRC to have gravely abused its discretion in admitting MORESCO II’s evidence, citing Section 3, Rule V of
the NLRC Rules of Procedure36 which prohibits the parties from making new allegations or cause of action not
included in the complaint or position paper, affidavits and other documents. It held that what MORESCO II
presented on appeal was not just an additional evidence but its entire evidence after the Labor Arbiter
rendered a Decision adverse to it. To the CA, MORESCO II’s belated submission of evidence despite the
opportunities given it cannot be countenanced as such practice "defeats speedy administration of justice" and
"smacks of unfairness."

The dispositive portion of the CA Decision reads:

IN VIEW THEREOF, the petition is GRANTED. The Decision of the Labor Arbiter is reinstated with the
modification that if reinstatement of petitioner is not feasible, he should be paid separation pay in accordance
with law.

SO ORDERED.37

MORESCO II filed a Motion for Reconsideration38 insisting that it may present evidence for the first time on
appeal as the NLRC is not precluded from admitting the same because technical rules are not binding in labor
cases. Besides, of paramount importance is the opportunity of the other party to rebut or comment on the
appeal, which in this case, was afforded to Cagalawan.

Cagalawan, for his part, filed a Partial Motion for Reconsideration,39 seeking modification of the Decision by
ordering his reinstatement to the position of Disconnection Lineman instead of Collector.

In a Resolution40 dated September 6, 2006, the CA maintained its ruling that MORESCO II’s unexplained failure
to present evidence or submit a position paper before the Labor Arbiter for almost 12 months from receipt of
Cagalawan’s position paper is intolerable and cannot be permitted. Hence, it denied its Motion for
Reconsideration. With respect to Cagalawan’s motion, the same was granted by the CA, viz:

Anent petitioner’s Partial Motion for Reconsideration, We find the same meritorious. The records of this case
reveal that prior to his constructive dismissal, petitioner was a Disconnection Lineman, not a Collector, assigned
at Balingasag, Misamis Oriental. Hence, We modify the dispositive portion of Our July 26, 2005 Decision, to
read:

‘IN VIEW THEREOF, the petition is GRANTED. The Decision of the Labor Arbiter is reinstated with modification
that petitioner be reinstated to his position as Disconnection Lineman in Balingasag, Misamis Oriental with
further modification that if reinstatement of petitioner is not feasible, he should be paid separation pay in
accordance with law.’ 41(Emphasis in the original.)

Issues

MORESCO II thus filed this petition raising the following issues:

(1) Was the respondent constructively dismissed by the petitioner?

(2) Did the Court of Appeals err in reversing the NLRC?42

MORESCO II insists that Cagalawan’s transfer was necessary in order to attain the collection quota of the
Gingoog sub-office. It contests the credibility of Ortiz’s certification which stated that there was no need for
additional personnel in the Gingoog sub-office. According to it, Ortiz is not a managerial employee but merely
a disconnection crew who is not competent to make declarations in relation to MORESCO II’s business needs.
It likewise refutes Cagalawan’s claim of incurring additional expenses due to his transfer which caused him
inconvenience. In sum, it claims that Cagalawan was not constructively dismissed but instead had voluntarily
abandoned his job.

MORESCO II avers that the CA’s ruling is not in accordance with jurisprudence on the matter of admitting
evidence on appeal in labor cases. It submits that the NLRC is correct in accepting its evidence submitted for
the first time on appeal in line with the basic precepts of equity and fairness. The NLRC also correctly ruled in
its favor after properly appreciating its evidence which had been rebutted and contradicted by Cagalawan.

Our Ruling

The petition has no merit.

MORESCO II’s belated submission of

evidence cannot be permitted.

Labor tribunals, such as the NLRC, are not precluded from receiving evidence submitted on appeal as technical
rules are not binding in cases submitted before them.43 However, any delay in the submission of evidence
should be adequately explained and should adequately prove the allegations sought to be proven.44

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 Labor Arbiter despite sufficient notice and time given to do so. Only after an adverse
decision was rendered did it present its defense and rebut the evidence of Cagalawan by alleging that his
transfer was made in response to the letter-request of the area manager of the Gingoog sub-office asking for
additional personnel to meet its collection quota. To our mind, however, the belated submission of the said
letter-request without any valid explanation casts doubt on its credibility, specially so when the same is not a
newly discovered evidence. For one, the letter-request was dated May 8, 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. Why it was not presented at the earliest
opportunity is a serious question which lends credence to Cagalawan’s theory that it may have just been
fabricated for the purpose of appeal.

It should also be recalled that after Cagalawan received the memorandum for his transfer to the Gingoog sub-
office, he immediately questioned the basis thereof through a letter addressed to Ke-e. If at that time there
was already a letter-request from the Gingoog area manager, Ke-e could have easily 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 this respect. Nevertheless, Cagalawan, for
his part, faithfully complied with the transfer order but with the reservation to contest its validity precisely
because he was not adequately informed of its real basis.

The rule is that it is within the ambit of the employer’s prerogative to transfer an employee for valid reasons
and according to the requirement of its business, provided that the transfer does not result in demotion in rank
or diminution of salary, benefits and other privileges.45 This Court has always considered the management’s
prerogative to transfer its employees in pursuit of its legitimate interests. But this prerogative should be
exercised 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
employee, it cannot be upheld.46

Here, while we find that the transfer of Cagalawan neither entails any demotion in rank since he did not have
tenurial security over the position of head of the disconnection crew, nor result to diminution in pay as this
was not sufficiently proven by him, MORESCO II’s evidence is nevertheless not enough to show that said
transfer was required by the exigency of the electric cooperative’s business interest. Simply stated, the
evidence sought to be admitted by MORESCO II is not substantial to prove that there was a genuine business
urgency that necessitated the transfer.

Notably, the only evidence adduced by MORESCO II to support the legitimacy of the transfer was the letter-
request of Engr. Canada. However, this piece of evidence cannot in itself sufficiently establish that the Gingoog
sub-office was indeed suffering from losses due to collection deficiency so as to justify the assignment of
additional personnel in the area. Engr. Canada’s letter is nothing more than a mere request for additional
personnel to augment the number of disconnection crew assigned in the area. While it mentioned that the
area’s collection efficiency should be improved and that there is a shortage of personnel therein, it is, standing
alone, self-serving and thus cannot be considered as competent evidence to prove the accuracy of the
allegations therein. MORESCO II could have at least presented financial documents or any other concrete
documentary evidence showing that the collection quota of the Gingoog sub-office has not been met or could
not be reached. It should have also submitted such other documents which would show the lack of sufficient
personnel in the area. Unfortunately, the area manager’s letter provides no more than bare allegations which
deserve not even the slightest credit.

When there is doubt between the evidence submitted by the employer and that submitted by the employee,
the scales of justice must be tilted in favor of the employee.47 This is consistent with the rule that an employer’s
cause could only succeed on the strength of its own evidence and not on the weakness of the employee’s
evidence.48Thus, MORESCO II cannot rely on the weakness of Ortiz’s certification in order to give more credit
to its own evidence. Self-serving and unsubstantiated declarations are not sufficient where the quantum of
evidence required to establish a fact is substantial evidence, described as more than a mere scintilla.49 "The
evidence must be real and substantial, and not merely apparent."50 MORESCO II has miserably failed to
discharge the onus of proving the validity of Cagalawan’s transfer.

Clearly, not only was the delay in the submission of MORESCO II’s evidence not explained, there was also failure
on its part to sufficiently support its allegation that the transfer of Cagalawan was for a legitimate purpose.
This being the case, MORESCO II’s plea that its evidence be admitted in the interest of justice does not deserve
any merit.

Ke-e and Subrado, as corporate officers,

could not be held personally liable for
Cagalawan’s monetary awards.

In the Decision of the Labor Arbiter, the manager of MORESCO II was held to have acted in an arbitrary manner
in effecting Cagalawan’s transfer such that moral and exemplary damages were awarded in the latter’s favor.
However, the said Decision did not touch on the issue of bad faith on the part of MORESCO II’s officers, namely,
Ke-e and Subrado. Consequently, no pronouncement was made as to whether the two are also personally liable
for Cagalawan’s money claims arising from his constructive dismissal.

Still, we hold that Ke-e and Subrado cannot be held personally liable for Cagalawan’s money claims.

"Bad faith does not simply connote bad judgment or negligence; it imputes a dishonest purpose or some moral
obliquity and conscious doing of a wrong; a breach of sworn duty through some motive or intent or ill will; it
partakes of the nature of fraud."51 Here, although we agree with the Labor Arbiter that Ke-e acted in an
arbitrary manner in effecting Cagalawan’s transfer, the same, absent any showing of some dishonest or
wrongful purpose, does not amount to bad faith.
Suffice it to say that bad faith must be established clearly and convincingly as the same is never
presumed.52Similarly, no bad faith can be presumed from the fact that Subrado was the opponent of
Cagalawan’s father-in-law in the election for directorship in the cooperative. Cagalawan's claim that this was
one of the reasons why he was transferred is a mere allegation without proof. Neither does Subrado 's alleged
instruction to file a complaint against Cagalawan bolster the Iatter's claim that the former had malicious
intention against him. As the Chairman of the Board of Directors of MORESCO II, Subrado has the duty and
obligation to act upon complaints of its clients. On the contrary, the Court finds that Subrado had no
participation whatsoever in Cagalawan's illegal dismissal; hence. the imputation of bad faith against him is
untenable.

WHEREFORE, the petition is DENIED. The Decision dated July 26, 2005 or the Court of Appeals in CA-G.R. SP
No. 84991 and its Resolution dated September 6, 2006, are AFFIRMED.

SO ORDERED.

G.R. No. 85985 August 13, 1993

PHILIPPINE AIRLINES, INC. (PAL), petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ISABEL P. ORTIGUERRA and PHILIPPINE
AIRLINES EMPLOYEES ASSOCIATION (PALEA), respondents.

Solon Garcia for petitioner.

Adolpho M. Guerzon for respondent PALEA.

MELO, J.:

In the instant petition for certiorari, the Court is presented the issue of whether or not the formulation of a
Code of Discipline among employees is a shared responsibility of the employer and the employees.

On March 15, 1985, the Philippine Airlines, Inc. (PAL) completely revised its 1966 Code of Discipline. The Code
was circulated among the employees and was immediately implemented, and some employees were forthwith
subjected to the disciplinary measures embodied therein.

Thus, on August 20, 1985, the Philippine Airlines Employees Association (PALEA) filed a complaint before the
National Labor Relations Commission (NLRC) for unfair labor practice (Case No. NCR-7-2051-85) with the
following remarks: "ULP with arbitrary implementation of PAL's Code of Discipline without notice and prior
discussion with Union by Management" (Rollo, p. 41). In its position paper, PALEA contended that PAL, by its
unilateral implementation of the Code, was guilty of unfair labor practice, specifically Paragraphs E and G of
Article 249 and Article 253 of the Labor Code. PALEA alleged that copies of the Code had been circulated in
limited numbers; that being penal in nature the Code must conform with the requirements of sufficient
publication, and that the Code was arbitrary, oppressive, and prejudicial to the rights of the employees. It
prayed that implementation of the Code be held in abeyance; that PAL should discuss the substance of the
Code with PALEA; that employees dismissed under the Code be reinstated and their cases subjected to further
hearing; and that PAL be declared guilty of unfair labor practice and be ordered to pay damages (pp. 7-14,
Record.)

PAL filed a motion to dismiss the complaint, asserting its prerogative as an employer to prescibe rules and
regulations regarding employess' conduct in carrying out their duties and functions, and alleging that by
implementing the Code, it had not violated the collective bargaining agreement (CBA) or any provision of the
Labor Code. Assailing the complaint as unsupported by evidence, PAL maintained that Article 253 of the Labor
Code cited by PALEA reffered to the requirements for negotiating a CBA which was inapplicable as indeed the
current CBA had been negotiated.

In its reply to PAL's position paper, PALEA maintained that Article 249 (E) of the Labor Code was violated when
PAL unilaterally implemented the Code, and cited provisions of Articles IV and I of Chapter II of the Code as
defective for, respectively, running counter to the construction of penal laws and making punishable any
offense within PAL's contemplation. These provisions are the following:

Sec. 2. Non-exclusivity. — This Code does not contain the entirety of the rules and regulations of the company.
Every employee is bound to comply with all applicable rules, regulations, policies, procedures and standards,
including standards of quality, productivity and behaviour, as issued and promulgated by the company through
its duly authorized officials. Any violations thereof shall be punishable with a penalty to be determined by the
gravity and/or frequency of the offense.

Sec. 7. Cumulative Record. — An employee's record of offenses shall be cumulative. The penalty for an offense
shall be determined on the basis of his past record of offenses of any nature or the absence thereof. The more
habitual an offender has been, the greater shall be the penalty for the latest offense. Thus, an employee may
be dismissed if the number of his past offenses warrants such penalty in the judgment of management even if
each offense considered separately may not warrant dismissal. Habitual offenders or recidivists have no place
in PAL. On the other hand, due regard shall be given to the length of time between commission of individual
offenses to determine whether the employee's conduct may indicate occasional lapses (which may
nevertheless require sterner disciplinary action) or a pattern of incorrigibility.

Labor Arbiter Isabel P. Ortiguerra handling the case called the parties to a conference but they failed to appear
at the scheduled date. Interpreting such failure as a waiver of the parties' right to present evidence, the labor
arbiter considered the case submitted for decision. On November 7, 1986, a decision was rendered 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 arbiter held that PAL was "not totally fault free" considering that while the issuance of rules and
regulations governing the conduct of employees is a "legitimate management prerogative" such rules and
regulations must meet the test of "reasonableness, propriety and fairness." She found Section 1 of the Code
aforequoted as "an all embracing and all encompassing provision that makes punishable any offense one can
think of in the company"; while Section 7, likewise quoted above, is "objectionable for it violates the rule
against double jeopardy thereby ushering in two or more punishment for the same misdemeanor." (pp. 38-
39, Rollo.)

The labor arbiter also found that PAL "failed to prove that the new Code was amply circulated." Noting that
PAL's assertion that it had furnished all its employees copies of the Code is unsupported by documentary
evidence, she stated that such "failure" on the part of PAL resulted in the imposition of penalties on employees
who thought all the while that the 1966 Code was still being followed. Thus, the arbiter concluded that "(t)he
phrase ignorance of the law excuses no one from compliance . . . finds application only after it has been
conclusively shown that the law was circulated to all the parties concerned and efforts to disseminate
information regarding the new law have been exerted. (p. 39, Rollo.) She thereupon disposed:

WHEREFORE, premises considered, respondent PAL is hereby ordered as follows:

1. Furnish all employees with the new Code of Discipline;

2. Reconsider the cases of employees meted with penalties under the New Code of Discipline and remand the
same for further hearing; and

3. Discuss with PALEA the objectionable provisions specifically tackled in the body of the decision.

All other claims of the complainant union (is) [are] hereby, dismissed for lack of merit.

SO ORDERED. (p. 40, Rollo.)

PAL appealed to the NLRC. On August 19, 1988, the NLRC through Commissioner Encarnacion, with Presiding
Commissioner Bonto-Perez and Commissioner Maglaya concurring, found no evidence of unfair labor practice
committed by PAL and affirmed the dismissal of PALEA's charge. Nonetheless, the NLRC made the following
observations:

Indeed, failure of management to discuss the provisions of a contemplated code of discipline which shall
govern the conduct of its employees would result in the erosion and deterioration of an otherwise harmonious
and smooth relationship between them as did happen in the instant case. There is no dispute that adoption of
rules of conduct or discipline is a prerogative of management and is imperative and essential if an industry, has
to survive in a competitive world. But labor climate has progressed, too. In the Philippine scene, at no time in
our contemporary history is the need for a cooperative, supportive and smooth relationship between labor
and management more keenly felt if we are to survive economically. Management can no longer exclude labor
in the deliberation and adoption of rules and regulations that will affect them.

The complainant union in this case has the right to feel isolated in the adoption of the New Code of Discipline.
The Code of Discipline involves security of tenure and loss of employment — a property right! It is time that
management realizes that to attain effectiveness in its conduct rules, there should be candidness and openness
by Management and participation by the union, representing its members. In fact, our Constitution has
recognized the principle of "shared responsibility" between employers and workers and has likewise
recognized the right of workers to participate in "policy and decision-making process affecting their rights . . ."
The latter provision was interpreted by the Constitutional Commissioners to mean participation in
"management"' (Record of the Constitutional Commission, Vol. II).

In a sense, participation by the union in the adoption of the code if conduct could have accelerated and
enhanced their feelings of belonging and would have resulted in cooperation rather than resistance to the
Code. In fact, labor-management cooperation is now "the thing." (pp. 3-4, NLRC Decision ff. p. 149, Original
Record.)

Respondent Commission thereupon disposed:

WHEREFORE, premises considered, we modify the appealed decision in the sense that the New Code of
Discipline should be reviewed and discussed with complainant union, particularly the disputed provisions [.]
(T)hereafter, respondent is directed to furnish each employee with a copy of the appealed Code of Discipline.
The pending cases adverted to in the appealed decision if still in the arbitral level, should be reconsidered by
the respondent Philippine Air Lines. Other dispositions of the Labor Arbiter are sustained.
SO ORDERED. (p. 5, NLRC Decision.)

PAL then filed the instant petition for certiorari charging public respondents with grave abuse of discretion in:
(a) directing PAL "to share its management prerogative of formulating a Code of Discipline"; (b) engaging in
quasi-judicial legislation in ordering PAL to share said prerogative with the union; (c) deciding beyond the issue
of unfair labor practice, and (d) requiring PAL to reconsider pending cases still in the arbitral level (p. 7, Petition;
p. 8, Rollo.)

As stated above, the Principal issue submitted for resolution in the instant petition is whether management
may be compelled to share with the union or its employees its prerogative of formulating a code of discipline.

PAL asserts that when it revised its Code on March 15, 1985, there was no law which mandated the sharing of
responsibility therefor between employer and employee.

Indeed, it was only on March 2, 1989, with the approval of Republic Act No. 6715, amending Article 211 of the
Labor Code, that the law explicitly considered it a State policy "(t)o ensure the participation of workers in
decision and policy-making processes affecting the rights, duties and welfare." However, even in the absence
of said clear provision of law, the exercise of management prerogatives was never considered boundless. Thus,
in Cruz vs. Medina (177 SCRA 565 [1989]) it was held that management's prerogatives must be without abuse
of discretion.

In San Miguel Brewery Sales Force Union (PTGWO) vs. Ople (170 SCRA 25 [1989]), we upheld the company's
right to implement a new system of distributing its products, but gave the following caveat:

So long as a company's management prerogatives are exercised in good faith for the advancement of the
employer's interest and not for the purpose of defeating or circumventing the rights of the employees under
special laws or under valid agreements, this Court will uphold them.
(at p. 28.)

All this points to the conclusion that the exercise of managerial prerogatives is not unlimited. It is circumscribed
by limitations found in law, a collective bargaining agreement, or the general principles of fair play and justice
(University of Sto. Tomas vs. NLRC, 190 SCRA 758 [1990]). Moreover, as enunciated in Abbott Laboratories
(Phil.), vs. NLRC (154 713 [1987]), it must be duly established that the prerogative being invoked is clearly a
managerial one.

A close scrutiny of the objectionable provisions of the Code reveals that they are not purely business-oriented
nor do they concern the management aspect of the business of the company as in the San Miguel case. The
provisions of the Code clearly have repercusions on the employee's right to security of tenure. The
implementation of the provisions may result in the deprivation of an employee's means of livelihood which, as
correctly pointed out by the NLRC, is a property right (Callanta, vs Carnation Philippines, Inc., 145 SCRA 268
[1986]). In view of these aspects of the case which border on infringement of constitutional rights, we must
uphold the constitutional requirements for the protection of labor and the promotion of social justice, for these
factors, according to Justice Isagani Cruz, tilt "the scales of justice when there is doubt, in favor of the worker"
(Employees Association of the Philippine American Life Insurance Company vs. NLRC, 199 SCRA 628 [1991] 635).

Verily, a line must be drawn between management prerogatives regarding business operations per se and
those which affect the rights of the employees. In treating the latter, management should see to it that its
employees are at least properly informed of its decisions or modes action. PAL asserts that all its employees
have been furnished copies of the Code. Public respondents found to the contrary, which finding, to say the
least is entitled to great respect.
PAL posits the view that by signing the 1989-1991 collective bargaining agreement, on June 27, 1990, PALEA in
effect, recognized PAL's "exclusive right to make and enforce company rules and regulations to carry out the
functions of management without having to discuss the same with PALEA and much less, obtain the
latter's conformity thereto" (pp. 11-12, Petitioner's Memorandum; pp 180-181, Rollo.) Petitioner's view is
based on the following provision of the agreement:

The Association recognizes the right of the Company to determine matters of management it policy and
Company operations and to direct its manpower. Management of the Company includes the right to organize,
plan, direct and control operations, to hire, assign employees to work, transfer employees from one
department, to another, to promote, demote, discipline, suspend or discharge employees for just cause; to
lay-off employees for valid and legal causes, to introduce new or improved methods or facilities or to change
existing methods or facilities and the right to make and enforce Company rules and regulations to carry out
the functions of management.

The exercise by management of its prerogative shall be done in a just reasonable, humane and/or lawful
manner.

Such provision in the collective bargaining agreement may not be interpreted as cession of employees' rights
to participate in the deliberation of matters which may affect their rights and the formulation of policies
relative thereto. And one such mater is the formulation of a code of discipline.

Indeed, industrial peace cannot be achieved if the employees are denied their just participation in the
discussion of matters affecting their 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 policy of the State, "(d) To promote the
enlightenment of workers concerning their rights and obligations . . . as employees." This was, of course,
amplified by Republic Act No 6715 when it decreed the "participation of workers in decision and policy making
processes affecting their rights, duties and welfare." PAL's position that it cannot be saddled with the
"obligation" of sharing management prerogatives as during the formulation of the Code, Republic Act No. 6715
had not yet been enacted (Petitioner's Memorandum, p. 44; Rollo, p. 212), cannot thus be sustained. While
such "obligation" was not yet founded in law when the Code was formulated, the attainment of a harmonious
labor-management relationship and the then already existing state policy of enlightening workers concerning
their rights as employees demand no less than the observance of transparency in managerial moves affecting
employees' rights.

Petitioner's assertion that it needed the implementation of a new Code of Discipline considering the nature of
its business cannot be overemphasized. In fact, its being a local monopoly in the business demands the most
stringent of measures to attain safe travel for its patrons. Nonetheless, whatever disciplinary measures are
adopted cannot be properly implemented in the absence of full cooperation of the employees. Such
cooperation cannot be attained if the employees are restive on account, of their being left out in the
determination of cardinal and fundamental matters affecting their employment.

WHEREFORE, the petition is DISMISSED and the questioned decision AFFIRMED. No special pronouncement is
made as to costs.

SO ORDERED.